Singapore Productivity Push: Tan See Leng's Growth Plan

 

Singapore Must Raise Productivity to Sustain Economic Growth, Says Tan See Leng

Singapore’s next phase of economic growth
cannot depend simply on adding more workers, expanding land use or increasing resource consumption. The country must raise productivity, innovation and value creation, Minister for Trade and Industry (Energy and Industry) Tan See Leng said on August 26, 2026.

Speaking at the Ministry of Trade and Industry Economic Dialogue 2026, Tan said Singapore’s small size, dependence on international trade and an increasingly fragmented global economy make productivity-led growth essential. He argued that the country needs to create more value from the resources, talent and capabilities it already has.

The message comes as Singapore looks to strengthen its economy amid geopolitical tensions, shifting supply chains, trade barriers and rapid technological change.

Why Productivity Has Become Critical for Singapore

Singapore has limited land and a relatively small population. That makes a growth strategy based primarily on adding more physical resources difficult to sustain.

Tan said Singapore’s next phase of growth cannot come from simply using more land, adding more workers or emitting more carbon. Instead, the country needs to find ways to generate greater economic value from its existing resources.

For businesses, productivity generally means producing more value with the same or fewer resources. This can happen through better technology, automation, improved processes, employee training, innovation and higher-value products and services.

For Singapore, that shift is becoming increasingly important because demographic and manpower constraints limit the scope for relying on workforce expansion alone.

The government has previously emphasised productivity-driven growth as a way to support higher wages and move workers and businesses up the value chain. Tan had also highlighted the importance of productivity in earlier policy discussions when he was Minister for Manpower.

AI Could Become a Major Productivity Driver

Artificial intelligence is emerging as one of the main tools Singapore hopes will improve productivity.

Tan said AI could transform important sectors including advanced manufacturing, logistics, healthcare and connectivity. Together, these four sectors account for more than 40% of Singapore’s GDP, according to The Straits Times.

The potential impact goes beyond individual companies.

If manufacturers use AI to improve production planning, predictive maintenance and quality control, they may be able to increase output without proportionally increasing their workforce. Logistics companies can use automation and intelligent systems to optimise routes and warehouse operations, while healthcare providers can use AI to improve processes and decision-making.

The broader economic benefit could emerge when these improvements spread to suppliers and related industries.

Singapore Wants AI Gains to Reach Smaller Companies

One challenge is that productivity improvements cannot remain concentrated among large technology companies.

Tan stressed that Singapore needs to ensure that smaller and medium-sized businesses can also adopt useful AI solutions and that workers have the skills required to use the technology effectively.

This is important because SMEs form a large part of Singapore’s business ecosystem. If only a small number of large companies capture the productivity benefits of AI, the impact on the wider economy could be limited.

The government’s approach therefore involves not only encouraging technology adoption but also helping businesses redesign workflows and developing talent capable of working alongside AI.

AI May Increase Productivity Without Creating the Same Number of Jobs

There is also a difficult side to the productivity push.

Tan said AI and automation could allow companies to produce more with fewer workers. As a result, economic growth can no longer automatically be expected to create the same number or types of jobs as in the past.

This creates a policy challenge.

Higher productivity can raise business competitiveness and potentially support higher-value jobs, but workers whose existing roles are heavily exposed to automation may need to transition into new occupations.

Singapore therefore plans to focus on skills development, redesigned jobs and pathways into growth sectors. Tan also referred to “career bridges” for workers more exposed to disruption from AI, automation and changing cost structures.

The objective is effectively to make technological progress compatible with employment resilience rather than treating productivity and jobs as competing goals.

Manufacturing Could Be One of the Biggest Beneficiaries

Advanced manufacturing is particularly important because Singapore already has a strong semiconductor, electronics and precision-engineering ecosystem.

AI can improve factories through predictive maintenance, automated inspection, process optimisation and data-driven production decisions.

Singapore has already seen examples of this approach. A smart manufacturing partnership involving Rolls-Royce, SIA Engineering Company’s joint venture SAESL and A*STAR reported more than 20% higher productivity in 2024 compared with 2017, without expanding the factory footprint.

That example illustrates why productivity is especially valuable for Singapore: increasing output does not always require acquiring more land or significantly expanding physical infrastructure.

The Bigger Economic Challenge Is Global Competition

Tan’s comments also need to be viewed against a changing global environment.

Geopolitical tensions, trade restrictions and shifting investment patterns are making international commerce less predictable. Singapore, as a highly trade-dependent economy, is particularly exposed to these changes.

The government’s recently completed Economic Strategy Review is designed to strengthen Singapore’s value proposition, improve adaptability and build resilience alongside economic efficiency.

That means productivity is not simply about cutting costs.

Singapore is attempting to remain attractive for high-value activities such as advanced manufacturing, technology, research, finance and other knowledge-intensive industries. Maintaining competitiveness will require businesses to continuously improve while the government adapts policies to changing global conditions.

What Investors Should Watch

For investors following Singapore’s economy and Asian technology markets, the productivity push could have several implications.

The first is the potential growth of companies providing AI, automation, semiconductor equipment and industrial technology.

The second is whether productivity improvements translate into stronger corporate margins and higher-value economic activity.

The third is the pace at which AI adoption spreads from large corporations to SMEs. Wider adoption would make the productivity gains more meaningful for the overall economy.

Investors should also watch labour-market developments. Rapid automation could improve efficiency but create adjustment pressures in occupations that are easier to automate.

Risks to the Productivity Strategy

The productivity transition is not guaranteed to be smooth.

Companies may struggle to justify AI investments if the expected returns are uncertain. Smaller businesses may lack the capital, expertise or data infrastructure required to deploy advanced technologies effectively.

There is also a skills challenge. Technology adoption can move faster than workforce retraining, creating temporary mismatches between available workers and available jobs.

Finally, global trade tensions remain a major risk. Even highly productive companies can face weaker demand if international markets become significantly more fragmented.

Bottom Line

Tan See Leng’s message on August 26 is clear: Singapore needs productivity-led growth to sustain its economy in a world where land, labour and resources are increasingly constrained.

AI and automation could become important tools in that transition, particularly across advanced manufacturing, logistics, healthcare and connectivity. But the economic benefit will depend on how effectively companies redesign their operations, workers acquire new skills and smaller businesses gain access to useful technology.

For investors, the key theme is not simply AI adoption. It is whether AI can translate into measurable productivity gains, stronger competitiveness and sustainable economic value across Singapore’s broader business ecosystem.

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This article is for informational and educational purposes only and should not be considered investment advice.