Industry Overview: SMO 2014
LAYING THE GROUNDWORK FOR GROWTH
Development in advanced global economies was generally weaker in 2013 than was expected, with the US yet to solve its fiscal impasse and with the weak domestic demand in Europe. While recovery in advanced economies in Asia is likely to lift export demand, structural reforms in China and fiscal consolidation in some ASEAN economies are likely to moderate growth. In view of this, the Singapore economy showed a recovery of 3.7 per cent in 2013, which was better than initially expected. This means the Gross Domestic Product (GDP) forecast for this year is expected to remain between 2 to 4 per cent in 2014.
Singapore’s 2013 Performance
The Singapore economy grew in the first two quarters of 2013 by 0.2 per cent and 4.4 per cent respectively. Preliminary estimates indicate that in the third quarter, the Singapore economy grew by 5.8 per cent on the year-on-year basis. On a quarter-on-quarter seasonally-adjusted annualised basis, the economy grew by 1.3 per cent in the third quarter after expanding by 17.4 per cent in the previous quarter. In the final quarter, Singapore’s GDP grew by 4.4 per cent on the year-on-year basis. However, analysts expect 2014 to be a more robust year, propped up by the manufacturing sector.
The manufacturing sector, which includes the transport engineering cluster, contracted by 6.3 per cent in Q1 of 2013 on a year-on-year basis. It then expanded with 0.8 per cent, 5.3 per cent and 3.5 per cent growth in the remaining three quarters of 2013. On a seasonally adjusted quarter-on-quarter annualised growth rate, the manufacturing industry shrank 10.4 percent before rebounding with a 32.7 per cent and 1.2 per cent growth in the second and third quarters respectively. In the final quarter, the manufacturing industry shrank by 4.0 per cent. However, the transport engineering cluster showed a strong growth of 17 per cent, a reversal from the contraction seen in the previous two quarters of 2013. The growth in this cluster was driven by the marine and offshore engineering segment, which surged by 21 per cent due to higher contributions from rig building and ship conversion projects.
According to International Enterprise (IE) Singapore’s 2013 third quarter trade performance review, Singapore’s total external trade rose on a year-on-year basis by 6.0 per cent in 3Q 2013, after a 2.0 per cent dip in the previous quarter. The level of total trade reached S$254 billion in 3Q 2013, higher than the previous quarter’s S$246 billion. Total exports and total imports grew year-on-year by 6.1 per cent and 5.9 per cent respectively in 3Q 2013.
Total trade’s year-on-year increase in 3Q 2013 can be attributed to the expansion in both oil and non-oil trade. Oil trade grew year-on-year by 10.9 per cent in 3Q 2013, after a contraction of 10.8 per cent in the previous quarter. Non-oil trade rose year-on-year by 4.1 per cent in 3Q 2013, following the 1.7 per cent increase in 2Q 2013.
On a year-on-year basis, oil domestic exports rose by 17.9 per cent in 3Q 2013, after decreasing by 10.7 per cent in the preceding quarter. In volume terms, oil domestic exports rose by 21.4 per cent in 3Q 2013, in contrast to the 3.0 per cent decline in 2Q 2013.
Preparations in the Year Ahead
As a global leader in the marine and offshore industry, Singapore is nonetheless facing stiff international competition from China and Korea. Furthermore, land constraints and the reduction of the inflow of foreign labour in Singapore pose additional challenges to the industry. In an effort to stay ahead, the Singapore government will be investing in the industry to support companies by increasing their design and engineering capabilities. Public research infrastructure such as the Singapore Maritime Institute and ocean-basin test facility will be set up. Companies will also receive aid from the government to improve overall productivity through new production technologies, training and equipment. Relevant educational institutes will be partnered with to bring in programmes which focus on areas such as offshore engineering and naval architecture. Furthermore, educational institutions in Singapore are beefing up on the maritime courses offerings. For example, economics majors at the Singapore Management University (SMU) that take up Maritime Economics Concentration (MEC) will have courses taught by industry specialists. They will also go on local and overseas industry-study trips, site visits and exchanges to international maritime academic centres of excellence, as well as undergo internships with maritime companies.
Bureau Veritas (BV), a global assessment and certification services provider, opened its Deepwater Technology Research Centre (DTRC) in Singapore in October 2013. The DTRC is the first BV technology research centre in Asia and it is supported by the Maritime and Port Authority of Singapore's (MPA) Maritime Cluster Fund (MCF). Moving forward, it aims to provide advanced technical solutions and innovations to BV's clients in Asia-Pacific to reinforce the level and quality of its real-time support.
