Singapore Country brief - April 2008
General Information
Geography
The Republic of Singapore sits only 137km north of the Equator, separated from Peninsular Malaysia by the Strait of Johor and from Indonesia by the Strait of Singapore. Singapore is made up of the main island – which is 42km long by 23km wide – and 63 other smaller islands. Singapore has a total area of approximately 1000 sq km, which is roughly one 12th the size of Greater Sydney.
Singapore's climate is warm and humid, averaging between 23ºC and 31ºC, with an average of 2.3 metres of rain annually. The highest point is 163m at Bukit Timah Peak.
Population
The total population of Singapore is 4.6 million (2007 data). This figure includes approximately 1 million foreigners. The three major ethnic groups within the local community are Chinese (77 per cent), Malay (14 per cent), and Indians (8 per cent). The official languages of Singapore are Malay, Chinese (Mandarin), Tamil and English. English is the language of administration and is widely spoken.
Political Overview
Singapore is a republic, with a parliamentary system of government, and an elected President as the Head of State. Parliament is elected by general election every five years. The first sitting of Parliament was held on 8 December 1965. The first general election for Parliament was held on 13 April 1968. The present Parliament has 84 elected members, one Non-Constituency MP (NCMP) and nine Nominated MPs who represent various professional and business sectors. The judiciary administers the law independently of the Executive.
The political scene in Singapore has been dominated by the People's Action Party (PAP) since 1959. The party has won eleven general elections in succession. The last general elections were held on 6 May 2006. There are only three opposition members in the current Parliament.
In Singapore, the President is the Head of State. Prior to 1991, the President was appointed by Parliament and had a largely ceremonial role. In January 1991, the Constitution was amended to allow for the election of a President by Singapore citizens. The term of office for an elected President is six years. Under the Singapore constitution, the President may veto government budgets and appointments to public office. He may also examine how the Government exercises its powers under the Internal Security Act and religious harmony laws, and investigate cases of corruption. A Council of Presidential Advisors is appointed to advise and make recommendations to the President. The President must consult the Council before performing some of his functions, for instance, in appointing key civil servants.
The first presidential election was held on 28 August 1993. The first elected President was HE Mr Ong Teng Cheong. The current (and second elected) President, HE Mr Sellapan Rama (S R) Nathan, was re-elected unopposed in August 2005 to serve a second six year term.
The Singapore Cabinet is led by the Prime Minister, who is appointed by the President, as the Member of Parliament who commands the confidence of the majority of the Members of Parliament. On the advice of the Prime Minister, the President appoints other ministers from among the Members of Parliament to form the Cabinet. Singapore's current Prime Minister is Mr Lee Hsien Loong who assumed the post in August 2004 and was re-elected in 2006.
The Cabinet is responsible for all government policies and the day-to-day administration of the affairs of state. It is responsible collectively to Parliament, and comprises the Prime Minister and the Ministers in charge of the Ministries of Community Development, Youth and Sports, Defence, Education, the Environment and Water Resources, Finance, Foreign Affairs, Health, Home Affairs, Information, Communications and the Arts, Law, Manpower, National Development, Trade and Industry, and Transport.
Foreign Policy
One of the guiding principles of Singapore's foreign policy is its commitment to maintaining a secure and stable environment politically and economically in and around South-East Asia. Singapore’s active membership of the Association of South-East Asian Nations (ASEAN) is central to Singapore's foreign policy.
Following his appointment in August 2004, Prime Minister Lee reaffirmed that maintaining good relations with Singapore's immediate neighbours and the major powers was one of Singapore's priorities. He acknowledged that Indonesia and Malaysia would always be of special importance to Singapore.
Outside ASEAN, Singapore is continuing to strengthen its links in the Asia-Pacific region and beyond. It has a strong relationship with the United States. A Singapore-United States Strategic Framework Agreement was concluded in July 2005. Singapore has always been an active participant in the Asia-Pacific Economic Cooperation (APEC) and views it as an important regional forum. Singapore has an interest in building links between East Asia and Latin America, and instigated the Forum for East Asia and Latin American Co-operation (FEALAC). Contacts are increasing between Singapore and Europe bilaterally and through the Asia-Europe Meeting (ASEM), a Singaporean initiative. Recently Singapore has also been concentrating on its relations with the Middle East – it is negotiating a free trade agreement with the Gulf Cooperation Council and has established an Asia-Middle East Dialogue, with the inaugural meeting held in Singapore in June 2005.
