"An encouraging sign is that investments announced before 2020 are going ahead, including Arkema’s PA 11 resin plant and Neste Oil’s S$2.2 billion biofuels project."
How is Singapore and its chemical industry positioned as we emerge out of 2020?
In the first half of a very challenging year, we have seen a year-on-year drop in GDP by 5.5%, but the latest forecasts by the Ministry of Trade and Industry project a rebound in the economy to positive 6% growth for 2021. In the chemical industry, the contractions seen at the start of 2020 have been replaced by a 12.3% year-on-year growth in December 2020. Nevertheless, one must keep in mind that the chemical industry is a cyclical business with long cycles and, even before the pandemic, the global industry entered 2020 with significant capacity overhang due to a boom in investments in petrochemicals, especially in Asia. An encouraging sign is that investments announced before 2020 are going ahead, including Arkema’s PA 11 resin plant and Neste Oil’s S$2.2 billion biofuels project. I remain optimistic about Singapore’s prospects; in the heart of Asia, we are well-positioned to serve growing markets with high population dividends.
With China and India expanding their own refining capacity, how can Singapore’s chemical industry retain its significance as a global chemical hub?
Singapore still remains the strategic location for energy and chemical companies. Singapore has the world’s fifth largest export refinery capacity, with over 100 global chemical companies operating in the country, predominantly on Jurong Island. The contribution of the manufacturing sector to GDP has been inching towards 21%, from about 19% five years ago. At the same time, Singapore has become a more diverse economy, and manufacturing itself is spread out to more sectors. The chemical sector remains key in terms of output, along with the semiconductor sector, which is a reflection that Asia is becoming the growth engine of the world. Even if China reaches self-sufficiency, which may very well happen, there are still 700 million people in Southeast Asia and over a billion in India, and these are countries that will take longer to be self-sufficient from a chemical standpoint. These large markets will continue to secure Singapore’s relevance from a manufacturing and export perspective. Finally, Singapore is a strategic location not just for manufacturing, but also for headquarters and innovation, with specialty chemical companies tapping into the talent available in Singapore and its R&D ecosystem to build a strong competitive advantage.
What are your thoughts on the recent RCEP agreement?
The RCEP comes with the recognition that intra-Asian trade will continue to grow regardless of other trade developments globally. Singapore is one of the lead signatories in the partnership, which adds to a thick network of FTAs with over 20 countries that continue to serve us well.
The government announced the next five-year RIE2025 plan, with record capital commitment. How is the government and the EDB working to encourage innovation, and what are the key areas that the funding will be directed to?
Our Deputy Prime Minister confirmed the government’s commitment to spend 1% of Singapore’s GDP into research and innovation, which translates to about S$25 billion budgeted for the next five years. This money goes into funding public research institutes, universities, corporate labs within large enterprises, and also small commercialization teams whose innovators are ready to take their technologies to the market. In the chemical industry, there are three trends that drive further innovation: The first is sustainability and sustainable chemistry, which encompasses: bio-based, biotech, and biodegradability; the second is the rapidly growing and increasingly more affluent Asian middle-class and the third relates to technological advancements in other sectors such as 5G and materials, which will propel more application development and translational R&D.
Over five years since the Paris Agreement, and two since implementing the carbon tax, what is Singapore’s progress in terms of its sustainability goals?
We have followed through on the commitments we made over the years, and the carbon tax policy remains unchanged; we have made it a core value to stay transparent and consistent. The carbon tax approach is not a revenue-generating initiative, as we are reinvesting the collected tax back into industry. We have committed S$20 million into energy-efficient and carbon abatement projects, and we have a healthy pipeline for 2021, unhindered by the pandemic. If all of these projects are realised in 2021, we are looking at eliminating CO2 emissions equivalent to halving the car population, and their tail pipe emissions, in Singapore.
What is a key challenge for Singapore’s chemical industry?
Our oldest refinery has been around for 60 years, and some of our petrochemical complexes are around 30 to 40 years old, so a key challenge is to make sure that our Jurong Island portfolio continues to keep pace with the rest of Asia and its evolving needs. China, India and South Korea are not resting, so we need to take advantage of the base of capabilities we have built over the decades, whether it is talent or innovation, and use that to ensure that our Jurong Island companies are competitive, future-ready from a climate perspective, and ready to ride on Asia’s growth story.
What are the near and long-term growth opportunities for Singapore’s chemical industry?
In the near term, there is no running away from the spectre of Covid-19, though there continues to be new pockets of opportunity, particularly in the specialty chemicals field, where there has been a wave of interest from multinational companies looking at Covid-resilient areas like nutrition, food and beverage, hygiene products, and also electronics and semiconductor sectors. In the longer run, Asia will continue to drive the petrochemical market well into the next decade, and we need to continue growing the sector in a competitive and climate-sustainable manner. Singapore needs a major upstream olefin project that would catalyse downstream opportunities as we approach 2030