SINGAPORE - 2007 INVESTMENT CLIMATE STATEMENT

UNCLAS SINGAPORE 000024

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EB/IFD/OIA/JNHATCHER
TREASURY FOR DO/WALLACE
COMMERCE FOR ITA/SMATHEWS
STATE PASS USTR
STATE PASS OPIC

E.O. 12958: N/A
TAGS: EINV EFIN ETRD ELAB KTDB PGOV OPIC USTR
SUBJECT: SINGAPORE - 2007 INVESTMENT CLIMATE STATEMENT

REF: 2006 STATE 178303


1. Per reftel instructions, Post submits the text of
the 2007 Investment Climate Statement for Singapore.
As requested, we have also provided the document via
email to EB/IFD/OIA.


2. Begin text of Statement:

Singapore INVESTMENT CLIMATE STATEMENT 2007

INTRODUCTION

Foreign investments, combined with investments through
government-linked corporations (GLCs),underpin
Singapore's open, heavily trade-dependent economy.
With the exception of restrictions in the financial
services, professional services, and media sectors,
Singapore maintains a predominantly open investment
regime. The World Bank's report, "Doing Business
2007: How to Reform," ranked Singapore as the easiest
country in which to do business. The U.S.-Singapore
Free Trade Agreement (FTA),which came into force
January 1, 2004, expanded U.S. market access in goods,
services, investment, and government procurement,
enhanced intellectual property protection, and
provided for cooperation in promoting labor rights and
the environment.

The Singapore government is strongly committed both to
maintaining a free market and to taking a leadership
role in planning Singapore's economic development.
The government actively uses the public sector as both
an investor and catalyst for development. As of
September 2006, the top six Singapore-listed GLCs
accounted for nearly 25 percent of total
capitalization of the Singapore Exchange (SGX). Some
observers have criticized the dominant role of GLCs in
the domestic economy, arguing that it has displaced or
suppressed private sector entrepreneurship and
investment.

Singapore's aggressive pursuit of foreign investment
as another pillar of its overall economic strategy has
enabled the country to evolve into a base for
multinational corporations (MNCs). The Economic
Development Board (EDB),Singapore's investment
promotion agency, focuses on securing major
investments in high value-added manufacturing and
service activities as part of a strategy to replace
labor-intensive, low value-added activities that have
migrated offshore.

OPENNESS TO FOREIGN INVESTMENT

Singapore's legal framework and public policies are
generally favorable toward foreign investors; foreign
investors are not required to enter into joint
ventures or cede management control to local
interests, and local and foreign investors are subject
to the same basic laws. Apart from regulatory
requirements in some sectors (see "Limits on National
Treatment and Other Restrictions"),the government
screens investment proposals only to determine
eligibility for various incentive regimes (see Annex).
Singapore places no restrictions on reinvestment or
repatriation of earnings or capital. The judicial
system upholds the sanctity of contracts, and
decisions are effectively enforced.

Limits on National Treatment and Other Restrictions:
Exceptions to Singapore's general openness to foreign
investment exist in telecommunications, broadcasting,
the domestic news media, financial services, legal and
other professional services, and property ownership.
Under Singapore law, Articles of Incorporation may
include shareholding limits that restrict ownership in
corporations by foreign persons.

Telecommunications: On April 1, 2000, Singapore began
removing all barriers limiting foreign entry to the
telecommunications sector. Under the Telecoms
Competition Code 2000 (Competition Code),Singapore
Telecommunications (SingTel),the former monopoly that
E
is currently 62-percent government-owned, faces
competition in all telecom services, whether
facilities-based (fixed line or mobile) or services-
based (local, international and callback). Its main
competitors, MobileOne and StarHub, are also GLCs.
Following the government's 2005 review of the
Competition Code aimed at enhancing market
transparency, SingTel has made public its prices for
interconnection services.

The FTA requires that Singapore take steps to ensure
that U.S. telecom service providers obtain the right
to interconnect with networks in Singapore at
competitive rates and on transparent and reasonable
terms and conditions. Despite the Infocomm
Development Authority's (IDA) regulatory changes
designed to moderate SingTel's market dominance,
concerns remain that SingTel's interconnection
requirements for "tail" local-leased circuits are
anti-competitive and not in compliance with
Singapore's FTA commitments in this area.

SingTel announced in June 2006 plans to consolidate
its local exchanges but failed to provide details of
specific local exchanges to be closed. This has put
U.S. and other carriers' build-out plans on hold. IDA
has denied requests by U.S. and other companies for
tandem-level interconnection. Under the FTA,
Singapore has also agreed that dominant licensees
(SingTel and Starhub) must offer cost-based access to
submarine cable-landing stations and allow sharing of
facilities. U.S. and other companies continue to have
problems with access to inter-exchange ducts as
provided for in the FTA.

U.S. and other companies remain concerned about the
lack of transparency in some aspects of Singapore's
telecommunications regulatory and rule-making process.
In particular, there is no obligation to make
information publicly available concerning a company's
request for a stay of decision or the filing of an
appeal, to request public comments about such
requests, or to publish a detailed explanation
concerning final decisions made by IDA or the Ministry
of Information, Communications and Art (MICA).
Although this "closed-door" system does not contravene
Singapore's FTA obligations, Singapore is reviewing
this process at the U.S. Government's request to
determine how to make it more transparent.

