Dec 18, 2013

    S'pore's Nov NODX slump points to structural issues

    SINGAPORE reported a surprise fall in non-oil domestic exports last month, indicating the strong recovery in October's electronics shipments was a Christmas blip while raising deep concerns about the city-state's pharmaceutical sector.

    Trade agency International Enterprise Singapore (IE Singapore) said yesterday that non-oil domestic exports fell 8.8 per cent last month from a year ago, surprising economists whose median estimate was for a rise of 4.3 per cent.

    Last month's non-oil domestic exports were 9.3 per cent lower from October, after seasonal adjustments.

    "It's a huge miss. It seems the October spike in electronics exports was for Christmas orders and that the structural drag in the industry remains," said Barclays economist Joey Chew.

    Domestic exports of pharmaceuticals plunged 46.9 per cent to $934.5 million from a year ago, falling at a meteoric double-digit pace for the sixth consecutive month to the lowest level since December 2008, according to research by CIMB, the second-largest bank in neighbouring Malaysia.

    CIMB regional economist Song Seng Wun said: "It may be a reflection of a very competitive landscape, where the absence of new drugs has hurt the value of exports."

    Nevertheless, economists were still surprised by the sharp drop in last month's pharmaceutical shipments, as factories continue to add facilities.

    But Ms Chew noted: "Plants in Singapore have been producing more lower-value-added generic drugs. Exports to the European Union, the biggest market for Singapore-produced drugs, have been extremely weak because of this."

    Singapore made an aggressive push into biomedicals around 15 years ago. The biomedical sector last year surpassed electronics in terms of contribution to manufacturing gross domestic product, although electronics will likely regain first position for this year, given the drop in pharma exports this year.

    Shipments of electronics from Singapore factories dropped 8.9 per cent year-on-year, hurt by a 32.4 per cent plunge in disk media and a 11.9 per cent drop in disk drives.

    In a note to clients, Bank of America Merrill Lynch's South-east Asian economist, Dr Chua Hak Bin, said: "The ugly (November) export reading raises concerns yet again that Singapore's manufacturing may be losing competitiveness and facing hollowing-out pressures."

    For instance, Singapore's non-oil domestic exports have contracted by 6.3 per cent since the start of this year, while Taiwan and South Korea have seen exports edge up slightly and China's grew by 8.2 per cent, he said.

    Singapore has seen its manufacturing sector lag the rest of the region in the last few years, as its economy becomes increasingly reliant on areas such as trade and financial services, as well as tourism and property development.