Singapore has attracted high-tech manufacturers with incentives and a well-educated workforce, but growing demand for highly skilled labour, combined with limits on numbers of foreign workers may mean a tougher path ahead.
The city-state is a major producer of products ranging from aircraft engines to medical equipment and oil rigs, and top firms such as Rolls-Royce and German industrial conglomerate Siemens have operations there.
British appliance pioneer Dyson will open its first electric car plant in the city-state, with vehicles set to roll off the production line from 2021, and this year announced plans to move its global headquarters to Singapore.
But a potential shortage of more specialised skills as firms shift into fields such as robotics and 3D printing, as well as limits on hiring foreigners in the space-starved country, may make it less attractive to set up shop in Singapore in future.
Authorities work closely with businesses to help them set up and find workers, as well as giving them incentives such as tax breaks, but rapid technological changes in many industries makes it tougher for a government used to planning well ahead.
"Ten years ago, policymakers could plan with greater certainty," Song Seng Wun, a regional economist with CIMB Private Banking, said.
"The age of disruptive technology is creating a lot more uncertainty," he added.
In a recent report, the ministry of manpower said that one in three job openings in 2018 was left unfilled for at least six months and among the reasons employers gave was "lack of candidates with the necessary specialised skills".
Foreign labour curbs
Singapore has traditionally welcomed foreign workers in sectors ranging from construction to investment banking to plug skills shortages and do jobs that locals shun, and 40 percent of its 5.6 million inhabitants are from overseas.
But in recent years unease has been growing at the large number of foreigners in the city – which is just half the size of Los Angeles – with local residents blaming them for overcrowding and pushing up living costs.
The government has responded by making it more difficult to hire in certain sectors and making companies prioritise local recruitment.
This includes requiring companies over a certain size to advertise higher-skilled jobs at a government website for a set period before moving to hire workers from overseas, a scheme that officials say aims to ensure Singaporeans are fairly considered.
The government applies foreign worker quotas across various sectors. Manufacturing companies have to cap the percentage of foreigners they hire at 60 percent of their workforce. This quota was lowered from 65 percent in 2012.
The most recent cut to a quota for foreign workers, in this year's budget, applied only to the services sector and manufacturing was not affected.
At a forum on the country's labour challenges, participants "agreed that, for now, Singaporeans appear to have accepted a trade-off of lower economic growth for a restrictive foreign labour policy, in favour of social considerations," wrote Mooris Tjioe, from Singapore think-tank the Institute of Policy Studies.
Still, a large number of high-tech manufacturers view Singapore as the best place to set up their Asian headquarters and plants due to proximity to booming regional markets, ease of doing business and political stability, despite the relatively high costs.
The city-state makes half the world's top 10 drugs, 70 percent of its oil rigs and is the fifth biggest source of refined oil.
From rigs to drugs
Rolls-Royce produces its "Trent" engines for Boeing's 787 Dreamliner as well as the Airbus A380 and A330neo at its Singapore plant, and believes that cooperation between companies, the government and educational institutions is a major advantage.
Singapore-based companies are in close contact with universities and polytechnics so they can tailor their courses according to the requirements of high-tech manufacturing, said Bicky Bhangu, Rolls-Royce president for Southeast Asia, Pacific and South Korea.
"What you see in Singapore is a very effective coming together between government, industry and academia," he said adding that an annual student internship scheme was a major source of recruits for the firm.
Local schools may however face a tougher time in future as they scramble to adjust their curricula fast enough to meeting changing demands from industry, and the city's leaders are warning that workers must urgently take action to improve their skills.
In a Labour Day speech, newly appointed deputy prime minister Heng Swee Keat – who is tipped to take over as premier in the coming years – warned that without action, some Singaporeans could fall behind in the jobs market.
"Those who are well-educated and digitally savvy can go on to build more skills and do even better. Those who start with less may risk falling behind," he said. - AFP