WORLD TRADE
ORGANIZATIONRESTRICTED
WT/TPR/S/130
17 May 2004
(04-2082)
Trade Policy Review Body
TRADE POLICY REVIEW
SINGAPORE
Report by the Secretariat
This report, prepared for the fourth Trade Policy Review of Singapore, has been
drawn up by the WTO Secretariat on its own responsibility. The Secretariat has,
as required by the Agreement establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), sought clarification from the Government of Singapore on its
trade policies and practices.
Any technical questions arising from this report may be addressed to
Mrs. Rohini Acharya (tel: 022 739 5874) and Mr. Michael Daly
(tel: 022 739 5077).
Document WT/TPR/G/130 contains the policy statement submitted by the
Government of Singapore.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Singapore.Singapore WT/TPR/S/130
Page iii
CONTENTS
Page
SUMMARY OBSERVATIONS vii
(1) E CONOMIC ENVIRONMENT vii
(2) T RADE AND INVESTMENT POLICY FRAMEWORK vii
(3) T RADE AND TRADE -RELATED MEASURES viii
(4) O THER MEASURES AFFECTING TRADE ix
(5) S ECTORAL POLICIES x
(6) P ROSPECTS xi
I. ECONOMIC ENVIRONMENT 1
(1) I NTRODUCTION 1
(2) R ECENT ECONOMIC PERFORMANCE 1
(3) M ACROECONOMIC POLICIES 7
(i) Monetary and exchange rate policy 7
(ii) Fiscal policy 8
(iii) National wage policy 9
(4) S TRUCTURAL MEASURES 9
(5) D EVELOPMENTS IN TRADE 11
(i) Composition of merchandise trade 11
(ii) Direction of merchandise trade 11
(iii) Composition of trade in services 14
(iv) Direction of trade in services 14
(6) D EVELOPMENTS IN FOREIGN DIRECT INVESTMENT (FDI) 15
(7) P ROSPECTS 15
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES 16
(1) O VERVIEW 16
(2) G ENERAL CONSTITUTIONAL AND LEGAL FRAMEWORK 16
(3) D EVELOPMENT AND ADMINISTRATION OF TRADE POLICY 17
(i) Agencies involved in trade policy implementation 17
(ii) Main trade laws 19
(4) T RADE AGREEMENTS AND ARRANGEMENTS 19
(i) World Trade Organization 19
(ii) Regional agreements 20
(iii) Bilateral agreements 22
(iv) Other preferences 25
(5) F OREIGN INVESTMENT REGIME 26
(i) Overview 26
(ii) Legislation and incentives 26
(iii) International agreements 27WT/TPR/S/130 Trade Policy Review
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Page
III. TRADE POLICIES AND PRACTICES BY MEASURE 28
(1) I NTRODUCTION 28
(2) M EASURES DIRECTLY AFFECTING IMPORTS 29
(i) Customs procedures 29
(ii) Tariffs 30
(iii) Other charges affecting imports 34
(iv) Customs valuation and rules of origin 35
(v) Import prohibitions, restrictions, and licensing 36
(vi) Contingency measures 37
(vii) Standards and sanitary and phytosanitary requirements 38
(viii) Government procurement 43
(ix) State trading 45
(x) Other measures 45
(3) M EASURES DIRECTLY AFFECTING EXPORTS 45
(i) Procedures 45
(ii) Export taxes and other charges 46
(iii) Export prohibitions, restrictions, and licensing 46
(iv) Export assistance 47
(v) Free-trade zones 48
(4) M EASURES AFFECTING PRODUCTION AND TRADE 49
(i) Industrial policy 49
(ii) Incentives 55
(iii) Legal framework for businesses 60
(iv) Competition policy and corporate governance 60
(v) Intellectual property rights 63
IV. TRADE POLICIES BY SECTOR 68
(1) I NTRODUCTION 68
(2) A GRICULTURE 68
(3) M ANUFACTURING 69
(i) Overview 69
(ii) Policy responses 71
(4) P OWER AND WATER 72
(i) Electricity 72
(ii) Gas 75
(iii) Water 76
(5) S ERVICES 77
(i) Overview 77
(ii) Commitments under the General Agreement on Trade in Services 77
(iii) Banking and insurance 78
(iv) Telecommunications 85
(v) Transport 88
(vi) Air transport 91
(vii) Maritime transport 93
(viii) Professional services 96
(ix) Tourism services 100
REFERENCES 103
APPENDIX TABLES 107Singapore WT/TPR/S/130
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Page
CHARTS
I. ECONOMIC ENVIRONMENT
I.1 Total factor productivity growth, 1983-03 5
I.2 Product composition of merchandise trade, 1999 and 2003 12
I.3 Direction of merchandise trade, 1999 and 2003 13
III. TRADE POLICIES AND PRACTICES BY MEASURE
III.1 Share of bound tariff lines, by HS section, 2003 31
III.2 Average bound tariff rates, by HS section, 2003 32
IV. TRADE POLICIES BY SECTOR
IV.1 Value added in manufacturing, 1999 and 2002 70
IV.2 Interest rates of commercial banks, 1996-2003 81
IV.3 Maximum IDD rate between Singapore and selected countries 86
TABLES
