2.

INDUSTRY OVERVIEW
2.1 PESTEL ANALYSIS
Political
Political Stability

Singapore’s politics has been dominated by the People’s Action Party (PAP) since 1965. Its
governing philosophy for the last several decades can best be described as Socialist Democracy.

Singapore’s power structure is highly centralized, characterized by a top-down style. It features

appointment rather than election to most offices. There is a dominance of government-controlled
companies in the local economy. But in spite of its powerful position, the Singapore government
has maintained a clean, corruption-free image.

Tax Policy

Singapore’s tax regime is well-known for its attractive corporate and personal tax rates, tax relief
measures, absence of capital gains tax, one-tier tax system, and extensive double tax treaties.
Singapore follows a territorial basis of taxation which means companies and individuals are taxed
mainly on Singapore sourced income. Country’s corporate tax rate is capped at 17% and by
keeping the corporate rates competitive, Singapore continues to attract foreign investment.

Employment and Labor Laws

In Singapore, the relationship between employer and employee is determined largely by the
contract of service (COS) between them. The Singapore Employment Act (EA) provides the basic
terms and conditions of employment, and the rights and responsibilities of employers and
employees under a COS.

On 1 April 2014, amendments to the EA were made to better protect more workers, introduce
some flexibility to employers, and enhance enforcement and compliance with employment
standards.
 Political Factors

Political stability
4
3
Tariffs 2 Tax policy

1
0

Employment and
Trade restrictions
labor laws

Environmental
regulations

Environmental Regulations

Tougher vehicle pollution standards and mandatory air suction waste systems are two of the latest
initiatives that the Singapore government plans to implement to curb emissions and revive the
nation’s stagnant domestic recycling rates. Installation of dual chutes is must for private
developments, which are taller then four storeys.

Applications to develop private apartment from April 1, 2018 onwards must also come with plans
for pneumatic waste conveyance systems if the development has 500 residential units or more.

Trade Restriction

Singapore is an open economy and encourages trade and investment into the country and maintains
its reputation as one of the most liberal trading regimes in the world. There are no restrictions on
foreign ownership of business in Singapore, except for national security reasons and in particular
areas such as air transportation, public utilities, newspaper publishing, and shipping. Singapore is
also a signatory to the WTO Agreement on Government Procurement.

Tariff
Singapore is generally a free port and more than 99% of all imports into Singapore enter the
country duty-free. Singapore levies a 7% Goods and Services Tax (GST); for dutiable goods, the
taxable value for GST is calculated based on the CIF (Cost, Insurance, and Freight) value, plus all
duties and other charges. In the case of non-dutiable goods, GST will be based on the CIF value
plus any commission and other incidental charges whether or not shown on the invoice.

Economical
Economic Growth

Singaporean economy has been growing rapidly since its independence and as a result the country
has now one of the highest GDP per capita in the world. The country is also a leading foreign
direct investment recipient due to its status of one of the freest, most competitive and most
business-friendly economies in the world. The country’s economy expanded by 4.6 per cent in the
third quarter of 2017, the highest growth in more than three years. This growth was powered by
the strong performance of the manufacturing sector

Interest Rates

In Singapore, the monetary policy decisions are taken by The Monetary Authority of Singapore.
The Monetary Authority of Singapore does not control the monetary system by monitoring interest
rates. Instead, it manages the Singapore dollar (SGD) exchange rate against a trade-weighted
basket of currencies of Singapore's major trading partners and competitors.

Inflation Rate

Consumer prices in Singapore increased 0.4 percent from a year earlier in October of 2017. The
inflation figure remained the lowest since April, as cost of food increased at a fast pace. The Import
and Export Price Indices went up 1.1% and 1.2% respectively in Oct 2017 over the previous month.
The Singapore Manufactured Products and Domestic Supply Price Indices rose 0.1% and 1.1%
respectively in Oct 2017 over Sep 2017

Capital Availability

Singapore is experiencing a surge in venture capital fundraising, with the government providing
incentives to attract entrepreneurs and venture capitalists by protecting intellectual property and
allocating public money for early investments. Singapore venture investments totaled USD 725.3
million in the second quarter of 2017, boosted by Sea Ltd.’s USD 550 million funding round. In
2017, Vertex Ventures and two other venture-capital firms completed fundraising efforts in the
city, each with their largest fund yet.

Economic Factors

Economic growth
4
3.5
3
2.5
2
1.5
1
Capital Availability 0.5
(Bank capital to 0 Interest rates
assets ratio (%))

Inflation rate
Social
Age Distribution

Singapore's population has grown older over the years. The median age of the resident population rose from
34.0 years in 2000 to 40.5 years in 2017. Singapore is also ranked as the most infertile country in the world
by CIA World Fact book with fertility rate of 0.83 in 2017

Population Growth

The current population of Singapore is 5,744,765 as of Thursday, December 7, 2017, based on the latest
United Nations estimates. Singapore population is equivalent to 0.08% of the total world population.
Singapore ranks number 115 in the list of countries (and dependencies) by population. The country’s
population growth over the past year was the slowest growth in more than a decade due to fewer citizen
births and a drop in non-resident population driven by a decline in foreign employment.

Emphasis on Safety

Singapore is the 6th safest country in the world, based on the safest and most dangerous countries ranking.
After Japan, Singapore is the safest country in Asia. The main reason for low crime rates in Singapore is
due to the severe penalties that are handed out for even the pettiest crimes. Although crime rates in all other
categories are dropping in Singapore, cybercrime is increasing year on year.

Education Standards

The education system in Singapore is highly centralized. The Ministry of Education is responsible for
education for kindergarten (age’s four to five) through higher education. Schools are grouped into
geographic clusters. These clusters can help determine how the curriculum will be implemented, and can
choose teaching materials, though the Ministry makes recommendations. The Ministry also determines all
national education goals and curriculum guidelines. These goals, which are revisited regularly, emerge
after widespread discussion with partners in the system and with the public
 Social Factors
Age distribution
4

Education Standards 0 Population growth rate

Emphasis on safety

Technological
Automation

Singapore has now reached a point where one of the biggest growth drivers will be through
increased productivity. With an ageing population and limited space, it cannot count on large-scale
manufacturing to employ thousands of people.

With automation, Singapore's economy can maintain a Singaporean core in the face of a local
workforce on the verge of shrinking, while not relying on foreign labour for growth.

Technology Incentives

Foreign precision engineering firms are investing more in Singapore, due strong semiconductor
demand and government incentives aimed at re-tooling the Singapore economy short of skilled
labor.

The country is running programs worth billions of dollars to support productivity, automation and
research, attracting global chipmakers including U.S.-based Micron Technology Inc and
Germany’s Infineon Technologies
Taking advantage of government grants, Micron is investing USD 4 billion to make more flash-
memory chips in Singapore.

Technological Factors
Automation
4
3
2
1
R&D activity 0 Technology incentives

Rate of technological
change

Rate of Technological Change

There has been a rapid technological advancement in the country since 1965. In 1991, the first
five-year plan, then called the National Technology Plan, was initiated with an SGD 2 billion
budget. Subsequent iterations of this initiative saw funding for the plans increase like the SGD 5
billion Science & Technology Plan of 2005 and 2010’s SGD 13.55 billion plan.

R&D Activity

Singapore will be investing SGD 19 billion of public money in science, research and innovation
activities for the five-year plan period starting 2016, up from SGD 13.55 billion it allocated in the
2010-15 period. Under the plan, labelled RIE2020 (Research, Innovation and Enterprise), the
National Research Foundation (NRF) will help coordinate investments in four technology
domains: advanced manufacturing & engineering; health and bio-medical sciences; services and
digital economy; and urban solutions and sustainability.
Legal
Consumer Law

The Consumer Protection (Fair Trading) Act (CPFTA) provides for civil actions which may be
taken against errant retailers who persist in unfair practices. Singapore adopts a balanced approach
to consumer protection.

To better protect the public from unfair trading practices, Singapore authorities are proposing
changes to consumer protection laws. The proposed amendments to the Consumer Protection (Fair
Trading) Act aim to empower SPRING Singapore to gather the necessary evidence to file timely
injunction applications.

Antitrust Activity

Enacted in 2004, the Competition Act provides a generic law to protect consumers and businesses
from anti-competitive practices of private entities. It also sets out the various powers and processes
in the administering and enforcement of the Act.

