But, he cautioned in the blog post, the pace must be managed to avoid prompting firms to relocate which may cause retrenchment and higher unemployment among Singaporeans.
According to manpower statistics for the first half of this year, the number of Employment Pass (EP) holders dipped from 175,400 to 174,700 - the first half-yearly reduction since recession hit in 2009.
However, the number of work permit holders, excluding maids, rose by 20,600.
Overall, the growth in foreign manpower, excluding maids, slowed to 34,100, a 7 per cent drop from the growth registered in the first half of last year.
The decrease comes even as the total foreign labour workforce currently climbed to 1,234,100 - the highest since 2007.
Tan said the contraction in EPs, for instance, could be traced to tighter requirements - such as a higher minimum salary - which kicked in at the start of this year.
"Our adjustments are beginning to be felt at the professional-managerial-executive (PME) level. It is likely that companies are using S Passes to bring in more junior-level PMEs," he said.
The number of S Pass holders rose from 113,900 last year to 128,100 as of June this year. These are for mid-level workers earning at least S$2,000 (US$1,600) a month.
As for work permit holders, excluding maids, much of the inflow was linked to foreign construction workers. Tan said the Housing Board would need about 30,000 workers to meet this year's building programme. This could rise to about 50,000 within the next few years, he added.
Although Singapore is on the right track to reduce foreign labour dependency, he said how long it takes will depend on the extent of the Government's tightening measures that have included higher levies, and how swiftly firms restructure and boost productivity.
"Singapore cannot grow our foreign workforce without limits, given our land, infrastructure and social constraints," he said. "But to shrink our foreign workforce altogether will also be quite dire as our companies may close, (leading) to a sharp rise in retrenchments."
He said efforts to boost productivity must continue. Productivity was negative in the last three quarters as job creation outstripped gross domestic product growth.
Noting that one reason for negative productivity was the ready availability of low-cost foreign labour, he said: "I'm not aware of any country with high productivity levels which has easy access to low-cost labour."
He also outlined the need to create more quality jobs for Singaporeans as they get more educated, and generate sufficient income to fund various government expenditures for citizens.
Bank of America Merrill Lynch economist Chua Hak Bin called the lack of productivity growth worrying as it suggested that firms were slow to adapt. Noting that construction and S Pass holders were driving a large part of employment growth, he said: "Construction workers are probably here on a temporary basis and will likely leave when the projects are over. That should dispel some concerns about the recent increase in foreign worker numbers."-Asia News Network (October 01, 2012)
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