Media: The local free-to-air broadcasting, cable and
newspaper sectors are effectively closed to foreign
firms. Section 44 of the Broadcasting Act restricts
foreign equity ownership of companies broadcasting to
the Singapore domestic market to 49 percent or less,
although the Act does allow for exceptions. The
Broadcasting Act (Part X) states that no person shall,
without prior approval, hold more than 5 percent of
the shares issued by a broadcasting company.

The Newspaper and Printing Presses Act restricts
equity ownership (local or foreign) to 5 percent per
shareholder. The Act also requires that all the
directors of a newspaper company be Singapore
citizens. Newspaper companies must issue two classes
of shares, ordinary and management, with the latter
available only to citizens of Singapore or
corporations approved by the government. Holders of
management shares have an effective veto over selected
board decisions. Distribution, importation and sale
of any "declared" foreign newspaper is controlled by
the government. Singapore significantly restricts
freedom of the press, having curtailed or banned the
circulation of some foreign publications. In
September 2006, Singapore banned the Far Eastern
Economic Review on the grounds that the publisher did
not comply with Section 23 of the Newspaper and
Printing Presses Act, whereby the offshore publisher
must appoint a person within Singapore authorized to
accept service of any notice or legal process on
behalf of the publisher and post a security deposit of
S$200,000 (US$125,000). The government has also
"gazetted" foreign newspapers, i.e., numerically
limited their circulation. Foreign publishers face
the risk of defamation suits should they be found to
"interfere" with Singapore's domestic politics.

MediaCorp TV is the only free-to-air TV broadcaster;
the government owns 80 percent and SGX-listed
Singapore Press Holdings (SPH) owns 20 percent.
StarHub Cable Vision (SCV),the sole pay-TV provider
since 1996, is a 100-percent owned subsidiary of a
majority government-owned, public-listed company. In
November 2006, the government granted SingTel a six-
month commercial pay-TV trial license. Free-to-air
radio broadcasters are mainly government-owned, with
MediaCorp Radio Singapore being the largest operator.
BBC World Services is the only foreign free-to-air
broadcaster in Singapore. In July 2005, the Media
Development Authority (MDA) announced more restrictive
regulations governing the relationships between
content/channel providers and pay TV operators in
Singapore. Following industry and U.S. Government
feedback, MDA rescinded the decision in May 2006.

Banking: The Monetary Authority of Singapore (MAS)
regulates all banking activities as provided for under
the Banking Act. Singapore maintains legal
distinctions between offshore and domestic banking
units, and the type of license held -- full service,
wholesale, and offshore. As of November 2006, 24
foreign full service licensees, 35 wholesale
licensees, and 44 offshore licensees operated in
Singapore. Of the 24 foreign full service licensees,
the government has granted "qualifying full bank"
(QFB) licenses to seven foreign banks, including two
U.S. banks. Eventually, all offshore banks will be
upgraded to wholesale bank status to enable them to
conduct a wider range of activities. Except in retail
banking, Singapore laws do not distinguish
operationally between foreign and domestic banks.

In 1999, the government embarked on a five-year
banking liberalization program to ease restrictions on
foreign banks. The government has removed a 40-
percent ceiling on foreign ownership of local banks
and a 20-percent aggregate foreign shareholding limit
on finance companies. It has stated publicly,
however, that it will not approve any foreign
acquisition of a local bank. Acquisitions exceeding
prescribed thresholds of 5 percent, 12 percent or 20
percent of the shares or voting power of a local bank
require the approval of the Finance Minister.

U.S. financial institutions enjoy phased-in benefits
under the FTA. U.S. licensed full-service banks have
been able to operate at up to 30 customer service
locations (branches or off-premise ATMs) since January
2004, and at an unlimited number of locations since
January 2006; non-U.S. full-service foreign banks have
been allowed to operate at up to 25 locations since

2005. U.S. and foreign full-service banks can freely
relocate existing branches, and share ATMs among
themselves. They can also provide electronic funds
transfer and point-of-sale debit services, and accept
services related to Singapore's compulsory pension
fund.

Locally incorporated subsidiaries of U.S. full-service
banks have been able to apply for access to local ATM
networks since June 30, 2006; non-locally incorporated
subsidiaries of U.S. full-service banks can begin
doing so effective January 1, 2008. Singapore will
lift its quota on new licenses for U.S. wholesale
banks from January 1, 2007. Singapore abolished
quotas on new licenses for full-service foreign banks
in July 2005.

Despite liberalization, U.S. and other foreign banks
in the domestic retail banking sector still face
barriers. Local retail banks do not face similar
constraints on customer service locations or access to
the local ATM network. Foreign charge card issuers
are prohibited from allowing their local card holders
to access their accounts through the local ATM
networks. Customers of foreign banks are also unable
to access their accounts for cash withdrawals,
transfers or bill payments at ATMs operated by banks
other than those operated by their own bank or at
foreign banks' shared ATM network. Nevertheless,
foreign full-service banks have made significant
inroads in other retail banking areas, with
substantial market share in products like credit cards
and personal and housing loans.

U.S. industry advocates enhancements to Singapore's
credit bureau system, in particular, adoption of an
open admission system for all credit lenders,
including non-banks. Singapore's two credit bureaus,
Credit Bureau (Singapore) Private Ltd. ("CBS") and
Credit Scan, do not currently provide sufficient
support to credit lenders, including non-banks.

