"The inflow of foreign workers into the economy has proved to be a buffer for the local workforce," the Ministry of Manpower said in a report.

"During the growth period of 1993 to 1997, foreigners helped meet the shortage of workers, enabling the economy to grow beyond the confines of Singapore's indigenous resources.

"In the difficult years of 1998 to 2003, foreigners bore the brunt of the losses suffered."

Singapore, a tiny Southeast Asian city-state, has relied heavily on foreign workers in its rise from an economic backwater to one of Asia's most modern countries.

Foreign professionals such as bankers and computer specialists occupy middle and senior positions while labourers from Bangladesh, Sri Lanka and other poor countries perform many menial tasks shunned by Singaporeans.

The presence of foreign workers was widely questioned when the city-state slipped into a prolonged slump that started with the 2001 recession, with locals expressing concern about the perceived job threat.

The Manpower Ministry report, which breaks down the analysis between the boom years of 1993-1997 and difficult period from 1998-2003, said that was not the case.

"Foreigners moved into the manufacturing jobs not taken up by locals," it said.

"At the higher end, the inflow of foreigners helped meet the demand for expertise and skills that were lacking locally, enabling the economy to grow strongly."

The report pointed out that foreign employment contracted by 43,700 when the economy was weak in 2001, while locals actually saw a gain in employment of 20,700.

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