User:Shailkr2004

Singapore's economy is 85.7 percent free, according to our 2007 assessment, which makes it the world's 2nd freest economy. Its overall score is 2.8 percentage points lower than last year, partially reflecting new methodological detail. Singapore is ranked 2nd out of 30 countries in the Asia–Pacific region, and its overall score is much higher than the regional average. Singapore is a world leader in all 10 areas of economic freedom. Virtually all commercial operations are performed with transparency and speed, and private enterprise has boomed. Inflation is low, and foreign investment is welcomed and given equal treatment. There are no tariffs. Singapore's legal system is efficient and highly protective of private property, and corruption is almost nonexistent. The labor market is highly flexible, and dismissing workers is costless. Singapore could do slightly better in financial freedom, which at 50 percent is the only one of 10 economic freedoms below 80 percent. It is a world leader in foreign exchange transactions, and the government is promoting Singapore as a global financial hub, but state influence in the banking system persists.

Background:

Singapore gained its independence in 1965, and the People's Action Party has controlled its parliament ever since then. One of the foundations of Singapore's attractiveness to business is the integrity of its courts, but there is a growing perception that the judiciary may reflect the views of the ruling party. In 2006, a Canadian appeals court was asked to determine whether rulings in Singapore were sufficiently fair and impartial. Regardless of how the court rules, this case could well affect the decisions of foreign investors. Manufacturing makes up the largest portion of the economy, followed by business and financial services.

== Business Freedom - 94.6% ==

Starting a business takes an average of six days, compared to the world average of 48 days. The business environment has allowed entrepreneurship to flourish. Obtaining a business license is simple, and closing a business is very easy. The overall freedom to start, operate, and close a business is strongly protected by the national regulatory environment.

Trade Freedom - 80.0%

Singapore's weighted average tariff rate was zero percent in 2003. Although tariffs are generally low, import restrictions, import taxes, import licensing, export incentive programs, issues involving the enforcement of intellectual property rights, service market barriers, sanitary and phytosanitary rules, and non-transparent regulations add to the cost of trade. Consequently, an additional 20 percent is deducted from Singapore's trade freedom score to account for these non-tariff barriers.

Fiscal Freedom - 93.0%

Singapore enjoys low income tax rates. The top income tax rate is 22 percent, and the top corporate tax rate is 20 percent. Other taxes include a value-added tax (VAT) and a property tax. In the most recent year, overall tax revenue as a percentage of GDP was 13 percent. Freedom from Government - 86.2% Total government expenditures, including consumption and transfer payments, are low. In the most recent year, government spending equaled 14.6 percent of GDP, and the government received 26.4 percent of its revenues from state-owned enterprises and government ownership of property.

Monetary Freedom - 89.5%

Inflation in Singapore is low, averaging 0.8 percent between 2003 and 2005. Relatively low and stable prices explain most of the monetary freedom score. The government influences prices through regulation and state-supported enterprises and can impose controls as it deems necessary. Consequently, an additional 5 percent is deducted from Singapore's monetary freedom score to account for these policies.

Investment Freedom - 80.0%

Singapore's investment laws are clear and fair. Foreign and domestic businesses are treated equally, there are no production or local content requirements, and nearly all sectors are open to 100 percent foreign ownership. Foreign investment is still limited in broadcasting (up to 49 percent unless waived); newspaper services (5 percent); foreign law firms and foreign lawyers practicing in Singapore; and 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 percent). Foreign ownership of certain landed properties is subject to approval by the relevant authority. Residents and non-residents may hold foreign exchange accounts. There are no controls or requirements on current transfers, payments, or repatriation of profits.

== Financial Freedom - 50.0% ==

The financial system is sound and well regulated, and Singapore is among the world's top five foreign exchange trading centers. The Monetary Authority of Singapore, owned and controlled by the Ministry of Finance, acts as the central bank. Credit is readily available and generally allocated at market rates. The government controls the Development Bank of Singapore (the largest domestic bank group and publicly listed) and indirectly holds significant minority shares in the other two domestic bank groups. The government launched the SME Access Loan Program, a new financing scheme for small and medium-sized enterprises, in 2005. Foreign banks have been granted greater freedom to open branches and offer services, but the government seeks to maintain the domestic bank share of deposits above 50 percent and requires that the majority of board members of domestic banks must be Singapore citizens and residents. Six foreign banks possess "qualifying full bank" licenses. Other foreign banks face more restrictions on their activities. A free trade agreement between Singapore and the U.S. has greatly loosened restrictions on U.S. banks in Singapore. Foreign financial firms compete aggressively in insurance, fund management, and venture capital. Capital markets are sophisticated and well developed, and the Singapore Exchange is increasing its ties with other Asian exchanges.

Property Rights - 90.0%

The court system is very efficient and strongly protects private property. There is no threat of expropriation, and contracts are very secure. Freedom from Corruption - 94.0% Corruption is perceived as almost nonexistent. Singapore ranks 5th out of 158 countries in Transparency International's Corruption Perceptions Index for 2005.