Securities and Asset Management: Singapore removed all
trading restrictions on foreign-owned stockbrokers in
January 2002. Aggregate investment by foreigners may
not exceed 70 percent of the paid-up capital of
dealers that are members of the SGX. Direct
registration of foreign mutual funds is allowed,
provided MAS approves the prospectus and the fund.
The FTA has relaxed conditions that foreign asset
managers must meet in order to offer products under
the government-managed compulsory pension fund
(Central Provident Fund Investment Scheme).

Legal Services: As of November 2006, 64 foreign law
firms operated in Singapore, among them 16 U.S. firms.
Foreign law firms face certain restrictions. They
cannot practice Singapore law, employ Singapore
lawyers to practice Singapore law or litigate in local
courts. Since June 2004, U.S. and foreign attorneys
have been allowed to represent parties in arbitration
without the need for a Singapore attorney to be
present. U.S. law firms can provide legal services in
relation to Singapore law only through a Joint Law
Venture or Formal Law Alliance with a Singapore law
firm, subject to the Guidelines for Registration of
Foreign Lawyers in Joint Law Ventures to Practice
Singapore Law. The FTA has relaxed some of these
guidelines for U.S. law firms. Currently, there is
one U.S. Joint Law Venture and one U.S. Formal Law
Alliance.

With the exception of law degrees from designated
U.S., British, Australian, and New Zealand
universities, no foreign university law degrees are
recognized for purposes of admission to practice law
in Singapore. Under the FTA, Singapore recognizes law
degrees from Harvard University, Columbia University,
New York University, and the University of Michigan.

Singapore relaxed its criteria for admission of
attorneys to the Singapore Bar, effective October

2006. One of the new criteria will admit to the Bar
Singapore-citizen or permanent-resident law school
graduates of the above-mentioned designated
universities who are ranked among the top 70 percent
of their graduating class or have obtained lower-
second class honors (under the British system). The
government is also working on requirements to
implement its decision to allow highly skilled foreign
lawyers to practice Singapore corporate, finance and
banking law.

Engineering and Architectural Services: Engineering
and architectural firms can be 100-percent foreign-
owned. In line with FTA provisions, and also
applicable to all foreign firms, Singapore has removed
the requirement that the chairman and two-thirds of a
firm's board of directors must be engineers,
architects or land surveyors registered with local
professional bodies. Only engineers and architects
registered with the Professional Engineers Board and
the Architects Board, respectively, can practice in
Singapore. All applicants (both local and foreign)
must have at least four years of practical experience
in engineering or architectural works, and pass an
examination set by the respective Board.

Accounting and Tax Services: The major international
accounting firms operate in Singapore. Public
accountants and at least one partner of a public
accounting firm must reside in Singapore. Only public
accountants who are members of the Institute of
Certified Public Accountants of Singapore and
registered with the Public Accountants Board may
practice in Singapore. The Board recognizes U.S.
accountants registered with the American Institute of
Certified Public Accountants.

Real Estate: In July 2005, the government relaxed
certain restrictions on foreign ownership of real
estate. Under the Residential Property Act,
foreigners are now allowed to purchase condominiums or
any unit within a building of six or more levels
without the need to obtain prior approval from the
Singapore Land Authority. For landed homes (houses)
and apartments in buildings of fewer than six stories,
prior approval is required. Under a new option to the
EDB's Global Investor Program, up to 50 percent of the
S$2 million (US$1. 2 million) investment required by a
foreigner to qualify for Permanent Resident status can
be in private residential properties. There are no
restrictions on foreign ownership of industrial and
commercial real estate.

CONVERSION AND TRANSFER POLICIES

The FTA commits Singapore to the free transfer of
capital, unimpeded by regulatory restrictions.
Singapore places no restrictions on reinvestment or
repatriation of earnings and capital, and maintains no
significant restrictions on remittances, foreign
exchange transactions and capital movements. (See
"Efficient Capital Markets" for a discussion of
certain restrictions on the borrowing of Singapore
Dollars (SGD) for use offshore.)

EXPROPRIATION AND COMPENSATION

The FTA contains strong investor protection provisions
relating to expropriation and due process; provisions
are in place for fair market value compensation for
any expropriated investment.

Singapore has not expropriated property owned by
foreign investors and has no laws that force foreign
investors to transfer ownership to local interests; no
significant disputes are pending.

Singapore has signed investment promotion and
protection agreements with a wide range of countries
(see "Bilateral Investment Agreements" below). These
agreements mutually protect nationals or companies of
either country against war and non-commercial risks of
expropriation and nationalization for an initial
period of 15 years and continue thereafter unless
otherwise terminated.

DISPUTE SETTLEMENT

All core obligations of the FTA are subject to the
dispute settlement provisions of the Agreement. The
dispute settlement procedures promote compliance
through consultation and trade-enhancing remedies,
rather than relying solely on trade sanctions. The
procedures also set higher standards of openness and
transparency.

Singapore enacted and subsequently amended the
Arbitration Act 2001 for domestic arbitration based on
the United Nations Commission on International Trade
Law (UNCITRAL) Model Law. Singapore ratified the
recognition and enforcement of Foreign Arbitration
Awards (New York, 1958) on August 21, 1986, and the
International Convention on the Settlement of
Investment Disputes on November 13, 1968. The
Singapore International Arbitration Center (SIAC) and
the Singapore Mediation Center (SMC) actively promote
mediation and reconciliation for settling commercial
disputes.

PERFORMANCE REQUIREMENTS/INCENTIVES

In general, Singapore complies with WTO Trade-Related
Investment Measures (TRIMS) obligations. The FTA
prohibits and removes certain performance-related
restrictions on U.S. investors such as limitations on
the number of customer service locations for the
retail banking sector.

