Impact of Tighter Foreign Worker Quotas on Completion of new HDB Flats

The foreign worker tightening policy will impact the construction industry in two ways. First, the man-year-entitlement (MYE) quota for new projects will be further reduced by 15% in July this year, so this would bring the cumulative MYE cut since 2010 to 45%, which is quite hefty. Second, the foreign worker levy will be further increased in phases over 2014 and 2015, with the exception of the levy for higher skilled workers employed within the MYE quota. These measures aim to steer the industry towards skills upgrading, mechanisation, and streamlining workflow to improve productivity and to reduce the reliance on foreign workers. During the process of adjustment, construction time and cost may be affected.

Like other developers, HDB will likely be impacted by the tightening on foreign worker policy, despite there being no delay to the construction timeline for HDB's BTO projects so far. Having said this, HDB should be less affected as it uses prefabrication construction extensively, which helps to raise productivity and reduce on-site labour requirements. Currently, 60% to 70% of the super-structure of HDB projects is constructed with precast components. Indeed, HDB is the market leader in prefabrication. HDB is however, monitoring the situation very closely.

If any contractor is unable to proceed with the construction work, HDB will consider allowing the contractor to novate the contract to another contractor. HDB could also terminate the employment of a non-performing contractor and engage a new one to complete the remaining work. Regardless of which option is adopted, delivering flats to Singaporeans on time remains our top priority.

HDB has not closed any building tender since the announcement of the increase in foreign worker levy. The impact on construction cost will be clearer when we receive new tender bids. HDB will continue to work closely with the contractors to improve productivity and minimise the impact of the recent changes on construction time and construction cost.

Thank you, Mdm Speaker. I would like to thank Minister for the answer. My supplementary question is that the cut of 45% MYE is indeed hefty. With the many projects that are to be rolled out over the next few years, is there any consideration that the Ministry will look into relaxing the quota for the foreign worker? Next question is that, yes, pre-casting is in fact widely used in HDB projects. Is the Ministry going to help the contractors to resolve some of the crunch? I was told that pre-casting yards also

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cannot cope; they have dormitory shortage, they face long delays at dumping grounds as well as the shortage of engineers, architects and so on.

Madam, the Acting Manpower Minister has repeated several times that there will be no turning back on this tightening policy. Let us forget about options or possibilities of further relaxation. If you look at the growth of the foreign worker population for the last few years, the construction sector is really a laggard in productivity. The bulk of the increase in foreign worker numbers is really due to this sector.

We are determined to work together with the construction industry to try to upgrade and raise productivity. For the private sector, they can take reference from what HDB is doing. Even HDB itself will continue to push the frontier. Our internal guidelines state that by 2020, we should try to push up our productivity by another 20% to 25%, if possible.

Let us forget about the option that we would go back to the good old days of freely available cheap, unskilled foreign workers. We just got to press on with the job of raising productivity. The tightening is necessary. Yes, there is heavy pressure on us to deliver on building more HDB flats and also MRT trains and so many other infrastructural projects. We must work together as a team, together with the developers, contractors, engineers and the architects, to try to achieve productivity that has been achieved in other countries. Indeed, we have been talking about this for a long time. I remember when I joined the Civil Service 36 years ago, we have been talking about productivity being very low in construction. Thirty six years later, now that I am in MND, we are still talking about this subject.

The 45% MYE reduction is hefty, but is doable and we have been watching how our HDB contractors perform. They have been able to achieve that. We monitor their utilisation of foreign workers outside the MYE quota, it remains at single-digit percentage. That is a very good sign.

As I said, I believe that this can be done and can be achieved and let us work hard at it. Senior Minister of State Lee Yi Shyan is chairing an inter-Ministry committee because this work involves many agencies to try to make sure that this tightening policy maximises the upside that we hope to achieve. And what is the upside? The upside is increased productivity in the construction sector, and minimise the downside. What is the downside? The downside is delay in project completion or costs may go up. But if you do it well, we may be able to maximise upside with minimal downside. That is the intent that we want.

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On precast and prefabrication yard difficulties, their difficulties are my difficulties and we intend to work together as a team. Because when they succeed, I succeed.

I would like ask the Minister a supplementary question. Given the Minister's assurance to keep BTOs prices low, yet the cost of building will invariably be higher due to the higher foreign worker levies. How can we account for the additional cost that the Government will need to bear, going forward? Even though the Minister said that some of the tenders have not come in but, I guess, the cost escalation will invariably be pushing upwards. Could the Minister share how the Government is going to address this cost that the Government is looking to undertake?

As I said, we are still awaiting new tender bids to come in and we will see. Tender bids, of course, partly depend on cost of the operator but also on the competitiveness in the industry. So far, there has been good stability in HDB tender bid prices in the last couple of years, which have been very reassuring for me. But even if tender costs should go up, we have already delinked the BTO prices from resale price index, which is the subject of the next question. If, indeed, it comes to that, then the Government subsidy just grows, and we will absorb that increased cost so that we can continue to be able to achieve the objective of ensuring affordability of HDB flats.