SINGAPORE - Last year, the number of foreigners working in Singapore, excluding maids, saw the biggest drop in 15 years.

This comes after the Government progressively tightened measures such as levies and minimum salary levels for foreign work passes over this decade.

In recent years, there have also been more efforts targeted at getting employers to consider Singaporeans fairly for higher-skilled job openings, as the local workforce becomes better educated.

But while local workers are faring better, local businesses are concerned about rising costs and the unavailability of talent, especially in manual jobs or niche fields.

This week's Insight looks at the pros and cons of a reduced inflow of foreigners.

1. What are the benefits of a tighter foreign manpower policy?

The key benefits are higher productivity growth and a greater impetus to raise the skill levels of the local workforce as well as expand local employment.

Due to the tighter labour market, businesses have been forced to automate where they can and improve productivity. More efficient operations will help the economy cope with slowing employment growth.

Support schemes have been rolled out to help employers hire and develop local staff, and employment for locals has been improving over the past two years.

It went up by 21,300 last year, especially in sectors which have a higher share of professionals, managers, executives and technicians. These include the financial and insurance services, infocomm technology, professional services and healthcare sectors.

Local workers also benefit from skills training and the chance to move into higher roles.

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2. What are the downsides of a tighter foreign manpower policy?

Some employers are struggling amid a lower supply of workers and higher wage costs.

While businesses in certain industr ies have been able to automate their processes, it is not as easy in some services industries and in construction, which still rely quite heavily on labour. For more manual jobs, bosses cannot find Singaporeans willing to do the work.

In other cases, especially in high-tech fields where locals do not have enough experience and deep skills, the tighter measures can constrain companies' ability to grow and compete globally if they cannot access the skills they need.

Another concern is that a lack of talent or the administrative costs of compliance with rules to protect local workers - such as the need to advertise certain roles on the national Jobs Bank for at least 14 days - may hurt Singapore's attractiveness as a business hub.

3. How sustainable is the tighter foreign manpower policy?

Manpower Minister Lim Swee Say has said that the goal is to sustain annual economic growth of about 3 per cent, comprising productivity growth of 2 per cent and employment growth of 1 per cent.

With Singapore's working-age citizen population set to decline after 2020, even with immigration, many are wondering where the additional workers will come from.

But opening the door too wide to foreigners can result in unhapiness among residents.

The Government has said it will exercise some flexibility when it comes to bringing in foreign professionals with niche skills, if the aim is for them to build up expertise among locals.

DBS economist Irvin Seah also said he expects some loosening of the policies targeting lower-skilled foreign workers who do jobs that locals do not wish to, especially as the resident workfore becomes higher-skilled over time.

Read the full Insight here.