Yahoo Finance 5 Industries in Singapore That May Be Facing a Tougher 2016
It may have been the year of #SimiSaiAlsoSG50, but it was also not all fun and games. In the midst of a global recession that saw the China stock market crash and oil prices remain low, several industries in Singapore had to struggle harder to get through the year. Here are 5 industries that we feel are going to still feel the pinch come 2016.
1. Shipping
The shipping industry on the whole has been stagnating and some are saying that there’s going to be another three years of challenging times. Singapore, with its historical status as a shipping hub, can expect to be significantly affected. The reasons for this are linked: There is a global recession, which leads to lower trade volumes and as a result, there is a lack of demand for transportation. Complicating matter further, there is an overcapacity crisis in the market, meaning that there is more space in ships than cargo. As a result, shipping companies are forced to idle more ships or risk lowering shipping rates and affect profit margins.
Recently, this led to the sale of Neptune Orient Lines, which started out as the national shipping line, owned by the Singapore government, to French shipping giant CMA CGM for $3.38 billion. It can be seen as a good thing that there is a buyer willing to pay such a premium for a struggling shipping firm at this point in time. On the other hand, any buyout is bound to result in changes – and one of those feared changes is that Singapore might lose out as a shipping hub, now that our main shipping line is no longer obligated to operate at our port.
As it stands, CMA CGM is buying up NOL shares and is ultimately planning to delist the company, should the sale go through. It is currently pending regulatory approval.
2. Retail
The retail industry in Singapore faces competition from both big and small online competitors. On the one hand, you have Taobao and Amazon making shopping a breeze with low hard-to-beat prices. On the other, you have multiple local and overseas blogshops taking advantage of the fact that they don’t need to pay overheads like shop space rental and salaries to salespeople to offer discounts and convenience to customers. Add this to the fact that government policies are now more rigid when it comes to foreign talent, and you have the retail industry at a crossroads.
Just last week, Manpower Minister Lim Swee Say warned of lower job growth over the next 5 years, especially in the retail sector. His recommendations were for retailers to rely less on quantity and more on quality when it comes to manpower. And when Lim Swee Say opens his mouth, you should listen. People who listen can later say, heng ah.
3. Hotels
It really was a wakeup call when the parent company of iconic Singapore hotels like the Raffles Hotel and Swissotel the Stamford gets bought out for a relatively measly $4.1 billion. Remember, this price is not just for two hotels, but 155 hotels – 40 of which are under development – across the world. In addition to the two local hotels I mentioned earlier, this list also includes London’s most famous hotel The Savoy and the historic Plaza Hotel in Manhattan.
This sale, while it technically shouldn’t result in too many changes in the way the hotel chains operate, should still be a cause for concern as Singapore’s been seeing a small but steady drop in demand compared to last year. The main cause of this slight decrease in international arrivals? Our relatively strong Singapore dollar. Sure, it’s weaker compared to last year, but the countries that majority of our visitors come from are also suffering from weaker currencies.
What might make things worse is the introduction of over 4,000 new rooms, with several new hotels opening across our island. Simple economics will tell you that when supply increases, price often decreases.
The only category that has been beating this trend this year? The luxury segment, interestingly enough. But a lot of that was attributed to the many events and celebrations like the SEA Games and the general SG50 atmosphere. Singapore will need to sustain that level of interest somehow in 2016. Maybe the opening of the National Gallery and the mystery of the breaking glass doors will help.
4. Airlines
You’d think that if a company like Scoot can withstand two huge flight delays over three days in June this year and still come up tops in the Airline Excellence Awards at the end of the year, then the airline business has nothing to worry about, right? Wrong.
The Singapore Airlines group has experienced an overall muted growth this year, with improvements in capacity for the Scoot and SilkAir subsidiaries balanced out by slowdowns with the parent carrier and struggling budget carrier Tigerair.
SIA claims that it has put in place measures that can weather this storm in the years to come, but with increasing competition, they will need to hope that these measures take effect sooner than later. Alternatively, they can hope that their Scoot fiasco, where passengers had to board and disembark the plane two times, gets topped by the recent China Airlines plane delay, where passengers had to suffer the same inconvenience three times.
5. Manufacturing
This year’s China stock market crash was the result of several factors that led to the creation of an unsustainable stock market bubble. While it didn’t result in the disaster some were predicting, it has significantly affected the general business sentiment in the local manufacturing sector. The other contributing factor is the ongoing weak oil prices.
But not every sector in the manufacturing industry is as pessimistic. Biomedical manufacturing, pharmaceuticals and medical technology are all looking forward to 2016. Presumably, their businesses are less affected by the global economic recession.
For companies that don’t fall under these categories, however, it’s not the end of the world. Minister for Trade and Industry S Iswaran pointed out that manufacturing firms need to shift from adding value to creating value. This means that Singapore companies need to do more than just make components for bigger firms. They need to innovate and invent new products that they can put their name on.
If not, the manufacturing sector is most likely at risk of losing jobs especially to regional competitors, who aren’t burdened by Singapore’s higher costs. And jobs, unfortunately, are the hardest to manufacture.
Do you agree with our assessment of these 5 industries? Share your thoughts with us.
The post 5 Industries in Singapore That May Be Facing a Tougher 2016 appeared first on the MoneySmart blog.
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