I. ECONOMIC ENVIRONMENT
I.1 Selected macroeconomic indicators, 1999-03 1
I.2 Basic economic and social indicators, 1999-03 3
I.3 Sources of productivity growth, 1981-03 5
I.4 Trade in services, 1999-03 14
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
II.1 Ministerial responsibility for trade-related issues 18
II.2 Elements of Singapore's bilateral free-trade agreements 23
III. TRADE POLICIES AND PRACTICES BY MEASURE
III.1 Bound tariff rates, selected years 31
III.2 Applied MFN tariffs, 2003 33
III.3 Singapore's preferential rules of origin, 2003 35
III.4 Standards in Singapore, 2000-03 39
III.5 Percentage of alignable Singapore standards aligned to international standards, 2000-03 40
III.6 Incentives offered by IE Singapore 47
III.7 Tax incentives offered by the Economic Development Board 57
IV. TRADE POLICIES BY SECTOR
IV.1 The electronics and chemical industries, 1999-02 71
IV.2 Structure and performance ratios of the banking sector, 1999-03 80WT/TPR/S/130 Trade Policy Review
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Page
APPENDIX TABLES
I. ECONOMIC ENVIRONMENT
AI.1 Outward foreign direct investment, by industry, 1999-02 109
AI.2 Outward foreign direct investment, by country, 1999-02 110
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
AII.1 Main trade-related laws in Singapore 111
AII.2 Status of selected notifications to the WTO, January 2000 to January 2004 112
III. TRADE POLICIES AND PRACTICES BY MEASURE
AIII.1 Import prohibitions, 1999 and January 2004 114
AIII.2 Products covered by automatic and non-automatic import licensing 115
AIII.3 Exports subject to controls, February 2004 118
AIII.4 Non-tax assistance for industrial development (administered by EDB and SPRING) 119
IV. TRADE POLICIES BY SECTOR
AIV.1 Electricity licence holders, 1 January 2004 123
AIV.2 Incentives offered by the Monetary Authority of Singapore 124
AIV.3 Singapore's tourism industry, 1998-03 126Singapore WT/TPR/S/130
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SUMMARY OBSERVATIONS
(1) ECONOMIC ENVIRONMENT
1. Singapore weathered the Asian
financial crisis well, with GDP rebounding by
almost 7% and 10% in 1999 and 2000. The
strong economic recovery was in great part
due to Singapore's sound macroeconomic
policies and its openness to international trade
and foreign investment. Since then, however,
the global economic slowdown has severely
affected Singapore's exports and GDP fell by
almost 2% in 2001. The effects of the
international economic slowdown were further
compounded by the emergence of severe acute
respiratory syndrome (SARS) and events in the
Middle-East in 2003. As a result, growth
remained sluggish but is expected to pick up to
around 3.5%-5.5% in 2004. With national
saving continuing to exceed domestic
investment by an average of 20% of GDP (in
1999-03), Singapore's external indicators
remain strong. In particular, the counterpart
of the excess saving, which has been invested
abroad, are persistently large current account
surpluses, averaging 20% of GDP (during the
same period).
2. While a decline in external demand
was the main reason for sluggish recent
growth, Singapore faces several longer-run
challenges, including a lack of growth in total
factor productivity (TFP), a key indicator of
an economy's efficiency since the mid-1990s.
This has meant that while Singapore's high
rates of national savings and domestic
investment have continued to raise labour
productivity, capital productivity appears to
have declined. At the same time, Singapore is
facing the challenge of more intense
competition from low-cost regional producers,
resulting in structural changes and declining
employment, especially in manufacturing.
3. In response to these challenges,
Singapore established the Economic Review
Committee (ERC), which reported in 2003.
The Government has already implemented
several ERC recommendations aimed atreducing overall costs of production. These
include: a lowering of the corporate tax rate
from 26% in 2000 to 22% in 2003
(accompanied by an increase in the goods and
services tax (GST) rate from 3% to 5%); and
a lowering of mandatory contribution rates to
the retirement fund, the Central Provident
Fund (CPF), from 40% to 33% (20% for
employees and 13% for employers).
