Some companies may struggle to adopt technology to cut reliance on foreign workers: Panel

(From left) MoneyFM deejay Howie Lim with UOB economist Barnabas Gan; chairman of the Association of Chartered Certified Accountants Singapore Network Panel James Lee; and chairman of SME Centre@ASME Irene Boey at the UOB Plaza Atrium on Feb 20, 2019
(From left) MoneyFM deejay Howie Lim with UOB economist Barnabas Gan; chairman of the Association of Chartered Certified Accountants Singapore Network Panel James Lee; and chairman of SME Centre@ASME Irene Boey at the UOB Plaza Atrium on Feb 20, 2019.ST PHOTO: KUA CHEE SIONG

SINGAPORE - The tightening of the foreign worker quota will push companies to adopt technology to address manpower needs, but panellists at an event hosted by radio station Money FM 89.3 say some companies may struggle to make the switch.

The panel comprising chairman of SME Centre @ ASME Irene Boey, UOB economist Barnabas Gan and chairman of the Association of Chartered Certified Accountants (ACCA) Singapore Network Panel James Lee was discussing the Budget on Wednesday (Feb 20).

In particular the panellists focused on the Dependency Ratio Ceiling (DRC) in the services sector, which Finance Minister Heng Swee Keat had announced on Monday was to be lowered.

He said this was to reduce the reliance on foreign workers and to get companies to upgrade Singaporean workers and build deep capabilities in sectors such as the Food and Beverage industry and retail, both of which remain very labour-intensive.

On Jan 1 next year, the proportion of foreign workers a firm can employ will drop from 40 per cent to 38 per cent. It will drop to 35 per cent on Jan 1, 2021.

For the subset S Pass workers - mid-skilled foreigners earning at least $2,300 a month - the quota will be cut from 15 per cent to 13 per cent on Jan 1 next year, and to 10 per cent on Jan 1, 2021.

Speaking at the event sponsored by UOB, Ms Boey said the Government should be lauded for trying to get the services sector to restructure more quickly, but added some segments may need more time.

"We have advance notice and it will be rolled out in phases, which we are grateful for, but the deferment of lowering the DRC in certain segments might be necessary."

She said each market should be looked at differently.

"In this sector, service by humans is the main differentiator (between businesses)," she said, adding that there is a need to understand the problems some companies face and why they cannot transform as quickly as the others.

Mr Gan said while the switch from a reliance on foreign workers to reskilling locals is the right move, he added: "It is not just about the number of jobs, but the quality of jobs."

However, he added that the Budget signals to businesses that they "must prepare for the next 10 years to come rather than the here-and-now".

Mr Lee noted that the tightened quotas will push companies to look to technology for solutions.

 

He said: "If you look at it in the long-term, the DRC is a good thing as it forces us to think harder of the solutions available.

"If I have one nurse caring for five patients today and next time it will be eight patients, that is where technology can come in to make it more efficient."

In getting small and medium-sized enterprises (SMEs) to adopt technology to innovate and grow, Ms Boey said there should not be a “one-size-fits-all” approach.

"More than 60 per cent of SMEs are micro enterprises, which are those with less than $1 million in annual revenue, so the schemes have to take that into consideration.

"We have to consider the affordability of a scheme to a micro enterprise, as opposed to a medium or large enterprise," she added.

Mr Gan said economists welcomed the initiatives for SMEs to innovate and grow, which were announced in the Budget.

They include the new Scale-up SG programme - to help local firms grow and innovate - and an expansion of the SMEs Go Digital programme, to cover a larger number and wider range of cost-effective, pre-approved digital solutions.

Mr Gan said businesses are the heart of the economy and most of the labour supply is dedicated to SMEs.

He said: “We understand that businesses are the heart of the economy and most of the labour supply is dedicated to SMEs. 

“That is why when we look at the Budget and see SME initiatives, we are comforted that the Government is trying to support SMEs.”