Speech by Minister Chan Chun Sing at the launch of the Southeast Asia Manufacturing Alliance

1. A very good morning to all of you. 

2. It is my pleasure to join you at the launch of the Southeast Asia Manufacturing Alliance today. 

Global Shifts in Production and Supply Chains 

3. Manufacturing has been, and will continue to be, an important pillar of our economy.

a. The sector contributes to about 21% of our GDP and employs some 450,000 workers.

b. Despite the challenges of COVID-19, the manufacturing sector grew by more than 7 per cent last year – a credible performance amidst a very difficult period.  Clusters like electronics, biomedical manufacturing, and precision engineering continue to see bright growth prospects. 

4. However, manufacturing is changing rapidly and fundamentally. We can no longer expect to succeed just by doing things the way that we have done previously. COVID-19 has accelerated two broad shifts that were already well underway before the pandemic struck us.  

a. First, technological advancement is changing the face of manufacturing. 

i. Leaps in computing power have enabled advanced artificial intelligence and analytics.  Combined with additive manufacturing, production times, production processes and repair cycles have transformed manufacturing. 

ii. IoT and the use of digital twins have transformed traditional production lines into dynamic, interconnected systems. 

iii. The competitiveness of our manufacturing will now hinge on whether we can push the frontiers of production, evolve new products, services and business models in compressed time cycles.  

iv. It is not just about quality and efficiency, but just as importantly will be our “speed to evolve” new products and production systems, and “speed to market” propel by secured and resilient supply chains.

b. Second, the shift in production patterns and methods requires us to re-examine our value proposition as a manufacturing hub amidst the regional and global competition. 

i. COVID-19 exposed the vulnerabilities of depending on just a few markets for both supply and demand. Geopolitical forces have added complications to the layout of the global production system. We have seen greater re-shoring, regionalisation, and diversification, to hedge against trade and travel restrictions.

ii. To preserve and strengthen our relevance, we must situate ourselves at critical nodes in the different global value chains. We do not just want to provide support services. 

iii. In a recent dialogue with the EDB Society, someone asked me what are the sectors that Singapore should focus on in the coming years. My answer was not so much which sector we should focus on, but which part of the global value chain that we can be relevant in. 

iv. It is one thing to be able to produce at scale, at a certain point in time. It is another thing to be able to position ourselves at particular niches along that global value chain that makes it hard for us to be displaced. In today's manufacturing landscape, if we are at critical nodes, it will make it much more difficult for others to displace us on the basis of scale or on the basis of price. And that is the space that we want to be in. 

v. In order for us to be at those critical nodes of the global value chain, we must aspire to be the catalyst and centres of innovation, where we can create core intellectual property for us to entrench our relevance at those nodes. Without this, we will just be one amongst many, competing on the basis of price, efficiency, and perhaps quality. 

vi. Going forward, we need to compete on the basis of our R&D, our innovation, and our knowledge by being able to be at critical nodes of the global supply chain that others cannot easily displace us. 

Southeast Asia as a Key Prong of our Manufacturing Vision

 5. These are challenges that we have to overcome. But it also presents great opportunities for both Singapore and the region.

6. As more companies look to diversify their production base and supply chains, Singapore, as part of Southeast Asia, is well-positioned to capture a sizeable share of these shifts.

a. First, the region has strong fundamentals, with a large consumer base, and a young labour force. While Singapore cannot compete on our size or cost structure, we can leverage the collective strength of the region, to seize opportunities together. But it will require us to re-examine the layout of our manufacturing processes across the region, rather than just across and within Singapore.

b. Second, Southeast Asia can be and must be an integrated and well-connected place with the rest of the world. Through the ASEAN Economic Community and our extensive Free Trade Agreements (FTAs) such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), we will continue to broaden and deepen our economic linkages. This makes us a much more attractive location for others to site their operations here, because they know that they can connect and have privileged access to the rest of the markets. And they also know that Singapore will maintain our reputation as a trusted partner, where we will not impose export restrictions even in the depths of a crisis; that even in the depths of a crisis, we will enable our commercial enterprises to fulfill their obligations and responsibilities to the global supply chains. These put us in good stead over and above the other competitors when it comes to the value and the brand of trust that we can offer others.

c. Third, manufacturing is a key growth driver for many of the economies in Southeast Asia.  Our neighbours have undergone significant industrial transformation to raise their competitiveness, especially in the areas of Industry 4.0 (I4.0).

Partnering Enterprises to Expand to Southeast Asia 

 7. Last week, I shared our vision for Singapore to become a global business, innovation, and talent hub for Advanced Manufacturing by 2030.

8. The Southeast Asia Manufacturing Alliance, or SMA, will play an important part by helping businesses grow their manufacturing and innovation footprint in Singapore and the region.

