The slowing global economy is making life hard for some sectors here but there are still rich pickings to be had elsewhere, said Finance Minister Heng Swee Keat yesterday.
He noted that while industries like wholesale trade are facing an uphill slog, opportunities abound on three fronts - niche production, consumption spending and modern services.
Mr Heng's remarks came after Monday's first meeting of the Committee on the Future Economy that he chairs. The committee is looking into Singapore's next stage of economic development.
In a wide-ranging speech on the economy, he told a wealth insights conference organised by Swiss banking giant UBS that in the domestic information technology sector, "manufacturers have recast business models and shifted towards niche production as well as services-related activities, such as chip design, delivery of IT services and innovative solutions".
Home-grown electronics player Venture works with manufacturers to produce devices and core components for the medical and life- science industries. This is an example of how Singapore firms provide "services that complement the evolving production networks in the region", Mr Heng said.
The backdrop for all this is the economic performance of emerging Asia - including places such as China, India, Taiwan and Singapore - the slowest since 2001, Mr Heng noted. He said investors need to be vigilant amid the volatile markets, but Asia is coming from a stronger base compared to the 1990s.
Apart from niche production, another potential area is consumption spending, which is likely to expand as income levels grow and the population rises - two factors at play in Singapore and the region.
"Consumers value diversity in consumption, and this provides good potential for intra-regional trade in final goods and services, even as trade in intermediate components remains important," said Mr Heng.
Singapore could grow with this trend, with tourism a good example of the potential. Mr Heng noted that Chinese visitor arrivals to Singapore have grown on average by 25 per cent every year since the global financial crisis, except in 2014.
A third area he cited was modern, not traditional, services. He said exporters of modern services here have the edge, especially in the financial sector where there is great potential to develop niche growth areas.
The country is already a pan-Asian centre for wealth management, with total assets under management here up 30 per cent to $2.4 trillion in 2014 from 2013. It is also the world's third-largest foreign exchange centre.
China's internationalisation of the yuan and technology have also "given greater impetus to Singapore's development as an international financial centre", Mr Heng added.
Asked where Singapore could excel, OCBC economist Selena Ling said the best position would be in modern services, including financial services. She noted that niche production areas require a lot of resources and attention. "Based on our clean government, clear legal and regulatory regime, head start in regional wealth management hub, and AAA-rated sovereign, these factors put us in good stead," she added.
But Singapore must still develop what Mr Heng called "an innovative agility" to grow on these fronts.
"What we can and must do is to strengthen our robustness against unexpected shocks by keeping the economy flexible and nimble.
We must persevere with structural reforms, to reposition ourselves and build new capabilities, especially in innovation, that will secure sustainable and inclusive growth," he said.
This article was first published on Jan 13, 2016. Get a copy of The Straits Times or go to straitstimes.com for more stories.