SINGAPORE - Singapore's competitive edge in offering products and services that are cheaper or better may soon be eroded.

Minister of Manpower Lim Swee Say warned on Tuesday (Nov 1) that cheaper competitors are getting better with higher educational levels, while better competitors are getting cheaper through better technology.

If productivity gains continue to lag behind wage growth, Singapore's competitiveness will be eroded, he said.

Mr Lim was speaking at the first day of the two-day Singapore Productivity Conference and Exhibition, organised by the Singapore Business Federation.

Singapore's productivity growth has been flat in the last two years, Mr Lim warned. Coupled with flat local workforce growth, it has caused Singapore's sharp drop in GDP growth.

Between 2011 and 2014, workforce growth at 4 per cent drove GDP growth of 4 per cent, despite no gains in productivity.

Last year, with similarly flat productivity growth and 2 per cent workforce growth, GDP growth was just 2 per cent, said Mr Lim.

Next year will be equally challenging, he warned, but noted that "we cannot hope to go back to high growth simply by taking in more foreign workers."

Furthermore, Mr Lim noted that there is a structural transition in the local workforce.

Local workforce growth increased by only 700 people last year. About 190,000 Singaporeans left the workforce, while about the same number entered.

With better education and skills, those entering the workforce are looking for jobs different from the jobs vacated by those who have left, he said.

"What this means is that economic transformation is important, not just because they will bring about higher productivity for the economy.. but because they will bring about better jobs and better wages," he added.