WT/TPR/S/67 Trade Policy Review
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IV. TRADE POLICIES BY SECTOR
(1) INTRODUCTION
1. The manufacturing and services sectors account for around 85% of Singapore's GDP.  Over
time, production has shifted from labour intensive to more capital intensive and higher value-added
activities;  in manufacturing, electronics currently accounts for almost half of the sector's output,while high value-added services are rapidly growing in importance.
2. Singapore, nevertheless, sees manufacturing as  an important component of GDP and, despite
its declining share in GDP in recent years (22% in 1998), aims to sustain this share at around 25%.
This is presumably to maintain diversity amongst its export markets, a desire that has recently been
reinforced, perhaps as a result of the economic crisis in the region.  Singapore depends more onregional markets for its services exports than for manufacturing exports;  around 80% of Singapore's
exports to the region consist of intermediate inputs into products ultimately destined for OECD
markets.  However, the electronics industry, although experiencing rapid growth during the 1980s and
1990s, has shown signs in recent years of losing market share in its main export markets.  This is due
partly to oversupply, notably in the U.S. market, although in the longer run there are implications for
the continued competitiveness of the industry as competition from low-cost producers, particularly in
the region, is increasing.
3. The Government's economic development policy, which has been used extensively to guide
the economy since the 1960s, is therefore being used to direct manufacturing into higher value-added
activities through statutory boards and a number of tax incentives.  Government programmes to
support high-value activities and information technology have also been launched, including the
Industry 21 and Information Technology 21 programmes, the latter linking electronics with theoverall information technology infrastructure, including key services such as telecommunications and
electronic commerce.  The Committee on Singapore's Competitiveness, which noted that unit labour
costs remain high, relative to other competitors in the region, also suggested several cost cutting and
productivity raising measures in the short and long term.
4. While aiming to maintain manufacturing at 25% of GDP, Singapore also recognizes the
important role of services in its economy, thus the Government is liberalizing and encouraging the
development of certain key services, such as financial services, transport, telecommunications, and
electronic commerce.  Regulatory structures have been put in place to ensure that liberalization is
accompanied by efforts to introduce further competition into these services, some of which were
previously supplied by monopolies.  The Government, however, continues to be indirectly involved in
the economy through its holding company, Temasek Holdings, whose companies include some of the
largest services providers in Singapore.
5. Liberalization has been relatively slow in some utilities, such as electricity, and water, which
also constitute important inputs into manufacturing and service activities.  Nevertheless, the
authorities recognize that if Singapore is to improve overall productivity, reform must be completed inthese key sectors as well as in financial services, transport, telecommunications, and electronic
commerce.
(2) A
GRICULTURE AND FISHERIES
(i) General features
6. Agricultural land in Singapore totals around 1,600 hectares (around 2% of total land area.
Production is mainly confined to vegetables for local consumption, and ornamental plants, such asSingapore WT/TPR/S/67
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orchids, for export (Table IV.1).  Total agricultural and fisheries output represented around 0.2% of
GDP in 1998.
Table IV.1
Production of agricultural and fisheries, 1995-99
1995 1996 1997 1998 1999a
Major crops
Vegetables (tonnes) 7,336 10,870 16,281 17,291 14,116
Orchid flowers (million stalks) 29 29 16 17 17
Other plants (million) 77 65 66 55 26
Fisheries  (tonnes)
Local productionb13,353 13,129 13,049 11,030 7,595
Imports 181,090 156,077 150,257 119,810 151,188
Exports 136,909 116,396 102,427 104,549 80,893
a January-September 1999.
b Including aquaculture production.
Source: Singapore Department of Statistics (1998), Yearbook of Statistics,1998.
7. Because of the limited amount of land devoted to agriculture, Singapore has concentrated on
productivity improvements to increase output.  Land used for farming is managed by the PrimaryProduction Department (PPD) in the Ministry of National Development and has been allocated mainly
to six agrotechnology parks covering 1,465 hectares.
1  The Department provides the parks with basic
infrastructure, such as water and drainage, roads, and electricity.  Technical assistance is also
provided to ensure that farmers are kept informed  of new technological and industrial developments.
Within the parks, plots of land ranging from two to 40 hectares are allocated by open tender tofarming companies.
2  In addition to vegetables and ornamental plants, eggs produced in seven large-
scale layer farms in the agrotechnology parks account for around 35% of local consumption.3
8. Singapore exports orchids and plants mainly to Japan, the European Union, and the
United States.  Imports consist mainly of fruit, vegetables, and livestock, from Malaysia, Indonesia,
Australia, and China.  Around 94% of domestic consumption needs of fruit and vegetables are met by
imports.
9. Like agriculture, Singapore's fish farming development is managed by the PPD under the
Fisheries Act of 1966.  Singapore's limited coastal waters provide around 150 hectares, mainly for
aquaculture;  fishing in these waters is strictly regulated through licences issued by the PPD.  The
department licenses commercial, floating, fish-cu lture farms in the east and west Johor Straits.4  Fish
farmers and their employees working on board these fish-culture farms are required to register with
the PPD, and must renew their registration annually.  In 1998, there were 92 such licensed marinefarms covering around 55 hectares of coastal waters, supplying fresh fish and shellfish to the local
market.
5  Fishing vessels plying Singapore's coastal waters must similarly be licensed by the PPD.  In
addition, all fish-processing establishments must obtain a licence to operate from the PPD (a fish
                                                     
1 The six parks are Sungei Tengah, Murai, Loyang, Nee Soon, Mandai, and Lim Chu Kang (Primary
Production Department, undated).
2 Farms meeting stringent R&D and technology-transfer capability criteria may be allocated land
without a tendering procedure.
3 The egg farms have a production capacity of 2.4 million eggs per day or 80% of daily local
consumption.