Section 54 of the Competition Act (Chapter 50B of Singapore) prohibits mergers that have resulted
in, or may be expected to result in, a substantial lessening of competition within any market in
Singapore for goods or services.

Legal Factors
Consumer law
4
3
2
Health and safety law Antitrust law
1
0

Discrimination law Employment law

Employment Law

The Employment Act (EA) is the major piece of legislation that sets out a minimum standard of
terms and conditions that an employer must abide by.

The Ministry of Manpower defines employees with managerial or executive positions as those
who have managerial or executive functions, including the authority to influence or make decisions
on employee and business matters.

Discrimination Law

Article 12 of the Constitution of the Republic of Singapore guarantees to all people’s equality
before the law and equal protection of the law.

The Retirement and Re-employment Act, the Employment Act and the Child Co-Savings
Development Act help protect against discriminatory practices that are related to age and gender.
The Manpower Ministry (MOM) has employment laws in place to penalise discriminatory
practices related to age and gender.

Health and Safety Law

The Workplace Safety and Health Act is a legislation relating to the safety, health and welfare of
persons at work in a workplace. The WSH Act has four key features:

 It places responsibilities on stakeholders who have it within their control to ensure safety
at the workplace.
 It focuses on workplace safety and health systems and outcomes, rather than merely on
compliance.
 It facilitates effective enforcement through the issuance of remedial orders.
 It imposes higher penalties for non-compliance and risky behavior.
Environmental
Greenhouse and Carbon Emissions

Singapore ranks 123rd of 142 countries in terms of CO2 emissions per dollar GDP, based on
International Energy Agency (IEA) data. It contributes around 0.11% of global emissions.

Singapore’s Nationally Determined Contribution (NDC) emissions target of a 36% reduction of

emissions intensity below 2005 levels by 2030 is considered weak compared to currently
implemented policies

Even without any additional policies, Singapore will overachieve its NDC target and reach a
reduction of more than 40% in 2030.

In view of this, Singapore needs to substantially strengthen its NDC target to reflect its high
economic capacity.

Waste disposal laws

Singapore’s solid waste output has increased significantly over the years. The amount of waste
sent for disposal rose from 1,260 tonnes per day in 1970 to 8,559 tonnes per day in 2016.

The National Environment Agency (NEA) plans, develops and manages Singapore’s advanced
waste management system. An efficient waste collection and disposal system is critical, given
Singapore's limited land area and densely populated living environment.

Popular attitude towards the environment

A survey conducted in 2013 conducted by the National Climate Change Secretariat (NCCS), found
that about 70 per cent of respondents were concerned about climate change, down from 74 per
cent in 2011 when a similar study was conducted. About 63 per cent felt they were doing their part
in tackling climate issues. The NCCS survey polled 1,000 Singapore residents aged 15 and above
from September to October in 2013 through face-to-face interviews to find out their knowledge
and attitudes about climate change, as well as their practices.
 Environmental Factors
Greenhouse and
carbon emissions
5
4
3
Popular attitude
2 Waste disposal
towards the
1 laws
environment
0

Environmental Energy consumption

protection laws regulation

Energy consumption regulation

With effect from 22 April 2013, energy intensive companies in the industry sector were required
under the Energy Conservation Act (ECA) to register with the National Environment Agency
(NEA) within 6 months of qualifying as a registrable corporation and to implement mandatory
energy management practices.

The regulations governing these requirements are:

 Energy Conservation (Registrable Corporations) Order 2013

 Energy Conservation (Energy Management Practices) Regulations 2013
 Energy Conservation (Composition of Offences) Regulations 2013

Environmental Protection Laws

The Environmental Protection Control Act (EPCA) is Singapore’s primary environmental

legislation. The EPCA was passed to replace the Clean Air Act, the Water Pollution Control and
Drainage Act, the Poisons Act and to enforce the Environmental Public Health Act (EPHA). The
EPCA controls 4 main areas: Air pollution, Water pollution, Noise pollution, and Toxic and
hazardous substances.
2.2 SINGAPORE: ECONOMIC ACTIVITY AND THE FREIGHT & LOGISTICS
INDUSTRY

Economic Activity
Singapore has a free market economy. The country enjoys positive growth owing to its open
market structure, corruption-free environment, higher per capita GDP, and stable prices. Singapore
has experienced contraction in economic growth due to the global financial crisis and dipped up
to -0.6% in 2009. However, the country is experiencing continues growth thereafter.

Singapore is a home to many industries and is continuously proving itself as a major financial and
technological hub of Southeast Asia. Owing to its flexible policies and state-of-the-art industrial
facilities; Singapore has attracted many big investments in advanced manufacturing,
pharmaceuticals, and medical technology-based industry.

Despite all these positive factors, the real GDP growth of the country has declined over the recent
years. The annual GDP growth of 2016 and 2015 has been reported less than half as compared to
2014 and 2013; global market slowdown is one of the key factors for such economic performance
of the country. However, the global economy has started moving upward over the past few quarters
and business sentiment is spurring an improvement in global trade. This is expected to bring the
short-term economic growth in the Singaporean economy.

REAL GDP (at 2010 Market Price)

500,000.0 7.00%
450,000.0 6.22%
394,288.6 402,159.8 6.00%
373,471.5 386,812.9
400,000.0 355,683.1
342,426.2
350,000.0 322,361.1 5.00% 5.00%
In SGD million

300,000.0 4.00%
3.87%
250,000.0 3.57%
200,000.0 3.00%

150,000.0 1.93% 2.00% 2.00%

100,000.0
1.00%
50,000.0
0.0 0.00%
2010 2011 2012 2013 2014 2015 2016
Axis Title

GDP (at 2010 Market Price) Growth Rate

The real GDP growth in Singapore was reported at 2.0% in 2016, almost unchanged to 2015’s
growth rate of 1.9%. Positive outlook of the economy was largely reflected by manufacturing
sector, which grew by 3.6% in 2016 after a significant dip of nearly 5% in 2015. Globally
increasing demand for medical equipment and cyclical upswing in the global information
technology industry led the demand for medical devices and semiconductors respectively. This in
turn, boosted the biomedical and electronics manufacturing industry worldwide. Such evident
growth in electronics and biomedical sectors especially in last quarter of 2016 was the key revival
factor Singapore’s manufacturing industry. Whereas, construction and services sector did not
encouraged the same spirit for the country as the growth in these sectors became even slower as
compared to 2015. High property cost and taxes countered the growth of service sector and the
contribution of service sector in Singapore’s overall real GDP growth was nearly 0.7% in 2016.

Singapore’s total consumption expenditure increased by 1.8%, curbing from 5.3% in 2015 owing
to the decreasing demand on both public and private front. Significant decline in private sector
consumption, from 4.6% in 2015 to 0.6% in 2016, led this slow growth in the country. Public
sector consumption has also followed the similar trend, however, the change in growth was not as
drastic as in private sector. The consumption in public sector grew with a slow pace of 6.3% as
compared to 8.0% in 2015.

In 2017, the economy contracted 1.3% in the first quarter owing to declined manufacturing sector;
however, strong demand from electronics sector has managed to keep the growth positive in early
2017. Construction industry has depicted some positive vibe in the Q1, however, weak private
sector haven’t led any chances to celebrate this positive turn. Service industry has also shown the
cold reaction as the relative growth was lower than the previous quarter. Exports enjoyed entering
into 2017, the growth touched 5.7% for the first four months as compared to the same period in
2015.

The global GDP growth is expected to portray rise and is likely grow at 3.5% in 2017 as of 3.1%
in 2015 owing to positive growth signs from Europe and North American countries. Additionally,
improving business sentiments coupled with increased corporate earnings are some of the key
factors behind the improved global outlook, which is a positive indicator for global trade.

According to the World Economic Outlook (WEO) report, global trade volume is projected to
increase 3.8 percent in 2017, up from 2.2 percent in 2016. Some other key indicators such as the
container throughput index, international air freight volumes, and PMI, are also indicating towards
improvement in the global trade over the next few years. Since trade is a vital part of the
Singaporean economy, hence the current upswing in the global trade is anticipated to reflect direct
shine on the country’s economy for the noticeable period of time.

The government of Singapore has implemented various strategies to restructure the economy such
as skill development programs, monitoring the country’s industrial performance to address the less
productive industries/weak performers in the industrial sector, innovation, digitization, and
increasing the global integration; seeing that the low cost high volume industries are shifting
towards developing economies in Asia for abundant and cheap labor supply. These planned
economic transition of Singapore becomes more important if labor productivity is the major
concern. Singapore’s majority of population is aging rapidly and economic transition of the
country becomes necessary to avoid the threat of low productivity from both internal and external
ends.