4. The longer run challenge of reversing
the recent decline in TFP and moving into
higher-value-added activities is being
addressed mainly through investment in
infrastructure for certain industries, and
incentives to attract private investment to
these activities. The TFP developments are
linked to the importance of external demand to
Singapore; but this and the associated decline
in capital productivity does raise certain
concerns, including Singapore's active
industrial policy, particularly the channelling
of its very high savings into investments in
certain activities and sectors, through
government linked companies (GLCs) and
incentives. However, Singapore is redefining
the role of its industrial policy and is
gradually divesting non-strategic GLCs and
has introduced competition in some services.
Furthermore, it is committed to introducing an
economy-wide competition law by 2005.
(2) TRADE AND INVESTMENT POLICY
FRAMEWORK
5. Singapore's merchandise trade is
three times its GDP, thus it is highly
dependent on external markets for economic
growth. It has traditionally been a strong
supporter of the multilateral trading system
and provides most-favoured-nation (MFN)
treatment to all Members of the WTO. It is
also a member of the Association of Southeast
Asian Nations (ASEAN), the Asia-Pacific
Economic Cooporation (APEC) forum, and
the Asia Europe Meetings (ASEM). The major
change since the previous Review has been a
decision to pursue bilateral free-trade
agreements. In sharp contrast to the previous
review period, when Singapore had noWT/TPR/S/130 Trade Policy Review
Page viii
bilateral free trade agreements, as at March
2004, it had signed FTAs with New Zealand,
Japan, the EFTA States, Australia, and the
United States, and was in negotiations with
Canada, Chile (Pacific Three along with New
Zealand), India, Jordan, Mexico, and Korea.
Under the ASEAN umbrella, negotiations are
under way with China, India, and Japan.
Furthermore, negotiations with Sri Lanka may
be launched soon.
6. Under its bilateral FTAs, Singapore
has made commitments in addition to those
undertaken in the WTO (including the GATS
and TRIPS), underscoring its view that FTAs
can be used as building blocks for a stronger
multilateral trade liberalization framework.
7. Overall responsibility for trade policy
remains with the Ministry of Trade and
Industry. The main change to the trade policy
framework since the previous Review was the
transformation of the Singapore Trade
Development Board (TDB) into International
Enterprise (IE) Singapore. IE Singapore, a
statutory board in the Ministry of Trade and
Industry, will focus on helping Singapore-
based companies to grow and internationalize.
In addition to regular consultations with key
players, such as industry groups and labour
unions, transparency has been enhanced by
issuing new draft legislation for public
consultation, usually through government
websites, where appropriate.
8. Foreign investment in the
manufacturing sector remains unrestricted.
The main changes to FDI policy have been
with regard to services. In 1999, a 40%
foreign shareholding restriction on local
banks was lifted. A 70% limit on foreign
ownership of Stock Exchange of Singapore
(SES) members was also removed. In the
telecommunications sector, all FDI
restrictions (previously 49% direct and
24.99% indirect) were lifted in 2000. Foreign
investment limits continue to be maintained in:
broadcasting (up to 49%, unless waived) and
newspaper services (raised from 3% to 5% in
2002 and possibly higher if permission is
given); foreign law firms and foreign lawyerspracticing in Singapore (although liberalized
somewhat in 2000); and in some sectors in
which government linked companies are
dominant (for example, foreign equity in the
PSA Corporation, one of two main managers
of Singapore's ports, is restricted to 49%).
Restrictions are also maintained on foreign
ownership of certain landed properties unless
permitted by the relevant authority.
(3) TRADE AND TRADE -RELATED
MEASURES
9. Singapore uses very few border
measures, and most of these are maintained
for health, security, and environmental
reasons. Only six tariff lines (on alcohol
products) are subject to specific rates of duty,
while the rest of the applied tariff is zero.
Under its regional and bilateral free-trade
agreements, Singapore provides duty-free
access for products subject to MFN tariffs.
10. Singapore has bound 69% of its
tariffs. The overall simple average bound rate
is currently 7.5%. The gap between the
average applied MFN and bound rates may
create uncertainty as it provides scope for
governments to raise tariffs up to their bound
levels; this has not occurred in Singapore
during the period under review. The bound
tariff rates are especially higher in fats and
oils, vegetable products, prepared foods, hides
and skins, textiles, livestock, and mineral
products. Singapore also levies a goods and
services tax (GST), currently 5%, on most
goods, as well as excise taxes on alcohol,
petroleum, and tobacco products, and motor
vehicles.