4 Under the Fisheries (Fish Culture Farms) Rules of the Fisheries Act, Chapter III.
5 Singapore Department of Statistics (1998).WT/TPR/S/67 Trade Policy Review
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processing establishment licence, under the Fisheries (Fish Processing Establishment) Rules);
detailed plans of the establishment must be submitted in support of the application for a licence.6  The
establishments may be inspected by the Department at any time.  In 1998 there were 93
fish-processing establishments licenced to produce for the local market, and ten approved to export to
the European Union.
10. The bulk of Singapore's fish consumption is imported, while exports are dominated by
ornamental fish.  The main export markets for ornamental fish include France, Germany, Japan, the
United Kingdom, the United States, Belgium, Italy, the Netherlands, and Spain.
(ii) Assistance
11. Singapore notified the WTO Committee on Agriculture that it did not provide domestic or
export support for agriculture, within the meaning of Articles 6 and 9.1, respectively, of the
Agreement, during calendar years 1996, 1997 and 1998.7
12. Nevertheless the PPD, which manages the agrotechnology parks, provides support in the form
of infrastructure, to farmers operating in the parks, as well as for research and development and
technical consultancy services.
(iii) Trade policy measures
13. Most agricultural (including fish) products ar e imported into Singapore free of customs duty;
imports of alcoholic beverages are subject to specific customs duty.8  Automatic import licences are
required for a number of products including fresh fruit and vegetables, plants and plant products, meat
products and animals;  the licences may be obtained from the PPD.  All imports must also comply
with Singapore's sanitary and phytosanitary regulations and may be inspected upon entry
(Chapter III(2)(xi)).  There are no restrictions on exports except those related to international
conventions.
14. As rice is a staple food for Singaporeans and there is no domestic production, the Government
seeks to ensure that supplies are sufficient to meet consumer demand.  For food security reasons,
therefore, all rice imports have been subject to non-automatic licensing since 1986.  Licences are
issued by the Singapore Trade Development Board (TDB).  There are two categories of licence:stockpile licences, and ordinary licences.  The former are issued for imports of "stockpile grades";  all
importers holding this licence are required to main tain a constant stock of rice equal to twice the
quantity imported.  Stocks must be held in warehouses approved by the TDB at a cost borne by the
importer, which is presumably passed on to the consumer through the retail price.  There is no limit
on the number of licences issued annually and no corresponding limit on the amount of rice to beimported per year.  The rationale for the licensing sc heme for "stockpile grades" appears to be that it
enables the authorities to keep track of the rice impor ters so that they can ensure that the stockpile is
maintained.  Ordinary licences are issued for non-stockpile rice (that is, specialty rice, such as
parboiled rice, glutinous rice, basmati rice and brown rice), which is not normally consumed by the
general population and is generally much more expensive than normal rice.  It would appear thatordinary licences are necessary to prevent stockpile grades of rice being imported in the guise of other
rice, thereby avoiding the costs associated with stockpiling requirements.  It is unclear why such
                                                     
6 Fisheries (Fish Processing Establishments) Rules.
7 WTO documents G/AG/N/SPG/2, 8 September 1998, G/AG/N/SGP/3, 8 September 1998,
G/AG/N/SGP/4, 3 March 1999, and G/AG/N/SGP/5, 3 March 1999.
8 Domestic sales of alcoholic products are subject to licensing;  licences may be obtained from the
Liquor Licensing Board.Singapore WT/TPR/S/67
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circumvention of stockpiling requirements cannot be detected by normal customs clearance
procedures, without the need for ordinary licences.  In 1998, Singapore imported 254,646 tonnes of
rice, of which around 18.5% under ordinary licences.
15. Imports of fish products may be carried out only under licence, in accordance with the
Fisheries (Import, Export and Marketing) Rules.  The import, export, and transshipment of ornamentalfish also requires a licence from the PPD.  The applicant for the licence must also have government-
approved premises with facilities for holding, quarantine and packing of ornamental fish.  The licence
is renewable annually.
(3) M
ANUFACTURING
(i) Structure and recent economic performance
16. Despite the decline of certain industries, manufacturing is an important source of value added
in Singapore, accounting for around 22% of GDP in 1998.  The Government, in its policy statement,
Industry 21 (I21), launched in June 1998, declared its desire to sustain the share of the manufacturing
sector at around 25% of GDP.  The sector provid es employment to around 21% of Singapore's total
labour force (compared with 26% in 1994) and relies on attracting skilled labour from abroad to
continue to build up Singapore's capabilities in high value-added industries.
17. Production is dominated by the electronic products and components industry, whose share
declined slightly from almost 45% in 1995 to 43% in 1998;  followed by chemicals and chemical
products (13%), including plastics and pharmaceuticals, transport equipment (7%), including aircraft
components, ship repairs, and shipbuilding;  and machinery and equipment (6%) (Chart IV.1).
Per cent
      
Data provided by the authorities of Singapore.Chart IV.1
Value added in manufacturing, 1995 and 1998
Total manufacturing: US$19.0 billion
Source :Electrical machinery & 
apparatus
3.1
Refined petroleum prod.  
4.8Chemicals &
 chemical products
9.4
Other 
7.1Transport equip.
6.4Electronic products & 
component
44.6
Rubber & plastic 
prod.  2.9Fabricated metal 
products  6.21998 1995
Paper, paper prod.,
printing & publishing 
6.2
Total manufacturing: US$17.7 billionMachinery & equipment
6.1
Food, beverages & 
tobacco  3.1Electrical machinery & 
apparatus
2.4
Refined petroleum products  
5.3Chemicals &
 chemical products
12.8
Other 
6.8Transport equipment
7.0Electronic products & 
component
43.1
Rubber & plastic prod.  
2.4Fabricated metal products
5.8
Paper, paper prod., printing 
& publishing 
5.4Machinery & equipment
6.0
Food, beverages & 
tobacco  2.9
18. There has been no substantial change in the structure of Singapore's trade in manufactured
products since the previous Review.  The largest share of exports is accounted for by office machinesWT/TPR/S/67 Trade Policy Review
Page 90
(including electronic products) and telecommuni cation equipment (61.9%), followed by chemicals
(7.6%) (Chart IV.2).9  Singapore imports mainly office machines (including electronic products) and
telecommunications equipment (43.6%), non-electrical machinery (11.8%), other electrical machinery
(9.0%) and transport equipment (7.6%).
