I n 1817, the economist David Ricardo introduced the concept of comparative advantage in his book On the Principles of Political Economy and Taxation . Briefly stated, this is the theory that it is in countries’ best interests to trade with others by exporting the goods they have a relative advantage in producing cheaply, and importing from others the ones they don’t. For the past 200 years or so, the growth of the global trading system has provided a good illustration of this theory, with increasingly open economies searching the world for partners that can provide goods or services at lower costs. In recent years, this has boosted China’s manufacturing industry , thanks to the relative cheapness of its labour in comparison to that of trading partners, particularly in Western countries such as the United States . As countries across the globe began to outsource more and more manufacturing tasks, China came to assume the mantle of “the world’s factory”. Then the coronavirus struck. Suddenly, with the world struggling to get its fix of Chinese goods, it realised it was addicted. As China went into lockdown, its supply of goods dropped drastically. This disrupted supply chains worldwide and countries across the globe began to question the wisdom of relying on a single source for the production of goods. This is the big picture. In fact, such trends were beginning to emerge before Covid-19. De-globalisation (visible some say in Brexit and the election of Donald Trump in the US), the advent of artificial intelligence and automation and the disruption of old business models had all got the ball rolling. But Covid-19 accelerated the rate of change and has robbed countries of the luxury of time in restructuring their economies. BACK TO THE FUTURE Clearly, action is needed, and quick. Thankfully for Singapore, the city state is in a better position than most when it comes to re-embracing manufacturing, an industry it has a long and proud history of even if it has shown some signs of neglecting it more recently. In the glory days of the 1980s and 1990s, Singapore was one of the four “Tiger Economies” of Asia, alongside Hong Kong , South Korea and Taiwan. Manufacturing accounted for about 30 per cent of GDP for each of these economies and they enjoyed rapid growth. But since its peak in the early 2000s, manufacturing in Singapore has steadily fallen to the point that last year it accounted for just 18.6 per cent of GDP. That is in sharp contrast to South Korea and Taiwan, where it still accounts for about 30 per cent of GDP. Likewise, there has been a similar drop in the number of people employed in the sector. In 1994, manufacturing employed around 25 per cent of Singapore’s workforce; last year that figure had fallen to just 13 per cent. In South Korea, manufacturing still employs one in four workers. Singapore cuts GDP forecast for 2020, cites risk to China’s growth from coronavirus This is a trend Singapore must reverse. Manufacturing can be Singapore’s golden ticket because it is exportable, high value-added and scalable. It can help Singapore to create and retain new and better jobs, while taking control of supply chains can enable the city state to ensure self-sufficiency in critical goods, a crucial benefit in times of emergency. There would be knock-on benefits too. Every economic activity stimulates another economic activity. An article I read in 2018 said the creation of 100 manufacturing jobs stimulates the creation of 27 new service jobs. Meanwhile, in reverse, the creation of 100 service jobs stimulates the creation of just three manufacturing jobs. Strategically, manufacturing not only employs skilled workers in industrial R&D, product design and engineering services, but it also creates demand for logistics and transport, and allows Singapore to withstand shortages during crises. And Singapore has a super power when it comes to manufacturing: a large pool of trained workers. While it is true that PMETs (professionals, managers, executives, technicians) having been displaced over the past decade due to industry disruptions and relocations, there is still a vast range of skills and capabilities to be harnessed. Working out how to redeploy them could help Singapore to regain a comparative advantage. Singapore’s intensive investment in intellectual property (IP) is also in its favour. New technologies, applications and business models can drive advanced manufacturing. Between 1991 and 2020, Singapore invested S$61 billion (US$44 billion) in Research, Innovation and Enterprise funding. Now we must figure out how best to reap the benefit. Of course, there are sceptics who say relying too much on manufacturing would ignore the problems of Singapore’s high land costs and shortage of workers. But the first of these “problems” is easily solved by government pricing industrial land differently. The second has already been solved by technology . In Singapore, mid-career workers face the brunt of job losses GROWTH STRATEGY So, how can Singapore re-grow the manufacturing sector? Firstly, it should become