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SMEs feel the blues of a tighter foreign labour supply

Wei Chan, owner of a mom and pop bakery in Ang Mo Kio spoke at two of events. From what I understand from Gilbert, Wei Chan wanted to convince the audience that we need more cheap foreign workers in order for SMEs to survive. However, not only did he fail to get his message across, he soon became the target for the rest of the guys in the room. The conversation soon steered from a forum for minimum wage to one about migrant worker issues. At the heart of it was a very deep-seated problem faced by most SMEs in Singapore – businesses here are struggling to survive.


Vincent Wijeysingha, Kumaran Pillai, Leong Sze Hian, Jolovan Wham and Wei Chan.

Wei Chan obviously was in the wrong neck of the woods. He soon realized that enough is enough and went back to where he hailed from and we didn’t see him around Gilbert’s forum anymore. I later found out that he sought company with ASME where his misery found other doting companions.

Like the story of Wei Chan, SMEs, who contribute to 50% of our national income, feel that they are left in the cold and with the government restricting the flow of foreigners in Singapore; these little businesses will have to either shape up or ship out (or close shop).

From the conversations that I have had with him and from what he has shared at the forum; behind his veneer of success is a struggling businessman. He depends on it to feed himself and his family. His workers depend on it and he is driven to succeed not because of greed but because of an ambition to do better than his predecessors, or plainly put because of the need to survive. For success would mean breakout from the economic trap(s) that hold us down.

Now, his hopes of building a better tomorrow, after investing thousands of dollars are dashed – the government plans to tighten the supply of foreign labour which he depends on to expand his business. He says the locals do not want to do it at the wage levels that he is offering. He can’t offer more because he will not be able to sustain his business at higher costs.

So, what can the likes of Wei Chan do?

If you’re an owner of an SME and have been adversely affected by the change in government’s foreign manpower policy, do not fret because there are ways to overcome this labour shortage by adopting strategies to overcome our over-reliance on cheap foreign labour.

But seriously, how much more can we innovate? If you have already invested in nice IT systems – point of sales, accounting, inventory management and automated your sales process or bought expensive machinery to cut down manual work, what else can you do?

Take a look at the two video below and you’ll be amazed but what our counterparts are doing:

Lay’s Vending Machine in Argentina

Automated cake baking machine in Japan

Now, why didn’t Wei Chan think of that? Or might it be that the cakes baked by an untrained foreign baker would be any better? I do not know.

But, what I know is that the noisiest fellas in our business community come from small businesses that are either too small to automate and not large enough to innovate (pun intended); and they often indulge in wallowing and attention seeking (just read the statements that come out from ASME).

Looking on the bright side, our G has decided to throw some good $$$ at this problem. However, throwing money at a problem is not a solution. What we need to do is to throw money where it matters most. There are few programmes, administered by A*Star and Spring Singapore that comes to my mind:

1. Technology Adoption Programme: A*STAR will help to link companies’ technology needs to solution providers to help companies across sectors increase productivity through adopting technology innovations and solutions. From July 2013, this programme will be piloted in six sectors – Construction, Food Manufacturing, Precision Engineering, Marine, Aerospace as well as Retail.

2. Capability Development Grant (CDG): supports up to 70% of the cost of productivity improvements and capability development that will result in greater enterprise competitiveness and business growth.

3. Collaborative Industry Projects: The Government will work with industry players and partners like Trade Associations and Chambers (TACs) to address sector-specific productivity challenges. Consortia with at least 3 SMEs, comprising solution providers and users, will be formed to develop and propose bottom-up deployable and scalable productivity solutions. SPRING will be looking at the Collaborative Industry Projects (CIP) in six priority sectors: Food Manufacturing, Food Services, Furniture, Printing & Packaging, Retail and Textile & Fashion…   for more information

There is also another programme that caught my eye – SME Talent Programme – where SMEs can attract local talent from ITEs and Polytechnics over the next three years. This is really commendable; something that they should have done years ago. Now, Wei Chan cannot say that he can’t find talent locally!

If you do need assistance or advise, please drop me an email or leave a message below.

Kumaran Pillai is a member of Action Community for Entrepreneurship (ACE). He also blogs actively, comments periodically, runs a business incubator daily and stages protests at Hong Lim Green when he feels the blues. 


Is PAP becoming more welfare oriented?

I predicted not too long ago that the government would become more welfare oriented at a forum organized by Gilbert Goh in 2011. My predictions were not based because PAP would have a change in mindset, but because of necessity and with a huge fiscal reserve, the government can afford to have a more balanced budget in the future. In fact, going forward and if everything else remains constant we’d see more balanced budgets in the years to come.

govt here to help

Photo: Internet

My assumptions are based purely on econometric projections, if the government has a huge reserve and since we are investing our monies in economies which are growing at a rate which is faster than ours; the external wing of our economy is self-sustaining. So there is little incentive to grow the external wing by extracting rent from the locals.

