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 government is committed to maintaining a free market, but also actively plans Singapore’s economic development, including through a network of state-owned enterprises (SOEs). As of April 2023, the top three Singapore-listed SOEs (DBS, Singtel, and Singapore Airlines) accounted for 25.4 percent of the Singapore Exchange (SGX) market capitalization. Some observers have criticized the dominant role of SOEs in the domestic economy, arguing that they have displaced or suppressed private sector entrepreneurship and investment.
Singapore’s legal framework and public policies are generally favorable towards foreign investors. Foreign investors are not required to enter 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, eligibility for various incentive schemes depends on investment proposals meeting the criteria set by relevant government agencies. 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.
The Economic Development Board (EDB) is the lead promotion agency that facilitates foreign investment into Singapore ( https://www.edb.gov.sg ). EDB undertakes investment promotion and industry development and works with foreign and local businesses by providing information and facilitating introductions and access to government incentives for local and international investments. The government maintains close engagement with investors through EDB, which provides feedback to other government agencies to ensure that infrastructure and public services remain efficient and cost competitive. EDB maintains 20 international offices, including in Chicago, Houston, New York, San Francisco, and Washington D.C.
Exceptions to Singapore’s general openness to foreign investment exist in sectors considered critical to national security, including telecommunications, broadcasting, domestic news media, financial services, legal and accounting services, ports, airports, and property ownership. Under Singaporean law, articles of incorporation may include shareholding limits that restrict ownership in such entities by foreign persons.
Since 2000, the Singapore telecommunications market has been fully liberalized. This move has allowed foreign and domestic companies seeking to provide facilities-based (e.g., fixed line or mobile networks) or services-based (e.g., local and international calls and data services over leased networks) telecommunications services to apply for licenses to operate and deploy telecommunication systems and services. Singapore Telecommunications (Singtel) – majority owned by Temasek, a state-owned investment company with the Ministry of Finance as its sole shareholder – faces competition in all market segments. However, its main competitors, M1 and StarHub, are also SOEs. In April 2019, Australian company TPG Telecom began providing telecommunications services. Following the merger of TPG Telecom and Vodafone Hutchison Australia, TPG Singapore was spun off and later rebranded as SIMBA Telecom. Approximately 30 mobile virtual network operator (MVNOs) services have also entered the market. The four Singapore telecommunications companies compete primarily on MVNO partnerships and voice and data plans.
As of April 2023, Singapore has 76 facilities-based operators offering telecommunications services. 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 intellectual property transit, leased satellite bandwidth (including VSAT, DVB-IP, satellite TV Downlink, and Satellite IPLC), terrestrial international private leased circuit, and backhaul services. The Infocomm Media Development Authority (IMDA) granted Singtel’s exemption after assessing the market for these services had effective competition. 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.
To facilitate the 5th generation (5G) mobile network technology and service trials, IMDA waived frequency fees for companies interested in conducting 5G trials for equipment testing, research, and assessment of commercial potential. In April 2020, IMDA granted rights to build nationwide 5G networks to Singtel and a joint venture between StarHub and M1. In December 2021, IMDA also extended license and granted rights for TPG Telecom to build 5G networks. IMDA announced a goal of full 5G coverage by the end of 2025. These three companies, along with TPG Telecom, are also permitted to launch smaller, specialized 5G networks to support specialized applications, such as manufacturing and port operations. The government did not hold a traditional spectrum auction, instead charging a moderate, flat fee to operate the networks and evaluating proposals from the MVNOs based on their ability to provide effective coverage, meet regulatory requirements, invest significant financial resources, and address cybersecurity and network resilience concerns. The announcement emphasized the importance of the winning MVNOs using multiple vendors, to ensure security and resilience. Singapore has committed to being one of the first countries to make 5G services broadly available, and its tightly managed 5G-rollout process continues apace, despite COVID-19. The government views this as a necessity for a country that prides itself on innovation, even as these private firms worry that the commercial potential does not yet justify the extensive upfront investment necessary to develop new networks.
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 in Singapore to 49 percent or less, although the Act does allow for exceptions. Individuals cannot hold shares that would make up more than 5 percent of the total votes in a broadcasting company without the government’s prior approval. The Newspaper and Printing Presses Act restricts equity ownership (local or foreign) of newspaper companies to less than 5 percent per shareholder and requires that directors be Singaporean citizens. Newspaper companies must issue two classes of shares, ordinary and management, with the latter available only to Singaporean citizens or corporations approved by the government. Holders of management shares have an effective veto over selected board decisions.
