What's holding back productivity laggards

The singling out of three sectors by the Finance Minister for productivity watch is another reminder that use of abundant labour will crimp profitability and business growth in the long run. It is no accident that these sectors - construction, retail and logistics - are the most labour-intensive, together with manufacturing, among the 16 pinpointed by the Government for productivity improvements. These 16 sectors employ six in 10 people in the workforce and pose a big drag.

Unless employers break the old mould by investing in equipment and smart processes, Singapore will continue to trail the sophisticated economies. Of the three cited by Mr Tharman Shanmugaratnam, construction is beginning to adjust to a slower rate of labour input with more efficient design and building methods. The adoption rate can be speeded up, though. The Building and Construction Authority can propose new methods, but it is up to developers and contractors to see the process through. Collaboration is the key. Big firms gain if they help their subcontractors upgrade.

Building proficiency is still only 40 per cent of Japan's, whose world-beating construction firms using state-of-the-art equipment were already a familiar sight in Singapore's early development phase in the 1970s. If dry walls take half the time to put up compared with brick walls, why aren't these used more when appropriate? Instead of sticking to concrete walls and pillars and customised designs, would the use of other materials, standard sizes and labour-saving methods find favour with homebuyers seeking cheaper stand-alone homes? In North America and Australia, for example, the use of lumber for framing is the main construction method because of cost and availability.

The retail sector and logistics firms, many of them of middling size, have been even less ready to take the plunge. Logistics firms are, in industry-speak, enablers for other services and manufacturing. Their link in the production chain is crucial. Toyota's just-in-time inventory processing three decades ago revolutionised car-making, but it was made possible through efficient logistical support. In retail, process management of the sales force is as important as the use of tools and developing e-retailing to complement the high-street shopping experience central to tourist spots.

Continuing state support for this push is justified because of the link between work rate and real income growth and the need to stem the widening income gap. There is a wide array of productivity "road maps" and state funding support available to help firms defray costs of process upgrades through technology and training. What makes the crucial difference is the willingness to embrace change and to invest in new tools and people.

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