SINGAPORE: An economy that remains open and well-connected to the world, a working population equipped with deep skills and a lifelong learning attitude, and companies scaling up through innovation - these are the key features of how a future-ready Singapore looks like in the eyes of a 30-member committee tasked to chart out the country’s longer-term growth path.
To achieve that, the Committee on the Future Economy (CFE), which is made up of five Cabinet ministers and 25 members from the private sector, laid out seven recommendations on Thursday (Feb 9) after a year of deliberations. The recommendations, if well-implemented, should help the economy to grow an average of 2 to 3 per cent per year, the report said.
With the Singapore economy trudging through a frosty environment of slower growth, some may have high hopes for the CFE’s recommendations to be an antidote for the slackening economy. However, observers have said the report, with its focus on longer-term economic transformations, was never meant to be a quick miracle pill.
In fact, economists who Channel NewsAsia spoke to described the CFE’s proposals as having few surprises. For one, the wheels of the Industry Transformation Maps (ITMs) - a S$4.5 billion programme to promote growth and competitiveness in 23 industries that was first announced in last year’s Budget - are already in motion.
“This report isn’t a big surprise and you may even say it’s underwhelming primarily because economic adjustments have been taking place all these while,” said CIMB economist Song Seng Wun. “But that’s how the Government works. It doesn’t do nothing in between these development reports … so this latest one seems like a look back at what has been done so far and a look ahead on what should be continued or started.”
Following the unveiling of the report, Prime Minister Lee Hsien Loong said the Government will pursue all the strategies proposed and added that the publication of the report marks “the beginning of another chapter of the Singaporean story”.
So, what does this “new chapter” mean for the average Singaporean worker and homegrown businesses, and how will it pan out for the wider economy? Channel NewsAsia takes a closer look.
WHAT IT MEANS FOR WORKERS
Amid a fast-changing labour market upended by rapid technological disruption, as well as an ageing and shrinking workforce, Singaporeans will need to embark on a lifelong learning journey to seek deeper skills in order to stay competitive.
With regard to that, the CFE suggested that more needs to be done on the back of the national SkillsFuture movement, such as introducing more modular courses for working adults; setting up an online one-stop education, training and career guidance portal; as well as encouraging companies to promote employees based on skills.
These initiatives may lend a helping hand to workers who have found it difficult to keep up with the swift changes in skillset requirements, in particular middle-aged Singaporeans.
“Over the last few years, we’ve had a rapid change in skillsets. In the meantime, sub-par global growth has also made the transition for workers who may have been retrenched even more challenging … so the adjustment of expectations and skillsets for this group will take some time,” Mr Song said.
Most importantly, the CFE’s recommendations aim to drive home the message that “a lot of changes are taking place so please stay on top of these developments”, he added.
Nomura economist Brian Tan cited a recent report by the Ministry of Manpower (MOM) that highlighted the urgency for the local workforce to keep up. The report, which was released on Feb 7, showed that as the economy restructures, nearly half of the job vacancies in Singapore last year were for professionals, managers, executives and technicians (PMETs).
“The report showed a lot of vacancies for PMETs but people just do not have the skills to enter those industries. As a workforce, if we remain inflexible and unadaptable, we will have problems as the world changes,” he explained.
WHAT IT MEANS FOR BUSINESSES
For businesses, ramping up innovation remains the key to staying relevant and to promote that, the CFE suggested strengthening Singapore's intellectual property (IP) ecosystem and providing more support for local entrepreneurs.
High-growth enterprises that display strong growth potential should also receive more targeted support, including access to networks, mentors, technology and financing, to scale up and venture abroad.
According to CIMB’s Mr Song, this serves as a call for homegrown firms to set their sights high and far. “This is a reminder that despite protectionism, there are many markets that remain open to trade in goods and services, so going abroad will bring opportunities."
“More importantly, you can now reach an external market without having to leave Singapore because of technology. The global market can be a click of the button away now that technology has changed the landscape and we no longer need to be constrained by borders,” he added.
And even as the relentless pace of technological change has disrupted business models in sectors such as transport, the digital economy also throws up economic opportunities. Apart from suggesting further boosts to the local start-up ecosystem, the committee also suggested help be given to small and medium enterprises (SMEs) for the adoption of digital technologies.
This recommendation of expertise and financial support for SMEs, which form the bulk of local enterprises, suggests a “more micro approach” that may help SMEs to build up stronger digital capabilities faster, said Nomura’s Mr Tan. “While the talk of digitisation is nothing new, the report seems to be taking a much more micro approach than the previous set of suggestions under the Economic Strategies Committee (ESC).”
He added: “It’s one thing to talk about becoming a Smart Nation and wanting firms to go digital but it’s another to talk about what it really looks like. I think the report gives a roadmap on how to get to that point, like the mention of a ‘Digital Harbour’, and these are ideas to get more SMEs to digitise, which will help them improve productivity.”
WHAT IT MEANS FOR THE ECONOMY
The support for businesses to venture abroad echoes the committee’s broader view for Singapore to resist rising protectionist sentiment around the world. As the country embarks on its next phase of growth, the report noted that Singapore will have to continue deepening links with overseas partners and seek opportunities in new markets.
Apart from innovative companies and people in the US and Europe, there is also strong potential in many Asian markets such as Southeast Asia, China, India and emerging markets, according to the committee.
Given Singapore’s position as an open and trade-dependent economy, economists like OCBC’s head of treasury research and strategy Selena Ling said that this strategy to remain plugged in global trade is “to a large extent inevitable”.
She said: “Singapore will essentially have to continue to keep up a brave front and push on with free trade and investments, notwithstanding the US pushback on TPP (Trans-Pacific Partnership) post-Trump. This is to a large extent inevitable because Singapore remains a small and open economy with no economic hinterland market.
“As such, Singapore remains committed to a rules-based trading system and will continue to work with like-minded partners to pursue the liberalisation of trade and investments.”
Meanwhile, the manufacturing sector - a key cornerstone of the local economy - is also here to stay.
The CFE recommends building a globally-competitive manufacturing sector, at around 20 per cent of GDP, over the medium term. Apart from targeting advanced manufacturing activities, Singapore could encourage the “growth of areas that sit at the confluence of high-tech manufacturing and high-end services such as advanced manufacturing and the Industrial Internet of Things”, its report said.
For OCBC’s Ms Ling, the “servicisation of manufacturing” such as design, research and development, marketing and after-sales services could be an area where Singapore can develop a niche and competitive edge over other low-cost manufacturing bases in the region.
Overall, economists told Channel NewsAsia that the committee’s growth target is a “manageable” one.
UOB’s senior economist, Alvin Liew, noted that the target of 2 to 3 per cent growth is a “significant markdown” from the 3 to 5 per cent target set previously in the ESC.
“In the past, the 3 to 5 per cent was to be supported by 1 to 2 per cent labour supply growth and 2 to 3 per cent labour productivity growth. Although we managed the former, our labour productivity grew an average of zero per cent since the 2011 General Election.
"The CFE's GDP target thus lowers public expectations and implies 1 per cent labour supply growth with a 1 to 2 per cent labour productivity growth, which is much more manageable,” he said.