Transcript Presentation - The UAE National Productivity Forum

Managing Productivity Challenges and Progress:
The Experience of Singapore
Professor Sin Hoon HUM
2nd May 2016
Overview of Singapore
World’s Easiest
Place to Do
Business
2nd Most
Competitive City
Globally
Source: Doing Business
2015 Report, World Bank
Source: Global
Competitiveness Yearbook
2015/16, World Economic
Forum
Best Global
Innovation
Source: Global Innovation
Index 2015, Cornell,
INSEAD and World
Intellectual Property
Organization
2
Top of BERI’s
Labour Force
Evaluation Measure
Source: Business
Environment Risk
Intelligence (BERI) Report
2014
LEADING FROM ASIA
Economic Challenges Over the Years
Singapore – a small open economy subject to external shocks
1959
Deep structural
inequality, high
poverty &
unemployment,
booming
population
1985
First recession in Singapore due to
slowdown in developed countries,
decreased demand for local goods/
services and high costs
1965
Independence
1997
Asian Financial
Crisis
1973
Oil Crisis and U.S.
Stock Market Crash
2009
Global Financial
Crisis
2003
SARS outbreak
1974
Recession in global trade and
general stagflation in the
developed world
2001
Dotcom Bubble
3
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Economic Progress Over the Years
Going for growth while attempting restructuring and managing productivity
30.0%
GDP Growth
Knowledge Based
25.0%
R&D
Focused
20.0%
Technology
Intensive
15.0%
10.0%
5.0%
Capital
Intensive
Labour
Intensive
0.0%
-5.0% '61 '63 '65 '67 '69 '71 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15
4
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Economic Progress Over the Years
Going for growth
I think that when conditions are good and the sun is
shining, we should go for it, as fast as we can, as
much as we can. Get the growth, put it under our
belt, put it aside a little bit, so that when the
thunderstorm comes again, we will be ready.
Prime Minister Lee Hsien Loong, 2006
Source: National Day Rally, Aug 20, 2006
5
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Economic Progress Over the Years: Labour Statistics
Labour-based growth: productivity drag
Total Foreign Workforce
Percent Change
1980
119,483
-
1990
248,200
-
2000
615,700
-
2007
900,800
-
2008
1,057,700
+17.4%
2009
1,053,500
-0.4%
2010
1,113,200
+5.7%
2011
1,197,900
+7.6%
2012
1,268,300
+5.9%
2013
1,321,600
+4.2%
2014
1,355,700
+2.6%
2015
1,387,300
+2.3%
6
Note: Singapore’s
population was
5.54m in June
2015
Source: Ministry of
Manpower,
Singapore (2008 to
2015)
Yeoh, 2007
(1980,1990,2000)
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Economic Progress: Two-Tier Economy
Domestic vs export-oriented: productivity drag, employment shift & labour quality
Labour
productivity
grew by 2.5%
per annum
from 2009 to
2014
Source: Ministry of
Trade and Industry
7
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Overview of Singapore’s Productivity Efforts
Managing productivity: growing importance and changing focus
2010: National Productivity and Continuing Education Council (NPCEC)

Sector-based strategy to improve national productivity by 2 - 3 percent annually over the decade
2002: Standards, Productivity and Innovation for Growth (SPRING) Singapore

Renamed to signify the shift towards an innovation and creativity-driven economy
1996: Productivity and Standards Board (PSB)

Focused on SMEs, productivity, standardisation and metrology
1972: National Productivity Board (NPB), a full statutory body

Introduced Japanese productivity practices and launched the National Productivity Council
1967: National Productivity Centre, autonomous division in EDB

Formed with tripartite representation to spearhead the productivity movement
1964: Productivity Unit

