SMS S Iswaran's oral reply to Parliament Question on GDP Growth

Question No. 679 of Notice Paper No. 274 of 2010

Name and Constituency of Member of Parliament
Mrs. Mildred Tan, Nominated Member

Question
To ask the Minister for Trade and Industry in view that Singapore is likely to hit a high growth of around 15% this year and an anticipated drop of about 10% next year (a) what measures are being put in place to help Singaporeans prepare for the road ahead; and (b) what measures and initiatives will be introduced to help stimulate growth.

Answer
Mr. Speaker, Sir, last year’s GDP growth of almost 15 per cent was exceptional and, it is not an appropriate indication of Singapore’s longer term growth potential. Rather, it reflects the recovery following two years of below-trend growth, coupled with an extremely large expansion in pharmaceutical output and the opening of the Integrated Resorts. If we take an average of economic growth over the last three years (2008-2010), it will come to about 5 per cent per annum – which is more reflective of our economy’s underlying potential.

This year’s expected growth of 4 to 6 per cent is still above our medium term growth potential of 3 to 5 per cent per annum. This healthy rate of growth will support job creation and wage growth in both the manufacturing and services industries. There is no need for stimulus measures. If anything, we need to be watchful of over-heating risks and rising inflationary pressures as the labor market tightens and capacity constraints become more binding.

With the economy at full employment, the emphasis will be on raising the productivity of our workforce and increasing our economic competitiveness over the medium term. The government has been working with businesses and unions to put in place several initiatives to boost skills and innovation. A good example is the Workfare Training Support scheme, which will pay for up to 95 per cent of course fees and provide training commitment awards for older low-wage workers. NTUC has launched the Inclusive Growth Programme (IGP) to drive productivity improvements. The programme targets to benefit 25,000 low-wage workers over the next two years by helping them acquire new skills to handle higher-value jobs.

The government will also help to raise corporate capabilities. The National Productivity and Continuing Education Council (NPCEC), chaired by DPM Teo Chee Hean and comprising representatives from unions and the public and private sectors has endorsed a number of initiatives to raise productivity. One of these is the SME-Productivity Roadmap, a joint initiative by SPRING Singapore and the Singapore Workforce Development Agency. This initiative will help Small and Medium Enterprises (SMEs) identify weaknesses in their work processes and embark on suitable training courses to increase their productivity. Another example is the Construction Productivity and Capability Fund. Builders can apply to the Building and Construction Authority to fund 50 to 80 per cent of costs incurred for manpower development, technology adoption, and capability building.

To boost innovation and R&D in the economy, the Government will invest a further $16.1 billion over the next 5 years in research, innovation and enterprise. We will focus on enhancing the alignment between research carried out in our laboratories and the commercialization needs of our industry. We will also continue to support foundational research to seed the intellectual capital that is necessary for future innovations.

In addition, we aim to strengthen our position as a leading financial and business hub by attracting new companies, particularly those which are keen to take advantage of rising opportunities in Asia. For example, we are developing Singapore as a leading Asian consumer business center, by anchoring the regional operations of major consumer product companies here. Global players that we have successfully attracted include Unilever, Proctor & Gamble and Nestle. In fact, Unilever’s headquarters in Singapore is its largest outside London.

If we continue to do these things well, Singapore should be able to sustain 3 to 5 per cent growth over the medium term and consequently increase the standard of living for all Singaporeans.