Delivered in Parliament on 11 May 2021
Mister Speaker, this third suite of proposed amendments to the COVID-19 (Temporary Measures) Act of 2020 is aimed at providing additional flexibility for contracts pertaining to construction works affected by cost escalations, resulting from delays and restrictions imposed because of COVID-19 management measures, to be renegotiated.
I wish to just offer three brief points of intervention. The first two are of a more practical nature, about the scope of coverage for this set of amendments, and whether there are better ways to design our labor exchange. The third point is of a more fundamental nature, about the productivity—or lack of it—in our construction industry.
Practical concerns about the Bill
First, while I understand that the construction sector has been the most severely affected by COVID-19 restrictions—and that construction projects tend to be the sort where cost projections can be most rapidly invalidated by changing conditions—one is nevertheless left to wonder why other sectors with large numbers of nontraditional source (NTS) workers are not included in this scope for contract renegotiation.
After all, in operating our town councils, we are also aware of the heavy reliance of our contractors on NTS workers in our conservancy operations. Agritech and certain process industries also rely relatively heavily on foreign worker inflows.1 While I recognize that these are comparatively smaller sectors, it is unclear why they are not being considered for additional support, even if they may be similarly afflicted. It strikes me as more sensible to allow for the coverage of these amendments to apply to all firms that can demonstrate harm, rather than by economic sector, per se.
Second, and relatedly, I am wondering about current efforts by this government to ease the reallocation of workers already in Singapore, between firms. During the round-up speech on the previous set of amendments to the Bill, MOS Tan Kiat How referred to the establishment of an SCAL Construction Manpower Exchange (SCMX), meant to ease the transition of workers from one employer to the next.2
I fully support this idea, not least because it not only promotes greater efficiency, but also serves to further alleviate the risk of the need to constantly introduce new workers, some of whom may inadvertently harbor the virus, even after serving the necessary quarantine protocols. I wonder if the Ministry would be willing to share an update on the status of the SCMX thus far.
Ultimately, my concern is about the success of the SCMX in practice. Employers who subsequently lose contracts may see a competitive reason to send their workers back,
rather than avail them to the exchange. Indeed, in the second half of 2020, we lost some 41,500 workers due to expiring permits.3
Thus, while they may save on repatriation costs if they were to relinquish their workers, firms may feel that not releasing their NTS could damage their competitors’ viability, and the threat of doing so may further favor their own position as incumbents, since only they have a guaranteed pool of workers. While workers may request a transfer, sans employer agreement, between the 40th and 21st day prior to expiry of their permit, some employers could simply choose to renew the permit first, then subsequently cancel the permit less than 3 weeks prior to the original end date. Anecdotally, we have received feedback that such practices are far from uncommon. I am left to wonder if the Ministry has considered how to better refine the system.
My Aljunied colleague, Gerald Giam, has suggested that workers should be permitted to request a transfer as early as the 56th day, the same time that the employer is required to renew. Another suggestion is to mandate that employers who wish to otherwise send NTS workers home instead release them directly to the exchange. The Ministry can play the role of market maker, absorbing workers into a roster. The firm giving up workers will place their repatriation costs into an escrow account, to be managed by the Ministry. These funds, net of costs for those workers who wish to be returned home, will be released to the firm if another company subsequently hires the workers. Hiring companies, in lieu of paying for the search, travel, and quarantine costs for new workers, can instead be tasked with financing the short-term room and board for in situ workers.
An unexpected mechanism for raising productivity in construction?
My third point, Mr Speaker, concerns the construction sector in general. It is well-known that for all the productivity challenges we have faced in our economy, the construction sector has been even worse off. While some have objected to this characterization,4 most observers—in reports issued by academia,5 policymakers,6 and even the industry itself7—have recognized how the sector lags in terms of productivity. The justifications have been varied: from purported low skills of workers (especially related to the large, transient foreign worker pool), to inadequate project planning, to insufficient mechanization.
One common theme runs through many of these explanations, and it is simply this: with steady access to a large pool of foreign construction workers, most paid at very low wages, it is unsurprising that firms rationally choose to substitute capital with labor, and skilled workers with unskilled ones. This would go on so long as it is cheaper to bring in two or three low-cost workers to do the job of one higher-skilled, but undeniably more costly, worker.
While one may simply argue that this reflects marginal cost calculations on the part of construction firms, this practice is ultimately to the detriment of more than just productivity, per se. The challenges—and dare we say it, additional costs—of managing COVID-19 in the presence of a large low-cost foreign worker workforce reveal that there are additional costs, external to each firm, that are not accounted for when we rely on this labor-intensive model. Moreover, by keeping wages low in the sector, there is limited incentive to rapidly scale up productivity, whether in terms of attaining modern construction skills, or adopting appropriate safety-related best practices, or acquiring new equipment and machinery. The result could be reduced quality of our constructed buildings, a factor not well captured by the dollars and cents reflected in project costing.
May I suggest, then, that one unexpected implication of increased costs from construction is that it could, ironically, be the catalyst toward finally weaning the sector off low-cost, low-skill foreign workers, a move desperately needed for raising construction productivity. If so, we would do well to carefully monitor the labor-capital deployment for the industry over the next few years, and if proven efficacious for raising productivity, consider implementing measures to support higher wages in the sector.
Beyond these points of caution, Mr Speaker, I have no objections to the Bill.
References:
1 For agritech, see https://www.sfa.gov.sg/food-farming/food-farms/farm-employment; for others, see: https://lkyspp.nus.edu.sg/docs/default-source/ips/pa_mt_managing-international-migration-for-de velopment-in-east-asia-research-papers_240215.pdf.
2 Source: https://www.mnd.gov.sg/newsroom/speeches/view/round-up-speech-by-mos-tan-kiat-how-on-the-c ovid-19-temporary-measures-(amendment-no.-2)-bill-1.
3 Source : https://sprs.parl.gov.sg/search/sprs3topic?reportid=written-answer-na-7239.
4 Low, S.P. (2015), “The Myth of Low Construction Productivity,” The Straits Times, Jun 2. This is, of course, a minority position, and the very need to address this as a “myth” points to how widespread the notion of low construction productivity is.
5 Ofori, G., Z. Zhang & F.Y.Y. Ling (2020), “Key Barriers to Increase Construction Productivity: The Singapore Case,” International Journal of Construction Management (forthcoming); Tan, W. (2000), “Total Factor Productivity in Singapore Construction,” Engineering Construction and Architectural Management 7: 154–58.
6 Construction Productivity Taskforce (1992), Raising Singapore’s Construction Productivity, Singapore: Construction Industry Development Board.
7 Singapore Contractors Association (2016), Construction Productivity in Singapore Effective Measurement to Facilitate Improvement, Singapore: SCAL.