Labor Freedom - 99.3%

The labor market operates under highly flexible employment regulations that enhance overall productivity growth. The non-salary cost of employing a worker is low, and dismissing a redundant employee is costless. Regulations on increasing or contracting the number of work hours are very flexible.

Quick Facts•

Population: 4.2 million • GDP (PPP): $119.1 billion 8.7% growth in 2004 4.6% 5-yr. comp. ann. Growth $28,077 per capita • Unemployment: 3.4% • Inflation (CPI): 1.7% • FDI (net inflow): $5.4 billion • Official Development Assistance: $9 million (0% from the U.S.) • External Debt: $23.76 billion (2005 estimate) • Exports: $238.5 billion Primarily machinery and equipment (including electronics), consumer goods, chemicals, mineral fuels • Imports: $206.8 billion Primarily machinery and equipment, mineral fuels, chemicals, food

Overview of the Singapore Economy

Economic Growth in Singapore Since achieving independence in 1965, the Singapore economy has experienced rapid growth. Real GDP grew at an average of 8.6% per annum between 1965 to 1999. Real per capita GDP rose about eight-fold, from around S$4000 in 1965 to over S$32,000 in 1999. The brisk economic growth was accompanied by low inflation averaging 3.2% per annum. Singapore's economic performance compares well with that of the OECD countries over the same period, with GDP growth more than twice the OECD growth of 3.3%, and inflation at about half of the OECD average inflation rate of 7.1%. In addition, Singapore's unemployment rate has consistently remained lower than that of the OECD countries since 1975, while its external position has strengthened over the years.

Singapore's economic strategy has adapted to the different challenges and priorities faced by the economy over time. The initial period of self-government in 1965-1970 was characterised by chronic unemployment among its poorly-educated population, a lack of proper housing and a low savings rate. Given the lack of natural resources and small size of the population, Singapore recognised the need to adopt liberal trade and foreign investment policies. Since independence, Singapore pursued an export-led industrialisation strategy by attracting foreign investments in labour-intensive industries to create jobs for the large number of unemployed. By the early 1970s, unemployment had come down and attention was turned to restructuring the economy towards more capital- and skill-intensive activities.

After the downturn in the mid-1980s, policies were also introduced to diversify the economic base, by promoting the services sectors such as business and financial services. As a result, the importance of the services sectors in the Singapore economy has risen steadily, especially over the past one-and-a-half decades. The services sector accounts for around two-thirds of value-added today. Nonetheless, the manufacturing sector retains its position as the single largest sector in the economy, accounting for about a quarter of GDP as at end 1999 compared with 19% in 1965.

The manufacturing sector has underpinned the strong contribution of trade to economic growth in Singapore over the years. International trade in Singapore as a proportion of local output is without parallel in modern history. Merchandise exports have averaged over 130% of GDP since the mid-1980s, with total merchandise imports averaging close to 150% in the same period. Excluding entrepot trade the figures were 85% and 98%, respectively. At the same time, services exports make up about 28% of GDP today. One striking feature of Singapore's trade performance has been the changing composition of exports to progressively higher capital and skill intensive products. The composition of non-oil domestic exports - the largest component of Singapore's exports - has shifted from traditional, lower value-added products like food and beverages, furniture and garments to more capital-intensive and higher value-added products like electronics and chemicals. Even within electronics, exports have moved away from the lower-end consumer electronics in the early 1980s, into areas like disk drives in the late 80s and 90s, and semiconductors from the mid-1990s.

Macroeconomic Fundamentals and Policies

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. 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.

Challenges Ahead 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.

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.

Singapore's economy expanded at 7.9 percent pace in 4Q; 2007 growth seen slowing Singapore's economy expanded an annual pace of 7.9 percent in the fourth quarter, in line with expectations, the government said Wednesday, although the economy is projected to slow this year. While the city-state upgraded its 2007 growth forecast slightly — to between between 4.5 percent and 6.5 percent, up from 4-6 percent — that's still slower than than the 7.9 percent growth notched last year due to projected slowdown in global demand for electronics, Singapore's main export. Global economic conditions have improved over the past few months, with oil prices falling from their 2006 peak and fears of a housing market correction in the U.S. subsiding, the Ministry of Trade & Industry said in a statement. OCBC strategist Selena Ling said Singapore's upgraded 2007 forecast is "achievable." She said the government's budget, which will be released Thursday, is likely to include some "fiscal stimulus" that will offset lower global demand by supporting the domestic economy. The government has flagged subsidies for low income households to offset an increase in the goods and services tax and may also announce new infrastructure spending. It has also indicated the 20 percent corporate tax rate will be cut by at least one percentage point Compared to a year earlier, Singapore's S$210 billion (US$136 billion; €105 billion) economy grew 6.6 percent in the fourth quarter, compared to the 7.0 percent year-on-year growth in the third quarter. The manufacturing sector grew 7.7 percent from a year earlier in the fourth quarter, down from 9.5 percent in the previous quarter, due to a fall in output of electronics and chemicals. Within the manufacturing sector, construction output rose 4.7 percent from a year earlier, marking a recovery for the building industry after several years of contraction. The services sector grew 6.6 percent from a year earlier in the quarter after 6.3 percent growth in the third quarter.