Policies Towards Foreign Direct Investment
Singapore maintains a heavily trade-dependent economy. It is characterized by an open investment regime, with some restrictions in the financial services, professional services, and media sectors. The World Bank’s Doing Business 2017 report ranked Singapore as the world’s second-easiest country in which to do business after New Zealand. The 2016-2017 Global Competitiveness Report ranks Singapore as the second-most competitive economy globally. The 2004 U.S.-Singapore Free Trade Agreement (USSFTA) 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 it also takes a leadership role in actively planning Singapore’s economic development, including through an extensive network of government-linked corporations (GLCs). As of February 2016, the top four Singapore-listed GLCs accounted for about 13.7 percent of total capitalization of the national stock exchange, 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 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 detailed below in this section, the government screens investment proposals with the purpose of determining eligibility for various incentive regimes. Singapore places no restrictions on reinvestment or repatriation of earnings or capital. The judicial system, which includes international arbitration and mediation centers and a commercial court, upholds the sanctity of contracts, and decisions are transparent and effectively enforced.
Exceptions to Singapore’s general openness to foreign investment exist in telecommunications, broadcasting, the domestic news media, financial services, legal and accounting services, ports and airports, and property ownership. Under Singapore law, Articles of Incorporation may include shareholding limits that restrict ownership in corporations by foreign persons.
Since 2000, the implementation of the Telecoms Competition Code has allowed foreign and domestic companies seeking to provide facilities-based (fixed line or mobile) or services-based (local, international, and callback) telecommunications services to apply for licenses to operate and deploy telecommunication systems and services. Singapore Telecommunications (SingTel) — a GLC which is currently 51 percent owned by Temasek Holdings (Temasek), a state-owned holding company with the Singapore Minister for Finance as its sole shareholder – faces competition in all market segments. However, its main competitors, M1 and StarHub, are also GLCs. In December 2016, Australian telco TPG Telecom became the first foreign-based mobile network operator and non-GLC to be awarded spectrum rights to provide nationwide mobile coverage. As of February 2017, Singapore has 65 facilities-based (group) and 257 services-based (individual) operators. Since 2007, SingTel has been exempted from dominant licensee obligations for the residential and commercial portions of the retail international telephone services. SingTel is also exempted from dominant licensee obligations for wholesale international telephone services, international managed data, international IP transit, leased satellite bandwidth, terrestrial international private leased circuit, and backhaul services.
In April 2017, Singapore held a General Spectrum Auction for mobile airwaves, the largest such auction in 16 years, to allocate additional blocks of spectrum to accommodate increasing demand for mobile data services. Telcos Singtel, Starhub, M1, and TPG paid a combined total of USD $1.1 billion (SGD $1.6 billion) in this heavily-bid auction for additional frequency bands, many of which were previously used for 2G services, which will be shut down in Singapore in April 2017. GOS will use the auction proceeds to assist infocomm media companies to go digital and for workforce training.
Citing the convergence of the information and communication technology (ICT) and media sectors, combined with a desire to expand the reach of the digital economy to more people, the Infocomm Development Authority of Singapore (IDA) and the Media Development Authority of Singapore (MDA) were restructured to become the Info-communications Media Development Authority (IMDA) and the Government Technology Organization (GTO) in November 2016. IMDA will conduct industry regulation and promotion activities for the info-communication and media sectors, while GTO will be the tech agency to implement government digital initiatives. In March 2017, it was announced that GTO will be placed under a new division in the Prime Minister’s Office, the Smart Nation and Digital Government Office (SNDGO).
IMDA conducts public consultations on major policy reviews and provides decisions and grounds on policy changes to companies concerned.
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 ordinary 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.
Singapore comprehensively regulates content across all major media outlets. The government also controls the distribution, importation and sale of any foreign newspaper, and significantly restricts freedom of the press, having curtailed or banned the circulation of some foreign publications. Singapore’s leaders have also brought defamation suits against foreign publishers. Such suits have resulted in the foreign publishers issuing apologies and paying damages. Seventeen publications remain prohibited under the Undesirable Publications Act, which restricts the import, sale and circulation of publications that the Government considers contrary to public interest. Examples include pornographic magazines and publications by banned religious groups.
Singaporeans generally face few restrictions on the internet. However, IMDA has blocked various websites containing objectionable material, such as pornography and racist and religious hatred sites. Online news websites which report regularly on Singapore and have a significant reach are individually licensed, which requires these sites to submit a bond of USD $40,000 (SGD $50,000) and to adhere to new requirements to remove prohibited content within 24 hours of notification from IMDA. Some view this regulation as a way to censor online critics of the government. In a high-profile case in 2016, the government charged and sentenced to 10 months imprisonment a foreign operator of an online media news site for sedition on the grounds of generating ill-will and hostility.