Per cent
Sourc e:  UNSD, Comtrade database (SITC Rev.3).Chart IV.2
Manufacturing trade by product groups, 1998
Total: US$92.9 billionOffice machines & 
telecommunication 
equipment
61.9
Chemicals
7.6
Other electrical 
machinery
6.9Other semi-manuf.
2.6Non-electrical machinery
6.8Exports
Total: US$85.3 billionOffice machines & 
telecommunication 
equipment
43.6
Iron & steel
2.3
Other
10.2
Textiles & clothing
2.9 Transport 
equipment
7.6Imports
Other electrical 
machinery
9.0Textiles & clothing
2.5Other 
8.7
Transport 
equipment
3.0Chemicals
7.2Other semi-manufactures
5.3Non-electrical machinery
11.8
19. In the electronics sector, the main products include computer and data processing equipment,
consumer electronics, and semiconductor devices (Table IV.2).  The growth of semiconductors inparticular has been extremely rapid since 1995.  Singapore also became one of the world's largest
producers of computer hard disk drives in the 1990s, accounting for around 45% of world output in
1994.
10
20. Singapore exported US$58 billion worth of electronics products in 1998 compared with
US$60 billion in 1995.  The value of its exports fell by almost 11% in 1998, due partly to decreaseddemand in its major export markets but also because of a loss of market share in these markets.
Singapore's main exports are electronic valves, da ta processing machines (including computer hard
disk drives), parts for office and data processing machines, and telecommunications equipment
(Chart IV.3).  Its main export markets in 1998 were the United States, the European Union, Malaysia,
and Hong Kong, China.
                                                     
9 The figures used for Chart IV.2 are based on the UNSD Comtrade database;  the classification used is
SITC (Rev. 3);  figures therefore differ slightly from those reported by the Government of Singapore.
10 Low (1998).  In the classification used in Table IV.2 and Chart IV.3, disk drives are included in the
category "data processing machines".Singapore WT/TPR/S/67
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Table IV.2
The electronics industry in Singapore, 1995-99(S$ million and per cent)
1995 1996 1997 1998
Production (S$ million) 57,872.7 60,912.8 62,905.2 61,200.5
(Annual percentage change) (18.8) (5.3) (3.3) (-3.0)
Employment (number) 126,891 128,455 123,863 114,133
Production by sector (value)
Computer and data processing equipment 9,477 9,112 9,090 ..
Consumer electronicsa6,406 6,082 5,261 ..
Semiconductor devices 48 10,982 10,895 ..
Capacitors and resistors 619 516 551 ..
Printed circuit boards 3,786 3,841 3,976 ..
.. Not available.
a Including communication equipment, television sets, other audio and video equipment.
Source: Data provided by the Singapore authorities.
21. Following positive although slower economic grow th than previous years, between 1995 and
1997, output in the electronics industry fell by around 3% in 1998 as a result of a decline in theproduction of computers, disk drives, telecommunication equipment, and consumer electronics
(Table IV.2).  Lower production of disk drives was mainly attributed to excess supply in the
international market, particularly the United States, during the first three quarters of 1998.
11  By early
1999 the industry had shown strong signs of recovery, growing by 14% during the first quarter.  In
particular, production of computers and computer peripherals grew, supported by increased demand inthe United States, and oversupply in the semiconductor and disk drive market appeared to have
declined.
22. While the immediate cause of slower growth in recent years may have been cyclical,
Singapore's share of the U.S. electronics market has been declining since 1996 and, although
stabilizing in 1999, remains below 1996 levels.  With labour costs forming an important share ofbusiness costs, and growing competition from lower cost suppliers in the region, Singapore is facing
pressure to improve productivity in the long run.  Over the years, efforts have been made to keep unit
labour costs down.  Indeed, unit labour costs grew less rapidly during the 1990s than in the previous
decade;  there also appears to have been a substantial increase in labour productivity in the electronics
sector recently (based on output per employee) (Table IV.2).  However, unit labour costs in
manufacturing have grown more rapidly compared with selected Asian countries, including China,
Chinese Taipei, Hong Kong, China, Japan, and Korea, especially since 1993.
12  The Committee on
Singapore's Competitiveness (CSC) concluded that there had been a steady rise in Singapore's relative
unit labour costs in manufacturing compared to other countries in the region.13  One of the key
responses suggested by the Committee, in addition to cost cutting in the short run, was to upgrade
capabilities to keep ahead of competition by ensuring that productivity gains are not outstripped by
growth in business costs.
                                                     
11 Ministry of Trade and Industry (1999b).
12 Growth in Singapore's total factor productivity (TFP) nevertheless compares favourably with that of
regional competitors according to a recent study, which finds TFP in Singapore to have grown at an average rate
of 2.2% between 1978 and 1996 (2.5% between 1991 and 1996) (Sarel, 1997, contrasting sharply with Young'sanalysis, which found TFP to be almost zero (Young, 1995 and 1996).
13 Recent currency depreciations in the region were also partly responsible for a loss of competitiveness
in the short run (Ministry of Trade and Industry, 1998a).WT/TPR/S/67 Trade Policy Review
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Chart IV.3
Trade in electronics, 1995-98
010203040506070
1995 1996 1997 1998
05101520253035404550
1995 1996 1997 1998(a)  ExportsUS$ billion
(b) Imports
Source :   UNSD, Comtrade database (SITC Rev.3).Data processing machines
OtherParts for office and da ta processing machines
Telecommunication equipment Electronic valvesSingapore WT/TPR/S/67
Page 93
23. In contrast to the volatility experienced in the electronics industry, the chemicals and
chemical products sector has performed relatively well during this period.  The industry comprises
chemical compounds, plastics, and pharmaceutical products.  Value added continued to rise rapidly
during the period under Review with value added per worker rising more rapidly than for electronicsbetween 1995 and 1998.
