singapore

Singapore: Country Analysis Report – In-depth PESTLE Insights Published 08/2010

© Datamonitor. This brief is a licensed product and is not to be photocopied

OVERVIEW

Catalyst

This profile analyzes the political, economic, social, technological, legal and environmental structure in Singapore. Each of the PESTLE

factors is explored on four parameters: current strengths, current challenges, future prospects, and future risks.

Summary

Key findings

Singapore is a world leader in governance, but the government is accused of restricting the political freedom of its

citizens

Singapore's high-quality governance has played a significant role in the country's development. The honesty and

competence of the political leadership of Singapore has worked well for the economy. In addition, the country is ranked as

one of the least corrupt nations in Asia and the third least in the world, according to Transparency International’s corruption

perceptions index (2009). The political leaders in Singapore are appointed on the basis of merit and capabilities.

Meritocracy is followed in both politics and bureaucracy. The high quality of political leadership that the country offers has

reinforced the people’s traditional respect for distinguishing between inherited and created factors. These conditions have

enabled the country to develop competitive advantages in several areas like manufacturing and services to attract FDI.

Most of the competitive advantages of the country have been developed under the astute leadership of the PAP

government. The ability of the government to create strong economic fundamentals has been one of the strengths of the

country.

However, the government is accused of restricting the political freedom of its citizens. The government is bent on retaining

restrictions on freedom of speech, commonly known as out-of-bounds markers. These refer to limits on matters that can be

discussed in public, including religion and race. The deliberately ambiguous nature of these limits indicates the prevalence

of self-censorship, particularly criticisms raised against the PAP. The ruling party also regularly uses the country's

defamation laws to undermine its critics.

COUNTRY ANALYSIS REPORT

Singapore

In-depth PESTLE Insights

Publication Date: August 2010

Overview



Set for strong growth in 2010, but industries may be impacted by the low external demand

The economy of Singapore is set for a strong growth in 2010 as the first and second quarters showed high growth rates.

According to official estimates, in the second quarter of 2010, the economy expanded by 18.8% on a year-on-year basis,

following a 16.9% growth in the first quarter. Although the growth momentum will not be as strong in the second half of

2010 as it was in the first half, Datamonitor estimates that the economy will grow by 6% in 2010.

However, being a highly trade-dependent economy with one of the highest trade to GDP ratios in the world, Singapore

industries may be impacted by the low level of demand in its overseas export markets. According to Datamonitor estimates,

Singapore recorded a trade surplus of $5 billion in 2009. According to the Singapore’s Trade Development Board, the

average rate of export growth in 2010–11 will be slower than it has been in the recent past as economic recovery in

Singapore’s main export markets is expected to be gradual.

Strong performance of the education sector, but income inequality is a major concern

The government has given special significance to education, allocating nearly one-fifth of the country's annual budget to the

sector. The strong support given to the educational sector has provided the country with a skilled labor force and highly

trained scientific personnel. Furthermore, the country's brand of education is attracting interest from traditional educational

strongholds like the US, the UK, and Australia, and many universities from these countries have tied up with Singapore

University for exchange programs.

The biggest criticism of Singapore's social strategy is its immigration policy, which takes a conservative approach towards

population growth, while allowing people willing to work for minimum wages to settle in the country. This policy has resulted

in the creation of a growing income gap for those at the bottom of the economic pyramid. Despite a GDP per capita of

$52,200 (PPP) as of 2009 (second only to Japan in Asia), Singapore suffers from high income inequality. According to

Singapore's Household Survey and the World Bank's Gini coefficient rating (a measure of income inequality between zero

and one with zero corresponding to absolute equality), in Singapore has came down from 0.43 in 1998 to 0.48 in 2008.

Singapore has emphasized R&D in the recent past, but the innovation output in terms of patents granted remains

low

The Singapore’s government has been building R&D capabilities in the country by increasing R&D investment. Gross

Expenditure on R&D (GERD) has increased from 2.52% of GDP in 2007, to 2.77% of GDP in 2008. An increase in R&D

investment has also led to an increase in the number of research personnel. The research scientist and engineers per

10,000 working members for 2008 was 87.6. The government will continue its efforts in 2010; the development budget for

the A*STAR program (Agency for Science, Technology and Research) in FY2010 is pegged at $1.24 billion. A*STAR’s

Science and Engineering Research Council’s (SERC) research institutes participated in 222 projects with 146 companies in

2009. Going forward, A*STAR will continue to be involved in industry development efforts.

The number of patents granted to Singapore is very low compared to other developed countries around the world.

Singapore was granted 493 patents by the US Patent Trademark Office (USPTO) in 2009. In terms of patents, Singapore

lags behind other developed countries such as South Korea (9,566 patents granted in 2009), Japan (38,066 patents), the

US (92,001) and Germany (10,086). Although the country has been performing well economically, it lags behind in terms of

registering intellectual property rights.

Overview



Singapore has a business-friendly environment, but political interference in judicial decisions is high

Singapore has a very open and business friendly economy. It ranks second in the world on the 2010 Index of Economic

Freedom (a product of the Heritage Foundation and Wall Street Journal). The index takes into consideration various

parameters like business freedom, trade freedom, investment freedom and labor freedom. Starting, operating and closing a

business are very easy in the country, and the labor market is flexible. The country also ranks first in terms of the ease of

doing business according to the World Bank's Doing Business report (2010).

The judiciary of Singapore is often alleged to buckle under political pressure. There have been doubts about its impartiality

in cases of arbitration where the government is one of the concerned parties. This is more so in non-commercial cases like

public law, where the judiciary has been accused of being compliant with the interests of the government. The PAP has

often used defamation cases against members of the opposition and the media and sought large damages which have

effectively silenced dissenters. Political interference in judicial decisions is currently jeopardizing the judicial freedom of the

country.

Singapore has rich biodiversity, but CO2 emissions are on the rise

Singapore, by virtue of its tropical location, has rich biodiversity. But the country has suffered a great deal of biodiversity

loss due to urbanization ever since it became a trading post in the 19th century. To address this issue, the government of

Singapore has made efforts to conserve the remaining habitats, flora and fauna. In 1995, the country ratified the

Convention on Biological Diversity, which was formed during the 1992 Rio Earth Summit. Under the convention, Singapore

has set a target to be achieved by 2010 to halt the rate of its biodiversity loss. Conservation of nature is one of the focus

areas under the Singapore Green Plan (SGP) 2012 as well. The SGP 2012 lists several action points concerning the

conservation of nature areas, interconnecting nature parks, raising biodiversity awareness and creating a biodiversity hub.

However, emissions of greenhouse gases have been on the rise in Singapore. As per Datamonitor estimates, the level of

CO2 emissions increased from around 110.3 million metric tons in 2002 to over 153 million metric tons in 2009. The

manufacturing industries and vehicular emissions accounted for 70% of Singapore's overall greenhouse gas emissions.

Electricity generation is the biggest source of carbon dioxide emissions in the country, followed by industries and

transportation. At this rate, CO2 emissions are projected to increase further to reach 175.2 million metric tones by 2013.

PESTLE highlights

Political landscape

• In August 2010, Taiwan and Singapore began trade talks on signing a free trade pact. The stakeholders are in

the process of exploring the feasibility of signing the economic cooperation agreement under the framework of

the World Trade Organization (WTO).

• Relations between Singapore and Malaysia have improved since the resolution of the 20–year railway land issue

between the countries.

Overview



Economic landscape

• Under the Productivity and Innovation Credit (PIC) program, the government provides a substantial tax deduction

to companies on R&D related expenditure.

• The government plans to spend $2.5 billion over 2010–15 on Continuing Education and Training (CET) to

develop expertise in several professions.

Social landscape

• Singapore has witnessed declining birth rate. The average birth rate (number of births per 1000 population) for

males and females dropped from 16.8 in 1990 to 11.06 by 2001. As per 2010 estimates, the birth rate has further

reduced to 8.8.

• In 2010, the government introduced a three-year Workfare Training Scheme (WTS) to support unemployed

people or those with very low skills.

Technology landscape

• Singapore envisions becoming an information society by 2015. Through the strategy Singapore i2015, the

government is making efforts to stimulate the demand for ICT services by sponsoring programs such as e-

learning, e-health, and e-government.

• According to the World Economic Forum’s Global Information Technology report (2010–11), Singapore was

placed 2nd in the world by virtue of its impressive innovation and development strategies.

Legal landscape

• Singapore has one of the lowest rates of corporation tax in Asia. The government reduced the corporate tax rate

from 18% to 17% in 2009. At 17%, it is lower than the 25% charged in Malaysia.

Environmental landscape

• Singapore faces a number of environmental challenges, although its performance to date has been excellent.

With much of the land area less than 15 meters above sea level and about 150 km of coast line, Singapore is

vulnerable to rising sea levels.

• According to Datamonitor estimates, the Singaporean renewable energy market grew by 7.5% in 2009 to reach a

value of $1,121 million.

Overview



Key fundamentals

Table 1: Singapore: key fundamentals

2008 2009 2010 2011 2012 2013 2014

GDP, constant 2000 Prices ($bn)

134.1 132.4

140.4

148.3

156.3

164.4

171.8

GDP growth rate (%) 1.1 -1.3 6.0 5.6 5.4 5.2 4.6

GDP, constant 2000 Prices, per capita ($) 29,108.8 28,425.8 29,863.4 31,279.6 32,706.4 34,139. 3 35,441.7

Inflation (%) 6.6 0.6 3.0 1.9 1.9 2.0 2.0

Exports, total as % of GDP 219.6 205.2 190.2 192.0 195.6 199.9 205.2

Imports, total as % of GDP 207.9 202.1 185.1 182.6 181.9 182.6 184.5

Mid-year population, total (million) 4.6 4.7 4.7 4.7 4.8 4.8 4.8

Unemployment rate (%) 2.2 3.0 2.8 2.7 2.6 2.5 2.5

Mobile penetration (per 100 people) 137.6 147.7 154.7 159.5 162.6 164.8 166.2

Source: Datamonitor D A T A M O N I T O R

Table of Contents



TABLE OF CONTENTS

Overview 1

Catalyst 1

Summary 1

Key facts and geographic location 10

Key facts 10

Geographical location 11

PESTLE analysis 12

Summary 12

Political analysis 13

Economic analysis 16

Social analysis 18

Technological analysis 21

Legal analysis 24

Environmental analysis 26

Political landscape 28

Summary 28

Evolution 29

Structure and policies 30

Performance 34

Outlook 35

Economic landscape 36

Summary 36

Evolution 36


Performance 39

Outlook 52

Social landscape 53

Summary 53

Evolution 53


Performance 57

Table of Contents



Outlook 59

Technological landscape 60

Summary 60

Evolution 60


Performance 61

Outlook 63

Legal landscape 65

Summary 65

Evolution 65


Performance 70

Outlook 70

Environmental landscape 71

Summary 71

Evolution 71


Performance 73

Outlook 74

APPENDIX 76

Ask the analyst 76

Datamonitor consulting 76

Disclaimer 76

Table of Contents



TABLE OF FIGURES

Figure 1: Map of Singapore 11

Figure 2: Singapore: political events timeline 29

Figure 3: Singapore: key political figures 30

Figure 4: Distribution of seats by political parties in the 2006 elections of Singapore 32

Figure 5: Evolution of GDP growth in Singapore, 1991–2009 37

Figure 6: Market capitalization of Singapore stock exchange, 2002–08 38

Figure 7: GDP and GDP growth rate of Singapore, 2002–13 40

Figure 8: Sector specific GDP in Singapore, 2009 41

Figure 9: Agricultural output in Singapore, 2002–09 42

Figure 10: Industrial output in Singapore, 2002–09 43

Figure 11: Services output in Singapore, 2002–09 44

Figure 12: Current account balance in Singapore, 2002–08 46

Figure 13: Singapore’s external trade position, 2002–09 47

Figure 14: CPI and CPI-based inflation in Singapore, 2002–13 50

Figure 15: Unemployment in Singapore, 2002–13 52

Figure 16: Major religions in Singapore 55

Figure 17: Healthcare expenditure in Singapore, 2002–12 58

Figure 18: Education expenditure in Singapore, 2002–13 59

Figure 19: Growth of fixed and mobile phones in Singapore, 2002–13 62

Figure 20: Internet users in Singapore, 2002–13 63

Figure 21: Carbon dioxide emissions in Singapore, 2002–13 74

Table of Contents



TABLES

Table 1: Singapore: key fundamentals 5

Table 2: Singapore—key facts 10

Table 3: Analysis of Singapore’s political landscape 13

Table 4: Analysis of Singapore’s economic landscape 16

Table 5: Analysis of Singapore’s social landscape 18

Table 6: Analysis of Singapore’s technology landscape 21

Table 7: Analysis of Singapore’s legal landscape 24

Table 8: Analysis of Singapore’s environmental landscape 26

Table 9: Mid-year population by age (millions) 54

Table 10: Patents received by USPTO, 2002–09 61

Table 11: Singapore: individual income tax rates 68

Table 12: International environmental treaties signed and ratified by Singapore 73

Key facts and geographic location



KEY FACTS AND GEOGRAPHIC LOCATION

Key facts

Table 2: Singapore—key facts

Country and capital

Full name Republic of Singapore

Capital city Singapore

Government

Government type Parliamentary democracy

Head of state President Sellapan Ramanathan

Head of government Prime Minister Lee Hsien Loong

Population 4.7 million

Currency Singapore Dollar (SGD)

GDP per capita (PPP) $52,200

Internet domain .sg

Demographic details

Life expectancy 82.1 years (total population)

79.5 years (men)

84.9 years (women)

Ethnic composition (2000 data) Ethnic Chinese form the majority of the population (77%). Malay (14%) and Indian (8%) are the significant minorities.

Major religions (1995 census) Buddhists: 42.5%

Muslims: 14.9%

Taoist: 8.5%

Catholic: 4.8%

other Christian: 9.8%

Hindus: 4%

None:14.8%

Country area 697 sq km

Language Mandarin Chinese, English, Malay and Tamil are the official languages. Hokkien, Cantonese, Teochew and other Chinese dialects are also spoken.

Exports Machinery and equipment, consumer goods, chemicals, mineral fuels are some of the major exports.

Imports Machinery and equipment, chemicals, metals, and foodstuffs

Source: CIA D A T A M O N I T O R

Key facts and geographic location



Geographical location

Singapore is located in Southeast Asia between the Malay Peninsula to the north and Indonesia to the south. The major

geographical areas of the country comprise Singapore Island and 60 smaller islets.

Figure 1: Map of Singapore

Source: CIA The World Factbook D A T A M O N I T O R

PESTLE analysis



PESTLE ANALYSIS

Summary

Singapore is a former British colony which gained self-governance in 1959 and independence in 1965. Lee Kuan Yew from

the People’s Action Party (PAP) became the first prime minister in 1959 and remained in power until 1990. The PAP started

with communist affiliations but nevertheless promoted foreign trade and corporate growth from the 60s. Singapore grew

strongly as an entrepot economy, supported by political stability. The government played an important role in improving the

society by encouraging ethnic tolerance and providing housing for Singaporeans. The PAP has maintained a stronghold on

power even after Lee’s rule. The current Prime Minister, Lee Hsien Loong, is the son of the Lee Kuan Yew and enjoys

broad public support to continue with market-based economic policies.