MCI announced in January 2017 that the Broadcasting Act, which covers licensing, ownership, and content regulation, of broadcasting companies, services, facilities and equipment, will be reviewed in 2017. MCI indicated that the review will focus on content regulation of overseas content providers to ensure that content is in line with community values and that ratings on streaming sites are in line with Singapore norms. GOS has pledged to consult businesses and the public on any proposed changes.
MediaCorp TV is the only free-to-air TV broadcaster; the government via Temasek owns 100 percent of it. Pay-TV providers StarHub Cable Vision (SCV) and SingNet are wholly-owned subsidiaries of StarHub and SingTel, respectively. 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 radio broadcaster in Singapore.
To rectify the high degree of content fragmentation in the local pay-TV market, and to shift the focus of competition from an exclusivity-centric strategy to other aspects such as service differentiation and competitive packaging, the MDA implemented cross-carriage measures in 2011 requiring pay TV companies designated by MDA to be Receiving Qualified Licensees (RQL) – currently SingTel and StarHub — to cross carry content subject to exclusive carriage provisions. Correspondingly, Supplying Qualified Licensees (SQLs) with an exclusive contract for a channel are required to share that content with other pay TV companies. Content providers consider the measures an unnecessary interference in a competitive market that would deny content holders the ability to negotiate freely in the marketplace, and an interference with their ability to manage and protect their intellectual property. More common content is now available across the different pay-TV platforms, and the operators are beginning to differentiate themselves by originating their own content, offering subscribed content online via PCs and tablet computers, and delivering content via fiber networks.
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 (i.e., full service, wholesale, and offshore) held by foreign commercial banks. As of March 2017, 29 foreign full service licensees, 56 wholesale licensees, and 37 offshore licensees operated in Singapore. An additional 32 merchant banks are licensed to conduct corporate finance, investment banking and other fee-based activities. Offshore and wholesale banks are not allowed to operate Singapore Dollar (SGD) retail banking activities. Full banks may provide the whole range of banking business, but are subject to restrictions on the number of places of business, ATMs and ATM networks. Additional “Qualifying Full Bank” (QFB) licenses may be granted to a subset of full banks, which provides greater branching privileges and greater access to the retail market than other full banks. As of March 2017, there are 8 banks operating QFB licenses.
Except in retail banking, Singapore laws do not distinguish operationally between foreign and domestic banks. However, all banks in Singapore are required to maintain a Domestic Banking Unit (DBU) and an Asian Currency Unit (ACU), separating international and domestic banking operations from each other. Transactions in Singapore dollars can be booked only in the DBU whereas transactions in foreign currency are typically booked in the ACU. The ACU is an accounting unit, which the banks use to book all their foreign currency transactions conducted in the Asian Dollar Market (ADM). This enables additional prudential requirements to be imposed on bank’s domestic businesses in Singapore, while at the same time, avoiding undue restrictions on the offshore activities of banks. In September 2015, MAS concluded a consultation round which proposed for the removal of the requirement for two distinct accounting units as well as changes in the associated regulatory framework. No formal policy announcements following the recommendations have been made.
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 USSFTA, including removal of a 40-percent ceiling on foreign ownership of local banks and a 20-percent aggregate foreign shareholding limit on finance companies. The Minister in charge of the Monetary Authority of Singapore must approve the merger or takeover of a local bank or financial holding company, as well as the acquisition of voting shares in such institutions above specific thresholds of 5 percent, 12 percent or 20 percent of shareholdings. Although the GOS has lifted the formal ceilings on foreign ownership of local banks and finance companies, the approval of controllers of local banks ensures that this control rests with individuals or groups whose interests are aligned with the long term interests of the Singapore economy and Singapore’s national interests. Of the 29 full service licenses granted to foreign banks, four have gone to U.S. banks. U.S. financial institutions enjoy phased-in benefits under the USSFTA. Since 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) versus 25 for non-U.S. full service foreign banks with QFB status. 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. In 2007, Singapore lifted the quota on new licenses for U.S. wholesale banks.
