SINGAPORE - 2009 INVESTMENT CLIMATE STATEMENT

UNCLAS SECTION 01 OF 12 SINGAPORE 000051

STATE FOR EB/IFD/OIA
STATE PASS USTR FOR AUSTR WEISEL AND DAUSTR BELL

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: EINV ETRD EFIN ELAB KTDB PGOV OPIC USTR SN

SUBJECT: SINGAPORE - 2009 INVESTMENT CLIMATE STATEMENT

REF: 08 STATE 123907


1. (U) In response to reftel instructions, this message is Post's
draft chapter of the 2009 Investment Climate Statement for
Singapore. As requested, we have also provided via email a
Microsoft Word version of the document to EB/IFD/OIA.


2. (SBU) Begin text of Statement:
2009 Investment Climate Statement - Singapore
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 "Doing Business 2009" report 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 Government of Singapore (GOS) is strongly committed to
maintaining a free market but also takes 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 November 2008, the top six Singapore-listed GLCs
accounted for nearly 24 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: The Telecoms Competition Code opened the
industry in 2000 to foreign or domestic companies seeking to provide
facilities-based (fixed line or mobile) or services-based (local,
international, and callback) telecommunications services. Singapore
Telecommunications (SingTel),the former monopoly and currently
55-percent government-owned, faces competition in all market
segments. Its main competitors, MobileOne and StarHub, are also
GLCs. Singapore has approximately 65 facilities-based and 121
pre-paid services-based operators.
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) requirement that SingTel offer wholesale prices
for local-leased circuits at reduced rates, U.S. industry is still
unable to avail itself of this more competitive pricing structure
due to certain uneconomical technical interconnection requirements
imposed by SingTel.
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 issued a decision in June 2007 that increases the
notification period SingTel must provide from six to 18 months. IDA
has denied requests by U.S. and other companies for interconnection
at more centralized locations. Under the FTA, Singapore has also

SINGAPORE 00000051 002 OF 012


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.
Since 2007, SingTel has been exempted from dominant licensee
obligations for the residential and commercial portions of the
retail international telephone services. In August 2008, IDA
granted preliminary approval to exempt SingTel from dominant
licensee obligations for three of the 13 telecommunication services
SingTel provides to business and government end-users. SingTel has
appealed for exemption of all 13 services. IDA will issue a final
decision pending reactions from a formal public consultation held in
September 2008.
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, Communication and Arts (MICA).
OpenNet, a consortium formed by Canada's Axia Netmedia (which holds
30-percent ownership),SingTel (30 percent),Singapore Press
Holdings (25 percent),and SP Telecommunications (15 percent) won
the bid in September 2008 to build the infrastructure for
Singapore's next generation access network, (officially known as the
Next Generation National Broadband Network),a high-speed nationwide
network. Temasek Holdings owns 55 percent of SingTel and 100
percent of SP Telecommunications, giving Temasek 31.5 percent
ownership of OpenNet. When completed in 2012, the broadband network
may allow fuller access to telecom services providers to reach homes
and businesses without requiring access to SingTel-owned circuits.
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. Individuals cannot hold
more than five percent of the shares issued by a broadcasting
company without the government's prior approval.
The Newspaper and Printing Presses Act restricts equity ownership
(local or foreign) to five percent per shareholder and requires that
directors be Singapore citizens. Newspaper companies must issue two
classes of shares, ordinary and management, with the latter
available only to Singapore citizens or corporations approved by the
government. Holders of management shares have an effective veto
over selected board decisions. The government controls
distribution, importation and sale of any "declared" foreign
newspaper, and 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
for contravening 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$170,000). The government has also "gazetted" foreign
newspapers, i.e., numerically limited their circulation.
Singapore's leaders have brought defamation suits against foreign
publishers. Such suits have resulted in the foreign publishers
issuing apologies and paying damages.
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 StarHub Ltd, a
publicly-listed GLC. SingTel entered the pay-TV market in January

2007. 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.
Banking: The Monetary Authority of Singapore (MAS) regulates all
banking activities as provided for under the Banking Act. Singapore
maintains legal distinctions between foreign and local banks, and
the type of license held by foreign banks -- full service,
wholesale, and offshore. As of November 2008, 26 foreign full
service licensees, 42 wholesale licensees, and 40 offshore licensees
operated in Singapore. All offshore banks are eligible to be
upgraded to wholesale bank status based on MAS criteria 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.
The government initiated a banking liberalization program in 1999 to
ease restrictions on foreign banks and has supplemented this with
phased-in provisions under the FTA. These measures include removal
of a 40-percent ceiling on foreign ownership of local banks and a