Within the Economic Development Board (EDB)
8
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Multifactor Productivity Growth in Singapore
Productivity growth hampered by economic challenges
12.0
Multifactor Productivity Growth in Singapore
10.0
8.0
6.0
Percent
1985
Economic
Recession
1973 Global
Trade
Recession
4.0
2.0
1997
Asian
Financial
Crisis
2009
Global
Financial
Crisis
2001
Dot
Com
Bubble
0.0
-2.0
'74
-4.0
-6.0
'76
'78
'80
'82
1979-1982
Wage
Increases
'84
'86
'88
'90
'92
'94
'96
'98
'00
'02
'04
'06
'08
'10
'12
'14
-8.0
-10.0
Labour
Intensive
Capital
Intensive
Technology
Intensive
9
R&D
Focused
Knowledge Based
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Multifactor Productivity Growth: Pro-Cyclical
Productivity growth mirrors economic growth
20.0%
15.0%
10.0%
GDP Growth
5.0%
Productivity
Growth
0.0%
'84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
-5.0%
-10.0%
Source: Singapore
Department of
Statistics
10
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Multifactor Productivity Growth
Progress made over the years
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Criticisms of Singapore’s Growth Model
“I find that both capital
and (human capital
adjusted) labour input
have grown considerably
faster in Singapore. While
total factor productivity
growth has contributed
substantially to economic
growth in Hong Kong, its
contribution to growth
in Singapore is next to
nil.”
- A. Young, 1992
“[A]ll of Singapore’s
growth can be explained
by increases in measured
inputs. There is no sign at
all of increased efficiency.
In this sense, the growth
of Lee Kuan Yew’s
Singapore is an economic
twin of the growth of
Stalin’s Soviet Union—
growth achieved purely
through mobilization of
resources.”
- Paul Krugman, 1994
12
Although “everyone” was very
upset by Krugman’s article
when it was published, and
then- Senior Minister Lee
Kuan Yew “charged Krugman
with greatly overstating his
case”; the country
nonetheless quickly took
heed of Krugman’s criticisms
and by 1996 had launched
an islandwide efficiency drive
consisting of government
initiatives, campaigns, and
programmes .
- Wall Street Journal, Nov 19
1996
LEADING FROM ASIA
Criticisms of Singapore’s Growth Model
Singapore recognizes need for productivity-based growth
Such an inflow of foreign workers cannot continue indefinitely… Future economic growth
will therefore depend on productivity increases and improvements in business efficiency
Economic Committee, 1986
[T]he basic reality is that these sectors which are most dependent on foreign workers are
also the ones furthest behind international standards of productivity, and which account
for the lag in productivity in our overall economy.
Finance Minister Tharman Shanmugaratam, 2013
72
No. of Times "Productivity" Mentioned in Budget Statement
52
33
24
26
23
21
19
7
0
7
0 1 1 0 0
11
3
8
4 2 3 2
8
5
4
8 6
7
7 7
6
5
5 5 3
4 4
4 4
3
1 2 1 2
0 2
0 1 0
13
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Singapore’s Current Productivity Efforts: NPC
Driven by highest level NPCEC (from 2010); becomes NPC and SFC (2015)
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Singapore’s Current Productivity Efforts
Some specific examples
Productivity and Innovation
Credit (PIC) Scheme

Introduced to boost SMEs’
efforts to innovate and
compete

Provides Singaporeans
the opportunities for skills
mastery

Expected to cost S$3.6
billion over three years
from FY 2016 to 2018

Singaporeans above the
age of 25 receive an initial
credit of S$500 which may
be used for approximately
10,000 approved skillsrelated courses over 57
functional areas

SMEs enjoy 400% tax
deductions and 40% cash
payouts for relevant
investments
Industry Transformation
Package (S$4.5b)
SkillsFuture Credit Initiative
15

Firm-level: S$400m
Automation Support
Package, Business Grants
Portal, Internationalisation
Scheme

Industry-level: National
Trade Platform, National
Robotics Programme,
Industry Transformation
Maps

Innovation: $1.5b top-up
for National Research
Fund
LEADING FROM ASIA
Challenges Ahead for Productivity Growth
1
Graduate Glut

Half of Singaporeans
aged 25 to 29 possess
a degree

Mismatch between
required job skills in the
economy and skill-sets
of graduates

Exacerbated by
Singaporeans’
preference for PMET
jobs
2
Low Productivity in
Domestic Sectors

Sectors such as
Construction, Retail,
Food & Beverage are
less productive than
export-oriented sectors

Employment share of
domestic sectors are
also rising, worsening
the problem
3
New Industrial
Revolution

Study from Oxford shows
that 47% of total U.S.
employment at risk over
the coming decades to
computerisation (Frey &
Osborne, 2013)

Threat of severe
unemployment if unable
to adapt quickly
Clear Focus on Productivity-based Growth;
SkillsFuture and Value Creation will be Key
16
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