Locally and non-locally incorporated subsidiaries of U.S. full-service banks with QFB status can apply for access to local ATM networks. However, no U.S. bank has come to a commercial agreement to gain such access. Despite liberalization, U.S. and other foreign banks in the domestic retail banking sector still face barriers. Under the enhanced QFB program launched in 2012, MAS will require QFBs it deems systemically significant to incorporate locally. If those locally incorporated entities are deemed “significantly rooted” in Singapore, with a majority of Singaporean or permanent resident members, Singapore may grant approval for an additional 25 places of business, of which up to 10 may be branches. Local retail banks do not face similar constraints on customer service locations or access to the local ATM network. As noted above, U.S. banks are not subject to quotas on service locations under the terms of the USSFTA. Holders of credit cards issued locally by foreign banks or other financial institutions sometimes 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.
In February 2017, MAS announced upcoming regulatory changes under the Finance Companies Act to enhance finance companies’ role in small and medium enterprise (SME) financing. This includes relaxation of business restrictions on payment and banking services, easing of loan limits, and liberalization of shareholding policy. MAS will liberalize its existing policy of not allowing a foreign takeover of a finance company. This will accord finance companies greater flexibility to explore strategic partnerships and innovative business models that can strengthen their SME financing business, including with foreign partners. MAS is prepared to consider an application for a merger or acquisition, if the prospective merger partner or acquirer commits to maintaining SME financing as a core business of the finance company. In addition, the merger partner or acquirer must be able to demonstrate expertise in SME financing and present proposals to enhance the finance company’s SME lending activities with new technologies, methodologies or business models.
There are two MAS-recognized consumer credit bureaus in Singapore, Credit Bureau (Singapore) Pte Ltd and DP Credit Bureau Pte Ltd.
Singapore has no trading restrictions on foreign-owned stockbrokers. There is no cap on the aggregate investment by foreigners regarding 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 USSFTA 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).
The Legal Services Regulatory Authority (LSRA) under the Ministry of Law oversees the regulation, licensing, and compliance of all law practice entities and the registration of foreign lawyers in Singapore. Legal firms with a licensed Foreign Law Practice (FLP) may offer the full range of legal services in foreign law and international law, but cannot practice Singapore Law, except in the context of international commercial arbitration. To practice Singapore law, Foreign Law Practices require either a Qualifying Foreign Law Practice (QFLP) license, a Joint Law Venture (JLV) with a Singapore Law Practice (SLP), or a Formal Law Alliance (FLA) with a SLP. The vast majority of Singapore’s 130 foreign law firms operate FLPs, while QFLPs, JLVs and FLAs each number in the single digits.
The QFLP licenses allow Foreign Law Practices (FLPs) to practice in permitted areas of Singapore law, which excludes constitutional and administrative law, conveyancing, criminal law, family law, succession law, and trust law. As of March 2017, there are nine QFLPs in Singapore, including five U.S. firms.
A Joint Law Venture is a collaboration between a Foreign Law Practice and Singapore Law Practice, which may be constituted as a partnership or company. The Director of Legal Services in the Legal Services Regulatory Authority (LSRA) will consider all the relevant circumstances including the proposed structure and its overall suitability to achieve the objectives for which Joint law Ventures are permitted to be established. Currently, there are two U.S. law firms with Joint Law Ventures in Singapore. U.S. and foreign attorneys are allowed to represent parties in arbitration without the need for a Singapore attorney to be present. There is no clear indication on the percentage of shares that each JLV partner may hold in the JLV.
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 USSFTA, Singapore recognizes law degrees from Harvard University, Columbia University, New York University, and the University of Michigan. Singapore will admit to the Singapore professional bar- a citizen or permanent-resident law school graduates of those 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).
Engineering and Architectural Services
Engineering and architectural firms can be 100 percent foreign-owned. Engineers and architects are required to register with the Professional Engineers Board and the Architects Board, respectively, to 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 written and oral examination set by the respective Board.
Accounting and Tax Services
The major international accounting firms operate in Singapore. Registration as a public accountant is required for appointment as an auditor of financial statements in Singapore, although registration as a public accountant is not required to provide other accountancy services, such as accounting, tax and corporate advisory work. All entities that provide public accountancy services must be under the control and management of partner(s) who are public accountants residing in Singapore. If the firm has two partners, at least one must be a public accountant. If the firm has more than two partners, two-thirds of the partners must be public accountants residing in Singapore. Only public accountants who are members of the Institute of Singapore Chartered Accountants (ISCA) of Singapore and registered with Accounting and Corporate Regulatory Authority may practice in Singapore.
Singapore completed efforts to liberalize its gas market with the amendment of the Gas Act and implementation of a Gas Network Code in 2008, which were designed to give gas retailers and importers direct access to the onshore gas pipeline infrastructure. However, key parts of the local gas market, such as town gas retailing, domestic gas pipelines and access to offshore gas pipelines, remain controlled by incumbent Singaporean firms. Singapore has sought to grow its supply of Liquefied Natural Gas (LNG), and BG Singapore Gas Marketing Pte Ltd (acquired by Royal Dutch Shell in February 2016) was appointed in 2008 as the first aggregator with an exclusive franchise to import LNG to be sold in its re-gasified form in Singapore.