SINGAPORE 00000051 003 OF 012


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.
Singapore has granted 26 full service licenses to foreign banks,
including four U.S. banks. Of these 26, six, including one U.S.
bank, have also been granted "qualifying full bank" (QFB) status.
U.S. financial institutions enjoy phased-in benefits under the FTA.
Since January 2006, U.S.-licensed full service banks that are also
QFBs have been able to operate at an unlimited number of locations
(branches or off-premises ATMs). Non-U.S. full service foreign
banks with QFB status have been allowed to operate since January
2005 at up to 25 locations. U.S. and foreign full-service banks
with QFB status 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 with
QFB status 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 with QFB status since January 1, 2008. However,
no U.S. bank has come to a commercial agreement to gain such access.
Singapore, on January 1, 2007, lifted its quota on new licenses for
U.S. wholesale banks. 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. Holders of credit cards issued locally by
foreign banks or other financial institutions cannot access their
accounts through the local ATM networks. They 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, full-service foreign 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
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 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 2008, 17 of the 86 foreign law firms
in Singapore were from the United States. In December 2008,
Singapore granted Qualifying Foreign Law Practice licenses to six
foreign law firms (including two U.S. firms) to practice Singapore
law, although restrictions remain in certain areas, including
conveyancing, criminal law, family law and domestic litigation.
Foreign law firms can otherwise provide legal services in relation
to Singapore law only through a Joint Law Venture (JLV) or Formal
Law Alliance (FLA) with a Singapore law firm, subject to the
Guidelines for Registration of Foreign Lawyers in Joint Law Ventures
to Practice Singapore Law. Singapore relaxed some of these
guidelines for U.S. law firms under the FTA. Since July 2007,
foreign attorneys have been allowed to own equity in Joint Law
Ventures up to a maximum of 25 percent of total shares. Currently,
there is one U.S. Joint Law Venture and one U.S. Formal Law
Alliance. U.S. and foreign attorneys are allowed to represent
parties in arbitration without the need for a Singapore attorney to
be present.
With the exception of law degrees from a handful of 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

SINGAPORE 00000051 004 OF 012


government allows highly skilled foreign lawyers meeting certain
criteria to practice Singapore corporate, finance and banking law
within the JLV and FLA.
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 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 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 an option
to the EDB's Global Investor Program, up to 50 percent of the S$2
million (US$1.38 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.
Energy: Singapore implemented the Gas (Amendment) Act in June 2007
to facilitate competition and move towards a fully liberalized
energy market, in part by opening access to gas pipeline
infrastructure. In September 2008, the Energy Market Authority (EMA)
restructured the onshore gas transportation pipeline to allow
retailers to enter the market without having to build out their own
infrastructure. However, the restructured onshore and offshore gas
pipelines remain controlled by GLCs. At least one foreign company
has encountered on-going difficulties in its bid for market access
in the power sector and access to the offshore gas pipeline due to
lengthy delays in the review of its application by the EMA.
As part of its plan to liberalize the electricity market, Singapore
sovereign wealth fund Temasek divested all three of its wholly-owned
power generation companies in 2008 to foreign companies for a total
of US$8 billion.
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 of
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

SINGAPORE 00000051 005 OF 012


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, particularly 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 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 have
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-discriminatory 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 and established the Competition Commission
of Singapore in January 2005. The Act contains provisions on
anti-competitive agreements, decisions and practices; abuse of
dominance; enforcement and appeals process; and mergers and
acquisitions.
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, although
certain deficiencies still exist. 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 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,

