SINGAPORE: Even as the Singapore economy grew moderately well at a “new normal” for 2014, Singapore is falling behind in productivity, said Minister for Trade and Industry Lim Hng Kiang.
In a wide-ranging exclusive interview with 938LIVE, the minister said Singapore is “not achieving the two to three percent (labour productivity) growth rate that we’re aiming for”.
The 10-year annual target set by the Economic Strategies Committee for 2010 to 2020, however, has remained unchanged.
Data released on Tuesday (17th Feb) showed that Singapore’s labour productivity fell by 0.8 percent in 2014 – marking the third consecutive year of decline for productivity. Mr Lim said it reflects a mixed picture, with the externally-oriented sectors doing well, and the domestic sectors faring poorly.
“In some some sectors, the performance is very decent; for example in the financial services and insurance sector, productivity growth is above 2 per cent per year. Because they are facing international competition, they have to restructure quickly”
However, he pointed out that the domestic sector is still not showing “very good results”. This was particularly in the manpower-dependent areas of construction, retail, as well as food and beverage.
Specifically, Minister Lim also voiced concern about the transport engineering sector. He said that “this is a very cyclical business and now with oil prices coming down, their order book is still good for the next three years. But there will be a down cycle soon, and that will affect their productivity if they don’t restructure fast enough.”
And to help businesses, the Minister said the government has rolled out programmes on a broad scale, such as the Productivity and Innovation Credit scheme, as well as more targeted approachs like SPRING Singapore’s Capability Development Programme where individual companies get advice on their business growth.
When asked if the official forecast of 2 to 4 per cent economic growth in 2015 is realistic, Mr Lim said: “This is our typical range going forward, around 2 to 4 per cent … so this is the kind of new normal that we are aiming at and this year we expect growth at about the same rate as last year, because the global environment is still challenging.”
He noted that the US was the main driver of growth for last year, and is likely to remain so this year. “Essentially it’s only the US economy that’s doing well. Europe and Japan are having a big challenge and China is managing to have a soft landing at best. So the external environment is at best slightly better than last year, but not that much better.”
“HIGHER QUALITY GROWTH”
Looking ahead to the Economic Strategies Committee’s target of 3 to 5 per cent annual growth for Singapore between 2010 and 2020, Minister Lim said that “if you look at our performance in the 10 years between 2000 and 2010, the economy grow around 6 per cent per year. But if you look at the last 4 years we are averaging around 3 per cent.”
He added that the government had worked towards slower, but higher quality growth. This included reducing the flow of foreign workers, and growing at half the rate that the country did 10 years ago.
One bright spot for the economy this year could be in oil prices. Mr Lim said the recent monetary easing by the Monetary Authority of Singapore was in response to the drop in commodity prices, and a low inflation environment. As a result, exports should benefit from a lower Singapore dollar.
“Lower oil prices, we think its net plus for the economy, because we are an oil importing country, it’s a net plus for the businesses because electricity prices will come down, transport prices will come down. So businesses will do much better their input costs will come down”
But Mr Lim also cautioned that the low interest rate environment would end soon, “it’s likely that in the US the interest rate will be raised sometime this year…at some point in time, we must adjust to a more normal situation where interest rates have to reflect the cost of people lending you money.” He added that this is the reason why MAS has taken steps in the last few years to ensure personal debt remains healthy.
Amid the uncertainties in the global economy, Mr Lim said the focus for Singapore’s economy as she celebrates her golden jubilee is to perhaps emulate the US economy.
“We are having a more developed economy structure, our demographics are very similar to Japan and Europe – we are ageing very rapidly. So how do we try to have an economy that is more innovative, more dynamic, more like the US economy and less like the European and Japanese economy. That’s our big challenge.”
news source & image credits: channelnewsasia.com
