Minister Lim Hng Kiang’s Written Reply to Parliament Question on Impact Of Low Labour Productivity On Singapore’s Economic Growth

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Question

Mr Gerald Giam Yean Song asked the Minister for Trade and Industry (a) whether the Government is satisfied with labour productivity growth of 2.2%, -1.4% and -0.2% in 2011, 2012 and 2013 respectively vis-à-vis its stated target of 2-3% per year from 2010 to 2020; (b) what is the impact of this low productivity performance on overall economic growth; and (c) how much longer the Ministry expects it will take for 2-3% productivity growth per year to be achieved.

Written Reply by Mr Lim Hng Kiang, Minister for Trade and Industry

In 2010, we set a target of 2-3% annualised productivity growth over the decade starting from 2009. This ambitious target was set because productivity growth had been weak in the decade before 2009, at 1% per year, and we had assessed that there was significant room for improvement. Tracked against this target, we have achieved an annualised productivity growth of 2.9% so far.1

However, a large part of this was due to the strong recovery in 2010. Annualised productivity growth since then has been weaker, at 0.2%. Nevertheless, we were still able to record good overall economic growth during the 2010 to 2013 period. Annualised GDP growth was 4.1%, which is within the 3-5% projected for the decade.

Some sectors have also done better than others. From 2010 to 2013, productivity grew 2.1% annually in the export-oriented sectors like Wholesale Trade and Financial Services. Such sectors make up just over half of the economy. Being globally competitive, they are able to transform and adjust processes quickly to changing market conditions.

In comparison, domestic sectors like Construction and Retail performed more poorly, with an annualised growth rate of -0.3%. The National Productivity and Continuing Education Council (NPCEC) is focusing its efforts on measures that will significantly uplift productivity in these sectors. For example, we are taking more aggressive upstream measures in the construction sector. These promote greater use of pre-fabrication and other high-impact technologies to enhance productivity. It will take some time for these efforts to be reflected in the productivity numbers.

Overall, we have made progress in our productivity drive, but more remains to be done. Economic restructuring is a long-term process and we will press on with it.

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1 This refers to our productivity performance from 2009-2013.