Singapore supports a strong United Nations in its efforts to preserve international law and order and to settle disputes peacefully. It completed its two-year term as a Non-Permanent Member of the UN Security Council in December 2002.
Economic Overview
Singapore is an important hub for the South-East Asian region. It has a dynamic economy, and strong service and manufacturing sectors. Its port, airport and road systems are among the best in the world.
Singapore's economy has always depended on international trade and on the sale of services. Its merchandise trade is three times its gross domestic product (GDP). This includes a large volume of re-exports, reflecting Singapore’s position as a trans-shipment hub. Its major industries include petroleum refining, electronics, oil drilling equipment, rubber products, processed food and beverages, ship repair, financial services and pharmaceutical manufacturing. It is moving to reduce its reliance on the manufacture and export of electronics by developing its services sector, as well as its chemical, petrochemical and biotechnology industries.
Singapore's small population and dependence on external markets and suppliers has pushed Singapore toward economic openness, free trade, and free markets. This and government policies that foster economic development have been key factors in Singapore's historically strong economic performance. The Singapore Government has continued to pursue an outward-looking, export-oriented economic policy that encourages two-way flows of trade and investment. It has adopted a three-pronged approach to trade policy, by supporting the multilateral trading system particularly through the World Trade Organization (WTO), but also through such regional trading groups as the Association of Southeast Asian Nations (ASEAN), the Asia-Pacific Economic Cooperation (APEC), and the Asia-Europe Meeting (ASEM), and through bilateral Free Trade Agreements (FTAs) with a range of trading partners, including Australia.
Singapore has also sought to position itself as a regional hub and regional pace-setter in economic development and reform. In particular, the Government has introduced measures to enhance Singapore's position as a regional hub for financial, education and transport services. In the 2006 budget the Prime Minister announced measures that would be introduced for the education and training of Singaporeans, with a focus on the “knowledge economy”.
Accelerating globalisation and growing competition from fast-growing lower-cost producers like China and India have presented Singapore with continuing challenges. In recent years, Singapore has had to adapt to several additional challenges subsequent to the 1997 Asian financial crisis, including the global economic slowdown in 2001, the war in Iraq, and the outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003. Singapore had negative growth for the first time in 2001 and growth in Singapore’s economy was sluggish in 2002 and 2003.
Recent Economic Performance
There has been strong growth in recent years in Singapore’s economy. Growth in 2007 was 7.7 per cent in keeping with healthy growth over the last four years. The fastest growing sectors were construction and financial services.
The Singapore Government continues to upgrade and restructure the economy. In the 2008 budget, the Government announced a number of measures for households and individuals, including a personal income tax rebate of 20 per cent. Key business outcomes built on initiatives announced in the 2007 budget, including measures in support of R&D activities; tax incentives to enhance business competitiveness and further measures to promote Singapore’s financial services and maritime sectors.
Outlook
The Singapore Government’s economic outlook is good with continued strong growth. Economic growth is forecast to be 4 to 6 per cent in 2008. However, there are some downside risks in 2008 if the US economy slips into recession.
Australia-Singapore Bilateral Relations
The bilateral relationship with Singapore is one of Australia's closest and most comprehensive in South-East Asia. This is based on long-standing political, defence, education, trade, tourism and Commonwealth links, and a similar strategic outlook.
Singapore-Australia Joint Ministerial Committee
The Australian and Singaporean Governments have worked closely together to enhance the strong relationship between the two countries. A Joint Declaration by Australia’s and Singapore's respective Prime Ministers in January 1996, entitled `A New Partnership,' established a biennial Singapore-Australia Joint Ministerial Committee (SAJMC). The Committee is led by foreign ministers and attended by ministers responsible for other areas of bilateral cooperation (usually trade and defence). The inaugural SAJMC was held in Canberra in October 1996. Subsequent SAJMC meetings have been held in Singapore (1999 and 2003) and Australia (2001). The fifth and most recent SAJMC meeting was held in Perth, Western Australia, on 22-23 August 2005. The sixth SAJMC meeting is due to take place in Singapore.