SINGAPORE 00000051 006 OF 012


including the Paris Convention, the Berne 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. Amendments to
the Trademark Act, which took effect in January 2007, fulfill
Singapore's obligations in WIPO's revised Treaty on the Law of
Trademarks.
According to recent industry estimates, Singapore's piracy rate
averaged about five to ten percent for audio and video and 37
percent for business software. 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 $160 million in 2007. Rights holders have encountered
difficulties when attempting to prosecute IP cases based on tips
provided by company insiders. Singapore currently does not offer
specific protection to "whistleblowers". As a result, in some cases
informants have refused to provide crucial testimony in court.
U.S. industry has raised concerns that Internet piracy in Singapore
is on the rise as a result of the increasing availability of the
country's broadband facilities. Industry groups also argued that
the Copyright Act violated FTA obligations by permitting entities in
Singapore to "simulcast" radio broadcasts over the Internet without
paying the proper license fees. In December 2008, Singapore amended
its Copyright Law to require remuneration for simulcasts.
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. The police
have conducted multiple raids, but according to industry
representatives, the activity is lucrative enough to continue in
spite of the possibility of large fines.
Although it is a major global transshipment and transit point for
sea and air cargo, Singapore does not mandate reporting of critical
shipping information, such as the name and address of the foreign
supplier and ultimate recipient of most transshipment and transit
trade, which accounts for 80 percent of cargo passing through the
port. This lack of timely and complete information makes
enforcement against transshipment or transit trade in infringing
goods virtually impossible. In addition, goods in transit are not
subject to seizure under the Copyright Act, although it may be
possible if a search warrant is obtained in advance. 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 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 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 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, comprising 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

SINGAPORE 00000051 007 OF 012


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 January 2003, Singapore established a
private sector-led Council on Corporate Disclosure and Governance to
implement the country's Code of Corporate Governance. Compliance
with the Code is not mandatory but listed companies are required
under the Singapore Exchange Listing Rules to disclose their
corporate governance practices and give explanations for deviations
from the Code in their annual reports.
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 32 percent to $817
billion between 2006 and 2007. Over 80 percent of the funds managed
in Singapore are foreign sourced, with close to 60 percent of these
funds invested in Asia. 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 the
Government of Singapore Investment Corporation (GIC). Financial
institutions issued more than US$20.8 billion in SGD-denominated
corporate debt instruments in 2007.
Singapore's banking system is sound and well regulated. Total
domestic banking assets were nearly US$380 billion as of June 2008.
Local Singapore banks are relatively small by regional standards,
but are reasonably profitable and have stronger capital levels and
credit ratings than many of their peers in the region. As of
September 2008, the non-performing loans (NPLs, net of bank-to-bank
loans) ratio was 1.0 percent. 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 five 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 00000051 008 OF 012


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, North Korea, Egypt,
France, Germany, Hungary, Latvia, Mauritius, Mongolia, The
Netherlands, Oman, Pakistan, Peru, Poland, Saudi Arabia, Slovakia,
Slovenia, Sri Lanka, Switzerland, Taiwan, Turkey, 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, China, the European Free Trade Area
(Switzerland, Norway, Lichtenstein, and Iceland),the Gulf
Cooperation Council (comprising Bahrain, Kuwait, Oman, Qatar, Saudi
Arabia and the United Arab Emirates),India, Japan, Jordan, New
Zealand, Panama, Peru, South Korea, the United States, and
Uzbekistan. Singapore is negotiating FTAs with Canada, Mexico,
Pakistan, and Ukraine. Singapore is a member of the Association of
Southeast Asian Nations (ASEAN),which has concluded FTAs with
Australia and New Zealand, China, India and South Korea, and a
Comprehensive Economic Partnership Agreement with Japan. Singapore
is also party to the Transpacific Strategic Economic Partnership
Agreement with Chile, New Zealand and Brunei. Singapore has signed
tax treaties with a number of countries, but not with the United
States.
OPIC And Other Investment Insurance Programs
Under the 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 September 2008, Singapore's labor market totaled 2.93 million
workers; this includes nearly one million foreigners, of which about
85 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.
About 18 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, no workers 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

SINGAPORE 00000051 009 OF 012


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$30 billion in 2006
(latest available data). According to U.S. Department of Commerce
statistics (USDOC),U.S. firms (manufacturing and services) in 2007
had cumulative total investments in Singapore of $82.6 billion.
Discrepancies between USG and GOS FDI numbers are attributable to
differences in accounting methodologies.
Investment Statistics
TABLE A
STOCK OF FOREIGN DIRECT INVESTMENT (FDI) IN SINGAPORE BY COUNTRY
(As at Year-end, Historical Cost)
(US$ Million)
2003 2004 2005 2006
-------------- -------------- -------------- --------------
Total FDI 147,961 174,997 196,518 225,530