There are no discriminatory or preferential export or
import policies affecting foreign investors. The
government does not require investors to purchase from
local sources or specify a percentage of output for
export. The government also does not require local
equity ownership in the investment. There are no
rules forcing the transfer of technology. Foreign
investors face no requirement to reduce equity over
time and are free to obtain their necessary financing
from any source. Employment of host country nationals
is not required.

Singapore offers numerous incentives to encourage
foreign investors to start up businesses, in
particular, in targeted growth sectors (see Annex).

RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT

Foreign and local entities may readily establish,
operate, and dispose of their own enterprises in
Singapore. Except for representative offices (where
foreign firms maintain a local representative but do
not conduct commercial transactions in Singapore),
there are no restrictions on carrying out remunerative
activities.

All businesses in Singapore must be registered with
the Accounting and Corporate Regulatory Authority.
Foreign investors can operate their businesses in one
of the following forms: sole proprietorship, limited
liability partnership, incorporated company, foreign
company branch or representative office.

Private businesses, both local and foreign, compete on
a generally equal basis with GLCs, although some
observers have complained that GLCs benefit from
cheaper financing due to an implicit government
guarantee. Singapore officials reject such
assertions, arguing that the government does not
interfere with the operations of GLCs or grant them
special privileges, preferential treatment or hidden
subsidies; they claim that GLCs are subject to the
same regulatory regime and discipline of the market as
private sector companies. Many observers, however,
have been critical of cases where GLCs had entered
into new lines of business or where government
agencies have "corporatized" certain government
functions, in both circumstances entering into
competition with already existing private businesses.

The FTA contains specific conduct guarantees to ensure
that GLCs will operate on a commercial and non-
discriminative basis towards U.S. firms. GLCs with
substantial revenues or assets are also subject to
enhanced transparency requirements under the FTA. In
accordance with its FTA commitments, Singapore enacted
the Competition Act in 2004, which is being
implemented in three phases. Phase I established the
Competition Commission of Singapore in January 2005.
Phase II involved implementation of provisions on
anti-competitive agreements, decisions and practices,
abuse of dominance, enforcement, and the appeals
process; these came into effect in 2006. Phase III
provisions, which address mergers and acquisitions,
are expected to come into effect in July 2007.

Singapore has an extensive network of GLCs that are
active in many sectors of the economy. Some sectors,
notably telecommunications, power
generation/distribution, and financial services, are
subject to sector-specific regulatory bodies and
competition regulations typically less rigorous than
those being implemented under the Competition Act.

PROTECTION OF PROPERTY RIGHTS

In line with its FTA commitments and obligations under
international treaties and conventions, Singapore has
developed one of the strongest intellectual property
(IP) regimes in Asia. Amendments to the Trademarks
Act, the Patents Act, the Layout Designs of Integrated
Circuits Act, Registered Designs Act, a new Plant
Varieties Protection Act, and a new Manufacture of
Optical Discs Act came into effect in July 2004. The
amended Copyright Act and Broadcasting Act came into
effect in January 2005. Singapore further amended the
Copyright Act in August 2005. Singapore's new and
amended IP laws should help alleviate problems related
to the availability of pirated optical discs, use of
unlicensed software by businesses, the transshipment
of pirated material through Singapore, and removal of
infringing material from Internet sites. In
accordance with its FTA obligations, Singapore has
implemented Article 1 through Article 6 of the Joint
Recommendation concerning Provisions on the Protection
of Well-Known Marks of 1999. It has signed and
ratified the International Convention for the
Protection of New Varieties of Plants (1991) and the
Convention Relating to the Distribution of Program-
Carrying Signals Transmitted by Satellite (1974).

Singapore is a member of the WTO and a party to the
Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS). It is a signatory to other
international copyright agreements, including the
Paris Convention, the Patent Cooperation Treaty, the
Madrid Protocol and the Budapest Treaty. In September
2002, Singapore set up a specialized court (IP Court)
under the Singapore Supreme Court to handle IP
disputes. The WIPO Secretariat opened offices in
Singapore in June 2005.

Singapore claims that its enforcement efforts have
almost eliminated the production of pirated material
and blatant storefront piracy and counterfeiting.
According to the Singapore Police, the value of
counterfeit and pirated goods seized in 2005 was
nearly $12 million, compared to $8 million in 2004.
In September 2005, the Singapore Police initiated its
first corporate end-user enforcement action under the
amended Copyright Act, raiding a private company
suspected of using approximately $30,000 in illegal
software.

According to industry estimates, Singapore's piracy
rate averaged about 5 percent for music and 12 percent
for movies. Software piracy levels in Singapore,
while among the lowest in Asia, are almost double the
estimated level in the United States. Business
software losses were estimated at nearly $86 million
in 2005.

While a number of local educational institutions (the
majority government-operated) have signed agreements
to comply with legal obligations to pay royalty fees
to publishers, unlawful duplication of textbooks at
some commercial copy centers continues. Periodic
police raids against these copy centers have yielded
limited results as this activity is lucrative enough
to continue in spite of fines imposed under the
amended Copyright Act.

Although it is a major global transshipment and
transit point for sea and air cargo, Singapore does
not collect information on the contents and
destinations of most transshipment and transit trade,
which accounts for 80 percent of cargo passing through
the port. This lack of information makes enforcement
against transshipment or transit trade in infringing
goods virtually impossible. Under its FTA
commitments, Singapore amended Section 31 of the
Import/Export Act in November 2003 to facilitate
information-sharing with the U.S. Customs and Border
Protection and other country officials with which it
has relevant trade agreements.

