Mr Lim Hng Kiang at the MAXA 2006 Conference

SPEECH BY MR LIM HNG KIANG, MINISTER FOR TRADE AND INDUSTRY,AT THE MAXA 2006 CONFERENCE ON TUESDAY, 31 OCTOBER 2006, AT 9.10 AM, AT THEATRE – LEVEL 2, SUNTEC INTERNATIONAL CONVENTION AND EXHIBITION CENTRE

Esteemed speakers and panellists

Distinguished guests

Ladies and gentlemen

Good morning. I am pleased to open this morning’s proceedings on such a high note of confidence in Singapore’s manufacturing sector.We have done well so far, and the government is committed to enhance the sector further. However, at the same time, we know that we cannot afford to be complacent. Therein lies the impetus for the Manufacturing Excellence Award, or MAXA, which has been introduced to celebrate Singapore’s manufacturing excellence.

It is heartening to witness the active participation of so many companies in the inaugural Award. We have known all along that there are many world-class manufacturing companies in Singapore. Even so, the quantity and quality of the applicants still positively surprised us.

It is these MAXA winners and applicants, and the more than 8,000 manufacturing companies here, which are the bastions of our manufacturing sector. They constitute the critical driving force behind Singapore’s economic growth over the last four decades.

Singapore is a competitive location for the full manufacturing value chain

Even though Singapore is a global leader in the manufacture of high value-added products, there persists the misconception that the sector is losing its shine due to challenges from lower-cost countries. The fact is, over the last 10 years, the manufacturing sector’s growth has surpassed most of the other sectors, and is ahead of our GDP growth.

Besides successfully growing our manufacturing sector, we have also built up a complete value chain of capabilities. These capabilities range from production to innovation, design and supply chain management.

Production capabilities

Firstly, let me talk about production.Singapore is home to first world, sophisticated manufacturing capabilities, with high value-added. We have established global and regional leadership in various industry segments. On a global basis, we build or manufacture 70 percent of offshore oilrigs, and 25 percent of hard disk media, just to name a few. We rank amongst the world’s top three for refining. Singapore is also Asia’s number one for flavours and fragrances; and for aerospace maintenance, repair and overhaul (MRO).

Our strengths in production have attracted MNCs like MSD[1] Singapore, one of the MAXA finalists, and the world’s sixth largest pharmaceutical company by sales, to set up two manufacturing facilities in Singapore, producing for the global market. In July, it announced a S$100-million expansion of its pharmaceutical formulation facility here.

Over and above the expansion of physical space and production volumes, companies are also extending their technological capabilities. Hamilton Sundstrand, for example, is building a new 149,000 sqm plant to manufacture high-end aerospace components, whilst Matsushita Electric Industrial is building Singapore’s first large-scale plasma display TV manufacturing plant.

Innovation and R&D

Secondly, innovation and R&D are important areas that will drive Singapore’s growth.International companies find Singapore to be an attractive location for their global R&D centres, undertaking projects ranging from product and process development, to upstream research. Currently, over 60 percent of national R&D spending is undertaken by the private sector, and we are seeing an increasing number of companies setting up their corporate labs here – such as BASF, GE Water and Vestas.

This year’s MAXA finalists have all invested significantly in innovation and R&D. The MAXA judges have singled out BD Medical[2] for the MAXA Product Innovation Award, as it has successfully developed innovative products to meet the unique needs of its markets.As early as 2003, Leica Instruments Singapore had moved all its R&D and manufacturing operations to Singapore. Kenwood Electronics Technologies also conducts extensive R&D activities at its research centre here.And in March this year, Seagate Technology International, the inaugural MAXA winner, doubled its local R&D team to 400 people.

Design capabilities

Thirdly, Singapore’s industrial design capabilities are beginning to capture the world’s notice, having won numerous industry awards for design excellence in the recent years.

Already, we have a strong talent base for industrial design. Last year, we received a strong boost when BMW DesignWorks set up its first-ever design studio outside the United States and Germany. The red dot design awards, the equivalent of Hollywood’s Oscars in the design world, were also established here, making Singapore the only country in the world outside Germany to host the red dot design competition, and house a red dot design museum. Further, Seagate’s one-inch 8GB drive was wholly designed in Singapore.

Supply chain management

And lastly, let me touch on supply chain management. We are now experiencing a migration of global manufacturing to the region and within Asia, the trend is for MNCs to distribute the value chain of activities within a network of plants – to capitalise on comparative advantages, and to diversify risks. Singapore lends itself well to such an arrangement.

