Tuesday, January 26, 2010

Grow productivity, not just GDP: PM

Jan 26, 2010

Past 5% annual growth will be difficult to sustain, he says
By Jeremy Au Yong, Political Correspondent

SINGAPORE is to adopt a new economic growth strategy focused more on improving productivity than pursuing growth at all costs.

The reason boils down to the country's land and labour constraints, Prime Minister Lee Hsien Loong said yesterday.

'Our total land area is finite, and very little of it is lying fallow,' he told a conference examining the challenges facing Singapore.

'Our own population is growing slowly, and we cannot indefinitely expand our workforce by importing more and more workers from abroad.'

Mr Lee said Singapore would have to adjust its growth strategy and find new ways to continue to do well.

And, with that change, it has to shift to growing qualitatively not just by expansion, but by upgrading.

He said: 'We have to extract maximum value from the resources that we have; every piece of land must be put to optimum use, activities which are no longer competitive or productive have to be gradually phased out.'

Similarly, he said, workers, both local and foreign, need to be upgraded.
His call for higher productivity came a day after Senior Minister Goh Chok Tong spoke on the same topic - a clear sign that raising productivity is high on the Government's priority list this year.

The Economic Strategies Committee report, due for release next Monday, is expected to focus on it.

The Budget statement, on Feb22, will respond to the committee's recommendations.
The general target outlined by both Mr Lee and Mr Goh is to double productivity growth to 2 per cent to 3 per cent a year, from the present 1 per cent.

Productivity growth is usually considered critical to improving living standards. It means getting more value from each worker, resulting in more income being available to be distributed.
Such a change will take a major effort, said Mr Lee. 'But we have to do it so that progressively and inexorably, our economy will be transformed.

'Then, even if our total gross domestic product grows more slowly, our workers can become more productive and our income per capita can continue to rise.'

Previously, Mr Lee has warned that Singapore would not go back to pre-crisis growth levels. Yesterday, he said the average annual growth of 5 per cent enjoyed in the past decade would be difficult to sustain.

This was due to how much Singapore had progressed, and the push for higher productivity would result in slower expansion of the workforce.

'We must acknowledge that we are now more developed economically than we were 10 or 15 years ago, and we can no longer grow as rapidly as before,' he said.

'There will be good years when we should go faster. There will be other years which are tough, where we will do more poorly, but overall, if you take it over the next decade, I think 5 per cent will be a stretch,' he told about 900 people from academia, business, civil society and government sectors who attended the conference.

Called Singapore Perspectives 2010, it was organised by the Institute of Policy Studies.
Mr Lee also disclosed that the Trade and Industry Ministry is studying what a realistic long-term growth target would be.

He was careful to stress that the push for productivity did not mean just working harder.
Businesses needed to innovate relentlessly and be bold in seeking opportunities overseas, he said.

Workers, on the other hand, had to be psychologically prepared to upgrade their skills over and over again throughout their working lives.

Latest comments

If you still dreaming of getting Singaporean to have more babies, Dream on it you never success. Why ...ask yourself that the "Baby Bonus" what the real benefits. Make sure your MYCS or Feedback really doing the ground work cos they are not telling you the TRUTH. You can even give a 3-4 days Off to have couple make baby...forget it.

[Love these sort of comments. They hint at some obvious fact but they don't come out to say it. Or they hint at secret knowledge but they don't share it. As good as saying nothing. This sort of comments are just "farts". They make a sound, they stink, but you learn nothing from it except that the farter is very inconsiderate.]