The global economic crisis had a drastic effect on the Singaporean economy, which led to a contraction of 1.3% in 2009.

Singapore is an open economy, with exports constituting around 205% of GDP in 2009. The government’s budget for 2010

includes a “resilience” package worth SGD20.5 billion ($14.1 billion). This package includes investment towards training

and employment; grants and tax incentives to support firms; as well as outlay towards infrastructure, education and health.

The country fares well on human development indicators but the population is gradually ageing. The healthcare and

education system are delivering good results at low costs. Government policies have led to an increase in R&D spending

which in turn supports Singapore’s transition into a knowledge-based economy. ICT is being leveraged to increase

efficiency across sectors. The rule of law is strong and the regulatory, trade and tax environments make Singapore one of

the world’s most attractive destinations for business, trade and investment. Singapore has a good environmental track

record. The current policy focus is on tackling climate change, the management of scarce water resources, and waste

management for the growing city-state.

PESTLE analysis



Political analysis

Overview

Singapore is renowned around the world for its stable politics and consistent policy making. The government is considered

to be one of the most efficient among the Asian countries. However, the one party domination in the country is raising

concerns about the political freedom of its citizens. Relations between Singapore and Malaysia have improved in recent

times. The 20–year railway land issue between Malaysia and Singapore was resolved in May 2010.

Table 3: Analysis of Singapore’s political landscape

Current strengths Current challenges

▪ Continuity in government policies

▪ Efficient governance

▪ Government restrictions on political freedom

Future prospects Future risks

▪ FTAs with China and Taiwan

▪ Improved bilateral ties with Malaysia

▪ Government to ease restrictions on media

Racial tensions


Current strengths

Continuity in government policies

The political conditions in Singapore have been stable and have remained consistent with the policies of the ruling PAP.

The PAP has governed Singapore since 1959. Lee Kuan Yew was prime minister until the 1980s, making the country

economically strong with consistent policies. During the 1980s, Singaporean politics underwent a transition to bring the

younger generation of PAP into picture. The new generation policies brought in huge amounts of foreign direct investment

(FDI) into the country. The PAP government has brought in social stability, housing, employment, and a rise in living

standards to the citizens of the country. The political continuity in the country has allowed policy makers to take a long-term

view of the economy and society.

Efficient governance

High-quality governance has been particularly important for the development of Singapore. The honesty and competence

of the political leadership of Singapore has worked well for the economy. Moreover, the country is ranked one of the least

corrupt in Asia and third least in the world, according to Transparency International’s corruption perceptions index 2009.

The political leaders in Singapore are appointed on the basis of merit and capabilities. Meritocracy is followed in both

politics and bureaucracy. Increasingly, the People’s Action Party candidates for parliamentary elections and ministerial

appointments are being selected through a stringent selection process on the basis of ability. The high quality of political

leadership that the country offers has reinforced the people’s traditional respect for distinguishing between inherited and

created factors. These conditions have enabled the country to develop competitive advantages in several areas like

manufacturing and services to attract FDI. Most of the competitive advantages of the country have been developed under

PESTLE analysis



the astute leadership of the PAP government. The ability of the government to create strong economic fundamentals has

been one of the strengths of the country.

Current challenges

Government restrictions on political freedom

Although Singapore is among the freest places to do business and one of the few Asian countries to have strong political

stability, the government is alleged to have the power to restrict the political freedom of its citizens. The PAP currently

controls 82 of the 84 elected seats in the parliament. Its political dominance reflects both the weak and fragmented state of

the main opposition parties and the confidence of much of the electorate in the PAP. The government is bent on retaining

restrictions on freedom of speech, commonly known as out-of-bounds markers. These refer to limits on matters that can be

discussed in public, including religion and race. The deliberately ambiguous nature of these limits indicates the prevalence

of self-censorship, particularly criticisms raised against the PAP. The ruling party also regularly uses the country's

defamation laws to undermine its critics. Not surprisingly, the country was ranked in the 35.1 percentile on the voice and

accountability indicator (World Bank’s Governance Matters 2009). The strong one-party domination is showing its negative

effects on the country by limiting political and media freedom. Despite being one of Southeast Asia's wealthiest economies,

Singapore, which has been ruled by the PAP since independence in 1965, has been criticized in the international

community for its lack of tolerance of political dissent.

Future prospects

FTAs with China and Taiwan

The Singaporean government took quick and positive steps during March–October 2008 to forge free trade agreements

(FTAs) with both China. The FTA with China was signed in October 2008 in Beijing, on the eve of the Asia-Europe summit.

The pact has improved bilateral ties and advanced cooperation in East Asia. According to the Singapore Ministry of Trade

and Industry, about 95% of Singapore's exports to China is expected to have tariff-free access by the end of 2010. On the

other hand, the FTA with Taiwan is still in the initial stages. In August 2010, Taiwan and Singapore began trade talks on

signing a free trade pact. The stakeholders are in the process of exploring the feasibility of signing the economic

cooperation agreement under the framework of the World Trade Organization (WTO). The FTA is expected to open up

many possibilities for enhanced economic cooperation between the two countries, provided the economic matters remain

depoliticized. These agreements are expected to provide Singaporean businesses increased market access.

Improved bilateral ties with Malaysia

Relations between Singapore and Malaysia have improved in recent times. In May 2010, the Prime Minister Lee Hsien

Loong and Malaysian Prime Minister Najib Razak engaged in bilateral talks, which led to the resolution of the 20–year

railway land issue between Malaysia and Singapore. The Malaysian government agreed to relocate the Tanjong Pagar

railway station (situated at the southern tip of Singapore) to the border at Woodlands by July 2011. In addition, both

stakeholders announced initiatives to increase connectivity between Singapore and Malaysia. These developments have

paved the way for closer bilateral cooperation between the countries.

PESTLE analysis



Government to ease restrictions on media

The media in Singapore is heavily restricted and is under the constant scrutiny of the government. However, in August

2008 the government made room to ease the restriction levels on outdoor demonstrations, allowing people to participate

more actively and flexibly in political demonstrations. In April 2010, the government passed an amended law to ease an 11-

year-old ban on films that promote a politician or political party. However, the new law also imposes certain other

restrictions. Until 2007, the Singaporean government had a law which banned the production and screening of party

political films with a fine of up to $70,500 or two years in jail for violations. The new law is considered an improvement over

the previous law and is expected to give more freedom of speech to the citizens in the country.

Future risks

Racial tensions

Though Singapore is a multi-racial society, the Chinese (which constitute 77% of the population in Singapore) are dominant

within the government. The Malays represent 14% of the resident population while the Indian community represents about

8%. These groups are under-represented in the government. Moreover, divisions could emerge between Muslims and non-

Muslims. In order to alleviate tensions and encourage inter-racial and inter-religious co-operation in the government, the

Harmony Centre was opened in 2006. However, racial tensions are high and businesses in Singapore could also face

related challenges in the workplace.

PESTLE analysis



Economic analysis

Overview

Following the economic crisis, Singapore has shown strong recovery in the first and second quarters of 2010 and is

expected to expand by 6% in 2010. The government has introduced programs to support employment, to provide tax

incentives for businesses and to support innovation enterprises. However, given that many overseas markets are still under

difficult economic conditions, Singaporean businesses might be impacted by the low level of demand in those markets.

Table 4: Analysis of Singapore’s economic landscape


▪ Top destination for business investment

▪ Scaling up support for business enterprises

▪ Reliance on external trade


▪ Strong prospects for growth in 2010

▪ Investment in education and training

▪ Economic cost of the ageing population


Current strengths

Top destination for business investment

Several factors make Singapore a favorite destination for business investment. According to the World Bank’s Doing

Business report (2010), Singapore ranked 1st in the world (among 183 economies) in terms of the ease of doing business.

The country also ranks 1st in the world for employing workers. This indicates that Singapore’s labor market is highly flexible.

The non-salary cost of employing a worker is low, and regulations related to work hours are very flexible. Singapore also

has in place regulations for protecting investor rights; the country ranks 2nd in the world on this parameter. Singapore’s pro-

business policies are expected to attract foreign investment and business entrepreneurs.

Scaling up support for business enterprises

As part of the Partnerships for Capability Transformation (PACT) program, the government aims to scale up support for

business enterprises. According to the budget 2010, the government will commit $100 million over five years to provide

support for business associations and drive productivity at the industry level; around $250 million will be allocated during

2010–15 to help local enterprises in meeting stringent manufacturing quality and certification requirements. The

government also plans to commit $450 million over the five-year period to start a program for government agencies to

partner with companies to co-develop innovative solutions. These initiatives are expected to help SMEs and

entrepreneurships build competencies and enhance their business growth.

PESTLE analysis



Current challenges

Reliance on external trade

Singapore is a highly trade-dependent economy with one of the highest trade to GDP ratios in the world. According to

Datamonitor estimates, Singapore recorded a trade surplus of $5 billion in 2009. The value of exports totaled $361 billion in

2009, whereas that for imports stood at $356 billion. According to the Singapore’s Trade Development Board, net exports

of goods and services are expected to contribute 2.4 percentage points to growth in 2010. However, the average rate of

export growth in 2010–11 will be slower than it has been in the recent past as economic recovery in Singapore’s main

export markets is expected to be gradual. Singapore industries rely on overseas export markets and may therefore be

impacted by the low level of demand in those markets.

Future prospects

Strong prospects for growth in 2010

The economy of Singapore is set for an impressive growth in 2010 as the first and second quarters showed strong growth

rates. According to official estimates, in the second quarter of 2010, the economy expanded by 18.8% on a year-on-year

basis, following a 16.9% growth in the first quarter. Although the growth momentum will not be as strong in the second half

of 2010 as it was in the first half, Datamonitor estimates that the economy will grow by 6% in 2010.

Investment in education and training

As per the government’s budget for 2010, the government will invest in education and training. The government will spend

approximately $2.5 billion over 2010–15 on Continuing Education and Training (CET) to develop expertise in several

professions. This will include the development of centers of excellence focused on specific industries and enterprise

groups. This initiative is expected to improve the performance of the labor market.

Future risks

Economic cost of the ageing population

Singapore, like most Western nations, will face long term fiscal challenges as a result of its ageing population. Based on

government estimates (2009), by 2030, Singapore will have the second highest percentage of people aged above 65 years

(at about 20%) in Asia, behind only Japan. These estimates imply that the overall government expenditure in Singapore will

increase steeply with an increase in cost of pensions, healthcare and old-age care. Major reforms and policy changes are

required to avoid a large fiscal gap and to secure the sustainability of public finances.

PESTLE analysis



Social analysis

Overview

The strong education system in Singapore has helped the country increase literacy rates and student turn-out in all regions.

However, Singapore is troubled with a low birth rate, an ageing population, and declining population growth. There is also

high degree of income disparity in the country. In 2010, the government introduced a three-year Workfare Training Scheme

(WTS) to support those unemployed or with very low skills. However, there has been no growth in wages for many years,

especially for those at the low-income level.

Table 5: Analysis of Singapore’s social landscape


▪ Sound education policy ▪ Low birth rate

▪ Income disparity


▪ Support for low-wage workers

▪ Stagnating wage growth


Current strengths

Sound education policy

The government has given special significance to education, allocating nearly one-fifth of the country's annual budget to the

scetor. Primary education in the country is heavily subsidized. Students are also provided with the option of studying in

private schools at secondary and pre-university levels. Public secondary education provides multiple paths to students,

depending on their abilities and goals. These range from gifted student programs to vocational school programs. Under the

gifted student program, the education system lets students learn at their own pace. The objective of the program is to

provide leadership in the education of intellectually gifted children. University education is provided by four universities: the

National University of Singapore (NUS); the Nanyang Technological University (NTU); the Singapore Management

University (SMU); and the SIM University (UniSIM). The education expenditure of Singapore as a percentage of GDP was

2.6% in 2009. The strong support given to the educational sector has provided the country with a skilled labor force and

highly trained scientific personnel. Furthermore, the country's brand of education is attracting interest from traditional

educational strongholds like the US, the UK, and Australia, and many universities from these countries have tied up with

Singapore University for exchange programs.

PESTLE analysis



Current challenges

Low birth rate

Singapore has a declining birth rate and an ageing population. The average birth rate (the number of births per 1000

population) for males and females dropped from 16.8 in 1990 to 11.06 by 2001. As per 2010 estimates, the birth rate has

further reduced to 8.8. The government promoted family planning with a degree of success in the 1980s and 1990s by

encouraging residents to have more children. Although the policy provided financial incentives for the first four children born

in each family during the period, it did not bring any noticeable changes. According to 2010 estimates, the fertility rate

(births per resident female) stood at 1.1, a bit over half of the 2.10 required to maintain the population. A decrease in

population is likely to put pressure on the country’s labor market.

Income disparity

The biggest criticism of Singapore's social strategy is its immigration policy, which takes a conservative approach towards

population growth, while allowing people willing to work for minimum wages to settle in the country. This policy has resulted

in the creation of a growing income gap for those at the bottom of the economic pyramid. Despite a GDP per capita of

$52,200 (PPP) as of 2009 (second only to Japan in Asia), Singapore suffers from high income inequality. According to

Singapore's Household Survey and the World Bank's Gini coefficient rating (a measure of income inequality between zero

and one with zero corresponding to absolute equality), income disparity in Singapore has worsened from 0.43 in 1998 to

0.48 in 2008. As per the index, Singapore is equal to the Philippines (which has a Gini coefficient rating of 0.46) and

Guatemala (0.48), and worse than China (0.44). Other wealthy Asian nations such as Japan, Korea and Taiwan have

healthy Gini coefficient ratings of 0.25, 0.32 and 0.33, respectively. The prevailing income disparity in Singapore has been

a cause of concern.

Future prospects

Support for low-wage workers

While Singapore boasts a population of skilled workers, little had been done to support those at the bottom-most rung of

the labor force. In 2010, the government introduced a three-year Workfare Training Scheme (WTS) to address this issue.

As part of this program, a structured training program will be planned for those unemployed or with very low skills. The

Workfare Income Supplement (WIS) will be increased by about $150–400. Furthermore, under the WTS, employers will be

offered subsidies for providing training to low-wage workers. These initiatives are expected to result in a more homogenous

labor market.

