Positive Impacts of Precision Engineering on Singapore’s Economy
The economy of Singapore is one of most economically open economies of the world. The low tax rate and the lack of strict bureaucracy allow the business to operate smoothly. One of the biggest business sectors of the country is the engineering and the precision engineering industry of the economy. The main characteristics of the precision engineering company are their innovation and new product development. Khoo et al. (2016) pointed out that, new product development through research and development is the contribution of this sector to the economy of the country. The demand for the modern electronic products is increasing day by day with the changes in the lives of the people of the country. The precision engineering with adept production is meeting the needs of the market thereby leading to a great expansion of the manufacturing sector of the economy (Tripathi et al. 2017). This manufacturing sector is making new job opportunities for the people of the economy and hence contributing positively towards the economic growth of the country. The aim of this paper is to shed more light on the performances of the engineering and precision industry and their impacts on the economic growth of Singapore.
The electronics and precision engineering have a number of positive impacts on the economy of Singapore. These involve the job creation in the economy. With high demand for the electronic products in Singapore and other countries of the world, the operation of these companies is expanding (Chiu, 2018). Therefore, these companies are providing technical and nontechnical jobs to the people of the economy. The manufacturing sector of the economy employs around 16% of an overall labour force of the country and estimation shows further increase in the employment in this sector (Ho and Tan, 2018). Furthermore, the contribution of this industry is not limited to its own industry, the job growth also have improved in the related industries as well.
The contribution of the sector is not limited to the job creation; rather the repercussions are also working in favour of the economy. The increase in the employment in the economy along with the high demand for the electronic product is also increasing the wage of the workers of the economy as well. Kurnia, Karnali, and Rahim (2015) pointed out that the wage in the economy of Singapore has increased 41% since the year 2004. The corresponding increase in the household consumption has also increased leading to a change in the overall aggregate demand for goods and services in the Singaporean economy. Thus, the industry has a major role to play in the economic growth. Another notable contribution to the economy is the increased number of product choices to the customers of the market. The engineering and precision industry is continuously innovating to have a competitive edge over the other players of the market.
Constraints Faced by Precision Engineering Industry in Singapore
Furthermore, with the new product development through research and innovation, this sector is producing new electronic products for the customers of the market. Thus, this sector has a huge role to play in the competition building. The use of state of the art technologies in this sector also paves the way for productivity increase as well (Teo et al. 2015). The companies of the market are competition fiercely among themselves in order to provide best quality products the customers of the market. However, one of interesting point to note in this case is that the companies never engage in the price wars among themselves and hence the quality of products in the market remains the same. Rather these nonprice wars lead to further development of auxiliary features in the electronic products.
Despite its contribution to the economic growth of the economy, there are some of the limitations that this sector of the economy is facing that is not allowing it to perform at its potential. One such constraint is the regulatory burdens of the country. The norms and the regulations of Infocomm Development Authority of Singapore have some strict rules to control the industry. Tan and Shang-su (2017) pointed out that the flexibility of the companies gets hampered due regulatory actions of the authority. Each of the projects of these companies needs to be sanctions separately to ensure the security of the labours and hence takes a lot of time. The operation schedules of the companies get impacted due to this and hence the productivity reduces. Apart from that the regulatory authority also imposes a number of formalities on the production units of the companies that further increases the cost of operation.
Another constraint of industry in the increasing cost of production. Seetharaman et al. (2017) pointed out that, the main reason for the increasing cost of production in the Singaporean electronic and precision engineering industry is that the increasing wage rate of the labour is increasing the cost of production of the companies. The increasing cost of the raw materials is another reason for the rise in the production cost of the company. The huge number of medium producers of the market is another reason for the increasing cost of operation of the company. Seetharaman et al. (2017) stated that the electronic and precision engineering companies of Singapore have not yet been able to use the economies of scale in order to reduce the cost of operation. Each of the companies has small production capabilities and hence economies of scale are hard to implement. Any merger acquisition in order to club small companies can allow them to get rid of this problem. Furthermore, the marketing and promotion is another constraint of the economy that is being faced by the companies. It is the lack of knowledge regarding the customers of the market that is creating a problem for the companies to put across their content towards the potential customers. Gong and Wang (2015) highlighted that; the cost of promotion in the Singaporean economy is also very high. Given the high operation cost of the company, promotion and marketing are becoming an issue for the companies. Another problem is the dynamic changes in the preferences of the customers of the market which makes it difficult for the marketing department of the companies to articulate an accurate strategy as per the needs of the customers of the market.
Government Action to Mitigate Problems Faced by Precision Engineering Industry
It is important for the government and the authorities to look after the problems which are being faced by these companies of Singaporean economy. There are a number of ways the government can take action in order to mitigate the problems. The most effective action that the government can take in this case is providing better opportunities to the companies of the economy. Ho and Rajabifard (2016) stated that opportunities in terms of tax reduction will allow the organisation to reduce some of the operational cost. This is also important to maintain a high wage rate for the labours of the company as well. Furthermore, the government can also increase tariff for the imported products in order to remove some of the foreign competition. In addition to that, the government of the country can also provide credits to the new companies in order mitigate the problems of the companies as well. According to Kumar et al. (2018), broadcasting and information management policies of the government need to be modified in order to bring down the cost of promotion in the country.
Along with the tariff to remove the foreign competition, another step that is important is the networking in order to increase competition among the domestic companies of the country. Networking among the domestic companies can be done through many of the channels. Masum (2015) stated that a most effective channel for the networking is a common platform that can help in the transfer of information among the companies of the market. The collective effort in terms of research and development may also pave the way for cost-efficient production processes in the economy.
Conclusion
Therefore the paper furnishes that the improvement in the manufacturing sector is mainly driven by the performance of the electronic and precision engineering industries of the Singaporean economy. With the increase in the demand for the electronic products in the market, the production of this industry has expanded not only increasing employment opportunity in the economy but also boosting their productivity eventually having an effect on the overall economic performance of the country. Despite its contribution, there are many of the limitations which are being faced by the companies in the market. One of the major problems is the increase in the operating cost that is reducing the margin of the company. The government and the regulatory bodies can take actions to mitigate this problem by providing more and more opportunities to these companies in terms of tax reduction or tariff on foreign products. This will allow these companies to operate at their potential thereby having even more impacts on the economic growth of Singapore.
Reference
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