Singapore risks tarnishing its business-friendly reputation by implementing new labour laws that require companies to prioritise hiring locals over foreigners for middle income jobs, analysts say.
From Friday, large and medium-sized companies looking to hire workers with a monthly salary below S$12,000 ($9,700) must advertise the positions on a government-run online job database that only Singapore citizens and permanent residents can apply through.
The job must stay open to locals for two weeks before the company is allowed to seek foreign candidates.
Many multinational corporations, from Google and Microsoft to Procter & Gamble and BP, use Singapore as their regional headquarters, attracted by the city state's political and economic stability, low taxes and ability to attract talent from across Asia and the world.
Foreigners make up around 38 percent of Singapore's 3.4 million strong workforce and the new rules are the latest in a series of government measures aimed at easing locals' worries about the growing presence of foreigners on the tiny island.
Concerns about jobs were one of the most prominent issues raised by voters at the 2011 general election, which was the most contested since Singapore's independence. The ruling People's Action Party share of the vote also slipped to around 60 percent from 67 percent in the previous election.
Economists said the foreign labour restrictions could tarnish the city-state's reputation as an open and free economy.
"There is a risk that Singapore might slide down the scale in terms of how open it is," said Chua Hak Bin, head of emerging Asia economics at Bank of America Merrill Lynch in Singapore.
Ten of 12 recruitment agencies polled by Reuters said filling vacancies has become tougher in the past year, a trend set to continue.
"Singapore's very strict policy when it comes to hiring foreigners will further exacerbate the skills shortage in Singapore," said Chris Mead, regional director at recruitment agency Hays.
Several recruiters say they expect a rise in companies moving certain departments offshore, with IT and manufacturing the most likely sectors to be affected.
Credit Suisse has already moved some back-office jobs from Singapore to India and Poland, while Deutsche Bank said in early 2013 that it was considering moving more than 8,000 staff from offices in New York, London, Hong Kong and Singapore to lower-cost locations.
The aviation industry is also struggling with labour shortages and higher hiring costs. "Manpower costs you today in Singapore," said Barathan Pasupathi, CEO of budget airline Jetstar Asia.