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The Singapore economy expanded by 8.8 per cent in 1995. The economy benefitted from strong regional growth and a
favourable global electronics cycle, with growth being led by the manufacturing, and transport and communications sectors. The other key sectors also recorded good growth.
The economy grew by 10.7 per cent in the first quarter of 1996, up from 9.1 per cent a quarter ago. The growth in
manufacturing, transport and communications, and construction remained strong. These were in turn due to buoyant regional growth and strong global demand for electronic products. With the
external environment remaining largely favourable, growth for the economy should continue to be good.
Manufacturing Sector
The manufacturing sector grew by 10 per cent in 1995, down from 13 per cent in 1994. This was the second year that
manufacturing has grown faster than GDP growth. Growth was driven by the electronics and related industries like fabricated metal products and plastic products. However, several key
non-electronics industries were affected by keen competition, rising costs as well as industry-specific factors like plant maintenance shutdowns.
In the first quarter of 1996, the sector grew by 15 per cent, up from 12 per cent a quarter ago. The growth was led
by electronics industry due to strong demand for disk drives, semi-conductors, printed circuit boards and other computer peripherals.
Investment Commitments
In spite of keen competition, the manufacturing sector attracted investment commitments of $6.8 billion in 1995. This
was $1 billion more than 1994. Foreign investors accounted for 71 per cent of the total commitments. The bulk of total commitments went into the electronics, industrial chemicals and
petroleum industries at 37 per cent, 19 per cent and 17 per cent respectively.
The US remained the leading investor with $2.1 billion of investment commitments. Most of the commitments went into
the electronics, industrial chemicals and petroleum industries both for new plants as well as for the expansion of existing capacities.
Europe overtook Japan to become the second largest foreign investor with investment commitments of $1.5 billion. The
UK, Netherlands and Germany were the key investors. In total, these three countries accounted for $1.3 billion, mainly in the petroleum, petrochemicals and semiconductor industries. These
commitments would be used to increase and upgrade existing capacities.
Japan's investment commitments amounted to $1.2 billion. The electronics industry accounted for the major portion,
followed by the petrochemicals and food industries.
Local investment commitments remained healthy and amounted to $2 billion. The commitments were spread across a broad
spectrum of industries for the expansion and upgrading of existing capacities, particularly in the petroleum, electronics and printing and publishing industries.
Local small-and-medium enterprises (SMEs) in the manufacturing sector also made progress in their development. Their
nominal value addred grew from $5.4 billion in 1993 to $5.5 billion in 1994. The investment commitments by local SMEs rose in 1995 although at a slower rate than in 1994. Commitments reached
$540 million this year, an increase of 22 per cent over 1994.
Investment commitments in the manufacturing sector amounted to $1.3 billion in the first quarter of 1996, an increase
of 12 per cent compared to a year ago. Foreign commitments constituted 82 per cent of the total. U.S still remained the largest foreign investor, followed by Europe and Japan. The bulk of
total investment commitments are in industrial chemicals and electronics industries.
The US 's investment commitments of $458 million would help to increase the existing capacities in petrochemical and
semiconductor industries. The total Investment commitments from Europe amounted to $372 million; the European Union ($370 m), United Kingdom ($105 m) and Netherlands ($102 m) and they are
mainly to expand and create new capacities in the industrial chemicals industry.
Japanese investment commitments amounted to $248 million and involved in projects which would enhance capabilities in
petrochemicals and electronics industries.
Local investment commitments amounted to $237 million. These were mainly in the machinery, fabricated metal products,
plastic products and electronic industries for the expansion of production capacities.
Finacial and Business Services Sector
The financial and business services sector grew by 8.3 per cent in 1995, same as in 1994. Growth in the financial
services sector moderated to 7.3 per cent from 8.5 per cent in 1994 and 22 per cent in 1993. The sector's performance was mixed, with banks' domestic redit expansion accelerating and their
offshore banking and foreign exchange operations maintaining relatively strong growth. On the other hand, stock market transactions declined and the growth in finance companies' and
insurance companies' value-added slowed after high growth in recent years. The business services sector grew by 9.2 per cent in 1995, supported by continued strength in real estate services
and Singapore's attractiveness as a regional business hub.
The financial services sub-sector grew by 7.3 per cent in 1995 compared with 8.5 per cent in 1994. The slowdown in
growth was mainly due to lower trading activity on the stock market. As at end 1995, there were 142 banks, 79 merchant banks and 22 finance companies in Singapore. In the domestic banking
market, total loans and advances continued to expand strongly by 19 per cent compared with 16 per cent in 1994. Total assets/liabilities in the Asian Dollar Market grew by 15 per cent to
US$477 billion as at end November 1995 compared with a growth rate of 7.9 per cent in 1994. Total syndicated loans and bonds arranged in Singapore for non-resident borrowers increased by 8.7
per cent from $10.3 billion in 1994 to $11.2 billion in 1995.
Growth of value-added in the business services sector was 9.2 per cent in 1995, higher than the 8 per cent in 1994.
Both real estate and business services growth stayed robust.
Singapore's attractiveness as a regional business hub saw a doubling of the number of OHQs and BHQs awarded in 1995
from 12 in 1994. Engineering and information technology services continued to be in demand as the electronics and supporting industries recorded strong growth.
The real estate services sub-sector continued to benefit from the strong demand for office space. According to URA's
estimates, office rentals have continued to rise since 1994. With gross average rentals rising by 2.1 per cent in the third quarter (year-on-year) to around $7 per square foot (psf) per
month, industry analysts are upbeat that they will rise further to $9-10 psf for the next 10-15 months. The high office occupancy rate of about 95 per cent in 1995 reflects the strength of
demand.
The financial services sub-sector grew by 6.4 per cent in the first quarter of 1996. Financial services benefitted
from growth in the value added of stockbroking activity and in banks' domestic credit operations. The business services sub-sector grew by 9.7 per cent. It continued to benefit from demand
for business headquarters and information technology services, as well as strong demand for office space and residential units in prime districts.
Investment Commitments
The promotion of Singapore as a total business centre resulted in commitments in total business spending of $1.1
billion in 1995. In terms of fixed assets the commitments amounted to $1 billion. Local capital contributed 59 per cent of commitments in fixed assets while foreign capital committed 81 per
cent of the total business spending. The boom in the Asia-Pacific region and the strategic location of Singapore continued to attract MNCs to set up operational and business headquarters
here. This led to commitments in projects accounting for more than half of the total business spending amount. In 1995, eleven OHQs and twelve BHQs were awarded.
The logistics services accounted for 62 per cent of the commitments in fixed assets, followed by headquarters and
business services.
Commerce Sector
The commerce sector grew by 9 per cent in 1995, and was largely driven by entrepot trade due to strong regional
growth. Entreport trade grew by 18 per cent, same as a year earlier. All other sectors grew more slowly in 1995. The domestic trade sub-sector grew by 5.5 per cent, compared with 6 per cent
in 1994, while the restaurants and hotels sub-sector grew by 3.9 per cent, compared with 5.8 per cent a year ago.
Entrepot trade remained healthy but moderated slightly in line with slower regional growth. The commerce sector grew
by 9.2 per cent in the first quarter of 1996.
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