Return to: Index of "1993 Country Reports on Economic Practice and Trade Reports" ||
Index of "Economic and Business Issues" || Electronic Research Collections Index || ERC Homepage


TITLE:  SINGAPORE ECONOMIC POLICY AND TRADE PRACTICES
DATE:  FEBRUARY 1994
AUTHOR:  U.S. DEPARTMENT OF STATE

                            SINGAPORE

                     Key Economic Indicators
    (Millions of Singapore dollars unless otherwise indicated)

                                  1991      1992      1993 est.
Income, Production,
 and Employment

Real GDP (1985 prices)            60,884    64,416    69,569
Real GDP Growth (pct.)              6.7       5.8       8.0
GDP (current prices)              69,451    74,822    81,590
By Sector: (1985 prices)
 Agriculture                         161       162       156
 Energy and Water                  1,370     1,430     1,487
 Manufacturing                    17,458    17,868    19,343
 Construction                      3,691     4,341     4,599
 Commerce                         10,677    11,034    11,621
 Transport and
  Communications                   8,758     9,562    10,289
 Financial Services               15,771    16,625    18,161
 Other Services                    6,280     6,597     6,883
 Govt. Devmt. Exp.
  on Health and Education            507.3     724.3     743.0
 Net Exports of Goods and
  Services                         6,641     5,822     4,829
Real Per Capita GDP (US$)         12,992    14,435    15,498
Labor Force (000's)                1,554     1,576     1,641
Unemployment Rate (pct.)            1.9       2.7       2.5


Money and Prices

Money Supply (M2)
 (pct. growth)                     12         9         3.6
Base Lending Interest rate /1       7.1       5.6       5.4
Prime Personal Saving Rate          3.1       1.8       1.6
Retail Inflation
 (sales volume index, 1991-100)   100.0     109.7     114.4
Wholesale Inflation
 (1985-100) /2                     86.3      82.5      81.1
CPI (1988-100)                    110.0    112.5   114.9
Exchange Rate S$/US$
 Official                          1.73      1.63      1.61


Balance of Payments and Trade
(in million of U.S. dollars)

Total Exports (FOB)               56,739    61,531    68,200
  Exports to U.S.                 11,620    13,361    15,365
Total Imports (CIF)               60,861    66,428    74,730
  Imports from U.S.               10,422    11,865    13,350
Aid from Other Countries               0         0         0
External Public Debt                  23.5      26        33.6
Debt Service Ratio /3                  0.1       0.1        0.1
Gold and FOREX Reserves           55,324    65,239    72,545
Trade Balance /4                  -4,122    -4,897    -6,530
  Balance with U.S.                1,198     1,496     2,015


Note:

1/ Refers to actual average interest rate quoted by 10 leading
banks.
2/ Refers to manufactured products price index.
3/ Percent of total exports of goods and services.
4/ Merchandise trade

Source:  Government of Singapore official publications.



1.  General Policy Framework

    Singapore is an island nation with only 3.2 million people
and no natural resources, except for a magnificent harbor and a
skilled and hard-working labor force.  Trade and shipping have
been its lifeblood since its founding as a British colony in
1819.  At independence in 1965, facing a dearth of physical
resources and a small domestic market, the Government of
Singapore had no realistic alternative but to adopt an
outward-looking, export-oriented economic policy that
encourages two-way flows of trade and investment.  That policy
has been a resounding success.  Total trade in 1992 was three
times the country's gross domestic product (GDP), and Singapore
has become a major center for electronics, oil refining and
financial services, acting as a hub for the growing southeast
Asian market.  Real GDP growth, which averaged seven percent
annually over the last decade, slipped to 6.7 percent in 1991
and 5.8 percent in 1992.  However, the economy has rebounded in
1993, with growth expected to reach about eight percent.

    Singapore's formula for success has been an open trade and
investment environment; a corruption-free, pro-business
regulatory framework; political stability; public investment in
infrastructure; high savings and prudent fiscal management;
efficient, and strike-free labor; and significant tax
concessions to foreign investors.  The government has run a
budget surplus for most years since independence.  The
country's considerable reserves are conservatively invested and
well protected.  Compulsory savings in the form of employer and
employee contributions to the central provident fund (a form of
social security) have formed the basis of a national savings
rate exceeding 46 percent of GDP.