Defence and Security Links
Australia and Singapore have developed a strong bilateral defence relationship covering a comprehensive range of activities, including high level policy dialogue, significant combined exercises, personnel exchanges and training. A major feature of the relationship is the access to Australian training areas provided to the Singapore Armed Forces. Singapore, as one of the most advanced armed forces in the region, is one of the Australian Defence Force's most valuable combined exercise partners. The strength of the defence relationship was highlighted by the visit to Singapore of Australia’s Chief of Defence Force, Air Chief Marshal Angus Houston, AO, AFC, in January 2006 and the conferral of Singapore’s highest military award – Darjah Utama Bakti Cemerlang (Tentera) or Distinguished Service Order (Military) – on him in August 2007.
Australia and Singapore are both members of the Five Power Defence Arrangements (FPDA), a joint defence arrangement between Malaysia, Singapore, Australia, New Zealand and the United Kingdom which is a valuable component of the regional security architecture and the only one with an operational dimension. This arrangement has existed for 37 years and, although it originally focussed on the defence of Malaysia and Singapore against conventional threats, it now also encompasses asymmetrical threats such as terrorism. Australia and Singapore are also active participants in the annual International Institute for Strategic Studies (IISS) Asia Security Conference (Shangri-La Dialogue). Singapore is an influential and active member of the Association of South-East Asian Nations (ASEAN) and ASEAN Regional Forum (ARF). It also supports the Proliferation Security Initiative (PSI) and hosted a major PSI exercise – Deep Sabre – in August 2005.
Australia and Singapore have similar views on regional security issues. Singapore is a strong ally in global efforts to combat terrorism. In recent years, bilateral collaboration on counter-terrorism has strengthened, including in the areas of law enforcement, intelligence sharing and through the FPDA. In 2005 the Australian Federal Police and Singapore Police Force signed a Memorandum of Understanding (MOU) that provided the framework for ongoing police collaboration to combat transnational crime. This is the first Police to Police MOU that Singapore has signed with another country.
Other Areas of Cooperation
Australia and Singapore are engaged in significant cooperation and dialogue on major regional and global economic, political and security issues, including through APEC, the ASEAN Regional Forum (ARF), the AFTA-CER Consultations, and the Indian Ocean Rim Association for Regional Cooperation (IOR-ARC). Australia also has links with Singapore in countering narcotics and in disarmament and arms control. Singapore and Australia are the most comparable countries in the region in terms of social and economic development. There is also growing cooperation on social issues such as child-care and ageing.
Bilateral Visits
As a reflection of the strength of the bilateral relationship, there are many high-level visits between Australia and Singapore. On 10 December 2007, the Hon Simon Crean MP, Minister for Trade, visited Singapore for bilateral discussions. Australia hosted Singapore’s Prime Minister, Lee Hsien Loong, Foreign Minister George Yeo, Trade Minister Lim Hng Kiang and other senior ministers, for the series of APEC meetings held from February-September 2007. In March-April 2007, Singapore’s Minister Mentor and first Prime Minister, Lee Kuan Yew, visited Australia.
Bilateral Economic and Trade Relationship
Singapore (pdf) is our largest trade and investment partner in ASEAN, and our fifth largest trading partner overall. The Singapore-Australia Free Trade Agreement (SAFTA), which came into force on 28 July 2003, has contributed towards a stronger bilateral economic partnership. In 2006-07 Australian merchandise exports to Singapore were A$4.6 billion (our 8th largest export market) and our imports from Singapore reached A$10.1 billion (our fourth largest source). Services are a key part of our bilateral trade, with exports to Singapore valued at A$3 billion and imports at A$4.3 billion in 2006-07.
Major services exports include education and tourism. In 2007, Singapore was Australia’s fourteenth largest source country for foreign students, with 8,852 Singaporean students enrolled in Australian educational institutions.
Singapore is also one of Australia's major sources of short term visitors. With 263,800 Singaporeans visiting Australia in 2007. Singapore was our sixth largest tourism market. Tourism Research Australia forecasts that inbound arrivals from Singapore will grow by an average annual rate of 3.8 per cent over the period to 2015. Around 768,391 Australians travelled to Singapore during 2007, with many more stopping over on their way to third countries.
