Feature Articles
Manufacturing And Services In Singapore’s Economy: Twin Engines Of Growth And Their Asymmetric Dependencies
23 November 2017
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Manufacturing and services are the twin engines of growth in the Singapore economy. Although they share a close, inter-dependent relationship, the development of services globally has historically depended more on the growth of the manufacturing sector than vice versa. This study examines whether the asymmetric dependencies between manufacturing and services hold in Singapore, and how this relationship has evolved over time.
The manufacturing sector was found to have stronger value-added (VA) spillovers to the services sector than vice versa in 2013. Specifically, for every $1 million of VA generated in the manufacturing sector, $0.29 million of VA were produced in the services sector, particularly in knowledge-intensive professional services such as regional/international headquarters and engineering services, and wholesale trade. Notably, the chemicals and precision engineering clusters within the manufacturing sector contributed the most economic spillovers to the services sector. On the other hand, for every $1 million of services VA generated, $0.02 million of VA were produced in the manufacturing sector.
Similarly, employment creation in the manufacturing sector was associated with greater employment creation in the services sector than vice versa. Specifically, every 100 new jobs in the manufacturing sector were associated with 27 jobs created in the services sector. Notably, jobs created in the biomedical manufacturing and chemicals clusters were associated with the most number of services jobs created, particularly in exportable services such as professional services and wholesale trade. By contrast, every 100 new services jobs were associated with only 3 new jobs in the manufacturing sector.
Over time, the economic spillovers by both the manufacturing and services sectors have risen on the back of a strengthening of their backward linkages with other sectors within the domestic economy. Between 2000 and 2013, the indirect VA generated by the manufacturing sector rose by 2.2 per cent per annum, while that generated by the services sector increased by 0.2 per cent per annum. Within the manufacturing sector, the chemicals cluster saw the largest improvement in backward linkages (8.6 per cent per annum increase in VA spillovers), followed by the precision engineering (4.6 per cent per annum) and transport engineering (1.4 per cent per annum) clusters.
In view of the manufacturing sector’s strong backward linkages to the services sector, efforts to grow highly-productive modern services such as professional services, wholesale trade and finance & insurance under the Government’s Industry Transformation Maps will be supported by the concomitant development of a globally-competitive manufacturing sector.
The views expressed in this paper are solely those of the author and do not necessarily reflect those of the Ministry of Trade and Industry or the Government of Singapore