My Dearest Mr PM, basically we are very tired of the PAP same old selfish and self interest from the older to the younger MP or NMP, basically you all know the facts that cost keep raising and your excuses that everything around us or the world is rising cost. Don't push the blame to others, just look at that same Coconut Tree around you all. Just say that you needed the money to pay your MP or NMP for their salary and allowance. Btw everyone grows old and Death is the reality so just cannot wait for "HIM" to kick the bucket. Like the old Chinese saying "When the Trees Fall, all the Monkeys run away." Sorry for being Rude but at one stage I have respect for the Party but NOW after 45 year in age, you all are just TOO MUCH, Greed at the expense of the Citizen. And for Fellow Citizen, this is not to a Joke, and seriously you guys have the Pen & Pencil decide something not out of what you feel for them, but for HEAVEN Sake your children, family and relatives too are Concern People that is effected by this Group of Government which tend to that advantage of matters. Look around you and decide not for yourself but the socities as a whole. If they have really cared for you all then why foreign telant, why cost cut, look at the ERP around you and many more to come. Please for the sake of our children and friends, give the Opposition a Chance in Life, give them beyond 5-10-15 years. Dont expect them to do miracle but give them a Chance. Remember the old rumor of PAP (Pay and Pay) well that ramour don't come from nowhere. The basic saying Smoke come from nowhere except the present from sources like heat, sunlight and materials. So for Haven Sake Wake UP.
Posted by: colin1965 at Tue Jan 26 10:07:22 SGT 2010

[And then the rambler. And at the end of it... nothing. Accusations without evidence. Sound bites and cliches. Nothing new. Nothing at all. Just one long fart.]

"We cannot indefinitely expand our workforce by importing more and more workers from abroad."And the desperado who has been massively importing foreign workers for the past 10 years is ... Lee Hsien Loong and his merry men. Full mark for hypocrisy.
Posted by: augustus_cesar at Tue Jan 26 09:32:41 SGT 2010

[And if Singapore employers did not want these foreign workers, would they come and would Singapore have to issue work permits and build dormitories for them? Is the Govt going to employers and forcing them to hire foreign workers? Or are the employers going to the Govt and pleading for the Govt to raise the cap on foreign workers? The reason for foreign workers are 1) there are not enough Singaporeans to take up the jobs or are willing to take up the menial jobs, and 2) employers like foreign workers because they work hard, for low salaries, and can easily be exploited. Blame Govt? Sure why not. You don't know any better.]

To encourage young Singaporean couples to start a family, it stands to reasons that one needs to re-assess the present policies of allowing the runaway housing prices.What indeed is Singapore real GDP without the exuberances of real estate(asset inflation) and its related hyped activities eg one may need to check on :a)how many registered and unregistered property agents were there in Singapore 10 years ago as compared to now.In other words,how many productive Singaporean are being enticed into property agency activities thereby deprived the able manpower supply for the real economy activitiesb)how many 50sqm so-called micky mouse box(condo unit) in Year 2000 as compared to nowc)is micky mouse box(condo unit) conducive for young couples to start a family d)does the long waiting list of applicants for HDB new flat under the over-driven BTO(build-in time lag) of Build-To Order) conduce one to start a familye)is there a need to revise upwards the household combined income ceiling of HDB applicantsf) should one not review the policy of foreigners' buying re-sale HDB flatsg)why tear down houses and condominium under the disguise of "en bloc" for which these houses condominum are otherwise more than fit for dwelling --it is a waste of resources and only adds to fuelling up the runaway property prices beyond the reach of young Singaprean couples.
Posted by: samudera1993 at Tue Jan 26 08:16:17 SGT 2010

[The simple fact is that even if flats were immediately available, would the birth rate go up? This housing lag-birthrate link is false and stupid. People using this argument is attempting to blackmail the govt. If this is really true, then the Govt should introduce a scheme to allocate flats on delivery of a child. So when a married woman is carrying her first child at the 6th month of pregnancy, they can select a flat, and one month before estimated date of delivery, they will be given the flat. We should see more pregnancies and births then.

Raising the income ceiling is another stupid idea from people who don't think things thru. At the current income level, there are already so many applicants for HDB flats. If you raise the income ceiling and allow more people to buy direct from HDB, then there would more applicants and the queue gets longer.

BUT in the long term, this may work. Overall, price is determine by supply and demand. short supply = higher prices. If the income ceiling is raised, more people will join the queue and waiting time will increase. But if the buyers exiting the resale market are not competing in the resale market anymore, then the resale market will ease.

Since HDB pegs their selling price to the market, HDB prices will also ease.

BUT we will have the problem with subsidies - low prices, and long queues. Unless HDB ramp up construction of new flats.

The fact is that HDB flats are highly subsidised. That's why people want them. They are a no-lose investment. You buy a flat today and if you were allowed to sell on the open market immediately, you get to pocket tens of thousands of dollars.

