Singapore to Expand Benefits, Tighten Foreigner Curbs After Poll Backlash

Singapore Prime Minister Lee Hsien Loong will expand public housing and medical benefits and tighten curbs on foreign workers, after a backlash over the cost of living led to record opposition gains in the May elections.

The government will raise salary thresholds and require better educational qualifications for some foreign workers, Lee said in a televised speech late yesterday, stressing the nation needs to ensure policy adjustments don’t hurt Singapore’s attractiveness to investors.

“We can keep the thrust of our policies but adjust them to deal with specific problems,” Lee, 59, said in the annual National Day rally speech, the first major policy address since a May 7 election. “Let’s not throw out the baby with the bathwater. It’s very dangerous.”

Lee’s ruling People’s Action Party won this year’s general election with the smallest margin of popular votes since independence as citizens expressed discontent over rising costs and competition with foreigners for jobs and housing. He has pledged to be more responsive to criticism of government policies and unveiled measures yesterday to widen the social safety net for elderly and lower-income Singaporeans.

“The issues that are close to the people’s hearts and were big agenda items during the election, such as housing, got an airing and voters will want to look for a continued attitude of being more consultative and open to feedback,” said Selena Ling, head of treasury research at Oversea-Chinese Banking Corp. in Singapore. “For investors, the message is that Singapore remains open for business as usual.”

Easiest Place

The Singapore dollar rose 0.4 percent to S$1.2068 against the U.S. currency as of 1:11 p.m. local time today. Singapore’s benchmark Straits Times stock index rose 0.7 percent, set for a second day of gains.

Singapore, ranked by the World Bank as the easiest place to do business, has cut taxes in recent years to spur investment, prompting companies to hire hundreds of thousands of foreigners to fill positions. The island was among the top 20 destinations for international investment last year, according to the United Nations Conference on Trade and Development.

“After the general election, investors have been watching us very closely and they’ve asked us directly whether Singapore is changing course fundamentally,” Lee said. “We are determined to keep our strengths. We will maintain the policies which are important for us and therefore useful for them.”

Foreign Presence

More than a third of Singapore’s 5.1 million population is made up of foreigners and permanent residents. Companies added about 116,000 jobs last year, and 59,700 of the new positions created went to foreigners, according to the Ministry of Manpower.

The government has made it more expensive for companies to hire foreign workers by raising levies, and it tightened the inflow of immigrants last year. Opposition leaders have urged more measures to rein in property prices and temper immigration, which they said damped wage gains among lower-skilled workers.

Singaporeans will remain the core of the island’s workforce, unlike the Gulf states in the Middle East, where foreigners make up the majority, Lee said yesterday. The government will raise salary thresholds and tighten educational qualifications for the so-called middle range of foreign workers, he said. He didn’t give details, saying the manpower ministry will give more information later.

Growth Forecast

“We have to accept that if we bring down the number of foreigners, slow the inflow, it means slower growth,” Lee said. “Companies will come here not so vigorously or they may choose to expand elsewhere and we will have less resources to improve our lives.”

Inflationary pressures are rising in the nation even as growth slows from a record 14.5 percent pace in 2010. The Southeast Asian nation’s gross domestic product will probably rise 5 percent to 6 percent this year, Lee said earlier this month. Retail sales growth from a year earlier accelerated to 10.9 percent in June, a report showed today.

There is a possibility of another world recession should conditions in the U.S. and Europe deteriorate, and emerging markets including China and India will be vulnerable to the global slowdown, Lee said. Singapore needs long-term policies to keep the economy expanding, he said, without elaborating.

Singapore’s ruling party, co-founded by Lee’s father Lee Kuan Yew and in power since independence in 1965, won 81 out of 87 parliamentary seats and 60.1 percent of the vote on May 7, compared with about 67 percent in the 2006 election. Lee has said his government will change the way it rules after the opposition won a record number of seats.

Housing Measures

Officials are working to resolve crowded transportation and a shortage of public housing even as those issues will take time, he said. Before the election, the government pledged to build more homes and review the income ceiling for families seeking to buy new units from the state housing authority. That would allow more people to buy directly from the Housing & Development Board instead of through the more expensive resale market.

The income ceiling will be raised to S$10,000 ($8,288) from S$8,000, Lee said yesterday. The housing board will construct an additional 25,000 homes under the so-called Build-to-Order program next year, he said.

“We will keep housing available and affordable for Singaporeans,” Lee said.

Local universities will increase the intake of Singaporean students by 2,000 over the next four years and cap foreign enrollment at current levels, he said.

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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