7. Conclusions and Recommendations

As stated at the beginning of this paper, the purpose of this research project has been to analyse the capacity of Singapore’s Industry Transformation Programme (ITP) to meet the expectations. A number of activities have been carried out to underpin the analysis, including a review of relevant research literature, analysis of publicly available documents about Singapore’s ITP and industrial policy in general as well as a number of targeted interviews to understand better specific aspects of different elements of ITP and industrial as well as skills policy in Singapore more generally.

An important note to point out that analysis of expectations of a specific programme must enable clearly identifying what those expectations are. In the case of ITP, two elements can underpin the understanding of the expectations. Firstly, quantitatively, the overall goals as regards the rate of economic and productivity growth could be inferred from those set by strategic governing bodies in 2010 and later in 2017. More specifically, the economic growth targets for the overall economy are aimed to reach 3%-5% annually; with productivity growth being the key driver (aimed at around 2% annually). These economy-wide economic and productivity growth targets are then segmented into sector-specific targets. This include also targets for the Precision Engineering Industry, aiming i.e. at around 8% added-value growth and around 10% productivity growth annually (reaching around 178.000 SGD per employee, as set in the PE productivity roadmap in 2011), as well as creating 3000 new PMET jobs in the sector until 2020. Secondly, qualitatively, the expectations can be derived from the communicated purpose of the ITP – to improve the coordination capacity of public policy bodies, together with other stakeholders, in promoting economic restructuring.

As regards the capacity to realise expectations for quantitative growth, one basis for the assessment can be past efforts, including through the outcomes of 2011 productivity roadmaps, that also included precision engineering industry. Quantitative analysis for the overall ITP is complicated by the fact that there is no clear quantitative statement as regards the expected targets to be reached by the ITP –the only targets that are available at that level is the targets of the overall economic and productivity growth of the country; however, ITP does not cover the whole economy – sectors included in ITP represent around 80% of Singapore’s GDP. It is also not clear, if the growth targets of all the sectors included in the ITP will cumulatively arrive at a joint growth figure corresponding/supporting the national economic growth targets. Still, historic growth rates, driven by capital-investment, could overall result in the expected rates of productivity growth at around 2%.

On the other hand, quantitative analysis at the sector-specific level is somewhat easier as there exists concrete targets for the Precision engineering industry. From that point of view, while the level of ambition has been retained the same for the sector as set in 2011, the results of the sector between 2010 and 2015 were substantially below these targets. Accordingly, unless there is a major additional drive and investment in the sector beyond the one realised between 2010 and 2015 and/or substantially changed industry dynamics nationally and internationally, it is not likely that those quantitative targets will be reached.

However, the most difficult part in the analysis of the capacity of a policy intervention/ programme to achieve expectations is the analysis of attribution, i.e. the impact that can be attributed exclusively to the specific intervention, while eliminating the effects of other interventions or actions and activities carrier out outside the realm of public policy or even outside the country altogether. Therefore, even if trend analysis of statistical indicators would indicate that the targets are likely to be achieved, it must be clear how and to what extent the specific policy intervention contributed to reaching those targets. 110

After the analysis of the industrial policy context in Singapore a conclusion is drawn that the ITP/ITM(s), while having the potential to contribute in helping realise the specific policy goals, will not be sufficient on their own to ensure the attainment of those targets. This conclusion is drawn from several specific assumptions, based on the evidence collected in the report:

- The largest financial instruments, supporting industrial transformation are market-based and thus horizontal in their nature, as opposed to the sectoral nature of ITP; - ITP/ITM carries few additional financial commitments from the government to be invested in the economy beyond what is already existing since 2010 or even before; - ITP/ITM is in essence a “governing” intervention, aiming to change (improve) the coordination among existing actors and/or re-distribute decision-making power. The benefits of such intervention are limited to efficiency gains, which are often small and realised in a very gradual (incremental) manner, with substantial time lags.

The research task also included a question of which are the main gaps as regards the capacity of this specific type of intervention to realise expected outcomes. The key gap can be concluded to be a disconnection between the instruments available to be deployed and their size (mostly limited to coordination activities) as part of the intervention, compared to the level of expected outcomes (assumed to be sectoral/national economic growth targets). At the same time, the intervention is likely to bring some positive impact, but the size of the impact can be expected to be limited, in proportion to the resources deployed, which, as argued before, are rather modest.

These conclusions, it must be kept in mind, cover only the industry transformation programme, but does not fully assess the impact of overall industrial policy in Singapore which includes many policy instruments besides ITP. The existing (and often long-standing) instruments promoting in different ways the industrial transformation are quite substantial in their scope, are rather broad and diverse in their nature, covering majority of areas of industrial policy as discussed in the literature – including land-use; access to financing; international development; competition; intellectual property; ecosystem supporting local innovators and start-ups and attracting those from abroad and many others. Thus it might even be speculated, that policy intervention like ITP might have other purposes and/or a way to improve analytical and information gathering activities of the public sector agencies, rather than being an industrial policy intervention in its essence.

Furthermore, the research tasks included an aim to identify possible ways how to improve the capacity of these (or similar) policy instruments to generate impact. Therefore, a list of tentative recommendations are provided below that could be useful.

Recommendation 1: clarify the actual level of impact that a policy intervention is expected to achieve. As an example, for ITP/ITMs, a forecast could be done to assess trends with business-asusual assumptions and then developing scenario(s) as regards possible intervention(s) and their attribution to the outcomes beyond business-as-usual scenario.

Recommendation 2: for policy learning, develop an ITP monitoring framework and evaluation strategy, that would collect and present in an easy-to-analyse manner the key parameters of all the ITMs adopted, included value-added, productivity, manpower (R&F and PMET), the size of investment and it’s outputs/outcomes (like investment commitments), to the extent possible disaggregated at a sub-sector level, capturing also the qualitative element of the intervention.

Recommendation 3: evaluate the methodology behind key performance indicators used in Singapore, i.e. investment commitments, incremental VA commitments, job commitments and their links to the macro-level indicators (growth of value-added; growth of employment).

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Recommendation 4: further develop the understanding of the impact of policy measures at micro and (cumulative) macro levels, notably the scope, reach and impact of financial public sector investment (grants; discounted loans; tax incentives), including the number and type of beneficiaries (employment, turnover, value-added), the distribution of public financial investment across beneficiaries and their impact, that could lead to the capacity to monitor the committed and realised outcomes at an aggregate (sector, economy) level.

Recommendation 5: improve the monitoring of manpower flows – in and out of the labour market as well as across sectors, improving the capacity to identify manpower/skills gaps.

Recommendation 6: improve the capacity to account-for intangible investment (including investment in skills) in national accounts and growth accounting framework, thus revealing part of the residual multi-factor productivity.

Recommendation 7: given very high levels of investment in Singapore and specific labour market structure, pursue better understanding on the efficiency of factor markets in Singapore (notably capital and labour) as well as monitor if diminishing returns to capital investment are becoming more evident given lower-growth economic environment in the last decade.

Recommendation 8: to ensure ITP sustainability, embed more decision power as regards distribution of financial resources in ITP bodies as well as ensure continuous analytical capability and monitoring task for the ITP secretariat.

Recommendation 9: finally, pursue more detailed sector-specific benchmarking and carry out casestudies to identify bottlenecks for productivity growth.

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