The government is strategizing its economic policies targeting five key industries for growth:
advanced manufacturing, medical technologies, smart urban solutions, logistics and aerospace, and
financial services. Though, Singapore enjoys existing comparative advantage in these sectors; they
are also the potential sectors for the government to generate the future growth. The government
has established quota system to regulate the numbers of foreign workers employed in the country
in certain sectors. Furthermore, businesses are required to pay a tax on each foreign worker
employed, dependent on the worker’s qualification as well as the foreign worker quota imposed
on the sector. Tax rates are lower if the worker has the necessary academic and skill-based
qualifications.
Industry Overview
Singapore is well-placed to facilitate these developments as a leading logistics and supply chain
hub, with robust aviation and maritime capabilities. Through the Singapore Aviation Academy
and the Singapore Maritime Institute, Singapore has also trained thousands of regional personnel
in these two sectors.

With over 100 aerospace companies such as ST Aerospace, Goodrich, Rolls Royce, and Pratt &
Whitney based here, Singapore’s aerospace industry accounts for a quarter of Asia’s Maintenance,
Repair and Overhaul (MRO) output, supported by Seletar Aerospace Park.

Concurrently, with a strategically positioned global hub seaport connected to 600 ports in over 120
countries, Singapore is the ideal Asian gateway for global leaders in shipping finance, ship
broking, risk management and marine insurance. Little wonder that some 130 of the world’s top
shipping groups have established their presence here.

Singapore’s flourishing logistics hub is ranked in the top 5 performers among 155 countries in The
World Bank’s 2016 Logistics Performance Index1. Some 21 of the top 25 global logistics players,
including DHL, TNT, FedEx, Kuehne + Nagel, Sankyu, Schenker, Toll Logistics, UPS and Yusen
Logistics, centralise their regional supply chain operations in Singapore.

Singapore’s investment in world-class infrastructure includes the Airport Logistics Park in the
airport’s free trade zone, Singapore FreePort which provides the largest maximum-security facility
for fine art and collectibles, and Coolport@Changi which is the first airport facility in Asia to
handle perishable cargo. Singapore boasts the world’s busiest transshipment hub, handling about
one-seventh of the world’s container transshipment throughput or 30.62 million Twenty-Foot
Equivalent Units (TEU) of containers in 2015. The Asia Pacific remains by far the largest transport
infrastructure market, with investments expected to grow from US$557 billion per year to nearly
US$900 billion per year in 2025. More than 58.7 million passengers passed through Changi
Airport in 2016. This is projected to reach 135 million with the completion of Terminal 4 in 2017
and Terminal 5 by the late 2020s6 the airport is served by over 6,500 weekly flights to 280 cities
in 60 countries, handling close to 2 million tons of cargo annually

Singapore’s transportation and storage sector4 has been one of the key contributors to Singapore’s
economy and is instrumental for the country’s global connectivity. From 2011 to 2016, the
transportation and storage sector has consistently accounted for more than 7% of its overall GDP.
By 2016, the transportation and storage GDP grew at a CAGR of approximately 2.70% from 2011
to reach S$30.5 billion. The pace of growth is anticipated at a CAGR of approximately 5.14%
from 2017 onwards and by 2021, the sector’s GDP is expected to reach S$38.3 billion. This was
largely attributed to the continuous developments in the infrastructure sector that has undertaken
large projects over the years to improve and support connectivity in the country. Championing
agencies such as the Land and Transport Authority (LTA), Civil Aviation Authority of Singapore
(CAAS), Maritime and Port Authority (MPA) and the Economic Development Board (EDB) have
been continuously expanding Singapore’s connectivity via land, air and water routes to drive
growth in this sector.

As Asia progressively accounts for a bigger share of global trade and transportation, the strong
growth of Asia’s emerging economies will boost the intra-regional movement of goods and people.
Burgeoning passenger numbers call for immediate infrastructure, indicating potential for business
events which facilitate partnerships to address infrastructure gaps and investment models. As oil
prices fluctuate and developing economies battle with pollution, sustainable travel and logistics is
shaping up to be an important focus area, as is the unique realm of user-centred comfort and design.

Specifically for the supply chain and logistics sector, the recently unveiled 2016 Logistics Industry
Transformation Map in Singapore aims to transform the logistics sector and reinforce Singapore's
position as a global logistics hub. This, in line with global trends, will create demand for niche
events that focus on innovation in areas such as Advanced Infrastructure, Process Automation,
Systems integration and Analytics. Singapore’s strategic location, highly developed infrastructure,
technological advancements and global connections make it a promising entry point for such niche
events into the region.
2.3 PORTER’S FIVE FORCES ANALYSIS
Bargaining Power of Suppliers
The suppliers have very low bargaining power over the Logistics industry. The suppliers who
provide for the companies are the automobiles industry which offers from light weight vehicles,
forklift to trucks and cranes. Since these suppliers are found in abundance in the market, they are
chosen on their differentiated prices. However, suppliers may themselves enter into the market to
become the competitors and provide services according to their own capacity.
Bargaining Power of Buyers
Minimum differentiation and low switching costs gives a lot of bargaining power to the buyers.
Nowadays the consumers expect to receive their shipments faster, with more 􀃓flexibility and with
more transparency at a lower price. The manufacturing is becoming more and more customized
which attracts the consumers but complicates things for the Logistics industry. Since buyers are
the immediate customers of the company, they are not necessarily the end customers. They have
the power to switch because of the availability of large number of providers and low costs. But
since they are not accumulated, their power is reduced to medium.
Threat of New Entrants
The entry barriers are low, giving the new comers a wide berth to play in the 􀃓field. In the
Logistics Industry, the technology has provided a platform to new business models. Due to these
sharing business models, the company’s suppliers and customers end up being the new entrants to
the industry. These asset light new start-ups are utilizing the latest technology to offer interactive
benchmarking of the rates of the existing air and shipping companies and match them in their
available capacity with delivery needs.
Threat of Substitute Products/Services
The threat of the substitutes is low. The Logistics industry is a fast growing one and offers variety
of services at different price ranges. Logistics range from warehousing, supply chain to
transportation. The only substitutes are offered for transportation but they have extra costs attached
to them. Hence the customers don’t have much alternate options for the services provided by the
Logistics industry.
Competitive Rivalry among the Existing Players
The internal competition in the industry is extremely high. Due to low differentiation, the
companies are competing with their prices and quality of services. The intense rivalry makes it
hard for the competitors to increase their market share. The competition is high in Logistics and
Supply chain due to the presence of internationally renowned players like FedEx, GAC, ARAMEX
and DHL etc. The low barriers to entry increase the rivalry within the industry. Competition is
mainly based on price and quality of service. It is very easy for people to switch for more
reasonable prices. This forces the companies to cut their prices.
2.4 INDUSTRY VALUE CHAIN AND COST STRUCTURE ANALYSIS
Transport and logistics are defined as activities focused on transportation and logistics services
rendered to customers to deliver/store goods via different transport modes (i.e. land, sea and air)
to a designated destination, both local (inbound logistics) and out of the country (outbound
logistics). Specifically, transportation is defined as the deployment and movement of products (e.g.
commodities, livestock and goods) and people from one location to another. Logistics on the other
hand is defined as the process of planning, managing and implementing processes and activities to
ensure effective transportation and storage of products good. These include primary and secondary
activities such as (i) product management, cargo handling, inspection, packing, freight forwarding
and warehousing by logistics providers; and (ii) transportation services such as vehicle hire by
transportation service providers5. The transportation and logistics sector in Singapore also denotes
transportation and storage sector in Singapore. For the purpose of this report, the term
transportation and logistics sector will be used to represent the industry.

