MORE foreign law firms are to be allowed to practise in Singapore under a scheme that aims to build on the Republic's status as a legal hub.

They will be licensed to operate in areas such as corporate cases, but must employ a minimum number of local lawyers.

The aim is to develop the sector, while giving Singaporeans employed by the foreign firms more international exposure.

A second round of licences will be issued to companies from overseas later this year as part of the Qualifying Foreign Law Practice scheme, the Government announced yesterday.

The programme was introduced in 2008, when six firms were licensed.

This set them apart from other foreign law companies here, which are either barred from practising Singapore law or allowed to do so only if they team up with a local firm.

Each of the six had to generate a minimum amount of income from work that would otherwise be done abroad.

In the two years from 2009, their total gross revenue in Singapore grew by 25 per cent.

Meanwhile, the legal sector's contribution to the economy has increased from $1.4 billion in 2007 to $1.8 billion last year - despite the global slowdown.

Yesterday, Law Minister K. Shanmugam made clear that only the best would be granted licences. 'We want to make sure of the quality, we are looking for firms that can add value and bring new work from overseas into Singapore and add a significant premium to our legal scene.'

The scheme stemmed from a 2007 report by a high-level committee that called for the legal services sector to be liberalised.

Many lawyers from the top firms strongly supported the move. However, the report said some feared Singaporean law practices could end up being marginalised and out-manoeuvred by the foreign competition.

Mr Shanmugam said he also had reservations at first. This was why the foreign firms were licensed only on the condition that they bring in work that is usually done outside Singapore.

'If, by opening up, all we get is work being moved from local law firms to foreign law firms, how does that benefit Singapore? The result must be that new work should come in. The pie must grow bigger.'

He added that despite the concerns, Singapore law firms have held their own.

'It has given them some confidence that if they bulk up and they know the market they can compete effectively.'

Lawyers said they were not surprised that the scheme was being extended as the move had been expected for some time.

Rajah & Tann managing partner Lee Eng Beng said: 'Singapore firms will have to think about how best to compete, present the best proposition to their clients, and retain their share of the market and the talent pool.'

The Law Ministry said the minimum number of local lawyers that the firms had to employ were targets based on each company's business projections.

It added that how many licences are awarded at the end of the year will depend on the quality of applications received.