Business

No focus on increasing productivity

Singapore companies do not pay enough attention to maximising productivity, a failing that has led to stagnating output growth and a less competitive economy, according to a new report.

It noted that the pace of economic expansion has slowed while wage growth has outpaced labour productivity, resulting in rising staff costs and making Singapore less competitive internationally.

The authors of the report by management consultancy Oliver Wyman called on private sector firms to build productivity improvements into day-to-day operations, saying: "A real productivity drive should not purely be a reaction to competitive pressure or a result of a national effort."

The report found that some of the largest listed firms here have grown in size but have not become more productive.

The top 100 companies by market capitalisation listed on the Singapore Exchange saw market capitalisation grow 5.9 per cent annually between 2011 and 2015.

But there was also a declining trend in key productivity measures over the same period, the report said.

Return on total capital fell from 9.8 per cent to 6.8 per cent, and return on equity dropped from 24 per cent to 11.4 per cent.

While these falls may partially be driven by companies holding on to more capital and by investments in expansion, profit per employee also contracted at an annual rate of 9.5 per cent over the same period.

The report noted that falling profit per employee is typically characterised not just by rising operational costs but also by declining revenue.

It also found a strong correlation between productivity and traditional financial performance (return on total capital) across industries. - THE STRAITS TIMES

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