The transportation and storage sector is classified and structured based on the Singapore Standard
Industrial Classification system (SSIC) of Department of Statistics Singapore. It is segmented into
five broad categories which are 1) land transport and transport via pipelines; 2) water transport; 3)
air transport; 4) warehousing and support activities for transportation and 5) postal and courier
activities. Specifically, for land transport and transport via pipelines category, transportation
services providers in the context of product delivery, deployment and movement for inbound and
outbound logistics include: (i) freight transport by rail; (ii) freight transport by road; (iii) rental and
leasing of lorries and trucks. The transportation and storage sector’s participants include end
customers, shipping lines, ports, transport service providers and logistics service providers.
Logistics service providers, in particular firms that are larger in size, usually have their fleet of
vehicles to support the transportation of the consigned containers and delivery of Less than
Container Load goods (LCL).
2.5 GOVERNMENT INVOLVEMENT IN LOGISTICS INDUSTRY
DEVELOPMENT AND REGULATORY OUTLOOK
3. MARKET DYNAMICS
3.1 DRIVERS
1. Global Logistics Hub: “World-class logistics infrastructure and excellent connectivity that
provides extensive reach within short lead-time.”

Over the years Singapore grew as one of the preferred logistics hubs for players across industries
such as aerospace, biomedical science, electronics, telecommunications and petrochemicals. These
industries are expected to grow with continuous investment by the Singapore Government and as
outlined by the Committee on the Future Economy (CFE) Singapore; thus are expected to become
main users of logistic services in Singapore. With the expected increase in demand for products
and services related to these industries, proper connectivity and effective service delivery is
important to ensure smooth delivery of related products and services to final consumers. This
indirectly provides opportunities for connective role such as road haulage activities to grow.

Singapore is also a global hub for third-party transportation and logistics providers, providing
services ranging from sea and air freight, local transportation, warehousing and other value-added
services for products coming into or transiting Singapore. More than 20 of the world’s top third-
party logistics providers are based in Singapore and these include companies like DHL, Yusen
Logistics, NYK Logistics and Nippon Express. In addition, leading manufacturers also find
Singapore attractive as a logistics hub and examples such as Dell, Hewlett-Packard, Infineon,
Novartis and Panasonic are no strangers to the Singapore transportation and storage sector. As
such opportunities for the transportation and storage sector remains positive with the continuous
endorsement by leading manufacturers for Singapore as a global logistic hub.

Changi International Airport is served by over 80 airlines operating over 4,500 weekly scheduled
flights linking Singapore to200 cities in 60 countries. Among these, 12 airlines operate more than
290 weekly scheduled pure freighter flights linking Singapore to about 15 cities in 6 countries. In
2010, Changi Airport received the Best Airport in Asia accolade for the 24th consecutive time and
the inaugural Best Green Service Provider – Airport award at the 24th Annual Asian Freight and
Supply Chain (AFSCA) Awards which is organized by Cargonews Asia.

Region Weekly Flights

Southeast Asia 2960
Northeast Asia 1282
 South Asia 520
Southwest Pacific 574
Europe 426
North America 240
Middle East & Africa 282

PSA Singapore Terminals handle about one-fifth of the world's total container transhipment
throughput. In 2009, PSA Singapore Terminals handled 25.14 million twenty-foot equivalent units
(TEUS) of containers. PSA operates 4 container terminals, a multi-purpose terminal and a vehicle
transhipment terminal in Singapore, and links shippers to an excellent network of 200 shipping
lines with connections to 600 ports in 123 countries. Of the 60 vessels calling at the port daily,
most are berthed on arrival.

Weekly
Region
Sailings
South & Southeast Asia 70
China, Hong Kong, and Taiwan 9
Japan 5
Europe 4
United States 2
2. Global manufacturers expanding operations in Asia-Pacific to grab the coherent
opportunities lies with the significant regional upswing – “Singapore provides a strategic
advantage for the global giants to strengthen their supply-chain network by establishing regional
distribution centres”

a. Easy Access to Asian Markets:

Singapore offers excellent connectivity with over 4,500 weekly flights to more than 200 cities in
60 countries, and daily sailings to major ports via 200 shipping links to 600 ports in more than 100
countries. Coupled with highly efficient customs and business-friendly import/export procedures,
companies with regional distribution centres in Singapore can offer customers’ timely delivery to
destinations in Asia Pacific. Embraer Asia Pacific selected Menlo Worldwide Logistics to establish
and operate its Regional Distribution Centre in Singapore, to support the company’s round-the-
clock rapid response (parts) fulfillment services for its customers in Asia Pacific. Menlo maintains
a complete inventory of repairable, expendable and structural parts for Embraer's commercial
aircraft and executive jets in the region. The integrated, turnkey program incorporates
warehousing, logistics, transportation management and technology services.

Sandvik’s 240,000 square-foot facility at Airport Logistics Park of Singapore (ALPS) enables
airfreight delivery of products within 24 hours to markets in Asia Pacific and Southern Africa.
This state-of-the-art facility is Sandvik’s largest investment in Southeast Asia, and complements
two other hubs in Europe and USA.

Leading biomedical sciences companies and contract research organisations leverage TNT and
DHL’s Life Sciences hubs to distribute time-sensitive clinical trial materials, medicines and
medical devices to hospitals across Asia within 24 hours.

b. Reduced Time-to-Market:

Manufacturers from US and Europe that are expanding their reach in Asia’s markets can leverage
Singapore for their postponement strategy to reduce time-to-market. Singapore is a reliable and
secure location where market-specific customization, labeling and packaging can be conducted
upon order receipt, before products are shipped the last mile to fulfill orders from Asia.

Avaya’s first Asian SCM hub established in Singapore has helped Avaya reduce lead time from
14 days to 2 days, and reduce logistics cost by 80%. Over 500 tons of finished goods, worth over
US$100 million, are handled in Singapore. This RDC is co-located with Avaya’s 250- man
regional HQ that manages regional operations and supply chains.

BASF's Singapore hub has helped reduce lead time by as much as 60%, with optimum inventory
levels designed to serve customer requirements in Asia Pacific. BASF's Regional Distribution
Centre has doubled in size with the integration of CIBA's regional hub following its acquisition.
The RDC ships to over 110 port destinations by sea and 50 destinations by air, besides exports by
road to Malaysia. BASF in Singapore remains home to the Supply Chain Asia Pacific's
Procurement Logistics Solutions competency centre as well as the regional hub management team.

Diageo invested $13 million in its Asia Pacific logistics hub in Singapore. The high-speed, semi-
automated production lines set up for precise labeling and gift packing enabled a postponement
strategy that reduced average lead-time from production to point-of-sales, from 8-10 weeks to 1-3
weeks. Diageo’s 80-man Asia Pacific Logistics Hub in Singapore will process up to 8 million
cases annually.

c. Global Supply Chain Control and Procurement:

To be closer to the rapidly growing Asian markets and suppliers in China, Taiwan and South
Korea, Dell’s global control tower in Singapore manages its global logistics, supply chain strategy
and procurement activities, as well as planning the operations across Dell’s factories around the
world.

Similarly, IBM’s Singapore Trading Centre (STC) is the key global procurement centre and
financial hub for strategic components of a fast expanding segment of IBM’s business. As IBM’s
only other operational centre outside of the US during its start-up in 1997, IBM grew to handle
over US$4.5 billion in annual transactions in 2007 and US$2 billion in 2008. Through its optimized
procurement process of consolidation and contract price-confidentiality, IBM’s STC saves tens of
millions of dollars each year.

3. Specialized Logistic Capabilities offers a sophisticated lead market for 3PLs to develop
and deliver innovative logistics/SCM solutions to cater the complex needs of consumers

a. Eyeing medical technology industry for healthcare and cold chain logistics

Singapore is entrusted by medical technology companies such as Siemens Medical in delivering

critical spare parts for life-saving equipment that require fast turnaround time while maintaining
product integrity. To cater to the growing base of complex biomedical manufacturing, research
and clinical trial activities in Asia, 3PLs such as DHL and TNT have established life-sciences
logistics hubs in Singapore that can provide GDP-certified temperature and humidity-controlled
shipments to global markets. There is also a growing presence of niche transportation providers
such as World Courier that are familiar with the regulatory complexities of moving small volumes
of specific chemicals like liquid nitrogen (up to —186°C) using customized packaging solutions.