The success of this subsidy system may well be the seed of it's own spectacular destruction!

As for "en blocs" schemes, if these worked as planned, they are a way to a) enrich owners of the property, while b) facilitate re-development of older property to a higher density (plot ratio). So leaving the current residences untouched and undeveloped means for e.g. that 300 families can live there. But with redevelopment, the site can now house 600 or even 900 families. In at least one case, 600 units were demolished and 1800 units developed in its place. That's more homes for more people.]

A new economic strategy. The devils are in the details.Land and labour constraints in red dot are nothing new. It has existed since 1965.Is this another major U-turn in Policy by MIWs and their Ministers realising that gunning for growth at all costs alone is not the panacea to sustaining our economic growth and per capita income?If GIC and TH can grow our investments to receive passive income even though we might have an ageing and declining population, but we have to remember the passive returns will be huge on per head population on a 2.5m as compared to a population of 5m, isn't it?Is growing the population able to help us to sustain growth, and to sustain and increase our per capita income? But who can guarantee that our investments overrseas by GIC and TH will be safe and able to generate quality passive income for SG year after year?The Swiss is a land-locked country with investments overseas for the past 100 plus years and they have some big international product names giving them income and a quality Swiss-standard of living that many countries including SG are trying to copy but many cannot, including SG up till now.What is the Swiss magic that SG is unable to duplcate?What are their overseas investments? Where are they parked and what is the total passive income from overseas?What are their international brand names? They don't have SIA and PSA, but SG hasWhat is their population 100 years ago and now?What is the composition of their population? What is the percentage increase in their ageing population compared with now and that of 100 years ago?MIWs and their Ministers should wake up. Please wake up and look at what is already there for SG to copy and duplicate and not try to rebuild the wheel when the wheel is already in rotation in Switzerland for the past 100 years or more.
Posted by: CCLCCLCCL at Tue Jan 26 07:42:47 SGT 2010

[CCL is basically a self-absorbed idiot who fashions his ramblings upon the style of the Ultimate Warrior from the good old days when WWE was WWF. In this case for e.g. he draws in the issue of passive income even tho, there was no mention of this in PM's discourse. In any case, if passive income were to provide each Singaporean Citizen with $1000 pm, we would need $1.8 trillion in reserves generating a steady return of 2.5%. Even if we just provide for the elderly at 1/4 of the population eventually, it would still be $450b, which is twice what our reserves are currently estimated. In any case, his comment is to copy the Swiss. No study, no argument as to why the swiss model will work in our case, no analysis of strengths and weaknesses, just the swiss did it, let's copy them, without considering the current world order and circumstances. In any case, he does not provide any actual ideas or suggestion. He's like the parent scolding the child, "our neighbour Ah Keong can get "A" why you cannot? Go and learn from him, study like him and get an "A"! If he can you also can!"

In anycase, PM's point was that we can't grow the same way we used to by sheer application of labour. Now we must ensure that the labour units are more efficient, more productive. The next comment is a little more to the point.]

Productivity was in the IN thing in the 90s, after Paul Krugman argued that growth of economies in East Asia, especially Singapore, was from high capital investment and increasing labor force participation, and that total factor productivity had not increased. Krugman argued that in the long term, only increasing total factor productivity can lead to sustained economic growth.But it was soon forgotten with the government's perverse attention on the quantum of economic growth, rather than its quality. Perhaps it was because the ministers and senior civil servants have their bonuses pegged to GDP growth and not any other indicators?
Posted by: pappy at Tue Jan 26 07:03:41 SGT 2010

[No you twit. "Increasing labour force participation" is another phrase for "increasing employment rates." At less than full employment, it would have been potentially disastrous to increase productivity at the expense of jobs. Social stability requires people to be employed and plugged into the economy. However at some point employers should have started to scale up their production methods to raise productivity and reduce dependence on foreign workers. Instead they asked the govt for more leeway to employ foreign workers. To an extent the Govt had to agree because a lot of the work were being shunned by Singaporeans. Rightly or wrongly, these Singaporeans should have been upgraded so that they can be more productive and command higher wages, but they were not.]

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