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BLOG: Singapore budget 2012: SMEs, reduce dependence on foreign workers

Zafar Anjum | Feb. 23, 2012
My reaction to the slashing of the dependency ration ceilings (DRCs) is opposed to what many local SME bosses are feeling. I fully support it and I am rather surprised at the percentage—why is it just five percent?

One of the most striking items in this year's budget is the government's decision to reduce quotas or dependency ratio ceilings (DRCs) for foreign workers in Singapore.

Last week, Singapore's Finance Minister Tharman Shanmugaratnam announced that DRCs will be slashed by five percentage points-from 50 percent to 45 percent in the services sector and from 65 percent to 60 percent in the manufacturing sector in Singapore.

The reaction of local SMEs to this announcement has been, expectedly, cold. They are supposed to ramp up productivity of their staff and hire more locals. Of course, this upsets their set way of life (Someone wrote in in the local daily recently that some bosses, that is owners, of local SMEs live in expensive condos and drive BMWs but complain about their workers' wage hike!). Some of them are talking about moving their business elsewhere-to cheaper locations where costs are lower and staff easier to find.

I would say this is a natural reaction on the part of the firms' bosses. When you face a challenge, flee the scene.

Ramping up productivity by employing more local people and training them for the long haul is a bit daunting for them. Everybody likes a short cut to successful business. No one thinks of the nation and its citizens. It does not make much business sense, does it?

Just look at the numbers. Last year, of the 121,300 jobs created, nearly 80,000 went to foreigners. Locals got only 36,600 jobs. In 2010, the ratio was even worse for locals-a local paper informs me.

But businesses only looking at fattening their profit margins is not good for any nation in the long run. This is how the entire offshoring industry came into existence two decades ago, starting off in the U.S. And now look what's happened to that great country! President Obama is now asking the U.S. companies to bring the businesses back home.

My reaction to the slashing of the DRCs is opposed to what many local SME bosses are feeling-and they are a legion: Singapore has 8,500 service-related firms and 500 manufacturing companies. I fully support the Minister's call and I am rather surprised at the percentage-why is it just five percent? It should have been 10 or even 20 percent, and it should have been put in practice two years ago.

This might solve many of the problems that Singapore faces today. First, local employment will rise. Second, the overcrowding in the city, especially public transport, will be reduced; also, the government will not have to shell out more than two billion dollars for buying 800 new buses. Third, due to lower demand, residential rents would come down, and it would work out better for the remaining foreign workers-they can work at lower salaries if they can save more money in rent, thus making Singapore still an attractive destination for them. If the rents don't come down, the government can consider introducing rent ceiling legislation. Higher rents, both for individuals and establishments, are destroying small businesses and adding to the overall inflation in the country.

 

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