President’s Message
Message 32/2019
Creative Destruction and Floating Solutions
Mr Lim Soon Heng, PE, FIMarEST.
Founder President
The Singapore economy must be responsive to the rapid shift from the Third Industrial Revolution to the Fourth. Mega floats can be a useful tool to fast-track the process.
Too much land is used to support industries of the last three decades. Of these, three of them take up about 10% of the total land in the city state, viz. petrochemical, shipyard, and port. These are mainly located in Jurong and Tuas as shown in the map above.
Let’s examine some of the related issues:
Question. Is the land now occupied by these industries optimally used?
Answer. No. These industries are not suited for multi-level production systems. The economic output per hectare can be increased at least five time more with modern hi-tech industries as they can be performed in multi-storey buildings.
Question. Would these industries survive the geo-economic threats looming ahead?
Answer. No. Neighbouring countries that depended on Singapore for these services are pushing ahead to develop their own capabilities. Many shipyards have emerged in Indonesia. Malaysia has joined forces with the Saudis to develop a petrochemical complex three times larger than Jurong Island. The dynamics of shipping will change significantly as more port facilities kick in in the ASEAN countries and as the BRI results in overland shipment of cargos from Asia to Europe. Additionally, these countries have the advantage of low-cost land, abundant human resources and utilities.
Question. How would the world’s effort to combat climate change affect these industries?
Answer. Negatively. The significant breakthroughs made in storage in solar and wind energy reduces dependence on oil and gas. This will impact the petrochemical industry and by extension rig building and shipping negatively.
Question. Can we do something to recover the land highlighted in the map above for rejuvenation?
Answer. Yes. It may sound ridiculous, but I would urge that the government comes up with incentives for their stake holders to move their production offshore, including R&D grants and tax rebates.
It would be a win-win endeavour. The state benefits since the land so vacated would be worth a lot more if it was repurposed for industries of the Fourth Industrial Revolution generating a higher GDP per hectare than what it is capable of now. Besides, the mutation from 3IR to 4IR would reduce our carbon footprint as well the energy demand for each GDP dollar added to the national economy. It is also to be noted that much of the target areas were reclaimed in the 1970s and are at levels considered vulnerable to rising sea levels.
The urban heat island effect would be reduced when these industries operate on mega floats in the sea. Less ships need to come to shore to discharge transit cargos. Less shipping traffic means less toxic emissions and reduce maintenance of infrastructure (wharves, and navigation channels.)
Question. What would the owner of the asset benefit if he swops his lease on land for the sea?
Answer. Quite a lot. (a) In the transition from the old to the new system there would be no interruption to production as the old one need not be retired before the new one comes onstream. (b) A floating platform of reinforced concrete would last at least 100 years and be a hedge against inflation, compared to a recurrent annual expenditure for a lease of 25 years subject to the vagaries of the landowner. (c) Should cost pressures in Singapore become too severe he has the option to relocate his asset easily within days to a lower cost area or repurpose it. And (d) His floating asset is resilient to rising sea levels.
Question. Are there proven examples of floating petrochemical plants, shipyards and ports?
Answer. Yes. FPSOs, FSOs are examples of floating hydrocarbon processing systems. There are close to 200 of them around the world. There are no totally floating shipyards in the world but the major elements such as dry dock, berth, workshop and open fabrication area are proven floating systems. The container port at Valdez, Alaska is a single berth floating port. A 3 sq. Km floating port is undergoing model testing in MARIN, a test facility in the Netherlands.
Question. What is Creative Destruction? Quote some examples.
Answer: It is a principle advocated by Joseph Schumpeter to describe the need to actively promote the mutation of industries within an economy for its long-term viability. It is like pruning a plant to maintain its health.
Shipbuilding was the pride of British industry in the 1960s and 70s. But by the late 1980s it was tottering and finally, after billions of pounds of taxpayers’ money had been spent to save it, it eventually succumbed. Misguided politicians were too afraid to kill the sacred cow. The government had not the foresight to creatively destroy it so that resources could be put to other use.
In contrast, Shenzhen was a sleepy fishing village 30 years ago. After China opened to the world, Shenzhen started to manufacture and flood the planet with knickers, toys, tyres, fake Reebok, Louis Vuitton. By the 1990s it evolved to become the world’s factory for electronics. Shortly after, it moved from cheap electronics to 4IR products to become one of the world’s biggest and most dynamic innovation hub. Its commitment is reflected by its massive R&D expenditure which exceeds those of several OECD countries. According to Wikipedia, “(a)s of 2018, Shenzhen has a nominal GDP of 2.42 trillion RMB (HK$2.87 trillion), which recently had surpassed neighbouring Hong Kong’s GDP of HK$2.85 trillion and Guangzhou’s GDP of 2.29 trillion RMB (HK$2.68 trillion).” Destroying the old to free up resources (land and manpower) for the new is the story behind Shenzhen’s astounding success.
Mega floats provide a practical means to convert Jurong and Tuas from what it is to what it could be: a hub for a clean, environmentally friendly sustainable 4IR industries. As a Society we have a duty to heighten public awareness and attention to this opportunity. We know much remains to be done to move from concept to reality but as the saying goes: a journey of a thousand miles begins with a single step.
Within our waters where can we locate these industries? That would be a subject for another of my message.
President
Lim Soon Heng
27 December 2019