Coolport@Changi, announced in 2009, is amongst Asia’s first and largest dedicated on-airport
facility for perishable cargo and urgent medical cargo. Designed in accordance with HACCP
guidelines and in compliance with the highest standards of cold chain integrity, Coolport aims to
be the Asia’s first Halal-certified air cargo hub for perishables. The 8,000 square-metre facility is
located within the Free Trade Zone with direct airside access. With multi-tiered zones and
individual cold rooms set at different temperatures ranging from —28°C to 19°C, Coolport is able
to handle a wide range of commodities such as live seafood, meats, fresh produce, flowers and
pharmaceuticals. A host of value-added services include warehousing and distribution, inventory
management & control, ripening facilities and an express lane for urgent bio-medical products
provide a complete cold chain logistics solution.

b. Chemical logistics: a cash cow for Singapore’s logistics industry

Singapore, one of the world’s top three integrated petrochemical hubs, is at the forefront of the
industry, developing competitive feedstock for petrochemicals, advanced materials and specialty
chemicals. To support the continual growth of this industry, a strong base of world-renowned
chemical logistics companies have set up significant operations in Singapore. Beyond storage and
packaging, Katoen Natie’s facility on Jurong Island provides chemical manufacturers with other
value-added services such as chemical processing.

In the bulk liquid logistics sector, Vopak provides tank storage, regional distribution, and value
added services on oil products, gases, and chemicals from its four chemical and petroleum
terminals in Singapore. From its regional headquarters in Singapore, Vopak also manages
operations in many other Asian countries including Southeast Asia, China, Japan, Korea, Australia
and Pakistan. Singapore is one of Vopak’s key hub locations alongside Rotterdam/Antwerp,
Houston and Fujairah.

c. Gaining trust of art industry for art logistics services

As leading global art businesses seek to tap Asia’s fast growing affluence, they have forged strong
partnerships with Singapore, which presents a trusted and secured location for fine arts and
collectibles in Asia.

In 2010, The Singapore FreePort was launched and it operates a state-of-the-art facility for the
secure storage of the world’s finest collections and valuables. Located at Changi International
Airport, the facility offers integrated services to handle the shipping, storage, display and trade of
valuables. Special features include proximity to airport runways to expedite safe transfer of goods,
round-the-clock accessibility to valuables, temperature and humidity controlled storage, and
secured private-viewing suites. Encompassing 30,000 square metres of strong rooms, The
Singapore FreePort offers modular storage ranging from 10 square metres to 1,000 square metres,
showrooms, workshops, photo studios and private offices.

Companies that offer storage and logistics services at The Singapore FreePort include Christie’s
Fine Art Storage Services, Fine Art Logistics Natural Le Coultre and Helutrans Group.

d. Asia’s host for premium wine’s

Singapore is fast-emerging as a leading wine hub in Asia, with major regional shows (e.g. Wine
for Asia, Wines & Spirits Asia) being hosted in Singapore and major labels being distributed from
Singapore.

The Diageo Asia Pacific logistics hub in Singapore taps on IDS Group’s automated systems such
as ASRS and digital imaging capabilities, to improve process efficiencies and preserve the quality
of premium bottled brands such as Johnnie Walker and Singleton. Singapore is entrusted for the
labeling and rigorous quality control on behalf of the production lines in Europe.

Asia Pacific Wine Hub has launched a new beverage storage and logistics hub, where wine is
stored in more than 100,000 square feet of storage space that is humidity-, light- and temperature-
controlled. The facility is equipped with a computerized inventory and warehouse management
system that assures clients of reliable and efficient distribution to the Asia Pacific region. The
facility also offers value-added services such as just-in-time services, re-labeling, picking and
packaging of customized orders, and THE EXCHANGE, a business area where wineries can
showcase their labels.

3. Population growth and urbanization:

Population size and urbanization help to spur growth and demand for goods and services, as the
number citizens and residents increases over time. A country that is highly urbanized is also
typically a good platform to spur demand, because urban areas are typically densely populated and
demand for goods and services is crucial to achieving the expected quality of life. For example,
Singapore’s urban population in general drives the growth and demand for foreign food products
and beverages and thus creating demand for trading activities to import these products into the
country. For these products to reach consumers, transportation and logistics service providers play
important roles to ensure products and goods are delivered from one location to another. As such,
this provides opportunities for road haulage activities indirectly (e.g. deployment and movement
of products, goods and services from one location to another). By mid-2016, Singapore’s
population stood at approximately 5.6 million. Compared to 2015, the resident and citizen
population for 2016 grew at approximately 0.8% and 1.0% respectively.

3.2 RESTRAINTS
Lack of Optimized delivery process for urban logistics in Singapore:
Urban logistics play a critical role in ensuring smooth and efficient operations in the retail industry.
However, the logistics network and resources are not optimized in the goods delivery process in
Singapore.
Different logistics companies fulfil orders of retailers from the same destination individually, using
trucks that are often packed with goods that are below capacity for the delivery. Truck drivers
depend largely on experience to run the delivery. The lack of advance knowledge in traffic
conditions and congestion levels at the unloading bays of malls typically leads to a lengthy and
unpredictable last-mile delivery.
The economic impact for the various stakeholders include lost business opportunities by retailers
and lower visitor-ship at malls as a result of road congestion leading to the malls. Logistics
companies are also continuously grappling with increasing overheads, driver shortages and the
need for timely delivery.
The rapid growth of e-commerce also adds another layer of challenges to the urban logistics
framework with the fragmented last-mile delivery and shorter delivery time offered to customers.
With the recent Singles’ Day, the overwhelming success of the online sales event led to logistics
companies struggling to deliver orders on time and led to the ire of some customers.
To relieve the strain in the current logistics network, two government-led collaborative distribution
initiatives – in-mall distribution and offsite consolidation centres – are under pilot tests with
participating malls, retailers and logistics companies to arrive at a self-sustaining business model.
These new initiatives involve sharing of logistics resources such as drivers, vehicles and
warehouses to coordinate the delivery schedule to selected zones, with the aim of improving the
overall effectiveness of last-mile delivery for mutual benefit.
Another initiative – a parcel locker system – involves the installation of lockers around Singapore
for self-collection by customers. This will reduce house-to-house delivery inefficiencies and will
be launched later this year to address the increase in online shopping.
With successful execution, landlords will benefit from better mall images due to less congestion
from trucks and better security at malls, while retailers will benefit from timely deliveries and a
greater focus on customer service and sales instead of receiving goods whenever a delivery is
made. Logistics firms could potentially make deliveries to more destinations due to time saved on
last-mile delivery, reduce operational costs and alleviate manpower challenges. There are also
environmental and social benefits arising from less pollution and less congestion.
While the participation rate for the launched initiatives has been encouraging, there’s more room
for improvement. More effort is needed to help the various stakeholders (government, retailers,
landlords, logistics companies and customers) see the benefits of the initiatives, to garner their
support and commitment and to understand and address their varying objectives.
It is also important to eventually roll out the initiatives to retailers on a district level instead of a
mall level. The success of these initiatives hinges on collaborative efforts among the different
stakeholders. Each party plays an essential role to maximize logistics efficiency; a key factor for
retail businesses to thrive.
B2B: Striving for efficiency and transparency:

Manufacturing industries are facing far greater expectations around efficiency and performance
than ever before. Their customers expect faster time-to-market, reduced defect rates and
customized products. Ultimately, the result may be a goal that was once impossible: a ‘lot size of
one’, where each product is manufactured to the specifications of a specific end-customer. The
advent of the industrial Internet of Things and what other research refers to as ‘Industry 4.0’ is
allowing manufacturing companies, whether they make industrial equipment, cars, planes, or
consumer goods, to redefine everything from the way they interact with customers to how they
structure supply chains.
All this has huge implications for transportation and logistics. LSPs – in particular 3PLs and 4PLs
– need to integrate data analytics and social supply chains to provide much better traceability and
predictability (not to mention lower costs); smart warehousing solutions will become essential.
The implications are clear: ‘digital fitness’ is becoming a must for every logistics company.

Regional competition and susceptibility to global economic headwinds:

Although Singapore has one of the busiest ports worldwide, its position is vulnerable to any
economic changes in the region and globally. This is evidently depicted in its volume of container
throughput by the end of 2016, whereby volumes decreased slightly from previous years due to
the slowdown in global economy. In recent years, Singapore also faced competition by the growth
of other ports particularly from China. As such, Singapore’s shipping industry and other
transportation/logistics services need to constantly change to adapt and stay relevant in the industry

B2C: New shopping patterns:

Many logistics companies also serve B2C customers. Consumers went digital long before many
of the retailers, and some parts of the sector are still struggling to keep up. The leading players are
adopting what we call ‘total retail’, which is an operating model across bricks and mortar, online
mobile and other retail channels. Total retail is complemented by ‘connected retail’, where retailers
aim to create a seamless brand experience for the customer across personalized marketing, the
physical store, the digital experience, and the payment options, all of it driven by a strong coherent
brand. What are the consequences for the logistics industry?

