General Information

Economic Indicators

Trade Indicators

Economic Overview

Singapore's highly industrialised economy is one of the most open in the world and this, combined with an affluent population and its role as a gateway to Southeast Asia, makes it a very attractive trading market. Government is highly interventionist in the economy, not only through its macro- and microeconomic policies but also through its ownership of firms in many sectors. 1

Although government has indicated a desire to liberalise and restructure the financial services sector, there are no signs of it relinquishing control over other sectors of the economy. 2

Trade has grown rapidly in recent years. Except for the very occasional slowdown, annual levels of trade have regularly recorded double- digit expansion, equalling approximately three times GDP. 3 Singapore maintains very few import duties or non-tariff barriers to trade. The country's role as a regional commercial hub is underscored by the fact that about 37% of Singapore's total imports are re-exported. 4

Despite the region's economic problems Singapore's strategy remains to export as much as possible and it puts few barriers in the way of imports. Singapore remains keen to encourage further trade liberalisation through ASEAN and APEC. 5

Regulatory Environment

Tariffs are minimal; 96% of goods enter Singapore duty-free. Singapore still maintains significant tariffs on cigarettes, alcoholic beverages, automobiles and gasoline to discourage their use. 6 According to tariff studies by the WTO, Singapore's import duties - most of which are levied at 5% ad valorem - are maintained on only 509 out of 5799 tariff lines. 7

Singapore imposes no quota restrictions, and most goods may be imported under open general licence. 8

Singapore has one of the world s most open investment regimes, and encourages foreign investment, particularly in leading-edge technologies. 9 Investment in high value-added industries is encouraged in an effort to overcome a chronically tight labour market and maintain the Republic's competitive edge. 10

Singapore's economy is based on free enterprise with strong government participation and guidance and transparent investment policies. There are no taxes on capital gains and no restrictions on foreign ownership of businesses. Foreign investors are not required to take on private or official joint ventures or cede management control to local interests. Government policies encourage local firms to form strategic partnerships with multinational corporations (MNC's), especially in high technology activities.

The government has long realised that Singapore's economic interests are best served by welcoming MNCs and allowing them to operate with a minimum of constraints. Restrictions on equity, licensing and joint ventures are negligible. Moreover, local business, the media and the general public strongly welcome foreign investment. 11

Singapore's regulatory environment is characterised by clarity, fair competition and sound business practice. Prior to implementing any law or regulation, the Government usually consults relevant bodies and agencies, companies and the public. Tax, labour, banking and finance, industrial health and safety, arbitration, wage and training rules and regulations are formulated and reviewed with the interests of foreign investors and local enterprises in mind.

Current Process of Liberalisation

There are restrictions in a few sectors, including legal services, banking services, some telecommunications services, professional engineering services and trade in tobacco products. However, the Government is gradually allowing more freedom for market forces in the economy, as can be seen in its plan to privatise the telecommunications and public utilities industries. It has also announced that it will relax its regulations on professional engineering services. In the area of intellectual property rights, the Singapore Government does have laws to protect against piracy and copyright infringement, but it relies on the private sector to take the lead against transgressors. In general, Singapore maintains one of the most liberal trading regimes in the world.

In response to the regional economic crises the government has embarked on a process of rationalisation in the financial services sector by encouraging bank rationalisation and mergers, "although the opening up of the domestic banking market to foreign competition will take some time." 12

Since January 1993, Singapore has participated in the ASEAN Common Effective Preferential Tariff (CEPT) Scheme for the ASEAN Free Trade Area (AFTA). The Scheme involves the application of preferential tariffs to goods of ASEAN origin as defined under the Rules of Origin for CEPT. Under the rules, a product is of ASEAN origin if it is wholly produced or obtained in an ASEAN country. The product can also be deemed to originate from ASEAN Member States if at least 40% of its content originates from any member states. The 40% local content requirement refers to both single country and cumulative ASEAN content. 13

1. Country Profile: Singapore: 1999-2000 (Economist Intelligence Unit, London, 1999), p. 16.
2. Ibid..
3. CIA World Factbook 1997, (http://www.odci.gov/cia/publications/factbook/coimtry-frame.html).
4. Ibid..
5. Country Profile...1999-2000, p. 31.
6. CIA World....
7. Country Reference: Investing, Licensing & Trading Conditions in Singapore: 1997, (The Economist
   Intelligence Unit, London, 1997), p. 38.
8. Ibid..
9. CIA World....
10. Ibid..
11. Country Reference..., p. 8.
12. Country Profile...1999-2000, pp. 28-29.
13. CIA World....