January 14, 2010
By Patrick Barta and Tom Wright from Wall Street
Journal, 13 January 2010
For years, this rich city-state has marketed itself as one of
the world’s most open economies.
But as Singapore recovers from recession, its residents are
questioning a key part of the country’s economic model: its
long-standing openness to foreigners.
Singapore has thrown open its doors to bankers and expatriates
in recent years, making it easy in many cases to establish
residency and hastening the country’s emergence as an Asian version
of Dubai. It also welcomed low-skilled laborers from Bangladesh and
other developing countries to help man construction sites and
factories.
The goal was to capture more Asian wealth and offset Singapore’s
low birth rate with immigrants, spurring economic growth. But the
push has also fueled discontent, turning immigration into a red-hot
political issue in a country where dissent is still tightly
controlled by the government.
Between 2005 and 2009, Singapore’s population surged by roughly
150,000 people a year to 5 million—among the fastest rates ever
there—with 75% or more of the increase coming from foreigners.
In-migration continued in 2009 despite expectations it would
collapse because of the global recession.
The influx helped boost Singapore’s economy in the short run by
creating new demand for goods and services and helping
manufacturers keep labor costs low. Developers built apartments and
posh shopping centers for the new arrivals.
By some estimates, a third or more of Singapore’s 6.8% average
annual growth from 2003 to 2008 came from the expansion of its
labor force, primarily expatriates, allowing Singapore to post
growth more commonly associated with poor developing nations.
At the same time, though, foreign workers have driven up real
estate and other prices and made the city-state’s roads and subways
more congested. Their arrival has kept local blue-collar wages
lower than they would be otherwise, exacerbating Singapore’s gap
between rich and poor.
Some economists say the most damaging effect of the immigration
is that the influx appears to be putting a lid on productivity
gains, as manufacturers rely on cheap imported labor instead of
making their businesses more efficient. Labor productivity, or
output per employee, fell 7.8% in 2008 and 0.8% in 207—a phenomenon
that could eventually translate into lower standards of living.
Lee Ah Lee, a 58-year-old who makes 850 Singapore dollars a
month (about US$600) clearing tables in a cafeteria, says the flood
of immigrants has made it hard to make ends meet by pushing down
blue-collar pay in Singapore, which has no legal minimum wage.
Sitting nearby in a drab apartment block built by Singapore’s
Housing Development Board, a state-owned body that constructs and
sells subsidized housing, 79-year-old Lee Kwang Joo says
low-skilled foreign workers are often housed in corporate
dormitories, meaning they have no housing costs and can survive on
lower pay.
On Temasek Review, a Web site dedicated to Singaporean affairs,
one writer recently warned Singaporeans would be “replaced” as “3rd
class citizens” by foreigners, while another said that immigration
“will emerge as the single most important issue” in Singapore’s
next general election, due by 2011.
Immigration “kept our economic growth high but, at a tremendous
cost,” says Kenneth Jeyaretnam, the secretary-general of
Singapore’s Reform Party, a small opposition party founded in 2008.
Relying on foreign labor to help boost growth is unsustainable,
adds Choy Keen Meng, an assistant professor of economics at
Singapore’s Nanyang Technological University. He says a better
model would involve the reining in immigration and accepting that
Singapore is becoming a more mature economy like the U.S. or
Europe, with a long-term growth rate of 3% to 5% a year.
Singapore, unlike many of its neighbors, has a reputation for
reliable public services and minimal corruption. Its openness to
foreign investment is one reason why gross domestic product is
expected to rebound to 4.5% this year, according to the Asian
Development Bank, from a contraction of 2.1% in 2009.
Still, Prime Minister Lee Hsien Loong, speaking at a Singapore
university in September, said there was a need to be “mindful of
how quickly our society can absorb and integrate” new arrivals, and
vowed to curb immigration.
The government is also studying immigration as part of a
wide-ranging review of the city-state’s economic model launched in
2009. Results of the review, due this month,are expected to include
steps to diversify Singapore’s economy and reduce its reliance on
exports to the United States and Europe by boosting domestic
consumption, among other things.
Yet people familiar with the government’s plans say it is
unlikely to press for deep cuts in immigration, and will aim to
find other ways to restore productivity growth. Singapore remains
committed to a long-term goal of increasing the population to 6.5
million, though it would do so by prioritizing high-skilled
residents as opposed to blue-collar workers.
Immigration “is not a weakness, it’s a strength,” said one
person familiar with the long-term economic planning process.
“People want to come here, why not make use of that strength?”
Serious cuts to immigration could also generate a backlash from
other interests—notably the factory owners and real-estate
developers who rely heavily on foreign arrivals. Many employers
complain that local Singaporeans, accustomed to a higher standard
of living than most other Southeast Asians, are unwilling to take
on menial jobs, and are likely to resist further tightening of
foreign labor supply. – Wall Street Journal