SPEECH BY MR. S. ISWARAN, SENIOR MINISTER OF STATE FOR TRADE AND INDUSTRY AND EDUCATION AT THE INAUGURAL SINGAPORE PRODUCTIVITY AND INNOVATION CONFERENCE 2010 ON 21 JUNE 2010, 9.10 AM AT SHANGRI-LA HOTEL

Mr Renny Yeo, President, Singapore Manufacturers’ Federation

Distinguished guests, ladies and gentlemen,

A very good morning to all of you. I am happy to join you for this inaugural Singapore Productivity and Innovation Conference 2010.

Why productivity is important

As we all know, earlier this year, the Economic Strategies Committee (ESC) appointed by Prime Minister, under the chairmanship of the Finance Minister, identified productivity as a key driver for Singapore’s economic growth. Over the last ten years or so, a large part of our economic growth has been driven by an expansion in our workforce. And clearly, this cannot be a sustainable basis for growth in the long run. Our demographics are changing and certainly, our local workforce will not grow as rapidly as it did in the past. We continue to need and welcome foreigners who can contribute to our economy. But we must develop productivity to sustain our long term growth. This will drive GDP growth, enable us to remain competitive and, in so doing, achieve a higher standard of living for everyone.

Productivity in the manufacturing sector

I think you all are very familiar with the concept of productivity.For the manufacturing sector, this is really your bread and butter. You are constantly seeking to improve and enhance the production process.Some companies have invested in a robust ICT infrastructure to make their operations more efficient.Others have focused on automation as an enabler. For example, Tungsan Food Industries Pte Ltd, which manufactures pastes, sauces, marinades and other cooking ingredients. It automated its raw chillies processing line and packing system, and this has resulted in better quality products, improved hygiene and longer shelf life. Since the implementation of the Automatic Chillies Processing Line, the production of chillies has increased from 2 metric tons to 8 metric tons per 8 hour shift, with an estimated savings of about $250,000 a year.

While technology is a key factor in raising the productivity levels of a company, the human element is perhaps even more important in determining how efficiently and effectively technology is deployed and the use of technology. As announced by DPM Teo Chee Hean last month, SMa and the Workforce Development Agency have developed Singapore's first Workforce Skills Qualification (or WSQ) Certified Productivity and Innovation Manager programme. This will help develop change agents within companies to achieve measurable tangible productivity outcomes. I am very pleased to note that some manufacturing companies have already sent their employees for training to become productivity champions within the company.

But of course more can be done. The national productivity growth rate fell really low, to about 1% per annum in 1999-2009, which is significantly below our target of 2-3% per annum. Historically, our figures were higher. Many of you here today play a very important role in helping us achieves this target as you lead and manage companies that contribute towards our economy. SMEs form more than 95% of the manufacturing companies in Singapore, and employ about 60% of the manufacturing workforce.A quantum leap in the productivity of SMEs in the manufacturing sector is essential for Singapore to maintain strong growth rates over the next ten years and more.

Innovation and Productivity

The conference today is very aptly titled. It recognises that innovation and productivity are closely linked in today’s context. In our current competitive global environment, we need to move beyond mere adoption and utilisation of automation and technology. We need to see how we can optimise and use our resources more efficiently, and upgrade our workers’ skills. And we constantly are looking at new ways to innovate to grow our top line and to enhance the bottom line.

Innovation, can mean different things to different people.But, in general, it means coming up with new ideas and new products that can serve our customers better, and allow companies to enter new markets with different products that will fetch a premium price. Many companies in Singapore have a deep reservoir of knowledge and capabilities. Innovation is about taking advantage of this depth of expertise to move up the industry value chain and produce products and services that can command higher prices or strong market position. As our companies seek to innovate, I would like to highlight two important aspects which will underpin their success.

First, is to acquire deep and current understanding of the environment and circumstances we operate within. To be able to produce something that your customers will want, you really need to understand the ins and outs of the market, and you must be clear about your own capabilities and strengths. Pokka Corporation (Singapore) Pte Ltd is an example of a company that uses such an approach to expand into the international market. Pokka carefully studies trends in the beverage market, and develops an intimate knowledge of the preferences that overseas consumers have in taste and packaging. They work closely with their customers to refine the drink to suit local tastes. This approach has enabled Pokka to expand into the Middle East markets, first with fruit juice and later with energy drinks. Pokka has also successfully developed a range of coffee products in the Cyprus market.

The second aspect for critical success is to embed a culture and system that will encourage innovation and harness creativity. I think this is a very important point. When we talk about productivity and innovation, for some of you it may sound like déjà vu as we talked about it in the 70s and 80s.But, the fact of matter is that productivity and innovation cannot be a fashion or fad.It must be an intrinsic part of our corporate DNA.What that means is that we need to constantly and continuously looking at ways to enhance productivity and innovate.So our workers, employees can be the source of some of the best ideas because they are on the frontline running the daily operations, and so they have the best market sensitive knowledge of what is going on and needed in the market. Ideas will naturally flow from them if they are engaged in their daily work and feel a sense of ownership for the development of the company. Your company therefore must be willing to change and adopt new ideas and adapt to the evolving needs of the market.

The government is certainly committed towards helping businesses innovate. For this year’s budget, government introduced the Production and Innovation Credit (PIC) initiative. PIC gives you additional tax deductions for investments in a broad range of activities along the innovation value chain. For example, it covers spending on research and development, registration of intellectual property, acquisition of intellectual property, design activities, and training of employees. I want to encourage all of you to take full advantage of the PIC in their innovative pursuits.

If I can pull it all together, I would say that the most important part of this entire effort is to make sure that we recognise that productivity and innovation growth is an essential part of every corporate strategy for competitiveness. Also, it is an integral part of the national strategy to make sure that we develop a foundation which is essential for long term growth and sustainability. This is a joint effort. It requires individual workers to obviously take on the challenge of training themselvesand keeping their skills updated.It requires the effort and cooperation of SMEs, large corporations and industry associations. But you are not alone in this effort.This is an effort in which the government is also prepared to invest our resources in. Firstly, government agencies are formulating schemes which our companies should take full advantage of to enhance their productivity.Secondly, companies and industry associations should also propose ideas which government agencies can adapt for new programmes.

Conclusion

I want to commend the Singapore Manufacturers’ Federation (SMa) for their initiative in organising this conference. I certainly look forward to seeing many other associations follow SMa’s lead and starting similar industry-led efforts to improve productivity. I wish everyone a very useful and productive conference.

Thank you.