SMU professor points to productivity 'disconnect'

Singapore

WHEN it comes to productivity, there is "a big disconnect between aspirations and achievements" in Singapore, said Singapore Management University economics professor Augustine Tan on Wednesday.

Speaking at a Singapore Business Federation (SBF) panel discussion on economic restructuring, Prof Tan said that he was "quite astonished" by the government's productivity growth target of 2-3 per cent per year by 2020.

"It's the worst possible time to do restructuring, given the state of the global economy (and) the fact that the Singapore dollar is at historically the highest levels since the early 80s," said Prof Tan, adding that the country's appreciating currency has hurt export competitiveness.

But OCBC economist Selena Ling had a different take, saying that "there is no good time to restructure".

"As a businessman, would you rather be constrained by manpower policies when there is demand knocking on your door? Or at this stage in time where the global economy still looks very soft - US is up, Eurozone is down, Japan and China are still rather uncertain? I think we have to take that into perspective," said Ms Ling.

Both economists were speaking at the SBF SME Convention 2014, which was attended by over 300 executives and entrepreneurs. The event - themed "Economic restructuring: Are we there yet?" - coincides with the National Productivity Month, launched on Tuesday by Prime Minister Lee Hsien Loong.

In his opening address, guest of honour Minister of State for Trade and Industry Teo Ser Luck acknowledged that overall productivity growth has been "positive but weak," with labour productivity growing by a scant 0.2 per cent per annum from 2010 to 2013.

But he said that a deeper sectoral analysis shows "encouraging" signs of improvement, highlighting productivity growth in export-oriented sectors such as precision engineering and transport engineering.

"However, productivity has also declined in some domestic sectors, for example construction, retail, and F&B (food & beverage). So this (restructuring) journey is not yet done. I don't think we have arrived yet. We need to push ahead," said Mr Teo.

As part of its efforts to support SMEs (small- and medium-sized enterprises) amid rising cost pressures, the SBF-led SME Committee (SMEC) announced two new initiatives on Wednesday.

The first is a study on how SMEs can gain greater access to government contracts - since the S$10 billion worth of goods and services procured every year can help SMEs build up their experience and track record.

The second initiative is the Fair Tenancy Consideration Framework, which spells out the general elements of an equitable tenancy agreement - including terms and liabilities, tenancy renewal and termination, as well as the transparency of fees and charges.

Mr Teo told reporters that the government is studying SMEC's recommendations, with a view to supporting the initiative. "As long as the framework is fair (to both landlords and tenants), of course we'll support it and make sure that it is adopted (to help) the market have better practices."

He added that the government's plan to publish more comprehensive shop rental data - so as to make rental pricing more transparent - is still on track for completion by the end of this year.