Singapore regulates content across all major media outlets through IMDA. The government controls the distribution, importation, and sale of media sources and has curtailed or banned the circulation of some foreign publications. Singapore’s leaders have also brought defamation suits against foreign publishers and local government critics, which have resulted in the foreign publishers issuing apologies and paying damages. Several dozen 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, publications by banned religious groups, and publications containing extremist religious views. Following a routine review in 2015, IMDA’s predecessor, the Media Development Authority, lifted a ban on 240 publications, ranging from decades-old anti-colonial and communist material to adult interest content.
Singaporeans generally face few restrictions on the internet, which is readily accessible. The government, however, subjected all internet content to similar rules and standards as traditional media, as defined by the IMDA’s Internet Code of Practice. Internet service providers are required to ensure that content complies with the code. The IMDA licenses the internet service providers through which local users are required to route their internet connections. 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 adherence to 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, and in September 2021 IMDA suspended the license of alternative news website The Online Citizen with immediate effect for allegedly failing to declare its sources of funding.
In November 2022, parliament passed the Online Safety (Miscellaneous Amendments) Bill as an addition to the Broadcasting Act. The law requires social media platforms, but not private messaging communications, to implement measures to limit users’ exposure to online content the government deems to be harmful to the country. The law allows the government to designate platforms with significant reach and impact as “regulated online communication services.” The law also empowers the IMDA to direct social media services to take down or disable access for in-country users to “egregious content” or to disallow specific accounts to interact with and communicate content to in-country users, as proposed in the Content Code for Social Media Services. Such content includes sexual harm, child sexual exploitation, cyberbullying, terrorism, inciting racial or religious tensions, self-harm, public health and security, and racial and religious intolerance. Platforms are also required to proactively detect and remove such content. Social media services that fail to comply with the proposed law may be fined up to $750,000 or receive a direction to have their services blocked in-country.
In April 2019, the government introduced legislation in parliament to counter “deliberate online falsehoods.” The legislation, called the Protection from Online Falsehoods and Manipulation Act (POFMA) and entered into force on October 2, 2019, requires online platforms to publish correction notifications or remove online information that government ministers classify as factually false or misleading, and which they deem likely to threaten national security, diminish public confidence in the government, incite feelings of ill will between people, or influence an election. Non-compliance is punishable by fines and/or imprisonment and the government can use stricter measures such as disabling access to end-users in Singapore and forcing online platforms to disallow persons in question from using its services in Singapore. Opposition politicians, bloggers, alternative news websites, and as of recent posts about COVID-19 have been the target of the majority of POFMA cases thus far and many of them used U.S. social media platforms. Besides those individuals, U.S. social media companies were issued most POFMA correction orders and complied with them. U.S. media and social media sites continue to operate in Singapore, but a few major players have ceased running political ads after the government announced that it would impose penalties on sites or individuals that spread “misinformation,” as determined by the government. On January 31, 2020, the government temporary lifted the exemption of social media platforms, search engines and internet intermediaries from complying with POFMA, with the goal of combatting false information on the then evolving COVID-19 situation.
In September 2021, the Ministry of Home Affairs introduced the Foreign Interference (Countermeasures) Act (FICA) to strengthen the country’s ability to “prevent, detect, and disrupt foreign interference” in domestic politics conducted through hostile information campaigns and the use of local proxies. The bill was passed in October 2021 and expanded the government’s powers and tools to control “foreign influence”. Provisions related to countering foreign interference by hostile information campaigns came into force in July 2022. Under FICA, the Minister for Home Affairs can compel internet and social media service providers to disclose information, remove online content, block user accounts, and take “countermeasures” against “politically significant persons” who are or are suspected of working on behalf of or receiving funding from “foreign political organizations” and “foreign principals.” While the government provided assurances that “legitimate business activities” would not be targeted by the legislation, opposition parties, foreign businesses, and civil society groups expressed concerns about the law’s expansion of executive powers and potential impacts on the rights to freedom of expression, association, participation in public affairs, and privacy.