The FTA ensures that government agencies will not
grant approval to patent-violating products.
Singapore allows parallel imports. Under the amended
Patents Act, the patent owner has the right to bring
an action to stop an importer of "grey market goods"
from importing the patent owner's patented product if
the product has not previously been sold or
distributed in Singapore.

The FTA ensures protection of test data and trade
secrets submitted to the government for product

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approval purposes. Disclosure of such information is
prohibited for a period of five years for
pharmaceuticals and ten years for agricultural
chemicals.

Singapore has no specific legislation concerning trade
secrets, but rather protects investors' commercially

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valuable proprietary information under common law by
the Law of Confidence. U.S. industry has expressed
concern that this provision is inadequate.

TRANSPARENCY OF THE REGULATORY SYSTEM

The FTA enhances transparency by requiring regulatory
authorities, to the extent possible, to consult with
interested parties before issuing regulations, to
provide advance notice and comment periods for
proposed rules, and to publish all regulations.

Singapore in the past lacked a formalized system
whereby it published proposed regulations for public
comment. Beginning in April 2003, the government
established a new centralized Internet portal --
http://www.reach.gov.sg -- to solicit feedback on
selected draft legislation and regulations, a process
that is being used with increasing frequency. As
noted in the "Openness to Foreign Investment" section,
some U.S. companies, in particular in the
telecommunications and media sectors, are concerned
about the government's lack of transparency in its
regulatory and rule-making process.

Singapore strives to promote an efficient, business-
friendly regulatory environment. Tax, labor, banking
and finance, industrial health and safety,
arbitration, wage and training rules and regulations
are formulated and reviewed with the interests of both
foreign investors and local enterprises in mind.
Starting in 2005, a Rules Review Panel, comprised of
senior civil servants, began overseeing a review of
all rules and regulations; this process will be
repeated every five years. A Pro-Enterprise Panel of
high-level public sector and private sector
representatives examines feedback from businesses on
regulatory issues and provides recommendations to the
government.

Local laws give regulatory bodies wide discretion to
modify regulations and impose new conditions, but in
practice agencies use this positively to adapt
incentives or other services on a case-by-case basis
to meet the needs of foreign as well as domestic
companies.

Procedures for obtaining licenses and permits are
generally transparent and not burdensome, but some
exceptions apply. Procedures can be faster for
investors in areas considered national priorities.
Singapore has established an online licensing portal
to provide a one-stop application point for multiple
licenses -- http://licences.business.gov.sg.

Corporate Governance: In December 1999, Singapore
established the Corporate Governance Committee, the
Disclosure and Accounting Standards Committee, and the
Company Legislation and Regulatory Framework Committee
(CLRFC) to review and enhance the existing framework
for corporate law and governance. The government has
implemented all of the Committees' recommendations
except for those put forth by the CLRFC, which are
still under review. In January 2003, Singapore
established a private sector-led Council on Corporate
Disclosure and Governance to implement the country's
Code of Corporate Governance.

Accounting Standards: Singapore's prescribed
accounting standards ("Financial Reporting Standards"
or FRS) are aligned with those of the International
Accounting Standards Board. Companies can deviate
from these standards where required to present a "true
and fair" set of financial statements. Singapore-
incorporated, publicly-listed companies can use
certain alternative standards such as International
Accounting Standards (IAS) or the U.S. Generally
Accepted Accounting Principles (US GAAP) if they are
listed on foreign stock exchanges that require these
standards. They do not need to reconcile their
accounts with FRS. All other Singapore-incorporated
companies must use FRS unless the Accounting and
Corporate Regulatory Authority exempts them.

EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT

Singapore actively facilitates the free flow of
financial resources. Credit is allocated on market
terms and foreign investors can access credit, U.S.
dollars, Singapore dollars (SGD),and other foreign
currencies on the local market. MAS formulates and
implements the country's monetary and exchange rate
policy, and supervises and regulates the country's
sophisticated financial and capital markets.

Total assets under management in Singapore grew 26
percent to $450 billion between 2004 and 2005. The
government has sought to boost the country's asset
management sector by placing with foreign-owned firms
a significant portion of government reserves managed
by MAS and the Government of Singapore Investment
Corporation (GIC). Financial institutions issued more
than US$12 billion in SGD-denominated corporate debt
instruments during 2005.

Singapore's banking system is sound and well
regulated. Total domestic banking assets were US$267
billion as of March 2006. Local Singapore banks are
relatively small by regional standards, but are more
profitable and have stronger credit ratings than many
of their peers in the region. As of June 2006, non-
performing loans (NPLs, net of bank-to-bank loans) as
a percentage of total loans were 3.8 percent (compared
to 4.2 percent in June 2005).

A statutory requirement prohibiting banks from
engaging in non-financial business took effect in July

2001. As of January 1, 2006, banks could hold 10
percent or less in non-financial companies as an
"equity portfolio investment."