14  The Government provides relatively less support to the sector through tax
or other incentives;  however, the Singapore Petrochemical Complexes provide infrastructural
assistance to chemical companies, most of which are housed within the complex.
24. As in the case of electronics, there are few restrictions on imports and exports for the
chemicals sector, the exceptions being registration and licensing requirements for pharmaceuticalimports, and import and export restrictions for specific items for health and safety reasons
(Chapter III(2)(xi)).  Chemical exports c ontinued to grow, from S$10.0 billion in 1995 to
S$11.8 billion in 1998;  their share in exports of manufactured products increased slightly during this
period (from 7.0% to 7.6%.)
(ii) Policy measures
25. The importance of the electronics sector in Singa pore is in large measure attributed to the role
played by government policies to encourage investment in the sector.  The sector is open to foreigninvestment and, with the exception of a new licensing requirement for optical disc manufacturers in
order to protect intellectual property rights, open for imports (Chapter III(2)(vi)).  Foreign investment
in electronics products and other high value-added manufacturing has been encouraged since the
1970s as part of the effort to develop export-oriented manufacturing.  Continued efforts to shift into
value-added production identified six strategies in the early 1990s, which have since beensupplemented by the I21 and the Information Technology 21 (IT21) programmes.  Tax incentives are
provided to encourage investment in high value-added activities in Singapore.
15
26. Other than incentives for foreign investment, the Government has also actively encouraged
Singapore-based companies to expand into neighbouring regions, which offer relatively cheap land
and labour.  One example is the "growth triangle" formed between Singapore, Indonesia, andMalaysia;  rapid growth has taken place on the basis of technology provided by Singapore, and land
and labour, especially non-skilled labour, provided by the other two countries.  Singapore is also
developing technology parks in other countries, such as China, India, and Viet Nam to diversify
production and export markets.
27. More recently, the Committee on Singapore's Competitiveness concluded that while
manufacturing should be promoted as one of two en gines of growth of the Singapore economy, there
should be an emphasis on upstream and downstream processes in the value-added chain, such as
research and development and design, and logistics and marketing and sales, respectively.
16  The EDB
believes that in order for Singapore to compete ef fectively in high-technology industry, there is a need
to promote other manufacturing related activities such as product design, research and development,product development, and process engineering.
                                                     
14 Calculated from data on value added and employment in Singapore Department of Statistics (1998).
15 The EDB estimates that around S$8.5 billion was invested in Singapore by foreign companies in
1997, creating some 18,000 new jobs of which two thirds require workers with at least post-secondary education(Economic Development Board, 1998).
16 Ministry of Trade and Industry (1998a).WT/TPR/S/67 Trade Policy Review
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(4) SERVICES
(i) Introduction
28. The services sector dominates the Singapore economy, accounting for some 64% of value
added;  its share has remained roughly unchanged since 1995.17  As in manufacturing, there has been
a tendency for investment to move into higher value-added activities because of Singapore's risingunit labour costs relative to those of other countries in the region.  In line with the general policy to
encourage higher value activities, the Government  provides tax incentives to companies wishing to
invest in these activities.  The competitiveness of a number of services is likely to improve as they are
opened up to competition, both domestic and foreign.
29. The services sector consists of wholesale and retail trade, whose share of total services output
declined from 24% in 1995 to 22% in 1998;  financial services (21%);  business services (20%);
transport and communications (16%);  and hotels and restaurants (4%) (Chart IV.4).  The sector
provides employment for about 70% of Singapore's workforce.
Per cent
      
Data provided by the authorities of Singapore.Chart IV.4
Structure of the services output, 1995 and 1998
Total: US$57.8 billion
Source :Hotels and restaurants
4.4
Wholesale and 
retail trade
24.4
Other 
15.4
Business services
19.4Transport and 
communications
17.41998 1995
Total: US$56.8 billionHotels and restaurants
4.1
Wholesale and 
retail trade
22.0
Other 
16.4
Business services
20.4Transport and 
communications
16.4
Financial services
20.7Financial 
services
18.9
30. Exports (receipts) of services grew during the period 1995-1997.  However, there was a
substantial contraction in 1998 due to a decline in regional demand for services in general, but
particularly for travel-related services, as a result of the Asian economic crisis;  there was also a majordecline in exports of "other services" (Table IV.3).
18  As a result, total exports of services fell by
                                                     
17 Disaggregation for the services sector into its component subsectors differs depending on whether
the measure used is value added or trade.  In the case of value added, sectoral data is available for commerce,
transport and communications, financial and business services, and other services.
18 A significant percentage of the category "other services", which accounts for nearly half of total
services exports, is banking and financial services.  Th e authorities indicate that the category refers mainly to
financial services, and other miscellaneous services.Singapore WT/TPR/S/67
Page 95
around 32% in 1998.  Imports (payments), however, co ntinued to grow, although more slowly in 1997
and 1998, than in previous years.  For 1999, the indications are that the overall services balance
reverted to a surplus, mainly due to a reversal of the previous year's contraction in exports.
31. The composition of exports and imports of services has remained relatively unchanged since
the previous Review.  The largest category of exports in 1998 remained travel (25%), followed bytransportation (24%);  "other services" accounted for 48% of the total.  Imports were mainly
accounted for by transportation (33%) and travel (28%).  Imports of "other services" (34%) include
mainly royalties, business services and financial services, according to the authorities.  A more
detailed breakdown of these subsectors is not available.
Table IV.3
Trade in services, 1995-99
(S$ million and per cent)
1995 1996 1997 1998 1999a
S$ million and percentage change
Services balance 17,090 14,459 16,474 553 5,309
(22.3) (-15.4) (13.9) (-96.6) ..
