The five-man panel at the PricewaterhouseCoopers Budget 2012 discussion included tax partner David Sandison, IBM …
The recent adjustments to policies regarding foreign workers in this year's Budget may prove detrimental to the inflow of foreign investments, say economists, businessmen and tax experts.
Speaking on Thursday at the PricewaterhouseCoopers Budget 2012 seminar, these experts were referring to the government's announcement that it will contract its dependency ratio ceilings (DRCs) for foreign workers in the manufacturing and service industries — the two sectors that employ the highest number of foreigners here.
The DRC, which specifies the maximum proportion of foreign workers that companies are allowed to hire, will be cut five per cent for both industries, leaving companies in manufacturing with a DRC of 60 per cent, and those in the service sector with a DRC of 45 per cent.
This, said Singapore Business Federation chief operating officer Victor Tay, is a hard blow from the government to its small and medium enterprises (SMEs), which have previously bemoaned their difficulties in finding enough workers to fulfill their respective service contracts.
"Just before the budget announcement, companies were crying aloud of the lack of workers, with not enough locals and problems hiring foreigners, due to increased levies compounding an already inflationary environment," he said in a five-way panel discussion held during the seminar.
"They were looking for a certain relief (in the Budget) but instead, there was a further reduction of the DRCs by five per cent!" he added, voicing the disappointment SMEs felt at the lack of support they received in that respect.
Member of Parliament (MP) for Tampines GRC Baey Yam Keng agreed, calling on businesses to voice their concerns about the impact that the new measures are exerting on them.
"Singapore's government is known to be a very 'pro-business' one, but after this it's also up to the businesses to highlight the real challenges after giving it (productivity measures to counter the lack of labour) a try, for say between six months and a year," he said.
Elaborating on productivity measures, IBM Singapore managing director Janet Ang noted that while the new measures mean that companies have increased opportunities to innovate, change and streamline their operations, to increase their efficiency and productivity while requiring less labour; ensuring if this can be done is another issue entirely.
"We need to reduce the type of foreign workers in a category where Singaporeans can do the jobs, or make sure that Singaporean companies can improve their productivity and competitiveness on the regional stage, with more technology and innovations," she added.
Perhaps the most chilling of warnings came from international tax partner Abhiijit Ghosh and economist Amitendu Palit, who allude to the possibility of the new policies spooking foreign investors.
"If the objective is to ensure that you need to engage only local people — Singaporeans or Permanent Residents — and if the requisite capacity is not here in Singapore, then they will not come and do their business in Singapore," said Ghosh.
"If that kind of percentage is continued to be imposed, and we do not have the capability here, then that will definitely affect the foreign direct investments into Singapore," he added.
Palit tended to adopt a more neutral stance, however, saying that as long as within their communities, the sentiment is positive in the short-term, they will continue to channel their investments here.
"As far as short-term capital investments are concerned, there will probably not be any shake-ups," he said. "I don't think that's what is expected (a shake-up), but insofar as medium-term investors are concerned, if I were an investor, I would probably take a position of waiting and watching for awhile to see how this pans out."
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