Commentary: Contours of Singapore’s post-COVID economy are coming into sharper focus
Even though economic recovery is narrow for now, the momentum for growth is strong, and businesses should build on this to embrace transformation fully, says SBF CEO Lam Yi Young.
SINGAPORE: What do papadums have to do with a post-COVID Singapore economy? Plenty, apparently.
While much of the attention has been on the latest economic data which shows the Singapore economy is on a positive path to recovery, a curious case of papadums reveal where those pockets of opportunity may lie.
Indeed, although it seems that recovery may be uneven across sectors, the contours of Singapore’s post-COVID economy are coming into sharper focus – and it is vital for businesses to identify how best to position themselves for the upturn.
Overall, there are encouraging signs for the domestic economy. Singapore's Gross Domestic Product (GDP) grew by 0.2 per cent year-on-year in the first quarter of 2021, a turnaround from three quarters of contraction, based on advance estimates by the Ministry of Trade and Industry released on Apr 14.
It’s still early days but there is cautious optimism the Singapore economy is turning the corner out of the pandemic. Interestingly, the first quarter GDP for 2021 is slightly higher than the same time last year, just before the circuit breaker.
DIGITALISATION FUELLING RECOVERY
Although economic recovery is narrow and limited to a few sectors for now, the momentum for growth is strong. Singapore’s factory output expanded for a fifth straight month, according to the monthly manufacturing performance data released by the Economic Development Board (EDB) last month.
Never mind the slight decline of 1.7 per cent in March since this was partially due to a weak global oil and gas market and travel restrictions – resulting in lower orders in the marine and offshore engineering and aerospace sectors.
The positive take-away is the strong drive for digitalisation, which saw electronic output continue to increase – 33.7 per cent in March 2021 from the same period last year and 28.1 per cent on a year-to-date basis over the same period last year.
Some good came out of the pandemic where companies were forced to pivot towards digitalisation and remote-working.
They are also embracing cloud services, data centres and 5G markets, which explains the stronger output in semiconductors, computer peripherals and data storage segments.
Growth in these segments should pick up as digitalisation continues apace.
No doubt robust global semiconductor demand also drove strong growth in Singapore’s exports, although trade in petrochemicals also underpinned this surge.
Non-oil domestic exports (NODX) also expanded 12.1 per cent year-on-year in March, with exports to China leading the strong rebound at an increase of 46.4 per cent from the previous month as the Chinese market demanded more specialised machinery, petrochemicals and primary chemicals.
This is significant as growth in petrochemicals exports is a bellwether for wider recovery and growth in other sectors around the world.
Nevertheless, sectors such as transportation and storage see continued weakness, still battered by the travel restrictions brought about by the pandemic.
While countries take baby steps to establish travel bubbles and roll out vaccination of their population on a larger scale, the mass reopening of international borders is unlikely to happen this year.
Sectors based on footfall, such as retail and food and beverage, are also likely to see slower recovery, with the lack of tourists and shifts towards e-commerce.
The construction sector is currently supported by a pickup in public and private sector construction activities.
However, challenges in manpower supply – particularly with recent restrictions on labour from India due to the explosion in infections there – coupled with shortages in materials supply, and work arrangements with safe distancing measures mean this sector will face strong headwinds.
Notwithstanding this, business sentiments are on the rise, and the highest since the pandemic began last year, according to the SBF-Experian SME Index (for the second and third quarter of 2021), a study that measures forward-looking business sentiments of local SMEs.
(Listen to Singapore economists debate the trade-offs in choosing which sectors, companies and workers to aid during this COVID-19 downturn in CNA's Heart of the Matter published in August 2020:)
BUILDING RESILIENCE THROUGH DIGITALISATION AND TRANSFORMATION
So what do these indicators mean for companies and sectors here?
The manufacturing, information and communications, finance and insurance sectors are expected to remain resilient for the rest of the year, if current conditions hold.
This is in line with global trends and is unsurprising given that the pandemic has accelerated digitalisation across a wide range of sectors and businesses.
Moreover, 72 per cent of businesses with a high level of transformation are confident in sustaining their business over the next 12 months, according to the recent SBF National Business Survey conducted in October and November 2020.
One such company is Exceed Tech, an electronics manufacturer that designs and produces ultra-sensitive sensors targeting the industrial, telematics and healthcare markets.
It successfully implemented a system to remotely track operations in its production facilities in Shenzhen, China from its headquarters in Singapore through the Industry 4.0 Human Capital Initiative (IHCI) Enabler Programme, a programme supported by Workforce Singapore.
Its management achieved greater visibility of shopfloor operations, to make more informed decisions, leading to an increase in output by 21 per cent. The company also tapped on insights yielded by data, to improve the accuracy of its assembly line and reduce operational costs by close to 30 per cent.
LOOKING BEYOND OUR SHORES
As the export data shows, there are opportunities overseas that Singapore companies must seize despite the pandemic.
Caught up with day-to-day operations, internationalisation may be the furthest thing from the minds of SMEs. But with an open mind and the right mindset, they can uncover unexpected opportunities.
So here’s where papadums foretell the spicy story of Singapore’s economic outlook.
Bhavani Stores worked closely with GlobalConnect@SBF, a programme supported by Enterprise Singapore, on a food hamper project to showcase Singapore food products in Vietnamese supermarkets earlier this year during the Vietnamese New Year holiday.
This helped their Uncle Saba’s Poppadoms brand of papadum snacks gain an initial foothold in Vietnam. The company is now in the process of bringing its “Poppadoms” to more supermarkets in Vietnam through local distributors.
However, even as companies navigate these challenges and look to seize the opportunities ahead, the pandemic has also impacted jobs and workers in many ways.
Manpower-intensive sectors such as manufacturing, healthcare, F&B, and retail have had to grapple with labour shortages with the impact of travel restrictions on inflow of foreign manpower.
The jobs companies are looking to fill include service crew, cooks, drivers, factory operators and patient service associates. This shortfall is mainly in the S$2,000 to S$3,000 salary band, in roles requiring repetitive tasks, like the operating of machinery, customer service and people skills.
The labour shortage has meant more job hopping and higher staff turnover for companies, plus higher costs, and is not expected to ease soon. Companies must look at transformation and job redesign to help cope with the tight labour situation.
As they digitalise and transform, companies must upskill staff, especially rank and file workers, to handle more complex and cognitive-driven tasks. Workers must also move towards becoming more multi-skilled to take on more critical tasks.
There are many government schemes available to support companies and workers in upskilling, and companies and workers should make good use of them.
The road to recovery is in sight. Our trade associations and business chambers stand ready to help our companies on their recovery and to seize new opportunities so as to emerge stronger from the pandemic.
Lam Yi Young is CEO of the Singapore Business Federation.