Exports 42,263 42,240 45,275 30,673 29,215
(20.1) (-0.1) (7.2) (-32.3) (33.8)
Transportation 7,265 7,322 7,659 7,449 5,667
(17.7) (0.8) (4.6) (-2.7) (0.9)
Travel 10,977 10,552 9,445 7,682 6,485
(6.0) (-3.9) (-10.5) (-18.7) (12.8)
Insurance 502 560 661 699 579
(-0.4) (11.6) (18.0) (5.7) (11.9)
Government services 132 138 138 141 104
(-17.5) (4.5) (0.0) (2.2) (0.3)
Other 23,387 23,668 27,372 14,702 16,380
(29.9) (1.2) (15.6) (-46.3) (66.4)
Imports 25,173 27,781 28,801 30,120 23,906
(18.6) (10.4) (3.7) (4.6) (7.6)
Transportation 8,401 8,861 9,380 10,011 7,866
(14.7) (5.5) (5.9) (6.7) (6.1)
Travel 7,121 8,071 8,352 8,427 6,378
(20.5) (13.3) (3.5) (0.9) (4.0)
Insurance 1,380 1,415 1,484 1,227 981
(17.1) (2.5) (4.9) (-17.3) (5.9)
Government services 168 137 166 188 141
(12.0) (-18.5) (21.2) (13.3) (-2.6)
Other 8,103 9,297 9,419 10,267 8,540
(21.6) (14.7) (1.3) (9.0) (12.4)
.. Not available.
a January-September.Note: Percentage change in 1999 refers to the rate of change from the first three quarters of 1998.
Source: Singapore authorities.
(ii) Commitments under the General Agreement on Trade in Services (GATS)
32. In its GATS Schedule, Singapore has made commitments in 7 of the 12 sectors in the WTO
Services Classification.  These are:  business services;  communication services;  constructionservices;  financial services;  tourism and travel related services;  recreational, cultural and sporting
services;  and transport services.  Under Singapore's horizontal commitments, market access for
natural persons is unbound, except for the temporary movement of intra-corporate transfers ofWT/TPR/S/67 Trade Policy Review
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personnel, such as managers, executives, and specialists, who have been employed by the company
concerned outside Singapore for not less than one year immediately preceding their application for
entry to Singapore.  Entry into Singapore is grante d for up to three years, extendable by a further two
years;  the total term under such conditions would not exceed five years.
33. Commercial presence restrictions also apply to foreigners registering their business in
Singapore.  In order to register a foreign company in Singapore, the firm must have a local manager
who is a citizen of Singapore or a Singapore Employment Pass holder.19  Additionally, at least one
director of the company must be a local resident and all branches of foreign companies registered in
Singapore must have at least two locally resident agents, either citizens or permanent residents of
Singapore or Employment Pass holders.
34. Singapore's MFN exemptions under Article II of the GATS include: a preference for workers
from traditional sources of supply;  reciprocal preferences granted to foreign investors who are
signatories to Investment Guarantee Agreements;  tax relief for income derived from a
Commonwealth country;  preferential broadcast and transmission rights to countries with which the
Singapore Broadcasting Corporation has signed bilateral agreements;  preferential access for
computer reservation systems under bilateral air services agreements;  reciprocal rights with regard to
four maritime transport subsectors based on bilateral agreements;  preferential treatment for theASEAN Reinsurance Corporation;  and preferential treatment to Brunei for banking and other
financial services under the currency interchangeability agreement between Singapore and Brunei.
35. Since the previous Review, Singapore has made  additional commitments under the fourth and
fifth Protocols to the GATS (WTO Agreements on Basic Telecommunications Services and Financial
Services, respectively) (sections (vi) and (iv), respectively).
(iii) Policy objectives
36. With the manufacturing sector being relatively open, recent efforts have concentrated on
allowing entry of private competition, both dom estic and foreign, in various services, hitherto
dominated by state-owned enterprises.  The authorities stress the need for a gradual and orderly
transition in their liberalization of services.
37. As the importance of services grows and as Singapore moves into high value-added activities,
the need to foster competition increases, particularly in the services sectors.  Singapore has addressed
this issue by establishing sector-specific regulatory frameworks, rather than a more general
competition law, to ensure that competition is introduced in key services.  Sectors such as financial
services, transport, and telecommunications, in which liberalization is already relatively advanced,have received particular attention.  In financial services, despite the regional economic crisis,
Singapore has pushed ahead with economic reform.  Singapore is also developing relatively new
areas, such as electronic commerce, at a rapid rate.
38. The authorities acknowledge that further economic liberalization must be pursued in other
utilities, particularly energy and water, the cost of which has a major impact on the overallcompetitiveness of other services and manufacturing.  As a result, gradual reform of the energy sector,
notably electricity generation and supply, and water, is currently taking place.
                                                     
19 A foreigner who is a permanent resident of Singapore or holds a Singapore Employment Pass may,
however, register a business without appointing a local manager.Singapore WT/TPR/S/67
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(iv) Financial services
(a) Fifth Protocol to the GATS20
39. Singapore made an improved offer on access to its financial services market under the Fifth
Protocol to the GATS (Agreement on Financial Services), which it accepted on 18 May 1998.21  Its
schedule of commitments include all the financial services activities covered by the Financial ServicesAnnex of the GATS.  The main improvements in  banking services are a commitment to increase
offshore bank lending limits to residents of Singapore from S$100 million per offshore bank to
S$200 million;  and to allow Singapore-based branches of foreign banks to transmit data to their head
offices and sister branches for processing, provided proper controls exist, the integrity and
confidentiality of the data are safeguarded, and the regulator of Singapore's banking sector is allowedon-site access to the data.
40. In insurance services, the main improvements include a commitment to allow up to 49%
foreign equity ownership, in aggregate, in lo cally owned insurance companies;  and to admit
reinsurance brokers as locally incorporated subsidiaries.  For other financial services, a commitment
was made to allow non-members of the Stock Ex change of Singapore (SES) to apply to become
Approved Foreign Brokers (AFBs) of the SES, enabling them to trade directly in
non-Singapore-dollar denominated securities quoted on the SES.
