Foreign worker curbs meant loss of some investors

By Jeremy Au Yong, The Straits Times, 18 Nov 2012

Singapore has had to sacrifice some investments as it restructures its economy to rely less on foreign workers, said Trade and Industry Minister Lim Hng Kiang yesterday.

But the country remains attractive to investors and the Government will be more picky about which ones it accepts. That means stricter criteria on investment returns, how many jobs they can create and whether they are the right type of jobs, he said.

"So if investments don't meet these hurdle rates, we can't give them the land, and if they don't have the land, they can't invest in Singapore," said Mr Lim. "We have to be very stringent."

Hurdle rates are minimum rates of return required by managers or investors.

Mr Lim was speaking to reporters after a meeting of Asean economic ministers at the 21st Asean Summit in Cambodia.

His remarks are the first from a Cabinet minister confirming that Singapore's move to restructure the economy has meant having to turn investors away.

While many Singaporeans want the supply of foreign workers to be tightened, observers are concerned about the impact on investment and economic growth.

Yesterday, Mr Lim described the move to forgo investments as a "big decision", saying that restructuring was one of the two main reasons for Singapore's lacklustre economic figures this year.

The other is the uncertain economic conditions facing the US, Europe and Japan.

Last Friday, his ministry released forecasts that the Republic's economic growth for this year would end up at the lower end of the 1.5 to 2.5 per cent range. This came after economic output shrank 5.9 per cent in the third quarter.

Mr Lim said that the move to take only investments that create high-value jobs is not without its own problems.

"On the positive side, the strong investment flow means good jobs created. On the negative side, it means greater pain in restructuring because as Singaporeans go for these better jobs, those jobs that are lower-paying and less-value-add will find that they can no longer continue in Singapore," he said, and stressed the need to achieve a balance.

Still, he noted that it was not sustainable for the economy to keep growing the way it did in the past.

"In the last five years, we have been generating something like 120,000 jobs a year, of which 40,000 are Singaporeans and we end up with 80,000 foreign workers. Going forward, we have decided that this is no longer tenable over a long term," he said.

But moves to cut the import of foreign workers will take time, he noted. With Singapore still projected to create 80,000 to 100,000 jobs this year, this will still add 40,000 to 60,000 foreign workers.

Said Mr Lim: "So even though we try to bring the trajectory down and try to make changes, we have tried to do it as gradually as possible, so that our companies can adjust. But as you can see, our companies are already feeling the pinch."

Foreign labour curbs 'not main cause of slower growth'
By Aaron Low, The Straits Times, 17 Nov 2012

THE tightening of the foreign manpower policy is not the primary cause of the growth slowdown, said senior officials at the Ministry of Trade and Industry (MTI).

If it was, the domestic service sector would be much weaker than it is, as the sector has been most affected by the tighter policy, said MTI's economics division director, Dr Thia Jang Ping.

Instead, it is external sectors such as electronics and wholesale trade which have seen the greatest declines so far, he said.

"But those (manufacturing and trade) are not the key sectors which are affected by the recent rounds of foreign worker policy tightening," he said.

Dr Thia was responding to a paper written by Bank of America Merrill Lynch economist Chua Hak Bin who said that the foreign manpower policy tightening is leading to slower growth and fewer jobs being created.

In the paper, Dr Chua argued that the stricter foreign labour regime has caused the pace of growth to slow by about half while 35,800 jobs were forgone.

Refuting this suggestion, MTI Permanent Secretary Ow Foong Pheng said the economic slowdown was primarily the result of sluggish external conditions.

Manufacturing, which is externally oriented, fell 0.8 per cent.

But construction still managed to record 7.7 per cent growth in the third quarter from a year earlier, while the service sector saw a slight 0.3 per cent increase.

But while it is true that external demand has fallen and accounts for some of the slower growth, Dr Chua said yesterday that he still believes supply constraints are restricting growth.

"If it was true that demand was the sole cause of the downturn, you would not see firms complaining about the lack of manpower," he said.

"The falling external demand also does not explain why the labour market remains so tight."

He also noted that the service sector had declined 3.5 per cent, when compared with just three months ago, indicating that manpower tightening had taken a toll.