United States 22,151 27,636 27,255 30,059
Canada 1,515 1,736 1,556 1,666

Australia 1,217 1,637 1,711 1,695
New Zealand 82 81 891 571

Europe 61,110 73,758 84,117 98,799
European Union 48,268 59,807 65,465 75,320
France 3,035 3,886 4,208 4,332
Germany 3,608 4,455 4,921 5,348
Netherlands 15,817 19,317 19,314 22,475
Norway 2,733 3,805 5,147 9,639
Switzerland 9,899 10,065 13,384 16,843
United Kingdom 22,397 26,885 29,800 34,312

Asian Countries 33,958 38,103 47,022 53,003
China 504 220 547 1,007
Hong Kong 2,296 1,957 2,825 4,095
Japan 19,967 22,954 26,927 28,669
South Korea 989 518 762 1,030
Taiwan 3,473 3,508 4,333 4,999
India 208 294 783 1,052
Asean 4,693 5,059 6,832 7,644
Brunei Darussalam 201 219 229 203
Indonesia 978 668 411 344
Malaysia 2,614 3,080 4,903 5,646
Philippines 304 433 445 500
Thailand 579 634 823 927
Vietnam 14 20 13 8
Cambodia 0 1 0 0
Myanmar 4 5 9 10

South & Central
America/Caribbean 22,393 25,507 30,130 35,724

Other Countries 2,621 3,504 4,775 4,013
Source: Department of Statistics, "Foreign Equity Investment in
Singapore, 2006"; Yearbook of Statistics, 2008
TABLE B
--------------
STOCK OF FOREIGN DIRECT INVESTMENT (FDI) IN SINGAPORE BY INDUSTRY
(As at Year-end, Historical Cost)
(US$ Million)
2003 2004 2005 2006
-------------- -------------- -------------- --------------

Total FDI 147,961 174,977 196,518 225,530

Manufacturing 53,926 59,324 63,298 71,156
Construction 829 691 554 687
Wholesale & 23,572 28,153 34,509 40,555
Retail Trade,
Hotels &
Restaurant
Transport & 6,017 8,029 10,397 12,540
Storage
Information & 1,835 2,115 2,245 2,392
Communications
Financial & 52,697 66,494 74,355 84,867
Insurance

SINGAPORE 00000051 010 OF 012


Services
Real Estate, 4,420 5,043 4,996 6,366
Rental &
Leasing
Professional/ 4,576 5,035 5,976 6,730
Technical/
Admin Support
Services
Others 89 92 188 237
Source: Department of Statistics, "Foreign Equity Investment in
Singapore, 2006"; Yearbook of Statistics, 2008
TABLE C
STOCK OF DIRECT INVESTMENT ABROAD BY COUNTRY
(As at Year-end, Historical Cost)
(US$ Million)
2003 2004 2005 2006
-------------- -------------- -------------- --------------
Total Direct
Investment 90,294 110,015 121,423 147,539

Asia 45,118 52,230 62,803 72,823

Asean 20,428 24,151 28,745 34,000
Brunei 36 39 38 46
Indonesia 6,055 7,360 8,792 10,698
Malaysia 7,991 9,018 10,747 11,420
Philippines 1,877 1,825 1,980 2,361
Thailand 2,767 4,420 5,141 7,363
Vietnam 859 934 1,032 1,100
Cambodia 137 75 73 n.a.
Myanmar 666 430 880 855
Laos 39 51 49 n.a.
Hong Kong 6,502 7,203 9,212 9,200
Taiwan 2,168 2,335 2,830 3,247
China 11,651 13,577 16,391 20,017
Japan 1,158 1,380 1,527 1,452
South Korea 1,502 1,732 2,035 2,034

India 368 400 757 1,409

Europe 7,963 10,155 10,522 16,951
European Union 6,006 6,876 7,482 13,192
Netherlands 435 607 1,522 1,611
United Kingdom 4,430 4,420 4,338 10,288
France 242 146 158 155
Germany 63 241 365 420
Switzerland 354 366 375 408

