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Singapore’s November export slump points to structural drag
SINGAPORE - Singapore reported a surprise fall in November non-oil domestic exports, indicating the strong recovery in October's electronics shipments was a Christmas blip while raising deep concerns about the city-state's pharmaceutical sector.
Trade agency International Enterprise Singapore (IE Singapore) said on Tuesday non-oil domestic exports fell 8.8 per cent in November from a year ago, surprising economists whose median estimate was for a rise of 4.3 per cent.
November's non-oil domestic exports were 9.3 per cent lower after seasonal adjustments from October. "It's a huge miss. It seems the October spike in electronics exports was for Christmas orders and that the structural drag in the industry remains," said Barclays economist Joey Chew.
Domestic exports of pharmaceuticals plunged 46.9 per cent to S$934.5 million ($744.47 million) from a year ago, falling at a meteoric double-digit pace for the sixth consecutive month to the lowest level since December 2008, according to research by CIMB, the second-largest bank in neighbouring Malaysia. "It may be a reflection of a very competitive landscape where the absence of new drugs has hurt the value of exports,"said CIMB regional economist Song Seng Wun.
Nevertheless, economists were still surprised by the sharp drop in November's pharmaceutical shipments, as factories in the city-state continue to add facilities.
But Chew of Barclays noted: "Plants in Singapore have been producing more lower-value-added generic drugs. Exports to the European Union, the biggest market for Singapore-produced drugs, have been extremely weak because of this."
Singapore made an aggressive push into biomedicals around 15 years ago, offering generous tax breaks to attract manufacturing investment in pharmaceuticals and providing millions of dollars in funding to get top scientists such as Alan Colman, who famously cloned "Dolly" the sheep, to relocate to Singapore.
The biomedical sector last year surpassed electronics in terms of contribution to manufacturing gross domestic product, although electronics will likely regain first position in 2013 given the drop in pharma exports this year.
Shipments of electronics from Singapore factories dropped 8.9 per cent year-on-year, hurt by a 32.4 per cent plunge in disk media and a 11.9 per cent drop in disk drives. "The ugly (November) export reading raises concerns yet again that Singapore's manufacturing may be losing competitiveness and facing hollowing-out pressures," Bank of America Merrill Lynch's Southeast Asian economist Chua Hak Bin said in a note to clients.
For instance, Singapore's non-oil domestic exports have contracted by 6.3 per cent since the start of 2013, while Taiwan and South Korea have seen exports edge up slightly while China's grew by 8.2 per cent, he said.
Hollowing-out refers to manufacturing being moved from a high-cost, well-developed country to a cheaper, emerging-market location.
Barclays economist Chew highlighted Singapore's loss of market share in the case of disk media, which has seen sharp double-digit dips in exports this year even though overall imports by Japan, the biggest market for Singapore disk media manufacturers, have remained steady.
While IE Singapore expects non-oil domestic exports to drop by 4-5 per cent this year, total trade will likely grow by 1-2 per cent due to re-exports of goods from the city-state's giant container port which is the world's second busiest after Shanghai.
Singapore has seen its manufacturing sector lag the rest of the region in the last few years, as its economy becomes increasingly reliant on areas such as trade and financial services as well as tourism and property development.
SINGAPORE - Singapore reported a surprise fall in November non-oil domestic exports, indicating the strong recovery in October's electronics shipments was a Christmas blip while raising deep concerns about the city-state's pharmaceutical sector.
Trade agency International Enterprise Singapore (IE Singapore) said on Tuesday non-oil domestic exports fell 8.8 per cent in November from a year ago, surprising economists whose median estimate was for a rise of 4.3 per cent.
November's non-oil domestic exports were 9.3 per cent lower after seasonal adjustments from October. "It's a huge miss. It seems the October spike in electronics exports was for Christmas orders and that the structural drag in the industry remains," said Barclays economist Joey Chew.
Domestic exports of pharmaceuticals plunged 46.9 per cent to S$934.5 million ($744.47 million) from a year ago, falling at a meteoric double-digit pace for the sixth consecutive month to the lowest level since December 2008, according to research by CIMB, the second-largest bank in neighbouring Malaysia. "It may be a reflection of a very competitive landscape where the absence of new drugs has hurt the value of exports,"said CIMB regional economist Song Seng Wun.
Nevertheless, economists were still surprised by the sharp drop in November's pharmaceutical shipments, as factories in the city-state continue to add facilities.
But Chew of Barclays noted: "Plants in Singapore have been producing more lower-value-added generic drugs. Exports to the European Union, the biggest market for Singapore-produced drugs, have been extremely weak because of this."
Singapore made an aggressive push into biomedicals around 15 years ago, offering generous tax breaks to attract manufacturing investment in pharmaceuticals and providing millions of dollars in funding to get top scientists such as Alan Colman, who famously cloned "Dolly" the sheep, to relocate to Singapore.
The biomedical sector last year surpassed electronics in terms of contribution to manufacturing gross domestic product, although electronics will likely regain first position in 2013 given the drop in pharma exports this year.
Shipments of electronics from Singapore factories dropped 8.9 per cent year-on-year, hurt by a 32.4 per cent plunge in disk media and a 11.9 per cent drop in disk drives. "The ugly (November) export reading raises concerns yet again that Singapore's manufacturing may be losing competitiveness and facing hollowing-out pressures," Bank of America Merrill Lynch's Southeast Asian economist Chua Hak Bin said in a note to clients.
For instance, Singapore's non-oil domestic exports have contracted by 6.3 per cent since the start of 2013, while Taiwan and South Korea have seen exports edge up slightly while China's grew by 8.2 per cent, he said.
Hollowing-out refers to manufacturing being moved from a high-cost, well-developed country to a cheaper, emerging-market location.
Barclays economist Chew highlighted Singapore's loss of market share in the case of disk media, which has seen sharp double-digit dips in exports this year even though overall imports by Japan, the biggest market for Singapore disk media manufacturers, have remained steady.
While IE Singapore expects non-oil domestic exports to drop by 4-5 per cent this year, total trade will likely grow by 1-2 per cent due to re-exports of goods from the city-state's giant container port which is the world's second busiest after Shanghai.
Singapore has seen its manufacturing sector lag the rest of the region in the last few years, as its economy becomes increasingly reliant on areas such as trade and financial services as well as tourism and property development.
