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     FrontPage Edition: Thu 31 August 2006

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Key Survey Findings on Services Sector 2004

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Source:  www.singstat.gov.sg

ECONOMIC SURVEYS SERIES Reference Year 2004

Key Survey Findings on Services Sector

I. OVERALL SERVICES SECTOR¡¯S ECONOMIC SHARE
The services sector is an important sector of the Singapore economy. In 2005, the sector accounted for 63.8 per cent of nominal GDP and 68.7 per cent of total employment (Chart 1).

Singapore¡¯s GDP share of services in 2005 was comparable to that of Taiwan (68.7 per cent) and Ireland (60.0 per cent). In terms of employment share, Singapore¡¯s services sector was closer to that of Germany (71.3 per cent) and Japan (67.6 per cent) (Chart 2).

II. COVERAGE OF ANALYSIS
The services sector is diverse and encompasses a wide range of heterogeneous activities. The analysis presented in the following sections is based on data collected from the Annual Survey of Services1 conducted by the Singapore Department of Statistics.
The analysis focuses primarily on services establishments in the private-sector group within the overall services sector, excluding institutions under the purview of the Monetary Authority of Singapore (i.e. banks and finance, securities & insurance companies). Services provided by the government sector (i.e. government ministries and departments) are also excluded.

III. ECONOMIC PERFORMANCE
In 2004, the services sector2 comprised 137,300 establishments and employed a total of 956,500 workers, or an average of 7 workers per establishment.
Total operating receipts generated by the sector rose from $700.3 billion in 2003 to $815.8 billion in 2004. The increase of 16.5 per cent was largely attributed to the growths registered by wholesale trade of petroleum & petroleum products and industrial & construction equipment. Correspondingly, operating receipts per establishment rose by 14.3 per cent during the same period.
Total operating expenditure incurred in 2004 amounted to $771.0 billion. This was 17.2 per cent higher than the $657.8 billion in the previous year.
Total operating surplus increased by 4.0 per cent, from $61.1 billion in 2003 to $63.5 billion in 2004. On a per establishment basis, operating surplus increased by 2.1 per cent to $462,300 in 2004.
Total value added rose from $75.7 billion to $85.1 billion between 2003 and 2004, an increase of 12.4 per cent. Value added per establishment also increased from $561,300 to $619,500 during the same period.
IV. MAIN ACTIVITIES IN SERVICES
The services sector comprises the following main industries:

Firms engaged in wholesale & retail trade, which made up 40.2 per cent of the total establishments in the services sector, contributed a significant share of 30.8 per cent of the services sector¡¯s total workforce (Chart 3). However, their average employment size of 5 workers per establishment was lower than the sectoral average of 7 workers.

On a per establishment basis, the largest employer was accommodation and food & beverage services, hiring an average of 19 workers. This was followed by transport, storage, information & communications with an average of 11 workers per establishment.

Of the total operating receipts collected by the services sector, wholesale & retail trade contributed the largest share of 80.1 per cent (Chart 4). However, due to its high operating expenditure, the industry¡¯s value added of $26.2 billion made up a smaller proportion (30.8 per cent) of the services sector.
In comparison, despite their relatively smaller contributions of 5-8 per cent to total operating receipts, both transport, storage, information & communications and real estate & business services generated significant value added shares of 28.2 and 20.1 per cent respectively.
V. KEY PERFORMANCE RATIOS
Profitability Ratio of financial- & insurance-related services continued to be the highest among the main services industries at 66.2 per cent in 2004 (Chart 5).
The lowest profitability ratio of 2.1 per cent in 2004 among the services industries was recorded by wholesale & retail trade. The ratios of the remaining services industries ranged from 13-22 per cent.

Cost Effectiveness, as measured by the earnings-expenditure ratio, was also a high 191.9 per cent for financial- & insurance-related services in 2004. This implied that the industry¡¯s operating surplus exceeded its operating expenditure. The high ratio was partly attributed to the considerable high operating surplus and relatively low operating expenditure registered by financial & investment holding companies and credit card services firms.
In comparison, the other services industries registered more moderate earnings-expenditure ratios, ranging from 2.2 per cent for wholesale & retail trade to 25.8 per cent for transport, storage, information & communications (Chart 6).

Average Annual Remuneration per Employee was the highest for financial- & insurance-related services at $85,500 among the various services industries in 2004 (Table 1). However, employees in transport, storage, information & communications recorded the largest year-on-year increase of 5.5 per cent in average remuneration.
Accommodation and food & beverage services, real estate & business services and community, social & personal services experienced a marginal drop of about 1 per cent in average annual remuneration in 2004 compared with 2003.

Value Added per Worker for financial- & insurance-related services was the highest at $183,800 in 2004. All industries registered higher value added per worker in 2004, except for community, social & personal services (-0.9 per cent) (Chart 7). The largest year-on-year increase was registered by transport, storage, information & communications, at 17.9 per cent.

VI. PERFORMANCE BY FIRM SIZE
Key Indicators of Firms by Size
Small firms (i.e. less than 10 workers) made up the majority (89.1 per cent) in the services sector. However, their contribution to total operating receipts and employment was only 17.2 per cent and 30.1 per cent respectively (Table 2).
Medium firms (10-99 workers), which constituted 10.2 per cent of the sector, generated the largest share of operating receipts (41.8 per cent). Large firms (100 workers & more) accounted for only 0.7 per cent of the total number of firms in the sector. However, they were the biggest employer, employing 37.8 per cent of all workers.

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1 Detailed coverage of the survey is provided in the Explanatory Note.

2 Detailed list of services activities covered in the sector is provided in the Explanatory Note.

3 Data for this industry exclude institutions under the purview of the Monetary Authority of Singapore, viz banks and finance, securities and insurance companies. Detailed list of financial- and insurance-related services activities covered in this industry is provided in the Explanatory Note.

Source:  www.singstat.gov.sg Media Release 31 Aug 2006

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