Limits on Foreign Control and Right to Private Ownership and Establishment
Foreign and local entities may readily establish, operate, and dispose of their own enterprises in Singapore, and there is no overarching screening process for foreign investment. A foreigner who wants to set up a company in Singapore is required to appoint a locally resident director. The foreigner can continue to reside outside Singapore. Foreigners who wish to incorporate a company and be present in Singapore to manage its operations are strongly advised to seek approval from the Ministry of Manpower (MOM) before registration. 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.
GOS maintains close and continuous engagement with investors through the Economic Development Board (EDB), which includes specialized offices within four clusters (consumer, engineering, enterprise, and new businesses) across multiple sectors. EDB is the lead investment promotion agency that facilitates foreign investment into Singapore (https://www.edb.gov.sg ), assists companies in setting up business in Singapore, and provides incentives including grants, allowances, awards, tax exemptions, and reduced tax rates for investments in certain sectors or categories (https://www.edb.gov.sg/content/edb/en/why-singapore/ready-to-invest/incentives-for-businesses.html ).
There are no general, economy-wide limits on foreign ownership or control. 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, limited liability partnership, incorporated company, foreign company branch or representative office. Stricter disclosure requirements were passed in March 2017 which require foreign companies registered in Singapore to maintain public registers of their members, while locally incorporated and foreign companies will be required to maintain registers of controllers (individuals or legal entities with more than 25 percent interest or control of the company), aimed at preventing money laundering.
Exceptions to Singapore’s general openness to foreign investment exist in telecommunications, broadcasting, the domestic news media, financial services, legal services, public accounting services, ports and airports, and property ownership. Under Singapore law, Articles of Incorporation may include shareholding limits that restrict ownership in corporations by foreign persons.
Other Investment Policy Reviews
Singapore underwent a trade policy review with the World Trade Organization (WTO) in July 2016. No major policy recommendations were raised. This is its only investment policy review in the past three years. Additional information on the review is available on the WTO website (https://www.wto.org/english/tratop_e/tpr_e/tp443_e.htm ).
Singapore’s online business registration process is clear and efficient, and allows foreign companies to register. All businesses must be registered with the Accounting & Corporate Regulatory Authority (ACRA) through the website (https://www.acra.gov.sg/home/ ), including any individual, firm or corporation that carries out business for a foreign company. Applications are typically processed immediately after the application fee is paid, but may take between 14 days to 2 months if the application needs to be referred to another agency for approval or review. The process of establishing a foreign-owned limited liability company (LLC) in Singapore is among the fastest of the countries surveyed by IAB and the fastest among IAB countries in the East Asia and the Pacific region. A step-by-step guide to registering a business or company in Singapore is provided at the SME Portal (formerly known as the EnterpriseOne Portal): https://www.smeportal.sg/ . Additional information on registering a branch of a foreign company is available through the Singapore’s EDB.
Foreign companies may lease or buy privately or publicly held land in Singapore, though there are some restrictions on foreign ownership of property. Foreign companies are free to open and maintain bank accounts in foreign currency. There is no minimum paid-in capital requirement, but at least 1 subscriber share must be issued for valid consideration at incorporation.
The International Arbitration Act (IAA) regulates international arbitration in Singapore. Domestic arbitration is regulated by the Arbitration Act (AA). The IAA is heavily based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law, although with a few significant differences. Arbitration agreements must be in writing, and oral agreements and arbitration agreements that can be inferred through conduct are not enforceable. The Singapore International Arbitration Centre is the major arbitral institution and its increasing caseload reflects Singapore’s policy of encouraging the use of alternative modes of dispute resolution, including arbitration. On average, it takes around 8 weeks to enforce an arbitration award rendered in Singapore, from filing an application to a writ of execution attaching assets (assuming there is no appeal), and 7 weeks for a foreign award.
Singapore places no restrictions on domestic investors investing abroad. The host government promotes outward investment through International Enterprise (IE) Singapore, a statutory board under the Ministry of Trade and Industry. It provides market information, business contacts, and financial assistance and grants for internationalizing companies. While it has a global reach and runs overseas centers in major cities across the world, a large share of its overseas centers are located in major trading and investment partners and regional markets like China, India and the nine other countries in the Association of Southeast Asian Nations (ASEAN) region.