SINGAPORE

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SINGAPORE
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AGENDA
Basic data
Economic issues
Financial issues
Political issues
OUTLOOK
OUTLOOK
OUTLOOK
Natural and technical features
SWOT,RATINGS AND CONCLUSION
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Quick introduction

• Since it got independent in 1965, Singapore has
  been undergoing a steady growth until the late
  90s (9,4 in the 70s 8 in the 80s 4 in the
  90s) and is now a modern and developed country.
  In less than a half-century Singapore has turned
  into a prosperous, politically and socially
  stable city.
• Today it is ranked 6th in the Global
  Competitiveness Survey 2003-2004 of World
  Economic Forum
• Singapore is a major international financial
  center. With political stability, modern
  infrastructures and highly-developed legal and
  regulatory frameworks, and strong macroeconomic
  fundamentals
• However it faces a decrease in economic growth
  and the latter is more volatile. Its
  competitiveness is challenged by the growing
  forces in SEA

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In Brief

• Official name Republic of Singapore
• Form of state Parliamentary democracy
• The executive the prime minister (Goh Chok Tong)
  and the cabinet are appointed by the president
  and are responsible to parliament
• Head of state the president, S R Nathan, took
  office for a six-year term on September 1st 1999
• National elections November 3rd 2001 the next
  election is due by early 2007
• National government the ruling Peoples Action
  Party (PAP) won 75 of the vote in November 2001
  and holds 82 seats in parliament (out of 84). The
  last cabinet reshuffle took place in April 2003
• Area 685 km²
• A British colony until 1965
• Unemployment rate 4,5 in 2003
• GDP per capita 38 023 SGD in 2003
• GDP growth 0,8 in 2003

Source Singapore Dep. Of Statistics 2003
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Pop/Demo/Social/Educ/empl
Singapore Department of Statistics _ 2003
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ANNUAL Growth rate of pop
Singapore Department of
Statistics_2003
18 between 1992_2002 due to improvement of
living standards
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Singapore International Institutions

• Singapore is member of
• - international organizations UN, WB,IMF,WTO,
  Commonwealth
• - regional organizations ASEAN, APEC
• - others Foundation Europe-Asia, forum
  Asia-Latin-America
• BUT Singapore isnt a member of OCDE like
  Monaco!!

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1) POLITICAL RISK

• Lee Kuan Yew will not leave the stage
• Mr Lee, prime minister of Singapore from 1965 to
  1990 and senior minister since then, is now 80.
• This may create a small (and probably solvable)
  succession problem
• Mr Lees son is supposed to become Prime Minister
  in 2005. His wife, Ho Ching, who is currently
  executive director of Temasek Holdings, a
  government investment arm. Her presence will only
  reinforce worries about the nature of relations
  between government and business in Singapore.
• Relations with the US remain good
• In mid-November, the coordinating minister for
  security and defense, Tony Tan, confirmed that
  Singaporean forces would remain in Iraq.
• Relations with Malaysia stagger onwards
• Relations between Singapore and Malaysia appear
  to have improved since the beginning of January,
  following two visits to Singapore by the new
  prime minister of Malaysia, Abdullah Badawi
• Mr Badawi has adopted a more conciliatory tone
  towards Singapore than his predecessor, Mahathir
  Mohamad (island, bridge, water supply)

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PRINCE MODEL SINGAPORE
Between being loved and being feared, I have
always believed Machiavelli was right. If nobody
is afraid of me, Im meaningless. Lee
Kuan Yew, Oct 6,1997
Positive influence
Government
USA
PAP
Law
Lee Kuan Yew
Lee Kuan Yew Clan
Gov-Link- Companies
SEA
Malaysia
Negative influence
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Singapore s Ethnicity and religions
Repartition of population among religions of population
Buddhists 42,5
Muslims 15
Christians 15
Taoists 8,5
Hindus 4
Others 15
Singapore Department of
Statistics_2003
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SURVEY 2004
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SURVEY 2004
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Transparency International Corruption
Perceptions Index 2003
Country rank Country CPI 2003 score
1 Finland 9.7
2 Iceland 9.6
3 Denmark 9.5
3 New Zealand 9.5
5 Singapore 9.4
18 Ireland 7.5
18 USA 7.5
20 Chile 7.4
21 Israel 7.0
21 Japan 7.0
23 France 6.9
23 Spain 6.9
40 Hungary 4.8
41 Lithuania 4.7
41 Namibia 4.7
50. Costa Rica 4.3
50. Greece 4.3
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ERC

