FOREIGN WORKERS (Quota system of allocation)

Column No : 992

FOREIGN WORKERS:

(Quota system of allocation) * 2. *Prof. Ivan Png Paak Liang asked the Minister for Manpower if he will consider changing the system of allocating foreign workers to one where the Government sets a national quota for each year and then auctions the rights to employ the foreign workers, and which also permits unrestricted re-sale of quotas and transfer of workers among employers.

Dr Ng Eng Hen: Mr Speaker, Sir, the Nominated Member is essentially proposing a COE-like system for foreign workers. In other words, he has suggested why not the Government sets the national quota for the foreign workers that we want and employers can bid and trade their rights to employ foreign workers, through auction.

From the purely economic point of view, such a free-market system using price as the only mechanism to distribute foreign workers is neater and more efficient. It is certainly simpler for the regulator. The Government decides the total number of foreign workers it can allow but leaves it to employers to decide how much they are willing to bid against others to meet their manpower needs. In other words, the one who bids the highest employs that number of foreign workers he wants.

We do use the foreign worker levy as a price mechanism to ration the supply of foreign workers.

But our foreign worker policies also have to take into account other non-economic considerations. In practice, we cannot always apply the same economic yardstick to different sectors and groups of workers. Indeed, this is so in all countries. In other words, no country that I know of practises or regulates foreign workers based on a purely economic point of view because it is too artificial and workers are human beings, and you are allowing them through social contacts.

For example, in our system, we differentiate between Traditional Source (TS) and Non-Traditional Source (NTS) foreign workers, because Traditional Source foreign workers, for example, Malaysians fit more easily into our society and their social cost is lower. We generally allow Non-Traditional Source workers only in the construction and marine industries, because a large influx of less assimilable nationalities could impact our social rubric. Therefore, this is one instance where we do not apply only the price mechanism when we take into account non-economic reasons.

We complement the foreign worker levy with the dependency limit, as another tool to regulate foreign workers. Why? From a purely economic point of view, the Nominated Member may say this is inefficient. So why do we set a dependency limit on top of our foreign worker levy? We use the dependency limit because it can and does shape recruitment behaviour within companies. In other words, what we are saying is that, even if you are willing to pay more for foreign workers, you reach the limit. It is a hard limit and signals to human resource managers that they must have some proportion of Singaporeans within their companies' workforce. Many Members in this House have said that we have to assure Singaporeans of jobs and the dependency limit is a tool that we use to ensure that. In other words, for example, in the manufacturing sector, it is now 50%. You can only hire 50 foreign workers if, and it is a hard "if", you have 50 Singaporean workers. If we did not have that mechanism and said, "Well, you could just bid by price", you could have many situations where many companies could have 100% foreign workers because they are willing to pay for it. The dependency limit also gives us useful reassurance to Singaporeans that the foreign workers that we allow in are helping to increase the number of jobs for locals, because for every foreign worker that the company has to hire, he needs to hire a certain number of local workers.

However, I agree broadly with the Nominated Member that it is possible even given these non-economic considerations to streamline our schemes to make them more economically efficient, which is to allow businesses to meet their manpower needs more flexibly, without compromising our social objectives. However, we have to do this carefully, so as not to cause any sudden increases in costs for employers or surges in the foreign worker population here. For example, we have recently allowed manufacturing and services sector companies to exceed existing dependency limits but up to again a higher limit with effect from 1st July 2005, provided they pay a higher levy of $500.

We will continue to monitor and review rules controlling the deployment of foreign workers, and from time to time discard those that do not serve any useful purpose.

Prof. Ivan Png Paak Liang (Nominated Member): Sir, I thank the Minister for his considered response to my suggestion. In June 29th Straits Times, it was reported that in the construction industry, building contractors are actively buying and selling foreign worker quotas. The going rate is $2,000-$3,000 a worker. In this light, I ask the Minister, would it not be better for this trade to be simply legalised and the revenue to go to the Government than some crooked building contractors?

Dr Ng Eng Hen: Sir, we should not confuse enforcement with the primary policy tool. And indeed, if there are infringements, then let us deal with the enforcement. Contractors know that if someone spills the beans on them, they risk being put out of business because they will be banned from hiring any more foreign workers. It could be a lifetime ban. And if they do not have access, especially contractors who traditionally use a high proportion of foreign workers, if they are disallowed to have MYEs or employ foreign workers, it basically means that they are out of business. If they want to risk this, we will step up enforcement and if they are caught, then they risk that. So that is the enforcement aspect. Because they want to infringe on our rules, I do not think we should say that we should now change the whole system so that we will collect the revenue that goes to someone else. I think from time to time, we have to tweak the system in response.

As Members may know, recently, we have allowed workers in the construction industry who have worked here for more than six years to be employed outside the MYE system. So, indeed, there is a recourse for contractors and subcontractors not to buy these MYEs. All they need to do is to find workers who have worked here for six years or more and they can employ as many workers as they like. So, from time to time, we will refine the system. But I think the primary system is a sound one. It helps us regulate the total proportion of foreign workers, and it also helps us meet our social objectives.

Mdm Halimah Yacob: Sir, would the Minister agree that auctioning foreign workers in the manner suggested is quite demeaning for the foreign workers because it amounts to auctioning human beings? My second question is, if we allow unrestricted transfer of foreign workers, that would also undermine our efforts and job redesign in certain areas?

Dr Ng Eng Hen: Sir, Mdm Halimah Yacob has stated a very sensible view which unionists globally and even lay people would hold that, while it may be economically sensible and efficient to have an auction-like system, you are still dealing with workers, and it would be hard to explain to people why you are using this system. So, as I said, while, in principle, the theory that it is more economically efficient to use price may be attractive, in real life, you may bring on many more problems that you did not anticipate. So I think our current system is a robust one. It helps us to adjust from time to time what we need. And, as I have replied to the NMP, I think we have to make minor changes, but the system on the whole is quite sound.