11. Other border measures include import
and export restrictions, which, with the
exception of rice and rubber (the latter for
exports only), are maintained mainly for
environmental, security and health reasons.
Rice imports and exports are restricted on
grounds of food security and price stability
and are subject to stockpile and non-stockpile
licences; importers are required to stock a
minimum quantity of stockpile varieties of rice,
which are released into the market when thereSingapore WT/TPR/S/130
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are shortages. Rubber exports are licensed in
order to maintain international standards. In
addition, Singapore maintains a ban on
imports of cars that are three-years old and
over for environmental and road safety
reasons. Although three-year old cars
operating in Singapore are required to
undergo mandatory testing, the authorities
state that the same cannot be applied to
imports of three-year-old cars because the
tests are not foolproof and it is better to solve
the problem by banning the import of such
cars. Car usage is also restricted through
high taxes on the purchase of cars and fuel
and a requirement that the fuel tanks of all
cars travelling to Malaysia are at least three-
quarters full before crossing.
12. Singapore makes very little use of
contingency measures. During the period
under review it removed its remaining anti-
dumping measures against imports of steel
reinforcement bars from Malaysia and Turkey.
No countervailing measures were imposed.
Singapore has no legislation on safeguards
and although such measures can be taken
under some of its bilateral and regional trade
agreements, it has not done so. Sanitary and
phytosanitary restrictions are strict, with each
imported consignment of food products
undergoing checks by Singapore Customs.
Imports of some products (mainly meat and
poultry) are permitted only from specific
countries and, in some cases, only from
accredited establishments in those countries.
Singapore bases its standards on international
norms with around 75% of alignable
standards aligned with international
standards.
13. Singapore has been a member of the
WTO Agreement on Government Procurement
(GPA) since 1997. It has offered additional
market access concessions under its recently
signed bilateral free-trade agreements.
(4) OTHER MEASURES AFFECTING TRADE
14. While there are few border measures,
Singapore maintains an active industrialpolicy. This is implemented mainly through a
number of tax and non-tax incentives to induce
investment into certain sectors and activities;
the incentives are currently aimed at
attracting investment to high-value-added
activities. A Post Implementation Review has
been put in place to examine the effectiveness
of incentives, as a result of which a few were
removed in 2003 and 2004. However, no data
on cost-benefit analyses or duty forgone as a
result of incentives were made available to the
Secretariat. The Government also maintains a
significant degree of control over the
allocation of land. In addition, efforts have
been made to make wages more flexible
including through annual recommendations by
the National Wage Commission (NWC), a
tripartite commission comprising government,
labour and business representatives.
15. Industrial policy has also traditionally
been conducted with the support of companies
known as government linked companies
(GLCs), set up to assist in Singapore's
industrialization efforts at a time when the
domestic capital market was not well
developed. The GLCs, which are owned by
the Government's holding company, Temasek,
are active in a wide range of sectors, including
finance, telecommunications and media,
transport and logistics, and utilities, and
account (along with statutory board
companies) for an estimated 13% of GDP.
Although they operate on a commercial basis
under the Companies Act, there has been
increased pressure on the Government to
reduce its shareholdings in these companies.
Recent research by the IMF has also
suggested that although the GLCs do not
receive any assistance or guarantees from the
Government, they are more highly valued by
capital markets than other private companies,
thereby reducing their cost of capital. In
addition to Temasek's holdings, statutory
boards have also formed companies to
channel assistance into certain activities. For
example, the Economic Development Board
set up EDB Investments Pte Ltd (EDBI) to
invest in the development of industry clusters
and new technologies, and the StartupWT/TPR/S/130 Trade Policy Review
Page x
Enterprise Development Scheme (SEEDS) to
provide matching financing in innovative
start-up companies.
16. Disinvestment has occurred in the
GLCs, including during the period under
review, and the Government has declared that
it will disinvest all Temasek companies except
those considered to be strategic or in the
public interest or with international growth
potential. It has also issued a set of guidelines
to ministries and statutory boards on the
formation of companies under statutory
boards. During the period under review (1999
to February 2004), Temasek disinvested some
20 companies, of which six appear to have
been complete divestments; no data were
available on their size, market share or
contribution to GDP.
17. Although Singapore has implemented
sector-specific competition legislation (for
example in electricity and gas and
telecommunications services), it does not have
an economy wide competition policy. A major
change since the previous Review has been the
decision to implement a wide ranging
competition law, which Singapore has
committed to put in place by 2005. The law is
expected to apply to all activities by private
sector entities and GLCs in all sectors, unless
there are exclusions and exemptions for
reasons of public policy and interest.
