SINGAPORE, December 23: Fuelled by a spectacular growth in the petrochemical industry, Singapore's chemical sector output rose by an impressive 12 per cent in 1997 to S$27 billion ($16 billion), the Economic Development Board (EDB) said on Tuesday.

Brushing aside the economic ills afflicting several Asian countries, the EDB said it expected the industry to grow further in 1998.

"In 1998 we expect the industry to expand further despite the regional economic problems," an EDB official said.

She said the bullish forecast was due to the start up of several new plants as well the full benefit of plants that began operations in the latter half of this year.

"The star performer is the petrochemical industry which sees a steep jump in output growth," the EDB said in a statement.

The chemical sector, which includes petrochemicals, petroleum, specialty chemicals and pharmaceuticals, contributed around 18 per cent of Singapore's total manufacturing output.

The sector's importance to the Singapore economy is growing fast as billion dollar investments are expected to come to fruition over the next few years.

In five years, the chemical sector's share of Singapore's manufacturing output will rise to about 30 to 35 per cent, EDB chairman Philip Yeo said recently.

"Growth will be significantly fuelled by new projects in the petrochemical, specialty chemicals and pharmaceuticals, scheduled to come on stream in 1998 and 1999," the EDB said.

The petrochemical industry's output grew an estimated 64 per cent in 1997 after a 5.4 per cent contraction in 1996.

The strong growth is mainly due to the start up of a S$3.4 billion petrochemical complex in May which more than doubled Singapore's ethylene capacity to 965,000 tonnes annually.

Ethylene is the basic petrochemical ingredient used for the production of various plastic products.

Another mega plant start up is the Singapore Aromatics Co's S$1.1 billion aromatics complex in early 1997.The sector was also boosted by news that Exxon Corp will go ahead with plans to build a S$3.3 billion ethylene-based complex which will start up in 2000.

"Investments in the petrochemical industry in Singapore continue to be strong as the industry is confident of long-term growth and business prospects in Asia," the EDB said.

The petroleum industry also performed well in the face of poor market conditions after a major refining capacity build up in South Korea sent oil prices and profits crashing.

Output was estimated to increase 5.5 per cent in 1997 with overall refinery operating rates at a high 90-95 per cent of capacity. Volume rose by 1.7 per cent over 1996, the EDB said.

"However, factors such as high crude prices, lower product demand from key markets and excess regional capacities have contributed to depressed margins," it said.

Singapore has a small 1.25 million barrel per day (bpd) refining capacity compared to Asia's total 18.1 million bpd, but it is regarded as a critical swing producer.

The EDB said growth in the petrochemical industry would also be spurred by the development of an island as a hub for the industry where the government is investing S$7 billion to reclaim land and bridges to link it to the mainland.

It said the smaller specialty chemicals sector grew by an estimated 12 per cent, while the pharmaceuticals industry was projected to grow by 3.3 per cent to S$2.5 billion.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.