Productivity – The Key to Sustainable, Long-term Economic Growth

By Jeisilan Sivalingam

For the past 10 years, I have helped companies to streamline their operations; I reduce operating costs in companies by improving their efficiency and productivity. A leaner, more competitive company will be better equipped to attain higher profitability and growth. This is an ideal situation for all stakeholders – higher profits for companies, more cost effective products and services for consumers and most importantly, more jobs and income growth for employees. Making these goals a reality for all stakeholders is my job, and nothing gives me more pleasure!

Almost inexplicably, productivity has been given prominence in Singapore’s mainstream media only in recent times. However, productivity has always been an important factor in any organization. While governments, companies and efficiency specialists in other countries have continued working on improving productivity for the past 10 years, the cogs in the PAP machine have been moving very slowly indeed. The PAP seems to have woken up to the importance of productivity a decade too late, and are now belatedly realizing that they have caused Singapore to lose a lot of ground to her competitors.

Let me explain exactly how much ground we have lost. Singapore’s productivity growth averaged only 1% in the last decade. Our productivity in the manufacturing sector is only 55%–65% of the US and Japan’s productivity. In the retail sector, it is 75% that of Hong Kong’s productivity and a mere third of the productivity in the US. In construction, the situation is even more dire. Economists have singled out one key reason for this abysmal productivity growth: the abundance of cheap foreign labor. In sectors such as construction, companies in Singapore tend to employ a high proportion of low-wage workers, while other developed economies employ fewer workers who are more skilled, or utilize more automation in their processes.

Let us take a look at how other developed economies have improved productivity over the last decade. The productivity of Hong Kong’s service sector grew by 3.1% annually from 1999–2008. This was achieved by employing more knowledgeable and experienced workers, having business investments with more value and a shift towards higher value-added services, such as financial services. In Finland, phasing out inefficient factories and encouraging more competitive plants to invest in technology enabled the manufacturing sector’s productivity to grow by 5.8% from 2000–2008. Producing innovative products with higher quality, such as designer furniture, allowed Denmark to increase the productivity of its manufacturing sector by 2.7% annually from 2000–2008. Investing in high-value niche sectors, restructuring industries and carrying out more research and development has paid off handsomely in terms of increased productivity.

After 20 years of stagnant productivity growth, Australia’s government pushed for industry reforms to improve the construction sector’s productivity significantly in the past 10 years. Contractors were given incentives to embrace value-adding technology and reduce their reliance on large numbers of unskilled workers. As a result, Australian companies are now more willing to invest in training and upgrading their workers, resulting in higher salaries and a better standard of living for the Australian working class.

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The writer, Jeisilan Sivalingam is the Organising Secretary of the Reform Party.