A reduction in the service sector’s dependence on foreign workers is a major goal for this year’s budget in Singapore.
In Budget 2019 budget speech Monday afternoon, Singapore’s Finance Minister Heng Swee Keat said the Dependency Ratio Ceiling (DRC) must be reduced so that Singaporean nationals can hold “good jobs and opportunities.”
Reducing foreign worker dependency
The DRC decides the maximum number of foreign workers that an organization can hire as a percentage of its total number of employees in a particular sector. This ratio of the number of foreign workers to the total workforce will be reduced from 40 to 38 percent, effective Jan. 1, 2020 and further reduce it to 35 percent on Jan. 1, 2021.
Currently, the ratio in the manufacturing, construction, process and marine shipyard sectors remain at 60 percent, 87.5 percent, and 77.8 percent respectively.
Heng added that the number of Service Sector’s S Pass and work permit holders have increased by about three percent per year or 34,000 every year for the past three years. The foreign talent growth could become “unsustainable” if this trend continues in the service sector given that this sector has seen the highest growth of S Pass in five years.
“Relying on more and more foreign workers is not the long-term solution,” Heng said during his speech adding that a sustainable inflow of foreign workers is essential to “complement” the Singaporean workforce. “While we upgrade our Singaporean workers and build deep enterprise capabilities in these sectors, we must enhance the complementarities of our local and foreign workers.”
The new limits for those companies who are already in excess will be applied as and when these enterprises apply for renewal of permits.
In order to help enterprises get acquainted with the imminent policy changes when it comes to foreign workers, the Government of Singapore will offer the Enterprise Development Grant (EDG) announced in 2018 up to March 31, 2023. This grant is meant for businesses to enhance their capabilities, expand business overseas and remove operational inefficacy.
“The reduction to the DRC is the necessary medicine in the medium term. It will force enterprises to further invest in new technology, re-skill their existing workforce, and reduce the reliance on cheaper foreign labor,” noted Chris Woo, Tax Leader at PwC Singapore.
For Heng, investing in Singaporeans is a crucial aspect of building up the economy. To that end, the Government is launching new Professional Conversion Programmes (PCPs) targeted towards building skills in the areas of blockchain, embedded software, and prefabrication. These programs aim to build the capabilities of Professionals, Managers, Executives, Technicians and mid-career level professionals who are looking to switch their professions.
“As defined industry boundaries are blurring, the addition of the new Professional Conversion Programs will enable wider employment opportunities for Singaporeans,” noted a spokesperson from Ernst & Young Singapore.
Heng added that this year’s budget focuses on transforming the economy by “deepening the capabilities of our workers.”
Singaporean government will spend about S$ 4.6 Bn over a period of three years on new measures to build economic capabilities and to support Singaporean workers. Out of these S$ 4.6 Bn, about S$ 3.6 Bn will be directed to boost technological innovations in various industries. The Ministry of Manpower and Ministry of Education will use this part of the budget towards creating jobs and upskilling. Another S$ 1 Bn is set aside to be used by companies to build capabilities.
“We want our people to have the skills, knowledge, and attitude to adapt and thrive in this competitive and technology-intensive environment,” he added.
As a part of its endeavor to invest in building the skills of the Singaporean talent, the Budget 2019 also provides for investment in research, development, and innovation in research institutes, universities and domestic enterprises.
Enterprise Singapore is setting up two Centres of Innovation: one would be the Center of Innovation in Aquaculture (i.e. marine farming) at Temasek Polytechnic and the Center of Innovation in Energy at Nanyang Technological University (NTU).
The energy center at NTU will work in tandem with the Sustainable Energy Association of Singapore to achieve the country’s goal of becoming energy efficient, innovating in the realms of renewable energy and electric mobility.
“For R&D to make an impact, companies must take the lead,” said Heng while talking about the technological advancements in traditionally labor-intensive sectors such as construction and food.
The new Scale-up SG program to foster private-public partnerships to help startups and SMEs build up capabilities and internationalize is welcomed, according to Ernst & Young Singapore spokesperson.
“In order to encourage higher take-up by SMEs, easy access and timely disbursements of benefits will prove to be key,” added the EY spokesperson.
Funding to hire older Singaporeans
The 2011 Special Employment Credit (SEC) scheme will get an additional S$366 Mn which will enable companies to hire older Singaporean workers. The Additional SEC (ASEC) has also been extended for another year until Dec. 31, 2020, according to the Finance Minister of Singapore. The ASEC was introduced in order to hire those who are beyond the re-employment age.
“As our society ages, older workers will make up an increasing share of our workforce,” said Heng adding that these funds were allotted to empower older members of the country earn more and get a peace of mind during their retirement.