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SINGAPORE

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Title: SINGAPORE


1
SINGAPORE
2
AGENDA
Basic data
Economic issues
Financial issues
Political issues
OUTLOOK
OUTLOOK
OUTLOOK
Natural and technical features
SWOT,RATINGS AND CONCLUSION
3
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

4
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
5
Pop/Demo/Social/Educ/empl
Singapore Department of Statistics _ 2003
6
ANNUAL Growth rate of pop
Singapore Department of
Statistics_2003
18 between 1992_2002 due to improvement of
living standards
7
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!!

8
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)

9
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
10
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
11
SURVEY 2004
12
SURVEY 2004
13
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
14
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

15
AGENDA
Basic data
Economic issues
Financial issues
Political issues
OUTLOOK
OUTLOOK
OUTLOOK
Natural and technical features
SWOT,RATINGS AND CONLUSION
16
GDP Growth
Sourcewww.singstat.gov.sg
17
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

18
Repartition of GDP in 2003
Source www.dree.org/singapour
19
Repartition of the Labor force
Sourcewww.singstat.gov.sg
20
Inflation VS Interest rates
21
Exchange Rate SG VS USD
22
Trade Balance
www.cofacerating.com
23
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

24
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.

25
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.

26
A result FDI
27
AGENDA
Basic data
Economic issues
Financial issues
Political issues
OUTLOOK
OUTLOOK
OUTLOOK
Natural and technical features
SWOT,RATINGS AND CONLUSION
28
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
29
Domestic borrowing
  • Historical budgetary surplusgt Domestic
    borrowinggt Domestic capital receipt 5
    Billion SG (3 Billion US) gt 10 of
    the central government revenue.

30
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).

31
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

32
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.

33
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

34
Net international reserves
  • International reserves - External debts about
    70 Billion US 9 months of GDP 7 months of
    imports gt Very safe financial situation

35
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).

36
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
37
AGENDA
Basic data
Economic issues
Financial issues
Political issues
OUTLOOK
OUTLOOK
OUTLOOK
Natural and technical features
ANALYSIS,SWOT,RATINGS AND CONCLUSION
38
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
39
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
40
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
41
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
42
Singapore and Globalization
43
Business environment
44
Business OK but
45
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
46
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

47
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.

48
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.
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