Besides, what our economy requires is a shot in the arm and it is also politically prudent to do so. Our local industries, particularly the SMEs need to be revitalized. The government has probably come to the realization that growing the GLCs at the expense of SMEs is hurting the people. And if you’ve been paying close attention to Hsien Loong and team, they will probably push our GLCs to focus in the regional economies so that SMEs can grow domestically.

But growth in the domestic sector will be sluggish in the next couple of years. With rising cost of living (and it seems like they will be able to tame this beast for the moment) and because of cutting down on the intake of foreign labour, our SMEs will take time to adapt to the new cost structures.

Putting the moral issues of whether the workfare subsidies reach employees and about the profligate use of tax-payers’ monies, any injection into the circular flow of income will boost GDP by a factor of 1.8- 2 times of $3.6B. Hence, the revision of our GDP projections from 1% -3% to 3% – 4% in the next three years. Good GDP growth and a more social focus seems like a good recipe to win over those sitting on the political fence.

According to some analysts, the COE prices are also likely to decline in the next few months/years. And Khaw is likely to keep a lid on HDB prices and even bring it down to tolerable levels. It is also quite unlikely that Khaw would adopt the suggestions put up by SDP, as it Pareto inefficient i.e. as some home owners may be adversely affected by this policy*. (I mean no disrespect to the ex Chief Economist of GIC who endorsed it. To be fair, he said that it is worth looking at)

It seems like the arguments for minimum wage is based on grounds of morality rather than good economics or politics. A minimum wage of S$1200 would more likely to benefit our foreign workers and foreign domestic workers. While we speak of greed and all that (and enough of that rubbish), the real test is whether we are willing to pay S$1200 for our maids (Foreign Domestic Workers) at home. It just seems to me that this policy would be hugely unpopular as it would affect about 600,000 people in Singapore. Unless the minimum wage policy is aimed purely at locals, in which case, the policy makers would be criticized of being home biased or exploitative of foreign workers,  cos their (FW) wages may be lower than the minimum wage floor.

Increasing our population to 7M maybe arguably good economics (still I’m not totally convinced by this) but it is definitely poor politics. It seems like the government wants to grow our population in order to drive domestic consumption and growth. There are some benefits from this exercise, but the key concern is that some Singaporean workers may be displaced (and the PAP knows this). On the flip side, there are more opportunities for locals to set up businesses as the consumption base would be bigger.

There are more reasons now than ever to implement social programmes to keep the electorate happy. And speaking of PAP trying to keep us happy, we may even get free bus rides during off-peak hours. How about throwing in a free lunch at Jack’s Place and free Dim Sums for tea? For some, that would be enough to win their “trust.”

*I do confess that I have not read the whole population paper by SDP in its entirety and if there are any differences of opinion, I’d be happy to publish their response on my blog. 

Society needs to accept broader definition of success in life: Heng Swee Keat

“We cannot have broader definition of success in education without our society accepting broader definition of success in life.” – Minister for Education Heng Swee Keat


Is this a sign that PAP will be revisiting its meritocracy policy? It makes one wonder what triggered the Minister to say such a thing. This is a stark departure from their meritocracy policy where emphasis was purely on exams and government scholars. Ironically, we have seen a few scholars themselves who have jumped onto the Opposition bandwagon and have become critical of the PAP. Fate has it that some people would have the best of both worlds.

So what would be the new definition of success in life? I hope the new definition would go above our worldly material accomplishments and focus on how we as individuals impact the society.

I think the first step in defining our success is to stop saying yes to everything. This would be hard to measure for most people, but it can be easily solved by looking at the performance of MPs in Parliament. It is only when we challenge status quo that we can innovate and change.

As for children in school, what would be key is to develop their critical thinking abilities. Only then, we’ll see a bunch of kids growing up to make real changes in the world.

While I applaud the new measures to improve our education system. It seems like the government is still emphasizing on rote-learning and exam oriented education system- more is done to take care of the “weaker” students.

What we are going to see in the next few years is that private pre-schools going out of business with the government entering the fray of providing quality kindergartens. I shall not bitch about this because there is really a dire need to improve the standards of our kindergartens. Unfortunately, PAP kindergartens do not cut it!

Would the wage credit scheme work?


Touted as a purely Singaporean Wage Model by Minister Lim Swee Say, the PAP is full of gusto that they have found the perfect remedy to the predicament of the underclass. But few would argue that businesses are the eventual beneficiaries from this exercise.

As the saying goes, the devil is in the detail. How are companies going to be reimbursed? Would bosses pass on the savings to their employers if the money goes to them automatically? There are some ethical issues in this.

However, some say that this would benefit the middle  class the most. As Minister Chan Chun Sing has said, this scheme is designed to address the wage disparity of the middle class.

This scheme will be effective immediately and will run for three years till 2015. It will cost the government S$3.6 billion over the next three years.

The government wants to make the reimbursement as seamless as possible; companies will receive the monies automatically at the end of the year.

