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Saturday, 17 March 2012

Foreign worker flow choked in Singapore


From July, manufacturing firms will see their quota of foreign workers reduced from 65% to 60%, while the quota in services will drop from 50% to 45%.

FOR the first time in years, Singapore is cutting back on the intake of foreign workers to placate widespread public resentment.

“In the next five years, we have decided to tier down our need for foreign workers,” declared the strategy’s architect, former prime minister Lee Kuan Yew.

It was a tacit admission that its ambitious immigration strategy had run into trouble among Singaporeans and needed to be cut back – at least temporarily.

Lee’s son, Prime Minister Lee Hsien Loong, added: “We should consolidate, slow down the pace. We can’t continue going like this and increasing our population 100,000 to 150,000 a year, indefinitely.

“And we should give Singaporeans time to adjust, and our society time to settle, and integrate better the new arrivals.”

He mentioned no time-span for the reduction, but Lee Senior spoke of five years, evidently to take into account the next general election due in 2016-17.

A strong anti-People’s Action Party vote could make the policy more uncertain. But if it performs well, the doors may be opened even wider, according to analysts.

This in effect means the next election will serve as a referendum on future immigration.

The cutback is as follows: From July, manufacturing firms will have their quota of foreign workers reduced from 65% to 60%, while the quota in services will drop from 50% to 45%.

This was announced by Finance Minister Tharman Shanmugaratnam in his recent Budget speech.

He also said that the dependency ratio ceiling for “S” Pass holders – mainly mid-level skilled foreigners – would also be reduced to 20% from 25%. This affects middle-class Singaporeans most of all.

“The number of foreign workers has risen 7.5% each year for the last two years and account for a third of the city-state’s work force,” Tharman told parliament.

“We have to reduce our dependence on foreign labour. It’s not sustainable. It will test the limits of our space and infrastructure. A continued rapid infusion of foreign workers will also inevitably affect the Singaporean character of our society.”

A number of foreigners here – especially permanent residents – were a little rattled by the move, particularly Indians and Filipinos.

One family of PRs contacted me to ask if I thought this was prelude to a reversal of policy or a start of worse things to come.

The government has said those who are already here would not be affected.

There are other reasons for the review. One is a feared economic decline ahead and an expected drop in employment chances.

Another is the sustained drop in productivity growth from 11% (in 2009) to 1% last year, partly blamed on the import of too many cheap, low-skilled workers.

During the past year, the authorities had already been tightening rejection rates. The rise in foreigners slowed from 4.8% to 4.1%, and PR growth also slowed. From 6% a year from 2005, it rose by only 1.5% this year.

Lee Kuan Yew, who had long been the staunchest champion of the immigration policy, appeared to have softened his stand a year ago.

He said then: “We’ve grown in the last five years by just importing labour. Now, the people feel uncomfortable, there are too many foreigners.

“Trains are overcrowded with foreigners, buses too, property prices have gone up because foreigners with permanent residence are buying into the market.”

Actually, Singapore’s attitude towards low-skilled foreign workers runs counter to that a generation ago when the manufacturing era and large economies like China and India were emerging.

Sensing a threat in the 70s and 80s as they could offer more and cheaper workers and land to foreign factories, Lee – then at the height of his leadership – ordered a restructure to move Singapore’s economy to higher skill levels.

By the late 1980s state leaders raised salaries and cost of operations for low-skilled manufacturers to operate in Singapore. The idea was to move them to nearby Batam, Malaysia and Thailand.

“We don’t want investors to come here to manufacture low-margin products like umbrellas, plastic and clogs,” one government economist said.

I remember as a newspaper editor I sat in on a briefing by Economic Development officials in Brussels who told Lee Kuan Yew that they were faced with several requests from European investors to relocate to Singapore.

These were medium-size operations, but Singapore could not meet their demand for Singapore workers.

“We can tell them to operate in one of our nearby hub cities in Malaysia or Indonesia to make use of their workers under Singapore supervision,” Lee suggested.

The officials replied: “No, Sir, they insist on Singapore workers; otherwise they would have set up business in other countries.”

The industrial revolution was still in full swing. But Lee saw the shortcoming in Singapore’s small size in manpower and land.

The solution was to move to high-skilled levels, especially in services. Tertiary education and job retraining went full swing.

At the time he was against the intake of too many unskilled foreigners.

In several briefings, he sniffed at Europe’s mass import of low-skilled workers from Asia and Africa, saying it is something Singapore will not emulate.

The rich Europeans were addicted to imported cheap labour to do “dirty jobs” that locals refused to do, a reliance long turned into a national addiction.

As a result, more and more unskilled foreigners were needed.

Today with the strong reliance on “cheap foreigners”, it is becoming a lot harder to turn back to the original strategy of high-skilled services by using trained Singaporeans.

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