Singapore’s Productivity Challenge: Part III

Abstract

The 1997 Asian Financial Crisis severely impacted regional economies. Although Singapore emerged relatively unscathed compared to other Southeast Asian economies, it adopted wide cost cutting measures including wage reductions to restore export competitiveness because the Singapore Dollar remained relatively strong. Singapore recovered strongly from the crisis, but continued to face economic volatility in the following decade. This volatility justified a strategy of “go for growth in the good years”, supported by growth in the foreign labour force that helped to grow the workforce by up to 5% per year during this period. But largely due to the changing attitudes of the population towards the increasing proportion of foreign labour in the economy, labour productivity once again became a priority after 2009 and the government set an ambitious target of 2-3 per cent annual productivity growth for the decade from 2010 to 2020. Meeting this target has proved challenging because of a number of structural issues in the economy including an entrenched dependence on foreign labour. Nevertheless, the government has so far seemed determined to press on with industrial restructuring.