Speaking to the Straits Times, Singapore economist Dr. Chua Hak Bin declared that Singapore’s economy could have grown twice as fast this year if not for the government’s attempts to manage the inflow of foreign workers, primarily, basic-skilled and junior professionals.
If current foreign worker policies were more liberal, Dr. Chua estimated that the economy could have expanded by 3% in 2012. Instead, year-on-year (y-o-y) growth was a more modest 1.3% in the first three quarters of the year.
Dr. Chua, Bank of America Merrill Lynch’s resident expert, further claimed that the stricter Singapore work pass regime has cost the economy $1.1 billion in potential tax revenue, some 35,800 potential jobs, and trimmed approximately $4.2 billion off Singapore’s GDP this year.
While a stricter immigration framework can potentially reduce congestion and competition for housing, Dr. Chua believes that the cons far outweigh the pros. By reducing quotas and imposing higher levies on foreign workers, the government is inadvertently creating a less dynamic job market, thus paving the way for higher wage-cost inflation, and ultimately restricting potential economic growth.
Other economists, however, disagree with Dr. Chua’s assessment, arguing that the weakened momentum cannot be blamed squarely on stricter immigration policies. They instead add that external pressures, such as the decline in demand resulting from the Eurozone crisis and a generally lukewarm global financial climate, are contributing factors as well.
No U-Turn on Foreign Manpower Policies
Regardless of the ongoing debate, Acting Manpower Minister Tan Chuan-Jin insisted that there will be no U-turn on policies to restrict foreign worker inflow.
Speaking at the Singapore Business Federation SME Convention earlier this week, Minister Tan acknowledged that small and medium sized enterprises are struggling to cope with the tighter labor market.
In response, the government pledged to help SMEs by managing the pace of manpower tightening in the most prudent manner, balancing domestic pressures with the global economic factors. To this end, further changes in foreign labor regulations will be incremental to allow firms to adjust accordingly.
Singapore as Global Investment and Talent Hub
Rikvin, a Singapore company incorporation specialist, opines that Singapore should remain an international center for investment and talent.
“Foreign investment and talent fuel the economy and drive economic growth,” commented Mr. Satish Bakhda, Head of Rikvin Operations. “To maintain our reputation as one of the world’s most competitive economies, we need a highly dynamic workforce to sustain productivity and innovation. Granting more Singapore employment passes to high-skilled individuals is a step in this direction.”
“Furthermore, entrepreneurs who opted for Singapore company formation are increasingly concerned that the foreign talent restrictions will impede their plans for expansion. Multinationals, for example, wish to bring on board some of their top talent when they set up a Singapore office, but there is now a mounting concern that Singapore may not want them here. If this trend continues, we may see firms pulling out and relocating their base of operations elsewhere,” he said.
“While we support the government’s efforts to reduce the reliance on low-cost foreign labor and move towards higher-value add activities, we also seek the maintenance of a liberal policy in terms of accepting highly-skilled, highly qualified talent. Perhaps what we need is a calibrated framework that can achieve a balance between persistent manpower demand in certain industry sectors and the need to limit population growth so as not to strain Singapore’s limited infrastructure,” he concluded.