A little less open in Singapore
By Megawati Wijaya
SINGAPORE - New regulations that will force firms to consider hiring Singaporeans before foreigners aim to stem a recent influx of expatriates and rising anti-foreign sentiment in the wealthy city-state. Whether the rules erode Singapore's attractiveness to foreign investors and overall business competitiveness will come down to how the nationalistic policy is ultimately implemented.
Introduced in late September as the Fair Consideration Framework (FCF), the regulation will require employers to
advertise a job vacancy for local hire for at least 14 days on a new jobs bank administered by the government's Workforce Development Agency before they will be allowed to apply to fill the position with foreigners under the Employment Pass (EP) scheme.
The Ministry of Manpower (MoM) also announced it will raise the current minimum salary requirement of S$3,000 (US$2,400) per month for employers to hire foreign professionals on EP criteria, which is currently not limited by quotas. The new regulations will come into full effect on August 1, 2014.
Ever since its worst ever electoral showing in 2011, the ruling People's Action Party has aimed to curb the number of expatriate professionals in the city-state. The FCF policy comes in response to rising discontent among Singaporeans who blame foreigners for suppressing wages, sparking inflation and taking the city state's best jobs. The political opposition won votes at the polls by promising to stem the foreign tide.
Previous government measures such as setting quotas on work permits and so-called "S pass" holders, however, were targeted respectively at low-skilled and semi-skilled workers. The FCF targets potential EP holders - ie workers who earn more than S$3,000 per month and are usually skilled professionals, managers, executives and technicians, known collectively as PMET.
PMET occupations are expected to grow exponentially as more tertiary-educated Singaporeans join the workforce. The MoM forecasts that two-thirds, or up to 1.25 million Singaporeans, will work in PMET jobs by 2030, up from 850,000 at present. These sectors are thus also where competition for jobs is expected to be tightest between educated Singaporeans and white collar foreign workers.
While the nationalistic policy surprised markets, the FCF had been years in the making. The National Trades Union Congress (NTUC) - Singapore's only legal trade union - had for years pushed the government to put in place mechanisms that give priority to locals over foreigners in hiring. Since August 2011, Patrick Tay, director in charge of PMET issues at NTUC, has also called on the government to enforce resident labor market testing.
The tests, adopted in Australia, Britain, Canada, Germany, New Zealand and the United States to protect their labor markets from foreign competition, essentially force employers to prove to government regulators that they have exhausted all possible local sourcing options before they are allowed to employ foreign PMETs.
With the growing popular call for foreign-curbing measures, the Singaporean public has responded positively to the FCF - despite the negative implications it could have on Singapore's reputation as among the world's most open economies and labor markets. The opposition Singapore Democratic Party (SDP) and National Solidarity Party have commended the policy, saying that a Singaporean-first labor market is something they have long advocated.
The government has played down the FCF policy's protectionist implications, saying that it was introduced to provide a level playing field for locals rather than curb foreign involvement in the economy.
"We do not require global firms to give preferential treatment to locals, but they must be fair to Singaporeans," said MoM minister Tan Chuan Jin during a parliamentary speech that presaged the measures in March. "There must be equal opportunities for our people, whether at hiring or in advancement. There has to be a level playing field."
With one of the world's most open economies, Singapore has long relied on both skilled and unskilled foreign workers to drive its competitiveness. Currently, 40% of the island state's 5.4 million residents are foreigners, up from 36% in 2010, 26% in 2000 and a mere 14% in 1990.
The foreign influx has been driven in part by a low local fertility rate, which has remained below the replacement level of 2.1 for the past three decades. Last year Singapore's fertility rate was a mere 1.29, up slightly from 1.20 in 2011. The government has promoted with limited success various family-friendly, baby-making promotion campaigns to reverse the country's declining demographics.
Yet a white paper released by the government's National Population and Talent Division in January forecast that Singaporeans will make up only 55% of a targeted national population of 6.9 million in 2030. Nationalist critics raised a hew and cry about the projection, forcing the government to clarify that the projection was for infrastructure and land-use planning and not a roadmap for population policy to maintain competitiveness - as it initially presented the research.
As early as 2009, NTUC representatives warned Prime Minister Lee Hsien Loong about rising worries among local workers that foreigners were taking their jobs, reducing their wages and increasing workplace pressures. The FCF also aims to address another perceived as rising phenomenon: unfair job recruitment practices among foreign-run firms.