At the end of the day, it is uncertain if the wage credit scheme will benefit the workers. However, we’ll know it at the end of 2015.

Panasonic Singapore exploits foreign workers

Yang paid S$3600 of her savings to an agent in promise of more money, better life and to escape from the communist regime of China. But now, she has found herself only the short end of the stick. She works for a meagre S$500 a month as a factory hand in Panasonic Singapore which is located in suburban Bedok. There seems to be an awful regret that she has spent her money on a lousy deal. She has learnt the hard way that her life isn’t any better in democratic ‘Chin-cha-pore’ (Singapore) either.

Similar to those in the bottom 20% of our general population here, her life in Singapore is down to mere existence. Her income of S$500 is insufficient to meet her monthly expenditure. She has worked out a frugal budget though, of $300 for food, $250 for rent and S$60 for transportation, which is $110 more than her wage. To supplement her income, her employer has “generously” given out, in the past, additional allowance of S$150 for housing and S$30 for transportation. With a stipend of S$680, her head is hardly above water.

She works hard for the money

She has a three year old child and her two elderly parents to support back at home. The $60 surplus is inadequate to meet her total financial needs. She needs to work overtime.

Additionally, she works up to 100 hours in overtime in order to make about S$1200 a month. This is on top of the 44 hour work week and she can end up working as many as 72 hours in a typical workweek. The Ministry of Manpower guidelines for overtime states, “An employee can be required to work up to 12 hours a day if the employee gives his consent in writing” (here). It appears that the workers did not give their consent in writing. The employment contract was in English and no translation was made available for the Mandarin speaking workers.

Yang however, is not overly concerned about the long working hours, she is concerned that the 78 hour limit is too low and that 100 hours of overtime hours are insufficient for her to earn the extras. She is willing to work all her waking hours to make as much as she can.

She is hopeful that hard work and determination can see her through all the hardships. She is hopeful that someday she’ll be able to break out of her poverty cycle. But for now, hope is all she has got.

Yang’s passage to Singapore

Her job agent in Hubei China made her many promises. He told her that her she could save as much as $1200 a month and that she could become rich in no time if she were to do overtime in Singapore. So, she was asked to buy her own airline ticket and asked to pay S$3600 as agency fees before her passage to Singapore.

Yang was given a contract in Mandarin which said that she was not forced or coerced into signing it and she was going to Singapore on her own free will. She was not aware of her actual employment terms until she started work in Singapore. In fact, her current employment contract with Panasonic is in English and the company has yet to give her a translation in Mandarin.

When asked if she would consider coming here again, she hesitantly said in Mandarin, “I have to work close to half a year just to earn back the agent fees, of course I would think twice”

Panasonic Singapore Vs Huawel China

There were 14 others we spoke to, who had similar stories to tell. There was one university graduate who was lamenting about how he was short-changed. One said that China was better, yet another said that things were too expensive here. But, also said the people here were cultured and polite.

The graduate worker said that Huawei China paid about S$700 – S$800 as basic pay and he could easily make up to $2000 per month doing a similar job in China. He came here thinking that he could land a white collar job and was hoping to make about $3000 a month.

Union warns employees not to speak up

The workers were warned not to speak-up, negotiate or “create trouble” for the management. They were told that Singapore government had very strict laws and “action” would be taken against those who spoke up.

Some employees received a pay rise of S$1.00 when they became too “vocal.”

Assembly work at Panasonic Singapore

We learnt from the workers that Panasonic Singapore does assembly of refrigerators and air-cons which are exported out of Singapore.

The plausible reason for Panasonic to continue operating in Singapore despite the high rental rates is due to labour laws that permit exploitation of low wage earners and a favourable tax regime.

Is it beneath Singaporeans to work in factories?

Listening to the plight of these workers, it has become apparent to us that industries prefer such low wage workers because these workers often lack the support and backing from unions and the industry bodies in Singapore. A Singaporean worker, on the other hand would have better access, though limited and perfunctory, to unions in Singapore.

One MP said that most Singaporeans do not take these jobs because we Singaporeans are concerned about our dignity and often do not take up menial jobs because we do not want to lose face. Looking at the ruthless exploitation and the wages that Panasonic offers, it makes us wonder if the MP has lost touch with reality and if he seriously wants Singaporeans to work under these conditions? We would like to think that Singaporeans are a whole lot wiser than these migrant workers!

The way forward

In another TOC article written by Jolovan Wham, “Exploitation of Migrant Workers = Exploitation of Low Wage Local Workers,” he has clearly shown how such exploitation can lead to depressive wage conditions in Singapore.

These workers are taking a big risk by standing up and speaking up against our “incompetent” system. Therein lies a lesson for us – there are things that we can learn from them – that we will only be able to find solutions to our social ills by surfacing them in the right forums, by standing up against incompetency in whatever form it may be, and by being the agent of change.

Our fight against inequality and social injustices seems like a long and hard road. TOC is committed and stands shoulder to shoulder with the civil societies in Singapore in fighting these social disparities.

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