SINGAPORE:Singapore said Monday it will raise levies to curb the hiring of foreign workers, amid growing unease among locals over the influx of guest workers and immigrants in recent years.

The phased-in increase from July 1 is aimed at reducing dependence on foreign workers, who already comprise almost a third of the city-state's total workforce, Finance Minister Tharman Shanmugaratnam said.

"We should moderate the growth of the foreign workforce and avoid a continuous increase in its proportion of the total workforce," he said in presenting the 2010 fiscal year budget in parliament.

"There are social and physical limits to how many more (foreign workers) we can absorb."

But instead of imposing quotas, Shanmugaratnam said the government will raise the levies paid by companies for every worker they hire.

"This allows the foreign workforce to fluctuate across the economic cycle and enables employers who are doing well and need more foreign workers to continue to hire them rather than be constrained by fixed quotas."

He said the rise in the levies will be phased-in over the next three years.

The government will allot 5.5 billion Singapore dollars (3.9 billion US) in the next five years to help upgrade the skills of local workers to boost their productivity, resulting in higher salaries.

The move to slow the influx of guest workers follows a recent public backlash over Singapore's open-door policy, with locals complaining that they were having to compete for jobs, housing, medical care and other needs.

Foreign workers have also been blamed for soaring property prices.

Singapore had earlier taken steps to sharpen the distinction between locals and permanent residents in a bid to placate criticism that immigrants were getting almost the same benefits.

Singapore's first Prime Minister Lee Kuan Yew recently warned against reducing the number of foreign workers drastically, warning of "low growth, maybe even zero growth" for Singapore as a result.

However, analysts said the move to raise the levy will affect labour-intensive sectors but will ultimately benefit the economy.

"In the short term, it will be more expensive for labour-intensive businesses... like construction," said Ho Woei Chen, an economist with United Overseas Bank.

"But in the long-term, it will push the economy towards higher productivity business activities," she told AFP.

Much of Singapore's growth over the past decade took place between 2004 and 2007 when gross domestic product grew an average 8.0 percent a year.

The workforce surged 5.0 percent annually during those four years, with foreigners accounting for about half of that growth, said Shanmugaratnam.