there is also a need to differentiate between imported and local producers services, as this has implications for relative factor prices. Currently, only input-output tables, which are published every five years, contain some of such information.
Third, Griliches (1992:19) suggests that the household sector be included in the national income accounts as some of the primary effect of technical change is not in terms of the items themselves, but in what they accomplish when used in the household sector and how they substitute for consumer time and other purchased inputs.
2.3 Performance of the Manufacturing and Services Sectors
Output TrendsIn the absence of an agricultural sector, the services sector has thrived alongside the manufacturing sector since the early 1970s. There have been no major changes in the GDP shares of these sectors over time, as shown in Figure 2.1.
Figure 2.1 : GDP Share by Sector (Percent)
Manufacturing
Services
Source: Singapore Yearbook of Statistics, various issues
In the 1970s, when Singapore was in its initial stage of development, to solve the unemployment problem, FDI was encouraged in the labour intensive manufacturing sectors like the textile and garment industries, food and beverage, printing and publishing, and metal and engineering industries. The most prominent industry in the
manufacturing sector in the 1970s was petroleum, which was established by virtue of locational advantages in serving the surrounding region endowed with oil reserves.
In the early 1980s, the manufacturing share decreased slightly. This could be due to the structural changes that were taking place, particularly in the manufacturing sector where the high-wage policy of 1979-81 was implemented by the government to gear the manufacturing sector towards capital intensive operations. The chemical process, metal engineering and machinery, heavy engineering, and electrical and electronics industries were then selected for priority development.16
The Economic Committee Report (1986:160) then decided that “a strong and viable manufacturing sector is important and services cannot plausibly expand sufficiently to replace this.” Besides focusing on the electronics industry, other new growth industries in manufacturing were identified in biotechnology, pharmaceutical and medical products. The aerospace industry today is a key aviation hub and service centre. Singapore is also a base for aircraft repair and maintenance, component manufacturing, product design and development, and regional sales and supporting activities.
The electronics sector, however, has been the key manufacturing sector since the late 70s. In the 80s, the items produced by the electronics sector included computer peripherals, integrated circuits, semiconductor devices, printed circuit boards, audio and video equipment. In the 1990s, the electronics industry was into design and wafer fabrication, which is close to the advanced end of the production. Singapore today produces almost half of the world’s hard-disk drives and 90% of all sound cards. High- technology exports (covering bio-technology/life science, opto-electronics, flexible manufactures, information and communication, electronics, advanced materials and, aerospace) grew 16% each year between 1990 and 1995 and accounted for the largest share of all such goods exported by the four Asian tigers between 1990 and 1995.17 Thus, although the GDP share of manufacturing has not changed much except for the fall in 1996, the composition of the manufacturing sector has changed significantly.
16 See Lim (1984:41).
The share of the services sector seems to have gradually increased. After the 1985/86 recession, the share has increased due to the boost given by the government through incentives. The ‘supply-puli’ elements were also well in place and this referred to the growing need for producer services like distribution and infrastructure services which were key ingredients for the manufacturing activities. At the same time, Singapore was gearing up towards being a major financial centre and business hub of the region.
Table 2.1 shows the breakdown of various service industries’ GDP within the services sector.
Table 2.1 : Breakdown of Services Sector’s GDP (Percent)
Service Industry 1970 1976 1982 1988 1992 1996 Commerce 36.0 35.6 30.0 26.2 26.1 25.7 Transport & Communication 11.9 17.4 11.3 20.0 20.1 20.8 Financial & Business Services 27.7 25.4 32.6 36.8 37.8 38.7 Other Services 24.4 21.5 18.4 17.0 15.4 14.7
Note: Figures may not add up to 100 due to rounding up.
Source: Singapore Yearbook of Statistics, various years
In the 1970s, the commerce sector’s share of GDP increased due to strong demand for entrepot trade but this role has diminished over time and tourism has now become a larger component of commerce. But the lead sector is clearly the financial and business services sector which grew, in part, to the timely promotional efforts of the government in making Singapore a major financial centre and a total business hub of the region. This is expected to continue as neighbouring countries deregulate their financial sectors and the growing information technology industry becomes increasingly able to support the growth of this sector.
The transport and communication sector’s share increased in the 1970s due to large investments in infrastructure designed to support and attract the large FDI that was coming in. Since the 80s, this share has stabilised. The ‘other services’ component, which comprises community, personal and social services, consistently declined in its
share as other sectors have taken on increasing importance.
Employment Trends
The service sector has always had more workers than the manufacturing sector (Figure 2.2) and the services sector employment is increasing while the manufacturing sector has stabilised after 1990.
Figure 2.2 : Employment By Sector
Manufacturing Service
Source: Singapore Yearbook of Statistics, various years
The employment shares of these sectors (Figure 2.3) show that services have consistently absorbed two-thirds of the total employment, rising to around 70% in the
1990s.
Figure 2.3 : Employment Share By Sector (Percent)
Manufacturing Services
The manufacturing sector’s employment share increased in the 70s, because of the FDI in labour intensive manufacturing, strongly encouraged by the government. The electronics sector has always been the largest employer in the manufacturing sector since the late 70s. In the 80s, the two oil price shocks, as well as a wage correction policy to encourage the shift to capital intensive manufacturing, reduced the employment share of the manufacturing sector but the share picked up in the late 80s before decreasing in the 90s, by which time, the services sector had been identified as an engine of growth, resulting in knowledge and information intensive service industries and increased demand for financial and business services, which have caused service employment to increase. In the 90s, not only was the Singapore port the world’s largest port in terms of shipping tonnage, it was also the second busiest container port.18 In 1995, Singapore was the top bunkering port and the 10th biggest tourism earner in the world.19 The growth of the manufacturing sector in the past two decades has also created the need for producer services. The expanding Asia-Pacific region will also increase the demand for Singapore’s financial and business services.
Table 2.2 enables a closer look at employment shares of the various components of the services sector.
Table 2.2 : Employment by Industry in the Economy (Percent)
Service Industry 1970 1976 1982 1988 1992 1996
Commerce 23.5 23.1 22.2 22.9 22.6 22.5
Transport & Communication 12.1 11.7 11.4 9.7 10.0 10.8
Financial & Business Services 3.5 6.5 7.9 9.6 10.9 13.6
Other Services 27.2 24.5 20.6 21.3 21.5 20.4
Note 1 Data prior to this refers to persons aged 10 years and over. After 1984, figures refer