Shippers aren’t generally part of a branded retail experience. Most private end-consumers are what
we call ‘shipper-agnostic’: they don’t care who delivers their goods, as long as they get them
reliably, quickly and cheaply. Many want more flexible delivery – whether in terms of when or
where they get their goods - and most aren’t willing to pay for shipping: they expect it to be free,
though they are prepared to pay a premium for additional services, such as faster delivery for high-
value items. There’s also currently a low acceptance of dynamic pricing for parcels; customers
expect to pay the same price for shipping regardless of seasonal capacity constraints faced by their
shipper, with the exception of surcharges for same day, overnight or expedited service.

Digital is still a challenge for the some sector:

There is no other industry where so many industry experts ascribe a high importance to data and
analytics in the next five years than transportation and logistics – 90% in T&L compared to an
average of 83%. The sector has never had access to more data. There are vast opportunities here
to improve performance and serve customers better, and LSPs who are part of a digitally integrated
value chain can benefit from significantly improved forecasting to scale capacity up or down and
plan routes. Adding machine learning and artificial intelligence techniques to data analytics can
deliver truly dynamic routing.

Cloud technology can enable platform solutions, which in turns makes it possible to use new
business models, such as ‘virtual freight forwarding’. It can also provide flexibility and scalability,
as well as standardized and harmonized processes across the whole organization. That’s especially
important for those LSPs or carriers who have grown through acquisitions, and currently rely on a
patchwork of legacy systems. The potential is huge, but the industry has thus far been slow to seize
it. In our recent Industry 4.0 study, the percentage of T&L companies that rated themselves as
‘advanced’ on digitization was just 28%. Some of the industry’s customers are already well ahead
of this – 41% of automotive companies and 45% of electronics companies already see themselves
as advanced. The lack of a ‘digital culture’ and training is thus the biggest challenge for
transportation and logistics companies. T&L firms are in line with other industries in planning to
invest 5% of their revenues per annum until 2020, but the next few years will be critical: companies
that don’t start soon risk being left behind permanently.
3.3 OPPORTUNITY
4. SINGAPORE FREIGHT & LOGISTICS MARKET
SEGMENTATION ANALYSIS – BY FUNCTION
4.1 FREIGHT TRANSPORT
4.1.1 ROAD
4.1.2 RAIL
4.1.3 SEA AND INLAND WATER TRANSPORT
4.1.4 AIR
4.2 WAREHOUSING
4.3 FREIGHT FORWARDING AND FREIGHT MANAGEMENT SERVICES
4.4 COURIER, EXPRESS, AND PARCEL
4.5 VALUE-ADDED SERVICES (3PL, INTEGRATED LOGISTICS, VALUE
ADDED WAREHOUSING AND DISTRIBUTION, AND ICT-BASED
SOLUTIONS)
4.6 COLD CHAIN LOGISTICS, LAST MILE LOGISTICS, RETURN
LOGISTICS, AND OTHER EMERGING AREAS
5. SINGAPORE FREIGHT & LOGISTICS MARKET
SEGMENTATION - BY END USER
5.1 CONSTRUCTION

Total construction demand fell by 3.6 per cent to $26 billion (Exhibit 6.5). This was due to
weakness in private sector construction demand. Public sector construction demand, on the other
hand, provided some support. Public sector construction demand increased by 19 per cent to reach
$16 billion. Growth was supported by a 108 per cent surge in demand for civil engineering works
such as the construction of the Thomson-East Coast Line (TEL), among others. On the other hand,
demand for public building works registered broad-based weakness, mainly led by declines in the
residential, industrial, and institutional & others segments.

Private sector construction demand shrank by 25 per cent from $14 billion in 2015 to $10 billion
in 2016. This was largely due to a fall in the demand for residential, industrial, institutional and
other building works. On the other hand, contracts awarded for commercial developments such as
Woods Square, the first office development in Woodlands Regional Centre, provided some support
to growth.

Although Budget 2017 gave the construction sector a boost by bringing forward the start dates for
about $700 million worth of public-sector infrastructure projects to this year and 2018, the overall
construction sector is expected to experience aggressive tender competition while tender
opportunities are likely to remain uneven across both the private and public sectors.

While the local construction industry undergoes a major revamp to reduce its reliance on foreign
workers, and to improve productivity to offer better paying jobs for locals, employment in the
construction sector declined by 12,900 for the third consecutive quarter due to continued weakness
in private sector construction activities. The decline in employment in 1Q 2017 was mainly due to
the reduction in Work Permit Holders (WPH) in the manufacturing and construction sectors.

The government constantly urges local construction firms, especially small and medium-sized
enterprises (SMEs) to keep pace with the technology push despite the tough economic outlook.
These technologies include offsite construction methods, which are more expensive, but can
shorten building time and cut manpower needs and digital building design, which requires
investment and skilled manpower. The road map for the future of the construction sector, known
as the Industry Transformation Map (ITM), is scheduled to be released in late 2017.

In its push to get more contractors to adopt pre-fabricated building technologies (i.e. Design for
Manufacturing and Assembly (DfMA)), the government will extend a tax relief scheme, called the
Land Intensification Allowance (LIA) scheme, till June 2020. The LIA scheme aims to promote
the intensification of industrial land use towards more land-efficient and higher value-added
activities. Construction firms can receive a tax relief on the capital expenditure incurred in the
construction of Integrated Construction and Prefabrication Hubs (ICPHs), which are multistorey
advanced manufacturing facilities for producing prefabricated construction elements. In addition,
the government is looking to pilot a government land sales (GLS) site that specifies productivity
outcomes to encourage innovative solutions by offering developers the flexibility to propose the
most suitable technologies to adopt.

BCA is currently exploring the use of automated checking software to identify non-compliance of
building requirements when processing building plans. Productivity levels are expected to be
raised higher when there is easier and more transparent processing. Based on current demand and
cost trends, and barring any significant contraction in the public sector construction program.
5.2 OIL & GAS
Singapore has become one of the most important shipping centers in Asia and is one of the world’s
top five oil trading and refining hubs. In addition, Singapore is one of the market leaders for
floating production, storage and offloading (FPSOs) conversions and offshore jack-up rigs.
Underground caverns for oil storage and a liquid natural gas (LNG) terminal are also being
expanded in phases to enhance Singapore’s position as the premier regional center for the oil and
gas industry. In view of the significant decrease in oil prices, the growth and imports are expected
to be much less promising over the next 6-12 months due to a decrease in oil and gas exploration.
However, as the regional hub for Southeast Asia and its friendly business environment, there will
be opportunities for U.S. exporters in Singapore especially when the oil and gas industry improves
globally.

Singapore offers many opportunities for American companies including:

 Supply of equipment such as boring or sinking machinery for upstream and downstream
oil and gas, shipbuilding, marine, mechanical and electrical construction, oxidation
additives, and various control systems
 Oilfield equipment that includes instrumentation such as drilling information systems,
drilling monitors, mud logging units, mud monitoring systems, torque gauges, pressure
gauges, weight indicators, deadline anchors, valves/actuators, performance testing, and
design control systems
 Supply of tubular products such as casings, tubing, carbon steel line pipes, drill pipes,
heavy wall pipes, drill collars, drill stem accessories, and mechanical alloy steel tubes
used on derricks

2014 2015 2016 2017 (estimated)

Total Market Size 122,319 66,959 72,149 77,300

Local Production 85,280 50,061 43,938 58,000

Exports 93,378 60,386 52,483 58,000

Imports 130,417 77,734 60,827 77,300

Import from U.S. 4,773 5,659 1,809 2,200

Opportunities
Singapore is often listed as the leading oil trading hub in Asia (third in the world after New York
and London) and amongst the world’s top five oil refining centers. It has a refining capacity of
nearly double its rate of petroleum products consumption. It is also a world leader in the
construction of exploration and production platforms and FPSOs conversions as well as for jack-
up rigs.

Engineering, procurement, and construction of the US$700 million LNG terminal was awarded in
late 2009 to a Korean consortium led by Samsung. The first phase was completed in 2013 with the
arrival of the first shipment of LNG from Qatar. Future expansion work (including a second LNG
terminal which has been proposed), costing more than US$500 million, is already being planned
as Singapore aims to be a future hub for natural gas trading and transshipment in Asia. Once all
phases are completed by 2017, the first terminal will be able to handle nine million metric tons per
year.

