What is missing in the productivity debate

Written by Ng E-Jay
26 Feb 2010

Budget 2010 which was unveiled in Parliament by Finance Minister Tharman Shanmugaratnam on Monday went to great lengths to emphasize the need to raise productivity in Singapore.

It was proposed that the government spend $5.5 billion over the next 5 years at measures to retrain workers and help companies improve their business operations. The government intends to spend further $1.5 billion on research and development, and will nurture industries and companies it thinks has the greatest chance of innovating and succeeding globally.

The solution, it appears, is based on greater government intervention in the private sector and increased micromanagement of the economy.

But the same has been tried before, way back in the 1990s when productivity had begun to stagnate after two decades of high growth, and again in the early part of this decade, with initiatives spearheaded by bodies such as the Economic Review Committee. The proposals laid out in Budget 2010 seem like a tired re-run of the schemes devised in yesteryears.

Why then is the government confident that it will succeed this time round? As the old saying goes, insanity surely is doing the same thing over and over again and hoping for different results.

Perhaps it is time to question whether excessive government intervention in the economy is the true killer of productivity growth, and whether the latest slew of measures will have the unintended consequence of further retarding the ability of Singaporeans to innovate and think out of the box.

Entrepreneurship, innovation, creativity and risk-taking are attributes developed not under the umbrella of a watchful and powerful regime that controls where the money flows and decides who should get what benefits and under what conditions.

Those are qualities developed in the free market where competition amongst peers is the main driver of higher output and productivity.

What is conspicuously absent in the productivity debate is the fact that after more than four decades of nation building under the PAP, Singapore as a country has become less entrepreneurial and less productive.

The bedrock of any dynamic economy lies in its small and medium enterprises, the mom and pop businesses, the heartland shops, stalls and emporiums that cater to folks from all walks of life.

In Singapore however, Government-Linked Corporations (GLCs) which account for 60% of the economy have crowded out many small players and stifled innovation.

Worse, because they are run not by seasoned businessmen but by bureaucrats from the establishment circles, wastage and poor allocation of resources build up over time, and the lack of drive and creativity puts an ever increasing dampener on the whole economy.

The suffocating entrenchment of GLCs in our economy must be drastically reduced before Singaporeans can break free from the economic chains that inhibit the full expression of their creative drive.

We are getting nowhere with the current productivity debate because the government has refused to acknowledge the root cause of poor productivity growth and the proposed measures will only serve to entrench the status quo and deepen our problems.

Ultimately the problem lies with what the PAP has done to, and will continue to do to, our minds.

4 comments on What is missing in the productivity debate

  1. We can start to demonstrate that the private sector is indeed entrepreneurial by taking the first and necessary risk, ie vote out the PAP. But if you cannot live with that risk, than how is anyone to believe that you have any stomach at all for risks?

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