Our integrated supply chain management infrastructure, which spans information technology, managerial, financial and legal expertise, and transport links to the world via our world-class seaport and airport, ensures optimised and cost-effective global deliveries.

Industry leaders such as Motorola, STMicroelectronics and Cooper Cameron recognise the sophisticated supply chain capabilities offered by Singapore. For example, Motorola has set up its Global Supply Chain Control Tower here. Similarly, our MAXA finalists are leveraging on Singapore’s supply chain capabilities to reach out to their regional and global markets.

Singapore’s value propositions for manufacturing activities

Singapore was recently named the world’s most competitive place for business[3], as well as the world’s easiest place to do business[4]. These accolades bear testimony to our standing as a choice manufacturing location. The conferment of the MAXA Singapore Advantage Award to Philips DAP[5] demonstrates how one company has successfully tapped into Singapore’s value propositions to boost its competitiveness in the global market.These value propositions did not appear overnight, but were the result of much concerted effort over the years. Allow me to elaborate on four main areas.

World-class workforce

First and foremost, we have a world class workforce. Singapore’s workforce has ranked highly in many international rankings. We have achieved this through sustained emphasis on developing expertise to ensure depth of knowledge and sophistication of skill.These efforts are usually undertaken in tandem with industry partners and we are continually retraining our workers to keep up with technology and meet the evolving needs of industry.

Investments in infrastructure

A second key element in Singapore’s success in manufacturing has been our heavy investments in infrastructural projects, conceptualised and created to meet industry needs.Some note-worthy projects include JurongIsland, and Biopolis and Fusionopolis at One-North. More recently, the Government announced plans for the SeletarAerospacePark, which will take Singapore aviation and MRO activities to the next level, and the Jurong Rock Caverns, which will create space in land-scarce Singapore for chemical storage.

Connectedness to the world

Thirdly, our connectedness to the rest of the world. Singapore is committed to pursue a strategy of expanding our economic space through our network of global and regional free trade agreements. Our network of FTAs is designed to support our business community in moving up the value-added ladder and knowledge chain. Today, we have 13 concluded FTAs and we will continue to work towards expanding this network to include other emerging markets, such as the Middle East and South Asian economies

Vibrant enterprise ecosystem

Finally, let me touch on an often less noticed, yet significant advantage that Singapore has as a manufacturing hub – Singapore’s vibrant enterprise ecosystem. One of the deciding factors for manufacturers in the choice of location for their operations is the availability of a pool of qualified suppliers.This is something that we have built up over the years, across the various industries.

But we are not resting on our laurels. As the outsourcing trend looks set to gain in momentum, we launched the Supplier Development Initiative (SDI) last year.Through this win-win partnership between international OEMs and Singapore-based suppliers, local suppliers will be upgraded to international OEM standards, while the OEMs will enjoy better support from them.

Manufacturing is a key driver of Singapore’s growth

Moving forward, manufacturing will continue to feature prominently in Singapore. Manufacturing investments create jobs across the entire value chain. These jobs are no longer only production-line positions – they span a wide range and offer different challenges.Manufacturing also leads to spin-offs in other industries and diversifies our economic base.These are compelling reasons for the Government to remain committed to growing manufacturing.

Last year, EDB announced that it aims to double manufacturing output to S$300 billion, and value-added to S$80 billion by 2018. The sector should also continue to account for a quarter of Singapore’s GDP. EDB has informed me that we are on track to meet the targets and the sector has been experiencing healthy growth in both output, as well as mindshare.I am heartened to hear this.

Conclusion

In closing, I would like to congratulate the winners and finalists of MAXA 2006 – Seagate, BD Medical, Philips DAP, Kenwood, Leica, and MSD. We will hear from the MAXA winner, judges and partners later in the Conference, and I am sure they will inspire us to reach for even greater heights.

I urge public and private enterprises to work together to put Singapore manufacturing on the world map.The MAXA tagline – “Singapore Made. Globally Admired.” – is a claim which I hope all of you will proudly make.

Thank you.

[1] Merck Sharp & Dohme.

[2] Becton Dickinson Medical

[3] KPMG Competitive Alternative Study 2006

[4] World Bank – Doing Business 2007 – How to Reform

[5]Philips Domestic Appliances and Personal Care