By GENEVIEVE CUA

SINGAPORE companies appear to have the highest proportion of foreign workers on their workforce at 27 per cent, a survey by KPMG International has found.

In addition, companies here are the least likely to target locals in their hiring decisions. Those who hire locals do so because they cost less and are socially more stable.

KPMG's survey polled 260 human resource decision makers in 12 countries, including Australia, China, Singapore, Japan, the UK and US.

Twenty of the respondents were in Singapore-based multinationals, each with an annual turnover of at least US$1 billion.

Globally, China was named as the top choice to start a business next year or in the next five years. Singapore was the fourth choice, after the US and India. Hong Kong was ranked fifth.

Owi Kek Hean, head of KPMG tax services (Singapore), said: 'Singapore companies seem particularly keen to compare tax regimes before deciding where to locate their operations.'

Seventy per cent of Singapore companies said tax policy was an important factor in deciding on a location. Of these, half said tax policy was more important than access to an educated workforce.

Over half of the respondents also called for direct tax incentives for foreign workers.

On government's role in helping to secure labour for companies, Asian respondents, particularly in Singapore and China, indicated that the government should play a strong role.

Among European respondents, less than 40 per cent said the government had a role to play.

Globally, seven in 10 respondents supported the idea of harmonising tax rates among countries to avoid the personal tax arbitrage that has distorted labour markets, particularly in the Asia Pacific.

Most also supported the idea of measures to make pensions portable, including a relaxation on restrictions on where pensions can be paid into and drawn from.

In a statement, Lloyd Deverall, head of tax for KPMG (Asia Pacific), said: 'Our survey shows that business is keen to move to the next stage in globalisation - a freer movement of people around the world to where they are needed. Part of the challenge for governments seeking international investment will be the measures they take to develop the local workforce and attract foreign talent.

'At a time when global confidence is at a low point, it is farsighted action that will help countries ride out the storm and lay the groundwork for future growth.'

This article was first published in The Business Times on November 20, 2008.