SINGAPORE - The biggest risk to the population scenario presented by the government is that Singapore's companies fail to raise productivity swiftly enough to make up for the projected slowdown in workforce growth.
Business associations, whose members already feel the pinch of tightened foreign manpower policies, were not surprised by the direction of the Population White Paper released by the government on Tuesday. But productivity remains the weak link, they said.
"While people are reacting negatively to the 6.9 million number (that overall population is expected to be in 2030), for businesses, the slowdown that implies is already quite drastic," said Ho Meng Kit, chief executive of the Singapore Business Federation, which represents more than 18,000 companies here.
After expanding 3.3 per cent a year over the past 30 years, the workforce is expected to slow to grow just 1-2 per cent a year from now until 2020, and an even slower 1 per cent a year from 2020 to 2030.
Even to achieve slower GDP growth of 3-5 per cent a year from now till 2020, productivity would have to grow by 2-3 per cent a year, the paper estimates. In the subsequent decade, GDP is expected to grow a more subdued 2-3 per cent on the back of productivity growth of 1-2 per cent.
"The government has said that 2-3 per cent productivity growth is an 'ambitious stretch target'. We think so too. We think a more realistic target is 1-2 per cent because what has been done so far hasn't borne fruit," said Mr Ho.
Singapore Manufacturing Federation secretary- general Lam Joon Khoi shared similar concerns. "We are uncertain at this stage how our ongoing efforts in raising productivity across the economy will bear out in the future. We hope to see more government support for productivity measures," he said.
Also, the paper did not spell out the potential trade-offs of curbing workforce growth and banking on productivity growth, Mr Ho said. "If we cannot achieve that productivity growth, the trade-offs will be our competitiveness, access to good jobs, higher wages."
He thinks the productivity drive must yield results in the next two to three years. "If by 2015, productivity growth is still very weak, then clearly something different needs to be done," said Mr Ho.
Chan Chong Beng, president of the Association of Small and Medium Enterprises (ASME), remains hopeful. "Everyone wants to give it a try, businessmen won't give up so easily," he said.
There has been a change in the mindset of SME bosses over the past year. "We've got people coming to us not to complain about the lack of workers, they know they won't get more, but to seek grants to help them relook their business model. People are also more receptive to engaging older workers now," said Mr Chan.