Challenges faced by expats in Singapore

Foreign workers account for one quarter of the 5.7 million people in Singapore. They are an integral part of what is one of the world’s remarkable development stories; they help explain how a small island with no natural resources has managed to become one of the 10 richest countries in the world as measured by GDP per capita. And for expats it’s traditionally been a great posting. What’s not to like about a top income tax rate of just 22 per cent with most paying a lot, lot less?

Recently, though, attitudes have changed. A slowing economy is partly to blame. Singapore came perilously close to a recession this year, thanks largely due to a slump in demand for the electronics it manufactures from its two biggest customers who are slogging it out in a trade war. Office rents fell in the third quarter, as did retail sales which have now been going backward since April.

The city that loves shopping has lost some of its mojo and the always-present divisions between the the city nation's citizens and the Europeans, Malays, Filipinos, Chinese, Indians, Bangladeshis and others who make up the foreign work force have become more pronounced.

“This is a natural reaction when you see a lot of foreigners in your country; as growth slows down, there tends to be a desire to look inward, to say we must look after our own people first,” says Fitch Solutions' country risk analyst for Singapore, Darren Tay. But Tay reckons there are other factors at play. He says Singapore’s famously open immigration policy has tightened in recent years due to rising opposition from its citizens. “As a society Singaporeans are displeased with the influx of foreign workers into the country,” Tay says. And it’s not just one of three main categories of foreign workers – professionals, domestic, and construction workers – who are on the nose, it’s all of them. Tay says the misgivings extend to the expatriates “or what we like to call ‘foreign talent’ here, those who occupy the higher rungs”. Expat nirvana

Much of the angst and the tighter rules are aimed at domestic and construction workers but for many Europeans employed by multinationals with a regional base in Singapore, the city is not the expat nirvana it was in the past.  Quiet waves of redundancies and restructuring are washing through finance, shipping and other sectors. There are some new arrivals but the always selective Ministry of Manpower is making it harder to bring in the talent organisations want if the candidates are not judged useful for Singapore's future.

As of June 2019 the foreign workforce numbered 1.39 million. Some 255,000 of these are domestic workers – traditionally drawn from the Philippines but now also including workers from Myanmar – while another 284,300, mostly from the India subcontinent, held construction work permits. Add in students and dependants and the number of non-residents increases to 1.68 million.

Lisa*, a Singaporean whose career in financial forecasting has taken her around the world, has recently returned to her native city and believes social media is partly to blame for the rising sense of discontent. “People used to keep it to themselves,” she says. “Now they can put it out there and everyone rushes to agree.”

Her criticism of the system that drafts in workers and then sees them return to their own country lies in what happens after retirement.

“Say you are a domestic worker from the Philippines,” she says. “You reside here during your prime working years and earn Singaporean dollars. After that, you will go back to the Philippines where those Singaporean dollars will go a long way. I won’t be doing that. I’ll be retiring here and my retirement will be a lot more expensive. “For me, it’s an income distribution issue.” Prime Minister Lee Hsien Loong is expected to hand over leadership, sometime after next April's election. BloombergStrict rules ensure that only a certain percentage of a company's workforce can be imported. These Dependency Ratio Ceilings vary from industry to industry and are highest in lower-paid sectors such as construction, where 87.5 per cent of a workforce can be foreign.

Unsustainable path

In his budget speech in February, Minister for Finance Heng Swee Keat announced a cut in the DRC for the services sector from 40 per cent to 35 per cent. And there was also to be a cut within the cut; the number of “S Passes”, generally held by professionals, allowed in the sector would be reduced from 15 per cent to 10 per cent. The problem, the finance minister said, was that S Pass growth was up by 3 per cent a year – the equivalent of 34,000 people – in the past three years.

Foreign manpower growth could be on “an unsustainable path” if the trend persists, according to Heng. “Relying on more and more foreign workers is not the long-term solution – other economies are developing too. What we need is to have a sustainable inflow of foreign workers to complement our workforce, while we upgrade our Singaporean workers and build deep enterprise capabilities in these sectors." Catherine, an Englishwoman who works for a not-for-profit, is not surprised. “Every election year employment permits become harder to get,” she says.