The Securities and Futures Act (SFA),implemented in
2002, introduced a host of policy reforms in
Singapore's capital markets, moving them to a
disclosure-based regime. The SFA allows for
imposition of civil or criminal penalties against
corporations listed on the Singapore Exchange (SGX)
that fail to disclose material information on a
continuous basis. Since January 2003, listed
companies with more than US$44 million market
capitalization have been required to prepare quarterly
financial reporting. The SFA requires persons
acquiring shareholdings of 5 percent or more of the
voting shares of a listed company to disclose such
acquisitions as well as any subsequent changes in
their holdings directly to the SGX within two business
days. The SFA also contains enhanced market
misconduct provisions.

POLITICAL VIOLENCE

Singapore's political environment is stable and there
is no history of incidents involving politically
motivated damage to foreign investments in Singapore.
The ruling People's Action Party (PAP) has dominated
Singapore's parliamentary government since 1959, and
currently controls 82 of the 84 regularly contested
parliamentary seats. Singapore opposition parties,
which currently hold two regularly contested
parliamentary seats and one additional seat reserved
to the opposition by the constitution, do not usually
espouse views that are radically different from the
mainstream of Singapore political opinion.

CORRUPTION

Singapore typically ranks as the least corrupt country
in Asia and one of the least corrupt in the world.
Singapore has, and actively enforces, strong anti-
corruption laws. The Prevention of Corruption Act,
and the Drug Trafficking and Other Serious Crimes
(Confiscation of Benefits) Act provide the legal basis
for government action by the Corrupt Practices
Investigation Bureau, an independent anti-corruption
agency that reports to the Prime Minister. These laws
cover acts of corruption both within Singapore as well
as those committed by Singaporeans abroad. When cases
of corruption are uncovered, whether in the public or
private sector, the government deals with them firmly,
swiftly and publicly, as they do in cases where public
officials are involved in dishonest and illegal
behavior.

Singapore is not a party to the OECD Convention on
Combating Bribery, but the Prevention of Corruption
Act makes it a crime for a Singapore citizen to bribe
a foreign official or any other person, whether within
or outside Singapore.

BILATERAL INVESTMENT AGREEMENTS

Singapore has signed Investment Guarantee Agreements
(IGA's) with all other ASEAN member nations, the
Belgium-Luxembourg Economic Union, and the following
economic partners: Bahrain, Belarus, Bulgaria, Canada,
China, the Czech Republic, Egypt, France, Germany,
Hungary, Latvia, Mauritius, Mongolia, The Netherlands,
Pakistan, Peru, Poland, Saudi Arabia, Slovenia, Sri
Lanka, Switzerland, Taiwan, Ukraine, the United
Kingdom, the United States, Uzbekistan and Zimbabwe.
These agreements mutually protect nationals or
companies of either country against war and non-
commercial risks of expropriation and nationalization.

Singapore has signed free trade agreements, including
investment chapters, with Australia (February 2003),
New Zealand (August 2000),the European Free Trade
Area (Switzerland, Norway, Lichtenstein, and Iceland
in June 2002),the United States (May 2003),Jordan
(May 2004),India (June 2005),South Korea (August
2005),and Uzbekistan (October 2006). Singapore has
signed tax treaties with a number of countries, but
not with the United States.

OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS

Under a 1966 investment guarantee agreement with
Singapore, the U.S. Overseas Private Investment
Corporation (OPIC) offers insurance to U.S. investors
in Singapore against currency inconvertibility,
expropriation and losses arising from war. Singapore
became a member of the Multilateral Investment
Guarantee Agency (MIGA) in 1998.

LABOR

As of June 2006, Singapore's labor market totaled 2.4
million workers; this includes nearly 600,000
foreigners, of which about 80 percent are unskilled or
semi-skilled workers. Local labor laws are flexible,
and allow for relatively free hiring and firing
practices. Either party can terminate employment by
giving the other party the required notice. The
Ministry of Manpower must approve employment of
foreigners.

Singapore imposes a ceiling on the ratio of
unskilled/semi-skilled foreign workers to local
workers that a company can employ, and charges a
monthly levy for each unskilled or semi-skilled
foreign worker. The government also provides
incentives and assistance to firms to automate and
invest in labor-saving technology.

Labor-management relations in Singapore are generally
amicable. More than 20 percent of the workforce is
unionized. The majority of unions are affiliated with
the National Trades Union Congress (NTUC),which
maintains a symbiotic relationship with the PAP ruling
party. Although workers, other than those employed in
the three essential services of water, gas and
electricity, have the legal right to strike, none have
done so since 1986.

Singapore has no minimum wage law; the government
follows a policy of allowing free market forces to
determine wage levels. Singapore has a flexible wage
system in which the National Wage Council (NWC)
recommends non-binding wage adjustments on an annual
basis. The NWC is a tripartite body comprising a
Chairman and representatives from the Government,
employers and unions. The NWC recommendations apply
to all employees in both domestic and foreign firms,
and across the private and public sectors. While the
NWC wage guidelines are not mandatory, they are widely
implemented. The level of implementation is generally
higher among unionized companies compared to non-
unionized companies.

FOREIGN TRADE ZONES/FREE TRADE ZONES

Singapore has five free-trade zones (FTZs),four for
seaborne cargo and one for airfreight. The FTZs may
be used for storage and repackaging of import and
export cargo and goods transiting Singapore for
subsequent re-export. Manufacturing is not carried
out within the zones. Foreign and local firms have
equal access to the FTZ facilities.

