Singapore’s slowing manufacturing sector

Rising automation by way of using intelligent machines and nuanced application of robotics are today greatly reshaping modern day jobs. This in addition to a tumultuous global economic scene, marked with rising protectionism and conservative politics has made many countries, which have till now been operating in a highly integrated and globalized world, rethink their own plans of talent development. One of the key focus in doing so across various economies has been to boost local manufacturing industries with the hopes of generating employment while helping the economy to grow. 

To translate this intent into ground reality is often a difficult task for both policymakers and companies alike. There is no one policy solution to the increasing manufacturing sector overnight to boost domestic hiring. Even when successfully done so, manufacturing, although still a labor-intensive sector which gives rise to both generalized and specialized jobs, isn’t necessarily the same in nature now. Companies, in order to remain profitable, are busy introducing newer tech like using robots during the manufacturing process and while storing and shipping goods from the warehouse. This bites into potential jobs created within the sector. 

Local manufacturing

But despite such  tech advents into the sector, governments still hope boosting local manufacturing can provide a good base to improve domestic jobs number and often goes hand in hand with the rising protectionism across both developed nations like the US and UK, and developing nations like India which today has programmes that aim to boost domestic manufacturing. The same has been the case with southeast Asian economies. Vietnam, today with one of the largest in the region, has fruitfully benefitted from the US-china trade war as many companies across the globe, even ones based out of Taiwan and Hong Kong, are shifting their manufacturing bases from China to Vietnam. The cheap labor and reasonable skill levels make Vietnam a preferred destination to set up manufacturing units. For Vietnam, opportunities like this provide a vital economic recourse to provide employment and create a base for skill development so that its working population can access better-paying jobs. 

For a region like Southeast Asia, which today has some of the ‘top performing’ emerging economies like Indonesia and Singapore and is soon collectively to harbor a labor market the size of countries like China and India, needs to rely on its manufacturing sector to deliver in terms of growth and jobs creation. It is under this light that the recent slowdown in the growth of manufacturing witnessed in Singapore raises certain red flags in the region. Last Tuesday, Singapore’s Economic Development Board, a statutory board of the Government of Singapore, announced that the country’s manufacturing output for January dropped 3.1 percent from a year earlier, making it the first year-on-year decline since December 2017 and the sharpest fall since July 2016. Singapore being a small but relatively open economy depends much on global economic shifts and trends. It also focuses on manufacturing high-end products, which have reportedly taken a hit this time. 

And as reports suggest, this might not be an isolated trend in the region. Countries like The Philippines’ and Vietnam are witnessing a decline in their industrial production. Report from the Nikkei Asian Review states that The Philippines’ industrial production output dropped 9.3% in December, the first year-on-year decline in 12 months. The growth rate in the electronics machinery segment dropped to 5.8% growth in December from November's 19%, also the slowest growth in 12 months. Vietnam’s January growth slowed to 7.9% from December’s 11.4%, according to an estimate by the country’s General Statistics Office. This slowdown could potentially impact hiring numbers in the short run, throwing a wrench on how effectively countries have been building their manufacturing sector to create more jobs. 

China's slowdown

Coming back to Singapore, it isn’t necessarily the slowdown in manufacturing products that is the only cause of concern. China’s recent projected slowdown is also a cause of concern. The Singapore government earlier this month noted that one of the key risks is China’s slowdown — growth that is expected to slow from last year’s 6.6 percent. Noting the adverse effect it added, "A sharper-than-expected slowdown of the Chinese economy could adversely affect the region’s growth due to falling import demand from China, especially given regional economies' close interlinkages with China.” With both demand and supply projected to get affected due to short-run economic problems makes it critical of policymakers to think of countermeasures to the impact of such slowdown on the jobs market. But given the integrated nature of such economic trends, the country could find itself too tangled up to take corrective measures. As most countries in Southeast Asia are entrenched in China’s supply chain, it’ll be difficult to isolate itself from a slowdown in China.