‘We agonised over this’: Chee Hong Tat explains tightening of foreign worker quota for services sector

‘We agonised over this’: Chee Hong Tat explains tightening of foreign worker quota for services sector

A number of MPs raised their concerns in Parliament on Tuesday (Feb 26), while some suggested how businesses can deal with the challenge.

Singapore night skyline
File photo of Singapore skyline. (Photo: TODAY)

SINGAPORE: Tightening the foreign worker quota for the services sector was a difficult decision for the Government, who “agonised over this” during many rounds of inter-ministry discussions, said Senior Minister of State for Trade and Industry Chee Hong Tat on Tuesday (Feb 26),

Speaking in Parliament at the end of the first day of the Budget debates, Mr Chee said the Government was aware that doing so "would be painful" for the companies affected, and have an impact on industries such as accommodation, information and communications, food services, retail and professional services.

However, if nothing were done to moderate the number of foreign workers in Singapore, the situation could create certain problems.

READ: Budget 2019: Services sector to face ‘challenge’ of tighter foreign worker quota, but adapting firms will benefit

Finance Minister Heng Swee Keat had announced in his Budget speech on Feb 18 measures to ensure Singaporeans continue to have “good jobs and opportunities”, including reducing the foreign worker quota for the services sector.

This would involve reducing the Dependency Ratio Ceiling (DRC) - which sets out the maximum permitted ratio of foreign workers to the total workforce that a company is allowed to hire - for the services sector in two steps: from 40 per cent to 38 per cent on Jan 1 next year, and to 35 per cent on Jan 1, 2021.

In addition, the services sector’s S Pass Sub-DRC will also be reduced in two steps - from 15 per cent to 13 per cent on Jan 1 next year, and to 10 per cent on Jan 1, 2021.

Referencing an editorial published in Chinese-language daily Lianhe Zaobao on Feb 22, Mr Chee said that the number of S Pass and Work Permit holders in the services sector has increased by 34,000 in the last three years.

“The editorial hit the nail on the head by observing that if we do not control the total number of foreign workers, it will affect the employment outcomes of local workers and lead to socio-political problems in Singapore,” he said. “We have seen this happen in other countries.”

This, he said, was the key reason why the Government proceeded with the tightening.

“On balance, we decided that it was better to make a move now to moderate the overall number of foreign workers in Singapore before the problem gets out of hand,” he said. “As the Zaobao editorial said, the DRC tightening is necessary bitter medicine.”

READ: Government will help businesses transform, reduce reliance on foreign manpower: Indranee Rajah

DEPENDENCY RATIO CEILING MAIN CONCERN OF BUSINESSES

The DRC was the focus of a number of MPs’ speeches on Tuesday, with concerns raised about how businesses would be able to deal with the tightening.

Nominated MP Douglas Foo, who was providing a response on behalf of the business community, described the Budget as a “forward-looking Budget, preparing and galvanising Singapore businesses for the challenges and opportunities ahead.”

However, he said, the plan to reduce the DRC in the services sector was a “main concern” for the business community.  

“For these businesses, no matter how technology may alleviate operation demands, a lack of readily available human resources, which will invariably in turn drive up already increasing labour costs, will work in tandem to drive businesses out of Singapore or out of business altogether,” Mr Foo said.

READ: 7 things you need to know about Budget 2019

He cautioned against an “over-reliance on legislation”, pointing out that in recent debates, MPs have lobbied for mandatory Progressive Wage Models, eldercare leave and flexible work arrangements.

“While all of these are indeed legitimate interests, legislating for them may not necessarily be the best way forward. I would like to urge this House to better support the efforts of tripartite collaboration and MOM’s efforts to promote a strong culture of shared responsibility, rather than to adopt a legalistic and prescriptive approach,” he said.

MP for East Coast GRC Jessica Tan said that the move to tighten the DRC has sent a strong message to companies on the need to be more productive, and to rely less on foreign workers.

“We must recognise it will not be easy for companies in the services sector, as they rely heavily on manpower and currently are facing challenges in attracting Singaporeans,” she said, adding that businesses must also understand that the supply of foreign manpower will eventually diminish as well.

“While it is painful and difficult if companies in the services sector do not reduce reliance on foreign manpower for their businesses now, they will be more severely impacted if they are not prepared for it,” she said. “To raise productivity of the services sector, companies will need to innovate and restructure. And we will see some companies struggle to make the shift.

