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Singapore's labour productivity sees zero growth in 2013

The Ministry of Trade and Industry said this is an improvement over the negative growth of minus two per cent seen in the year before.

SINGAPORE: Singapore's labour productivity registered zero growth for 2013.

But the Ministry of Trade and Industry said this is an improvement over the negative growth of minus two per cent seen in the year before.

Singapore has a target to achieve a two to three per cent productivity growth per annum by 2020.

And there are signs that it is on track to achieve this goal.

Singapore's productivity drive started about three years ago when the government poured in more funds to help businesses restructure.

So even though Singapore's labour productivity growth was flat last year, MTI said it is an encouraging sign compared to the negative growth the year before, adding that businesses take time to restructure.

Singapore's labour productivity has been falling in recent years.

And at zero per cent, last year's flat growth in labour productivity is the first improvement in three years.

The last three quarters of 2013 had positive growth, up from minus 3.3 per cent in the first quarter.

The finance and insurance sector continued to post the highest labour productivity growth since the beginning of the year, while manufacturing began to pick up in the second half of the year.

The construction sector had the poorest performance, registering negative growth for six consecutive quarters.

Mrs Ow Foong Pheng, Permanent Secretary at MTI, said: "In terms of the sectors where we have lower productivity growth or even poor productivity growth, they tend to be the labour-intensive sectors and the ones that are more domestically oriented. In Singapore's context, it would be your retail, trade, food services and our construction, of course.

"Then, the ones that are more externally oriented, where they face global competition, productivity has been improving. So our manufacturing sector, even within the manufacturing sector, I think the ones like biomed - I'm talking about longer term, not quarter to quarter - and our electronics, I think the productivity has been fairly robust and improving.

"Within the manufacturing, our SMEs for example as a group, have been hoisting in the productivity message, as foreign worker constraints start to bite and they have been implementing the various initiatives and taking up the various initiatives on the productivity fund that's been rolled out to help at the sectoral level. These are encouraging signs.

"So we actually expect productivity, especially in the manufacturing sector to improve. For the services, domestically-oriented sectors, again, it's a case where we need to continue to work on them."

Associate Professor Randolph Tan, from SIM University's Centre for Applied Research, said: "In terms of manufacturing, you see the productivity performance (is) actually better compared to construction, for instance. The reason why it's happening now is because manpower employment has been stabilising and in fact shrinking in many areas.

"The shrinkage in manufacturing employment is itself a concern - it's a separate concern for policy-makers if the question is whether we need the manufacturing sector to continue to be a major source of jobs creation in Singapore."

Analysts also said Singapore should be prepared for more gradual productivity improvement, as studies have shown that sudden improvements are usually unsustainable.

And labour economists believe the tightening labour market has also contributed to slower productivity improvements.

Associate Professor Randolph Tan said: "The tightening actually began with a tightening of the supply of foreign manpower, but what we're seeing now is a tightening in the local manpower supply as well.

"The tightening of local manpower supply is with low-wage workers in certain sectors, such as the cleaning sector, as well as with older workers if there turns out to be a realisation of the call for an increase in the employer CPF contribution for older workers.

"Now, in general, there's no objection to that. But the question is the pace. A tightening of foreign manpower supply itself is already going to require some adjustment for businesses before they can come to terms with it, before they can get their systems in place to eke out more productivity gains from a smaller workforce."

He added that affected sectors could consider investing in technological innovations to reduce their reliance on manpower. 

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