OPENING ADDRESS BY MINISTER OF STATE FOR NATIONAL DEVELOPMENT AND TRADE & INDUSTRY, MR LEE YI SHYAN, AT THE MEMORANDUM OF UNDERSTANDING SIGNING CEREMONY, 8 SEPTEMBER 2011, 9:30AM AT THE RITZ CARLTON

Professor Steve Burt, Senior Deputy Principal, University of Stirling

Adjunct Professor Lee Kwok Cheong, CEO, SIM Global Education

Mr Wong Hong Kuan, CE, Singapore Workforce Development Agency

Mr Chan Lee Mun, Principal, Nanyang Polytechnic

Ladies and Gentlemen,

Good morning. I am pleased to join you today to witness the Memorandum of Understanding (MOU) signing.

Productivity Improvements

Despite global economic uncertainties around the world today, our services sector has achieved relatively good growth. In particular, the June 2011 Retail Sales Index[1]revealed that retail sales grew by 10.9 per cent on-year. This, we believe has to do with a healthy consumer confidence and higher tourist arrivals.

While leading chains such as H&M and Abercrombie & Fitch continue to enter the local retail scene, adding variety and vibrancy, further growth in the industry would add to the pressure in an already-tight labor market. As one of the most labor-intensive sectors, the retail industry is still hiring to fill vacancies.

Some retailers I met told me that they could not find Singaporeans coming forward to fill the jobs. Others told me that they had to curtail their original expansion plans because of shortage of workers. I believe these are real challenges the retail industry is facing. And we will need to seek immediate and longer term solutions.

Several months ago, I had a conversation with someone who had just returned from visiting Universal Studios in Orlando, Florida. I was told that over at the restaurants there, they typically required one-third of the waiting staff as compared to ours at our own Universal Studio. You know that restaurants in Universal Studios all over the world are fashioned similarly. Hence, I was curious to know why there existed a gap between their waiting staff and ours. What exactly was the productivity gap? Was it due to workflow? Was it due to the skills and motivation level of the staff? Or was the supervisor lacking in organization abilities?

At the company level, what would result if our waiting staff were three times more productive? Does it mean that existing chains could open up three times more stores without adding new headcounts? Would it also mean that every waiting staff would be paid more now that they are handling more customers and revenue?

Even though the example I quoted was from the F&B sector, studies have shown that our retail sector productivity lagged behind that of USA and Hong Kong. The same imperative exists for us to dramatically improve the productivity levels of our workers in the retail sector. The good thing about international productivity comparisons is that others have proven that it is possible. We are not aiming for some sort of imaginary or theoretical productivity level. We are just playing catch up with the best practices.

Significance of the MOU

Which is why today’s signing is significant. WDA, SIM Global Education and University of Stirling are coming together to introduce a new degree scholarship programme for our retail professionals. I am pleased to note that with this MOU signing, partner organization will award 90 Retail degree scholarships worth some $3 million over three years starting 2012. A direct beneficiary of the new degree scholarship programme will be existing Retail WSQ diploma holders. They can now take up the Retail Marketing Degree programme offered by SIM and University of Stirling to further advance their skill sets and career development.

To be sure, some of our leading retailers have gone far in the journey of human resource development and training. Consider Wing Tai Retail. Under the Customer Centric Initiative[2], Wing Tai Retail has developed its very own WSQ-certified, Fashion Apparel (PAFA) Training Course for its service staff. Service staff from G2000 and Top shop are being sent to Hong Kong, China and the UK for advanced training. Wing Tai Retail is also the first in the industry to provide an internationally accredited in-house training program designed by the Fashion Institute of Technology (New York) for its service staff. What Wing Tai Retail has demonstrated is a committed approach towards human resource development. Their strategy would go a long way to help them attract and retain the best staff in the industry.

Accept and adjust to the new operating environment

Our next phase of growth will be constrained by labor supply. Our foreign worker policy will continue to emphasise and support productivity-driven growth. Our retailers must therefore accept and adjust to this new operating environment, and commit themselves to productivity improvements. It is not just a stop gap measure; it is a long term undertaking to fundamentally re-invent our retail industry.

There are many ways to raise productivity for retailers. Yet, beyond workforce training, firms could look at adopting new business models, increasing supply chain efficiency, adoption of technology in front-end and back-end processes, emphasize on focused branding and targeted-marketing, groom a highly skilled and motivated workforce, step up product innovations, discover economies of scale in operations and so on.

Given external competition and domestic constraints, our retailers must quicken their pace of learning. With a sense of urgency, they should look out for best practices domestically and internationally, within the industry and outside the industry to glean new ideas for innovations, adaptation and to achieve quantum-leap improvement. The end outcome must be a profitable and internationally competitive retail industry with a highly skilled and well-paid workforce. Only in this way, can our retail industry achieve sustainable growth and profitability.

Conclusion

The Government is committed to supporting companies in making this transition towards higher productivity. The $86 million Retail Productivity Plan announced earlier this year aims to improve the retail sector’s value add per worker by about 25 per cent by 2015.

On this note, I would like to extend my heartiest congratulations to WDA, SIM GE and University of Stirling and their partnership and to the Singapore Institute of Retail Studies, for organizing this seminar successfully today.