The word ‘productivity’ has made a comeback. In early February, the Economic Strategies Committee (ESC) pointed out the need for Singapore to switch to a productivity-driven economic strategy in order to have sustainable growth.

Raising workers' efficiency and effectiveness is key as the country seeks to manage its dependence on foreign workers.The ESC also has a target of raising Singapore's productivity growth to two to three per cent a year over the next 10 years.

Productivity, according to the committee, is not so much about working harder, but working smarter and getting more training. The committee stressed that companies too have a role to play in developing new markets and finding innovative ways of doing business.

The strategy

In Budget 2010, the announcement was made that that the foreign worker levy hike was the chosen tool as a progressive measure to address the issue.

The primary objective of the levy adjustment is to encourage employers to improve productivity with fewer foreign workers, not just to push them to replace foreign with local workers. But if employers were to replace a foreign worker with one local worker with no change in skills or productivity level, there is no improvement in productivity.

As the Government has reiterated, the hike may appear unnecessary and untimely. But from a public policy perspective, it can be seen as a measure that creates some short-term pain to achieve longer-term gain.

To give companies a leg up with productivity, the Government allows them to turn to the Productivity and Innovation Credit (PIC). It allows a 250 per cent tax deduction to companies that spend in six innovation-related areas.

New productivity council formed

Deputy Prime Minister Teo Chee Hean will be heading the high-level National Productivity and Continuing Education Council. To drive productivity efforts at the individual, enterprise and sectoral levels, the council will adopt different customised strategies.

The council will also nurture a productivity culture; push for training in productivity-related skills, in addition to job-related skills; and study how companies, especially SMEs, can work with tertiary institutions to produce product and process innovations and related worker training.

What’s in the productivity war chest

The council will focus on selected sectors that employ a significant proportion of the workforce and have the most potential for productivity improvements. They include the construction, retail, food & beverage, hospitality, transport & logistics, general manufacturing, precision engineering and business services industries.

Within each sector, the council will identify government agencies to work together with the business associations, companies and unions in raising productivity.

Mr Teo said the council will also seek and develop new focus areas of growth for the continuing education and training (CET) system.

But he was clear that companies must take the lead in the productivity drive spearheaded by the council. The onus of making Singapore more productive does not lie with workers alone, though they must also do their part to pick up new skills.

Among other tools at the council's disposal is the $2 billion National Productivity Fund that will give firms cash grants for productivity initiatives.