Are Singapore's foreign labour source markets diversified enough?

Singapore

THE global spread of the novel coronavirus has revived concern over Singapore's economic reliance on rank-and-file workers from overseas - including from mainland China, where the respiratory disease originated.

With some staff either unable to return from China or put on mandatory leave of absence, companies in the construction, manufacturing and services sectors face an immediate manpower shortfall to varying degrees.

To be sure, the crisis - which saw China impose exit controls on its end, even as Singapore rolled out entry restrictions - is not without precedent.

Past interventions by labour source countries included the minimum wages set by the Philippines and Indonesian authorities for their nationals working as domestic workers here.

And it looks unlikely that the virus will prompt the government to expand its approved sources of labour, with economists Tan Khay Boon, a senior lecturer at SIM Global Education, calling travel curbs "only a temporary restriction which will be lifted when the situation is back to normal".

In response to Business Times queries, a spokesman for the Ministry of Manpower (MOM) maintained in a statement that "Singapore does not depend on a single source country for its foreign manpower needs".

"To mitigate the impact from the PRC restrictions, employers could retain more of the foreign workers they require for business continuity, be it PRC or other nationalities," he added.

But industry watchers noted that the question of whether manpower sources are too limited is not new: The 2019 novel coronavirus outbreak is just the latest risk to emerge from Singapore's dependence on foreign workers.

Services and manufacturing companies can hire workers from Malaysia, mainland China, Hong Kong, Macau, South Korea and Taiwan, while the construction, marine shipyard and chemicals processing industries can hire from those markets, plus India, Sri Lanka, Thailand, Bangladesh, Myanmar and the Philippines.

Excluding domestic workers, there were 1.16 million foreigners in Singapore's workforce at end-2019, although the data is not broken down by nationality, as a matter of course.

Still, Steven Koh, executive director of the Singapore Precision Engineering and Technology Association, estimated that some 15 to 25 per cent of the precision engineering workforce hails from mainland China - with the proportion held in check by the MOM's tiered levy system.

Under the ministry's rules, the levies on work permit holders in the manufacturing sector go up when they make up 25 per cent of headcount, and again at the 50 per cent mark, with a hiring cap at 60 per cent.

Mr Koh told BT this week that "opening up more sources is good", while adding: "We also don't want to be over-reliant on a certain country."

Meanwhile, Minister for Trade and Industry Chan Chun Sing said in Parliament that, "beyond quantity and quality, we must also diversify our foreign manpower sources" - in view of both business continuity risks, and "the public discomfort that can surface with too high a concentration of any particular foreign worker group".

All the same, Nominated Member of Parliament Walter Theseira, a labour economist at the Singapore University of Social Sciences, told BT that, although the government regulates and monitors foreign manpower sources, businesses must also "manage their own concentration risks, since they are the ones employing and sourcing the workers".

For now, Dr Tan suggested: "With the economic growth slowing, which reduces the demand for manpower, and the unemployment rate edging upwards, there might be the possibility of firms using local manpower to fill the foreign labour gaps."

But, amid a debate on which countries should be eligible for the pool of migrant workers, this present pinch only drives home the urgency of Singapore's longer strategy: a shift to a high-tech, high-skilled workforce.

When push comes to shove, and faced with structural issues in Singapore such as a greying population, "companies may also want to consider if they can move towards being manpower-lean and invest in technology", Selena Ling, OCBC Bank's chief economist, also pointed out.

Prof Theseira observed another structural risk - "that economic development in the source countries makes migration relatively unattractive", as wages on offer in Singapore start to pale against incomes abroad.

Indeed, the unit cost of labour cost has been going up in recent quarters - from 0.1 per cent in Q2 2018 to 3.2 per cent in Q3 2019 - while value added per actual hour worked, a gauge of productivity, has come down.

The ongoing epidemic-driven shortfall will definitely not be the last labour crunch that Singapore faces.

But if there is a silver lining to the crisis, it is underscoring the urgency for Singapore's employers to figure out new ways to get the job done.