Singapore's manufacturing sector could be seeing the tail-end of
a massive relocation drive to low-cost countries.
Investment bank Credit Suisse First Boston says it is hearing of
firms returning from China to set up services and high-value added
IT production in Singapore.
It says the strong showing in the manufacturing and services sector
last year put paid to talk of a "hollowing" out of Singapore's
manufacturing base.
Many companies have been setting up production bases in China to
take advantage of the lower labour costs there.
But in its latest research report, CSFB says there are signs that
companies do not want to put all their eggs in a single China
basket.
In addition, problems with intellectual property rights and high
logistics costs in China are starting to push capital flows back
home.
Logistics costs in China account for 3 percent of sales but in
Singapore, they are much lower at about 1 percent.
And due to the shortage of talent in China, it is also more
cost-effective to do high-value added services in Singapore - such
as testing, process management, and design services for
R&D.
CSFB says the Singapore economy is emerging from massive structural
adjustment.
It is forecasting growth of 5 to 6 percent over the next one to
three years. - CNA
