Budget 2019: Tighter foreign worker quota may be tough on some firms, say panellists

DJ Howie Lim engaging (from left) UOB economist Barnabas Gan, Association of Chartered Certified Accountants' Singapore Network Panel chairman James Lee and SME Centre@ASME chairman Irene Boey in a discussion on the Budget hosted by Money FM 89.3 at
DJ Howie Lim engaging (from left) UOB economist Barnabas Gan, Association of Chartered Certified Accountants' Singapore Network Panel chairman James Lee and SME Centre@ASME chairman Irene Boey in a discussion on the Budget hosted by Money FM 89.3 at the UOB Plaza Atrium yesterday.ST PHOTO: KUA CHEE SIONG

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 said some firms may struggle to make the switch.

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

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

Ms Boey said the Government should be lauded for trying to get the service sector to restructure more quickly, but added that 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.

Speaking at the event sponsored by UOB, Ms Boey noted that in the sector, "service by humans is the main differentiator (between businesses)", and there is a need to understand the problems some companies face and why they cannot transform as quickly as others.

In his Budget speech, Mr Heng said the DRC cut is aimed at reducing the reliance on foreign workers.

 

It is also aimed at getting companies to upgrade Singaporean workers and build deep capabilities in sectors such as food and beverage, 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.

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

However, he acknowledged 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 companies 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: "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."

A version of this article appeared in the print edition of The Straits Times on February 21, 2019, with the headline 'Tighter foreign worker quota may be tough on some firms: Panellists'. Print Edition | Subscribe