9. First, for local and global companies looking to diversify their production to Southeast Asia, we offer a “Singapore plus one” strategy that enables them to tap on our ecosystem, capabilities, and networks, to mobilise capital, aggregate talent and protect their intellectual property.  In the past, many of the manufacturing activities competed on the basis of the abundance of resources, the cost of their labour and so forth. Going forward, the nature of the competition will change. It will be our ability to aggregate talent, mobilise capital, protect intellectual property, and to provide a long-term predictable environment for people to put their significant investments in Singapore.

a. The SMA arose because we recognise that Singapore is uniquely placed to support companies in enhancing their competitiveness. Over the years, we have built a robust ecosystem for enterprises, but we are not complacent:

i. We are constantly strengthening our connectivity, both in terms of physical trade and infrastructure, and digital flows;

ii. We have developed trusted quality and standards infrastructure and capabilities, to support high-value industries that manufacture safe and reliable products;

iii. We are focused on transforming our economy to uplift the productivity, innovation, and skills of our local workforce and businesses. These are evergreen challenges where we can never say we have arrived; these are things that we have to keep working on to ensure that Singapore remains a dynamic and competitive environment

b. We have also attracted the best-in-class firms with frontier capabilities to anchor their operations here. Many of them continue to see Singapore as a springboard to the region, by situating their innovation, R&D centres and key operations here.

i. For example, BASF, a leading chemical company, is building its regional production hub in Singapore, leveraging our ecosystem and connectivity to expand their agricultural solutions across the Asia Pacific.

c. Through the SMA, we will strengthen our support for companies who invest here and partner our Strategic Partners, to build up their capabilities and facilitate their expansion into the region.

i. By tapping on the network of partners, we enable companies to evaluate the feasibility of siting their operations in different locations across Southeast Asia, based on their business needs. If this works well, Singapore will not need to compete on the basis of our own local characteristics and offerings; every country in Southeast Asia will be able to compete as one, offering potential global investors a suite of characteristics that they want to see in this region as an integrated market.

ii. Eligible companies can also tap on support provided by the Economic Development Board (EDB), Enterprise Singapore (ESG) and the respective Strategic Partners. These include differentiated tiers of logistics prices, grants for the set-up of innovative activities in Singapore, and support to identify potential Singapore suppliers for their industrial activities.

iii. We welcome international companies to leverage our ecosystem, experience, and expertise, to situate their core business activities here.

d. Ultimately, we will enable and offer global companies an effective and decentralised model, that harnesses the best of what Singapore and Southeast Asia can offer in order to mitigate the risk that comes with disruption.

10. Local companies are also looking to grow in the region, and we will provide the opportunity for them to come together and compete as a team.

a. We often speak of the importance of expanding our regional footprint, but it is not easy. Understanding the regional landscape, finding the right in-market partners, developing the talent and innovation capabilities to break into a new market – all these are vital challenges that we need to overcome together.

b. The SMA will help us gain early insights on market needs and challenges faced by potential manufacturing investors.

i. We can then better assess and band suitable Singapore companies as a group, to jointly provide a comprehensive, targeted and customised set of solutions to meet investor demands.

ii. This approach strengthens our firms’ value proposition, giving them a better shot at penetrating the global supply chains.

c. This also complements our existing support for local enterprises, through initiatives such as Scale-up SG, the Global Innovation Alliance (GIA), and co-innovation programmes.

i. For example, Scale-Up SG has brought together PBA Group – a robotics and automation company,  and HMI Group – a healthcare company , to capture new opportunities overseas. PBA deployed the first made-in-Singapore UV-disinfecting autonomous mobile robots, at two of HMI’s hospitals in Southern Malaysia to combat COVID-19.  Now in its third run, the latest scale-up cohort comprises seven companies in AgriTech, healthcare, urban solutions and supply chain.

ii. For the GIA, from 2019 to 2020, we saw a tripling of participating companies to over 350 , reflecting their thirst for new markets and collaboration opportunities. Today, the GIA network spans across 15 cities in 11 countries.

iii. We will continue to forge strong collaboration, and grow our enterprises into globally-competitive players.

d. The SMA also brings new opportunities for our local solution providers in advanced manufacturing.

i. As companies diversify across Southeast Asia, they will look for ways to improve productivity, optimise manufacturing workflows, and tighten inventory control.

ii. Our local players are well-positioned to partner companies that are expanding in SEA, to build smarter, more efficient, and more resilient solutions.

e. To Singapore companies that can add value to global investors and suppliers, solution providers, catalysts for innovation and transformation:

i. We urge you to leverage the SMA, and forge new and more meaningful collaborations with global manufacturers.

Conclusion

 11. On that note, I would also like to thank our Strategic Partners – CapitaLand, Gallant Venture, and Sembcorp Development – who are here with us today.

a. Together with our partners, the SMA has a comprehensive regional coverage that extends to countries such as Indonesia, Malaysia, and Vietnam.

b. We will continue to expand this coverage by onboarding more Strategic Partners, with industrial assets in other parts of Southeast Asia.

12. Beyond COVID-19, Asia is expected to remain the world’s growth engine. The time is now for companies to strengthen our collective value proposition and operations, to secure an advantage over competitors.

13. Singapore and Southeast Asia stand ready for those looking to make this move. We look forward to working with many more like-minded companies to grow this network and to bring our manufacturing capabilities to the next level, so that we can compete on the basis of our trusted brand, the quality of our innovation, and the ability for us to aggregate talent and mobilise capital over and beyond what people already know of our brand of efficiency and reliability.

14. Thank you.