Singapore has one of the most open economies in Asia in terms of trade, foreign direct investment inflows, and foreign labor inflows. By 2010, citizens formed only 63.6% of the population and foreigners (not including permanent residents) form 34.7% of the labor force. This high foreign labor ratio reflects buoyant labor demand, limited domestic labor supply with declining total fertility rate, and the lack of xenophobia and labor protectionism. Foreign labor is needed to grow the population, mitigate population aging, grow the GDP and per capita GDP, cover shortages in labor supply and skills, act as a cyclical buffer, and contain wage costs to ensure international competitiveness. However, the heavy dependence on foreign labor has also delayed economic restructuring, adversely affected productivity performance, and engendered a FDW-dependency syndrome among households.
The foreign labor policy is dual track, with unrestricted inflow of foreign talents and managed inflow of low-skilled labor through the use of work permits, worker levies, dependency ceilings, and educational and skills criteria. Going forward, Singapore has to limit its dependence on foreign labor to accelerate productivity growth and as it is constrained by physical space and citizen concerns over crowding out of jobs, public and recreational spaces, and public services. Greater bilateral and ASEAN cooperation is needed to mitigate the cross-border conflicts and tensions arising from the cross-border movement of labor.