Executive Summary

Singapore maintains an open, heavily trade-dependent economy, characterized by a predominantly open investment regime, with strong government commitment to maintaining a free market and to actively managing Singapore’s economic development. U.S. companies regularly cite transparency and lack of corruption, business-friendly laws and regulations, tax structure, customs facilitation, and well-developed infrastructure as attractive features of the investment climate. The World Bank’s Doing Business 2017 report ranked Singapore as the world’s second-easiest country in which to do business. The Global Competitiveness Report 2017-2018 by the World Economic Forum ranked Singapore as the third-most competitive economy globally. Singapore typically ranks as the least corrupt country in Asia and one of the least corrupt in the world, and actively enforces its robust anti-corruption laws. The U.S.-Singapore Free Trade Agreement (USSFTA), which came into force on 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 environmental protections.

Singapore has a diversified economy and attracts foreign investment in manufacturing (petrochemical, electronics, machinery and equipment) and services (financial services, wholesale and retail trade, and business services). The government actively promotes the country as a research and development (R&D) and innovation center for businesses by offering tax incentives, research grants, and partnership opportunities with domestic research agencies. U.S. direct investment in Singapore in 2016 reached $258.9 billion, primarily in non-bank holding companies, manufacturing (particularly computers and electronic products), and finance and insurance – an increase of 3.2% from the previous year. The investment outlook remains positive due to strong regional GDP growth.

Singapore’s government has also stepped up efforts to promote the adoption of digital technology among its businesses and work force through a broad range of infrastructure initiatives, skills-based training, and other platforms established under the Smart Nation Initiative, providing opportunities for businesses to collaborate with public sector agencies to drive adoption of skills, platforms and standards. In 2017, the Singapore government budgeted over US$1.7 billion on Information Communications Technology tenders. Encompassing only 278 square miles, Singapore is one of the most wired countries in the world, connected nation-wide by a network of high-speed fiber optics and extensive wireless links.

Simultaneously, Singapore has tightened its cyberspace rules through ratification of the Cybersecurity Act, which designates critical information infrastructure and provides broad investigatory and remedial powers to the Commissioner of Cyber Security to respond to threats in cyberspace. The European Union’s General Data Protection Regulation (GDPR) – which comes into force on May 25, 2018 – and Singapore’s participation in the APEC Cross Border Privacy Rules (CBPR) and Privacy Recognition for Processors will create new compliance requirements and exacting standards in personal data protection. Regulatory and compliance costs for data handling will likely increase due to these developments. Furthermore, Singapore plans to introduce a risk-based regulatory framework on retail payment service-providers, likely in 2019.

In recent years, the government has also toughened policies restricting the number of foreign workers in favor of employment of Singaporean citizens. The Ministry of Manpower introduced measures in 2016 to place companies on a watch list and suspend work pass privileges for firms found not to maintain a “healthy Singaporean core.” From 2016-2018, approximately 500 companies were placed on the watch list, with only 150 removed after complying with requirements. The government indicated in February 2018 that the reduction of foreign workers would not change substantially in the coming years despite industry concerns about skills gap, which creates impediments to sustained economic growth.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2017 6 of 175
World Bank’s Doing Business Report “Ease of Doing Business” 2017 2 of 190
Global Innovation Index 2017 7 of 128
U.S. FDI in Partner Country ($M USD, stock positions) 2015 250, 748 USD
World Bank GNI per capita 2015 52,740 USD

7. State-Owned Enterprises

Singapore has an extensive network of government-linked corporations (GLC) that are fully or partially owned by Temasek Holdings, a holding company with the Singapore Minister for Finance as its sole shareholder. Singapore GLCs play a substantial role in Singapore’s domestic economy, especially in strategically important sectors including telecommunications, media, public transportation, defense, port, gas, electricity grid, and airport operations. In addition, the GLCs are also present in many other sectors of the economy, including banking, subway, airline, consumer/lifestyle, commodities trading, oil and gas engineering, postal services, infrastructure, and real estate. Consolidated figures of total assets, net income, and numbers employed in state-owned enterprises (SOEs) are not publicly available, but Temasek’s domestic asset ownership stake in SOEs is estimated at USD $70 billion. There is no published list of SOEs.

Temasek’s annual report notes that its portfolio companies are guided and managed by their respective boards and management, and Temasek does not direct their business decisions or operations. However, as a substantial shareholder, corporate governance within GLCs typically are guided or influenced by policies developed by Temasek. There are differences in corporate governance disclosures and practices across the GLCs, and GLC boards are allowed to determine their own governance practices, with Temasek advisors occasionally meeting with the companies to make recommendations. GLC board seats are not specifically allocated to government officials, although it “leverages on its networks to suggest qualified individuals for consideration by the respective boards”, and leaders formerly from the armed forces or civil service are often represented on boards and fill senior management positions. Temasek exercises its shareholder rights to influence the strategic directions of its companies but does not get involved in the day-to-day business and commercial decisions of its firms and subsidiaries.

GLCs operate on a commercial basis and compete on a generally equal basis with private businesses, both local and foreign. Singapore officials highlight that the government does not interfere with the operations of GLCs or grant them special privileges, preferential treatment or hidden subsidies, asserting that GLCs are subject to the same regulatory regime and discipline of the market as private sector companies. 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. Some private sector companies have said they encountered unfair business practices and opaque bidding processes that appeared to favor incumbent, government-linked firms. In addition, they note that the GLC’s institutional relationships with the government give them natural advantages in terms of access to cheaper funding and opportunities to shape the economic policy agenda in ways that benefit their companies.

The USSFTA 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 USSFTA. In accordance with its USSFTA 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.

Privatization Program

The government has privatized GLCs in multiple sectors and has not publicly announced further privatization plans, but is likely to retain controlling stakes in strategically important sectors, including telecommunications, media, public transportation, defense, port, gas, electricity grid, and airport operations. The Energy Market Authority (EMA) is scheduled to fully open up the electricity retail market to competition by the second half of 2018, extending the liberalization of the retail market from commercial and industrial consumers with an average monthly electricity consumption of at least 2,000 kWh to households and smaller businesses. The Electricity Act and the Code of Conduct govern Licensing and standards for electricity retail companies for electricity retail licensees.

Investment Climate Statements
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