Economic Affairs

Skilled workers needed to match inflow of manufacturing investment

The recent spate of investments in the sector spells good news for the economy but brings relatively few new jobs. Is this of concern?

Singapore's manufacturing sector received a shot of confidence last month when German chemicals giant Evonik Industries announced its latest investment here.

The company broke ground on its second methionine plant on Jurong Island in an investment worth more than €500 million (S$762 million), barely two years after it opened its first such facility here in November 2014.

Clearly, recessionary conditions in the sector - which is just showing nascent signs of a pick-up after being in the doldrums for more than a year - have not stopped global players from coming in with new investments, and fairly sizeable ones too.

Other major investments that made headlines this year include chipmaker Micron Technology pumping in US$4 billion (S$5.4 billion) to expand its Senoko facility, and drug-maker AbbVie's plans to build a US$320 million manufacturing plant in Tuas Biomedical Park, its first in Asia.

This continued inflow of investment is one of the few bright spots the manufacturing sector is seeing, after posting a dismal 5.2 per cent drop last year over 2014, its worst showing in 14 years.

Data from the Singapore Economic Development Board (EDB) shows Singapore has seen some $7.6 billion in fixed asset investments (incremental capital investment in facilities, equipment and machinery) for manufacturing and services being made as at the third quarter of this year.


ST ILLUSTRATION : MIEL

Yet the number of jobs these investments are bringing in is relatively small. Evonik will employ at least 150 people, Micron will add 500 people and AbbVie will offer more than 250 jobs. The question is whether these mega investments come with sufficient pay-off in terms of job creation.

JOB CREATION

The number of new manufacturing jobs generated, after all, is not enough to offset the rate of job losses across the overall sector, notes IHS Markit's Asia-Pacific chief economist Rajiv Biswas.

Indeed, employment in the manufacturing sector has shrunk significantly for four straight years, from 424,622 workers in 2012 to 400,173 in 2015. The sector's share of employment in the country's total workforce fell from 30 per cent in 1980 to around 14 per cent this year.

This was largely due to the high wage costs here, he says, which have pushed multinationals to seek other Asian locations for low- to medium-cost industry segments.

Dr Tan Khay Boon, senior lecturer at SIM Global Education, says: "Manufacturing tends to be more intensive in automation, and the increasing use of technology means that the number of jobs created are not in large numbers.

"It is also well known that Singapore is tightening the flow of foreign labour and companies are aware that labour-intensive manufacturing is not suitable in Singapore."

CAN SINGAPOREANS FILL THESE JOBS?

Set to begin operations in 2019, Evonik's new plant (for producing an essential amino acid used in animal feed) will create more than 150 jobs, adding to some 500 staff across the group's operations here.

An Evonik spokesman notes that these jobs will require high-skilled personnel - from logistics specialists and chemical process technicians to chemical engineers and production managers. "We would like, if possible, to fill all 150 positions with Singaporeans and Singapore PRs (permanent residents) if they are available at the point of hire," she says.

One key issue is whether the existing workforce has sufficient skills to take up these jobs.

The jobs, such as those in precision engineering, tend to be very technical in nature, with specialised specifications - skills that much of the Singaporean workforce is not equipped with, at least for now.

The Monetary Authority of Singapore has said that skills mismatches in the labour market are on the rise, which could leave laid-off workers - especially professionals, managers, executives and technicians - in a rut as they are unlikely to possess the skills required as the Singapore economy moves towards higher-value-added niche sectors.

"These investments tend to have high technical components with specialised job specifications for which you can't easily find Singaporeans with the relevant skills," says Dr Tan Khee Giap of the National University of Singapore's Lee Kuan Yew School of Public Policy, adding that qualified Singaporeans tend to prefer higher-paying jobs, particularly in banking and financial services.

That many young Singaporeans see engineering as second-tier to other more "glamorous" jobs has only exacerbated the talent crunch.

