Sociologists and political pundits have long debated the impact of large numbers of foreign workers warning of the possible negative impact. 

Economists had long argued their positive impact. 

But now some economists and businessmen are re-thinking their stance, 

Is the foreign workers issue economic or social? 

The history and demographics of the region has long involved the influx of foreigners, some of whom stayed and some who moved on. 

Conventional wisdom was that foreign workers were a necessary and integral part of the economy. 

Both Singapore and Malaysia's economies have relied heavily on migrant foreign workers to fulfill their labour demands. 

Karim Raslan is a KL based analyst and commentator. 

"For example industries such as oil palm which are very very important to Malaysia, they contribute more to the exports of oil and gas. Fully hundred percent of the workers on the ground are foreign. The foreign worker component to the Malaysian economy is fundamental and has to be thought through with incredible strategic care, its the same in Singapore."

Thinking through its strategy is exactly what Singapore is in the process of doing. 

A recent government panel consisting of union and corporate leaders has recommended limiting the number of foreign workers here, the bulk of whom are low skilled. 

Eugene Tan is a law Professor at the Singapore Management University and explains the panel's rationale, 

"I think there is a concern now as highlighted by the economic strategies committee, over dependance on cheap foreign workers has resulted on a lowering of productivity within Singapore's work force. The government will try and re calibrate the supply and try to manage the business sectors demand for foreign workers. So long as foreign workers are easily available the economic thinking is that companies will be less incentivised to come up with innovative ways of going about their business, of coming up with more productive ways of doing business."

This is necessary he says if Singapore wants to move up the economic ladder to keep it prosperous and forward looking.

More cheap foreign labour may mean more direct output in the near term but is it the kind of output that we want? 

"When Singaporean companies hire cheap foreign workers the increase in output is not due to better manufacturing processes, a better way of going about doing business it is really more about perspiration rather than inspiration. If companies can automate, if companies can bring in better skilled workers then we could see output increasing not just incrementally but the hope is that output would then increase perhaps double or three fold."

Professor Tan believes that the limits on number will be introduced gradually. 

He says that over time even if numbers are not sharply reduced the cost of hiring foreign workers will go up in terms of additional levees and taxes. 

The question is how will Singapore's business sector respond? 

Will local companies especially in low productivity sectors make the necessary but perhaps painful adjustments? 

"The challenge for the government is to persuade companies to recognise that the reliance on cheap foreign workers is not going to be sustainable in the long term. Companies as well as the government need to be more mindful of not taking a short term approach. It will take time, right? to train workers, to be more productive. It will require a mind set change, it will perhaps require to bite the bullet and suffer short term disadvantages you know in terms of sending workers for training and higher costs in the short run."

But the issue is not just economic. 

"When we talk about foreigners in our midst whether its in Malaysia or Singapore it affects the political constituencies it affects the economic sector. It also affects the social dynamics within the country. There is always the perception that the foreigners are a source of competition, a threat, that they may depress salaries or that they increase the cost of living because they will also need housing. They will add to the need for transportation, for food and all that and I think all this becomes even more sensitive during economic hard times. 2009 was generally a hard time for many economies in Asia."

So in the end Professor Tan says local industry that is too reliant on large numbers of low skilled labour will have little choice but to adapt. 

"There is no alternative, our over dependance on cheap foreign workers not only has economic disadvantages but increasingly social costs that cumulatively could translate to political costs in which governments not just in Singapore may not be prepared to bear."

Karim Raslan says that this debate is echoed in Malaysia although there is a marked difference in terms of scale. 

"In Singapore its a different type of debate in that the foreign workers in Malaysia are generally coming in at the bottom end of the scale whereas what you're seeing in Singapore is foreign workers coming in across the scale."

With success then, come the inevitable challenges-short and long term, how Singapore manages them, will be closely watched by others in the region.


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