United States 4,738 5,918 5,905 5,572
Canada 63 75 143 165

Australia 2,733 6,782 5,369 6,219
New Zealand 627 788 809 851

Caribbean/Latin
America 24,824 26,174 28,418 33,871

Other Countries 4,228 7,893 7,454 11,088
Source: Department of Statistics, "Singapore's Investment Abroad,
2006"; Yearbook of Statistics, 2008
TABLE D
GDP AND FDI FIGURES, 2002-2006
(US$ Million)
2002 90,811 135,390 1.49
2003 98,512 147,961 1.56
2004 111,115 174,977 1.57
2005 116,717 186,927 1.60
2006 141,493 147,539 1.04
Footnote: *GDP at Current Market Price
**Based on Singapore dollars
Source: Department of Statistics
Table E
TOP 20 FOREIGN INVESTORS BY TOTAL ASSETS
(US$ Billion)
Country Total Business
Company of Origin Assets Activities
-------------- -------------- -------------- --------------

Citicorp
Singapore U.S. 29.21 Banking
Glaxo Wellcome Mfg. U.K. 24.20 Healthcare Products
ExxonMobil Asia
Pacific U.S. 9.43 Chemicals
Prudential

SINGAPORE 00000051 011 OF 012


Assurance Co. U.K. 9.37 Insurance
Shell Eastern
Trading Netherlands 6.70 Chemicals
Shell Eastern
Petroleum Netherlands 6.13 Chemicals
Credit Suisse
Singapore Switzerland 6.13 Banking
BP Singapore U.K. 4.53 Chemicals
ING Asia Netherlands 4.29 Banking
Citigroup
Investment U.S. 3.41 Banking
Citigroup
Holding U.S. 3.33 Finance
Seagate
Singapore U.S. 3.28 Electronics
Texas Instruments
Singapore U.S. 3.23 Electronics
National
Australia
Merchant Bank Australia 2.97 Banking
Kuok Singapore Cook Islands 2.74 Multindustry
Aviva Ltd U.K. 2.40 Insurance
Vitol Asia Netherlands 2.36 Chemicals
Motorola Trading
Center U.S. 2.28 Electronics
Asia Food &
Properties BVI 2.28 Multindustry
GE Pacific U.S. 2.16 Multindustry

Source: DP Information Group, "Singapore 1000, 2008"
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

O. Foreign Charitable Trust Incentive

P. Tax Incentive for Approved Fund Managers

Q. Over-the-Counter (OTC) Financial Derivative Payments

R. Insurance and Re-insurance Broking Tax Incentive

S. Wealth Management Tax Incentive
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

SINGAPORE 00000051 012 OF 012


http://www.sedb.com.


INCENTIVES ADMINISTERED BY INTERNATIONAL ENTERPRISE SINGAPORE (IE
Singapore)

A. Double Tax Deduction (DTD) Scheme for Overseas Investment and
Market Development

B. Global Trader Program (GTP)

C. Enterprise Fund

D. Trade Credit Insurance Scheme

E. Loan Insurance Scheme 3

F. Internationalization Finance Scheme

G. International Business Fellowship

H. Local Enterprise Association Development Program

I. Malaysia-Singapore Third Country Business Development Fund

J. Overseas Enterprise Incentive
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

E. INVIGORATE - PC Casual Game Initiative

F. Synthesis - Online Content Initiative

G. Film in Singapore! Scheme

H. International Cooperation Agreement

I. Short Film Grant

J. Overseas Travel Grant

K. New Feature Film Fund

L. Script Development Grant

M. Overseas Travel Grant

N. SCREEN - Scheme for Coinvestment in Exportable Content

O. Media Education Scheme
Further guidelines and application information are available at
http://www.mda.gov.sg.
INCENTIVES ADMINISTERED BY INFOCOMM DEVELOPMENT AUTHORITY OF
SINGAPORE (IDA)

A. Infocomm@SeaPort

B. Infocomm@SME

C. Integrated Clinic Management Systems Program

D. Digital Manufacturing Program

E. Collaborative High Tech Manufacturing Plan

F. Retail eSCM Ecosystem

G. RFID Initiative
Further information, details, and guidelines are available at
http://www.ida.gov.sg.
INCENTIVES ADMINISTERED BY MARITIME PORT AUTHORITY (MPA)

A. Approved International Shipping Enterprise Scheme

B. Approved Shipping and Logistics Scheme

C. Maritime Cluster Fund

D. Maritime Enterprise IT Development Program

E. Maritime Innovation and Technology Fund
Further information, details and guidelines are available at
http://www.mpa.gov.sg
HERBOLD