    The Monetary Authority of Singapore (MAS), the country's
central bank, engages in limited money market operations to
influence interest rates and ensure adequate liquidity in the
banking system.  There are no controls on capital movements,
limiting the scope for an independent monetary policy.  In
fact, the government does not set targets for monetary
aggregates.  Money supply and domestic interest rates are
primarily determined by international, rather than local,
conditions.  The exchange rate is the MAS's most important tool
for controlling inflation.

    Although inflation is moderate by international standards,
an acute labor shortage has induced a sharp run-up in wages. 
The MAS has kept inflation relatively under control to date by
maintaining a strong currency.  This could erode the export
competitiveness of certain industries in the long run.  The 
government is therefore encouraging industry to move more
labor-intensive operations offshore while promoting services
and high-technology industries at home.  Despite the strong
growth figures for 1993, the government appears to have
succeeded in engineering a gradual slowdown to a more
sustainable economic growth rate of five to seven percent.


2.  Exchange Rate Policies

    The MAS uses currency swaps and direct purchases or sales
of foreign exchange (principally U.S. dollars) to keep the
Singapore dollar within a desired trading range with respect to
an undisclosed trade-weighted basket of currencies.  The U.S.
dollar is the bench mark currency.  Exchange rates with other
currencies are determined by the daily cross rates in the
international foreign exchange markets.  The Singapore dollar
is freely convertible, and there are no multiple rates. 
Forward quotations against the world's major currencies are
available in the active local foreign exchange market.

    The Singapore dollar has appreciated nearly 20 percent
against the U.S. dollar since 1988 due to the MAS' ability to
restrain inflation in the face of rising wages.  This has made
U.S. products more competitive in the Singapore market.  In
1993, the U.S. dollar hit an all-time low of S$ 1.57, down from
S$ 2.18 at the end of 1986.  There has been little apparent
impact on Singapore's export performance to date.  Singapore
lifted all restrictions on foreign exchange transactions and
international capital movements in 1978 and places no
restrictions on reinvestment or repatriation of earnings and
capital.


3.  Structural Policies

    Singapore's prudent economic policies have allowed for
steady economic growth and a reliable market, to the benefit of
U.S. exporters.  Singapore was the 11th-largest U.S. export
customer in 1992.

    Prices for virtually all products are determined by the
market.  Singapore's tax policy is designed to maintain its
international competitive position.  Foreign firms are taxed on
the same basis as local firms.  As of 1993, the corporate tax
is 27 percent.  There are no taxes on capital gains, turnover,
or development.  However, the government will institute a new
three percent value-added tax on goods and services beginning
in April 1994.  The government maintains tariffs on a few
products (notably automobiles) and levies excise taxes on
cigarettes, alcohol, petroleum products and motor vehicles
aimed at curbing socially "wasteful" behavior and a burgeoning
vehicle population.  There are no non-tariff barriers to
foreign goods.

    Many of Singapore's public policy measures pertaining to
the economy, public finance, trade, industrial expansion,
immigration and education are aimed at attracting foreign
investment and maintaining an environment that is conducive to
their operation and profitability.  Investment policies are
direct and designed to benefit both parties.  Although the
government seeks to develop more high-tech industries, it does
not impose production standards, require purchases from local
sources, or specify a percentage of output for export.

    This sound economic policy has attracted U.S. investment
totalling over $6.6 billion (on an historical cost basis). 
Almost 900 U.S. companies have operations in Singapore, and a
significant share of U.S.-Singapore trade is accounted for by
intra-company transfers.  Typically, U.S. firms ship components
and capital goods to plants in Singapore, and finished products
are re-exported to the United States.  Overall, multinational
firms account for nearly three-fourths of Singapore's export
production.  Recognizing the link between investment and trade
patterns and the danger of relying excessively on a single
market, Singapore has sought to diversify its export markets in
recent years by balancing its sources of foreign investment. 
Yet the United States still accounts for one-fifth of
Singapore's total trade and over a quarter of Singapore's
exports (excluding re-exports).

    Over the last few years, the government has emphasized the
importance of restructuring Singapore to maintain its
competitiveness in the face of growing competition of its lower
cost neighbors, including the emerging economies of Vietnam and
China.  The 1993 budget reflected this priority.  Although the
government allocated additional funding for educational and
health care endowments (Edusave, Medisave), the thrust of the
new budget was on measures to increase savings, investment, and
exports, notably the new three percent goods and services tax
that takes effect in April 1994 coupled with rebates and cuts
in income taxes (from 33 to 30 percent for the top rate) for
individuals.  The government also reduced the corporate tax to
27 percent and, as part of its "regionalization" drive, offered
numerous new tax incentives to firms that invest abroad.

