Staying open is how Singapore can compete, grow and stay relevant
As Singapore grapples with a shrinking local workforce and rising business demands, how can we remain open to foreigners while addressing concerns over job security, social integration and infrastructure strain?
The need for foreign talent to support our economic growth is an undisputed hard truth, made more acute by our declining birth rates and rapidly ageing population.
In 2014, there were six working-age residents supporting each elderly resident aged 65 and above. By 2024, this fell to 3.5. Including foreign workers raises this support ratio to 5.2, highlighting their essential role in augmenting the local workforce and keeping our economy going.
A delicate act of balancing concerns
Singaporeans are pragmatic and understand the need to remain open to foreigners at all levels – work permit holders for blue-collar jobs where we have insufficient locals, and Employment Pass (EP) and S Pass holders to plug skills gaps and supply shortages, to create more opportunities and enhance our economic dynamism.
Singaporeans' concerns centre around three key issues: fear that growth in EP and S Pass holders displaces local jobseekers because of discrimination and lower wages; infrastructure strain, rising prices and social disamenities caused by a growing foreign workforce; and dilution of the 'Singapore identity' at both at the workplace and community.
On the flip side, businesses also have concerns on foreign manpower issues. In the Singapore Business Federation's (SBF) National Business Survey, availability and increasing cost of hiring foreigners ranked among the top three challenges limiting business growth.
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Without adequate foreign talent, businesses face challenges in meeting demand, innovating and scaling, which can hinder their ability to compete globally. As a result, they may be forced to relocate or limit their expansion, ultimately impacting local employment, as the shortage of foreign workers also affects job opportunities for local workers.
Optimising the work permit holder population
Having said that, given the strong economic rebound from Covid, the overall foreign workforce population in Singapore has grown – while the number S Pass holders decreased by 11 per cent, EP holders have increased modestly by 4 per cent and work permit holders by a much larger 17 per cent.
We cannot infinitely increase work permit holder numbers, which are at an all-time high due to infrastructure limitations. Rising dormitory costs, such as from the impending closure of two worker dormitories, underscore the pressure on our infrastructure.
Dorm beds are now costing upwards of S$460 per month (as of H2 2024). These translate to increased operating costs, which eventually flow through to higher costs of services and reduced competitiveness for sectors dependent on foreign labour, such as construction, marine, manufacturing and services.
We have two choices: businesses must bring in higher-skilled workers and automate to reduce foreign manpower needs, or we must scale back output to limit foreign manpower demand – potentially slowing down construction volume, relocating manufacturing activities that are labour-intensive and accepting fewer service staff.
Seen in this light, the recent enhancements to the framework to enable employers to hire and retain higher-quality work permit holders announced at the Ministry of Manpower (MOM) Committee of Supply Debate will allow businesses continued access in a calibrated manner.
These include the removal of maximum employment period restrictions and the raising of the maximum employment age for work permit holders from non-traditional sources (NTS); the expansion of NTS to include Laos, Cambodia and Bhutan, as well as the NTS Occupation List to hire skilled workers in more non-PMET (professional, managerial, executive and technician) occupations; and the extension of the Manpower for Strategic Economic Priorities support period from two to three years, to allow increased transitional work permit quotas.
Many of these enhancements were recommendations from the Alliance for Action on Business Competitiveness.
However, given our limits in importing work permit holders in large numbers, we can do more to utilise the existing pool by allowing greater flexibility in their cross-deployment across sectors and between firms with strategic contractual relationships.
Take for example a multidisciplinary engineering firm that operates across diverse industries employing skilled work permit holders such as electricians and fitters. Allowing these workers to be flexibly deployed would optimise workforce allocation and reduce the need to hire additional workers for short-term needs.
As highlighted by Prime Minister Lawrence Wong at the SBF Singapore Budget Symposium, our focus should be on better retaining and utilising our pool of skilled work permit holders, rather than simply relaxing quotas, which could lead to an oversupply of workers and strain Singapore's infrastructure. With appropriate safeguards, cross-deployment could complement recent work permit holder framework enhancements.
Reducing discrimination and identity dilution
At the S Pass and EP level, Singaporeans' concerns on potential discrimination and the dilution of the Singaporean identity are reasonable. Hence, the landmark Workplace Fairness Bill, which was recently passed in Parliament, is a significant move to protect Singaporeans from discrimination.
This marks a paradigm shift from the current framework of using regulatory guidelines (namely, the Tripartite Guidelines on Fair Employment Practices), which does not have the force of law and limited enforcement levers (primarily the curtailment of work pass privileges for the hiring of foreign employees).
Expected to take effect in 2026/2027, it will require businesses to ensure that their employment policies comply with the fair employment guidelines, and train hiring managers to assess skills and experience objectively to foster a fairer work environment, to avoid facing potential private actions by individual employees and/or enforcement action by MOM.
Businesses can also do more to encourage workplace integration. Initiatives like the Workplace Diversity Programme by OnePeople.sg and the Institute of Policy Studies, alongside corporate integration efforts such as DBS' Integration Playbook and EY's Cultural Agility Toolkit, are exemplary for building a more inclusive workplace culture.
The set-up of the Alliance for Action on the Integration of Foreign Professionals, led by the SBF, Singapore National Employers Federation and Ministry of Culture, Community and Youth, is therefore timely in raising the importance of this issue and developing practical solutions, to foster meaningful interactions and friendships between locals and foreigners at the workplace.
We need to work harder to preserve Singapore's standing as a country that can attract skilled talent, reflected in our second-place ranking in the IMD World Talent Ranking 2024 and Insead Global Talent Competitive Index in 2023. In an increasingly inward-looking global environment, strengthening social cohesion through integration and addressing discriminatory practices becomes even more crucial to increase the absorptive capacity of Singapore for skilled talent.
Optimising beyond Singapore
We have thus far been trying to optimise our manpower within Singapore shores. The Johor-Singapore Special Economic Zone (JS-SEZ) offers a breakthrough to overcome our land and manpower constraints. With an integrated economic region with Johor, Singapore can access a larger, diverse workforce while easing infrastructure pressures.
Partnering our Malaysian counterparts to locate relatively more labour-intensive segments of high value-added manufacturing operations in the JS-SEZ will reduce pressure on our physical and social infrastructure.
Having the seamless movement of foreign workers living in the JS-SEZ but working in Singapore would achieve the same purpose. With the Johor Bahru–Singapore Rapid Transit System Link turning operational by late 2026, capable of moving 10,000 passengers hourly with streamlined immigration, our combined workforce could feasibly live and commute to work within the entire JS-SEZ.
Resisting the call of nativism
Singapore has so far been able to help locals secure good jobs while keeping businesses competitive. The dual-pronged approach – to help our locals compete strongly and fairly through heavy investment in skills development, and ensuring a level playing field through fair practices while allowing companies to have access to a complementary foreign workforce through a system of qualifying salaries, quotas and levies – have worked. There is always room to improve, but we must preserve this delicate equilibrium.
With the current wave of nativism sweeping across many countries, let Singapore shine as an example of how a highly skilled local workforce can thrive alongside a complementary foreign workforce, working together to expand the economic potential of the Republic.
The writer is CEO of the Singapore Business Federation
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