In his parliamentary speech in March, Tan said, "We have heard anecdotes of how in certain cases heads of business units or HR [human resource] managers have a preference for candidates they are familiar with or of the same nationality, for reasons that are irrelevant to job performance and irrespective of whether they are more competent than other candidates."
There are also cases where Singaporeans were retrenched or made to resign in the name of downsizing, only to realize later that their same positions were given to foreigners who were from the same countries as the business heads.
The reasons for such alleged practices are varied. For instance, foreigners might be willing to accept lower starting pay than Singaporeans for the opportunity to work abroad. Some employers likely find it cheaper and easier to rely on recommendations of foreign candidates supplied by headhunters than to invest in a less certain and time-consuming recruitment search in the local job market.
The MoM has not singled out any particular industries, but high-paying jobs in the finance industry appear to be under scrutiny. Singapore's online forums are littered with bitter anecdotes relating how certain multinational banks, run by someone with a particular nationality, are claimed to hire mostly foreigners of that same nationality at Singaporeans' expense.
In June, the state-controlled Straits Times newspaper reported that up to 40% of the staff in Citibank's Singapore office are foreigners who hold either a work pass or permanent residency. Tan told parliament in March that he and Finance Minister Tharman Shanmugaratnam had met senior members of the finance industry, without naming names, to urge them to develop a "local talent pipeline."
As anti-foreign sentiment simmers, the government now seems determined to clamp down hard on perceived discrimination in hiring. Along with the new FCF policy, officials will look for firms that have a disproportionately low level of Singaporeans at the PMET level compared to others in their industry, or have faced repeated complaints of nationality-based or other discrimination. Offending firms may have their work pass privileges curtailed, officials said.
The MoM said it had already taken action against 10 firms after finding their job advertisements to be "discriminatory" for mentioning desired attributes of candidates such as age, gender or nationality without providing valid justification for doing so. The sanctioned firms range from recruitment outfits to education centers to cosmetic companies. They have all been ordered to post online public apologies for 30 days and are barred from hiring new foreign workers for six months.
Whether the FCF is limited to curbing discriminatory hiring practices or extends more broadly into a protectionist campaign against foreigners will depend on employers' mindsets and the government's implementation of the measure, labor experts said.
The opposition SDP has already pointed out that companies can go through the motions of advertising positions but after two weeks still determine on undefined criteria that no local candidate fits the bill. There are also significant loopholes, including an exemption from the measure for firms aiming to hire other work-pass holders who earn less than EP holders.
In the recruitment of mid- to senior-level professionals, companies already prefer to hire local or locally-based talent whenever possible, as there are less risks and expenses involved than relocating an individual from overseas, said Mark Ellwood, Southeast Asia managing director at recruitment firm Robert Walters.
The preference for local hires also extends to employers searching for Singaporeans who have returned from an international position, he said. In other cases, foreigners are brought in initially before handing over to locals. "When multinational corporations set up their regional office in Singapore, some senior level management professionals are brought in from the head offices to train, nurture and pass on specific skill sets to a local succession plan," Ellwood said.
Singapore's gross domestic product (GDP) grew 1.3% last year, down from 4.9% in 2011. Last month, the ministry of trade and industry (MTI) adjusted up its 2013 GDP growth forecast to between 2.5%-3.5%, from a 1%-3% projection earlier this year. The rise takes into account strong year-to-date performances in the manufacturing, wholesale and retail trade, transportation and storage, and finance and insurance sectors.
The resilience and high wages of Singapore's economy, along with the on-the-ground reality of labor crunches in sectors such as construction, marine, and food and beverages, will surely attract more foreigners to its shores - even with the introduction of the new FCF policy. There is still rising demand from Western professionals looking to move to Asia, and Singapore specifically, due to the region's comparatively strong growth opportunities, said Ellwood.
At the same time, the clamp down on foreign workers contributed to Singapore's slowest population growth rate in nine years, up only 1.6% in the year through June. Growth in the number of foreign employees, excluding domestic and construction industry workers, nearly halved to 3.5% in the year to June, compared to 7.1% over the same period the previous year. While the FCF may be politically expedient, it is not immediately clear if the measure will lead to the hiring of more Singaporeans or instead an eventual skilled labor crunch.
Megawati Wijaya is a Singapore-based journalist. She may be contacted at email@example.com.
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