Mediacorp TV is the only free-to-air TV broadcaster and is 100 percent owned by the government via Temasek Holdings. Mediacorp reported that its free-to-air channels are viewed weekly by 80 percent of residents. Local pay-TV providers are StarHub and Singtel, which are both partially owned by Temasek or its subsidiaries. Local free-to-air radio broadcasters are Mediacorp Radio Singapore (owned by Temasek Holdings), SPH Radio (owned by SPH Media Trust), and So Drama! Entertainment (owned by the Ministry of Defense). BBC World Services is the only foreign free-to-air radio broadcaster in Singapore.
To rectify the high degree of content fragmentation in the Singaporean 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 IMDA implemented cross-carriage measures in 2011. These measures required pay-TV companies designated by IMDA 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 carry that content on other RQL pay-TV companies. In February 2019, the IMDA proposed to continue the current cross-carriage measures. The Motion Picture Association (MPA) has expressed concern this measure restricts copyright exclusivity. Content providers consider the measures an unnecessary interference in a competitive market that denies 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 personal and tablet computers, and delivering content via fiber networks.
Streaming services have entered the market, which MPA has found leads to a significant reduction in intellectual property infringements. StarHub and Singtel have both partnered with multiple content providers, including U.S. companies, to provide streaming content in Singapore and around the region.
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 licenses (i.e., full service, wholesale, and offshore banks) held by foreign commercial banks. As of April 2023, 30 foreign full-service licensees and 96 wholesale banks operated in Singapore. An additional 22 merchant banks were 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 Banks” (QFBs) can operate Singapore dollar retail banking activities but are subjected to restrictions on their number of places of business, ATMs, and ATM networks. Additional QFB licenses may be granted to a subset of full banks, which provide greater branching privileges and greater access to the retail market than other full banks. As of April 2023, there were 10 banks operating QFB licenses. China Construction Bank received the most recent QFB award in December 2020.
Following a series of public consultations conducted by MAS over a three-year period, the Banking Act 2020 came into operation on February 14, 2020. The amendments include the removal of the Domestic Banking Unit (DBU) and Asian Currency Unit (ACU) divide, consolidation of the regulatory framework of merchant banks, expansion of the grounds for revoking bank licenses and strengthening oversight of banks’ outsourcing arrangements. Newly granted digital banking licenses under foreign ownership apply only to wholesale transactions.
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 the 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 MAS 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, 12, or 20 percent of shareholdings.
Although the government has lifted the formal ceilings on foreign ownership of local banks and finance companies, the approval for 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 30 full-service licenses granted to foreign banks, three have gone to U.S. banks (Bank of America, Citibank, JP Morgan Chase Bank). U.S. financial institutions enjoy phased-in benefits under the USSFTA. Since 2006, only one U.S.-licensed full-service banks has obtained QFB status (Citibank). 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 ten 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 subjected to quotas on service locations under the terms of the USSFTA.
Credit card holders from U.S. banks incorporated in Singapore 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 January 2019, MAS announced the passage of the Payment Services Bill after soliciting public feedback. The bill requires more payment services such as digital payment tokens, dealings in virtual currency, and merchant acquisition, to be licensed and regulated by MAS. In order to reduce the risk of misuse for illicit purposes, the new law also limits the amount of funds that can be held in or transferred out of a personal payment account (e.g., mobile wallets) in a year. Regulations are tailored to the type of activity performed and address issues related to terrorism financing, money laundering, and cyber risks. In December 2020, MAS granted four digital bank licenses: two to Sea Limited and a Grab/Singtel consortium for full retail banking and two to Ant Group and the Greenland consortium (a China-based conglomerate) for wholesale banking. The former launched MariBank in March 2023 and GXS Bank in August 2022, while the latter launched Anext Bank and Green Link Digital Bank in June 2022.
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 relaxed conditions 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. U.S. and foreign attorneys are allowed to represent parties in arbitration without the need for a Singaporean attorney to be present. To offer Singapore law, FLPs 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. As of September 2021, the vast majority of Singapore’s 120 foreign law firms operate FLPs, while QFLPs and JLVs 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. Decisions on QFLP licenses renewal take into consideration the firms’ 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. The Ministry of Law last renewed the QFLP licenses of all nine foreign law firms in Singapore in December 2020.
A JLV is a collaboration between a FLP and SLP, which may be constituted as a partnership or company. The director of legal services in the LSRA will consider all the relevant circumstances including the proposed structure and its overall suitability to achieve the objectives for which JLVs are permitted to be established. There is no clear indication on the percentage of shares that each JLV partner may hold in the JLV.
