Budget 2012 round-up: Singapore to reduce foreign worker inflow

Finance Minister Tharman Shanmugaratnam delivers a Budget 2012 which will reduce dependance on foreign workers. (TV screengrab)
Finance Minister Tharman Shanmugaratnam delivers a Budget 2012 which will reduce dependance on foreign workers. (TV screengrab)

The Singapore government unveiled a "Budget For the Future" that will reduce the dependance on foreign workers and do more to build a stronger, more inclusive Singapore.

At the same time, the Budget contained a slew of new economic and social measures targeted to help specific groups such as older workers stay in the workforce longer, senior citizens, lower-income and special needs Singaporeans, small and medium enterprises (SMEs), the transport and tourism sector.

In his annual Budget 2012 announcement on Friday, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said Singapore will post an estimated S$2.3 billion surplus for fiscal year 2011.

He unveiled the following measures:

Foreign Workers

The government will tighten the foreign worker quota by reducing Dependency Ratio Ceilings (DRCs), which specify the maximum proportion of foreign workers that companies in various industries can hire, to curb foreign worker growth from 1 July.

The two industries identified for these changes were the manufacturing and services industries.

The manufacturing industry will take a five per cent cut in DRC from 65 to 60 per cent. This means that foreigners will only be allowed to make up 60 per cent of the manufacturing workforce, as compared to 65 per cent previously.

The services sector will also take a reduction in foreign worker DRCs, from 50 per cent to 45 per cent.

S-pass holders will also see a cut in DRC of five per cent to 20 per cent.

These changes will be implemented come 1 July, where companies in the manufacturing and services industry will not be allowed to bring in new foreign workers that will result in them exceeding the new ceilings. Companies that exceed the new ceilings with their existing worker pool will be given an additional two years, till June 2014, to reshuffle their employee make-up to fall back within the new DRCs.

Foreign worker levies may also be raised from July 2013, depending on the rate of growth of the foreign workforce here in the coming year.

About 500 manufacturing companies and 8,500 services companies are set to be affected by the DRC changes.

Boosting the local workforce

To compensate the manpower crunch, particularly in the services industry, more incentives will be given to older workers, early retirees and homemakers to boost the local workforce.

A significant incentive will be introduced for SMEs to help them attract and retain older workers.

Employers will get a Special Employment Credit (SEC) for their Singaporean workers who are above 50 yrs old, and who earn up to $3,000 a month.

The SEC will be 8 per cent of wages and will cover almost 350,000 workers, or four-fifths of older Singaporean workers, including workers earning between $3,000 and $4,000, who will receive a smaller SEC.

This enhanced credit scheme, which was introduced last year, will be in place from September this year up to 2016, in order to allow employers space to hire older workers.

Over and above the SEC, all SMEs will receive a one-off cash grant of five per cent of their revenues in the year 2012, capped at a payout of $5,000, as long as they have been making CPF contributions to at least one of their employees.


The Government will make a major commitment to improve bus service levels by setting aside S$1.1 billion for a Bus Services Enhancement Fund over 10 years.

Under the Fund, the government will partner public transport operators (PTOs) to add 800 buses over the next five years, or a 20% increase, where PTOs took almost 20 years to increase their fleet of buses by that number previously.

Of these, the government will help fund the introduction of 550 buses, while the cost of the remaining 250 buses will be borne by the PTOs.

The increase in buses means that feeder buses will be able to run every 10 minutes or less for two hours during morning and evening peak periods, instead of one hour currently.

Turning to trains, the planned Downtown Line, Tuas West Extension, Thomson Line and Eastern Regional Line will be completed in 10 years' time, and will result in some 400,000 housing units being located within 400 metres of MRT stations, double the number at present.

The government has also decided to replace the Green Vehicle Rebate Scheme (GVR) with a new Carbon Emissions-based Vehicle (CEV) Scheme, which will give rise to up to $20,000 in Additional Registration Fee rebates for purchased green vehicles which have low carbon emissions. Conversely, new cars purchased under the scheme that have high carbon emissions will be subject to up to the same amount in surcharges.

The new CEV scheme is expected to cost government $34 million per year, more than double the total annual incentives given under GVR.

The Additional Transfer Fee (ATF), which was previously levied on used-vehicle transactions, will also be abolished come 18 February.

Senior citizens

A comprehensive package of benefits were unveiled for the welfare of elderly citizens in Singapore.

CPF contributions

Starting September this year, CPF contribution rates will be increased to help older workers aged between 50-65 by up to 2.5 percentage points.