(b) Banking services
Structure and performance
41. The structure of the banking sector in Singapore remains relatively unchanged since the
previous Review.  By the end of March 1999, there were 142 commercial banks in Singapore
(133 foreign and nine local), compared to 154 at the end of March 1998
22;  74 merchant banks;  and
71 representative offices of banks and merchant banks.  The Government, as at 31 December 1998,
had shareholdings in the Development Bank of Singapore (DBS) (38.75%) and the Keppel TatLee
Bank (46.24%).  More than 80% of local bank assets (51.5% of total domestic banking unit assets in
the system and 21.2% of total domestic banking unit and Asian currency units assets in the system) at
end October 1999 were accounted for by the four largest banking groups:  the DBS, the OverseasChinese Banking Corporation, the Overseas Un ion Bank, and the United Overseas Bank.
42. There are three categories of commercial banks in Singapore, fully licenced, restricted, and
offshore banks.  While fully licenced banks provide the full range of banking transactions to residents
and non-residents, restricted banks were introduced in 1971 to accommodate further entry of
commercial banks into the relatively small domestic banking market.  Restricted banks may engage inthe same activities as fully licenced banks but may only have one main branch and may not accept
savings and fixed deposit accounts in Singapore dollars below a value of S$250,000 per deposit from
non-bank customers.
23  Foreign fully licenced banks have a long history in Singapore;  some operated
in Singapore long before local banks were formed.  Certain of these foreign fully licenced banks have
a considerable branch network and are allowed to continue operating these.  They may not, however,set up new bank branches or relocate existing branches;  install off-premises ATMs or share ATMs
                                                     
20 Unless indicated otherwise, this section is based on WTO documents GATS/SC/76, 15 April 1994,
GATS/SC/76/Suppl.1, 28 July 1995, and GATS/SC/76/Suppl.3, 26 February 1998.
21 WTO document S/FIN/W/13, 25 May 1998.
22 Two new banks were admitted, while ten ceased operations and four converted to representative
offices during this period (Monetary Authority of Singapore, 1999a).
23 Monetary Authority of Singapore (undated (a)).WT/TPR/S/67 Trade Policy Review
Page 98
with other banks;  or offer electronic funds transfer  at point-of-sale (EFTPOS) services.  At the end of
October 1999, there were 31 fully licenced banks of which eight were locally incorporated while all
17 restricted banks were branches of foreign banks.  Offshore banks may provide financing in
Singapore dollars to Singapore residents, providing the total amount is limited to S$300 million per
bank.  They may not accept Singapore dollar deposits from residents but can accept fixed deposits ofS$250,000 or more in Singapore dollars from non-residents.  They may also borrow freely from the
domestic interbank market.  Other segments of the banking sector, such as foreign exchange trading,
trade finance and corporate lending, are completely open, with foreign banks accounting for a
significant share.  At the end of October 1999, of the 131 foreign commercial banks in Singapore, 92
had offshore banking licences dealing mainly in Asian dollar and foreign exchange transactions(Box IV.1)
24;  foreign banks accounted for almost 90% of total assets in ACUS.  In addition to the
banks there were 14 finance companies at end October 1999.
Box IV.1:  Offshore banking in Singapore
Offshore banking in Singapore is performed by separate bookkeeping entities known as Asian currency
units (ACUs).  These are normally run by banks that also have domestic operations (domestic banking
units, DBUs).  ACUs are normally constrained to operating in the Asian dollar market (ADM) in whichtransactions in all currencies except the Singapore dollar are permitted.
Offshore banking became permissible in Singapore in 1973 with the creation of the first ACU, as part of an
effort by the Government to develop Singapore into an international financial centre.  The growth of
offshore banking has been aided, in part, by Government incentives.  These include a concessional tax on
profits (10% compared with the standard rate of 27%).  In addition, ACUs are not subject to reserve andliquidity requirements.
There are also limitations on the activities of ACUs to protect the domestic market from currency volatility.
For example, ACUs are not permitted to transact in Singapore dollars;  and banks having offshore licencesmay not lend over S$500 million.
There were 212 ACUs in Singapore with estimated assets of US$504 billion at the end of 1998.  Their role
has been primarily one of routing capital from mark ets in Europe, North America and the Middle East to
the rapidly growing Asian region.
Source: International Monetary Fund (1995), Singapore:  A Case-study  in Rapid Development , 
Occasional Paper 119;  and Monetary Authority of Singapore (1999), Annual Report 1998/99 .
43. Disturbances in the financial market in the region and in other emerging markets had an
impact on Singapore's financial sector in 1997 and 1998, although Singapore's banks and finance
companies maintain high capital ratios, allowing th em to adjust to a certain extent to external
shocks.25  Singapore's relative openness, nevertheless, leaves it exposed to regional economic
developments.  The aggregate loan exposure of local banks, including their overseas subsidiaries,
regionally, in particular Malaysia, Indonesia, Thailand, the Republic of Korea, and the Philippines,
was around 18% of total assets at the end of November 1997, falling to 14.5% and 11.4% in
September 1998 and September 1999, respectively.  Malaysia alone accounted for around 11.3% of
                                                     
24 Offshore banks may provide financing in Singapore dollars to Singapore residents, providing the
total amount is limited to S$300 million per bank.
25 Bank profitability and the quality of bank portfolios have mainly been affected because of reduced
capital inflows, the slowing of domestic corporate activit y, and a decline in asset prices, as well as exchange
controls imposed by Malaysia in 1997.Singapore WT/TPR/S/67
Page 99
total loans and advances (including bills financing).  Exposure to the local property market was also
substantial with bank lending for building and construction accounting for 31.4% of total lending.
44. As a result, profits of the top four domestic banks fell by 28-50% during the first half of 1998
relative to 1997, mainly due to increased provisioning against regional loans.  Overall non-performing
loans accounted for 6.9% of total portfolios at the end of 1998 compared with 5% in June of the sameyear and 2.5% in December 1997.  The capital adequacy ratio of banks, however, at 18%, remained
well above the required 12% at the end of 1998.  By June 1999, there had also been a substantial
improvement in the ratio of bank exposure to regional markets as a percentage of assets, which stood
at 12%.