Singapore’s investment in Australia is substantial, at A$26.9 billion as at 31 December 2006. Although Singaporean investment has traditionally been concentrated in real estate, diversification is taking place. This is demonstrated by Singapore’s investment in a number of energy infrastructure assets; Temasek’s stake in ABC Learning; and Singapore Investment Corporation’s stakes in Myer Melbourne and Westfield Parramatta. Other significant investments include: the Singtel acquisition of Optus in 2001; Singapore Investment Corporation's acquisition of the Mayne Group's portfolio of private hospitals in 2003; and Singapore Power's purchase of the US TXU Corporation's assets in Victoria and South Australia in 2004.
Australia's investment in Singapore as at 31 December 2006 was A$14.3 billion. Significant recent developments in Singapore include Toll Holdings’ acquisition of SembCorp Logistics (A$1.1 billion) and QANTAS's joint venture project to establish Singapore-based budget airline Jetstar Asia, which commenced operations in December 2004. Singapore’s Economic Development Board has identified over 1300 Australian companies operating in Singapore.
Australian Trade and Investment Strategies
The Singapore-Australia Free Trade Agreement
Following ten full rounds of negotiations between April 2001 and October 2002, the Singapore-Australia Free Trade Agreement (SAFTA) was signed on 17 February 2003. It entered into force on 28 July 2003. SAFTA was the first FTA Australia had concluded in the twenty years since the Australia New Zealand Closer Economic Relations Trade Agreement (CER) came into effect on 1 January 1983.
SAFTA is fully consistent with Australia's and Singapore's shared interests in a strong and effective WTO. Both Australia and Singapore have made commitments in SAFTA that go beyond our existing liberalisation obligations in the WTO. SAFTA builds on Australia's already strong trade and economic relationship with Singapore, and provides a solid legal framework for future cooperation to strengthen economic links and create synergies between our two countries.
SAFTA is a wide-ranging and comprehensive agreement, covering tariff-free access for goods, improved market access for services (including specific commitments on sectoral markets for telecommunications, financial services and professional services) and cooperation and trade facilitation in key areas, such as e-commerce, standards, education, intellectual property protection, competition policy and customs procedures. SAFTA presents new trade and investment opportunities for businesses in both Australia and Singapore. It also provides investors with greater certainty through provisions on the protection and promotion of investment.
The Singapore-Australia Free Trade Agreement: A Business Guide explains in plain language how SAFTA has made it easier for Australian exporters, investors and professionals to access and do business in the Singapore market.
To ensure its continued relevance for business, SAFTA contains specific review provisions. The first review was launched on 14 July 2004. This Ministerial meeting produced a balanced package of outcomes for both Australia and Singapore, including Singapore's agreement to recognise law degrees from two additional Australian universities, and Australia's agreement to add four new entities to the list of government agencies subject to the national treatment provision on procurement as well as to revise arrangements in relation to Certificates of Origin for Singapore exports.
Singapore’s other trade relationships
In addition to its bilateral free trade agreement with Australia, Singapore has, since 2000, concluded FTAs with New Zealand (2000), the European Free Trade Association (EFTA, a group of countries covering Switzerland, Norway, Iceland and Liechtenstein) (2002), Japan (2002), the US (2003), Jordan (2004), the Republic of Korea (2005), Panama (2006) and Peru (2007). It has also finalised a comprehensive economic cooperation agreement with India (2005). It is currently negotiating bilateral FTAs with Canada, China, Egypt, Mexico, and Sri Lanka. Regionally, Singapore has concluded the Trans-Pacific Strategic Economic Partnership Agreement ('Trans-Pacific SEP') with Brunei, Chile and New Zealand (2005). In November 2006, Singapore and the Gulf Cooperation Council, comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, agreed to start negotiations for a free trade agreement.
