VZCZCXRO4645
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGP #0112/01 0370940
ZNR UUUUU ZZH
R 060940Z FEB 09
FM AMEMBASSY SINGAPORE
TO RUEHC/SECSTATE WASHDC 6327
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHNE/AMEMBASSY NEW DELHI 2193
RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 SINGAPORE 000112 
 
STATE PASS USTR 
NEW DELHI FOR EHRENDREICH 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ELAB SN
 
SUBJECT:  SINGAPORE BATTLES RISING UNEMPLOYMENT 
 
REF:  SINGAPORE 80 
 
¶1.  (SBU) Summary:  The global financial crisis is beginning to be 
reflected in a rise in unemployment in Singapore which will likely 
get worse as the recession continues.  Recent business surveys have 
been downbeat with employers expecting more layoffs and a long wait 
before conditions improve.  The GOS is working with unions and 
companies to maintain as many workers on the payrolls as possible, 
subsidizing training and wages to avoid layoffs.  Government 
programs to help Singapore workers are not necessarily aimed at 
reducing the number of foreigners who make up a large percentage of 
the labor force, but one report nevertheless sees a departure of 
approximately 200,000 foreigners from Singapore over the next two 
years.  End Summary. 
 
¶2.  (U) Singapore's Ministry of Manpower released statistics January 
30 showing a sharp slowdown in job growth and a rise in the 
unemployment rate in the fourth quarter of 2008.  The overall 
seasonally adjusted unemployment rate rose from 2.2 to 2.6 percent 
in December over the previous quarter, and the resident unemployment 
rate (which only includes foreigners who are permanent residents) 
rose from 3.3 to 3.7 percent.  Despite recent layoffs, net job 
creation was still positive with 26,900 new jobs added in the fourth 
quarter, led by construction and services.  However, the net gains 
were well off previous quarterly increases in jobs.  Manufacturing 
is bearing the brunt of the recession with 6200 fewer jobs in the 
fourth quarter, the sharpest quarterly decline since 2003. 
Approximately 73,100 Singapore residents were unemployed in 
December. 
 
¶3.  (SBU) Local analysts said the rise in unemployment was less than 
expected but cautioned that the labor market down cycle was just 
beginning and that net job creation would likely soon turn negative. 
 Citigroup is forecasting a 4.2 percent overall unemployment rate 
for 2009, but with a peak of 5.0 percent sometime in the second half 
of the year.  Net job losses will likely exceed losses during 
recession years in 2001 and 1998.  The GOS hopes to keep layoffs 
below 1998 losses of 30,000 jobs, but Citigroup anticipates 34,000 
net job losses for 2009.  Recovery in the job market may come later 
than recovery in GDP growth as the economy clears the excess labor 
supply built up during the recent boom years. 
 
¶4.  (SBU) Business sentiment for 2009 is downbeat.  Singapore's 
Business Expectations Survey found that 53 percent of firms in the 
services sector expected business conditions to deteriorate during 
the first six months of the year.  The hotel industry led the gloom 
with 100 percent of respondents in the industry expecting a decline. 
 An Economic Development Board survey of manufacturers released 
January 30 was even more pessimistic with 63 percent of firms 
anticipating a deterioration.  Only six percent expected an 
improvement.  70 percent of manufacturers expected to keep 
employment stable, while 29 percent expected a reduction in head 
count during the first quarter.  Electronics and precision 
engineering firms expected to be hit the hardest as the sharp 
slowdown in global demand compounds a structural relocation of the 
industry to lower cost countries that was already underway.  An 
American Chamber of Commerce survey in December found that 17 
percent of respondents had reduced staff in the fourth quarter of 
2008 and 15 percent had repatriated some of their expat staff 
because of the recession.  One-third of respondents said they did 
not expect a turnaround in business until after 2009. 
 
The Exodus 
---------- 
 
¶5.  (SBU) A recent Credit Suisse report predicted that the ongoing 
recession would result in the departure of approximately 200,000 
foreigners from Singapore over the next two years.  Non-Singaporean 
citizens make up approximately 1.7 million of the 4.8 million 
population and more than 40 percent of the labor force.  Foreign 
employment was up in 2008 due to strong demand in the early part of 
the year but employment growth slowed significantly in the fourth 
quarter.  The bank estimated that 16 percent of foreigners working 
in services and 19 percent in manufacturing would lose their jobs, 
and concluded that most would depart the country.  Employment pass 
holders who lose their position are allowed to stay in the country 
for a week to six months, depending on the type of pass, unless they 
can find alternate employment.  Long lines have formed at the 
Immigration and Checkpoints Authority offices for foreigners 
applying for residency status to avoid repatriation if their job is 
axed.  Credit Suisse said the contraction in population would 
generate drops in private consumption and property prices that could 
result in a second round of negative shocks on the economy. 
 
 
SINGAPORE 00000112  002 OF 002 
 
 
¶6.  (SBU) Local movers say an exodus of expatriates has not yet 
begun, but have seen signs one may soon begin.  Bill Cain of Santa 
Fe Relocations told Econoff that business had been quiet in the past 
few months, but the company has seen a large spike in requests for 
moving surveys over the next couple months.  Cain believes that at 
the end of the school year movers will be busy sending white-collar 
expatriates back to their home countries or elsewhere in the region. 
 Gordon Bell of Asian Tigers said incoming moves to Singapore were 
down 15 percent, but nevertheless he continued to see expats moving 
to Singapore as companies like Rolls Royce and Abbott Labs begin 
production in new factories that were planned before the recession 
hit. 
 
Saving Jobs the Singapore Way 
----------------------------- 
 
¶7.  (SBU) The GOS is tackling the unemployment problem by devising 
programs and working with companies to discourage layoffs and pursue 
other alternatives to save costs, Mr. Ong Yen Her, Director of the 
Ministry of Manpower, told Econoff February 5.  Working with unions 
and employers in a "tripartite" process, the Ministry is advising 
companies to reconsider layoffs and instead redeploy workers to 
alternative areas of work, implement shorter work weeks and flexible 
work schedules, or send temporarily surplus workers to training. 
The recent budget (see reftel) includes new programs to subsidize 
the cost of keeping workers on the payroll.  The Skills Program for 
Upgrading and Resilience (SPUR) subsidizes up to 90 percent of the 
cost of training courses for workers.  170 companies have so far 
sent a total of nearly 10,000 workers in the past two months into 
approved training courses.  The new Jobs Credit scheme is a cash 
grant to companies equivalent to 12 percent of employees' wages, 
capped at the first S$2500 (US$1660).  The scheme covers wages only 
for Singaporean citizens and permanent residents who pay into the 
Central Provident Fund, a compulsory savings program.  Although 
there has been some debate in Singapore about whether to narrow 
programs to assist Singapore citizens only, Mr. Ong said the 
government was taking pains to avoid an anti-foreign bias. 
 
¶8.  (U) The National Wage Council (NWC) issued guidelines January 16 
advising companies hit by the economic crisis to freeze or cut wages 
to reduce costs.  Although the guidelines are not compulsory, the 
private sector often uses them to guide wage decisions.  Many 
Singaporean companies have flexible wage systems including variable 
bonuses, regular annual wage increments and a monthly variable 
component that can be quickly adjusted downward during slow economic 
times and raised in boom years.  The NWC is encouraging senior staff 
to take deeper pay cuts than junior staff and line workers. 
Singapore's Ministers and senior civil servants are seeing their own 
pay cut by 19 percent as portions of their salary linked to economic 
performance are adjusted downwards in light of the recession. 
SHIELDS