Singapore has narrowed productivity gap: Tharman

SINGAPORE — While the Republic’s productivity levels have been dismal in the past few years, it has made good progress in closing the productivity gap with advanced economies over the decades, Deputy Prime Minister Tharman Shanmugaratnam said yesterday.

And in contrast to the approach taken by some countries, Singapore has been pursuing productivity improvements while maintaining full employment — which makes it challenging, he noted.

Wrapping up the three-day Budget debate, during which several Members of Parliament (MPs) had raised concerns about the lack of tangible results from the productivity drive in recent years, Mr Tharman said: “I think it’s useful to take a step back. It’s not as if we are a failing economy when it comes to productivity. It’s useful to see where we have come from.”

He shared a chart that compared productivity levels at 1980 and 2013 between Singapore and other advanced economies such as Hong Kong, Japan, Switzerland, the United Kingdom and the United States.

In 1980, Singapore was at 40 per cent of US productivity levels. Last year, this went up to 70 per cent — “quite a major shift” and not a bad achievement, Mr Tharman said.

Mr Tharman, who is also Finance Minister, reiterated that the Government has been able to achieve a rising employment rate over the years, giving everyone an opportunity to have a job. In contrast, some countries have gone about raising productivity differently — by removing a segment of the workforce entirely.

“The easy way to raise productivity is to go through some shock treatment, shed firms, (and) shed jobs ... we’ve taken a more inclusive approach which we will retain going forward,” he said.

To raise productivity, the Government has tightened its foreign worker policy and provided substantial assistance for businesses, with schemes skewed towards the Small and Medium Enterprises (SMEs) because they need the most help, he said.

However, he stressed that productivity “cannot just be summoned up”. The Government can do its part by spreading the innovation and productivity improvements throughout a particular sector but it also requires business owners to take the lead as well.

Amid the economic restructuring, companies have been hit by rising business costs, including higher salaries due to the tight labour market and increasing rental costs.

Mr Tharman said: “As long as we remain vibrant as an economy, our costs will basically approach those of an advanced country ... and the only way for our businesses to survive in that environment is to have advanced country capabilities in innovation, in commercialisation of R&D (research and development), in managerial skills, and in investing in employees so that they have deep skills.”

He assured that the Government will act to boost supply and find other ways to help business mitigate costs when it sees the market heating up.

In response to MPs’ questions about the effectiveness of the productivity schemes, Mr Tharman noted that MPs have expressed different views on the matter — some spoke about the need to make it easier for firms to qualify and take advantage of the schemes, while others felt the Government must require firms to demonstrate productivity improvements first, or mandate improvements that have to be made before assistance is given.

“Through the range of our schemes, we in fact have both approaches,” he said. The Productivity and Innovation Credit (PIC) scheme is not a “no-questions-asked” scheme, even though it is liberal in its approach to provide firms with broad based support, Mr Tharman said. But for the PIC Cash Payout scheme, there is an additional requirement for a company to have at least three Singaporean employees. “We’ve had to put a check into the system ... because it is more open to abuse,” he said.

Reiterating the importance of moving to a system where self-service becomes the default option in many services, he stressed that Singapore has to transform jobs, enterprises and culture. “We will not succeed (in restructuring) unless we move on all three.”