Impact of Inflation on Singapore Companies' Product and Service Competitiveness and Productivity
Ministry of Trade and IndustrySpeakers
Summary
This question concerns Mr Edward Chia Bing Hui’s inquiry into the impact of inflation on business competitiveness and the productivity strategies used to offset rising wage costs. Minister for Trade and Industry Gan Kim Yong highlighted that Singapore remains competitive, citing improved relative unit labour costs and strong growth in non-oil domestic and services exports. To drive long-term productivity, the Government is scaling the Productivity Solutions Grant to 100,000 projects and providing the SkillsFuture Enterprise Credit for business transformation. Furthermore, the Future Economy Council is refreshing 23 Industry Transformation Maps to boost productivity and wages through digitalisation, innovation, and internationalisation. Minister for Trade and Industry Gan Kim Yong also encouraged companies to utilise available schemes for worker upskilling and job redesign to remain future-proof.
Transcript
86 Mr Edward Chia Bing Hui asked the Minister for Trade and Industry (a) how will current inflation trends affect our companies’ product and service competitiveness against those from other countries; and (b) what new or additional productivity approaches will be adopted by our companies to keep pace with potential wage increases.
Mr Gan Kim Yong: Higher global inflation will impact Singapore more than other countries, because we import most of our commodities and upstream products, such as energy and industrial agricultural inputs.
Despite rising imported input costs and higher labour costs in a tight labour market, Singapore has generally remained competitive. For instance, Singapore’s relative unit labour cost for manufacturing – a measure of Singapore’s competitiveness against 16 other economies – improved in 2021. Similarly, our exports have continued to grow. In the second quarter of 2022, our non-oil domestic exports expanded by 8.9% on a year-on-year basis, extending the 11.4% increase in the preceding quarter. Over the same period, our services exports rose by 13.2% year-on-year, faster than the 10.8% growth in the first quarter.
In the longer term, we need to continue to improve productivity to overcome the issue of rising costs. The Government has introduced many schemes to support businesses on this. For instance, firms can tap on the Productivity Solutions Grant (PSG) to spur their transformation efforts and boost productivity. We are heartened by the progress so far. For example, The Hainan Story, an F&B operator, tapped on the PSG during the COVID-19 pandemic to get new kitchen equipment. Their purchase of combination and speed ovens helped its kitchen speed up cooking processes and alleviate its manpower crunch. With improved processes, the company is now in a better position to expand its operations in Singapore and internationally. As announced during Budget 2022, we are making a strong push to scale up PSG to support more than 100,000 projects over the next four years.
Beyond the PSG, companies can also tap on the SkillsFuture Enterprise Credit of up to $10,000 per company to embark on both workforce and enterprise transformation to upskill their workers and improve productivity. Companies requiring more customised help can leverage the Enterprise Development Grant (EDG).
At the same time, the Future Economy Council (FEC) is refreshing the 23 Industry Transformation Maps (ITMs) to better position Singapore businesses to create and seize opportunities, and improve the productivity and wages of workers through digitalisation, innovation and internationalisation. Not forgetting too, the continual task of upskilling workers and job redesign. We hope that companies will take full advantage of the available schemes to future-proof themselves and stay competitive and relevant.