Future risks

Stagnating wage growth

For decades, strong economic growth and high employment levels were the main factors behind the high income levels of

the Singaporeans. However, since the late 1990s, a fundamental change has taken place. Median real wages have not

risen with robust growth, and have been stagnating since 1998. For the bottom 60% of workers, individual wages, in fact,

cumulatively declined by 7–15% over 2002–07, despite recording a 5–7% GDP growth and an unemployment rate of below

3%. According to the manpower ministry, wages in Singapore's private sector rose by 4.2% in 2008 compared to the

PESTLE analysis



growth of 5.9% in 2007. The ministry said that this was mainly due to a drop in bonus to 2.31 months in 2008 from 2.36

months in 2007. If median workers face long-term wage stagnation, the credibility of tough policies on wage discipline will

be undermined. With difficult external conditions, the lower income earners are expected to face difficulties. As of 2009,

400,000 workers earned less than $1,400 a month and make up the bottom 20% of the workforce. The government is in

considering the proposition of raising the pay of low-wage workers in the near term.

PESTLE analysis



Technological analysis

Overview

The country is home to a number of reputed scientific institutions, backed by the private sector. The country is also

venturing in to new areas of research such as IT and IT services. Through its strategy Singapore i2015, the country aims to

become an information society by 2015. The government has increased its allocation towards R&D in recent years.

However, the country lags behind in terms of patents granted.

Table 6: Analysis of Singapore’s technology landscape


▪ Strong scientific institutions

▪ Building R&D competencies

▪ The Productivity and Innovation Credit (PIC) program

▪ Low level of patents granted


▪ ICT vision: Singapore i2015

▪ Developments in the medical R&D sector

▪ Increasing competition from emerging nations


Current strengths

Strong scientific institutions

Scientific institutions, such as the Science & Engineering Research Council (SERC) and Biomedical Research Council

(BMRC), have been established by the government to generate innovative products. Singaporean firms are already world

leaders in the data storage, and semiconductors and electronics segments. Both these segments have been successful in

establishing international technology roadmaps. The SERC is responsible for developing new capabilities to satisfy the

industry needs as projected by these roadmaps. The SERC is also promoting research in nanotechnology to help

overcome physical barriers for incumbent technologies like silicon chips. The BMRC, on the other hand, helps to bridge the

gap between basic biomedical research and clinical practice through the development of useful and commercially viable

applications. The presence of research institutions has enabled fast paced development and rapid advancement in R&D.

Building R&D competencies

The Singapore’s government has been building R&D capabilities in the country by increasing R&D investment. Gross

Expenditure on R&D (GERD) has increased from 2.52% of GDP in 2007, to 2.77% of GDP in 2008. An increase in R&D

investment has in turn led to an increase in the number of research personnel. The research scientist and engineers per

10,000 working members for 2008 was 87.6. The government will continue its efforts in 2010; the development budget for

the A*STAR program (Agency for Science, Technology and Research) in FY2010 is pegged at $1.24 billion. A*STAR’s

PESTLE analysis



Science and Engineering Research Council’s (SERC) research institutes participated in 222 projects with 146 companies in

2009. Going forward, A*STAR will continue to be involved in industry development efforts.

The Productivity and Innovation Credit (PIC) program

The government provides tax incentives for R&D companies under the Productivity and Innovation Credit (PIC) program.

As part of this program, the government provides a substantial tax deduction on expenditure related to R&D investment (for

example, salaries for research personnel or training of employees); registration of intellectual property; acquisition of

intellectual property; investment in design activities; and automation through technology or software. In specific terms,

nearly 250% tax deduction will be made for the first $300,000 of expenditure related to the above mentioned activities. As

the name suggests, this program promotes innovation by providing tax savings to companies on most of their R&D

activities.

Current challenges

Low level of patents granted

The number of patents granted to Singapore is very low compared to other developed countries around the world.


lags behind other developed countries such as South Korea (9,566 patents granted in 2009), Japan (38,066 patents), the

US (92,001) and Germany (10,086). Although the country has been performing well economically, it lags behind in terms of

registering intellectual property rights.

Future prospects

ICT vision: Singapore i2015

Singapore envisions becoming an information society by 2015. As a step in this direction, the government has put in place

a strategy called Singapore i2015. According to the Ministry of Communication, under this strategy, the government aims to

double the value added by the ICT industry to $17 billion, to triple ICT exports to $40 billion, to quadruple software and IT

services revenues to $24 billion, and to create of 80,000 new jobs, and to achieve a household broadband penetration rate

of 90%.

The Singaporean government is making efforts to stimulate the demand for ICT services by sponsoring a range of

programs such as e-learning, e-health, and e-government. The e-logistics program, for example, aims at managing supply

chain processes in the logistics industry, in order to increase manufacturing productivity in Singapore. The government’s

strategy for developing ICT is expected to reap significant economic benefits in the coming years.

Developments in the medical R&D sector

The Singapore Economic Development Board (EDB) reported significant developments in the medical R&D sector in the

country. For example, Pfizer has expanded its nutrition manufacturing plant, making it among the largest globally. In

addition, GlaxoSmithKline and EDB announced the first eight projects to be funded under a $24 million partnership for

green and sustainable manufacturing. Additionally, A*STAR research institutes announced their collaboration with Cytos

Biotechnology and Life Technologies. SingHealth launched its $13.8 million Investigational Medicine Unit. The National

PESTLE analysis



University of Singapore launched the NUS Initiative to Improve Health in Asia (NIHA), which comprises research, high-level

policy forums. These developments point out to a fast developing medical R&D and manufacturing sector.

Future risks

Increasing competition from emerging nations

Many emerging economies in Asia and Latin America have been investing heavily in R&D and recent predictions indicate

that around 90% of an emerging global middle class will live in developing nations by 2025. With the growth of emerging

economies, the global scientific landscape will change dramatically. Singapore should brace up to face fierce competition

from the emerging economies, as they offer advantages in terms of low cost skilled labor and large domestic markets.

PESTLE analysis



Legal analysis

Overview

Singapore has become one of the best trade hubs in Asia. The comprehensive tax treaties make it possible for the resident

companies to access worldwide technologies and expertise. The government reduced the corporate tax rate from 18% to

17% in 2009. However, there are some inherent regulations in Singaporean laws that often worry investors.

Table 7: Analysis of Singapore’s legal landscape


▪ Favorable business environment

▪ Comprehensive tax treaties

▪ Political interference in judiciary


▪ Low corporate tax rate

▪ Increasing flaws in business regulations


Current strengths

Favorable business environment

Singapore has a very open and business friendly economy. It ranks second in the world on the 2010 Index of Economic

Freedom (a product of the Heritage Foundation and Wall Street Journal). The index takes into consideration various

parameters like business freedom, trade freedom, investment freedom and labor freedom. Starting, operating and closing a

business are very easy in the country, and the labor market is flexible. The country also ranks first in terms of the ease of

doing business according to the World Bank's Doing Business report (2010). The tax rates are low with individual income

taxes range from 0 to 20% depending on the level of income. There are no capital gains taxes, and withholding taxes on

royalty payments have been reduced and the wage system made more flexible. Foreign businesses are treated on par with

local companies and property rights are protected strongly. Corruption is perceived as almost non-existent. Singapore’s

free trade agreements (FTAs) with a number of countries have lowered investment barriers. For example, the Singapore–

US FTA provides full protection of IP rights for US investors and an export tariff waiver on goods produced in Singapore.

The favorable business environment has made the country the most attractive among the Asian nations and has attracted

huge investments from abroad.

Comprehensive tax treaties

The country has comprehensive tax treaties with 51 countries, which offer incentives to resident companies of the country.

Tax exemptions and incentives are provided to companies that are considered to contribute to the economic and technical

advancements of Singapore, such as companies in the financial services and tourism sectors, which have benefited the

PESTLE analysis



most from such incentives. Singapore introduced a single tax deduction on patenting costs incurred in June, 2003, in order

to encourage companies to patent their inventions and promote the country’s credentials as an excellent R&D base. This

single tax deduction has indirectly helped in reducing the cost of R&D by forging tie-ups with various other countries.

Current challenges

Political interference in judiciary

The judiciary of Singapore is often alleged to buckle under political pressure. There have been doubts about its impartiality

in cases of arbitration where the government is one of the concerned parties. This is more so in non-commercial cases like

public law, where the judiciary has been accused of being compliant with the interests of the government. The PAP has

often used defamation cases against members of the opposition and the media and sought large damages which have

effectively silenced dissenters. Political interference in judicial decisions is currently jeopardizing the judicial freedom of the

country.

Future prospects

Low corporate tax rate

Singapore has one of the lowest rates of corporation tax in the Asia region. The government reduced the corporate tax rate

from 18% to 17% in 2009. At 17%, it is lower than the 25% charged in Malaysia. The government is unlikely to make further

major changes to direct tax rates in the next few years. These tax incentives will further enhance Singapore’s attractiveness

for business investment.

Future risks

Increasing flaws in business regulations

Though the country’s business environment is considered one of the best in the world, there has been a gradual increase in

business regulations. Some of the obstacles that might deter an entrepreneur to start business in Singapore include the

following:

• Irrespective of the company’s status in its home country, it has to be registered as a private limited company,

which is generally given as a choice in other countries. All company names require approval, and must end with

”private limited” or ”pte limited” labels.

• Annual accounts and returns are required to be filed by all businesses. Moreover, according to laws passed in

2007, returns have to be filed both with the registry of companies and the income tax authorities. Due to this, the

confidentiality that businesses may like to maintain can be compromised.

• To start a limited liability company in Singapore, two directors are required. One of the directors must either be a

resident of Singapore, a native Singaporean, or someone who has a Singapore Employment Pass. This puts

pressure on the company to compromise on its existing management and other human resources.

PESTLE analysis



Environmental analysis

Overview

The environmental policy in Singapore is focused on biological conservation and waste management. However, the

country’s emission levels have been on the rise. Atmospheric changes also affect the environment of the country.

Table 8: Analysis of Singapore’s environmental landscape


▪ Conservation of biological diversity

▪ Increasing greenhouse emission levels


▪ New waste management initiatives

▪ Changing climatic conditions


Current strengths

Conservation of biological diversity

Singapore, by virtue of its tropical location, has rich biodiversity. But the country has suffered a great deal of biodiversity

loss due to urbanization ever since it became a trading post in the 19th century. To address this issue, the government of

Singapore has made efforts to conserve the remaining habitats, flora and fauna. In 1995, the country ratified the

Convention on Biological Diversity, which was formed during the 1992 Rio Earth Summit. Under the convention, Singapore

has set a target to be achieved by 2010 to halt the rate of its biodiversity loss. Conservation of nature is one of the focus

areas under the Singapore Green Plan (SGP) 2012 as well. The SGP 2012 lists several action points concerning the

conservation of nature areas, interconnecting nature parks, raising biodiversity awareness and creating a biodiversity hub.

The hub, known as the National Biodiversity Reference Centre (NBRC), was established in May 2006, and forms part of the

National Parks Board (NParks) which manages Singapore’s green areas for conservation and recreation. Apart from

managing all biodiversity related information, the NBRC is responsible for the conservation of terrestrial and marine flora

and fauna.

Current challenges

Increasing greenhouse emission levels

Over the years, emissions of greenhouse gases have been on the rise in Singapore. As per Datamonitor estimates, the

level of CO2 emissions increased from around 110.3 million metric tons in 2002 to over 153 million metric tons in 2009. The

manufacturing industries and vehicular emissions accounted for 70% of Singapore's overall greenhouse gas emissions.

PESTLE analysis



Electricity generation is the biggest source of carbon dioxide emissions in the country, followed by industries and

transportation. At this rate, CO2 emissions are projected to increase further to reach 175.2 million metric tones by 2013.

Future prospects

New waste management initiatives

The government is taking several new initiatives to manage environmental conservation in the country. The municipal

waste management infrastructure includes sewerage and solid-waste management systems. The “polluter pays” principle is

applied to both homes and industries for wastewater collection and treatment. Non-residential premises are charged rates

proportional to the quantity of waste generated. The sewerage network has more than 2,500 kilometers of sewers, 139

pumping stations and six sewage treatment works. Waste water is collected and treated before being discharged to the

sea. Solid wastes are collected and disposed primarily through incineration due to the scarcity of land for land-fills. The

incineration plants have flue gas cleaning devices and the heat generated is used to generate electricity. Other waste

management efforts include increased recycling. The recycling rate was 49% in 2005, and a 2012 target of 60% has been

set. Centralized recycling bins are being set up in Housing Development Board (HDB) estates to encourage household

recycling. In June 2010, the Waste Management and Recycling Association of Singapore and the National Environment

Agency signed a memorandum of understanding with the International Solid Waste Association to establish a training and

advisory center for environmental and waste management. The government is also working with the Packaging Council of

Singapore to reduce the amount of packaging used and increase the recovery of packaging materials.

Future risks

Changing climatic conditions

Climate change is one of Singapore’s main environmental challenges, by virtue of being an island nation and the high

dependence of the economy on carbon fuels. The government has adopted a four-pronged strategy to tackle climate

change: adapt to climate change; mitigate carbon emissions; raise awareness; and build competency. The quality of air is

high, but efforts made by the government have failed to reduce particulate emissions from diesel vehicles. Moreover, with

an increasing immigrant population, vehicular pollution is increasing in the country. The changing climatic conditions can be

a potential environmental risk for the country.

Political landscape



POLITICAL LANDSCAPE

Summary

Singapore is a multiparty parliamentary republic. It became an independent nation in August 1965 after more than a

century of British control and a brief occupation by the Japanese during World War II. Post independence politics have

been dominated by the People’s Action Party (PAP), making the country a single party democracy. Successive PAP

governments have kept a tight hold on power even while guiding Singapore’s socio-economic development.

The government is headed by the prime minister and the cabinet holds executive power. The role of the president is largely

ceremonial. The parliament is responsible for making laws through the introduction of bills. The judiciary is headed by the

Supreme Court. The impartiality of the judiciary in political matters has been questioned at times as it has often been

alleged that the judiciary complies with the interests of the government. The PAP has used judicial means like defamation

suits to suppress both opposition parties and dissenting voices in the media.

Political landscape



Evolution

The following figure shows the key political events of Singapore during the last century.

Figure 2: Singapore: political events timeline

• In 1819, Sir Stamford Raf f les of the British

East India Company established trading a

post on Singapore island.

• In 1826, Singapore, Malacca and Penang

became a British colony of the Straits

Settlements.

• In 1832, Singapore

became capital of the

Straits Settlements.

• In 1867, the Straits Settlements became a

crown colony of the

British Empire.

• In 1922, Singapore became the main British

naval base in East Asia.

• In 1942, Singapore was

conquered by Japan.

• In 1945, Japan was

defeated and Singapore came under British

military administration.

• In 1946, Singapore became a separate

crown colony.

• In 1959, Self -

governance was attained with Lee Kuan

Yew as prime minister.


joined the Federation of Malaya, Sabah (North

Borneo), and Sarawak in the Federation of

Malaysia.


pulled out of the Federation of Malaysia,

at Malaysia's invitation,

amid political and ethnic tensions. The territory

became an independent republic and joined the

United Nations.


became a founding member of Association

of Southeast Asian Nations (ASEAN).

• In 1971, the last British military forces were

withdrawn f rom the country.

• In 1984, two opposition MPs were elected to

parliament for f irst time.

• In 1990, Prime Minister Lee Kuan Yew stepped

down after 31 years; Goh Chok Tong

became the new prime

minister.

