Minister of State Teo Ser Luck's reply to Parliament Questions on Productivity

​Questions

Ms Foo Mee Har: To ask the Minister for Trade and Industry (a) what plans are being considered to reverse the productivity decline seen this year; and (b) whether he can provide an assessment of the effectiveness of the slew of productivity measures rolled out by the Government to boost productivity.

Ms Foo Mee Har: To ask the Minister for Trade and Industry whether he can provide an update on how SMEs have benefited from the broad range of productivity improvement initiatives by the Government, in terms of their participation rate and the amount disbursed to date.

Mr Gan Thiam Poh: To ask the Minister for Trade and Industry whether the slower economic growth and rising labour costs as a result of tightening the rules on employment of foreign workers contributed to the decline in our national productivity this year and, if not, what are the major factors contributing to this decline.

Ms Mary Liew: To ask the Minister for Trade and Industry (a) what are the causes for the lower national productivity this year; (b) what can be done to reverse this trend; and (c) what is his Ministry's assessment of the pace of innovation and investment in productivity improvements that are currently undertaken by enterprises.

Oral Reply by Mr Teo Ser Luck, Minister of State for Trade and Industry

1. I thank the MPs for their questions on our productivity improvements.  Achieving sustained productivity growth is an important national goal. In 2010, the Government set out to achieve a stretch target of 2 to 3 percent productivity growth per annum over the next decade. We are fully committed to this effort.

2. But our measures of productivity are sensitive to economic cycles, and can fluctuate substantially over the short-term. From 2009 to 2011, we achieved a productivity Compounded Annual Growth Rate (CAGR) of 5.9 percent. However, this figure was over a relatively short timeframe, and includes a period of high productivity growth in 2010, as the economy recovered strongly from the downturn in 2009.

3. This year, Singapore’s GDP is expected to grow by 1.5 to 2.5 percent, slower than the 4.9 percent seen last year. However, even as business activities slow, companies tend not to adjust their workforce immediately given the costs involved in hiring and firing workers. Hence, we are seeing a productivity decline, mainly reflective of the slowing economy.

4. This is why we must see beyond the short term fluctuations, but press on with our productivity drive for the long term. We must continue to boost productivity at all levels – we need to restructure our economy to move up the productivity chain; companies need to reduce their reliance on manpower; and workers need to upgrade themselves continuously to take on higher value-added jobs.

5. Since its inception in 2010, the National Productivity and Continuing Education Council (NPCEC) has endorsed a comprehensive range of measures to drive productivity improvements at the sector, firm and worker level. The NPCEC is pushing out both broad-based schemes as well as sectoral roadmaps to better meet the unique needs and challenges of each sector. 16 priority sectors have been identified, based on their contribution to GDP, employment size, and potential for productivity gains.

6. The development of sectoral roadmaps has taken some time. But most have been completed (11 out of 16 endorsed, with the remaining to be endorsed soon), and we are working to help companies take them up. There is some early progress on the ground. For example, in the construction sector, $67 million has been committed from the Construction Productivity and Capability Fund (CPCF) to help over 1,600 companies adopt new technologies, build capability and train workers. Another example is in the retail sector. Launched in April 2011, 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. We will continually refine the respective roadmaps to meet changing needs on the ground, as well as closely track their implementation progress.

7.  We have also introduced broad-based schemes to complement the sectoral approach. For example, SPRING administers the Innovation and Capability Voucher (ICV) programme, which provides eligible SMEs with a $5,000 voucher to upgrade and strengthen their business operations, including in the area of productivity. Since its launch in Jun 2012, 800 SMEs have benefitted from this scheme.

8. Separately, under the Productivity and Innovation (PIC) scheme, companies can also claim a 400 per cent tax deduction on up to $400,000 spent on a broad range of productivity-related expenses, such as training or investment in equipment. The take-up has been good, and companies have enjoyed substantial tax savings overall. The Minister for Finance will elaborate in his answer to Mr Alvin Yeo later. Innovation and growing our top line is an essential part of our productivity drive, and these schemes will incentivise enterprises to make investments in this area.

9.  Our national Research & Development (R&D) agencies are also helping SMEs to enhance their technological capabilities, competitiveness and productivity through technology transfer. For example, A*STAR’s Manufacturing Productivity Technology Centre (MPTC) assists companies to raise manufacturing productivity through automation and harnessing technology in their processes and systems. Currently, A*STAR and the polytechnic research centres have numerous ongoing projects with SMEs, and have worked on over 700 projects in FY2011.

10. At the worker level, we are investing significantly in Continuing Education and Training (CET) to upskill our workforce and enhance workers’ competitiveness. CET programmes also support the NPCEC’s sectoral productivity strategies. The Workforce Development Agency (WDA), for example, has developed about 50 productivity-related training programmes under the Productivity Initiatives in Services and Manufacturing (PRISM) scheme. Over 4,000 employer-sponsored workers have gone through these programmes.

11. The overall take up of the various productivity initiatives has thus far been encouraging. To date, about 7,000 companies have benefitted from these initiatives, of which 86 per cent are SMEs. About $950 million has also been committed from the National Productivity Fund (NPF) to support the slew of productivity initiatives. We will continue to keep our programmes relevant and effective for companies, as well as introduce new initiatives where required. We will in particular help SMEs through the Enterprise Development Centres (EDCs) to navigate the schemes and apply for those that best fit their needs. I urge more companies to enrol in the schemes.