In issue #43 of One Thing, we wrote about how East Asia (Japan and South Korea in particular) went from being a poor nation to a high-income country within a few years by adopting the export-oriented manufacturing-centric model.

Singapore used the same playbook but as wages rose production moved on. By the late 2000s, it was best known as a financial hub as it saw a decline in manufacturing that rich nations have been experiencing for decades.

Now Singapore is making a comeback

• Singapore's manufacturing rose 21% of GDP in 2020 while the west like the US and UK has faced declines
• The most interesting thing is that Singapore's manufacturing workers have shrunk for eight years straight while unemployment rates have remained steady at around 2%

So how did Singapore manage to pull it off?

The TL;DR 

• Automation

The TS;WM

• For countries like the US which want their manufacturing industry to create jobs as well as products, the highly automated model could prove unpopular
• But Singapore's economy and labour market are well suited to this approach
• It focuses on skill-intensive and not labour-intensive manufacturing which also means capital-intensive - more foreign investment
• Singapore doesn't want to bring back low-cost manufacturing, it focuses instead on products such as chips and aircraft avionics that required advanced machinery and highly educated technicians
• It is now the world's fourth-largest exporter of high-tech goods

What makes Singapore the preferred manufacturing hub in South East Asia?

• Singapore's central location in Asia makes it easy to import raw materials and other goods from the region 
• Well so is Malaysia but we don't have a welcoming and low-tax government, not to mention low corruption 
• It also has a superb talent pool (Thanks to the Malaysian government)
• It has no problem hiring foreign labours (Again, all thanks to the Malaysian government)
• The government has set up agencies to improve manufacturing efficiency and integrate new production methods like 3-D printing

Fewer, but better jobs 

• Manufacturing is becoming a white-collar profession in Singapore
• And because of automation, the manufacturing value added for each worker doubled means higher productivity and higher productivity means higher wages

We all have friends who chose to work in Singapore and who could blame them? Better pay, career development and favourable exchange rate. 

And now that Singapore is becoming a high-tech manufacturing hub, we will only see more Malaysians seeking opportunities on the small island.

Oh what will become of Malaysia???? 

Before you go...

• Check out issue #47 where we talked about the next asian tiger: Bangladesh 🇧🇩
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