Global Prospective: Singapore Withdraws Red Carpet for Foreigners With Eye on Vote

Global Prospective: Singapore Withdraws Red Carpet for Foreigners With Eye on Vote
Bloomberg, 24-Feb-2010
By Shamim Adam

After luring investor Jim Rogers, actor Jet Li, Filipino maids and Bangladeshi construction workers with one of Asia’s most open immigration policies, Singapore is becoming a little less welcoming to foreigners.

Singapore almost doubled the rate it grants citizenship and permanent residence in the past five years to counter a falling birth rate, and let firms bring in thousands to work at hotels, shipyards and restaurants. The move saw foreigners make up one in every three people. The government plans to slow the inflow to avoid being “overwhelmed,” and unveiled higher levies for overseas laborers, cooks and janitors in its Feb. 22 budget.

The effort is part of a shift in economic policies designed to ease discontent in the aftermath of the deepest recession since independence in 1965 and to shore up public support before elections that must be held by February 2012. The danger is that the changes may make Singapore more expensive for companies to operate in and less attractive to investors.

“The economy generates more jobs than can be filled by locals and it wasn’t that long ago the government was arguing vehemently that we need foreign talent to ensure strong and sustainable growth,” said Song Seng-Wun, an economist at CIMB- GK Securities Pte in Singapore. “They’re trying to soothe Singaporeans’ anxiety that the whole island is swamped with foreigners. It’s politics.”

Election Timing

The government’s shift, which includes higher school and medical fees for non-citizens, has spurred speculation that an election may be called as early as this year. Prime Minister Lee Hsien Loong on Feb. 17 directed the Elections Department to update electoral rolls with eligible voters and for the process to be completed by March 31. A day later, a government gazette published the boundaries of new and existing polling districts.

Lee’s People’s Action Party was co-founded in 1954 by his father, former Prime Minister Lee Kuan Yew, and it has been in power since 1959. Its politicians currently hold 82 of 84 elected seats in parliament. Prime Minister Lee in a speech on Jan. 25 noted a speculation “fever” of early elections, while adding that it’s not imminent.

Support for long-serving governments in Asia has diminished in recent years. At the last Singapore election in 2006, Lee’s party won about 67 percent of ballots, 8 percentage points lower than the previous vote. In neighboring Malaysia, voters reduced the ruling coalition’s majority to a record low in 2008. Japan in August saw the ouster of the Liberal Democratic Party, which ruled the nation for almost all the postwar period.

Hit to Economy

Singapore’s economy contracted 2 percent last year as the global slump reduced demand for goods, hurting the island’s exports. The trade ministry last week said it expects an expansion as much as 6.5 percent in 2010.

Policy makers in Singapore say productivity is a cornerstone of their economic blueprint for the next decade, aiming to reduce the island’s dependence on exports. The government has blamed some industries’ use of cheaper, low- skilled foreign labor as a reason for low productivity in the past 10 years.

“We’re not against foreign workers,” Lim Swee Say, a government minister and secretary-general of the National Trades Union Congress, said at a Feb. 1 media briefing. “But just like drinking wine, wine is good but too much wine is bad. Foreign workers are good but too many foreign workers growing at too fast a rate is no good for the economy because it dilutes our focus on productivity.”

Birth Rate

Immigration had been a key component of Singapore’s population and economic strategy, given the failure of other incentives offered since 1987 to arrest a birth-rate decline -- such as tax breaks, subsidies and cash bonuses. Singapore, which has one-quarter the land area of Rhode Island, has no natural resources and the government relies on the skills of its populace to drive growth.

The government insists it’s still welcoming foreign talent, suggesting it will aim to reduce the inflow of lower-skilled workers rather than bankers, scientists and athletes. The laborers who build office towers and ships and serve at the city’s restaurants and hotels are mostly not allowed to apply to be permanent residents or citizens.

The influx of foreigners, both skilled and unskilled, has boosted sales for property developers such as CapitaLand Ltd., transportation providers including SMRT Corp. and telephone companies such as Singapore Telecommunications Ltd. It’s also helped consumption, given the birth rate has been below the level needed to replace the population since the 1970s.

Citizenship, Residence

About 20,513 people became Singapore citizens in 2008, and another 79,167 were given permanent residence. The tally is three times more than the 32,423 babies born to citizens that year. Of the 4.99 million population, about 1.8 million are non- citizens.

Disgruntled Singaporeans say the immigration policy means more competition with newcomers for jobs, public housing and places in choice in schools for their children. In the past few months, the government has lowered healthcare subsidies for permanent residents, increased public school fees for non- citizens, and tweaked a balloting system to give Singaporean children twice the chance of getting into the educational institution of their choice.

To address the flood of workers brought in by companies such as SembCorp Marine Ltd., the world’s second-biggest oil-rig maker, and casino operator Genting Singapore Plc, the government now plans to increase levies on foreign labor.

Levies on Workers

Singapore will raise the monthly charge for foreign workers in manufacturing and services industries by an average S$100 ($71) over the next three years, while construction companies will see a larger increase because there is more room for productivity improvements, Finance Minister Tharman Shanmugaratnam said Feb. 22. The first increase from July will see a rise of as much as S$30 a month per worker, he said.

An employer currently pays the government between S$50 and S$470 monthly per foreign worker. Professionals and executives who earn more than S$2,500 fall under a separate category that doesn’t require a levy.

The government’s latest move may cost SembCorp Marine, which estimates it has as many as 20,000 foreign workers and sub-contractors, an additional S$600,000 a month, said Ong Poh Kwee, the company’s deputy president.

“It will add on to the cost of operations,” Ong said. “This is the catalyst to driving productivity and adds to the urgency” of becoming more efficient.

The levy increase will slow economic growth and raise business costs, said Alvin Liew, an economist at Standard Chartered Bank in Singapore.

‘Hollowing-Out’

“The new policy on foreign workers may place a disproportionate burden on certain sectors, posing risks to their profitability in the next few years,” Liew said. “The most obvious victim is the construction sector, followed by low- end manufacturing and labor-intensive services industries like hotels and restaurants.”

Higher costs may also accelerate the “hollowing-out” of some manufacturing industries, which may move to cheaper locations in the region, he said. For consumers, Singapore will likely become a more expensive place for hotel stays and restaurant meals, he said.

Singapore cannot slow down the intake of foreigners too much because it will hurt growth even as locals complain of competition in schools or congestion in trains, buses and public areas, Lee Kuan Yew, now known as Minister Mentor, said at a community event Feb. 18.

In an interview with National Geographic last year, he called the country’s recent migrants “hungry” and “determined to succeed” compared with locals who are “less hard driving and hard-striving.”

“We tell them, look, they have to work harder or they’ll become stupid,” the elder Lee said of Singaporeans. “It’s just they don’t see the point of it. Why race when you can canter and save your energy and do other things? A regular inflow of migrants without too huge a deluge will keep” a society “on its toes,” he said.