• Since 2001 the government authorities launched
  the Economic Review Committee
• A reflexion on how to face the structural and
  conjectural difficulties? Why? To limit the loss
  of competitiveness and maintain investment flows
• Mesures taken since 2003 stimulate
  entrepreneurship and innovation and privatization
  of Government Linked Companies ( lay offs, fiscal
  policy favorable to enterprise and employers)
• CONCLUSION STRONG POLITICAL STABILITY

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AGENDA
Basic data
Economic issues
Financial issues
Political issues
OUTLOOK
OUTLOOK
OUTLOOK
Natural and technical features
SWOT,RATINGS AND CONLUSION
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GDP Growth
Sourcewww.singstat.gov.sg
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GDP per Capita
Sourcewww.singstat.gov.sg

• In 2003
• USA 35 000 USD/Capita
• EUROPE25 000 USD/Capita

• In 2003
• China970 USD/capita
• Thailand2000 USD/capita

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Repartition of GDP in 2003
Source www.dree.org/singapour
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Repartition of the Labor force
Sourcewww.singstat.gov.sg
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Inflation VS Interest rates
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Exchange Rate SG VS USD
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Trade Balance
www.cofacerating.com
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Economic panorama

• Exportselectronic,pharmaceutical
  products,petrochemical
• Financial center
• Shipping and airways hub
• Tourism (7.57 million tourists)
• Regional center for multinational

• 1 USD1.7 SD
• 4.4 unemployment.
• 64 active population
• 5 GST

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Economic outlook(1)

• Structural analysis
• Economy characterized by
• A growing GDP per capita symbol of a prosper
  development
• Strong openness ratio (Three times its GDP)
• Strongly Asia and US oriented.

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Economic outlook(2)

• Current economic situation analysis
• The 2001 economic slowdown and the electronic
  crisis hit very hard Singapore(-2 in GDP, the
  strongest slump since 1965). As a result the
  government launched a policy mix which aimed at
  softening the monetary policy and loosening
  budget restrictions in order to revamp the
  economy. Nevertheless because of its very degree
  of openness and its small domestic market, the
  measures were ineffective and the SRAS did not
  help the economy to recover. Unemployment
  rocketed to almost an all time high at 6
• The government is trying to maintain a
  competitive parity with the US dollar (still its
  principal trading partner). Also thanks to a
  controlled inflation and a boost of the world
  economy, growth is back ( 5 in 2002) and
  investment also as well as FDI.

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A result FDI
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AGENDA
Basic data
Economic issues
Financial issues
Political issues
OUTLOOK
OUTLOOK
OUTLOOK
Natural and technical features
SWOT,RATINGS AND CONLUSION
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Central government finance

• Current situation
• Total revenue15 of the GDP
• Total expenditure16 of the GDPgt Very low
  deficit (1.1 of the GDP).
• surplus decrease trend(there was a surplus of up
  to 8.6 of the GDP in 1994).

Source DREE
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Domestic borrowing

• Historical budgetary surplusgt Domestic
  borrowinggt Domestic capital receipt 5
  Billion SG (3 Billion US) gt 10 of
  the central government revenue.

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Trade balance

• Trade balance in 2004
• Exports 152 Billion US (180 of the GDP)
• Imports 135 Billion US (160 of the GDP)gt
  Trade balance 17 Billion US (20 of
  the GDP).

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Trade partners

• Major exports to
• USA
• Malaysia
• Hong Kong
• Japan
• Major imports to
• USA
• Japan
• Malaysia
• PR of China
• The major partners (USA and Malaysia) represent
  less than 15 of the global volume.gt Quite low
  dependence between Singapore and its main
  partnersgt Good trade balance stability

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High and stable trade surplus

• Trade balance surplusgt Increase of
  international reserves
• International reserves gt 80 Billion US in 2002
  (and growing) almost 1 year of GDP about 9
  month of imports.

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External debts

• Situation in 2003
• Long Term 9 Billion US
• Short Term 5 Billion USgt Total 14 Billion
  US Much less than the international
  reserves

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Net international reserves

• International reserves - External debts about
  70 Billion US 9 months of GDP 7 months of
  imports gt Very safe financial situation

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Financial overall situation

• Exceptional financial structure stability
• Large domestic reserves and very low governmental
  deficit
• Very high international surplus and growing
  reserves
• gt Extremely strong financial position
  One of the best ratings in the world
• Singapores strengths in public finances and
  external flexibility are substantial and compare
  favorably with its AAA peers. gt (Standard
  Poors).

