Singapore firms' R&D spend has lifted productivity: MTI economists

Singapore

SINGAPORE firms' research and development (R&D) investments are bearing fruit in productivity gains, according to a group of Ministry of Trade and Industry (MTI) economists.

Meanwhile, the dollar impact of R&D spend has also risen in tandem with boosts from national Science and Technology (S&T) and Research, Innovation and Enterprise (RIE) plans.

The MTI economists concluded, in a report published on Thursday, that "efforts to raise the R&D and innovative capacity of our firms will be key to the transformation of our industries" and to Singapore's future growth.

For every one per cent ramp-up in R&D, productivity went up by an average of 0.135 per cent, according to the report, which reviewed data from more than 1,720 firms polled by the Agency for Science, Technology and Research (A*Star) from 2002 to 2017.

The uplift was deemed on a par with outcomes in other advanced economies, like the average productivity increase of 0.15 per cent that was clocked by Organisation for Economic Co-operation and Development firms from 2006 to 2007.

Also, the impact of each dollar spent on R&D went up from S$0.20 in 2002, during the lifespan of the S&T 2005 plan, to S$0.28 in 2016 and 2017. The latest research road map, RIE 2020, is now in full swing, with just over half of its S$19 billion kitty committed as at end-FY2018.

Yong Yik Wei, who heads the MTI economics division, told reporters: "What is encouraging are the positive and significant returns from R&D among firms in Singapore. The impact on firms' productivity over the years has also increased, as observed from the estimated impact which has increased over the various RIE plans."

Private-sector R&D spending has grown to S$5.4 billion in 2017 - more than two and a half times the investment of S$2.1 billion in 2002 - although the growth was driven by foreign enterprises, large and small, rather than by Singapore companies.

Between 2002 and 2017, R&D spending grew by 10.9 per cent a year for foreign small businesses and by 8.3 per cent for large foreign firms - far outpacing the growth of 3.8 per cent at local small businesses and 1.6 per cent by large local companies.

A parliamentary committee had recently flagged the relatively low rate of local R&D spending, in a report out on Nov 14, as Singapore's top large local enterprises made up just 15 per cent of private-sector R&D spend in 2017.

In all, businesses' R&D expenditure in 2017 made up three-fifths of the S$9.1 billion in gross R&D spending - which includes three public spending buckets: the government sector, A*Star research institutes, and higher education institutions. But, although industries such as professional services and wholesale trade have upped their share of R&D spend over the 15-year review period, private-sector investment was still concentrated in engineering and technology fields, such as electronics, precision engineering, and aerospace and marine manufacturing.

The private sector's tech-heavy R&D allocations contrasted with funding priorities in the public sector, as public spending has been hiked in the energy sector and biomedical-related sciences, which the report noted "reflects the government's efforts to develop the biomedical sciences sector as a new engine of growth".

The report's authors recommended that the government "continue to leverage R&D investments, along with other efforts under the Industry Transformation Maps, to raise the productivity of firms and industries".

Their report came with the caveat that the researchers' views do not necessarily reflect the opinions of the MTI, A*Star, or the government.

But Permanent Secretary for Trade and Industry Gabriel Lim told the press on Thursday that "we are focused on maintaining a balanced portfolio of R&D and intellectual property work", as well as on creating "a much-tighter link to commercialisation".

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