FOREIGN DIRECT INVESTMENT STATISTICS

The United States is one of Singapore's largest
foreign investors, with over 1,500 U.S. firms in
operation. According to the Singapore Department of
Statistics (Singapore DOS),U.S. cumulative foreign
direct investments in Singapore totaled US$22.2
billion in 2004 (latest available data). According to
U.S. Department of Commerce statistics (USDOC),U.S.
firms (manufacturing and services) in 2005 had
cumulative total investments in Singapore of $48.1
billion; discrepancies between U.S. Government and
Government of Singapore FDI numbers are attributable
to differences in accounting methodologies.

Investment Statistics

TABLE A
--------------

STOCK OF FOREIGN DIRECT INVESTMENT (FDI) IN SINGAPORE
BY COUNTRY
(As at Year-end, Historical Cost)
(US$ million)

2001 2002 2003 2004

Total FDI 120,107 135,390 147,961 166,562

United States 20,086 20,170 22,151 25,220
Canada 1,719 1,594 1,532 1,753

Europe 47,172 54,596 62,501 71,638
European Union 36,155 43,985 49,586 57,715
France 2,533 2,893 3,164 3,388
Germany 3,438 4,245 3,633 3,855
Netherlands 19,395 14,576 16,219 17,124
United Kingdom 7,953 18,917 23,147 28,198
Other European
Union
Countries 2,835 3,355 3,423 5,150
Switzerland 8,465 8,761 9,959 10,038
Other European
Countries 2,552 1,850 2,956 3,884

Asia 28,076 31,827 34,365 37,343
China 481 552 510 114
Hong Kong 3,133 2,793 2,381 2,752
Japan 16,183 19,037 19,973 22,476
South Korea 17 661 989 738
Taiwan 2,567 2,908 3,474 3,549
India 189 233 207 278

Asean 5,242 5,292 5,001 5,222
Brunei
Darussalam 192 209 201 219
Indonesia 878 1,018 981 972
Malaysia 3,259 3,076 2,680 2,864
Philippines 561 554 536 524
Thailand 343 413 586 619
Vietnam 6 16 14 20
Cambodia 0 0 0 1
Myanmar 4 4 4 5

Middle East 213 327 1,800 2,195

Australia 1,432 1,451 1,233 1,632
New Zealand 106 113 85 86

Caribbean/Latin
America 19,742 23,380 23,466 25,287

Other Countries 1,773 2,260 2,627 3,604

Source: Department of Statistics, "Foreign Equity
Investment in Singapore, 2004"

TABLE B
--------------

STOCK OF FOREIGN DIRECT INVESTMENT (FDI) IN SINGAPORE
BY INDUSTRY
(As at Year-end, Historical Cost)
(US$ million)

2001 2002 2003 2004

Total FDI 120,107 135,390 147,961 166,562

Manufacturing 44,230 49,496 53,926 59,270
Petroleum &
Petroleum
Products 6,635 7,269 8,020 8,378
Chemicals &
Chemical
Products 2,103 3,174 3,414 4,351
Pharmaceutical
& Biological
Products 9,787 13,503 17,240 19,523
Electronic
Products &
Components 19,447 18,313 17,437 18,190
Construction 929 1,123 829 809
Commerce 18,427 21,921 23,572 26,471
Transport,
Storage &
Communications 4,421 5,028 6,017 7,977
Financial &
Insurance
Services 43,741 47,534 52,697 59,980
Real Estate 3,361 4,030 3,787 4,104
Business Services 3,713 4,366 5,210 5,638


Source: Department of Statistics, "Foreign Equity
Investment in Singapore, 2004"

TABLE C
--------------
STOCK OF DIRECT INVESTMENT ABROAD BY COUNTRY
(As at Year-end, Historical Cost)
(US$ Million)

2001 2002 2003 2004
-------------- -------------- -------------- --------------
Total Direct
Investment 72,184 85,761 91,531 106,383

Asia 34,866 40,926 45,615 52,003

Hong Kong 6,209 6,896 6,610 7,074
Taiwan 1,937 1,926 2,168 2,262
China 8,493 10,392 11,653 12,797
Japan 792 946 1,161 2,012
South Korea 1,488 1,427 1,503 2,262
India 414 235 670 729

Asean 14,307 17,786 20,505 23,247
Brunei 31 82 36 38
Indonesia 3,024 4,430 6,109 7,235
Malaysia 6,072 7,674 7,992 8,510
Philippines 1,481 1,649 1,898 1,848
Thailand 2,434 2,363 2,767 4,106
Vietnam 576 798 860 902
Cambodia 124 149 137 75
Myanmar 565 611 666 483
Laos 0 29 39 51

Middle East 381 507 538 628
Other Asian
Countries 843 811 806 991

Europe 6,855 8,919 7,986 10,295

European Union 5,622 6,575 5,703 6,979
Netherlands 699 700 401 599
U.K. 3,697 4,016 4,259 4,681
France 88 143 162 179
Germany 84 65 60 104
Other EU 1,053 1,650 821 1,416

Switzerland 242 306 354 202
Other European
Countries 992 2,038 1,929 3,113

United States 3,959 4,748 5,310 5,521
Canada 30 13 63 66

Australia 1,361 1,915 2,733 5,248
New Zealand 277 509 627 768

Caribbean/Latin
America 21,427 24,263 24,965 26,033

Other Countries 3,408 4,468 4,231 6,449


Source: Department of Statistics, "Singapore's
Investment Abroad, 2004"

TABLE D
--------------

GDP AND FDI FIGURES, 2001-2004
(US$ Million)

Year GDP* FDI FDI as ratio to GDP
-------------- -------------- --- --------------
2001 83,240 121,228 1.46
2002 91,025 135,890 1.49
2003 94,617 143,691 1.52
2004 111,215 166,562 1.50

Footnote: GDP at Current Market Price
Source: Department of Statistics

Table E
--------------

TOP 20 MAJOR FOREIGN INVESTORS BY TOTAL ASSETS
(US$ Billion)

Country Total Business
Company of Origin Assets Activities
-------------- -------------- -------------- --------------

J.P. Morgan
Securities Asia U.S. 16.85 Finance

Glaxo Wellcome U.K. 16.67 Chemicals
Mfg.