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Coface rating 2004
"Investment Grade" "Investment Grade"
Australia A1
Belgium A1
Canada A1
Finland A1
Hong Kong A1
Iceland A1
Japan A1
Luxemburg A1
New Zealand A1
Norway A1
Singapore A1
Spain A1
Sweden A1
Switzerland A1
Taiwan A1
United Kingdom A1
United States A1
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AGENDA
Basic data
Economic issues
Financial issues
Political issues
OUTLOOK
OUTLOOK
OUTLOOK
Natural and technical features
ANALYSIS,SWOT,RATINGS AND CONCLUSION
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Fundamentals and Policies (1)

• Singapore's strong economic performance has been
  predicated on its openness to capital and
  technology from abroad, an honest and efficient
  government as well as a co-operative relationship
  between labour and management. Equally important
  is a set of sound macroeconomic policies aimed at
  maintaining a conducive environment for long-term
  investment in the economy.
• Fiscal policy in Singapore is directed primarily
  at promoting long-term economic growth, rather
  than cyclical adjustment or the distribution of
  income. As such, the government has refrained
  from large unemployment benefits and price
  support schemes, preferring to pursue the route
  of job creation and free market competition.
• High economic growth and the ethos of fiscal
  rectitude, which extends throughout the public
  sector, have led to budget surpluses averaging 5
  of GDP over the past 10 years. Singapore's
  prudent fiscal policy has contributed to its high
  savings rate. Gross national savings rose from a
  modest 11 of GNP in 1965 to over 50 since 1995.
  Singapore's high domestic savings rate has
  allowed it to achieve one of the highest
  investment rates in the world without having to
  incur foreign debt. High domestic savings have
  also facilitated the maintenance of an ample
  stock of foreign reserves. This has served to
  boost investor confidence and provided a buffer
  against adverse economic shocks.

Sourcehttp//www.mas.gov.sg/masmcm/bin/pt1Overvie
w_of_Singapore_Economy.htm
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Fundamentals and Policies (2)

• Fiscal conservatism, however, has not compromised
  the government's commitment to build and maintain
  a world-class infrastructure. Over the last three
  decades, development expenditure accounted for
  around one-third of government expenditure on
  average. This does not include the large
  investments made by the statutory boards. The
  equivalent figure in industrial countries is
  5-10.
• Because of Singapore's healthy overall fiscal
  position, the MAS has been able to concentrate on
  its primary goal of ensuring price stability and
  preserving confidence in the domestic currency.
  Monetary policy in Singapore has been centred on
  the exchange rate since 1981. This reflects the
  fact that in the small and open Singapore
  economy, the exchange rate is the more effective
  tool in controlling inflation. Indeed, the system
  has proven its ability to deliver on the
  objective of maintaining price stability in the
  two decades it has been in operation. Its
  resilience was reaffirmed during the Asian
  crisis, when the flexibility of the system was a
  key part of the MAS response to the unfolding
  turmoil across regional financial markets.

Sourcehttp//www.mas.gov.sg/masmcm/bin/pt1Overvie
w_of_Singapore_Economy.htm
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Challenges ahead (1)

• Singapore's strong fundamentals have enabled it
  to weather the Asian crisis relatively well. But
  the collapse in external demand did result in a
  sharp slowdown in Singapore's GDP growth in 1998.
  The government responded with a package of
  short-term measures to help lower business costs.
  At the same time, the government took advantage
  of the lull in growth to rethink longer-term
  economic strategies. Technological advance has
  resulted in a globally-integrated marketplace. To
  remain competitive in this new global economy,
  Singapore has recognised the need to deregulate
  closed sectors and shift into a knowledge-based
  economy.
• The government has already taken steps to
  deregulate key sectors of the economy such as the
  financial, telecommunications and power sectors.
  In the financial services sector, the MAS has
  opened the domestic banking and insurance
  industries to greater foreign participation. At
  the same time, the MAS has also adopted a more
  open and consultative approach both in terms of
  supervision as well as development of the sector,
  and has shifted the emphasis from regulation to
  risk-focused supervision. To help promote a more
  vibrant and competitive environment, the MAS has
  been actively attracting new activities and
  players to Singapore. Various initiatives have
  been launched to give fund managers greater
  access to domestic funds, develop the debt market
  and overhaul corporate governance.

Sourcehttp//www.mas.gov.sg/masmcm/bin/pt1Overvie
w_of_Singapore_Economy.htm
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Challenges ahead (2)

• To shift successfully into a knowledge economy,
  Singapore must strengthen its IT capabilities.
  The government is actively promoting
  entrepreneurship, especially in the area of
  technology, and has set up a fund to co-invest
  with the private sector in high-tech start-ups.
  Given that human and intellectual capital are key
  competitive factors in a knowledge-based economy,
  the educational system has been changed so as to
  encourage creativity and innovation from young.
  The process should continue at the workplace in a
  life-long learning environment. As such, various
  manpower initiatives have been launched to
  encourage the continual retraining and
  re-skilling of the workforce. Another important
  component of labour market policies is the
  efforts that have been invested in attracting
  foreign talent to Singapore. Taken as a whole,
  these measures will help to position Singapore to
  contribute to, and partake of, the benefits of
  the new global economy.