“So apart from extension of Enterprise Development Grant and Productivity Solutions Grant, more needs to be done to help businesses in the services sector improve productivity and reframe their business model and strategy,” she added.

READ: Budget 2019: Measures worth S$1 billion to help businesses build ‘deep’ capabilities

MP for Holland-Bukit Timah GRC Liang Eng Hwa also pointed out that an increasing number of foreign workers is not sustainable, both economically and socially.

He suggested that the S Pass system be structured such that companies that have more local workers at mid- to high-wage levels and are able to demonstrate a high value contribution to the economy be given more S Passes.

“We should strengthen this linkage,” he said, suggesting that companies that have been shown to hire more displaced or retrenched local workers be given favourable consideration for renewal of S Passes as well.

“At the end of the day, we want more of the S Pass type of jobs to be undertaken by Singaporeans, whether they are seniors, ITE or poly grads or back-to-work mothers.”

READ: Commentary: The Singapore Budget and Heng Swee Keat’s shift away from Big Government

MPS CALL FOR MORE SUPPORT FOR START-UPS, SMES

Some MPs also called for more support for start-ups and small- and medium-size enterprises (SMEs).

MP for Jalan Besar GRC Denise Phua noted that a tiered, differentiated approach was explicitly adopted in Budget 2019 to provide different strokes of help to SMEs of different sizes.

However, she also asked how the Government would be able to identify and nurture small start-ups that deserve support but who might be overlooked because of their being defined as a micro or small business.

To that end, she made several suggestions to further help SMEs. This includes aggressively identifying, training and developing a special workforce comprising senior citizens and persons with disabilities, and incentivising SMEs through higher Special Employment Incentives to employ these workers.

MP for Ang Mo Kio GRC Darryl David applauded the Budget for keeping SMEs in mind, and putting in place measures to help them grow. He urged SMEs to continue to tap on the various schemes available to scale up on their digital solution capabilities.

He also urged Enterprise Singapore to do more to help Singapore companies make their mark overseas, and to further enhance the “Made in Singapore” brand regionally and globally.

Meanwhile, MP for West Coast GRC Foo Mee Har brought up the Industry Transformation Maps - sector-specific transformation plans for 23 industries - noting that these ITMs cover 80 per cent of Singapore’s economy, and that their progress is “central” to Singapore’s economic restructuring effort.

However, she said, even though the 23 ITMs have been launched, their contributions so far are “unclear”.

“The feedback from the ground is that the pivotal roles that industry stakeholders and trade associations and chambers (TACs) are expected to play have proven to be uneven across industries,” she said. “Far too few TACs are able to lead the development of industry-wide capabilities, and help their members access local and international networks.”

“There is an urgent need for the Government to evaluate the partnership model and support structure of how government agencies, TACs, industry players, unions and training providers come together to accelerate deep capability development,” she added.

SINGAPORE’S PRODUCTIVITY MEASURES PRODUCING RESULTS: CHEE HONG TAT

In his speech, Mr Chee also talked about how the Government and businesses can tackle future challenges on the labour constraints.

To counter labour challenges, some companies in the services sector have started to invest in productivity improvements by adopting technology and re-engineering their processes, he said.

“The hard work is starting to bear fruit, and we need to keep it up,” he said.

He pointed out that the real value-added per actual hour worked from 2013 to 2018 has increased by 4.4 per cent per annum for the accommodation industry, 3.2 per cent per annum for retail trade and 1.4 per cent per annum for food services.

“These positive results were due to our companies’ efforts to innovate, upskill their workers and adopt progressive work practices,” he said.

“The outcomes show that our productivity measures are producing results,” he added. “The key is now to spread these efforts and benefit more companies, and for the more successful ones to eventually scale up and expand overseas.”

He also stressed the importance for all companies to have a good understanding of technology, and what it can do to improve their products, reduce costs and enhance service quality.

“Technology is not everything, but if you do not make good use of technology, there are many things you cannot achieve.”

Ultimately, Mr Chee said that he understands the transformation journey for companies can be a “daunting and difficult challenge”.

“Government agencies and industry associations will walk this journey together with you. This is our commitment to our companies,” he said.

 “If you want to transform and you are willing to put in effort to do so, we will help you.”

 A total of 27 Members of Parliament spoke on Tuesday, and the debate continues on Wednesday.

Source: CNA/lc(aj)

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