By Teh Shi Ning

SINGAPORE - Singapore needs to refine its strategy and adjust policy to remain competitive in the long term, says the first Singapore Competitiveness Report 2009, released yesterday.

Among other recommendations, it calls for a broadening of the current science-driven innovation model to embrace creative and entrepreneurial activities. It also suggests that policy go beyond upgrading individual workers' skills to tackle productivity growth at the level of companies and clusters. And, as Singapore becomes increasingly plugged into the Asian production system and markets, a fresh look at Asean collaboration is needed too, the report says.

But cautioning against dramatic change or overreaction to the recent crisis, the report adds that Singapore's 'economic fundamentals remain solid and under no threat in the short to medium term'.

Prepared by the Asia Competitiveness Institute (ACI) at the Lee Kuan Yew School of Public Policy, National University of Singapore, it is the first non-official report examining the economy's competitiveness and will likely be produced once every two years.

Its release comes ahead of the Economic Strategies Committee's recommendations, which will be unveiled before next year's Budget.

'Overall, the report is positive about Singapore's current competitiveness. The longer-term challenges looked at are more subtle and complex,' Neo Boon Siong, director of the ACI and one of the report's three authors, told BT yesterday.

His co-author Christian Ketels of Harvard Business School, currently a visiting professor at the ACI, added: 'What we're suggesting is not drastic, but more evolutionary change.'

They used multiple sources of data and a conceptual framework designed by Michael Porter of Harvard Business School, who also chairs the ACI's International Advisory Panel, to assess Singapore's long-term competitiveness.

Of the areas examined, Singapore's flagging productivity was highlighted as 'the most immediate challenge to deal with'.

Although the report said that the 'disappointing recent performance' in productivity growth is largely cyclical and thanks to increased labour mobilisation, putting sharper fluctuations in that growth down to external shocks, it also raised reasons for concern.

Singapore's productivity is not growing as quickly as the United States' now, and there is a large gap between Singapore's worldwide standing on competitiveness and productivity, it said.

The authors observed how US companies have successfully harnessed new information technologies to redesign systems and raise productivity, adding that the less effective responses of local companies in this area beg further study.

One possibility, Prof Neo said, is that the availability of low-cost, low-skill foreign labour might 'disincentivise companies from moving to an operational model based on higher skills and productivity'. This has significant implications, as changes to labour market, immigration and wage policy may be needed.

The report also recommends that measures to boost productivity growth be pitched at companies and industry clusters, as improving individual workers' skills has limited value if the business models in which they function pale in comparison to global peers'.

Looking more broadly at Singapore's aspiration to become an innovation-driven economy, the report calls for a shift away from 'an uncritical leaning towards the US model, which may neither be appropriate nor ideal for Singapore'.

The data so far points to clear progress in science-related innovation, but more limited success in creative and entrepreneurial activities, says the report. More commercialising of scientific patents is also needed, and multinational and government-linked companies and statutory boards can also be encouraged to spin off innovative commercial ventures.

Also, with a broader definition of innovation that includes new strategies, processes, business models and ideas, there is huge potential for Singapore to export its strengths in health care, city planning and other public services too, the authors said.

Singapore remains highly globally connected, but trade and investment with Asian economies have been on the rise, says the report.

As such, there are benefits in reviving the Asean agenda, not via trade liberalisation, which is politically challenging, but by focusing on cross-border infrastructure, attracting foreign direct investment and building networks to make the region as a whole more competitive.

'We don't expect that everybody will agree with our recommendations, but hope to make a contribution to the nature of the debate on policy issues,' said Prof Ketels.

This article was first published in The Business Times.