Future state industrial development focus in Singapore 0 comments

(P.S: Sorry for any disturbances the advertisements above may have caused you)
Singapore is in the midst of a transformation, best exemplified by a certain senior politician's optimistic description of it as a "golden period". Certainly, this is putting a spin on things, because a situation can be seen in different ways. Economically, yes, there are many golden opportunities around.

For the stock investor, my view is that often it is the less obvious themes which offer the greatest opportunities for profit. Even as the residential en-blocs and commercial property private equity deals take up all the attention, let's not forget that the main economic, as well as social, pillar is the industrial sector. This is an oft-neglected non-headline theme but billions are being poured to reposition Singapore's industrial niches, and in the long term, stock prices will follow where the money goes.

JTC is traditionally the lead agency behind most of Singapore's broad industrial thrusts so it is interesting to watch its moves. In particular, its plan to relieve its balance sheet of many of its industrial assets (factories, business parks) through a multi-billion-dollar REIT suggests its need for massive infusions of new capital to be channeled into new developments. Below are where I think the main industrial foci will be in the foreseeable future:

one-North
There is a major billion-dollar investment push in the Buona Vista area. Positioned as the future research hub of Singapore supporting knowledge-intensive activities in biomedical, infocomms and media industries, the potential of this area --- 200 hectares is designated for the entire development --- is enormous, regardless of whether the investments pay off or not. That is because the investments themselves are already going to provide a strong pipeline of development/construction projects for clued-in developers in the coming years --- the masterplan calls for a 20-year development.

The two main research sub-hubs in the area are Biopolis and Fusionopolis, for biomedical and IT/media respectively. These have been in development since 2001. The interesting follow-up developments will be coming in the next few years, because one-North is to be developed as a multi-faceted work-live-play self-sustaining ecosystem (probably inspired by Silicon Valley) to attract the scientists, entrepreneurs and researchers. I believe the main drive for these started in 2006, and will continue for the next few years in a self-reinforcing cycle.

To start off, there will be two new Circle Line MRT stations (NUH and one-north) built along the north-western border of the site, as well as the Circle-line extension of Buona Vista MRT. The first residential developments are coming up, which are one-north Residences by UOL and a mixture of developments, including a business hotel, residential and mixed-use complex (Vista Xchange) by United Engineers. The Rochester Park area is being redeveloped as an entertainment/lifestyle area. These are but the beginning, and developers who position themselves well at the initial stages will reap the rewards for years to come.

The future of Singapore's industry lies in high-end manufacturing supported by research and development, and hence the government will do everything to make sure that it succeeds in the targeted areas. One-north, in my view, is the most promising and yet overlooked industrial development so far.

Petrochemical infrastructure investments
This theme had already been extensively explored in an earlier article: "Singapore oil and gas infrastructure construction". While direct investments are mainly private in nature, the state (eg. JTC) also builds supporting infrastructure to attract these investments. Petrochemical-related infrastructure on Jurong Island are another major thrust of JTC for the future, in-line with Singapore's drive to maintain its position as an oil refining/trading hub while extending its reach upstream into energy exploration/research. The upcoming Jurong Rock Cavern for underground hydrocarbon storage, and the proposed LNG import terminal, are two of the biggest examples of state-driven petrochemical infrastructure investments.

Seletar Aerospace Park
This is one for the future. Aerospace is a high value-add industry, and countries moving up the development ladder typically see aerospace as a key target sector. A key pillar of the US's exports, for example, is aerospace. Clearly Singapore is not up-to-scratch to manufacture aircraft, but has carved a niche in aircraft maintenance/repair/overhaul/conversion over the years by leveraging on its air hub status; today, it has a quarter share of the Asian aviation MRO market. The aerospace industry has registered strong growth over the last decade, with 12% annual growth rate.

Seletar Aerospace Park will be 140 hectares in size (2/3 size of one-north) and is meant to build on the MRO facilities of Singapore as well as housing aerospace equipment manufacturing plants and training academies, centering on the existing Seletar Airport which will be upgraded. Target completion is from 2015-18, still a long time away.

These mega-size industrial developments show clearly what the emphasis of the state will be for the foreseeable future, and suggest credible secular buy-and-hold themes with a tailwind (state funds and long-term commitment) behind them.

References:
(1) JTC Annual Report 2006