• In 1993, Ong Teng Cheong became the

f irst directly-elected

president.

• In 1999, S R Nathan became the president

without an election

af ter he was declared the only candidate

eligible to run.

• In January 2001, a pipeline feeding gas to

Singapore f rom Indonesia's Natuna

f ield in the South China Sea was opened.

• In the November 2001 general elections, there

was landslide victory for the governing

People's Action Party

which secured all but two of the 84 seats.

• In 2002, Japan and Singapore signed a

f ree trade agreement.


became the f irst Asian nation to sign a free-

trade deal with the US.

• In 2004, Lee Hsien

Loong, eldest son of former Prime Minister

Lee Kuan Yew, was sworn in as the prime

minister.

• In 2005, President S R Nathan began a

second, six-year term af ter winning elections.

• In May 2006, Lee Hsien Loong's ruling

People's Action Party won the general

elections.

• In September 2006,

Singapore hosted the IMF-World Bank

annual meeting.

• In October 2009, a

court ruled that the Far Eastern Economic

Review did defame the

country's founder Lee Kuan Yew and Prime

Minister Lee HsienLoong, rejecting an

attempt by the magazine to have a

2008 verdict

overturned.

Pre –1945 1945–70 1970–2000 2000–05 2005 Onwards


Some other developments in the political history of Singapore are listed below:

• The modern history of Singapore began in 1819 when Sir Thomas Raffles of the British East India Company

landed on the island. He signed a treaty with the ruling Sultan Hussein Shah of the Malaccan Sultanate and

began developing what was then a small fishing and trading village into a busy trading post. Political control

passed from the East India Company to the British Crown in 1867. The next upheaval came during World War II

when Singapore fell into Japanese hands in February 1942. Later, the British gained control over the country and

converted it into its colony.

• In 1959, Singapore gained self-government under Prime Minister Lee Kuan Yew in all state matters except

defense and foreign affairs. In 1963, it united with Malaya, Sabah and Sarwak to form the Federation of Malaysia.

Political landscape



A disagreement over the treatment of Singapore’s ethnic Chinese people and economic differences led to

Singapore seceding itself from the federation on August 9, 1965 to become an independent republic.

• Lee Kuan Yew continued as the prime minister of the country until 1990.This period saw significant economic

growth, along with reduced unemployment and racial tensions. Lee Kuan Yew continued to wield significant

influence on successive governments between 1990 and 2004 as a senior minister under the leadership of Prime

Minister Goh Chok Tong.

• Ong Teng Cheong became Singapore’s first directly elected President in 1993. The PAP continued to win

successive legislative elections with ease in 1997 (34 of 36 seats), 2001 (27 of 29 seats) and 2006 (45 of 47

seats). The opposition has been too weak and fragmented to challenge the PAP.

Structure and policies

Key political figures

Head of the state: President S R Nathan

Head of the government: Prime Minister Lee Hsien Loong

Figure 3: Singapore: key political figures

The President is the head of state. The role has been largely ceremonial but a 1991 amendment to the constitution made way for direct popular elections to the post and gave the president more authority including veto power on decisions like the use of national reserves and key judicial and civil service appointments. S.R.Nathan was appointed president for his second term in August 2005 following disqualification of the other three prospective candidates by the Presidential Elections Committee.

Lee Hsien Loong is the third prime minister of Singapore. Lee entered politics at the age of 32 in 1984. He was appointed Minister of State in the Ministry of Trade and Industry and the Ministry of Defense in December 1984 by his father, Lee Kuan Yew, and was subsequently promoted to Acting Minister for Trade and Industry in 1986, and the Second Minister for Defense. On August 12, 2004, Lee Hsien Loong succeeded Goh Chok Tong as Prime Minister.

The President is the head of state. The role has been largely ceremonial but a 1991 amendment to the constitution made way for direct popular elections to the post and gave the president more authority including veto power on decisions like the use of national reserves and key judicial and civil service appointments. S.R.Nathan was appointed president for his second term in August 2005 following disqualification of the other three prospective candidates by the Presidential Elections Committee.

Lee Hsien Loong is the third prime minister of Singapore. Lee entered politics at the age of 32 in 1984. He was appointed Minister of State in the Ministry of Trade and Industry and the Ministry of Defense in December 1984 by his father, Lee Kuan Yew, and was subsequently promoted to Acting Minister for Trade and Industry in 1986, and the Second Minister for Defense. On August 12, 2004, Lee Hsien Loong succeeded Goh Chok Tong as Prime Minister.


Structure of government

The Republic of Singapore is a parliamentary republic with a multi-party system. The prime minister is the head of the

government, which is vested with executive power. Legislative power resides jointly with the government and the

legislature, which is called the parliament.

Political landscape



Legislative branch of government

The parliament is unicameral and has 84 members of parliament (MP) elected for five-year terms. Nine MPs are elected

from single-member constituencies, while the remaining 75 are elected in teams of four to six from 15 group representation

constituencies (GRCs). At least one member from each group contesting a GRC seat should be from an ethnic minority

(non-Chinese). There is also provision for appointment of up to six opposition candidates who come close to winning seats

as non-constituency MPs, apart from the nomination of nine MPs from non-political backgrounds. The last elections were

held in May 2006. Legislation is through the introduction of bills into parliament by the cabinet or an MP. The bills must be

passed through three readings to be approved as laws.

Executive branch of government

The government wields executive power in the form of a cabinet headed by the prime minister. The president appoints the

prime minister, who in his view is likely to command the support of the majority of the parliament. He also appoints the

cabinet members on the advice of the prime minister. The cabinet decides the policies of the government and is

answerable to the rest of the parliament. The president is the head of state. The functions of a president have been largely

ceremonial but after formulation of an amendment in 1991, president was allowed to contest for direct popular elections.

This provided the president with more authority. S.R.Nathan was appointed president for his second term in August 2005

following disqualification of the other three prospective candidates by the Presidential Elections Committee.

Structure of legislature

Key political parties

People’s Action Party (PAP)

The PAP was formed in 1954 by Lee Kuan Yew with other English-educated middle class men. It won three seats in the

1955 elections and came to power in 1959 when Singapore’s first elections as a self-governed state were held. The PAP

has returned to power in every election ever since. Its worst performance was in 1963 when it retained power with only

47% of the vote. Since then, the PAP has won almost every seat on offer in every election. The PAP is now serving its

tenth-straight term; it holds 82 of the 84 elected seats in parliament.

Lee Kuan Yew headed the party as its secretary-general from 1959 to 1991, and was succeeded by Goh Chok Tong and

later Lee Hsien Loong. Apart from the secretary-general, power is concentrated in the Central Executive Committee, which

overlaps substantially with the government cabinet. The PAP’s policies have been guided by a sense of pragmatism and

meritocracy. In terms of economic ideology, the party used to believe in welfare spending and state intervention but it has

adopted free-market policies to a large extent since the late 1980s. While democratic institutions are now recognized, the

party is less liberal than its western counterparts. Its 2006 manifesto promised cheaper healthcare and refunds of

budgetary surpluses to the public.

Other parties

The other parties of the country include Workers Party (WP) and the Singapore Democratic Alliance (SDA), which won a

seat each in the last held elections of 2006. The SDA includes Singapore Justice Party or SJP, Singapore National Malay

Organization and Singapore People's Party.

Political landscape



Composition of the government

Currently, the PAP holds the largest number of seats in parliament with 82 of total 84 seats.

Figure 4: Distribution of seats by political parties in the 2006 elections of Singapore

People's Action Party (PAP)

98%

Singapore Democratic Alliance

(SDA)1%

Workers Party (WP)1%


Key policies

Economic

The government’s budget for 2010 includes a “resilience” package worth SGD20.5 billion ($14.1 billion). This package

includes investment towards training and employment; grants and tax incentives to support firms; as well as outlay towards

infrastructure, education and health. The government will also support banks to ensure that SGD11 billion ($7.6 billion)

worth of loans are available to companies in 2010.

The government has also initiated several programs to drive innovation and business productivity. For example, the

Productivity and Innovation Credit (PIC) program provides tax savings to companies on most of their R&D activities.

Furthermore, the government plans to spend $2.5 billion during 2010–15 through the Continuing Education and Training

(CET) program. Through these measures, the government expects to create around 18,000 public sector jobs by 2012.

Political landscape



Social

The social policies in recent years have been a mix of pragmatic and populist measures. Upon becoming the Prime

Minister, Lee Hsien Loong changed the length of the work-week to five days from the existing five-and-a-half days. In order

to counter the declining birth rate, his administration introduced two-month paid maternity leaves and financial incentives for

mothers giving birth to a fourth child. Housing grants were introduced for poorer families to help them buy Housing

Development Board (HDB) flats.

In early 2006, the government announced a $1.7 billion program called the Progress Package. The program distributed

accumulated budgetary surpluses to citizens through various measures like cash for everyone, contributions to the pension

fund for elders, rental and utility rebates for those living in public housing, education funds for school students from low-

income families, and bonuses for low-wage workers aged above 40 and for men who have completed national service.

In the healthcare sector, the government has allowed the use of a mandatory saving program called Medisave for paying

bills at private hospitals and specialist clinics. The age limit of the medical insurance scheme has been raised from 80 to 85

years to support the ageing population. Initiatives in the education sector are focused on producing better quality higher

education. Polytechnics will collaborate more with foreign institutes to develop expertise in niche areas. The government

has set up education accounts for students to pay for their higher education. At the secondary level, the curriculum has

been modified to make it more interesting through group work, practical work and the use of information technology.

In the budget for 2010, the government has allocated SGD4.4 billion ($3 billion) towards infrastructure, education and

health. The government also proposes to help those who are unemployed or with very low level skills through its three-year

Workfare Training Scheme (WTS). As part of the WTS program, a structured training program will be planned for the

unemployed people or those at the lowest rung of the workforce. The Workfare Income Supplement (WIS) will be increased

by about $150–400. Furthermore, under the WTS, employers will be offered subsidies for providing training to low-wage

workers.

Foreign

The Lee Hsien Loong government has tried to improve relations with China in order to boost trade and investment in

Singapore. The China-ASEAN free trade area was proposed by Singapore in September 2005 and duly established, with a

target trade volume of $50 billion by the end of 2010. Singapore has also increased commercial ties with the US through

the establishment of the US-Singapore free trade agreement in January 2004. In August 2010, Taiwan and Singapore

began trade talks on signing a free trade pact. The stakeholders are in the process of exploring the feasibility of signing the

economic cooperation agreement under the framework of the World Trade Organization (WTO). The country’s relations

with Malaysia have improved since the resolution of the 20-year old railway land issue (in mid-2010).

The Singapore–US cooperation has been extended to defense and security in recent years. The two countries have

entered into an agreement to jointly tackle issues like terrorism and the proliferation of weapons of mass destruction.

Singapore supports the US presence in Southeast Asia, and has sent armed forces to Iraq.

Political landscape



Performance

Governance indicators

The World Bank report on governance uses voice and accountability, political stability and absence of violence,

government effectiveness, regulatory quality, rule of law, and control of corruption as indicators to assess the quality of

governance in 212 countries and territories, and is measured over the period 1996–2008. The study was carried out by

Daniel Kaufmann and Massimo Mastruzzi of the World Bank Institute, along with Aart Kraay of the World Bank

Development Economics Research Group. For any country, a percentile of zero puts it at the lowest rank and 100

corresponds to the highest rank.

Singapore was ranked in the 35.1 percentile on the voice and accountability indicator in 2008. Voice and accountability

measures the extent to which a country's citizens are able to participate in selecting their government, as well as freedom

of expression, freedom of association, and the availability of free media. Singapore ranks low due to its strict attitude

towards the press. Singapore is slightly ahead of its neighbor Malaysia which is ranked in the 31.7 percentile. However, the

country is behind Indonesia, which is ranked in the 44.2 percentile.

Singapore was ranked in the 96.2 percentile on political stability and absence of violence in 2008. The political stability and

absence of violence indicator measures perceptions of the likelihood that the government will be destabilized or overthrown

by unconstitutional or violent means, including domestic violence and terrorism. Singapore ranks much higher than both

Malaysia and Indonesia, which were ranked in the 50.2 and 15.8 percentiles, respectively.

Singapore was ranked in the 100.0 percentile on government effectiveness in 2008, the highest in the world. Government

effectiveness measures the following: the quality of public services; the quality of civil services and the degree of its

independence from political pressures; the quality of policy formulation and implementation; and the credibility of the

government's commitment to such policies. Singapore’s status on this indicator has been impressive over the last decade.

Successive governments from the PAP have generally pursued similar economic policies, leading to stability in policy

formulation and implementation. The country is much ahead of both Malaysia and Indonesia, which are at the 83.9 and

41.7percentiles, respectively.

Singapore was ranked in the 99.5 percentile on regulatory quality in 2008. Regulatory quality measures the ability of the

government to formulate and implement sound policies and regulations that permit and promote private sector

development. A high ranking indicates a fair implementation of policies and regulations for the private sector. The country is

much ahead of both Malaysia and Indonesia, which are at the 60.4 percentile and 47.4 percentile in this category,

respectively.

Singapore was ranked in the 93.8 percentile on the rule of law index in 2008. Rule of law measures the extent to which

agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, the

police, and the courts, as well as the likelihood of crime and violence. Both Malaysia and Indonesia are behind Singapore in

this category, ranking at the 64.6 and 28.7 percentiles, respectively.

The country was ranked in the 99.5 percentile in the control of corruption category in 2008. Control of corruption measures

the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as

the appropriation of the state by elite and private parties. Singapore has one of the toughest laws against corruption in the

Political landscape



Asian region, due to which it ranks highly in this category. However, both Malaysia and Indonesia are far behind Singapore,

ranking at the 62.8 and 31.4 percentiles, respectively.

Outlook

The ruling PAP will continue to be the dominant force in politics during 2010–11. The PAP controls 82 of the 84 elected

seats in the parliament. Its political dominance reflects both the weak and fragmented state of the main opposition parties

and the confidence of much of the electorate in the PAP. The incumbent government has embarked on various policies to

support employment and economic recovery in 2010.

Relations with Malaysia were difficult in the past, especially due to the personality clashes between the leaders of the two

countries. Relations improved, especially due to the conciliatory stance of Abdullah Badawi, former prime minister of

Malaysia. Furthermore, the 20–year railway land issue between Malaysia and Singapore was resolved in mid 2010, paving

the way for closer bilateral cooperation between the countries. The Malaysian government agreed to relocate the Tanjong

Pagar railway station (situated at the southern tip of Singapore) to the border at Woodlands by July 2011. This

development is expected to improve bilateral relations between the countries.

Economic landscape



ECONOMIC LANDSCAPE

Summary

Singapore is one of the world’s leading economies with a per capita GDP (PPP) of $52,200 and an average real GDP

growth of 3.6% over 2003–09. The global economic crisis had a drastic effect on the Singaporean economy, with the

economy contracting by 1.3% in 2009. The country is an open economy with exports constituting more than 205% of the

GDP in 2009. With the largest economies in the OECD still experiencing difficult economic conditions, Singapore is

expected to face significant difficulties. The government has made continuous efforts through diversification of the

economy, emphasis on high value sectors like biosciences and nanotechnology, and integration with the global economy

using bilateral and multilateral associations and trade agreements.

