Policies Towards Foreign Direct Investment
Singapore maintains a heavily trade-dependent economy characterized by an open investment regime, with some licensing 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. The 2017-2018 Global Competitiveness Report ranks Singapore as the third-most competitive economy globally. The 2004 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 actively plans Singapore’s economic development, including through an extensive network of government-linked corporations (GLCs). As of January 2018, the top four Singapore-listed GLCs accounted for 14.3 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 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 (reference Limits on National Treatment and Other Restrictions), 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 generally considered to be transparent and effectively enforced.
Singapore’s Economic Development Board (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).
The GOS maintains close and continuous engagement with investors through the EDB, which provides feedback to other government agencies to ensure that infrastructure and public services remain efficient and cost-competitive.
Exceptions to Singapore’s general openness to foreign investment exist in telecommunications, broadcasting, the domestic news media, financial services, legal and accounting services, and ports and airports sectors, as well as 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 that is majority owned by 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 March 2018, Singapore has 69 facilities-based (group) and 264 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, allocating additional blocks of spectrum to accommodate increasing demand for mobile data services. Singtel, Starhub, M1, and TPG paid a combined total of US$870 million (S$1.15billion) in this heavily bid auction for additional frequency bands.
Singapore’s Info-communication Media Development Authority (IMDA) operates as both the regulatory agency and the investment promotion agency for the country’s telecommunications sector. IMDA conducts public consultations on major policy reviews and provides decisions on policy changes to relevant companies.
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. A ban on 240 publications, ranging from decades-old anti-colonial and communist material to adult interest content, was last lifted on November 25, 2015 following a routine review by the Media Development Authority.
Singaporeans generally face few restrictions on the internet. However, the IMDA has blocked various websites containing objectionable material, such as pornography and racist and religious hatred sites. Online news websites that 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.
Additional content regulations on “deliberate online falsehoods” transmitted via print and online media are under consideration by the Singapore government, with public consultations held in early 2018 and the subsequent establishment of a Parliament-appointed Select Committee on Deliberate Online Falsehoods, which will provide further recommendations on this matter to Parliament.
MediaCorp TV is the only free-to-air TV broadcaster and is owned 100% by the government via Temasek Holdings (Temasek). 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 Singapore pay-TV market, and 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 RQL 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.
Banking and Finance
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 2018, 29 foreign full service licensees, 92 wholesale licensees, and 2 offshore licensees operated in Singapore. An additional 30 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 retail banking activities. Only Full Banks and “Qualifying Full Bank” (QFBs) can operate Singapore dollar retail banking activities, but are subject to restrictions on the number of places of business, ATMs and ATM networks. Additional 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 2018, there are 10 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 also 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. MAS has initiated a 30-month implementation timeline from February 2017 for the removal of the DBU-ACU divide, which will be aligned with the revisions made to MAS 610 (Submission of Statistics and Returns).
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 requires 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 2017, MAS solicited public feedback on a proposed retail payments regulatory framework, which is intended to streamline and expand the regulation of payments under the proposed Payment Services Bill. The Bill will require licensing of entities that carry out account issuance, domestic money transfer, remittance, merchant acquisition, electronic-money issuance, virtual currency, and money-changing services, and targets specific AML/CFT, user protection, and technology risks. The proposed Bill provides statutory powers for MAS to mandate any Major Payment Institution to participate in a common platform, and/or to adopt common standards to achieve interoperability of payment systems, and to mandate that a payment system operator allow third parties to access its system for interoperability purposes. The Bill proposed that an e-money issuer (a separate category to virtual currencies) with a float above $3.7 million will need to safeguard the float with a full bank, or other means approved by MAS which protects the funds, and funds in the e-wallet that are for P2P transfers will be protected by statute (with carve-out provisions). It also would restrict the maximum personal e-wallet load capacity at $3730. As of March 2018, this legislation is still pending and under review.
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. Foreign law 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 126 foreign law firms operate FLPs, while QFLPs, JLVs and FLAs each number in the single digits.
The QFLP licenses allow foreign law firms 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 2018, there are nine QFLPs in Singapore, including five U.S. firms. In December 2017, the Ministry of Law announced the deferral to 2020 of the decision to renew the licenses of four QFLPs, which were set to expire in 2018 because the respective performances have fallen short of the initial commitments made in 2012. Decisions on the renewal considers the firm’s quantitative and qualitative performance, such as the value of work that the Singapore office will generate, the extent to which the Singapore office will function as the firm’s headquarter for the region, the firm’s contributions to Singapore, and the firm’s proposal for the new license period.
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. 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 examinations 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.
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% 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.
Singapore does not maintain an investment screening mechanism for inbound foreign investment, and there are no reports of U.S. investors being especially disadvantaged or singled out relative to other foreign investors.
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 was the country’s only IPR review in the past three years. (https://www.wto.org/english/tratop_e/tpr_e/tp443_e.htm)
The OECD released a peer review report in March 2018 on Singapore under Article 25 of the OECD Model Tax Convention, which commits countries to endeavor to resolve disputes related to the interpretation and application of tax treaties. (http://www.oecd.org/countries/singapore/making-dispute-resolution-more-effective-map-peer-review-report-singapore-stage-1-9789264290488-en.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.
ACRA provides a single window for business registration, however additional regulatory approvals (e.g. licensing or visa requirements) are obtained via individual applications to the respective Ministries/Statutory Boards. Additional information and business support on registering a branch of a foreign company is available through the EDB (https://www.edb.gov.sg/en/how-we-help/setting-up.html). Furthermore, GuideMeSingapore by corporate services firm Hawskford provides details on setting up a business in Singapore. (https://www.guidemesingapore.com/)
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 one subscriber share must be issued for valid consideration at incorporation.
At GER (ger.co), Singapore’s online business registration process scores 7/10 in Online Single Windows (https://www.bizfile.gov.sg/), and 1.5/10 in Information Portals (https://www.smeportal.sg/content/smeportal/en/home.html). In particular, the information portal website fared poorly in guiding users in what to do, how to do it, and user orientation.
Business facilitation processes provide for fair and equal treatment of women and minorities, and there are no mechanisms that provide special assistance to women and minorities.
Singapore places no restrictions on domestic investors investing abroad. The host government promotes outward investment through Enterprise 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, investment partners, and regional markets like China, India and ASEAN.