GDP Per Dollar of Business Cost in Singapore

Mr Gan Thiam Poh asked the Minister for Trade and Industry (a) for the past five years, what has been the gross domestic product (GDP) per dollar of business cost in Singapore; and (b) what measures has or will the Government take to either improve GDP or reduce the unit business cost that can improve Singapore's competitiveness and productivity drive.

Business cost trends in Singapore are tracked using two indices: the Unit Business Cost (UBC) index for the manufacturing sector and the Unit Services Cost (USC) index for the services sector. UBC and USC are defined as the total business costs required to produce one unit of real manufacturing and services output respectively.

From 2010 to 2014, the UBC index and USC index rose moderately, at a compounded annual growth rate (CAGR) of 3.1% and 2.7% respectively. The increase in the UBC index was driven mainly by services cost and, to a lesser extent, unit labour cost. The key drivers for the increase in the USC index were similar, with the unit labour cost and services cost contributing roughly equal shares to its increase. The rise in unit labour costs in both sectors were, in turn, due to productivity growth in the respective sectors, lagging behind the increase in labour costs.

Over the longer term, the only sustainable way for Singapore to contain the impact of rising business costs and, at the same time, enhance our competitiveness and grow the economy is by raising our productivity. To this end, the Government has put in place many schemes, such as the Productivity and Innovation Credit (PIC) and Innovation and Capability Voucher (ICV) schemes, to encourage businesses to engage in process improvements and technological innovation. The National Productivity Council (NPC) has also rolled out various productivity initiatives, which have benefited 24,000 companies as of December 2014.

At the same time, the Government has stepped up efforts to support workers so that they can upgrade their skills as well as acquire new ones to take on higher value-added jobs. For instance, as part of SkillsFuture, workers will be able to tap on schemes, such as SkillsFuture Credit and SkillsFuture Study Awards, to deepen their skills to meet the needs of companies.

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