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Singapore. Singapore will seek to stabilize the number of foreign workers amid growing discontent about rising housing costs, crowded public transport and stagnant wages for low-income workers, a top minister said on Friday.

The government will lower the percentage of foreign workers that manufacturing and service companies can employ and continue a four-year scheme to increase immigrant worker levies, Finance Minister Tharman Shanmugaratnam said in a budget speech.

“We have to reduce our dependence on foreign labor,” Tharman told parliament. “It’s not sustainable. It will test the limits of our space and infrastructure.”

“A continued rapid infusion of foreign workers will also inevitably affect the Singaporean character of our society,” he said.

The jump in foreign workers during the last decade has become a contentious political issue in the wealthy island of 5 million people, as workers from China, India and other Asian countries have swarmed into Singapore’s growing economy looking for jobs. The ruling People’s Action Party recorded its lowest percentage of the vote since independence in 1965 in parliament elections in May.

Singapore doesn’t have a minimum wage, and opposition parties argue foreign workers help keep salaries low, especially at the expense of poorer Singaporeans. The number of foreign workers has risen 7.5 percent each year for the last two years and they now account for a third of the city-state’s work force, Tharman said.

The government has argued foreign workers do jobs Singaporeans won’t and have been necessary to boost economic growth as the local population ages and birth rates decline. However, companies are now expected to boost productivity through investment in technology and worker training rather than relying on foreign workers, Tharman said.

The government is lowering the percentage of foreign workers that manufacturing companies can employ to 60 percent from 65 percent and services companies to 45 percent from 50 percent, Tharman said.

“The easy availability of foreign labor reduces the incentives for companies to upgrade, design better jobs and raise productivity. Companies must adapt to the permanent reality of a tight labor market,” Tharman said.

The government forecasts the economy to grow between 1 percent and 3 percent this year after expanding 4.9 percent last year and 14.8 percent in 2010.

The government expects a budget surplus this year of 1.3 billion Singapore dollars ($1 billion), or 0.4 percent of gross domestic product. Higher-than-expected corporate and property tax revenue boosted Singapore’s 2011 budget surplus to 2.3 billion Singapore dollars, or 0.7 percent of GDP.

Earlier on Friday the government reported that Singapore’s exports fell for the first time in three months in January on lower electronics and petrochemical shipments, as the European debt crisis crimped demand and the Chinese New Year holiday shortened the working month.

Non-oil domestic exports slid 2.1 percent from a year earlier, after a 9 percent gain in December, the trade promotion agency said in a statement on Friday. The median of 15 estimates in a Bloomberg News survey was for a 1.6 percent decline. Shipments to Europe plunged 14.5 percent.

“It’s too early to say if exports have bottomed out as the electronics sector still remains uncertain, given there is still weakness in Europe,” said Chow Penn Nee, an economist at United Overseas Bank in Singapore. “With the US showing signs of improvement, we may see better numbers in the second half of this year for electronics.”

Singapore’s gross domestic product shrank less than initially estimated last quarter, a report showed on Thursday, suggesting that the economy is withstanding Europe’s fiscal woes.

Singapore’s exports also fell in January this year during the Lunar New Year holiday, when factories from China to Vietnam typically shut and reduce production. Demand for goods made in the region has also weakened as Europe faces its second recession in less than three years, contributing to an economic contraction in Singapore last quarter.

Singapore’s non-oil exports increased a seasonally adjusted 0.9 percent last month from December, when they rose a revised 13.5 percent, Friday’s report showed. Economists surveyed by Bloomberg had predicted a 9 percent decline.

“Though many external risks remain, we are finally seeing signs that export growth may stabilize or begin to pick up slowly in the coming months,” said Vincent Conti, a Singapore-based analyst at Australia & New Zealand Banking Group.

Policy makers from Indonesia to the Philippines have eased borrowing costs as the European crisis hurts demand for their countries’ exports. A rebound in Singapore’s shipments may be damped by Europe’s fiscal crisis.

AP, Bloomberg