More firms across Singapore are expected to close or downsize, as restrictions on the recruitment of foreign manpower continues, according to employers and economists, reports The Straits Times.

Dr Chau Hak Bin, an Economist at Bank of America Merrill Lynch, commented: “If you cannot find enough workers to do the jobs, there is no choice but to consolidate.”

New figures from the Ministry of Manpower show that foreign employment has slowed significantly, increasing by 3,800 workers in the three months to June. This marks the slowest quarter since Q3 2009, when the number of foreign workers increased by just 700 in the three-month period.

Last year, Prime Minister Lee said: “The government understands the difficulties which small and medium-sized enterprises face and will try its best to help, though foreign worker numbers must still be controlled.”

Experts said the authorities tightened foreign worker hiring policies with the aim of forcing firms to work more efficiently, but the reverse has happened in some companies.

Victor Tay, Chief Operating Officer for the Singapore Business Federation, said a lack of workers has pushed some firms to focus on day-to-day operations instead of planning ahead to raise productivity: “There are pockets of firms which have raised productivity through innovation and technology. But you need manpower to use this equipment and to drive productivity projects."

Curbs on the renewal of Employment Passes are also curtailing productivity gains, according to Mr Victor Mills, Chief Executive of the Singapore International Chamber of Commerce: "(These EP holders) are talented, committed and productive employees... All too often, they are rejected.”

For things to improve, sectors which are perennially unproductive such as construction must do better.

Dr Chau commented: "But the effects will not be seen immediately. The construction workers need time to be trained.”

Mr Tay suggested that the pace of foreign manpower curbs be slowed down to allow firms to recover: "Policy formulation is like a medicinal prescription. We ought to monitor the patient's response, in this case, the companies. Sometimes, after detecting adverse reaction, dosage of medicine should be moderated."