45. Although the impact of the economic crisis in the region has not been as severe on
Singapore's financial sector as in other neighbouring countries, it did reveal a number of areas, for
example in supervision and transparency, especially bank disclosures, where standards could be
strengthened.  There are also indications that competition in Singapore's banking sector could be
improved.  Between 1995 and the first quarter of 1999 banks' interest rate spreads – the difference
between the interest rate received and the interest ra te paid – appears to have widened;  however, the
authorities indicate that the widening of the interest spread started after the onset of the Asian
economic crisis in mid-1997, and reflected the high-risk premium rather than a change incompetitiveness in the financial services sector.
26  The Singapore Government is currently addressing
some of these matters in its financial sector reforms (see below).
Policy framework
46. The licensing and operation of commercial banks is governed by the Banking Act, which,
along with its regulations, prescribes the minimum capital and liquidity requirements and setsprudential limits on credit and investment.  Banking licences may be obtained from the
Monetary Authority of Singapore (MAS), established as a statutory board in 1971, which regulates all
financial services.
27
47. The legal requirements to obtain a banking licence remain, in the main, unchanged since the
previous Review.  A bank incorporated in Singapore after 18 July 1996 must have paid-up capital andcapital funds of S$1.5 billion, and prior approval is required from the MAS before a purchase of 5%
or more of a bank's shares
28;  for a bank whose head office is situated outside Singapore, a minimum
paid-up capital of S$200 million for the head office is required.  In addition, all banks and finance
companies must be able to meet a minimum capital adequacy ratio of 12%, of which 10% must be
Tier 1 capital.29  All domestic banks, excluding those dealing in Asian currency units (ACUs), must
hold a minimum cash balance of 3% of their liabilities with the MAS and hold 18% of their liabilities
in liquid assets (at least 10% must be held in Singaporean Government Securities).30  Singapore did
                                                     
26 For example, the spread between the prime lendin g rate and the savings deposit rate increased from
3.56% in 1995 to 4.42% in the first quarter of 1999;  the spread between the prime lending rate and the 3-month
fixed deposit rate increased from 2.87% to 4.12% during this period (Monetary Authority of Singapore, 1999a,
Annex Table A4).
27 The issuance of legal tender currency is the responsibility of the Board of Commissioner of Currency
of Singapore.
28 A bank incorporated in Singapore before 18 July 1996 was required to have a minimum capital fund
of S$800 million and was given five years from 18 Ju ly 1996 to bring its capital funds up to S$1.5 billion.
29 The minimum capital adequacy ratio stipulated by the Bank for International Settlements (BIS) is
8%, of which 4% must be Tier 1 capital.
30 Banks wishing to operate ACUs may do so with MAS approval.  Six of the eight local banks
currently operate ACUs.WT/TPR/S/67 Trade Policy Review
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not grant any full or restricted banking licences be tween 1973 and 1999;  according to the authorities,
the domestic market is saturated.
48. Although restricted in their branching and ATM activities, foreign banks in Singapore enjoy
certain privileges not accorded to domestic banks, including not being subject to the minimum capital
adequacy ratio of 12% applicable to local banks, and community service requirements, such assupporting small customers and less profitable activities.
31
49. Finance companies are licenced and regulated under the Finance Companies Act.32  Licences
are granted by the MAS.  Conditions of the licence include a minimum capital requirement of
S$50 million and a minimum capital adequacy ratio requirement of 12%.  Licenced finance
companies may accept fixed-term and savings deposits but not demand deposits or negotiablecertificates of deposit (CDs).  In addition, they may grant consumer finance, subject to an unsecured
lending limit of S$5,000, and may deal in foreign cu rrency or gold, subject to approval from the
MAS, if they have capital funds of at least S$100 million.  Foreign participation in locally owned
finance companies is restricted to 20%.
50. In addition to regulation, the MAS has an impor tant role in developing Singapore into an
international financial centre by providing incentives for banks and financial institutions to invest in
certain activities (Table IV.4).  The incentives include concessional corporate tax rates of 10%,compared with the standard rate of 26%, and tax holidays for a number of activities.  In recent years,
particular emphasis has been placed on developing Singapore as the premier fund management hub
over the next decade.
33  In offering these incentives, national treatment is extended to all foreign
investors.
Table IV.4
Incentives offered by the Monetary Authority of Singapore
Scheme Eligibility Incentive
Operational
headquarters (OHQ)
incentivesFinancial institutions providing
management and other approved
headquarters related services to
subsidiary, associated or related
companies in other countriesConcessional corporate tax rate of 10% for five to ten years
(renewable) for income from providing qualifying OHQ services to
approved network.  Tax exemption for dividend income from
approved network companies and on dividends distributed from the
OHQ for five to ten years (renewable).
Double deduction for
R&D expenditureEligible financial institutions
engaged in R&DDouble deduction for qualifying R&D expenses against income.
Tax incentive for Asian
Current Unit (ACU)
incomeBanks and merchant banks Concessional tax rate of 10% on income derived from offshore
ACU activities with non-residents and other qualifying financial
institutions in Singapore.
Tax exemption scheme
for fund managementFund management Investment income of foreign investors exempt from tax;  fund
managers managing at least S$5 billion of foreign investors' fundsgiven a five to ten year tax holiday (renewable on a case-by-case
basis) on their fee income.  Other fund managers taxed at a
concessional rate of 10% on fee income.
Tax incentive schemefor approved trustee
companiesTrustee or custodian services Income from these activities provided to non-resident beneficiaries
taxed at 10%;  investment income from the trusts exempt from tax.
Table IV.4 (cont'd)
                                                     
31 Local banks face community pressure to not discriminate against small retail depositors by imposing
minimum account opening amounts or minimum balances, unlike some foreign banks, which, according to the
authorities, target only the high end of the retail market.  Local banks also maintain large unprofitable branchnetworks in outlying areas to service small retail customers.
