SINGAPORE – Over the past decade, Singapore has lost some of its economic competitiveness. While the economy has been growing steadily, the pace of growth has stagnated according to a new report from Oliver Wyman.
“Singapore is lauded as one of the greatest economic success stories in history. Gross Domestic Product (GDP) has grown at an average annual rate of around 7.7 percent since its independence in 1965,” said Christian Pedersen, Oliver Wyman partner and co-author of the report. “However, the pace of progress in Singapore is slowing, mainly due to a decline in productivity – a phenomenon which affects most economies. In lieu also of broader global uncertainties, the leadership of Singapore’s industrial and financial industries needs to be bold, adopt new techniques, and view productivity through a different lens in order to help reverse this trend.”
The report, entitled “Singapore Productivity Challenge: Role of the Private Sector” can be viewed here. The report examines how rising wages combined with a decline in labour productivity are making it more difficult for Singapore to stay ahead of the emerging Asian economies such as China, India, and Indonesia.
Key findings of the report include:
GDP growth decreased from 4.7 percent in 2013 to 2.0 percent in 2015. This is comparable to Australia (2.3 percent), Hong Kong (2.4 percent) and South Korea (2.6 percent). But many competing economies in the region continue to outpace Singapore, including Indonesia (4.8 percent), China (6.9 percent) and India (7.6 percent).
The global outlook pointing to a retreat of globalisation will further exacerbate the economic uncertainty in Singapore. The protectionist economics growing in strength in Europe and US will slow down cross-border flows of goods, services and capital, which will have further impact on Singapore’s competitiveness.
Several industries contributing significantly to Singapore’s GDP have seen a rise in market capitalisation over the last five years, but at the same time experienced a decline in numerous productivity metrics. These include profit per employee, return on capital, and – in some cases – return on equity.
Recognising the importance of workforce productivity, the Singapore government has promoted its improvement as a focus area for the economy. The government has highlighted the need to improve employee skills rather than reduce employee numbers and has also taken the lead by driving greater productivity within its own departments.
With further pressures coming from digitization, the larger private-sector companies operating in Singapore need to further evolve their organisations by raising the skills, effectiveness, and – ultimately – productivity of their employees.
The report discusses challenges and solutions across various industries including information and communication and healthcare and also features data on workforce metrics from Mercer, Oliver Wyman’s sister company. The report concludes with a call to action for large, private sector companies in the region to take measures in order to reverse the productivity drain, and set an example for smaller firms to follow.
“Ultimately, many Singaporean private-sector companies – both large and small – will need to transform with how they engage with and develop their workforces in order to combat the productivity challenge,” Pedersen added. “The journey will require strong leadership commitment, a willingness to challenge conventional wisdom, and a structural framework within the organisation that enables employee growth and development. Done right, there is tremendous upside for companies to realise the untapped productivity potential.”
About Oliver Wyman
Oliver Wyman is a global leader in management consulting. With offices in 50+ cities across nearly 30 countries, Oliver Wyman combines deep industry knowledge with specialized expertise in strategy, operations, risk management, and organization transformation. The firm has about 4,500 professionals around the world who help clients optimize their business, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is a wholly owned subsidiary of Marsh & McLennan Companies [NYSE: MMC]. For more information, visit www.oliverwyman.com. Follow Oliver Wyman on Twitter @OliverWyman.
Francine Minadeo, 212-345-6417
Source: Oliver Wyman