Creating value should also boost productivity

 Finance Minister Heng Swee Keat.
Finance Minister Heng Swee Keat. PHOTO: LIANHE ZAOBAO

The chairman of The Future Economy committee, Finance Minister Heng Swee Keat, has announced a fresh "value-creating" approach to tackling five future challenges in jobs, companies, resources, technology and markets ("Five future challenges for S'pore economy"; Thursday).

The usual tag phrase of "productivity-driven growth" seemed absent, but Mr Heng said that productivity would be indirectly addressed through shifting to jobs of higher skills.

Also, there was no mention of whether the 10-year productivity growth target of 30 per cent would remain or be tweaked.

While we tackle the five future challenges, let us not neglect the issue of productivity, as we are now facing a leaner supply of new workers; and the situation

is likely to worsen, unless we reverse the foreign labour tightening policy.

Let us constantly upgrade skills training, and strengthen our measuring and monitoring of productivity, so that better industry-specific policies can be formulated.

We also need to re-examine our economic system, infrastructure, rules and regulations, education system, fiscal policy, research and development, and progress of restructuring.

The manufacturing sector has, in the last 20 years, undergone quite a hefty restructuring.

Most labour-intensive industries have either been relocated abroad, right-sized or closed down.

New higher value-added manufacturing has replaced the lower value-added ones.

The service sector is lagging behind. The mushrooming of small retailing and catering businesses, in particular, has hindered national productivity growth.

Amid an expected slower growth in external markets, domestic demand could expand faster than external demand and stay as the major force for growth in future - especially demand for healthcare, public transport and social services.

Relatively, it is less demanding for businesses that cater to local consumers to be as competitive as those that cater to external markets.

Also, certain industries that cater to mainly domestic markets are not working in a true laissez-faire system, such as public education, public healthcare, public transport and social services.

Regulations and artificial price adjustments or cost subsidies could distort productivity measurement.

Worse, this may breed complacency and a reluctance to restructure or to improve productivity.

Attention should also be given to the issue of high operating costs, as any sharp increase in costs may eat into or cancel out gains in productivity and erode our international competitiveness.

Ng Ya Ken

A version of this article appeared in the print edition of The Straits Times on October 31, 2015, with the headline 'Creating value should also boost productivity'. Print Edition | Subscribe