Exxonmobil Asia
Pacific U.S. 7.05 Fuels

Prudential
Assurance Co. U.K. 6.54 Insurance

Shell Eastern
Petroleum Netherlands 5.62 Chemicals

Shell Eastern
Trading Netherlands 4.47 Fuels
Citicorp Invmts
Bank U.S. 4.00 Banking

Asia Food &
Properties Br. Virgin Is 3.77 Multi-industry

Glaxochem Pte Ltd U.K. 3.74 Finance

Shell Treasury
Centre East Netherlands 3.29 Finance

National Australia
Merchant Bank Australia 3.08 Banking


ING Asia Netherlands 2.66 Finance

Texas Instruments
Singapore U.S. 2.41 Electronics

STMicroelectro
-nics Pte Ltd Netherlands 2.20 Electronics

Bank of Nova
Scotia Asia Canada 2.18 Banking

Credit Suisse
First Boston
Singapore Switzerland 2.13 Banking

Jardine Cycle &
Carriage Ltd Bermuda 2.07 Transport

Aviva Ltd U.K. 2.00 Finance

Microsoft
Operations U.S. 1.71 Electronics

Norske Skog
Panasia Canada 1.61 Paper Products


Source: DP Information Group, "Singapore 1000, 2006"

ANNEX: INVESTMENT INCENTIVES
--------------

INCENTIVES ADMINISTERED BY THE MONETARY AUTHORITY OF
SINGAPORE (MAS)

As part of the government's strategy to develop
Singapore into a premier financial center, MAS offers
tax incentives for financial institutions looking to
set up operations here.

A) Financial Sector Incentive ("FSI") Scheme
B) Tax Incentive Scheme for Qualifying Processing
Services Company
C) Tax Incentive Scheme for Offshore Insurance
Business
D) Tax Exemption Scheme for Marine Hull & Liability
Insurance Business
E) Abolition of Withholding Taxes on Financial
Guaranty Insurance Contracts
F) Tax Incentive Scheme for Commodity Derivatives
Trading
G) Tax Incentive Scheme for Approved New Derivative
Products traded on the Singapore Exchange
H) Tax Incentive Scheme for Finance and Treasury
Centers
I) Tax Incentive Scheme for Approved Trustee
Companies
J) Tax Incentive Scheme for Syndicated Facilities
K) Innovation in Financial Technology &
Infrastructure Grant Scheme
L) Tax Incentive for Trading Debt Securities
M) Financial Sector Development Fund
N) Financial Investor Scheme for Singapore Permanent
Residence

Further guidelines and application information are
available at http://www.mas.gov.sg.

INCENTIVES ADMINISTERED BY THE ECONOMIC DEVELOPMENT
BOARD (EDB)

A) Pioneer Status
B) Development & Expansion Incentive
C) Investment Allowance Incentive
D) Approved Foreign Loan Scheme
E) Approved Royalties Incentive
F) Entrepreneurship Investment Incentive
G) HQ Program
H) Double Deduction for Research and Development
(R&D) Expenses
I) Research Incentive Scheme for Companies
J) Exemption of foreign sourced interest and royalty
income for R&D purposes
K) Innovation Development Scheme
L) Initiatives in New Technology
M) Integrated Industrial Capital Allowance
N) Special Goods & Services Tax Scheme for 3rd Party
Logistics Service Providers
O) The Enterprise Challenge (TEC) Scheme

Further guidelines and application information are
available at http://www.sedb.com.

INCENTIVES ADMINISTERED BY INTERNATIONAL ENTERPRISE
SINGAPORE (IESingapore)

A) Double Tax Deduction (DTD) Scheme
B) Global Trader Program (GTP)
C) International Marketing Activities Program (IMAP)
D) International Partners Program
E) Manpower for Internationalization Program
F) Regionalization Finance Scheme
G) iFinance Consulting Program
H) Design for Internationalization Program
I) Branding for Internationalization Program

Further guidelines and application information are
available at http://www.iesingapore.gov.sg.

INCENTIVES ADMINISTERED BY THE MEDIA DEVELOPMENT
AUTHORITY
(MDA)

A) Market Development Scheme (MDS)
B) TV Content Industry Development Scheme
C) Digital Content Development Scheme
D) Digital Technology Development Scheme

Further guidelines and application information are
available at http://www.mda.gov.sg.

INCENTIVES MANAGED BY INFOCOMM DEVELOPMENT AUTHORITY
OF
SINGAPORE (IDA)

A) Connected Homes
B) iLIUP (infocomm Local Industry Upgrading Program)
C) Overseas Development Program
D) SAFE (Securing Assets for End-Users) Program
E) WEAVE (Web Services)
F) Wired With Wireless Program
G) Digital Exchange
H) RFID Development Plan
I) Pilot and Trial Hotspots (PATH)
J) The Competency Centre Program (CCP)

Further information, details, and guidelines are
available at http://www.ida.gov.sg.
HERBOLD