Singapore has also, since the previous Review,
stepped up efforts to improve corporate
governance, including through a voluntary
Code of Corporate Governance, for listed
companies; a Council on Corporate
Disclosure and Governance was established in
2002 to, inter alia, prescribe accounting
standards, strengthen the existing framework
of disclosure practices and reporting
standards, and review and enhance the
existing framework for corporate governance
in Singapore.
18. Changes have been made to the
framework on intellectual property rights,
partly as a result of Singapore's bilateral
FTAs. These are, inter alia, extending
copyright protection to the life of the authorplus 70 years, measures against the
circumvention of technologies that protect
copyright works, protection of well known
marks, and an extension of the patent term for
pharmaceuticals due to delays in marketing
approval. In addition, since the previous
Review, Singapore has acceded to the Madrid
Protocol on registration of marks (on
31 October 2000). It also intends to make
changes in order to align Singapore's patent
legislation with the January 2004 changes to
the Patent Cooperation Treaty; to give effect
to Articles 1-6 of the Joint Recommendations
Concerning Provisions on Well-Known Marks
(1999) and the Trademark Law Treaty; and to
accede to the Brussels Convention Relating to
the Distribution of Programme-Carrying
Signals Transmitted by Satellite, the UPOV
Convention (1991), the WIPO Copyright
Treaty (1996), and the WIPO Performances
and Phonograms Treaty (1996) by the
beginning of 2005.
(5) SECTORAL POLICIES
19. The main economic activities are
manufacturing and services (some 26% and
63%, respectively, of GDP). Singapore aims
to sustain manufacturing's share of GDP at
20% or more if possible. The major
manufacturing sectors are electronics and
chemicals; electronics is the main
manufacturing export. Singapore is currently
facing a major challenge from low-cost
regional producers and is attempting to direct
manufacturing into high-value-added
activities. Efforts are also being made to
contain input costs, notably by making the
labour market more flexible and by
appropriate pricing of other inputs, such as
electricity and land. Deregulation and
liberalization of utilities, e.g. such as
electricity and gas, has also been undertaken.
The main reforms have been in electricity and
include the separation of ownership of
generation and transmission, and
liberalization of the retail market as well as
the creation of a new regulator for the sector.
The reforms have led to a decline in electricity
prices.Singapore WT/TPR/S/130
Page xi
20. Liberalization has also taken place in
several services. In banking, the Government
has been implementing a programme
announced in 1999 to open up the relatively
closed domestic retail banking sector.
Foreign investment restrictions were removed
and steps have been taken to strengthen
supervision and corporate governance in
banks. In insurance, restrictions were
removed on foreign investment and entry into
the sector by insurance companies. The
telecommunications sector was liberalized in
2000, two years earlier than originally
planned. As a result of the liberalization
measures undertaken, there has been a
considerable increase in the number of service
providers, and telecommunication charges
have been reduced.
21. Several services, notably transport
and tourism, were affected by the recent
economic downturn, the SARS crisis, and
events in the Middle-East in 2003. The
Government has provided temporary
assistance to encourage growth and to attract
visitors and traders back to Singapore.
Singapore is also trying to build up its health
services for international patients. It has
increased its recognition of international
degrees but the registration of foreign-trained
medical staff remains tightly regulated and
depends upon the availability of job-offers.
Singapore also continues to restrict non-
Singaporeans in the practice of Singapore
law; although some reform has taken place
recently, the overall number of lawyers that
can operate in Singapore is determined by the
Government.(6) PROSPECTS
22. Singapore's dependence on trade has
meant that economic growth during the period
under review suffered temporarily as a result
of the recent global economic downturn.
Improvements in the external environment
during the second half of 2003, however,
suggest that Singapore's immediate economic
outlook is healthy. The post-SARS recovery in
services also appears to be continuing,
particularly in tourism and transport services.
23. The longer term outlook may well be
influenced by measures now being taken to
deal with the developments in TFP growth as
well as the structural changes taking place in
the economy as a result of increased pressure
from other low-cost regional producers.
Singapore is tackling these issues including
through: reforms of its mandatory savings
scheme, the CPF; placing greater reliance on
indirect rather than direct taxation (by raising
the GST and reducing the corporate tax rate);
a gradual disinvestment in GLCs, thus
reducing government involvement in the
economy; and plans to enact an overarching
competition policy. These structural changes
along with liberalization in key services and
utilities should increase competition in the
economy and thus its efficiency, thereby
strengthening the resilience of the Singapore
economy in dealing with these formidable
challenges.