Evolution

The evolution of the Singaporean economy is described below.

• On becoming independent in the 1960s, Singapore started promoting its historically vibrant trading and

export based industries. It used its strategic location on the South-East Asian sea routes to overcome its

lack of natural resources and a small domestic market.

• The country recorded an annual average real GDP growth between 5–8% from 1960 to 1997.

• The economy suffered from the East Asian financial crisis and the GDP growth dropped to -1.4% in 1998.

The government's endeavors to cut the cost of doing business in Singapore helped the economy stage a

recovery with growth rates of 6.9% and 10.1% over the following two years.

• The year 2001 produced another slump due to the global recession. Singapore was badly hurt due to the

downturn in demand for electronics and IT, and the economy contracted by 2.3%. The government

responded with fiscal expansion and efforts to diversify the economy towards services and consumer

industries.

• Growth reached 3.8% in 2002, before another setback, in the form of the SARS outbreak, curbed tourism

and hurt investor and consumer confidence in 2003. The economy again recovered strongly due to

reduced interest rates, government spending and a surge in exports. The GDP grew by 9.1% and 7.1% in

2004 and 2005, respectively.

• Strong economic performance continued in 2006 with a GDP growth rate of 8.3%. The consumer price

index (CPI) inflation at around 1% in 2006 was higher than the 2005 figure of 0.4% due to higher oil and

food prices. Exports, imports and foreign investment in the economy continued to grow strongly.

• The global economic crisis had a drastic effect on the Singaporean economy. Real GDP came down from

7.8% in 2007 to 1.1% in 2008 and the country recorded an annual average GDP of over 6% during 2003–

08. The economy contracted by 1.3% in 2009.

Economic landscape



Figure 5: Evolution of GDP growth in Singapore, 1991–2009

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Financial system

Overview

The financial system in Singapore is strong and well administered. The system is not affected by short-term disturbances,

which is largely due to improved macroeconomic conditions and historically low interest rates. The country also has prudent

and transparent macroeconomic policies. The financial system is regulated and monitored by the Monetary Authority of

Singapore (MAS).

Financial authorities/regulators

Monetary Authority of Singapore (central bank of Singapore)

The MAS is the regulatory authority of the financial system in Singapore. Established in 1971 by a parliamentary act, the

MAS has been endowed with powers to act as a banker and financial agent of the government. It has also been entrusted

to promote monetary stability, and credit and exchange policies conducive to the growth of the economy. The MAS

administers the laws pertaining to money, banking, insurance, securities and the financial sector in general. Following its

Economic landscape



merger with the Board of Commissioners of Currency on 1 October 2002, the MAS also took over the function of currency

issuance.

Singapore Exchange Limited (SGX)

The SGX is Asia Pacific’s first demutualized and integrated securities and derivatives exchange. It was established in 1999,

with the merger of the Stock Exchange of Singapore (SES) and the Singapore International Monetary Exchange (SIMEX).

The SGX conducts trade in many wide varieties of financial products both domestically and internationally. Some of the

products include bonds, debentures and loan stocks, business trusts, equities, exchange traded funds (ETFs), global

depository receipts (GDRs), infrastructure funds, real estate investment trusts (REITs), and a wide range of warrants. The

market capitalization of SGX in the end of 2008 was around $265 billion compared to around $539 billion in 2007. As of 31

January 2010, the Singapore Exchange had 774 listed companies with a combined market capitalization of SGD650 billion

($447.6 billion).

Figure 6: Market capitalization of Singapore stock exchange, 2002–08

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Insurance

The insurance industry consists of the non-life insurance and the life insurance sectors. The value of the market is shown in

terms of gross premium incomes. The Singaporean insurance market had total gross written premiums of $14.2 billion in

2009, representing a compound annual growth rate (CAGR) of 5.5% for the period spanning 2005–09. The life insurance

segment was the market's most lucrative segment in 2009, with total gross written premiums of $9 billion. The performance

of the market is forecast to accelerate, with an anticipated CAGR of 7.3% for the five year period 2009–14, which is

expected to drive the market to a value of $20.3 billion by the end of 2014.

Recent government policies

The government’s policy in 2008–09 was focused on protecting jobs, boosting bank lending and supporting household

incomes. The government is expected to continue to implement similar reforms through 2010. The budget for 2010 includes

a “resilience” package worth SGD20.5 billion ($14.1 billion). This package includes investment towards training and

employment; grants and tax incentives to help firms; as well as outlay towards infrastructure, education and health. The

government will also support banks to ensure that SGD11 billion ($7.6 billion) worth of loans are available to companies in

2010.

The government has initiated several programs to drive innovation and business productivity. For example, the Productivity

and Innovation Credit (PIC) program provides tax savings to companies on most of their R&D activities. As part of this

program, the government provides a tax deduction of 250% on expenditure related to R&D investment (for example,

salaries for research personnel or training of employees); registration of intellectual property; acquisition of intellectual

property; investment in design activities; and automation through technology or software. The government will also invest in

education and training. The government plans to spend $2.5 billion during 2010–15 on Continuing Education and Training

(CET) to develop expertise in several professions. Through these programs, the government expects to create 18,000

public sector jobs by 2012.

Performance

GDP and growth rate

Overview

As a result of the global economic crisis, the Singapore economy contracted by 1.3% in 2009. Singapore had a GDP of

$134.1 billion in 2008 with a GDP growth rate of 1.1%. Real GDP growth came down from 7.8% in 2007 to 1.1% in 2008

and the country recorded an annual average GDP growth of over 6.1% during 2003–08. The country is an open economy

with exports constituting more than 205.2% of the GDP in 2009. Datamonitor estimates suggest that the economy will grow

by 6% in 2010.

Economic landscape



Figure 7: GDP and GDP growth rate of Singapore, 2002–13

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GDP composition by sector

The services sector contributed around 66.8% of the GDP in Singapore during 2009. This is followed by the industrial

sector, which contributed 33.2% to the GDP in 2009. A share of around 0.1% was contributed by the agricultural sector in

the same year.

Economic landscape



Figure 8: Sector specific GDP in Singapore, 2009

Agriculture, 0.1%

Industry, 33.2%

Services, 66.8%


Agriculture

In Singapore, agriculture constitutes only around 0.1% of the GDP. The main agricultural products include rubber, copra,

fruit, orchids, vegetables, poultry, eggs and ornamental fish. Total agricultural output declined to SGD169.7 million

($116.8 million) in 2009 from SGD186.1 million ($128.1 million) in 2008.

Economic landscape



Figure 9: Agricultural output in Singapore, 2002–09

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Agriculture output Growth rate

Source: Datamonitor

Note: The sectoral breakdown is given in local currency due to impact of foreign exchange

fluctuations and its impact on the growth figures

D A T A M O N I T O R

Industry

The country's key industries are electronics, chemicals, oil drilling equipment, petroleum refining, rubber processing and

rubber products, processed food and beverages, ship repair, offshore platform construction, and life sciences External

demand was the main driver of growth from the demand side, while investment demand increased on the domestic front.

The total industrial output in Singapore declined from SGD90.1 billion ($62.0 billion) in 2008 to SGD89.4 billion ($61.6

billion) in 2009; this represents a contraction of 0.8% in 2009.

Economic landscape



Figure 10: Industrial output in Singapore, 2002–09

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Source: Datamonitor




Services

The services sector accounts for 66.8% of GDP share in the economy. The sector has now become more important due to

Singapore’s emergence as a regional hub in financial and professional services. The service sector output decreased

marginally from SGD181 billion ($124.6 billion) in 2008 to SGD179.8 billion ($123.8 billion) in 2009. This represents a

contraction of 0.7% in 2009.

Economic landscape



Figure 11: Services output in Singapore, 2002–09

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Source: Datamonitor




Fiscal situation

Overview

The guidelines for economic policy given by the government and the MAS require the fiscal policy of Singapore to be

geared towards a gradual and sustainable use of revenues.

Fiscal deficit/surplus situation

The Singaporean authorities have traditionally followed an extremely conservative fiscal stance, building up a substantial

reserve fund through a succession of budget surpluses. The recessionary conditions that emerged in 2001 led to a policy

re-think. In 2001, the government announced a moderate loosening of fiscal policy. The $1.2 billion stimulus package

included rebates on property taxes and public rents and higher public expenditure on infrastructure projects. Towards late

2001, a more substantial package of measures was announced, including corporate and personal income tax rebates, cuts

in user fees for public services, an expanded welfare program and assistance to struggling small businesses. The

government also unveiled the “New Singapore Shares” scheme, whereby a share of the accumulated fiscal surpluses is

Economic landscape



returned to the public in the form of a return on what are effectively government bonds. The combined size of the measures

announced in July and October 2001 was estimated at more than 8% of GDP. As a result of the substantial fiscal

loosening, the authorities posted moderate fiscal deficits during 2001 and 2002. With respect to tax policy, the authorities

have a graduated policy of reducing direct taxes on business and households, partially offset by higher indirect taxation.

In recent years, the government has combined a sensible expenditure policy with a just tax policy. Government expenditure

is limited to key areas such as public healthcare, housing, education and security while tax rates have continuously been

lowered to facilitate investment and entrepreneurship. This fundamental approach to fiscal governance has largely been

responsible for successive years of budget surpluses. The budget surplus stood at 0.6% of GDP in 2006. Compared to a

number of other countries globally, personal income tax rates in Singapore remain low with the highest rate reduced from

the previous 21% level to 20% from in 2007.

In 2006, the operating fiscal balance, which excludes financial flows, stood at 0.6% of GDP. Tax revenues grew strongly

due to higher corporate profits while government spending increased at a slower rate due to the completion of transport

infrastructure projects in the previous year. In 2007, the recorded surplus was around $5.5 billion, with revenues touching

$27 billion and expenditure around $21.5 billion. Due to the implementation of the stimulus package, the government

incurred an overall budget deficit of SGD2.9 billion ($2 billion) for 2009; this corresponds to 1.1% of GDP. The budget

shortfall in 2009 is lower than the deficit of SGD8.7 billion ($6 billion) budgeted a year ago. The overall budget deficit for

2010 is estimated to be SGD8.7 billion ($6 billion), or 3.5% of GDP.

Current account

The sharp global slowdown in 2001 hit Singapore significantly harder than the 1997–98 regional financial crises. Real GDP

shrank by around 2.4% over the course of the year, driven by an 11% decline in manufacturing output. Exports fell by

almost 9%, while the decline in consumer confidence led to a 12% fall-off in import demand. The economy staged a rally in

2002, posting GDP growth of 4.2% driven by a recovery in manufacturing, a healthier external performance, and fiscal

expansion. However, consumer and investor sentiment remained weak, with investment demand in particular continuing to

stagnate. Dimmed consumer confidence fed into stagnant import demand during 2002. With export demand up from 2001,

the current account surplus strengthened further, from 19% to over 21% over the course of the year.

Foreign exchange reserves expanded as a result of the healthy external surplus, amounting to more than 94% of GDP by

the end of 2002. The economy fell back into recession during the second quarter of 2003 as a result of the SARS outbreak.

However, external conditions continued to brighten as the US recovery gathered pace, and the domestic economy bounced

back in the second half of the year. Export growth stood at around 15% for 2003 as a whole, with pharmaceuticals and the

ICT sectors performing particularly well. Exports were especially boosted by the weak currency during the year. GDP

growth in the fourth quarter of 2003 stood at around 5% on an annualized basis, however, due to the weak conditions in the

first half of 2003, the growth rate for the year as a whole was only a little over 3.1%. Weak import demand combined with

strong export growth led to a further substantial widening in the current account surplus, to more than 30% of GDP in 2003.

The current account balance in Singapore has always been in surplus over 2000–07. The country also maintained a

surplus of more than $17 billion every year during the period 2000–08, with the highest surplus of around $59 billion

achieved in 2007. The current account balance as a percentage of GDP fell from 38.6% in 2007 to 23.2% in 2008. In value

terms, the current account balance reached $25.4 billion in 2009, compared to $27.2 billion in 2008.

Economic landscape



Figure 12: Current account balance in Singapore, 2002–08

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Foreign trade

External trade has played an important role in Singapore’s emergence as a developed economy. Singapore ranks among

the top 20 exporting and importing nations of the world. Continued global expansion had contributed to the growth of

external trade until 2008. While higher oil prices resulted in higher receipts from oil trade, non-oil trade also grew due to

higher demand for electronic products and telecommunications equipment during 2002–06. However, external trade

declined due to a decline in international demand. In 2009, exports stood at $361 billion and imports at $356 billion.

Singapore’s foreign trade traditionally involved a lot of entrepot activities, where goods are transshipped with some

processing or manufacturing within the country. Hence, it imported raw materials like rubber, timber and spices from

Southeast Asian countries and exported finished goods to these and other countries. Import of crude oil followed by refining

and export of petroleum products still forms an important part of Singapore’s trade. Starting in the 1980s, Singapore

migrated to higher value activities like capital intensive manufacturing and to hi-tech industries like electronics.

Singapore’s top export destinations are Hong Kong (which accounted for 11.6% of total exports in 2009), followed by

Malaysia (11.5%), China (9.8%), Indonesia (9.7%), the US (6.6%), South Korea (4.7%) and Japan (4.6%). The main

exports of the country include machinery and equipment (including electronics), consumer goods, pharmaceuticals and

other chemicals, mineral fuels.

Economic landscape



Singapore’s main suppliers are the US (which accounted for 11.9% of total imports in 2009), Malaysia (11.6%), China

(10.6%), Japan (7.6%), Indonesia (5.8%), South Korea (5.7%) and Taiwan (5.2%). The country imports machinery and

equipment, mineral fuels, chemicals, foodstuffs, consumer goods

Singapore has worked in recent years on strengthening international linkages in order to reduce trade barriers. Since 2000,

it has entered into a number of Free Trade Agreements. These include FTAs with the US, Japan, European Free Trade

Association, Australia and New Zealand. It is a part of the ASEAN which has a FTA with China. These FTAs have provided

greater market access for Singapore’s exports with lower restrictions on tariffs and regulations.

Figure 13: Singapore’s external trade position, 2002–09

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External debt

The external debt of Singapore was over $8.2 billion in 2003. In 2004 and 2005, it increased to around $15 billion and $19

billion, respectively. In 2006 and 2007 it rose to more than $23 billion and $24 billion, respectively. As of December 2009,

the external debt of the country amounted to $19.2 billion, compared to $25.5 billion in 2008.