Equally important is a shift in mindsets. "Singaporeans must be hungry to do more and to do better. Right now, they're still very comfortable doing what they have been doing. They're just not hungry enough," says Mr Erman Tan, president of the Singapore Human Resources Institute.

FEWER JOBS, BUT BETTER ONES

But the trade-off is that these jobs pay well, and they offer good prospects. Global science company 3M, for instance, plans to add around 100 staff as it expands its Tuas plant, including production employees, engineers, supply chain planners and managers.

"The products manufactured at the new plant are in the high-tech industrial and healthcare industries, and require advanced manufacturing processes that are dependent on the highly skilled local talent pool," says 3M Singapore managing director Arthur Fong.

Remuneration in the overall manufacturing sector has grown steadily to reach a total of $21.59 billion last year - an improvement over the $17.99 billion five years ago, though slightly lower than the $21.81 billion in 2014, going by official data. The nominal median monthly salary of a full-time Singaporean or PR employee in manufacturing was 5.4 per cent higher, at $4,437, compared with in 2014.

Mr Biswas attributes this to the Republic's growing focus on drawing investments in "capital-intensive, advanced manufacturing segments" - such as aerospace, biopharmaceuticals, semiconductors and speciality chemicals - which require skilled workforces commanding higher salaries. "As Singapore's per capita GDP levels have reached the highest in the Asia-Pacific region, exceeding Japan, Hong Kong and Australia, the structure of its manufacturing sector has been increasingly shifting away from low-wage manufacturing towards high-value-added manufacturing," he says.

The biopharmaceutical manufacturing sector, for instance, is expected to generate more than 300 jobs over the next three years. The average remuneration was around $102,000 last year.

THE WAY FORWARD

NUS' Dr Tan believes more can be done for Singaporeans to fully benefit from the recent string of investments.

"Singapore must have a system of highly coordinated and targeted industrial attachments with professional certifications and incentives for potential employers with industrial skill-matching," he says. "Unless we have a comprehensive system of job- and skill-matching for Singaporeans... jobs created by such high-tech investments may only be fulfilled by foreign skilled professionals."

BMI Research Asia analyst Chia Shuhui believes these investments will be largely positive for Singapore's economy: "A more advanced manufacturing sector will help maintain Singapore's competitiveness and lend support to ongoing efforts to raise productivity, enabling the city-state to retain its advantage over its competitors."

SIM's Dr Tan notes that issues such as the environmental impact in terms of industrial waste and pollution might arise from such manufacturing activities, but adds that these investments also create spillover benefits for other industries. Evonik, for example, may purchase raw materials from suppliers here. "When manufacturing is completed, their products will need to be stored before exporting, and this will involve the logistics industry, the shipping industry and the port. And besides the construction company which benefits from building the plant, there will be transport, food and accommodation needed by the 150 workers as well."

Despite the weakness in global demand, the EDB, which expects to draw a total of $8 billion to $10 billion in fixed asset investments for 2016, remains on track to meet its targets for the year, says assistant managing director Lim Kok Kiang. "We continue to see strong investment interests from Singapore's key manufacturing clusters such as electronics, energy and chemicals, biomedical sciences and precision engineering."

He adds: "The global manufacturing landscape is increasingly competitive and complex. Manufacturing centres are competing not just in terms of cost, but also in terms of their depth of capabilities in multiple areas. It is especially important for Singapore to maintain a competitive manufacturing sector and deepen our role in global manufacturing value chains. While the transformation journey may not be an easy one, it is necessary to ensure the future of our economy."

The number of jobs created from these new investments may not be in the thousands, but they are good-paying, quality jobs which allow the local workforce to remain relevant in a changing world. And it may be a long-term project to see Singaporeans well equipped with the skills to benefit from these investments, but it is heartening that Singapore recognises the urgency and has embarked on this journey.

A version of this article appeared in the print edition of The Straits Times on November 09, 2016, with the headline 'Skilled workers needed to match inflow of manufacturing investment'. Print Edition | Subscribe