Australia

Executive Summary

Australia is generally welcoming to foreign investment, which is widely considered to be an essential contributor to Australia’s economic growth and productivity.  The United States is by far the largest source of foreign direct investment (FDI) for Australia.  According to the U.S. Bureau of Economic Analysis, the stock of U.S. FDI totaled USD 163 billion in January 2019.

Mining and resources attract, by far, the largest share of FDI from the United States.  Real estate investment is the second largest recipient of FDI from the United States, although it remains much smaller than mining investment in absolute terms.  The Australia-United States Free Trade Agreement, which entered into force in 2005, establishes higher thresholds for screening U.S. investment for most classes of direct investment.

While welcoming toward FDI, Australia does apply a “national interest” test to qualifying investment through its Foreign Investment Review Board screening process.  Various changes to Australia’s foreign investment rules, primarily aimed at strengthening national security, have been made in recent years.  The Security of Critical Infrastructure Act 2018 and  the related Telecommunications Sector Security Reforms were both introduced in 2018 with the aim of increasing the security of critical infrastructure and protecting against foreign investments deemed to not be in Australia’s interests.  In March 2020 the Australian government announced all foreign direct investment would be reviewed for a six-month period, the government’s assumed timing for the COVID-19 crisis.  Despite the increased focus on foreign investment screening, the rejection rate for proposed investments has remained low and there have been no cases of investment from the United States having been rejected in recent years.

In response to a perceived lack of fairness, the Australian government tightened anti-tax avoidance legislation targeting multi-national corporations with operations in multiple tax jurisdictions.  While some laws have been complementary to international efforts to address tax avoidance schemes and the use of low-tax countries or tax havens, Australia has also gone further than the international community in some areas.

Australia has a strong legal system grounded in procedural fairness, judicial precedent, and the independence of the judiciary.  Property rights are well established and enforceable.  The establishment of government regulations typically requires consultation with impacted stakeholders and requires approval by a central regulatory oversight body before progressing to the legislative phase.  Anti-bribery and anti-corruption laws exist, and Australia performs well in measures of transparency.  Australia’s business environment is generally conducive to foreign companies operating in the country, and the country ranks 14th overall in the World Bank’s Ease of Doing Business Index.

The Australian government is strongly focused on boosting economic productivity, particularly through increased use of digital and other emerging technologies.  It recently released a Digital Economy Strategy, a Blockchain Roadmap, and a Critical Minerals Strategy, and has launched the new Australian Space Agency, among other initiatives.  U.S. involvement and investment in these fields is welcomed.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 12 of 180 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2019 14 of 190 http://www.doingbusiness.org/
en/rankings
Global Innovation Index 2019 22 of 129 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country (historical stock positions) 2018 USD 163 billion https://apps.bea.gov/international/
factsheet
World Bank GNI per capita 2018 USD 53,230 http://data.worldbank.org/indicator/
NY.GNP.PCAP.CD

Singapore

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, intellectual property protections, and well-developed infrastructure as attractive features of the investment climate. The World Bank’s Doing Business 2020 report ranked Singapore as the world’s second-easiest country in which to do business. The Global Competitiveness Report 2019 by the World Economic Forum ranked Singapore as the most competitive economy globally. Singapore actively enforces its robust anti-corruption laws and typically ranks as the least corrupt country in Asia and one of the least corrupt in the world. Transparency International’s 2018 Corruption Perception Index placed Singapore as the fourth least corrupt nation. 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 that attracts substantial 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 2018 totaled $219 billion, primarily in non-bank holding companies, manufacturing (particularly computers and electronic products), and finance and insurance. Singapore remains Asia’s largest recipient of U.S. FDI. The investment outlook remains positive due to Singapore’s involvement in Southeast Asia’s developing economies. Singapore remains a regional hub for thousands of multinational companies and continues to maintain its reputation as a world leader in dispute resolution, financing, and project facilitation, particularly for regional infrastructure development. In 2019, U.S. companies pledged $4 billion in future investments in Singapore’s manufacturing and services sectors.

Looking ahead, Singapore is poised to attract foreign investments in digital innovation and cybersecurity. The Government of Singapore (hereafter, “the government”) is investing heavily in automation, artificial intelligence, and integrated systems under its Smart Nation banner and seeks to establish itself as a regional hub for these technologies. Singapore is also a well-established hub for medical research and device manufacturing.

In recent years, the government has tightened foreign labor policies to encourage firms to improve productivity and employ more workers that are Singaporean. The government introduced measures in the 2019 and 2020 budget to further decrease the ratio of mid- and low-skilled foreign workers to local employees in a firm. These cuts, which target the service sector, were taken despite industry concerns about skills gaps. To address some of these concerns, the government has introduced programs that partially subsidize the cost to firms of recruiting, hiring, and training local workers. Singapore is heavily reliant on foreign workers who make up more than 20 percent of the workforce. The COVID-19 outbreak has been concentrated in dormitories for low-wage workers in Singapore, which may accelerate the government’s efforts to reduce the number of foreign workers.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2019 4 of 175 http://www.transparency.org/
research/cpi/overview
World Bank’s Doing Business Report 2020 2 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2019 8 of 129 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2018 218,835 http://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2018 58,770 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

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