Economic landscape



International investment position

Foreign investments

Foreign presence has been strong since colonial times, as Singapore has been a gateway to the rest of the Asia Pacific

region due its strategic location and well-functioning port. The country boasts a world class physical infrastructure, an

efficient regulatory system, and a high density of skilled labor. Its intellectual property (IP) laws are strict unlike in other

parts of Asia, which has led a number of multinationals requiring R&D to locate their entire operations, from R&D and

manufacturing plants to marketing and supply chain management, within the country. The petrochemicals and electronics

sectors have been major draws for foreign companies (Singapore contributes about 40% of the world’s hard disk drive

exports), and other knowledge-based industries like biosciences and nanotechnology are also setting up bases in

Singapore.

Precision engineering in the aviation and maritime sector has been another significant FDI sector in Singapore. Singapore

is one of the biggest producers of offshore rigs and is the world leader in shipping and aviation maintenance, repair and

overhaul (MRO) companies. In the services sector, Singapore has drawn large investments in information and

communication technology and digital media. Several companies have located their development centers, data centers and

business continuity centers in the country. Furthermore, the logistics sector has a huge presence in order to capitalize on

Singapore's port, which is the world’s busiest and is connected to 700 ports worldwide. The FDI inflow in the country came

down from $35.8 billion in 2007 to reach around $10.9 billion in 2008. According to the United Nations Conference On

Trade and Development’s World Investment Report 2010, the FDI inflows increased to $16.8 billion in 2009 from $10.9

billion in 2008.

Credit rating

As of August 2010, Standard & Poor’s affirmed Singapore's “AAA/A-1+” sovereign credit ratings and the outlook is stable.

The ratings reflect Singapore's continual fiscal and external strengths and competitive economy.

Monetary situation

Overview

Inflationary pressures have been contained to an extent by the Monetary Authority of Singapore’s exchange rate policy.

Since 2004, the trade-weighted nominal effective exchange rate has been allowed to appreciate gradually to combat higher

prices of imported goods. The CPI inflation in Singapore has been on a downward trend since the second quarter of 2008

due to the lessening of the impact of the goods and services tax (GST) hike and, subsequently, to the collapse in global oil

prices. Other drivers of inflation in 2008, such as escalating global food prices and increasing domestic business costs,

have also moderated.

Economic landscape



Key monetary indicators

CPI inflation

The slowdowns in 1998 and 2001 caused deflation due to lower domestic and global demand. In subsequent years,

inflation has risen in tandem with strong economic growth. Inflation measured 1.7% in 2004 and 0.4% in 2005. In 2006,

higher oil prices and higher prices of imported food pushed up CPI inflation to 1.0%. Though the labor market was tight (in

line with sustained GDP growth), the increase in wages was checked by an increase in the number of foreign workers.

The first half of 2007 saw an inflation rate of between 0.5% and 1.0%, mainly due to soaring property prices and an

increase in GST from 5% to 7%. Overall inflation for 2007 was around 2%, which went up to 6.6% in 2008. CPI inflation in

Singapore was on a downward trend since the second quarter of 2008 and through 2009 due to the lessening of the impact

of the GST hike and, subsequently, to the collapse in global oil prices.

The country witnessed inflation of 0.6% in 2009. However, consumer price index (CPI) in the country rose by 3.1% year-on-

year in July 2010; the increase was mainly due to higher costs of transport, housing and food. The Monetary Authority of

Singapore (MAS) tightened the monetary policy in April 2010 as inflation became a concern during Singapore's rapid

economic recovery. Datamonitor forecasts suggest that the inflation level in Singapore will hover around 2% until 2013.

Economic landscape



Figure 14: CPI and CPI-based inflation in Singapore, 2002–13

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Interest rate

The Singapore inter-bank offered rate (Sibor), or the rate at which banks lend to one another, tends to track the US federal

rate. The three-month Sibor was recorded at 1.31% at the end of March 2008, which fell to 1.19% in June 2008, before

recovering to 1.88% at the end of September 2008. The three month interbank rate fell to 1% as of December 31, 2008,

which again reached a low of 0.69% as of March 31, 2009. The country’s prime lending rate remained at 5.38% throughout

2008. The prime lending rate in the country remained unchanged at 5.38% as of March 31, 2009. Singapore’s Sibor fell to

0.466% in August 2010 as economic growth bolstered confidence in the country’s lenders.

Money supply

There have been considerable changes in the money supply conditions of Singapore. According to the latest data released

by the Monetary Authority of Singapore, M1 stood at SGD99.2 billion ($68.3 billion) in April 2010, compared to SGD84.6

billion ($58.3 billion) in April 2009. The broad money supply (M3) stood at SGD387.5 billion ($266.8 billion) in April 2010,

compared to SGD357.7 billion ($246.3 billion) in April 2009.

Economic landscape



Banking sector

Singapore is one of the top financial centers in the world and a banking hub in Southeast Asia. The country has one of the

most highly developed banking systems, with more than 700 local and foreign banking and financial institutions providing

services ranging from consumer banking and asset management to foreign exchange, investment banking and specialized

insurance services. The monetary policy is set by the MAS, which is also the regulatory authority for banking, financials

institutions, and foreign exchange.

Employment

Singapore has enjoyed low unemployment rates since 1990. The unemployment rate stood at less than 1.9% from 1990 to

1998 when the East Asian financial crisis occurred. It shifted upwards to 2.5–3.0% for the next three years before the

downturn in electronics and technology caused another spike of 4.2% in 2003. Since then, unemployment has dropped due

to increased economic activity. Employment grew by 7.6% in 2006 as the economy grew strongly. The unemployment rate

fell to a five year low of 2.7% in 2006. Nominal wages however grew by just 3.2% as foreign workers helped fulfill the labor

demand. However, the country's unemployment rate rose from 2.1% in 2007 to.2.2% in 2008 due to the impact of the

global economic crisis. Unemployment in the country rose to 3.0% in 2009. According to Datamonitor estimates, the

unemployment rate in Singapore will come down to 2.5% by 2013.

Economic landscape



Figure 15: Unemployment in Singapore, 2002–13

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Outlook

Following a contraction of 1.3% in 2009, the economy of Singapore is set for strong growth in 2010. According to official

estimates, the economy expanded by 18.8% in the second quarter of 2010 on a year-on-year basis, higher than the 16.9%

growth in the first quarter. The government is expected to remain focused on economic recovery during 2010–11. The

government released a “resilience” package worth SGD20.5 billion ($14.1 billion) to support employment and enterprise

investments in innovation. The government will also support banks to ensure that SGD11 billion ($7.6 billion) worth of loans

are available to companies in 2010. In addition, the government has introduced the Productivity and Innovation Credit (PIC)

program which provides tax savings to companies on most of their R&D activities.

Given these expansionary measures and buoyant economic performance in the first and second quarters of 2010,

Datamonitor estimates that the economy will grow by 6% in 2010. However, the government is expected to record a budget

deficit of SGD8.7 billion ($6 billion), or 3.5% of GDP in 2010, which is higher than that of 2009.

Social landscape



SOCIAL LANDSCAPE

Summary

Singaporean society is multi-ethnic and multi-religious with its people living in relative harmony. The country has a high

population density and a gradually ageing society. Official policies in recent years have encouraged people to have more

children and made it easier for foreigners to immigrate in order to meet the labor force requirements of a growing economy.

The healthcare system in Singapore has achieved a high quality of public health at a relatively low expenditure. The

government places significance on education with about one-fifth of its annual budget spent on it.

Evolution

The Ministry of Community Development, established during the 1970s, acts as the regulatory authority and a supervising

body for social welfare in Singapore. Besides institutionalized care, the ministry administered and encouraged housing

service schemes for needy young persons between 1970 and 1990. Social welfare assistance was also provided by

mutual-benefit organizations and voluntary services like the Council of Social Service. Furthermore, the social system in

Singapore sought to strike an ideal balance between equity and efficiency objectives by financing healthcare services

through a mixture of personal payments, limited insurance coverage, and employment benefits which included company

plans for workers and their families. The National Health Plan (NHP), started by the government in 1983, provided

healthcare services of the highest quality to all sections of the population. In 1986, the government operated more than 80

child care centers and three welfare homes for aged and destitute persons. The social services system is, however, funded

more by the private sector and non-profit organizations.


Demographic composition

Age and gender-wise composition

The population of Singapore was about 4.7 million as of 2009, with a growth rate of 1.1% per annum. Around 77% of the

population are in the 15–64 year-old age group, and more than 9% are older than 65. The sex ratio in Singapore is around

1.08 males per female. The life expectancy of the total population is around 82.1 years, with an average age of 79.5 years

for males and 84.9 years for females. The net immigration rate in Singapore is 4.8 migrants per 1,000 people.

Social landscape



Table 9: Mid-year population by age (millions)

Mid-year population by age Female Male

0–4 0.10 0.11

5–9 0.11 0.12

10–14 0.12 0.13

15–19 0.14 0.14

20–24 0.14 0.14

25–29 0.18 0.17

30–34 0.22 0.20

35–39 0.25 0.22

40–44 0.25 0.23

45–49 0.22 0.21

50–54 0.18 0.18

55–59 0.13 0.13

60–64 0.08 0.08

65–69 0.07 0.06

70–74 0.05 0.04

75–79 0.04 0.03

80+ 0.06 0.04


Religious composition

Singaporean society is multi-ethnic and multi-religious with its citizens living in relative harmony. The use of English as the

medium of instruction in schools and the language of administration, combined with housing policies that require mixed

ethnic neighborhoods have promoted a degree of integration and tolerance in the country. Apart from English, all the main

native ethnic languages (Chinese, Malay and Tamil) are accorded official status. Residents have the freedom to practice

any religion. Over 40% of the population in Singapore is Buddhist and about 14% is Muslim.

Social landscape



Figure 16: Major religions in Singapore

Buddhist42%

Muslim14%

Taoist9%

Hindu4%

Catholic5%

Other Christian10%

Others1%

None15%


Education

Overview

Singapore’s education system is based on merit and is seen by the government as the most important vehicle for improving

the social status and standard of living of its citizens. English is used as the primary medium of instruction in order to

connect students from different ethnic and cultural backgrounds and integrate Singapore with the world economy. The

Ministry of Education directs the education policies of the country. It controls the administration of government-funded

public schools and plays an advisory role to private schools.

System of education

The education system comprises four stages: primary, secondary, post-secondary, and university education. Primary

education is compulsory and starts at the age of six, and has a four-year foundation and two-year orientation stage. At the

end of these stages a primary school leaving examination is conducted to assess the ability of students to attend secondary

school. Secondary school education lasts for four to five years depending on the ability of the student. At the end of this

stage, students may take the Singapore-Cambridge general certificate of education ”ordinary” (GCE 'O' Level) examination.

Students passing the ‘O’ level can proceed to pre-university or polytechnic education.

Social landscape



Pre-university education is the direct route to university and offers an advanced curriculum requiring academic rigor and

mental discipline. This stage can be completed in either two years at junior colleges or three years in centralized institutes.

Admission is based on a points system computed from the ‘O’ Level exams. At the end of the pre-university course,

students sit for the Singapore-Cambridge general certificate of education 'advanced' (GCE 'A' Level) examinations, which

determines their eligibility for tertiary education.

The Integrated Program is a new alternative available to students after primary schooling. It combines secondary and junior

college education without an intervening ‘O’ Level examination. The program is four to six years long and provides more

freedom in the choice of subjects, such as philosophy and political science, instead of focusing just on quick and basic

education.

Students who opt for polytechnic education after secondary school earn diplomas in their chosen courses. These courses

are three to four years long. Diploma awardees are eligible for university education but they usually join the workforce

without further studies. Apart from polytechnics, there is an Institute of Technical Education which offers a one to two year

long certification course in preparation for entering the labor force, especially in the industrial sector.

Healthcare

Healthcare services

Singapore’s healthcare system comprises both public and private segments and is complemented by high standards of

living, safe water supply and sanitation, and preventive medicine. The system is one of the most successful in the world in

terms of both efficiency in financing and public health outcomes. With a healthcare expenditure of less than 4% of GDP,

Singapore compares well with developed nations on life expectancy (82.0 years as per 2010 estimates) and infant mortality

(2.3 deaths per 1,000 live births, as per 2010 estimates). The key facet behind Singapore’s successful healthcare system is

the emphasis on individuals to assume responsibility for their own health and healthcare expenditure. Unlike most

developed countries, private healthcare expenditure financed by individuals and their employers is higher than public

expenditure in Singapore. Overall, healthcare is financed by a combination of taxes, employee medical benefits,

compulsory savings in the form of Medisave, insurance, and out-of-pocket payments.

Social welfare

Social welfare policies

Medisave is a compulsory national medical savings scheme which helps individuals save part of their income to meet future

medical expenses. It is a subset of the mandatory government pension scheme called the Central Provident Fund. Under

the scheme, every employee contributes 6.5–8.5% (depending on age group) of his monthly salary to a personal Medisave

account. The savings can be withdrawn to pay the hospital bills of the account holder and her immediate family members.

Medisave covers about 85% of Singapore’s population.

Other government-managed schemes exist to cover healthcare expenditures exceeding Medisave balances. These

include: MediShield, a low cost catastrophic illness insurance scheme for major or prolonged illnesses; ElderShield, a

disability insurance scheme which covers old aged people needing long term care; and Medifund, an endowment fund

which acts as a safety net for those who cannot afford even the subsidized bill charges. MediShield and ElderShield are

Social landscape



self-financed private insurance schemes where premiums can be paid from Medisave accounts. Private insurers too offer

insurance schemes, some of which cover expense types not covered by government schemes.

Performance

Healthcare

Primary healthcare is provided mostly by the private sector (80%) in Singapore. It includes preventive healthcare and

health education and is administered through over 2,000 private clinics and 18 outpatient polyclinics. The outpatient

polyclinics are subsidized government-run health centers providing multiple services like outpatient care, follow-up of

discharged patients, immunization, screening and preliminary investigation, education and pharmacy services.

Medium and long term healthcare services are delivered through a range of residential and community based services.

These include community hospitals, chronic illness hospitals, nursing homes, sheltered homes for the formerly mentally ill,

inpatient hospice institutions, home medical, home nursing and home hospice care services, day rehabilitation centers,

dementia day care centers, psychiatric day care centers and psychiatric rehabilitation homes.

In 2009, Singapore spent about $5.3 billion or 3.0% of its GDP on healthcare. In comparison, the country’s expenditure on

healthcare was $5.8 billion or 3.1% of GDP in 2008. Datamonitor estimates suggest that the health care expenditure in

Singapore is expected to reach a value of $6.3 billion in 2013 (equivalent to 2.6% of GDP). The financing philosophy of the

healthcare system is based on individual responsibility and community support. While government subsidies are available

to keep basic healthcare supportable, patients need to co-pay part of their medical expenses.

Social landscape



Figure 17: Healthcare expenditure in Singapore, 2002–12

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Income distribution

Standard of living

Singapore has a relatively high level of inequality, with a Gini coefficient value of 0.48 as of 2008. The Gini coefficient

ranges from 0 indicating perfect equality to 1 indicating perfect inequality. In comparison, Japan had a value of 0.25, the UK

0.36, the US 0.41 and Hong Kong 0.43. According to Singapore’s Department of Statistics, the Gini coefficient decreased

from 0.489 in 2007 to 0.481 in 2008. This is the first time that the country’s Gini coefficient has shown an improvement

since 1998. Faster income growth for skilled workers in the higher-income households has been a prime reason for income

inequality in Singapore.