The construction of Very Large Floating Structures (VLFS) for storage of oil and petroleum
products is also being explored since land is scarce. Feasibility studies are underway to determine
the impact of sea currents and met-ocean conditions according to recent press reports. To be
economical, the minimum storage capacity of a VLFS would be 300,000 cubic meters or
equivalent to that of a very large crude carrier. It is estimated that it would cost US$150 million or
more – the decision to move forward with the issue of a tender (engineering, procurement, and
construction) has been postponed till 2018 due to the downturn in the oil & gas sector, but actual
construction will commence in 2019-20 at the earliest.
5.3 AGRICULTURE, FISHING & FORESTRY
As a small country, Singapore has limited agricultural land and domestic food production.
Agriculture contributes less than 1% of the country’s GDP per capita and 1.3% of labor force by
occupation in 2016. Singapore produces mainly leafy vegetables and beansprouts, all for local
consumption. With a total landmass of 1,465 hectares (3,620 acres), its six Agro-technology parks,
comprising of 200+ farms, produce a diverse range of products including livestock, eggs,
vegetables, fruits, orchids, and aquarium fish and food. Singapore is a major exporter of some 500
ornamental fish species, and cut orchids that are exported to more than 30 countries including the
United States, Japan, Greece, and Canada.

Due to its limited agricultural land and resources, Singapore is almost entirely dependent upon
imports for all of its food requirements. There are no import tariffs or excise taxes for all food and
beverages, except for alcoholic beverages and tobacco products. A Goods and Services Tax (GST)
of 7% is levied for all goods and services at the point of distribution.

Leading Sub-Sectors

Dairy products

In general, prospects are bright for U.S. dairy product sales to Singapore due to steady economic
conditions, middle class expansion, dietary pattern shifts, growing food manufacturing industry,
and healthier lifestyles, which acknowledge dairy products’ role in health and nutrition. Albeit a
decrease in sales across-the-board, the United States was still mostly the fourth largest supplier of
dairy products in 2016 while Australia and New Zealand are strong competitors.

Some dairy products tend to perform better than others. Cheese retail value registered a growth of
3% in 2016, slightly lower than the review period average due to increasing category maturity.
Essentially, there are two distinct consumer bases for cheese/cheese products: those who trade up
to more expensive unprocessed cheese for healthy and quality reasons; and those who remain price
sensitive. Because customers’ interests in cheese continue to grow, the retail value growth sales
of cheese is expected to remain robust.

Fortified/functional milk products characterized new product launches in 2016. These launches
reflected increasing consumer demand for healthier and value-added products. They also indicated
a strong trend toward making drinking milk products more “premium” as a growth strategy in a
mature product category. For example, Fonterra brand added a black sesame flavor to its Anlene
brand; Nestle introduced Milo Nutri G- which combines Milo with whole grains; and regional
brand FandN launched a reformulated version of its Magnolia Plus Oats. Milk products are
considered dietary staples and thus the products’ retail value growth are expected to remain stable.

Yoghurt products are considered both nutritious and healthy, but they are increasingly in the
mature product category. However, with the on-going trend of eating healthy, as long as
companies keep focusing on new flavor development and better fortification, this would likely
help to retain and reinvigorate consumer interest in yoghurt products.

Breakfast cereal continued to do well in 2016. In April last year, Singapore’s Health Promotion
Board launched a campaign to support increased consumption of whole grains, including breakfast
cereal, in an attempt to reduce the risk of diabetes among Singaporeans. The campaign helped to
raise the overall profile of whole grains across food categories, and has had a positive impact on
sales of breakfast cereal. Cereal is also a common breakfast item for most international hotel
chains and restaurants; and international brands dominate the sector - including popular U.S.
brands.

Fresh Fruit

The U.S. continued to dominate the fresh fruit market in 2016 due to price competitiveness,
quality, and promotional support provided by U.S. suppliers, brand recognition, and supply
reliability. Despite a decrease of 2.17% compared to 2015, the U.S. still registered a healthy US$83
million in sales of fresh fruit last year. In addition, Singapore’s highly developed cold chain
distribution system helps U.S. fruit prospects. The top U.S. fresh fruit from 2012 to last year were
grapes, oranges, strawberries, and apples. The U.S. faces strong competition from China,
Malaysia, Australia, and South Africa.

Local consumers, in general, highly regard U.S. fresh fruit quality. Higher income also creates
more demand for certain premium air-flown fruit such as strawberries, plums, and avocados. Local
consumers are receptive to U.S. fresh fruit promotional programs and attractive packaging, and
educational materials. U.S. exporters have excellent opportunities in the main retail channels of
supermarkets, hypermarkets, and convenience stores. The fresh fruit market is competitive, with
extremely price-sensitive retailers and consumers.

Fresh Vegetables
Despite strong competition from neighboring countries with their lower labor and transportation
costs, prospects for U.S. fresh vegetables are still attractive due to solid demand for U.S. products
and ongoing health trend.

U.S. products tend to gravitate toward the premium market, where quality is more of a factor. Top
U.S. selling fresh vegetables in 2016 were potatoes, asparagus, celery, and lettuce. While there is
price sensitivity on more expensive products such asparagus, purchases for asparagus actually
increased by 4.05% for the 2016/2015 period.

Singapore’s vibrant and dynamic food service sector has led to rapid growth in imported temperate
climate vegetables. Key supermarket chains also offer imported vegetables from the United States.

Rising tourism in recent years and the large number of expatriates living in Singapore have led to
the increased demand for imported vegetables. Imported vegetables should continue to grow by
6% during the next five years.

Snacks
The snack sector in Singapore is dominated by products from Malaysia and international brands
manufactured in ASEAN and China. There is high competition for retail shelf space especially
among chocolate producers. However, there is still room for growth for U.S. products; in
particular they have strong brand recognition. In 2016, the U.S. was the third largest supplier at
$37 million; and the top U.S. selling snacks were bread, pastry, cake (one category), potatoes, and
nuts.

The demand for sweet and savory snacks is expected to remain robust in years to come, due to
Singaporeans’ rising disposable incomes, increasingly busy lifestyles, and growing tendency of
Singaporeans to snack. New launches and promotional marketing activities also help to sustain
demand, including new brands, product types, and flavor variants. There is also a growing demand
for higher quality and more expensive snack products. The increasing popularity of social media
generates demand for snacks.

Packaged food manufacturers (including snack producers) were tapping into the ongoing health
and wellness trend as a key focus area in 2016. With the increasing pervasiveness of the Healthier
Choice Symbol on products, manufacturers were taking advantage of enhanced fortification and
more specific health claims as a key marketing strategy in gaining value share for their products
and this trend dominated new product developments in the industry last year.
Wine
Wine is predicted to record a 5% total volume Compound Annual Growth Rate (CAGR) over the
forecast period, generating 15 million liters (3.9 million gallons) in sales in 2020. Wine sales have
been growing steadily in the last few years due to increased demand and broadness of the market.
Consumers in Singapore enjoy various types of wines. The increasing number of “specialty” wine
shops also reflects growing demand.

France dominates the wine market by more than 69%, followed by Australia, Italy, the United
Kingdom, and the United States. While it is growing, the U.S. market share in the overall market
is still quite low (it was number five in the global import ranking in 2016) due to Singaporeans’
lack of familiarity and awareness of U.S. wines. U.S. wines have greatest potential in the mid-tier
range as French wines dominate the premium market with their broad range of products and high
profile promotions; and Australian wines dominate the retail market with their broad range of
products from mass market to premium, and have strong distribution channels. Pernod Ricard led
wine with 9% of total volume sales given its brand strength; and consumers can easily find Jacob’s
Creek in foodservice and retail channels in Singapore.

Singaporeans are generally well educated when it comes to drinking wine and tend to follow global
trends. Their emphasis on matching wine and food has prompted them to try wines from different
countries. Also, the younger generation tends to experience wine drinking from an early age at
social gatherings. Thus, retail sales of wine are expected to record positive and stable growth.

U.S. wines have good quality recognition, and the growing premium dining sector, and growing
number of wine shops ensure potential for U.S. wine sales. Singapore also serves as an important
transshipment point for sales to neighboring countries.

