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Productivity a tale of two halves, and challenge is lifting it all-round: DPM

SINGAPORE — A closer look at the Republic’s productivity growth in recent years reveals an economy of two halves, and the task at hand is to lift productivity all-round, said Deputy Prime Minister Tharman Shanmugaratnam yesterday.

At the Singapore Forum yesterday, Mr Tharman also said more restructuring of firms is needed. Photo: Wee Teck Hian

At the Singapore Forum yesterday, Mr Tharman also said more restructuring of firms is needed. Photo: Wee Teck Hian

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SINGAPORE — A closer look at the Republic’s productivity growth in recent years reveals an economy of two halves, and the task at hand is to lift productivity all-round, said Deputy Prime Minister Tharman Shanmugaratnam yesterday.

Singapore’s outward-oriented sectors such as manufacturing, wholesale trade and finance have been doing “extremely well” in productivity growth, clocking 3.2 per cent per annum over the last five years, he said. They make up about 60 per cent of the economy.

In contrast, domestic-oriented sectors such as construction, retail trade and food and beverage services — making up the remaining 40 per cent of the economy — have not fared as well, only growing 0.2 per cent in productivity per annum in the last five years. In the last three years (2013-2015), these sectors even had negative productivity growth of 0.6 per cent per annum.

To tackle this “real divergence”, lessons from the leading and most innovative firms have to be spread to the rest, while the Government provides the infrastructure to help everyone hop onto innovation, said Mr Tharman to an audience of business leaders, thinkers and international policymakers at the welcome dinner of the Singapore Forum 2016.

“What we have is an economy of two halves. But whether you see the glass as half-full or half-empty, we have to fill it up full. And we can,” he said, adding that productivity growth is essential for growth in middle-income wages.

Some achievements have been made in the last five years, with some construction firms innovating. “But we need more breakthroughs, deeper innovations, more disruptors, and we need more restructuring where some firms may unfortunately exit in order to make space for the most innovative firms,” said Mr Tharman, who is Coordinating Minister for Economic and Social Policies.

“That’s our new phase, our Industry Transformation Programme,” he said, referring to the S$4.5 billion centrepiece of this year’s Budget aimed at transformation and innovation for Singapore firms and industries announced by Finance Minister Heng Swee Keat on March 24.

It may not come naturally for firms to collaborate but there are benefits to doing so, such as everyone gaining from training and use of technologies. Noting that technology is more of an enabler for small players than before, Mr Tharman cited Etsy, an online aggregation platform for sellers, which has over one million sellers on board and had total sales of US$1.35 billion (S$1.82 billion) in 2013.

Also behind the slowdown in productivity growth is the failure to invest in people, leading to great anxiety over skills and capabilities in finding new jobs and keeping pace with technological change, he said.

“That’s not the way it has to be. We have to work hard — governments, industry, individual firms, individuals themselves — work hard to make sure that technology works to our advantage, it doesn’t create a society of ... digital haves versus the digital have-nots, but that technology becomes a way of enriching every job,” he said.

A wrong focus would be the obsession with monetary policy, said Mr Tharman, calling it a distraction from the true task of governance.

In his speech, Mr Tharman also noted that this is an unusual period in global affairs marked by fragility and opportunity. Fragility exists in economy, jobs and incomes, as well as in increasing political polarisation, weakening social mobility and in the security sphere, he said. But opportunities exist, such as in China’s structural transformation.

“There are ways of tackling the fragilities. We can all take advantage of China’s transformation, we can do things to lift productivity and lift middle income wages and we can, with time, forge new multicultural compacts in all our societies,” he said.

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