Locally-oriented sectors the culprit behind Singapore’s productivity stagnation: MTI

These sectors have been dragging growth since 2010.

Domestic productivity remains stagnant nearly four years after the government began its decisive shift towards productivity-driven growth. In a report published yesterday, the Ministry of Trade and Industry revealed that domestically-oriented sectors are the main culprits behind the productivity drag.

According to the MTI, a “stark difference” exists between productivity growth rates of export-oriented and domestically-oriented sectors.

Domestically-oriented sectors include construction, retail trade, food services, business services and other services.

These sectors collectively accounted for more than one-third of the economy and they declined by 0.3% per annum from 2010-2013.

Meanwhile, export-oriented sectors such as the manufacturing clusters, wholesale trade, transportation & storage, accommodation, information & communications and finance & insurance, saw steady productivity gains of 2.0 per cent and 2.2 per cent per annum over the same period.

These sectors account for more than half of the economy, and productivity growth in these sectors was substantially higher than the 0.2 per cent growth registered for the overall economy.

According to the report, “In general, the export-oriented sectors may have performed better because they are globally competitive sectors that are able to transform and adjust processes quickly to changing market conditions. Many domestically-oriented sectors, on the other hand, are struggling with the tightening manpower supply, with some companies facing problems moving up the value-chain or improving their processes. Sector-specific factors may also explain the slow productivity growth in some of these sectors.”