Here's how local firms can escape Singapore's long-drawn productivity rut

Investing in high-growth markets is key.

Growth will remain elusive for local companies unless they muster enough courage to venture overseas. A steadily shrinking labour force and a rapidly ageing population means that Singapore's economic productivity is likely to stay stuck in the doldrums in the medium-term, and analysts reckon that internalisation is truly the only way forward for local firms.

"The key is to expand regionally and tap on other countries’ faster growth. If Singapore’s productivity and GDP growth cannot be lifted above those of other advanced countries due to an aging population and a shrinking labour force, investing overseas may help overcome these growth limitations," DBS noted in a report.

DBS highlighted that the phenomenon of sluggish productivity gains is also happening in other advanced economies, simply due to the fact that the growth of mature nations has been relatively slow due to structural constraints and demographic shifts.

“The internationalisation of local companies could help Singapore tackle the challenges of an aging population, achieve sustainable income and productivity growth, and overcome rising costs. Rather than be constrained by GDP growth of merely 1-3%, Singapore can invest in neighbouring countries that are growing 5-6%,” DBS noted.

In response to the greater need for internalisation, IE Singapore recently said that it will hold 15 overseas in-market workshops to help local companies gain hands-on experience in local markets.

Among the firms which has benefitted from these workshops is Xpressflower.com. The online florist has been selling flowers to the Philippines through its e-commerce platform, but decided to launch a brick-and-mortar shop in Manila after attending IE Singapore's workshop in April.

Another firm which has taken advantage of the workshops is Tai Sei Hei, which brought its Xiao Ban brand into Vietnam in November 2015. SInce setting up its first shop in Ho Chi Minh's SC VivoCity, the company has seen a 10% monthly growth in revenue. It plans to open five more outlets in the city by 2018.

"Unfamiliarity with overseas markets is a top concern among SMEs who go overseas. They have less resources and networks to help them navigate and understand local conditions. To alleviate this, we run in-market workshops, enabling companies to experience business conditions on the ground and connect them to like-minded partners," said Tan Li Lin, group director for customer services at IE Singapore.