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Written Answer by Mr Tan Chuan-Jin, Acting Minister for Manpower & Senior Minister of State, National Development, to Parliamentary Question on Foreign Worker Levy Rates

Ms Tan Su Shan: To ask the Acting Minister for Manpower whether the Ministry will consider adjusting the foreign worker levy rates according to the sector's strategic importance to the local economy and the sector's dependence on foreign workers, taking into account the impact this has on local inflation rates.

Mr Tan Chuan-Jin:

  1. The Foreign Worker Levy (FWL) is one amongst several levers used to manage the number of foreign workers (FWs) in Singapore. It operates as a pricing mechanism. Given our physical infrastructural constraints, and the restructuring of our economy to grow in a manner that can be less reliant on manpower, we have announced a schedule for FWL increases until July 2013. Raising the cost of foreign labour will encourage companies to consider investing in technology or equipment, which they would be more hesitant to pursue, if the cost of getting more workers is cheaper than the cost of capital. Singapore has reached a stage where we need to move away from a labour-intensive mode of growth which is not sustainable. There are several factors that we considered in adjusting FW levy rates; whether productivity has improved, the rate of FW growth, and local wages. Sectors that continue to rely heavily on FWs, have stagnating wages for locals, or with the greatest scope for productivity improvements, have been subjected to higher FWL increases.
  2. We are aware of the concerns that FWL increases could have an impact on domestic inflation. However, we need to send a clear signal to companies that do not choose to restructure and continue to rely heavily on FWs for their business operations. The Government will also continue to provide assistance to companies that are motivated to embark on productivity improvements. We have already introduced several measures to help these companies, such as through the Innovation and Capability Voucher, and the Productivity and Innovation Credit. These measures help to moderate some of the cost pressures that companies face, and ease their transition towards raising overall productivity.