Singapore is a strong supporter of the World Trade Organization (WTO). It hosted the WTO's first Ministerial meeting in December 1996 and the WTO Mini-Ministerial in October 2001 and the latter served as an important event in the lead-up to the WTO meeting in Doha. It has been working closely with other members in the Doha Round of negotiations for a successful conclusion. Singapore Ministers participated in five WTO Ministerial Meetings in Geneva, Seattle, Doha, Cancun and Hong Kong. Its leaders are very active participants in the World Economic Forum (WEF). Singapore hosted WEF meetings in 1999 and 2003. In 2006 Singapore hosted the IMF/World Bank Annual meetings.
Singapore also strongly supports trade liberalisation through its membership of the Asia-Pacific Economic Cooperation (APEC). Singapore has joined with Australia and other like-minded countries in pushing for identification of sectors for early liberalisation. The APEC Secretariat is located in Singapore and will host APEC in 2009.
Export Opportunities
Australia’s top ten merchandise exports to Singapore in 2006-07 were crude petroleum, refined petroleum, non-monetary gold, milk and cream, aluminium, meat (excluding bovine), confidential items, copper, chemicals and related products and general industrial machinery.
Changes in Trade and Investment Conditions
Trade
With the entry into force of the Singapore-Australia Free Trade Agreement (SAFTA) in July 2003, import tariffs on all goods originating in Australia and Singapore have been eliminated. Under SAFTA, Australian service suppliers enjoy improved conditions of access to the Singapore services market, particularly on the legal, financial and educational service sectors. SAFTA also offers a more open and predictable business environment across a range of areas, including telecommunications regulation, competition policy, government procurement, technical standards, intellectual property, e-commerce, customs procedures and business travel. These developments have encouraged a number of new Australian exporters to enter the Singapore market and established exporters to expand their operations there in the past few years. For example, through its acquisition of the former Singapore Public Works Department, Downer-EDI, Australia’s second largest listed engineering services firm, has become increasingly active in Singapore, as well as developing new business in Asia from its Singapore base. Details of SAFTA benefits are provided in the Singapore-Australia Free Trade Agreement: A Business Guide.
Singapore maintains some import restrictions relating to environmental, health and public security considerations. Rice is subject to import licensing for food security and price stability reasons. Imports of cars which are three-years old and above are prohibited for environmental and road safety reasons.
Investment
Foreign investment has traditionally been welcomed in Singapore, and has accounted for a significant share of total investment in the economy. Through foreign investment, Singapore has evolved into a base for multinational companies (MNCs) to engage in high-end manufacturing and product development, deliver services, and coordinate regional procurement, production, marketing, and distribution operations. Reflecting the important contribution of foreign investment to the Singapore economy, there are few restrictions on inward foreign investment. The restrictions that exist are mostly in broadcasting, the domestic news media, retail banking, legal and other professional services, multi-level marketing, and property ownership.
The Singapore Government is working towards transforming Singapore from an investment-driven economy to an innovation-driven economy. As a result, it has introduced a number of promotion programs aimed at attracting investment by MNCs and Small and Medium Enterprises (SMEs), including exemption of corporate tax on profits from pioneer activity for up to 10 years, double deduction for qualifying R&D expenses against income, and operational headquarters’ income from the provision of approved services in Singapore taxed at 10 per cent. Innovation development projects may obtain grants of 30 to 50 per cent of approved direct development costs. Environmental and water technologies as well as interactive and digital media have been identified as two areas for development.
Under SAFTA, Australian investors and investments are treated on the same basis as Singapore businesses (national treatment), including in relation to the establishment, acquisition, expansion, management, conduct, operation, liquidation, sale, transfer and expropriation of investments.
Australian Trade Commission (Austrade)
Austrade has identified potential opportunities for Australian suppliers of goods and services in a number of sectors. Austrade’s Singapore country page supplies general information on doing business and on specific export opportunities. The Austrade website has a database that can be searched by industry.
Austrade Singapore can also provide advice on accessing opportunities in Singapore. They can be contacted at singapore@austrade.gov.au.
Trade Successes
In 2006-07 Austrade assisted 487 Australian companies to export into Singapore, to a total export sales value of $A726 million. Of these, 163 were new exporters.
TradeWatch Contacts
If you would like more information on the trade and economic conditions in Singapore, please e-mail the Department of Foreign Affairs and Trade at TradeWatch@dfat.gov.au.
More information on Singapore
Australian Government
The Singapore Australia Free Trade Agreement: A Business Guide