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5. The structure of Singapore’s industrial policy logic
Given that Singapore’s industrial policy covers multiple instruments and levels, the analysis of the intervention logic of ITP needs to cover the links of ITP to higher-level industrial and economic policies (into which the ITP is integrated) as well as lower levels of the ITMs and specific pillars –thematic areas of ITMs interventions that should bring about the realisation of the ITP. Therefore, these different levels of the intervention logic can be represented as a pyramid going from more abstract and higher levels of policy formulation to more specific, lower levels of policy implementation.
Based on previous analysis it is presumed, that the different layers of policy discourse both historically as well as more recently are based on a similar underlying logical model/mental representation, mostly resembling that of growth accounting framework model. Such interpretation is made due to the use in policy discourse of goals and indicators that resemble elements of this highest-level model and correlates to the discussion in literature as well as broader policy discourse. The rest of lower-level policy initiatives and interventions feed into realising this highest level intervention logic.
Chart 2. The hierarchy of industrial policy concepts in Singapore
Underlying theoretical model (item I)
Aggregate productivity growth model (item II) Industry specific productivity growth model (item III)
Generic industrial policy interventions (item IV)
Industry Transformation Programme (item VI) Industry Transformation Map(s) (item VII)
Vertical coordination activities (item VIII) Horizontal coordination activities (IX)
I. Growth accounting framework (historical-theoretical basis)
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This highest level of intervention logic represents the indicators and discourse over a longer term historical period, stressing investment, economic growth, and productivity growth as key variables targeted by policy makers.
Investment + Employment + MFP = (equals) = GDP growth
II. Aggregate competitiveness and productivity (policy discourse)
This, more detailed recent model tries to specify how productivity and economic growth would lead to improvement in living standard of Singapore citizens, it also includes an explicit role for skills policy and training as a prerequisite for such improvement.
Productivity growth* + Employment growth = GDP growth > (leads to) > more better jobs*** > (leads to) > occupied by higher-skilled core*** > (leads to) > income growth
*As regards the definition of productivity growth, in the policy context it is more usually defined as value-added per employee and therefore it is not directly comparable to MFP concept. Value-added per employee might grow both due to increase in MFP, but equally (or more likely so) via increase in capital intensity (additional investment).
** Better (PMET) jobs do not automatically come from economic growth; therefore an important role for public policy is to promote “good growth” - i.e. growth that brings better jobs and limiting growth that is driven by the expansion of low-quality employment
*** Economic growth is only an enabler of growing individual prosperity; the latter can only be realised when attaining appropriate skills. This is the meritocratic element in the conceptual framework of the causal factor(s) of economic prosperity.
III. Industry-specific competitiveness and productivity growth (adjusted from IEG)
As visible over the recent years (but potentially present also earlier in industry-specific policy actions) the policy discourse stresses the necessity to address industry-specific needs and accordingly industry-specific policy requirements, which is then implicitly assumed to lead to aggregate effects at the level of the overall economy.
Market size growth + market share growth – employment growth (aggregate cumulative effect* in item II) > (leads to) > Industry-specific productivity growth
*Given that more emphasis is put on sector-specific interventions, the importance of sector-specific growth is more pronounced. However to realise economy-wide growth, a cumulative growth effect should be achieved across all economic sectors together, which might not necessarily be the case, particularly given the constrained labour market (zero-sum competition for labour) and other possible asymmetric effects across industries.
IV and V: Economic/ industrial policy interventions (using typologies from literature)
At this level the various policy interventions (both generic and sector-specific), such as tax regimes, migrant levies, various financial and non-financial incentives to direct and incentivise companies’ behaviour towards bringing about the capabilities and putting down investment to increase growth and
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productivity can be included. There are numerous typologies of industrial policy instruments that could be used to classify the policy instruments used in Singapore, or for that matter in any other country.
Economic and industrial policy interventions > (leads to) > better business conditions and capabilities > (leads to) > more output and productivity enhancing investment (including foreign) > (leads to) > aggregate output and productivity growth > (leads to) > more impact on items III and II and I.
VI and VII: Industry Transformation Programme (based on policy discourse)
This level of policy intervention describes the role and position of ITM, as primary focus of the analysis and how it fits into the broader logic of economic and industrial policy framework. It is presumed, that ITP is primarily a governing and information flows enhancing intervention (i.e. focused on changing processes of decision making rather than creating specific new external interventions targeted at specific companies or individuals), even if through representative bodies certain level of external impact (i.e. influencing companies by information and networking to adjust their activities towards the broader agreed aims/objectives) could also be envisaged.
More internal and external coordination > (leads to) > more efficient and effective interventions > (leads to) > more impact in items IV and V*;**
*Assuming that all other changes, both intentional – i.e. the possible re-distribution of financing towards sector-specific rather than generic interventions and unintended/unexpected effects will have neutral cumulative effect.
** Depending on the share of interventions/public investment covered by ITP (this could be a specific indicator created to evaluate the scope of ITP)
VIII. De-constructing ITP coordination activities (based policy discourse):
The core action of ITP is to improve coordination across and between different levels, with specific activities and bodies set for that purpose.
ITM-specific coordination + Cluster-specific coordination + horizontal coordination of ITP via CSIP > (leads to) > more internal and external coordination (item VI)
IX. De-constructing ITMs - coordinating across four pillars (based on policy discourse and ITM structure):
ITM’s are the lowest level of public discourse/reporting, bringing together different agencies and structuring coordination activities across different areas as prescribed in the ITP (and requested in the Future Economy Council) – productivity, skills, innovation and internationalisation.
Coordination of productivity interventions + coordination of skills interventions + coordination of innovation interventions + coordination of trade/internationalisation interventions > (leads to) > more sector-specific coordination (item VII)
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