Sourcehttp//www.mas.gov.sg/masmcm/bin/pt1Overvie
w_of_Singapore_Economy.htm
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Singapore and Globalization
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Business environment
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Business OK but
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Fiscal Policy

• 1) Fiscal Policy  In Singapore, the long-term
  objectives of government budgetary policy are
• to promote and support sustained,
  non-inflationary economic growth
• to keep the public sector lean and trim in order
  to leave more manpower and financial resources
  for the private sector
• To maintain a balanced budget ie. to finance
  total operating and development expenditures from
  operating revenue and
• to focus government expenditure in areas which
  yield lasting returns, eg. education, healthcare,
  infrastructure, housing and programmes to protect
  the environment.
• Underlying the above objectives are the
  recognition of market forces in driving the
  economy, financial prudence and emphasis on human
  infrastructural investment.      
•  .

Year Of Assessment Tax Rate
1986 and before 40
1987 to 1989 33
1990 32
1991 and 1992 31
1993 30
1994 to 1996 27
1997 to 1998 26
1999 26
2000 26
2001 25.5
2002 24.5
2003 22
Sourcewww.iras.gouv.sg Sourcewww.iras.gouv.sg
Sourchttp//www.iras.gov.sg/about20us/about_over
view.htm
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Tax Policy

• Tax Policy  is an integral part of fiscal policy.
  The main objectives of tax policy in Singapore
  are
• Promotion of Economic and Social GoalsTax has
  been used to influence behaviour towards
  desirable social and economic goals. For
  instance, to encourage mechanisation and
  automation, the government allows accelerated
  capital allowance for most assets used for
  business purposes. To encourage Singaporeans to
  have more children, tax rebates are given for the
  third and fourth child.
• The fundamental tenet of Singapore's tax policy
  is to keep tax rates low, both for corporations
  as well as individuals. Keeping our corporate
  rate low will help us to continue to attract a
  good share of foreign investment. Keeping our
  individual rates low will encourage our people to
  work hard. It will also make risk-taking
  worthwhile and encourage entrepreneurship.Another
  fundamental tenet of our tax policy is to keep
  the tax base broad. The aim is to inculcate
  awareness among citizens the social
  responsibility of paying taxes. For this reasons,
  our personal reliefs for individuals are
  deliberately kept low. This means that potential
  taxpayers would join the tax stream earlier

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CONCLUSIONRISK ASSESSMENT COFACE MAY 2004
ASSETS
WEAKNESSES

• Singapore constitutes a major regional platform
  thanks to the quality of its infrastructure and
  financial system.
• Labour is well trained and highly skilled.
• The economic success has been founded on a policy
  of inviting foreign capital and promoting
  exports.
• The city-state benefits from a comfortable
  financial situation thanks to the accumulation of
  fiscal and current account surpluses and to ample
  foreign exchange reserves.
• It enjoys remarkable political stability.

• The economy's extreme sensitivity to fluctuations
  in world economic conditions has increased due to
  its specialisation in electronics.
• The rigidity of the education system and
  government framework has tended to stifle
  entrepreneurial and innovative spirit.
• To remain competitive, the country will have to
  adjust to a rapidly changing regional environment.

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RISK ASSESSMENT COFACE MAY 2004

• CONLUSION After enduring an economic slowdown in
  2003, partly attributable to the SARS pandemic's
  negative impact on sectors involved in
  distribution or linked to tourism, Singapore has
  been benefiting from more sustained growth. The
  economic recovery has been depending on growing
  international demand for pharmaceutical and
  petrochemical products and an upturn in the
  electronics sector, which represents two-thirds
  of exports. The accumulation of fiscal
  surpluses has afforded the country considerable
  leverage in spurring domestic demand via
  stimulatory policy. External accounts have
  continued to post large surpluses with foreign
  debt remaining very low and foreign currency
  reserves ample. The banking system has remained
  the soundest in the region, especially with banks
  continuing to reduce their non performing
  loans.With its extreme sectoral specialisation,
  Singapore has been diversifying its economy
  focusing on biotechnologies and high value-added
  services. Moreover, it has been reducing tax
  levies to offset a loss of competitiveness in
  relation to other countries in the region as well
  as to China and India. However, it re-exporter
  role has been diminishing and its regional
  financial-centre from has been suffering from the
  region's persistent political tensions. In the
  face of those developments, Singapore has been
  adapting its positioning and concluding numerous
  trade agreements with major industrialised
  countries.