Jobs for Singaporeans will be lost and sociopolitical problems could flare up if the country does not control the number of foreign workers, said Senior Minister of State for Trade and Industry Chee Hong Tat.
Mr Chee told Parliament yesterday that such problems have occurred in other countries, and this is why the Government reduced the foreign worker quotas for the service sector despite knowing there would be an impact on some companies.
His response came after several MPs questioned the decision to lower the Dependency Ratio Ceiling in 2020 and 2021 for the service industry.
MPs argued that the move would raise business and labour costs for the service sector.
Nominated MP Douglas Foo said the quota cuts are the main concern of the business sector, given its labour constraints.
"No matter how technology may alleviate operational demands, a lack of readily available human resource, 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," he added.
Ms Denise Phua (Jalan Besar GRC) said the hospitality, food and beverage, arts, entertainment and other lifestyle sectors will likely be hit hardest.
HELP AT HAND
Government agencies and industry associations will walk this journey together with you. If you want to transform and you are willing to put in effort to do so, we will help you.
SENIOR MINISTER OF STATE FOR TRADE AND INDUSTRY CHEE HONG TAT, on support for companies.
She cited the predicament of Cube Boutique Hotel, whose owner Benedict Choa has adopted an innovative hotel model, automated its check-in system and worked with government agencies to transform some of its processes.
"Ben is all ready to employ any local staff willing to work, if he can only find them," she added.
How can the Government help such companies that are aligned with the national direction and yet still face manpower challenges, asked Ms Phua.
Mr Chee said at the end of yesterday's debate: "We knew it would be painful for the affected companies, and we agonised over this difficult decision during our many rounds of inter-ministry discussions."
Ultimately, the Government decided that it was better to make a move now to control the overall number of foreign workers before the problem got out of hand.
He said the Government was aware of labour constraints in the service sector and how some firms have begun investing in productivity improvements, working closely with government agencies and industry associations.
"The hard work is starting to bear fruit and we need to keep it up," added Mr Chee, noting how productivity has been rising steadily across sectors.
It rose 4.4 per cent for the accommodation segment in each year from 2013 to last year, 3.2 per cent for retail trade and 1.4 per cent for food services. Total manpower in the accommodation sector fell by 1 per cent in that period, while total room stock went up 4 per cent.
While technology cannot fully replace human roles, companies need to understand how it can improve products, reduce costs and raise the quality of services, said Mr Chee.
The Government will increase its support to help businesses transform, and has worked with industry associations for this purpose.
For example, the Productivity Solutions Grant will be enhanced to subsidise up to 70 per cent of out-of-pocket training expenses of eligible firms, up to $10,000.
They can also access up to 70 per cent of government funding for transformation projects through an extended Enterprise Development Grant.
The Ministry of Trade and Industry's Pro-Enterprise Panel has been working with industry associations and companies to review regulations and look for ways to reduce licensing costs, Mr Chee noted.
Change can be a daunting challenge for businesses, but there is support if firms are willing, he said, adding: "Government agencies and industry associations will walk this journey together with you.
"If you want to transform and you are willing to put in effort to do so, we will help you."