Workers aged between 50 and 55 will experience a 2.5 per cent increase in their monthly contribution (2 per cent from the employer, and 0.5 per cent from the employee) to 32.5 per cent.

For those aged between 55 and 60, an increase of 2 per cent to 23.5 per cent will be implemented, and a 0.5 per cent increase in contribution to 14.5 per cent will kick in for those aged between 60 and 65.

Income tax relief doubled

Income tax relief will also be doubled for some 119,000 older taxpayers aged 55 and above, so that they can retain more of their salary earned -- with those aged between 55 and 59 receiving $6,000 in income relief every year, and those aged 60 and above to receive $8,000.

Medisave contribution rates for self-employed persons aged 50 and above will be increased from 9% to 9.5%, to take effect from January next year.


Older Singaporeans will have another way to get money out of their homes -- with a Silver Housing Bonus of $20,000 awarded to those who opt to move to smaller homes.

The Bonus will be given to older Singaporeans who wish to sell their existing flats and purchase three-room or smaller HDB flats.

The existing Lease Buyback Scheme will also be enhanced, with incentives being doubled from $10,000 to $20,000.


To improve the long-term health care support for the aged, a yearly healthcare expenditure will be doubled from $4 billion to about $8 billion over the next five years.

Among this, a $120 monthly grant will be given to families that hire foreign domestic helpers to care for their elderly family members who have severe dementia, or are immobile and unable to take care of themselves, over and above the existing $95 concession that these families already enjoy.

Bed capacity in hospitals will be expanded by 30%, or 1,900 more beds by 2020 -- more than the capacity at SGH, while another 1,800 community hospital beds will be added by the same year, more than a 100% increase from the number at present.

Apart from the new Community Hospitals that will be co-located with Khoo Teck Puat Hospital and the new Ng Teng Fong General Hospital, two more Community Hospitals in Outram and Sengkang will be built by 2020.

Medishield coverage will also be extended to Singaporeans from age 85 to 90, as Singaporeans are living till 90 and beyond.

Medifund will be topped up by $600 million -- this will increase the payouts from Medifund by over 20 per cent.

Nursing homes, home-based health and social care services, day care and rehabilitation facilities and Senior Activity Centres will have more than double the capacity in long-term care services by 2020. Subsidies for these will be expanded to benefit more middle-income earners, with two-thirds of Singaporean households and 80 per cent of the elderly to qualify.

Lower-income patients will receive a 75 per cent government subsidy in community hospitals. Those above the median income, who previously did not receive any subsidy, will now receive a 20 to 50 per cent subsidy.

Lower income group

A permanent Goods and Services Tax voucher will be available to help lower income families.

This voucher will fully offset the 7% GST that the lower half of retiree households pay on their expenses. The GST voucher will come in the form of cash, U-Save and Medisave top-ups. [Click here to view more details]

Children from lower-income families will be benefiting more from this year's Budget, with criteria for subsidy entitlement being revised to a per capita basis instead of a total monthly income.

The household income ceiling for entitlement to the MOE Financial Assistance Scheme has also been raised to $2,500 per month, which will allow 40,000 more, or double the number of students to be fully subsidised for school fees, uniforms and textbooks, and receive a 75 per cent subsidy on their exam fees. Other schemes will also be enhanced.

$200 million top-ups will also be made to the Edusave and ComCare endowment funds, as well as a further $10 million to be given to self-help groups and the Citizens' Consultative Committee ComCare Fund.

Singaporeans with special needs

Singaporeans with disabilities will also not be neglected, as a "stronger helping hand" will be extended to them.

There will be more places in centres for children who need intensive early intervention.

A new "Development Support Programme" will be introduced to provide learning support and therapy interventions to children with mild speech, language and learning delays, benefiting some 2,000 children.

The Special Employment Credit scheme will also be extended to employers who hire special education (SPED) graduates, regardless of age. These employers will also receive a credit of 16 per cent of their SPED graduate employee's wages.

The Workfare Income Supplement scheme will also be expanded to include all SPED graduates who work, including those aged below 35, and all persons with disabilities will also receive double their existing Handicapped Earned Income Relief.

Tobacco Tax

DPM Tharman also said there will be a 20 per cent increase in tobacco tax. Unmanufactured tobacco taxes will be up 10 per cent.


Elsewhere, the government will inject $905 million into the Tourism Development Fund to develop high quality tourism offerings.

Goods and Services Tax relief for goods brought in by tourists and residents returning from abroad will be simplified and enhanced.