SINGAPORE - Instead of the "5 plus-minus 1" per cent growth of yesteryear, Singapore's economy will likely enter a phase of "3 plus-minus 5" per cent growth arising from technological disruption and global trade tensions, said Minister for Trade and Industry Chan Chun Sing.
This new reality will have wide implications for companies and whole industries that fall on either side of the spectrum, Mr Chan said. The wider growth range means redistribution through social policies will be affected too, since it will be more difficult to help everyone move together.
Speaking at the Future Economy Conference and Exhibition at the National Trades Union Congress Centre on Monday (Oct 22), Mr Chan outlined what the economic strategy for Singapore firms should be in a likely future of slower growth.
The Government, said Mr Chan, will transit from only having broad-based measures in the past to also having industry-specific strategies as a complement since the wider range of growth impacts each industry differently.
For poor-performing companies, the goal is to recycle land, labour and capital. This means moving them out of unproductive industries, and redeploying their factors of production into more productive ones.
"At the business level, the businesses must be prepared to say that this is not going to go very far if I continue on this particular track and I need to fundamentally change," he said.
Average-performing businesses at the 3 per cent growth level will also need to go beyond digitalising current processes to re-engineering the product or service entirely, he added.
Even the most productive firms at the top will require a strategy aimed at expanding their global market share or the size of the market; otherwise, Singapore will end up with a productivity problem.
"Some companies might have high productivity, but if the market does not expand as fast, it means that they need fewer people to get the same output. This means that there will be excess labour that will be displaced to sectors that have average or below average growth," explained Mr Chan.
Displaced workers will end up in less productive industries, hence bringing down national productivity as a whole.
Noting similarities in the best-performing industries in the 23 transformative road maps - such as the banking and finance, and logistics and transport industries - Mr Chan said strong trade associations and chambers (TACs), strong labour management relationships and clear definitions of problems are needed for the strategies to work.
The banking and finance industry, for example, has a banking association and the Monetary Authority of Singapore, which work together effectively to drive innovation. Unions in this industry, such as the DBS Staff Union, also function as intermediaries for transformation to happen, he said.
"They are there for a very clear purpose. Not to lobby the Government or the banks to stay where they are, but to prepare workers to move forward together with the transformation in the industry, to overcome disruption faced by that industry," said Mr Chan.
At a panel discussion following his speech, he expanded on his hope to see more focused TACs, as some mainly harp about cost management issues such as rental prices and labour quotas.
"Another group of TACs talk in a different way: They know they cannot beat other countries on cost, but ask for help from the Government to build real capabilities, like linking up with A*Star (Agency for Science, Technology and Research) to access cutting edge technologies that their competitors do not have," he said.
Singapore Business Federation chairman Teo Siong Seng, who was also on the panel, said Mr Chan's "3 plus-minus 5" model put paid to talk by some businesses that Singapore's economy growth projections are too conservative.
"This is the reality that we have to accept, and we have to figure out how to transform if the business is performing under 3 per cent growth," he said.