Education

The government spends as much as 20% of its annual budget on education. Subsidies in public schools ensure that

students pay as low as $8.5 for monthly fees. The average literacy rate of the population aged 15 years and above is at

92.5% (2000 census). The mean number of schooling years among residents aged 25 years or above is around 9.3 years.

Total education expenditure in 2009 was around $4.6 billion, or 2.6% of GDP. According to Datamonitor estimates,

spending on education is forecast to increase to $6.1 billion, constituting around 2.5% of GDP in 2013.

Social landscape



Figure 18: Education expenditure in Singapore, 2002–13

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Outlook

In Singapore the social system is well managed with good educational and healthcare facilities. However, the declining

labor force and liberal immigration problems are slowly beginning to negatively affect the society. The labor force

participation rate among residents was only about 69%.

Until 2010, the government did not provide any job assurance or benefits to the unemployed such as support for transport,

food, medical needs, school-related expenses, utilities and housing. The government has recently introduced a three-year

Workfare Training Scheme (WTS). Under this program, a structured training program will be planned for those unemployed

or with very low skills. Furthermore, employers will be offered subsidies for providing training to low-wage workers. These

initiatives are expected to improve the overall quality of the labor market in Singapore.

Technological landscape



TECHNOLOGICAL LANDSCAPE

Summary

Science and technology is seen as a national priority in Singapore and the government considers it as a tool to transform

the country into a knowledge-based economy. Singapore's R&D policy is designed to attract and create high-value

industries. The country spent 2.77% of GDP on R&D in 2008 and is in line with meeting its target of 3% by 2010. The

private sector is the biggest spender on R&D. R&D activities are higher in areas like biomedical sciences, electronics, and

engineering, and these sectors have been identified as the priority research areas.

Singapore has a strong telecommunication industry. Penetration rates for broadband internet and mobile

telecommunications are very high. The government aims to further leverage the ICT sector for adding value to the society

and the economy. It aims to double the value added to the industry to SGD26 billion ($17 billion) by 2015. In order to

facilitate these goals, the government has instituted plans for a next generation national telecommunication Infrastructure,

which will include a hi-speed broadband network and a pervasive wireless broadband network.

Evolution

In 1967, the Ministry of Trade and Industry in Singapore established a special Science Council. The Science Council was

established to advise the ministry on scientific and technological matters related to research and development and training

and utilization of manpower. During the 1970s, the Singapore National Academy of Science was established, under which

the Singapore Association for the Advancement of Science, was founded in 1976. The academy mainly concentrated on

R&D into advanced technologies. Two new research institutions were established in 1985. These included the Institute of

Systems Science, which does research in the area of information technology, and the Institute of Molecular and Cell

Biology, a center for biotechnological research. The Singapore Science Park was developed in 1987 for the protection of

rare species. Later, public research centers were interlinked with various technology institutes in Singapore for conducting

advanced R&D.


Intellectual property

Singapore has strict IP laws backed by efficient courts. The Intellectual Property Office of Singapore (IPOS) is the national

statutory board for granting patents. Patenting activity is strong, especially within Singapore. The residents of the country

need written authorization before filing an application for a patent overseas. The private sector accounted for most of the

patent awards (around 80%). Patenting activity is particularly strong in the semiconductor and other electronics industries.


fares better than Malaysia which was granted only 181 patents in 2009. However, it compares poorly with South Korea

(9,566 patents) and Japan (38,066 patents).




Table 10: Patents received by USPTO, 2002–09

Year Singapore Malaysia South Korea Japan US

2002 421 62 4009 36,339 97,125

2003 460 63 4132 37,248 98,590

2004 485 93 4671 37,032 94,129

2005 377 98 4591 31,834 82,586

2006 469 131 6509 39,411 102,267

2007 451 173 7264 35,941 93,691

2008 450 168 8730 36,679 92,001

2009 493 181 9566 38,066 92,037


Research and development

The Singaporean government encourages innovation and advanced R&D in the country. The Ministry of Trade & Industry

(MTI) announced a five year plan called the Science & Technology 2010 Plan (STP 2010). STP 2010 lists four key

programs for strengthening R&D in Singapore:

The government, through its Agency for Science, Technology and Research (A*STAR), aims to increase the scope for

students in Singapore for careers in research, while at the same time attract global talent to satisfy immediate R&D

manpower requirements. There is already a range of scholarship programs to cater for students at different levels. These

include the national science scholarships for undergraduates and post-graduates, and the A*STAR graduate scholarships

for PhD candidates.

The A*STAR has a mandate to develop international levels of competence in areas that are important to Singapore’s

economy. These key areas include biomedical sciences, electronics, telecommunication, precision engineering and

chemicals.

The government intends to provide financial incentives for promoting private R&D, including innovation grants and

additional tax deductions on R&D activities. Innovation is being encouraged in small and medium enterprise through

technical, manpower and financial assistance.

The government is set to provide additional infrastructural facilities to attract R&D talent and investment.

Performance

Telecommunications, broadband and the internet

Singapore has a strong telecommunication industry (termed as infocomm in Singapore) with revenues touching $29.6

billion (2006), representing a growth of about 20% from 2005. The industry has raised productivity and transformed

business processes across sectors, and enhanced the competitiveness of the whole economy. Mobile penetration rate in

Singapore is one of the highest in the world at more than 147 for 100 people as of 2009. The household internet

penetration was as high as 71% in the same year. The growth of fixed line telephony in Singapore has diminished with the




advent of mobile and internet technologies in the 1990s. The Infocomm Development Authority of Singapore (IDA) is

responsible for cultivating a competitive infocomm industry in Singapore. The fixed line segment saw an annual growth of

0.5% in 2009, while mobile phone segment witnessed 8.5% growth during the same period. The Internet market in the

country continues to grow, with the number of Internet users standing at 3.5 million in 2009, compared to that of 2.1 million

in 2002.

Singapore plans to build a next generation national infocomm infrastructure. This will comprise an ultra high-speed next

generation national broadband network and a pervasive wireless broadband network. In 2006, a three-year free wireless

broadband program called Wireless@SG was launched. Increased accessibility of internet has helped in the proliferation of

emerging applications like Voice over Internet Protocol (VoIP) and Internet Protocol Television (IPTV). At the same time,

the National Cyber Threat Monitoring Centre is monitoring and enhancing the network and information security capabilities

of Singapore.

Figure 19: Growth of fixed and mobile phones in Singapore, 2002–13

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2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

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Figure 20: Internet users in Singapore, 2002–13

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R&D expenditure

The Agency for Science, Technology and Research (A*STAR) conducts an R&D national survey every year in the country.

In 2006, it was found that Singapore spent a total of $3.15 billion on R&D as compared to $2.75 billion in 2005, which was

2.36% of the GDP. The private sector accounted for 66% of this expenditure, followed by public research institutes (14%),

the government sector (10%) and the higher education sector (10%). Private R&D spending grew strongly by 20% in 2004

and 17% in 2005, after registering minimal growth during 2001–2003. Almost 57% of total R&D expenditure was in the

fields of engineering and technology, 19% in the biomedical sciences, 10% in other natural sciences, 1% in the agricultural

and food sciences, and 14% in other areas. In the private sector, manufacturing industries like electronics, precision

engineering and chemicals attracted most of the R&D spending (65%). Services industries like ICT and financial services

drew about 35%, while construction and primary industries accounted for less than 1% of private R&D expenditure. The

country’s gross expenditure on R&D (GERD) reached a high of SGD7.13 billion ($4.9 billion) in 2008 or 2.77% of GDP.

Singapore is, therefore, on track to achieving its target of 3% by 2010.

Outlook

According to the World Economic Forum’s Global Information Technology report (2010–11), Singapore was placed 2nd in

the world by virtue of its impressive innovation and development strategies. The government of Singapore is recognized for




its vision and role in enhancing ICT penetration and leveraging ICT for economic and social modernization and

competitiveness. Under the government’s “Singapore i2015” strategy, the government aims to double the value added of

the ICT industry to $17 billion, to triple ICT exports to $40 billion, and to achieve a household broadband penetration rate of

90%.

In addition, the government has been building R&D capabilities in the country. Gross Expenditure on R&D (GERD) has

increased from 2.52% of GDP in 2007, to 2.77% of GDP in 2008. An increase in R&D investment has led to an increase in

the number of research personnel. The research scientist and engineers per 10,000 working members for 2008 was 87.6.

However, the country has low number of patents compared to other developed countries around the world.

Legal landscape



LEGAL LANDSCAPE

Summary

Singapore has an independent judiciary headed by the Supreme Court. The judicial system is based on the English

common law system. The Supreme Court is the highest court of the country comprising the court of appeal and the high

court. The courts of Singapore are recognized to be efficient and fair in commercial law, however, they are perceived to

favor the government and the PAP in political and public matters.

The regulatory environment in Singapore is highly business friendly. Singapore ranks 1st in the world in the ease of doing

business index, according to the World Bank’s Doing Business report (2010). According to the survey, the country fares

particularly well on parameters like employing workers, foreign trade, protecting investors and paying taxes. Foreign labor

may be hired with ease and efficiency. Foreign investment is welcomed in most sectors and trade barriers are very low.

The threat of expropriation is non-existent and the courts enforce contracts strictly. Furthermore, corporate and individual

income taxes are among the lowest in the world.

Evolution

The first official establishment of a court in Singapore was in 1826, with the British Crown issuing the Second Charter of

Justice that created the Court of Judicature of Prince Wales Island, Singapore and Malacca and formally introduced English

law to the island. There was only one judge (known as recorder) as of then. In 1855, a Third Charter of Justice was granted

which moved the court to Singapore and appointed an additional recorder. In 1868, the Supreme Court of the Straits

Settlements was set up. Under this new system, the recorder of Singapore became the first chief justice of the Straits

Settlements. In 1873, the court of appeal was established. In 1907, the Supreme Court (comprising the court of appeal and

the high court) was reorganized and the district courts were set up. In 1934, the court of criminal appeal was set up as an

extension of the Supreme Court. A new Supreme Court of Judicature Act was enacted in 1969 creating Singapore's own

Supreme Court, comprising the court of appeal, court of criminal appeal and the high court. The Subordinate Courts Act

was also enacted at this time, putting in place the district, magistrates, coroners, and juvenile courts. On November 12,

1993, the Application of English Law Act was introduced to declare the extent to which English law is applicable in

Singapore.


Judicial system

Structure of the system

The judicial system in Singapore is based on English Common Law, which is founded on precedents set by judges in

earlier cases. The constitution, however, lays down the fundamental principles and provides the basic framework for all

three organs of the government: the executive, the legislature and the judiciary. Any legislation contrary to the constitution

is deemed void. The constitution also guarantees the independence of the judiciary. Judicial power is vested in the

Supreme Court and the subordinate courts. Appeals to the Privy Council in England were abolished in 1994.

Legal landscape



Supreme Court

The Supreme Court consists of a court of appeal and a high court. It hears both civil and criminal matters. The Supreme

Court also has a special constitutional tribunal that hears questions by the president on the effect of constitutional

provisions. The Supreme Court bench consists of the chief justice, the judges of appeal, judges and judicial commissioners.

The bench is assisted by the registry and the justice’s law clerks.

Courts of appeal

The court of appeal hears appeals against the decisions of the high court. The chief justice sits in the court of appeal along

with the judges of appeal and at times with judges of the high court. The court of appeal is usually made up of three judges.

High court

The high court acts as a court of first instance and serves appellate, supervisory and reversionary functions on the

decisions of subordinate courts. The chief justice, judges of the high court and occasionally judges of appeal sit in the high

court with proceedings usually heard by a single judge. The high court is exclusively responsible for hearing bankruptcy

and company termination proceedings.

Subordinate court

The subordinate courts consist of the district courts, magistrates’ courts, juvenile courts, family courts, coroner courts and

the small claims tribunal. Together, these courts have jurisdiction on criminal, civil, family law and juvenile law matters.

Legislation affecting business

Industrial acts, legislations and regulations

Every business in Singapore has to be registered with the Accounting and Corporate Regulatory Authority (ACRA).

Financial institutions need to secure licenses from the Monetary Authority of Singapore. Manufacturing companies need

approval only if they seek incentives from the government or are involved in the production of controlled goods.

The Price Control Act allows the imposition of price controls on imports and exports but is hardly ever used. There is a

Competition Act and a Competition Commission which has the right to intervene in situations of monopoly practices and

restrictive acts. Mergers and acquisitions do not require official approval, but listed and unlisted companies with 50 or more

shareholders and net tangible assets of SGD5 million ($3.26 million) or more need to adhere to the principles set out in the

Singapore Code on Takeovers and Mergers.

Singapore has a strong intellectual property protection system. Its Patent Act is in line with international conventions and

has a strict legal system for IP law enforcement. Institutions like the Intellectual Property Office of Singapore, the Singapore

International Arbitration Centre and the Recording Industry Association deal specifically with IP issues. IP laws were

strengthened in 2005 as penalties for copyright infringement and piracy were made stronger and the copyright protection

period for authors was extended by 20 years.

Legal landscape



Establishing operations as a foreign enterprise

Foreign equity investment up to 100% is allowed in most sectors but foreign takeovers in the financial sector are prohibited.

Licensing and joint ventures are also allowed. Investment incentives include tax holidays and concessions, accelerated

depreciation schemes and favorable loan conditions. Incentives are particularly provided for knowledge-driven and high

value industries like electronics, biomedical and petrochemicals. A foreign company looking to start operations in Singapore

has the following options for formulating its entry strategy:

Sole proprietorship

To start a business in the form of sole proprietorship in Singapore, the person must be older than 18 years of age. The sole

proprietor must first apply to register the business in accordance with the provisions of the Business Registration Act. This

may be done by completing and submitting the relevant forms directly to the ACRA. Subsequently, the proprietor must

comply with all the requirements set out under the Business Registration Act. The assets and profits that the business

generates are owned by the proprietor who is personally liable to pay tax.

Partnership

Singaporean law does not treat a partnership as a separate legal entity from its partners. The partners collectively own the

assets of the partnership and are each individually liable for the debts and liabilities of the partnership. Each partner is

personally liable for the full amount of debt owed by the partnership without any limit. Partners are taxed individually on

their share of the partnership’s profits. To start a partnership business in Singapore, the firm must be registered under the

Business Registration Act. There is also an option of starting a limited liability partnership, with a minimum of two partners.

The rules guiding this form are provided by the Limited Liability Partnership Act.

Company

In Singapore, there are three options to establish a company: registering as a private company, an exempt private

company, or a public company. The companies in Singapore are formed in accordance with the Companies Act. The

companies must also comply with all the rules stated under the Business Registration Act. The companies are charged with

the regular corporate taxation rates for the income earned.

