Difference between Government and Business Sectors' Assessment of Productivity Growth Target

Mr Zaqy Mohamad asked the Minister for Trade and Industry (a) what is the Ministry's assessment of the Singapore Business Federation's (SBF) recent concerns on the Government's productivity growth target; (b) whether there are gaps between the Government's expectations and those of the SBF and the industry, and if so, what are the gaps and what more can be done to bridge these gaps; and (c) what is the Ministry's evaluation of the effectiveness of the various initiatives provided to help companies transition to a more productive business environment and what more can be done to help companies with this transition.

The Singapore Business Federation (SBF) had commented that the Government’s target of 2% to 3% productivity growth per annum over this decade is ambitious as most developed economies usually experience slower productivity growth averaging 1% to 2%.

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In 2010, the Economic Strategies Committee had recommended, and the Government had agreed to set a stretch target of 2% to 3% productivity growth per annum over this decade. This target was set after a decade of low productivity growth of just 0.8% per year between 2000 and 2009. In contrast, our productivity growth was 3% per year in the 1990s and 5% per year in the 1980s.

As productivity measures are sensitive to economic cycles, we have to take a long term view towards achieving our target. If we are able to achieve 2% to 3% per annum productivity growth by 2020, offsetting the weak performance of the last decade, our average productivity growth from 2000 to 2020 would be 1.5% to 2% per annum. Seen over the long term, our productivity target is challenging but not overly ambitious.

There is potential to transform practices and improve our productivity in several key sectors, such as construction, food services, food and furniture manufacturing. The productivity of these sectors lags significantly behind that of advanced economies. For example, productivity in our construction sector is 70% lower than that of Japan while productivity of our retail sector is less than half that of comparable global cities such as New York and London. If companies in these sectors are able to adopt the best-practices and technologies used in developed countries, and move up the value chain, we can close the gap and achieve significant productivity gains.

The Government remains fully committed to the national effort aimed at driving productivity improvements across our economy, at the sector, firm and worker level. The National Productivity and Continuing Education Council (NPCEC) has endorsed a comprehensive range of broad-based schemes and sectoral roadmaps to meet the unique needs and challenges in 16 priority sectors.

The take-up rate of the various productivity initiatives has been encouraging and there is some early progress on the ground. One example is in the retail sector. The retail productivity roadmap has supported various productivity and services upgrading projects from over 200 retailers. 185 CEOs and productivity managers have been trained under the various projects, and 14,000 workers were trained in collaboration with WDA. For example, Nanyang Optical used to rely on feedback and gut feel to manage inventory. In addition, collection of information was slow and tedious as many employees had to be involved in data entry. With support from SPRING’s Capability Development Scheme (Technology Innovation), Nanyang Optical implemented an IT system

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which improved the company’s inventory management and sales forecasting ability.

Our key task ahead is to drive even more companies to take up the range of productivity initiatives that have been put in place. We will continue to keep our programmes relevant and effective for companies, as well as introduce new initiatives to keep pace with evolving needs on the ground. We will also help SMEs to navigate our schemes and apply for those that best fit their needs.