Singapore must limit foreign workers, and develop its own skills, panel says

The commission representing government, corporate and union leaders warns that Singapore's economic growth will slow to between 3 and 5 percent a year over the next decade even if reforms are implemented. Growth has averaged about 7.5 percent a year since 1961.

“We're not against foreign workers,” said Lim Swee Say, secretary general of the National Trades Union Congress and a commission member. “But like wine, too much is a bad thing, and it dilutes focus from productivity.”

Most foreign workers, which account for a third of the city-state's workforce, toil as construction workers, maids and in other low paying occupations. Critics say cheap foreign labor has held down wages for Singaporeans though few want to take low-status jobs.

Singapore, one of the world's richest nations with GDP per person of US$37,700 in 2008, is becoming a victim of its own success as other Southeast Asian countries vie for a slice of the manufacturing that propelled it to prosperity.

Economies with lower-cost labor are luring away manufacturing jobs, while the city-state's high cost of living and education have led to a low birth rate and dependence on ever-more foreign workers to boost output.

The commission recommended the government should improve worker skills, invest more in research and development and limit the increase in foreign workers in a bid to spur productivity gains of between 2 percent and 3 percent a year during the next 10 years. Growth in productivity -- output per worker -- has averaged 1 percent a year in the previous decade.

“We're proposing a quantum leap in productivity to fuel a quantum leap in wages,” said Finance Minister, Tharman Shanmugaratnam, the commission's chairman.

Singapore is looking for productivity gains to account for two-thirds of the next decade's GDP growth, up from 20 percent of the last decade's growth.

“The catch-up process is probably over for Singapore,” said Tai Hui, head of research for Southeast Asia for Standard Chartered in Singapore, referring to its rapid industrialization.

“Growing an economy is a challenge for many developed countries, as we're seeing in the Unites States (U.S.) and Europe.”

The commission recommended the government raise research and development spending to 3.5 percent of GDP from its current 3 percent, establish an export-import bank to loan small and medium companies S$1.5 billion (US$1.1 billion) over the next 10 years and raise the fees companies must pay to bring in foreign workers.

Prime Minister, Lee Hsien Loong, said in a statement that the government will respond to the recommendations during a speech announcing the 2010 budget later this month.

Singapore's economy contracted 2.1 percent last year after growth of 1.1 percent in 2008.

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