1. Sir, it is said that a journey of a thousand miles begins with a single step. In the long road ahead to transform our economy, we are now taking the first step.
2. I thank the Finance Minister for taking a medium-term view when making the budget commitments over 5-years. This sends a strong signal that sustained effort are needed, and sets the clear expectation that results may not be apparent until after several years.
3. As we start the journey, we have equipped ourselves with a few key tools. The ESC recommendations serve as a compass, pointing us in the direction in which the economy must change. The Budget provides resources for the journey. The National Productivity fund, and Productivity and Innovation Credits are like food for sustenance, energising businesses to break new ground. Investments in Continuing Education and Training will give our workers sturdy shoes to handle any terrain. Workfare enhancements are like band aid, helping Singaporeans who develop blisters along the way.
4. While these tools are useful, they do not guarantee success. Close coordination by the National Productivity and Continuing Education Council chaired by Deputy Prime Minister Teo Chee Hean will play a critical role. To improve our chances, I would like to provide some suggestions to the Council.
Target Setting
5. One set of suggestions is for the Council to set targets, or critical milestones which will help us to assess progress and alert us when we need to make adjustments along the way. I believe we will need three types of targets.
6. First, we need to set sectoral targets, tied to international benchmarks. We have a set a macro target of 2-3% productivity growth per annum for the whole economy. This is too broad. Some sectors have more room for improvement than others.
7. Setting sectoral targets does not mean that we will necessarily achieve them. But what gets measured gets done. The target is a way of putting pressure on the stakeholders in that sector and helps to marshall the energies of all involved to move ahead together in a more concerted way.
8. For example, the construction sector which is due to receive around one quarter of the first $1 billion of the National Productivity Fund. It is a very big commitment to make. For good accountability, we must know the international benchmark and annual growth target for the sector in order to approve the funds.
9. The second type of target may be even more important. To achieve economic transformation and productivity breakthroughs, whole industries may need to be redeveloped and the jobs re-created. A positive example for successful industry redevelopment is the security industry.
10. The security business used to suffer from poor public image. Contracts were awarded purely on cost. Today, professionalism of security personnel has increased tremendously. Contracts are now awarded based on cost and quality factors. The SIRD – the Security Industry Regulatory Department of the SPF - was prepared to work with the NTUC to undertake the industry redevelopment, providing much policy support and a key driving force for the industry players to come on board job re-creation programme. Without SIRD, it is hard to imagine the breakthroughs achieved by the industry.
11. However, in other sectors, policy support by government agencies may be lacking. Agencies tend to take the view that regulation will increase compliance cost. While this is true, we must not shy away from introducing policies that promote healthy growth of specific sectors.
12. To overcome the inertia, I urge DPM Teo’s Council to identify industry sectors which could be redeveloped and hold specific agencies accountable.
13. A third type of target is for the business associations. Government is committing $100M over five years to scale up support for business associations to drive productivity at the industry level, and to facilitate international market access for their members.
14. Such support is welcome but also worrying. Just look at some National Sports Associations. Right at the outset, an effective governance structure must be in place to ensure that the funding to business associations is put to good use.
15. Government could consider a introducing a “bidding” system for business association to qualify for funding of industry-initiatives. Such an approach is not entirely new. In social services, for example, VWOs are already required to “bid” for opportunities to deliver services in various housing estates with government funding support. Likewise, the National Research Foundation has grant calls and selectively funds groups whose research proposals are aligned to our strategic R&D thrusts. Healthy competition among researchers and social service providers can lead to better quality.
16. Recently, I visited the Taiwan Design Centre. It is an industry-led organization which seeks to improve the international market access of Taiwan manufacturers through superior design. It receives partial government funding for its activities and has to actively “bid” for such funding. Other sources of funding include membership fees and consultancy service fees. In other words, the TDC must make itself relevant to its members in order to survive.
17. One of the most exciting things I saw at the TDC is a materials library. At the materials library, a designer can find in one location many innovative materials developed by suppliers all over Taiwan. They can develop product ideas using a variety of materials and get feedback from expert panels. TDC also works with designers and manufacturers to promote design themes, for example, innovative gift items based on the collections at the Palace Museum. By cleverly marrying the strengths of material suppliers and the creative talents of designers, the TDC helps Taiwanese enterprises grow their top line.
18. We need our business associations to have the same vitality as Taiwan Design Centre and our own Singapore Furniture Industry Council. I urge the Council to consider a bidding system for government funding to business associations, coupled with clearly spelt-out industry redevelopment targets. This will help to promote greater accountability and quality.
Ensuring Inclusive Growth
19. Sir, we must remember that the reason for pursuing productivity-driven growth is to enable Singaporeans to enjoy sustainable wage growth at all levels.
20. If we look at the Ministry of Manpower’s stated desired outcomes in the budget estimates, we see very clearly stated “Globally Competitive Workforce”, “Financial Security and Lifelong Employability for Singaporeans”, “Progressive Workplaces” and “Customer Responsiveness”. In order to stay focused on the goal of inclusive growth, perhaps it is time for us to add “Sustained Wage Growth” to the list of desired outcomes. And we could introduce two related KPIs.
21. One KPI is of course labour-productivity growth. Another KPI could be our wage share of GDP. Listing these as KPIs does not mean we hard-code any targets. Nor does it mean that the responsibility lies solely with the MOM. For example, one of MOM’s KPIs is “Employment Rate for Residents Aged 60-64”. There is no magic number we target to achieve but as a result of such a KPI, MOM has a variety of initiatives which it implements with the tripartite partners. Listing the KPIs is simply a discipline for us to measure and monitor performance, so that we can take corrective action before it’s too late.
22. Finally, I would also like to urge DPM Teo’s Council to consider promoting gain-sharing plans as a sustainable and fair way for companies and businesses to implement productivity initiatives.
23. In speaking with union leaders and workers, one oft-heard concern is whether the productivity revival means the workers have to work longer and harder for the same pay. While workers appreciate that this may be necessary for business competitiveness in the short-term, such situations are not sustainable. Union leaders have noted that the investments in CET, but point out that the National Productivity Fund and Productivity and Innovation Credit benefits businesses directly.
24. Productivity-measures, if implemented correctly, must lead to improve bottom-line. This could be dues to increased revenues or cost reductions, or both, due to improved efficiency and quality. The productivity gains enjoyed by businesses should be shared so that workers are motivated to find even more ways to contribute to productivity improvements. Some companies, such as SIA Engineering Company, have already introduced such gain-sharing plans and seen good results.
25. Therefore, promoting gain-sharing will ensure greater alignment of interests between businesses and their employees, to further boost the productivity drive.
26. Mr Speaker, Sir, let me conclude by noting that the road ahead will be long, and it may sometimes be winding, because achieving productivity and innovation driven growth is easier said than done. Now that we’ve started, we should also commit to supporting and encouraging one another to stay the course, whatever the challenges.
27. I have provided several suggestions to the National Productivity and Continuing Education Council chaired by DPM Teo Chee Hean to set targets and to ensure inclusive growth. I hope these suggestions can be considered and incorporated into the Council’s plans.
28. Sir, I support the Budget.
