Singapore Productivity Growth Projections

Business Times Singapore reported in an article on 15th January 2013 that a Member of Parliament Zaqy Mohamad had questioned the TRADE and Industry minister Lim Hng Kiang on productivity growth projections for the next decade. Zaqy noted that "that the Singapore Business Federation (SBF) had recently expressed concern over the government's productivity target, and wondered whether there were gaps between the government's expectations and those of the SBF and the industry", on the basis that developed countries tend to achieve only 1 to 2 per cent productivity growth a year as compared to the Ministers 2-3% goals. 

This certainly reflects that businesses are generally pessimistic about market demand and cost reduction opportunities. Without increase in output due to  market demand the only way increase productivity is to reduce the cost of inputs. Given the constantly increasing infrastructure costs in Singapore... salaries, rents, utilities, transportation...reduction in costs is certainly a challenge.

The Macro picture about National Productivity always looks dismal. However at a micro-level, when a business analytically and critically examines itself, it can always find new market opportunities for business growth; plenty of waste and productivity killers to eliminate in the way they work.  The Minster of Finance earlier noted some of these opportunities in a posting on his Facebook, also reported on a Channel News Asia article  on how restaurants in developed countries are able to work with less waiters and waitresses.

A productivity consultancy project can help to surface these opportunities to grow market demand, reduce waste and eliminate the productivity killers in a business.

  

Singapore National Productivity Growth

Despite all the touted initiatives, there is nothing really much to be proud of. The following is an excerpt from the Ministry of Manpower.

"Over the past decade, Singapore’s economy grew by an average of 5% per annum. Singapore’s productivity growth over the same period averaged about 1% per annum, a rate on par with that of other developed countries. The broad majority of Singaporeans also enjoyed real wage growth and a rise in living standards.

Nonetheless, productivity gains have declined in recent years due to heavier reliance on labour inputs to generate economic growth, especially inputs of foreign manpower. Globalisation, increased competition and lack of relevant skills have also led to slower wage growth for low-wage workers.

Only productivity-driven growth can deliver sustainable and inclusive economic development, and improve Singapore's standard of living over time. The Government will focus on productivity as a system and how employers can grow their companies without increasing their manpower at the same rate. This involves a mindset shift. Improving productivity is:

-Not about workers working longer hours; or
-Not about workers doing the same tasks faster and more cheaply;
-About working smarter – more efficiently, more effectively and more innovatively."

The Ministry also announced that  12 lucky sectors to will be focused on for providing upgrading.  They include:


Construction
Electronics
Precision Engineering
Transport Engineering
General Manufacturing
Retail
Food & Beverage
Hotels
Healthcare
Info-comm
Logistics and Storage
Admin and Support Services

The luck sectors should be expecting to enjoy generous incentive schemes form the government to assist them in upgrading their productivity.

PIC: Latest Productivity Incentives

The PIC is thus far still the latest announced government incentive for Productivity Improvement among business. 

Attached is an Except from SPRING Singapore's webpage Productivity Incentive at Work.

"The PIC is an extremely generous scheme introduced by the government to encourage SMEs to increase productivity and innovation. It has been made available for all businesses from YA (Year of Assessment) 2011 to YA2015.

Under the PIC, qualifying expenditures will basically qualify for a 400 per cent tax deduction; and the amount that qualifies for PIC is up to $400,000 per year for each of the six activities above.

For example, if a company is to spend $400,000 on the purchase of computers and another $400,000 on staff training, it will be able to claim total tax deduction of $3.2 million ($800,000 x 400 per cent).

Another way to look at the PIC scheme is that the government will provide a subsidy of $68 for every $100 that a company spends ($100 x 400 per cent x 17 per cent) on qualifying expenditures. In other words, the company's net cost is only $32 ($100 - $68).

With better-trained staff and the use of automation equipment (68 per cent subsidised by the government), the overall cost to the company should, in the medium to long term, see a decrease in cost.

In the service industry - especially in the F&B sector - there is constant concern about the shortage of staff. Consideration can be given to some simple 'automation'.

For instance, a restaurant can consider the 'automation' of its ordering process. This can be done by training staff to take orders (and billing) using hand-held devices. The orders can then be automatically transmitted to a screen in the kitchen. The chefs can then cook the dishes as the items ordered appear on the screen. Such a simple automation process should be able to improve the efficiency of the waiting staff by anything between 20 per cent and 50 per cent. This will mean a 20-50 per cent reduction of the number of waiting staff.

The net position will be that the restaurant ends up being able to pay its staff better and yet incurring lower total staff costs, which means that the restaurant would end up with higher profits"

$5.5 Billion to boost Productivity in Singapore

The 2010 budget dedicates S$5.5 billion to boost overall annual productivity gains over the next 10 years to 2% to 3% , which if successful would represent a significant boost from the 1% achieved annually over the past decade.

This aggressive move has been adopted as Singapore's productivity growth has been stagnant in recent years despite government efforts to lead the economy in more high-tech directions, including ventures into industries such as biotechnology and nanotechnology. According to analysts, Singapore's productivity is now only 55%-65% of comparable measures in the US and Japan.

Whilst the reason for this malaise is complex, and multifactored ... the overuse of low-cost foreign workers, the lack of a minimum wage regulations, new business with yet to be matured business models, over reliance on capital and technology, coporate complacency ... Teamy the Productivity Bee, launched in 1992 by the then National Productivity Board, may be poised to make a grand comeback...but this time with MORE HONEY...and a train of robotic clones behind it!