    In order to reduce reliance on foreign labor, the
government maintains differing recruiting limits and levy rates
based on skill levels for industry.  Levies can impose a
considerable financial burden, but are also a powerful
incentive for low-technology, labor-intensive activities to
move to neighboring countries.


4.  Debt Management Policies

    Singapore's external public debt was a mere $24 million at
the end of 1992, and its debt service ratio is less than 0.1
percent of its total exports of goods and services.  The
country has run current account surpluses for most of the past
decade, and thanks to steady inflows of investment capital, it
has enjoyed overall balance of payments surpluses for
practically its entire independent history.  Official foreign
reserves have grown sharply in recent years, topping $41
billion in the first quarter of 1993 -- about $12,900 per
capita.  Singapore is now using a portion of those accumulated
reserves to expand its direct investments overseas, both within
Southeast Asia and farther afield in China, Europe and North
America.


5.  Barriers to U.S. Exports

    Singapore maintains one of the world's most open trade
policies.  About 95 percent of imports enter duty-free.  Import
licenses are not required, customs procedures are minimal, the
standards code is reasonable and the government actively
encourages foreign investment.  All major government
procurements are by international tender.

    U.S. exports to Singapore rose sharply (19 percent) in 1992
to $11.9 billion.  Imports from Singapore, meanwhile, surged by
20 percent to $13.4 billion.  After shrinking to -$1.2 billion
in 1991, the U.S. trade deficit with Singapore has grown to
-$1.5 billion.

    Singapore maintains some market access restrictions in the
services sector.  For example, foreign investment in the
financial, legal, insurance and stockbroking services sectors
is limited by regulation and administrative practice.  Local
retail banking is limited to those foreign banks with full
licenses -- the Monetary Authority of Singapore has issued no
new ones since 1970.  Foreign banks are not allowed additional
branches or off-premises automatic teller machines,
restrictions which do not apply to local banks.

    Foreign legal firms are not allowed to hire or form
partnerships with local law firms.  Insurance and stockbroking
firms are required to apply for licenses; no new insurance
license has been granted for several years.  Foreign
participation is also prohibited or limited in a number of
sensitive sectors, such as arms manufacturing, airlines, mass
transit, broadcasting, public utilities, and property. 
Engineers and architects have experienced problems in obtaining
local certification of their professional qualifications.

    The parastatal Singapore Telecom maintains a 15-year
monopoly (beginning 1992) on all "basic telecommunications
services," except cellular services in which it has a 5-year
monopoly.  Although the Telecommunications Authority of
Singapore, a new regulatory body created in 1992, is expected
to continue to restrict sale of value-added network services by
broadly defining the scope of "basic services," gradual
liberalization of telecommunications policy is likely to
continue.  One example of a step in that direction was the
elimination in 1992 of volume-sensitive charges on the sale of
leased-line data services to third parties.  Authorities began
selling Singapore Telecom shares to the public in November 1993
as part of a gradual privatization of the company.

    U.S. cigarette manufacturers note that the structure of
import duties and excise taxes on tobacco products effectively
discriminates against imported cigarettes.  The duty on an
imported cigarette is based on its full weight (including the
paper and filter), whereas local cigarette manufacturers pay
duty only on the tobacco.  U.S. industry sources estimate this
puts them at a disadvantage of S$ 6.39 per kilogram, roughly
equivalent to a three percent tariff.

    Singapore's Economic Development Board uses tax and other
incentives to attract investment in areas favored in its master
development plan.  But this does not appear to have had an
adverse effect on U.S. trade or investment.  In fact, a number
of U.S. firms have profited from the incentives.

6.  Export Subsidies Policies

    Singapore does not subsidize exports, although it does
actively promote them.  The government offers significant
incentives to attract foreign investment, almost all of which
is in export-oriented industries.  It also offers tax
incentives to exporters and reimburses firms for certain costs
incurred in trade promotion.  But it does not employ multiple
exchange rates, preferential financing schemes,
import-cost-reduction measures or other trade-distorting policy
tools.