To increase efficiency in the face of land scarcity and labour tightening, Sembcorp Marine launched their integrated shipyard on 6 November 2013. The first phase is complete, and it incorporates innovative design and advanced automation to fully utilise the available workforce and resources to achieve higher productivity. There are a total of three phases, the end of which will see Sembcorp Marine consolidate all its yards in Singapore, including Sembawang Shipyard and Jurong Shipyard, to free up land for other developments by 2024.
The demand for energy will only go up, and the search for viable and sustainable alternatives to oil continues. As a result, Singapore’s first tidal turbine test-bed was also launched on 6 November 2013 to test the viability of tapping tidal energy to generate electricity in Singapore. Jointly funded by the Ministry of Trade and Industry, Nanyang Technological University (NTU) and the Sentosa Development Corporation (SDC), data gathered from the turbine test-bed will allow engineers at NTU’s Energy Research Institute (ERI@N) to develop more innovative turbine concepts for both Singapore and international environments. Unlike solar and wind energy, tidal cycles are predictable and so can provide a more stable supply of energy. Throughout 2014, the turbine test-bed will be used to power the lights at the Sentosa Boardwalk Turbine Exhibit which aims to inform the public about tidal energy.
The Republic of Singapore Navy’s (RSN) joined the ranks of the United Kingdom, Australia and New Zealand’s navies with a new professional relationship with the Institute of Marine Engineering Science and Technology (IMarEST). In January 2014, the RSM’s training pipeline was accredited by IMarEST to establish a streamlined route for marine engineers and technologists which maps each individual’s professional qualifications against IMarEST membership from Technician to Chartered Status. The accreditation is open to RSN’s Naval Officers, Naval Warfare System Engineers and Experts, and Naval Divers.
Membership of IMarEST by the newly established streamlined route reduces the paperwork and amount of evidence required to be produced by individuals. It helps to speed up administration of membership and attainment of professional qualifications up to Chartered status. Members have the immediate advantage of access to IMarEST’s virtual library and vast bank of technical information as well as other membership benefits.
International Investments
With the constraints facing industry players in Singapore, it only makes sense to venture overseas. From government investments to luxury cruise services, Singapore’s maritime companies are investing in overseas opportunities.
Mexico's maritime and port authority sent a delegation which included its head Guillermo Ruiz de Teresa to Singapore in August 2013. The delegation met with representatives of the Port of Singapore Authority (PSA), Keppel Corp, Sembcorp, Jurong Port, Portek International and the Kuok Group to discuss investment opportunities in Mexico's ports and shipyards. The shipping sector has been identified as a key engine for growth by President Enrique Pena Nieto, and Mexico aims to become a key hub for logistics in the region.
ST Marine, on the other hand, has bought a 10 per cent stake in the luxury cruise ferry service that was shut down in 2009. The service, which runs between Yarmouth in Nova Scotia, Canada and Portland, Maine, in the US, is expected to be up by the middle of 2014. The cruise ship is 160m long and can carry 1,215 passengers and about 300 vehicles. Its facilities include 162 cabins, a casino, three restaurants, bars, a conference centre and theatre, a spa, a fitness centre, an art gallery and a duty-free shop. Owned by ST Marine, it is being chartered out to Nova Star Cruises under a three-year contract, with options to extend up to seven years.
Meanwhile in China, Keppel Telecommunications & Transportation Ltd (KTT) announced in July that the unit will buy a 60 per cent stake in Foshan Sanshui Port Development Co Ltd in Foshan City for 165.73 million yuan (S$34.9 million) in a bid to expand their presence in Southern China.
Singapore port operator PSA International also announced in November 2013 that it will form a joint venture to run Lianyungang Port in the Yangtze River Delta. The terminal has a designed capacity of 2.8 million 20-foot equivalent units with 1,700 metres of quay length and a water depth of 16.5 metres. The port also has super-post panamax quay cranes of 23-row outreach. It is expected to begin operations in mid-2014, and will support the container trade originating from the Shandong and Jiangsu provinces that will go out to the rest of the world.
Green Pledges
The Maritime Singapore Green Initiative seeks to reduce the environmental impact of shipping and related activities and to promote clean and green shipping in Singapore. It was enhanced in April 2013 to further encourage companies to adopt environmentally-friendly shipping practices. 20 more maritime companies added their names to the Maritime Singapore Green Pledge in December 2013, signifying their commitment to adopting environmentally-friendly practices. For a full list of signees and more information, visit the Maritime and Port Authority of Singapore’s (MPA) website at www.mpa.gov.sg.