Singapore attracted S$17.2 billion in investments last year, exceeding forecast despite pandemic
SINGAPORE: Singapore attracted S$17.2 billion in fixed asset investment commitments last year, up from S$15.2 billion in the previous year despite an economic crisis fuelled by the COVID-19 pandemic, according to data released by the Economic Development Board (EDB) on Wednesday (Jan 20).
This exceeds the EDB’s goal of having S$8 to S$10 billion investments committed annually over the medium to long term.
The figure is also the highest since 2008, when investments of S$18 billion were netted.
“This is a strong performance from the EDB team in an exceptionally challenging year,” Trade and Industry Minister Chan Chun Sing told reporters in an online interview.
Electronics and chemicals remained the top two sources of investments last year, with S$6.5 billion and S$4.1 billion secured respectively.
By region, Singapore saw the most investment commitments from the United States (53.4 per cent) followed by the home-grown market (17.3 per cent) and Europe (17.1 per cent).
Total business expenditure per annum, which refers to companies’ incremental operating expenditure including wages and rental, was S$6.8 billion last year, compared with S$9 billion in 2019.
When these projects are fully implemented, they are expected to create 19,352 jobs over the next five years and contribute S$31.2 billion in value-added per year.
Nearly half (45 per cent) of these jobs will be in production, which are roles in the manufacturing, engineering, supply chain and logistics industries. This is followed by digital-related roles that will account for another 24 per cent, EDB’s report said.
STRONG PERFORMANCE BUT CHALLENGES REMAIN
Mr Chan noted that Singapore remains an attractive investment destination for global firms across sectors, despite the pandemic-induced uncertainties.
The minister cited reasons such as a skilled local workforce, the ability to attract foreign talent, a competent and trusted government as well as efforts to maintain external connectivity and ensure business continuity.
Singapore’s regulatory system and intellectual property regime also support a “trust premium” that is highly valued by global companies, he said. This allows the country to attract key investment projects, especially those dealing with high-value and knowledge-intensive products.
But Mr Chan cautioned of a challenging road ahead given uncertainties that range from recurrent waves of COVID-19 cases to a “slow and uneven” rollout of vaccination programmes in countries around the world.
Coupled with geopolitical tensions, the pace of a global economic recovery remains uncertain.
Mr Chan noted that tensions between the United States and China will likely persist.
“This could result in them having limited bandwidth to shoulder greater international responsibilities which could further stress the international rules-based trading system which many, including Singapore, have benefited greatly from over the years,” he said.
Closer to home, there has been “heightened sensitivity” over the balance of locals and foreigners in the job market.
While this is understandable given the economic downturn, Mr Chan said Singapore’s hard-won reputation as an open and connected country could be lost if the situation is not managed carefully, resulting in dire consequences.
The trend of remote working, as a result of the pandemic, will also change the nature of competition for jobs, said the minister.
“Others can compete away our jobs without being in Singapore. We can also compete with others without being overseas, if we are skilled,” he added.
SINGAPORE MUST REMAIN FLEXIBLE, ADAPTABLE
Concluding, Mr Chan said while there is “cautious optimism” about economic prospects for the rest of the year, one “should not think that the road ahead will be a walk in the park”.
“Many uncertainties lie before us, including how the COVID-19 situation will continue to pan out.
“Companies will take a much longer time to decide upon their investments over the next one to two years because of the uncertainties at the local and global levels. Countries will compete even harder for their investment dollars and jobs,” he said.
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To drive economic recovery, Singapore must remain flexible and adaptable, said the minister as he outlined four key strategies.
They are: Strengthening Singapore’s position as a “critical node” in the global value chain; forging new trade rules in forward-looking areas such as data, finance and technology; pursuing an innovation-led and sustainable economy; and helping companies and workers to stay competitive in a post-COVID-19 world.
EDB said its aim is to maintain investment commitment numbers for the medium to long term.
Apart from fixed asset investments of between S$8 billion and S$10 billion, it hopes to sustain total business expenditure per annum at S$5 billion to S$7 billion, and create 16,000 to 18,000 jobs.
It added that it will continue to strengthen fundamentals that have been driving business interest in Singapore.
These include opportunities from Asia, digitalisation and the digital economy, innovation and the “deep skills” of the local workforce.
ON JOBS, INVESTMENTS FOR 2021
Asked if the EDB’s goal is too conservative given 2019 and 2020’s investment figures, Mr Chan said given the multi-year approach taken by authorities, the target is a “fair reflection” of medium-term trends.
“We should not be overly focused on the year-to-year fluctuation. There will be some up and down in the course of the short term, especially in a situation where the pandemic is raging,” he replied.
He added that it is important to look beyond the investment figures to focus on the number and type of jobs created, as well as the “criticality” of these investments in the global production and supply chain.
“It is also important for us to look at how we can entrench ourselves in the global production and supply chains so that we cannot be easily displaced by cheaper sources or by people who might be able to compete on the basis of less rigorous intellectual property protection regimes.”
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Answering a separate question on job creation, Mr Chan said this is sector-dependent and does not necessarily have a linear correlation with investment amounts.
While some sectors with huge investments have yielded fewer jobs, these are high-quality jobs that allow workers to earn higher wages. Conversely, there are other sectors with smaller investments that have created more jobs.
“What is most important is that we must have a portfolio of different investment in different industries, and this will provide us the diversity necessary for the resilience of our economy,” said the minister.
Speaking at a separate press conference, EDB chairman Beh Swan Gin said 2020’s fixed asset investment figure benefited from “very good momentum” coming from 2019 that was based on uptrends in the semiconductor and chemicals industries.
Fixed asset investments tend to see a surge in every eight to 10 years, largely due to the wave of investments in the semiconductor, as well as the energy and chemicals industries, he added.
“These are the sectors where the projects are billion-dollar projects and that’s why every eight to 10 years or so, when there is wave of investments by companies to increase in capacity to meet the growing demand, we tend to see such a sharp increase in fixed asset investments in Singapore,” said Dr Beh.
He added that 2020 figures could have been higher but the energy and chemicals industries were “somewhat affected” by the COVID-19 pandemic with delays in projects.
For 2021, Dr Beh said he is expecting a difficult first half given patchy recovery around the world, with much depending on vaccine roll-outs. But if the latter is successful, the EDB is “cautiously optimistic” about prospects for the second half.
“For our investment numbers (in 2021), we certainly don't anticipate that we will have the sort of fixed asset investments that we saw for 2020, but we are still cautiously confident that we will be able to achieve the medium-term goals,” he said.