7.  Protection of U.S. Intellectual Property

    Singapore enacted strict, comprehensive copyright
legislation in 1987, following close consultations with the
U.S. Government.  The new law relaxed the burden of proof for
copyright owners pressing charges, enacted stronger civil and
criminal penalties and made unauthorized possession of
copyrighted material an offense in certain cases.  The
trademark law was similarly strengthened in January 1991, and
the government is reportedly considering legislation to improve
patent protection as well.

    U.S. manufacturers have set the pace in cracking down on
copyright violations under the new system, which relies heavily
on copyright owners to combat infringement.  Industries or
individuals discovering pirating may seek civil remedies or
criminal prosecution.  Some pirating operations have shut down,
and in July 1993, the government for the first time arrested
suspected software pirates.  However, concerns remain with
regard to the adequacy of enforcement, particularly as computer
software piracy remains widespread.  U.S. pharmaceutical
manufacturers complain that a loophole in Singapore's
patent law (Compulsory License Act) allows government hospitals
to buy "copycat" drugs when convenient, resulting in
considerable sales losses for patent holders.  Official
consultations are ongoing in the context of the U.S.-Singapore
bilateral trade and investment framework agreement on how to
improve Singapore's record on intellectual property rights
protection.


8.  Worker Rights

    a.   Right of Association

    Singapore's Constitution gives all citizens the right to
form associations (Article 14), including trade unions. 
Parliament may, however, impose "such restrictions as it
considers necessary or expedient in the interest of the
security of Singapore or any part thereof, public order or
morality."  The right of association is delimited by the
Societies Act and labor and education laws and regulations.  In
practice, Communist labor unions are not permitted.  The
national work force comprises about 1.6 Million workers, of
which some 229,000 are organized into 83 trade unions.  Some 74
of these, representing almost 99 percent of unionized workers,
are affiliated with an umbrella organization, the National
Trade Union Congress (NTUC), which has a symbiotic relationship
with the government.

    b.   Right to Organize and Bargain Collectively

    The Trade Unions Act authorizes the formation of unions
with broad rights.  Collective bargaining is a normal part of
management-labor relations in Singapore, particularly in the
manufacturing sector.  On average, collective bargaining
agreements are renewed every two to three years.

    c.   Prohibition of Forced or Compulsory Labor

    Singapore law forbids the use of forced or compulsory
labor, and such labor is not found in Singapore.

    d.   Minimum Age of Employment of Children

    The government enforces the Employment Act which prohibits
the employment of children under 12 years and restricts
children under 16 from certain categories of work.

    e.   Acceptable Conditions of Work

    The Singapore labor market offers relatively high wage
rates and working conditions consistent with accepted
international standards.  However, Singapore has no minimum
wage or unemployment compensation.  Because of a continuing
labor shortage, wages have generally stayed high.  The
government enforces comprehensive occupational safety and
health laws.  Enforcement procedures, coupled with the
promotion of educational and training programs, have reduced
the frequency of job-related accidents by one-third over the
past decade.  The average severity of occupational accidents
has also been reduced.

    f.   Rights in Sectors with U.S. Investment

    U.S. firms have substantial investments in several sectors
of the economy, including petroleum, chemicals and related
products, electric and electronic equipment, transportation
equipment, and other manufacturing areas.  Labor conditions in
these sectors are the same as in other sectors, except that the
labor shortage induces employers in the electronics industry to
hire many unskilled foreign workers.  The government controls
the number of foreign workers through immigration regulations
and through levies on firms hiring them.  Foreign workers face
no legal wage discrimination, but they are in general paid less
than Singaporeans.



         Extent of U.S. Investment in Selected Industries

              U.S. Direct Investment Position Abroad
                on an Historical Cost Basis - 1992
                    (Millions of U.S. dollars)

Category                                    Amount

Petroleum                                              1,213
Total Manufacturing                                    3,460
    Food & Kindred Products                      D
    Chemicals and Allied Products              319
    Metals, Primary & Fabricated                29
    Machinery, except Electrical             1,400
    Electric & Electronic Equipment          1,440
    Transportation Equipment                     D
    Other Manufacturing                        181
Wholesale Trade                                          892
Banking                                                  365
Finance and Insurance                                    369
Services                                                 276
Other Industries                                          55

TOTAL ALL INDUSTRIES                                   6,631


(D)-Suppressed to avoid disclosing data of individual companies

Source:  U.S. Department of Commerce, Bureau of Economic
Analysis.

(###)
To the top of this page