Speech by Prime Minister Lee Hsien Loong at Singapore Manufacturers' Federation 80th Anniversary Dinner

29 September 2012

Mr George Huang
President, SMa

SMa Council and Members

Distinguished guests, ladies and gentlemen

Many congratulations on your 80th birthday! Very few organisations in Singapore are 80 years old, but yours is 80 years and still going strong. And it reflects the good work which the Federation has been doing and the strong support which it is receiving from industry. A lot has changed in the world since SMa was established back in 1932. Back then, Singapore lacked a strong manufacturing industry. So to showcase our potential, what could be, the Government hosted a Manufacturers’ Exhibition at the Tanjong Pagar Railway Station, which at that time was newly opened. There were 90 exhibitors who took part, displaying products like tobacco, hats and pineapples. Soon after that, SMa was established to champion the manufacturing sector.

Today, Singapore is a thriving advanced economy with a strong manufacturing sector. In fact, manufacturing was essential to our economic takeoff, to becoming a more developed economy. Dr Goh Keng Swee, back in the 1960s, decided on a strategy of industrialisation to create jobs and growth, and get the stagnant economy moving. He developed Jurong into an industrial estate; he attracted MNCs to come to Singapore, to bring in technology, to open up access to world markets, and to start new industries which we could not have done on our own. Industries like semi-conductors, pharmaceuticals, petrochemicals, many others. We progressed steadily, from being a low-cost producer of mosquito coils and pyjamas to sophisticated goods like smartphone chips, new-generation aircraft engines, and cutting-edge drugs. Over time, we also built up a healthy cluster of local manufacturing companies which have become an integral part of our whole manufacturing eco-system. And these local companies, often not so big ones, serve the local market, do contract manufacturing for the big companies, or some have become international names in their own right.

Today, the global economy is changing rapidly, and changing especially for the manufacturing business. Robots are becoming more sophisticated and flexible, and rapidly doing work which used to be done by human beings on assembly lines. Foxconn, one of the biggest contract manufacturers in the world, has 1 million workers. But they have said that they are going to install 1 million robots by 2014. I am not sure what will happen to their workers, but the robots are coming on-stream. And there will also be new technologies like additive “3D” manufacturing. That means, instead of making something on a production line, you can “print” it on a 3D printer. You have a design, you input it into a computer, the computer will build it up layer by layer, and make the solid object, just like you print a piece of paper. Anyone can design his own product and “print” it, whether it is a simple widget or even a high-tech medical implant.

Manufacturing is getting integrated with services – it is called the “servitisation” of manufacturing. Integrating with service firms upstream or downstream – upstream, integrating with R&D and design; downstream, integrating with after-sales support, so as to deliver the better experience for your customers, so as to compete against cheaper manufacturing locations.

In Asia, consumers are getting more affluent, their weight is being felt, and they are causing companies to tailor and to design their products for Asian markets. So, manufacturing companies have to adapt to these changes. The big companies have more resources to do this, but it is harder for a big company to adapt and change direction. And if they do not get it quite right, they can get into difficulties like Nokia has done and others too, like HP, not doing as well as before. Small companies can be more nimble and flexible, but small companies are also more vulnerable to changes. So we need to keep both big and small companies doing well in Singapore. And we need manufacturing to remain a major pillar of our economy because it contributes more than 20% of our GDP. In recent downturns, we have picked up the most quickly with the manufacturing sector, and many Singaporeans work in manufacturing, doing good, skilled jobs. In fact, local wages in manufacturing have grown faster than the national average of wages in recent years. Manufacturing also has positive spillover effects onto the rest of the economy, whether it is into services, logistics, or innovation and enterprise.

So we need to strengthen our manufacturing sector, and to do that, we must leverage on our position as a hub, a Global-Asia Hub, meaning we must seize opportunities in rising Asia and connect with the rest of the world. We have to attract Western and Asian companies to Singapore, to use Singa¬pore as a base for their Asian operations, and for high value manufacturing for world markets. And we also need to help Singapore companies to go international. We need to improve productivity across the whole value chain, which is especially important as we approach our physical limits of growth and we reduce our inflow of foreign workers. We need to strengthen our whole eco-system, from the logistics infrastructure to the intellectual property protection to tripartism, which is one of our unique advantages. And of course we have to embrace new technologies – A*STAR has the Singapore Institute of Manufacturing Technology (SIMTech), and it works with Singapore companies to develop new ideas and bring them to production. For example, SIMTech has worked with one local company, Tru-Marine, to use additive manufacturing instead of manual welding so as to repair turbochargers, and to cut the time taken to do the job from four days to two hours. We need to upgrade our workforce, so that it can work in a hi-tech, hi-value added industry. We are developing our people at all levels – whether it is in the ITE, whether it is in the polytechnics or the universities, or in the workforce, through continuing education and training. We hope that companies will also invest in your human resources, take a long term perspective and build up your capabilities, so that you can remain viable beyond the latest business cycle and especially, we need to develop our technical and engineering skills, so that we add value to our products.

We will continue to attract MNCs to Singapore, because they will help us to upgrade, to develop new capabilities and access new markets. And that means maintaining a pro-business environment, where taxes are kept low, policies are consistent and sound, and our infrastructure is up to date and efficient. And of course we need to continue to welcome foreign talent, while encouraging employers to train and to build up the local talent pool. The Government will also help local companies, and manufacturing companies, and SMEs to adapt to the new landscape because local companies and SMEs are important to our economy – you employ many locals, you complement the MNCs’ production chains. We cannot guarantee that every single company will always succeed, but we are committed to help every company find a way forward. I acknowledge challenges that you face – difficulty finding enough local workers, being squeezed when we tighten up our foreign worker rules, lacking capital and scale. But we have many schemes to help companies to adapt and stay competitive – we have a Productivity & Innovation Credit to co-fund upgrading, we have training grants for workers, we have schemes like Flexi-Works! and ADVANTAGE! to encourage SMEs to hire local workers. So companies have to do your part, take full advantage of Government support to upgrade yourselves. Work together to overcome constraints of size, for example, when you are going overseas, form consortiums to enter new markets or to bid for large contracts. Working together through your own efforts and with Government support, I am sure we can transform the sector and we can help your companies do well.

The Singapore Manufacturers’ Federation plays an important role in this, because you represent diverse companies, from MNCs to SMEs, spanning 11 industry groups. I am heartened at SMa’s commitment to serve our manufacturing companies better. You are developing new capabilities through the Singapore Innovation and Productivity Institute, which is co-funded by SPRING, which is a Government agency; you are upgrading the manufacturing workforce through the SMa Centre for Corporate Learning and your Institute of Higher Learning and you are connecting companies with trade and business counterparts worldwide. So I am glad that SMa intends to expand its remit to serve all manufacturing-related industries, and not just manufacturing companies, and hence the change of name, from Singapore Manufacturers’ Federation to the Singapore Manufacturing Federation.

The Government deeply appreciates SMa’s consistent support over many years and we look forward to a long period of close cooperation ahead. So congratulations once again on this significant milestone, and may you go from strength to strength, and from success to success.

Thank you very much!