Yeo’s, Tiger Beer and now Gardenia – flight of food manufacturing from Singapore might be just as planned

[SINGAPORE] Gardenia Foods is the latest home-grown company that is shifting food manufacturing out of Singapore – and it may well be far from the last to do so.

Yet, even as these moves mean a loss of jobs, they are in line with the Republic’s path forward, as laid out in the recently released recommendations of the Economic Strategy Review (ESR).

Not only may Singapore have to brace for more of such departures, some mindsets may also have to shift – seeing these not as reasons to mourn, but steps towards greater efficiency.

In March this year, Tiger Beer maker Asia Pacific Breweries Singapore (APBS) announced the phased scaling-down of brewing facilities here, with production heading to Malaysia and Vietnam instead.

A month later, beverage stalwart Yeo Hiap Seng laid off staff in local can-making roles, in line with the consolidation of such manufacturing in Malaysia.

This month’s announcement came from Gardenia on Wednesday (May 20), with the bread-maker announcing that its bakery operations will shift to nearby Johor Bahru.

Just as planned?

These moves exact undeniable human tolls. APBS said it would lay off around 130 people over the next two years; Yeo Hiap Seng has laid off 25 workers; and Gardenia will retrench 141 staff.

Even with support from former employers and the labour movement, affected workers may find the transition difficult – particularly if they have been in such roles for a long time.

Still, that is no reason to try and stem future job losses of this sort. If anything, the government may be keen to facilitate such changes, under one of 32 recommendations in the ESR: “Enable firms to restructure and transition more smoothly.”

Beyond just helping companies grow, the government should help them “assess their position early” and transition as appropriate, said the ESR committees in their report.

This could include restructuring operations or offshoring parts of their business – which is precisely what these food manufacturers are doing.

The government will also work to lower regulatory frictions associated with such moves. This is to “ensure that capital, talent and resources flow more quickly to more productive uses”, said the ESR report.

The loss of a manufacturing job, in other words, means one additional worker available to fill other domestic roles.

Keeping value

Crucially, the closure of production facilities here is not the same as the complete exit of a company.

APBS retains its Asia-Pacific headquarters in Singapore. Yeo Hiap Seng’s Senoko facility continues to serve as the mainboard-listed group’s headquarters, cross-border logistics hub and smaller-scale manufacturing centre.

Gardenia has said that Singapore is still its central hub for key corporate functions, with about 250 employees remaining.

What would be truly worrying is if companies no longer find Singapore attractive as a base for such higher-value functions.

But as long as companies remain anchored here, the offshoring of certain operations may simply make financial sense.

The development of the Johor-Singapore Special Economic Zone (JS-SEZ) may further facilitate such relocation.

Indeed, a common model brought up in discussions of the JS-SEZ is for companies to keep their headquarters in Singapore while having manufacturing facilities in Johor.

Even while acknowledging and mitigating the very real effect that restructuring has on workers, Singapore has to keep the big picture in mind.

If more companies take this route and therefore achieve higher efficiency and profitability, that should be cause for celebration, not dismay.