Of course, elections in Singapore are a bit special given the People's Action Party wins every time. The next, expected around April, will be more significant than most, however, given Prime Minister Lee Hsien Loong is expected to hand over leadership, sometime after the vote, to Heng. The PAP will be keen to smooth the way for the transfer and most expect the budget, due a month or two before the election, to have a strong focus on jobs – for the locals.

A sniff of what's in store came a week ago in a speech from Manpower Minister Josephine Teo, who urged employers to push back against “negative forces” that make locals anxious about losing out to foreigners. It was a not-so-subtle reminder of the strict rules that govern recruitment, which require employers with more than 10 staff to advertise lower-paid jobs before hiring. Failure to do this has landed 600 companies on a blacklist since 2016.

Outside the domestic worker and construction categories, the goal has always been to bring in foreign specialists who can transfer skills to the local population. The priorities now include artificial intelligence, fintech and data sovereignty, which line up against the government's priorities for economic development.

Singapore has turned off the tap before when the economy slumped – back in 2002, for instance, the foreign worker pool shrunk by 43,000. The current downturn – and there is some hope the worst is over – isn't nearly as pronounced. Unemployment has started to tick up but the overall rate remains a lowly 2.3 per cent.

Social contract

However, full employment is a crucial element in the social contract forged between the PAP and the people. And while it's hard to imagine well-behaved Singaporeans rioting in the streets, at the PAP annual convention earlier this month Prime Minister Lee pointed to the protests in Hong Kong and Chile as examples of what happens when people lose faith in their institutions. “There's a lot that we can lose, too, if politics turns unstable, or becomes dysfunctional,” Lee told the party faithful. “We must make sure that our system always works for ordinary Singaporeans.”

There's no denying the system has worked very well thus far. Singapore excels in getting stuff done. It has managed to enlarge its territory by 25 per cent with some inspired planning and skilled engineering. More reclaimed land is on the way as it begins shifting all of its container operations, currently spread across Tanjong Pagar, Keppel, Brani and Pasir Panjang, to a megaport under construction at Tuas.

But the city state is also a victim of its own success. The slowing of the economy is not just cyclical, it's structural. Singapore's transformation into a developed economy means it has now entered a period of “trend growth”, in which economic expansion will struggle to top 2 per cent a year.

It also has demographic challenges; not enough babies and a rapidly ageing population. In recent years, fertility has continued to slide away from the 2.1 live births per woman replacement rate. Now it’s sunk to 1.14.** At the other end of the population curve, the proportion of residents aged 65 years and over reached 14.4 per cent this year, up from 8.8 per cent a decade ago.

The city-state will continue to need import talent to drive its economy. And it will need more workers to take on the domestic care and other jobs that its citizens aren’t interested in. But while no one can seriously imagine doing without guest workers, there is real resentment about the growing influence and ostentation demonstrated by wealthy Chinese, who are moving  themselves and/or their capital into Singapore. Ben, a commodities trader who has been visiting Singapore for decades, believes this has disrupted the social contract in the same way as the shift of uber-wealthy Russians into cities such as London caused resentment over their ostentatious purchases of football teams and mansions. “Mainland Chinese are coming to Singapore either as expats or by buying assets, and Singaporeans blame them for pushing up the cost of living,” he says.

“Singaporeans are proud of their egalitarian society. Everyone knows there are a few families who control Singapore but they have done a good job of staying under the radar. Now the locals are questioning the political actions that have allowed some of the recent investments from China.”

No wonder, he says, the Hong Kong protests are weighing heavily on the mind of the PAP, which is trying to not to offend China at the same time as it reassures voters it understands their concerns.

“The party will have to be careful how it handles this issue, particularly with the proposed handover of power from the Lee family. It could continue to just simmer away. Or it could boil over.”

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