Law degrees from designated U.S., British, Australian, and New Zealand universities 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 Bar law school graduates of those designated universities who are Singapore citizens or permanent residents, and 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 Board of Architects, respectively, to practice in Singapore. All applicants (both local and foreign) must have at least four years of practical experience in engineering, of which two are acquired in Singapore. Alternatively, students can attend two years of practical training in architectural works and pass written and/or oral examinations set by the respective board.
Accounting and Tax Services
Many major international accounting firms operate in Singapore. Registration as a public accountant under the Accountants Act is required to provide public accountancy services (i.e., the audit and reporting on financial statements and other acts that are required by any written law to be done by a public accountant) in Singapore, although registration as a public accountant is not required to provide other accountancy services, such as bookkeeping, accounting, taxation, and corporate advisory work. All accounting entities that provide public accountancy services must be approved under the Accountants Act and their supply of public accountancy services in Singapore must be under the control and management of partners or directors who are public accountants ordinarily resident in Singapore. In addition, if the accounting entity firm has two partners or directors, at least one of them must be a public accountant. If the business entity has more than two accounting partners or directors, two-thirds of the partners or directors must be public accountants.
Singapore further liberalized 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 and gas transportation through 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. In October 2017, Shell Eastern Trading Pte Ltd and Pavilion Gase Pte Ltd were awarded import licenses to market up to 1 million tons per annum or for three years, whichever occurs first. This also marked the conclusion of the first exclusive franchise awarded to BG Singapore Gas Marketing Pte Ltd.
Beginning in November 2018 and concluding in May 2019, Singapore launched an open electricity market (OEM). Previously, Singapore Power was the only electricity retailer. During the second half of 2020, the government significantly reduced tariffs for household consumption and encouraged consumer OEM adoption. To participate in OEM, licensed retailers must satisfy additional credit, technical, and financial requirements set by Energy Market Authority (EMA) in order to sell electricity to households and small businesses. There are two types of electricity retailers: Market Participant Retailers (MPRs) and Non-Market Participant Retailers (NMPRs). MPRs have to be registered with the Energy Market Company (EMC) to purchase electricity from the National Electricity Market of Singapore (NEMS) to sell to contestable consumers. NMPRs need not register with EMC to participate in the NEMS since they will purchase electricity indirectly from the NEMS through the Market Support Services Licensee (MSSL). In 2021, a number of the electricity retailers withdrew from selling electricity due to high natural gas prices globally, resulting in unfavorable market conditions. As of April 2023, there were 9 retailers in the market, including foreign and local entities.
Singapore announced in October 2022 that it would launch its national hydrogen strategy with a focus on using low-carbon hydrogen as a decarbonization solution. Singapore intends to use hydrogen to decarbonize sectors that could not be easily electrified, such as using hydrogen as a feedstock in semiconductor plants and petrochemical processes or producing low-carbon sustainable fuels in the maritime and aviation sectors. Singapore believes that low-carbon hydrogen could potentially supply up to half of Singapore’s power needs by 2050, playing a key role in helping it achieve its net-zero emissions target by then. Singapore is currently experimenting with advanced hydrogen technologies that could soon be commercially ready and launched an expression of interest for a small-scale commercial project using low-carbon ammonia for power generation. The authorities are keen to assess the viability of ammonia as a hydrogen carrier and direct fuel before developing regulations and an ecosystem to support it. Additionally, Singapore is setting aside an additional $97 million for research and development work to advance hydrogen technologies.
In June 2022 Singapore started importing up to 100 megawatts of hydropower from Laos, via Malaysia and Thailand, and in July 2022 it issued a request for proposal to import additional renewable and low-carbon energy, with a target to import up to 4 gigawatts (GW) by 2035. These projects also support a broader ASEAN power grid, a key regional initiative to enhance interconnectivity, energy security and sustainability through existing and future electricity interconnections. Related, in April 2023 the United States and Singapore announced the start of their joint Feasibility Study on Regional Energy Connectivity, as part of the Net Zero World Initiative led by the U.S. Department of Energy. In addition, in October 2022 Singapore announced plans to ramp up its solar capacity by more than seven times to produce 2 GW-peak of solar energy by 2030, which would constitute 3 percent of the country’s total electricity demand.