Branch office

Foreign companies have an option to set up a branch office in Singapore, but for taxation purposes they often choose to

set up a subsidiary, as in Singapore, branch offices are otherwise treated as a subsidiary. The branch office has to be

registered with the International Enterprise Singapore (IES), the lead agency under the Ministry of Trade and Industry,

spearheading the development of Singapore's external economic wing. Branches are also required to file corporate

financial statements with the ACRA on a regular basis.

Legal landscape



Tax regulations

Corporate tax

Singapore has a tax structure designed to encourage businesses and enterprises. The corporate tax rate is one of the

lowest in the world. There are other incentives and schemes that favor companies.

Singapore has a territorial taxation system wherein all income earned in Singapore and foreign income remitted to

Singapore is subject to taxes.

• The Singapore government reduced the maximum tax rate payable by companies to 17% from 18% in January

2009. This applies to subsidiaries incorporated in Singapore as well as branches of foreign companies.

• Partial tax exemption of 75% is provided on taxable income up to SGD10,000 ($6,520) and 50% on the next

SGD290,000 ($192,440).

• There is no capital gains tax.

• Capital allowances are provided on fixed assets, R&D expenditure, and the acquisition of intellectual property on

either a straight-line or accelerated basis.

Individual income tax

Individuals are taxed under a progressive tax system varying from 3.5%–20% depending on the level of income. The first

SGD20,000 (around $13,040) of taxable income base is exempt from taxes. A 20% tax is charged for income base above

SGD320,000 (around $208,640). The minimum income tax rate for non-residents is higher at 15%. Non-residents are also

ineligible for double tax relief, tax rebates, and other such benefits. However, foreign income received by non-residents is

not subject to tax. Both residents and non-residents are subject to taxes on fringe benefits like cost of living allowances,

housing, stock options and motor vehicles, and on income from other sources like interest, royalties and dividends.

Contributions to the central provident fund are tax-exempt for citizens and permanent residents. The income tax rates are

given below:

Table 11: Singapore: individual income tax rates

Tax (%) Taxable income ( SGD)

0% Up to 20,000

3.5% 20,000–30,000

5.5% 30,000–40,000

8.5% 40,000–80,000

14% 80,000–160,000

17% 160,000–320,000

20% 320,000 and above


Legal landscape



Individuals are also subject to property tax which is calculated as a percentage of the annual rental value of all houses,

lands, buildings and tenements. The property tax rate for industrial and commercial properties is 10%, while owner-

occupied residential properties are taxed at 4%.

Withholding tax

Withholding taxes are not charged on dividends. The taxation system became one-tier beginning January 1, 2003, wherein

tax paid on corporate profit is final and dividends distributed to shareholders are tax-exempt. The withholding tax rate is

15% on interest payments and 10% on royalties.

Other local taxes

Singapore levies a goods and services tax (GST) on the supply of goods and services in Singapore and on imports into

Singapore. Although the GST was increased from 5% to 7% in 2007, the level of consumption tax is among the lowest in

the world. Exports and international services are zero-rated while imported goods are taxed on the basis of their cost,

insurance and freight (CIF) value, plus commission, customs duties and other incidental charges. The GST paid on inputs

may be reclaimed by taxable persons as input tax. The GST exempt items include the sale and lease of residential land

and the provision of some financial services like life insurance. Other indirect taxes include entertainment tax, skills

development levy, excise duty, estate duty and stamp duty.

Labor law

The labor market is flexible and companies are free to employ foreign labor subject to some restrictions. The Employment

Act sets out the rules and requirements on employee benefits, rights and termination. There is no minimum wage required

by law but the National Wage Council issues guidelines on wage adjustments. The standard legal work week is 44 hours

long. Most companies have a five day work week. Termination of employment requires a notice period ranging from one

day for fewer than 26 weeks of service to four weeks for service of five years or longer.

Social security charges

Singapore has made provisions for the central provident fund (CPF), to which all employers and employees who are

citizens or permanent residents must contribute. The CPF primarily finances retirement and medical benefits. Employees

earning less than SGD750 ($490) per month and foreign employees and their employers are exempt from contributing.

Members may divert their CPF contributions to purchase homes or make their mortgage payments. The standard

contribution rate is 20% for employees and 13% for employers, while members aged 55 and above have a lower required

rate.

Trade regulations

Singapore’s economy is dependent on foreign trade to a large extent, and government policies have attempted to lower

trade barriers. The country is a member of the WTO and has removed a number of import items from its tariff lists. The

weighted average tariff rate is zero percent but non-tariff barriers are present. These include import taxes, import licensing,

export incentive programs, sanitary and phytosanitary requirements and service market barriers.

Legal landscape



Singapore is also part of the ASEAN and the Asia Pacific Economic Co-operation (APEC). Both attempt to lower trade and

investment barriers and create a fully integrated region within the global economy. In recent years, the government has

entered into a number of free trade agreements with major trade partners like the US, China and Japan, and even minor

economies like Panama.

Performance

Effectiveness of the legal system

Singapore was ranked as the second freest economy in the 2010 Index of Economic Freedom (a product of the Heritage

Foundation and Wall Street Journal). Singapore’s economic freedom score is 86.1. This score indicates a highly conducive

environment for business. Singapore ranks highly in business freedom (with a score of 98.2 on the indicator), property

rights (90), freedom from corruption (92), fiscal freedom (90.7), investment freedom (75.0) and labor freedom (98.9)

indicators. The country also ranked first on the ease of doing business index in the World Bank’s Doing Business report

(2010). According to the report, Singapore is ranked 4th in terms of starting a business and 2

nd for closing a business. Three

procedures and three days are required to start a business in Singapore, compared to the Asia Pacific region’s average of

8.6 procedures and 44 days. The country was ranked first for the ease of employing workers and also ranked second with

regard to protecting investors. Singapore was ranked 16th for the ease of registering a property and 4th for getting credit.

Outlook

While Singapore is one of the most attractive destinations for business investment, there are certain areas where further

reforms are possible. For example, trade tariffs are very low but some non-tariff barriers exist. Though the government

does not interfere with the private sector, it is still present in the economy, with substantial stakes in sectors like banking,

telecom, transport and energy.

The judicial system in Singapore is gradually becoming accessible to all people. In Singapore, poor and needy defendants

are turning to a program which provides them with free lawyers, and almost one out of five has seen a difference in the

judicial outcome. The Criminal Legal Aid Scheme (CLAS) is a legal assistance body which arranges legal advice and

representation for those who cannot afford to engage a lawyer. The efforts from the CLAS also help in handling the

prevailing inequality in the country.




ENVIRONMENTAL LANDSCAPE

Summary

Singapore faces a number of environmental challenges, although its performance to date has been excellent. The United

Nations Environment Program has recognized Singapore as a leader and an inspiration for other nations in achieving

sustainable development. The Ministry of Environment and Water Resources (MEWR) leads policy making and program

implementation in the environmental arena.

Evolution

Environmental regulations in Singapore started with the establishment of an anti-pollution unit in 1970. The unit was

established to provide regulations on environmental health. In the same year, Singapore Clean Campaign was introduced

as one of the first public initiatives to keep the city clean. The formation of the Ministry of Environment in 1972 brought in

many clean air standards and regulations, sewage programs, and regulations on drainage system. In 1976, the government

formulated many trade effluent regulations anticipating the boom in international trade. In 1986, a special pollution control

department was started within the Ministry of Environment. During the 1990s, the government launched several regulations

on toxic wastes, pollution in the sea, and the use of unleaded petrol, and a special waste minimization department was also

formed.


Environmental regulations

Overview

The MEWR is responsible for the development of a high quality environment and public health. It was earlier known as the

Ministry of the Environment but its role was expanded in 2004 to include the management of water as a strategic national

resource. The MEWR is assisted by the National Environment Agency (NEA) and the Public Utilities Board (PUB). The

NEA functions as the implementation arm for environmental policies, while the PUB is the national water agency. The NEA

has three divisions: Environmental Protection, Environmental Public Health, and Meteorological Services.

Policy

The Environmental Protection division is responsible for monitoring, reducing and preventing pollution. It oversees the

operations of Singapore’s four refuse incineration plants and its sole offshore landfill site. Other functions of the division

include the implementation of programs for minimizing waste generation and maximizing recycling, and energy

conservation. The Public Health division carries out ground surveillance and ensures overall civic cleanliness and hygiene

in the food retail industry. Its flagship program includes the Hawker Centers Upgrading Program and Clean Public Toilets

Program.

Singapore has a blueprint for sustained economic development called the Singapore Green Plan 2012. The MEWR first

instituted a green plan in 1992 to bring together the public and private sectors and the general public to create a

comprehensive environmental protection and sustainable development plan. The second ten-year period started in 2002




and the plan was updated in 2005 after a three-year review. It has six action programs, covering clean air and climate

change, water, waste management, nature conservation, public health, and international environmental relations.

Environmental actions

Measures on climate change

With much of its land area less than 15 meters above sea level and about 150 km of coast line, Singapore is vulnerable to

raising sea levels. The increased incidence of tropical diseases due to higher temperatures is also a risk factor. The limited

land area of the country is blanketed with extensive green cover which functions as a carbon sink, although its effect is

limited. In the absence of alternate energy sources, the government’s strategy for offsetting greenhouse gas (GHG)

emissions has been to promote higher energy efficiency. It is encouraging higher use of natural gas which produces less

GHGs, and efficient processes for power generation like co-generation and combined cycle gas turbine technology. It has

also instituted an Energy Labeling Scheme for consumer appliances and a Fuel Economy Labeling Scheme for vehicles.

Other measures include offering incentives for adopting clean technologies, energy-efficient housing design, and the

promotion of public transport. These efforts have contributed to a 15% improvement in carbon efficiency between 1990 and

2002, and a further 10 percentage points cut is targeted by 2012.

Water resources management

Singapore has limited water resources and imports more than 50% of its potable water requirements from Malaysia;

therefore, great importance is given to the efficient use and conservation of water resources. The PUB is responsible for

providing an adequate and reliable supply of potable water. Water from local sources and Johor in Malaysia meet most of

the requirements. The estuaries of some of the rivers have been damned to serve the dual purpose of storing water and

preventing sea water infiltration.

About two-thirds of the island, including 6% of protected areas, functions as catchments. Raw rain water from these areas

flows through a storm-water collection network. It is stored in reservoirs and is treated before being supplied as potable

water to all parts of Singapore. The quality of this water has consistently been well within WHO requirements. Desalinated

water, which is high-grade water reclaimed from sewage effluents, has been developed as an additional source to meet

future requirements. In early 2000, Singapore built its first wastewater recycling plant. It managed to turn wastewater into

purified water which is potable, although most of it is utilized by the industry. Three more plants are now operating, while

the largest one is under construction.

Flood management

The estuary dams and the storm water drains help prevent inland floods, but a rise in sea levels could hamper the drainage

system. The flood prone areas have been reduced by raising platform levels in the course of land development. In other

low-lying areas, pumped drainage systems and tide-gates have been installed to prevent inundation. All new land

developments are required to have adequate drainage systems, and the entire system is monitored carefully.




Participation in global efforts/agreements/pacts

Table 12: International environmental treaties signed and ratified by Singapore

International treaty Year of ratification

Vienna Convention for the Protection of the Ozone Layer, 1988 1989

Montreal Protocol on Substances that Deplete the Ozone Layer 1989

Framework Convention on Climate Change 1997

Convention on Biological Diversity 1995

UN Law of the Sea 1994

UN Convention to Combat Desertification in those Countries Experiencing Serious Drought and/or Desertification and Particularly in Africa 1999

Kyoto Protocol to the UN Framework Convention on Climate Change (year of ratification/signature) 2006


Copenhagen conference on climate change

The United Nations Framework Convention on Climate Change (UNFCCC) sets an overall framework for intergovernmental

efforts to tackle the challenge posed by climate change. It recognizes that the climate system is a shared resource whose

stability can be affected by industrial and other emissions of carbon dioxide and other greenhouse gases. The convention

has a universal membership, with 192 countries including Singapore having ratified the convention. No deal could be

clinched in Copenhagen, however, talks on a binding international climate change pact continue in 2010.

Performance

Environmental impact

According to 2010 Environmental Performance Index, Singapore was ranked 28th among 163 countries. The country had a

score of 69.6, higher than the average EPI score for Asia Pacific region of 57.4. Singapore has maintained a high ambient

air quality through stringent emission standards for industries and vehicles. Euro IV emissions standards were adopted for

new diesel vehicles in 2006. Concentrations of most major air pollutants like sulfur dioxide, nitrogen oxides and carbon

monoxide are within limits prescribed by the US Environmental Protection Agency. However, particulate matter smaller

than 2.5 microns in size (PM2.5) is an emerging pollutant of concern and has been linked to asthma and bronchitis. Diesel

vehicles are the principal source of PM2.5. The government has been promoting CNG vehicles as replacements for diesel

vehicles to combat PM2.5. CNG vehicles are eligible for a Green Vehicle Rebate, CNG taxis are exempt from a special

vehicle tax till December 2007, and public funds have been provided for the construction of CNG refueling stations.

Singapore relies heavily on fossil fuels for its energy requirements, and it currently lacks the requisite resources and

conditions to tap renewable sources on energy. Carbon dioxide is its main GHG emission. Electricity generation is the

biggest source of CO2, followed by industries and transportation. CO2 emissions are projected to increase further with the

growing economy, higher standards of living, and an increasing population. Carbon dioxide emissions increased from being

111 million metric tons in 2000 to more than 185 million metric tons in 2007. CO2 emissions increased at 3.4% to reach

153.9 million metric tons during 2009. Datamonitor forecasts suggest that CO2 emissions will increase to reach 175 million

metric tons by 2013.




Figure 21: Carbon dioxide emissions in Singapore, 2002–13

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Outlook

Singapore has a scarcity of fresh water within the country, making water resources management an important focus area.

An extensive storm water collection and purification system is in place to deliver potable water. New sources of water

through desalination and recycling are being developed to meet growing demands.

Waste management has become an important concern in many Asian nations including Singapore. In June 2010, the

Waste Management and Recycling Association of Singapore and the National Environment Agency signed a memorandum

of understanding with the International Solid Waste Association to establish a training and advisory center for

environmental and waste management. The recycling of household wastes and reduction of packaging waste are other

initiatives in the waste management area. The government has in place a ten year plan called the Singapore Green Plan

2012 which proposes actions on various fronts like climate change, waste management and nature conservation.

The government of Singapore is making efforts to pursue renewable energy development as part of its recent plan to

ensure the city-state's energy security and environmental sustainability. A foundation of the plan is building a home-grown

energy industry and investing in energy R&D. Along with expanding its energy trading to include liquefied natural gas, bio-

fuels and CO2 emissions credits, the government is also pursuing growth opportunities in clean and renewable energy,

including solar energy, biofuels and fuel cells. According to Datamonitor estimates, the Singaporean renewable energy




market grew by 7.5% in 2009 to reach a value of $1,121 million. The development of renewable energy sources will

decrease the country’s dependence on fossil fuels.

APPENDIX



APPENDIX

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