the prototyping factory of the world. Prototyping is what happens before products enter mass production. It requires skilled workers to work out the manufacturing processes that can transform a product from the design stages into something that can be mass-produced on a cost-effective scale. I have personal experience of setting up a prototyping factory with my third major start-up, Infiniti Solutions. The company is headquartered in Singapore, but I decided to set up its prototyping factory in Silicon Valley, where concentrated expertise could offer synergies and speed in semiconductor prototyping, initial production testing, designing and assembly of systems. There is nothing to stop Singapore from competing with Silicon Valley. The problem at the moment is a lack of support. Last year, I visited an NTU (Nanyang Technological University) start-up that used cutting-edge technology developed at the university. However, the NTU professor behind the project told me he had built the prototyping facility in Shanghai. I asked him: why Shanghai and not Singapore? After all, both are equally expensive. He lamented that he could not find funding support for commercialisation in Singapore. If Singapore wants to be at the top of the mass-production game, it needs to excel as the global prototyping place of choice. Another post-Covid-19 opportunity would be for Singapore to look around the globe for struggling companies with good core competencies. The Economic Development Board could search for valuable small and medium-sized enterprises in advanced countries in need of capital and incentives and integrate them into Singapore’s local ecosystem. It could also return to some of the industries it gave up on prematurely in which it was once globally competitive. Semiconductors are one such industry. Semiconductors power all electronic devices, so will continue to be a valuable part of the supply chain for the foreseeable future. Let us return to this industry as owners rather than rely on multinational corporations. Let us look globally to acquire the full supply chain of the semiconductor industry. Will Singapore banks regret easy loans for coronavirus-hit businesses? Contract manufacturing has huge potential in Singapore too. At present, while Venture Corp remains strong, all of the other significant contract manufacturing firms are in foreign hands. Singapore could purchase a couple of these companies and become like Foxconn, the world’s largest contract manufacturer of electronics and, in particular, Apple products. The Taiwanese government is offering great incentives to lure such companies back to Taiwan . Singapore could do the same; one strategy would be to tap sovereign wealth funds to acquire and convert such companies into Singapore companies. Then there are the new industries that Singapore should be getting into early on. Think robotics, artificial intelligence and automation. In 2016, the Chinese electronics manufacturer Midea acquired a German robotics company, Kuka, for US$5 billion. Interestingly, Kuka employs 13,710 people specialising in robotics. Singapore should build its own Kukas and employ thousands of people. Robotics is a bright spot of the future and there is room for new leaders to emerge. Remember, during the gold rush, many speculators lost money but those who supplied equipment, chemicals and materials profited richly. Robotics, AI and automation will be the new prospecting pan, providing essential manufacturing parts and components that enable the new “gold” (manufacturing) rush. 3D printing is another bright spot. Until recently, standardised mass production has meant a “one size fits all” approach, in which products are manufactured to one standard for all consumers. This will not sell in the future. Instead, demands for customisation will increase, and these demands will increasingly be met through 3D manufacturing. We are on the cusp of the customised mass-production era. In the post-Covid-19 world, taking charge of supply chains is not only about safeguarding the economy. It is also about ensuring food security and production and adequate supplies of clean water. Singapore can boost food production through vertical and urban farms and through the supporting industries of the internet of things and system integration, both of which it excels in. New technology can be used to cut food spoilage and waste, and to help recycle water. CALL FOR ACTION What is already clear is that the great disruption caused by Covid-19 will cause a complete realignment of global supply chains. Singapore should see this not as a threat but as an opportunity. It is agile and adept and is equipped with the necessary resources, skilled workers, technologies and strategies to remain a manufacturing powerhouse. In the end, this is about creating great jobs for future generations and securing a place in a world trading system disrupted by contagion, competition and changing customer demands. Now is the time to seize Singapore’s comparative advantage. ■ Inderjit Singh is an entrepreneur and a former PAP MP