Pork
According to USDA’s Livestock and Poultry: World Markets and Trade, U.S. pork production is
forecast up nearly 5% in 2017 as producers increase supplies in anticipation of strong domestic
demand and higher exports. Exports are forecast up to 8% at 2.6 million tons. Lower prices are
expected to boost shipments to foreign markets too. The projected increase in U.S. production in
2017 is attributed to several factors: increased producers’ profits and lower feed prices (as a result
of record harvest of soybeans and corn in 2016 that have spurred hog production to increase
globally); U.S. packers’ added capacity; and strong demand from China.
In Singapore, U.S. pork/pork products and offal faced strong competition in 2016 from Brazil,
Australia, Netherlands, China, and Spain. While U.S. pork’s sales went down in 2016 by more
than 51% at US$14 million, the long terms prospects in Singapore are relatively good as pork is a
major protein food staple for the majority of the population, and good prospects in high-end outlets
for U.S. pork where consumers pay premium price for higher quality food products.

Due to scarce agricultural land and resources, Singapore imports nearly 90% of its food products
from abroad and this, in turn, generates a vibrant and diverse retail foods market, with an assorted
range of food products, from basic to high-end organic foods. U.S. products have gained traction
in recent years, but competition is fierce. The United States was the fourth largest supplier at
US$872 million in 2016 and with a market share of 8%, behind Malaysia, Indonesia, China, and
Australia at number five. The U.S. is a major exporter of fresh fruits, dairy products, breakfast
cereals, meat products, snack foods, and pet food.

Growth in consumer spending for consumer goods and food and beverages is expected to stay
strong in 2014-18, at an average increase of 5% in local currency terms. According to the
Singapore Department of Statistics and Research, as of December 2016, retail sales of
supermarkets have grown by 1.2% month-on-month and 0.8% year-on-year. Despite the weaker
global economic climate and increased competition from online grocers, experts expect strong
sales at supermarkets over the next few years due to the effective marketing strategies adopted by
leading supermarket chains; higher prices for goods; more willingness to spend on quality; more
people choosing to dine at home; and a rising interest in cooking due to popularity of cooking
shows on television and social media.

Singapore is at the crossroads of major air and sea routes in the Asia Pacific region and serves as
a hub and major transshipment center for much of the Southeast Asian region and Indian
subcontinent. Singapore's important role in regional trade is demonstrated by the fact that re-
exports comprise 45-50% of total exports. The country’s strategic location also contributes to
Singapore’s position as a regional food showcase and headquarters for many major food and
agricultural multinationals.
5.4 MANUFACTURING & AUTOMOTIVE
Manufacturing output increased by 3.6 per cent, reversing the contraction of 5.1 per cent in 2015.
Growth was supported by higher levels of output in the electronics and biomedical manufacturing
clusters, which accounted for 122 per cent and 74 per cent of the overall expansion. By contrast, a
decline in the output of the transport engineering cluster placed the largest drag on growth.

The electronics cluster grew by 33 per cent in the fourth quarter, supported primarily by the
semiconductors segment, which expanded by 62 per cent. The robust performance of the
semiconductors segment came on the back of a strong recovery in global semiconductors demand.
On the other hand, output in the data storage and infocomms & consumer electronics segments
declined by 12 per cent and 19 per cent respectively, amidst a continued softening of the PC
devices market. For the full year, the electronics cluster expanded by 16 per cent, as the strong
performance of the semiconductors segment more than offset the weakness seen in the data
storage, computer peripherals and infocomms & consumer electronics segments.

The output of the biomedical manufacturing cluster increased by 30 per cent in the fourth quarter.
Within the cluster, the pharmaceuticals segment expanded by 33 per cent on the back of a higher
level of output in active pharmaceutical ingredients and biological products. At the same time, the
medical technology segment recorded robust growth of 19 per cent as a result of higher export
demand for medical devices. For 2016 as a whole, the biomedical manufacturing cluster expanded
by 14 per cent, with both the pharmaceuticals and medical technology segments supporting
growth.

The precision engineering cluster expanded by 5.6 per cent in the fourth quarter, supported mainly
by the machinery & systems (M&S) segment. Output in the M&S segment grew by 8.7 per cent
in tandem with healthy export demand for semiconductor manufacturing equipment. Output in the
precision modules & components segment inched up by 0.7 per cent due to an increase in the
production of dies, moulds, tools, jigs & fixtures and metal precision components. For the whole
of 2016, the precision engineering cluster’s output rose by 0.8 per cent. While the M&S segment
contributed positively to growth in the cluster, output was weighed down by firms supporting the
oil & gas industry, which had remained weak amidst the low oil price environment.

The output of the chemicals cluster grew by 2.2 per cent in the fourth quarter, supported by growth
in all segments. The specialty chemicals segment, which expanded by 3.1 per cent on the back of
a higher level of production of mineral oil additives, was the largest contributor to growth. For the
full year, the chemicals cluster contracted by 0.9 per cent. This was due to a decline in the output
of the petrochemicals segment arising from major plant maintenance shutdowns, even as the output
of all other segments expanded. The general manufacturing industries shrank by 7.6 per cent in
the fourth quarter, with all segments within the cluster posting declines in output. In particular, the
miscellaneous industries segment contracted by 9.6 per cent on account of a lower production of
fibre glass products and construction-related products & materials. The printing segment shrank
by 16 per cent, due to weak demand for commercial printing. In addition, output of the food,
beverage & tobacco segment fell by 2.7 per cent. In 2016, the general manufacturing industries
contracted by 2.5 per cent on the back of output declines in the printing and miscellaneous
industries segments. Output of the transport engineering cluster declined by 18 per cent in the last
quarter of 2016, weighed down by continued weakness in the marine & offshore engineering
(M&OE) segment. The M&OE segment contracted by 33 per cent, the ninth consecutive quarter
of contraction as sluggish global capital expenditure for offshore production and exploration
amidst the weak oil price environment continued to place a drag on rig-building activities and the
demand for oilfield & gas field equipment. On the other hand, the land transport and aerospace
segments grew by 13 per cent and 6.9 per cent respectively, with the latter supported by higher
demand for aircraft and engine maintenance work. For the whole of 2016, the transport engineering
cluster contracted by 18 per cent, largely due to the M&OE segment.
5.5 DISTRIBUTIVE TRADE (CONSUMER GOODS INCLUDED)
Retail
Retail shapes the character of Singapore – it underpins the growth of the tourism industry and
contributes to an enhanced quality of life for Singaporeans to live, work and play. There are around
22,000 establishments, in the retail sector today, contributing almost 1.4% to GDP and 3% of total
employment*, making it a key industry for the nation.

The sector faces several near term challenges – intensified competition and a need to undergo
structural shifts from brick-and-mortar outlets to e-commerce. The sector has to evolve and adapt
to major trends like the omni-channel approach, as well as tap new growth opportunities and
remain internationally competitive.

Singapore's cosmopolitan retail sector shapes the environment in which Singaporeans live, work
and play. In 2013, it generated $34.5 billion in operating receipts. According to a study by CB
Richard Ellis, Singapore is among the world’s top 20 cities to have a significant proportion of
international retailers in their retail sectors. Besides the many international brand names that have
established their presence locally, Singapore also boasts a plethora of local brands and product
offerings. An improvement in overall retail sales and increasing visitor arrivals, retailers would be
able to tackle these challenges with optimism. Island-wide occupancy is expected to maintain
within 91.0% to 92.0% as retailers remain prudent in their expansionary plans. However, rising
business cost and manpower shortage continue to plague the Singapore retail market.

While developments across the globe have increased the purchasing power of people, retailers will
find that the rise in demand comes with increasingly complex expectations. Consumer preferences
are shifting rapidly with the ebb and fall of trends. The wave of globalization has also brought
about an avalanche of shopping choices for consumers. In addition, the digital revolution has
introduced new methods of shopping – be it through websites or mobile applications, or even
through e-marketplaces – so retailers can no longer rely on their brick-and-mortar shops alone. To
find new avenues for growth, businesses must be able to adapt to the changes with new technology
and partnership opportunities.
5.6 TELECOMMUNICATION & INFORMATION TECHNOLOGY
5.7 OTHERS (PHARMACEUTICAL & MEDICAL, F&B INDUSTRY)
7. COMPETITIVE LANDSCAPE
7.1 INDUSTRY CONCENTRATION ANALYSIS
7.2 INDUSTRY PREDICTABILITY AND INDUSTRY MALLEABILITY
ANALYSIS
7.3 MERGERS & ACQUISITIONS, JOINT VENTURES, COLLABORATIONS,
AND AGREEMENTS