32 Finance Companies Act, 1985 and Finance Companies (Amendment) Act, 1994.
33 Republic of Singapore (1998c).Singapore WT/TPR/S/67
Page 101
Scheme Eligibility Incentive
Tax incentive scheme
for bond market
activitiesBond market players Tax holiday for fee income from arranging, underwriting and
distributing qualifying debt securities; interest income qualifying
from debt securities paid to financial institutions and corporations inSingapore taxed at 10%;  interest from qualifying debt securities
payable to non-residents exempt from withholding tax;  income
from trading in debt securities taxed at 10%.
Tax exemption scheme
for syndicated facilitiesBanks, merchant banks and
approved securities companiesTax exempt for income from arranging, underwriting and
participating in syndicated credit, guarantee and debt facilities
which are arranged in Singapore and for which proceeds are used
outside Singapore.
Tax incentive schemefor transactions in
foreign securitiesBanks, merchant banks and
securities companiesIncome from transactions in foreign securities and related services
taxed at 10%.  Income from arranging and underwriting initial
public offerings  of foreign currency denominated shares on theSingapore Stock Exchange and from transactions in foreign
securities listed on the Stock Exchange exempted from tax.
Tax incentive scheme
for foreign securities
lending and borrowingBanks, merchant banks and
securities companiesConcessional tax rate of 10% on net income from loans of foreign
securities to eligible parties and to income from arranging suchloans.  Withholding tax exemption on loan fee or manufactured
dividend or interest paid to non-residents.
Tax incentive for credit
rating agenciesCredit rating agencies Concessional tax rate of 10% for five years on income from
providing credit rating services with respect to the issue of foreign
securities in Singapore.
Tax incentives forfinance and treasury
centres (FTC)Corporate treasury centres Concessional rate of 10% on fee income received from the provision
of financial and treasury services to approved network companies
and income from conducting trading and other treasury activities onFTC's own account.  Interest paid on foreign currency denominated
loans from network companies and banks outside Singapore and on
foreign currency denominated bonds issued by the FTC may also be
exempt from withholding tax.
Tax incentive foroffshore insurance
businessInsurance companies Concessional tax rate of 10% on income from writing offshore
insurance business.
Incentives in new
technology schemes for
insurersInsurance companies Grants may be made for training staff in new and specialized lines
of risks, reinsurance or captive insurance business.
Source: Singapore authorities.
Recent reforms
51. In mid-1997, a Financial Sector Review Group ( FSRG) was established by the Government to
review policies regulating the financial services sector.  The review was aimed at improving
competition by shifting the emphasis to providing higher quality services and products and at
developing Singapore as a premier financial centre in Asia and globally.  Although the review is still
ongoing, several factors have already emerged and prompted policy changes with a view to
strengthening the sector, especially in the aftermath of the financial crisis in the region, and promotinginvestment (Box IV.2).
52. Further liberalization of the banking sector was announced in May 1999.  The new five-year
programme comprises further liberalization;  improved corporate governance;  and the lifting of a
40% foreign shareholding limit in local banks.  The rationale behind the latest changes is to help local
banks to maintain a market presence in the face of increased global competition in the sector;  theMAS believes that the means to strengthen local banks and the Singapore banking system in general
is through a gradual increase in competition and improved corporate governance rather than
protection.  An emphasis on maintaining a high quality of service and systemic stability of the
financial sector means that MAS will grant additional market access only to well managed foreignWT/TPR/S/67 Trade Policy Review
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banks with good credit and legal support ratings34, and with a demonstrated commitment to
strengthening their operations.  MAS will therefore extend privileges to selected foreign full-licence
banks to widen their domestic retail operations (Qua lifying Full Bank (QFB)) privileges, increase the
number of restricted bank licences, and provide greater flexibility to offshore banks to conduct
wholesale transactions in Singapore dollars. The domestic retail segment will gradually be opened toselected foreign banks through the new category of QFBs, with the MAS granting QFB privileges to
up to six foreign banks between 1999 and 2001;  in this regard, four foreign banks were selected by
the MAS in October 1999.
35  QFB privileges include additional branches and off-premises ATMs.36
In addition, the number of restricted banks will be increased from 13 currently to 20 by 2001.
Box IV.2:  Recent reforms in the financial sector
Several new policies have emerged from the Financial Sector Review Group (FSRG).  These relate mainly
to supervisory changes aimed at strengthening the banking sector, and changes in the role of the MonetaryAuthority of Singapore (MAS) to promote Singapore as a financial sector:
From regulation to supervision:  The MAS oversees the financial sector.  Under the policy changes, it
will maintain its role of financial oversight but the emphasis will shift from regulation to supervision with afocus on reviewing banks' risk management processes and control systems.  Examination of banks willconcentrate on management and asset quality and processes by which the bank identifies, measures,monitors and controls its risks;  transaction and numerical data testing will become less extensive and willbe selective.  This relatively shorter examination will also enable MAS to inspect financial institutions
more frequently than has been possible in the past.
Transparency:  Transparency in the banking sector is to be increased through enhanced bank disclosure.
The report by the Committee on Banking Disclosure (CBD), a subcommittee of the FSRG, recommendedthat banks:  discontinue the practice of maintaining hidden reserves and disclose the market value of theirinvestment;  report fully their loan-loss provisions, contingent liabilities, commitments and financialderivatives;  and disclose any significant concentrations of exposure, such as by customer or industry
groups and geographical areas.  Most of these improv ements have already been made by the local banks.
Investment promotion:  The second initiative resulting from the Review is that MAS will play a more
proactive role in promoting Singapore's financial sector.  To this end, a Financial Sector PromotionDepartment (FPD) was formed within MAS in April 1998.
Other measures to streamline the banking system include:  the establishment of a real-time gross settlement
system (RTGS) in July 1998, allowing payments between banks to be processed and settled individually
and continually during the day rather than the previous practice of settling at the end of the day;  andallowing Singapore incorporated banks to modify the composition of their capital adequacy ratios, from thecurrent 12% to 10% of equity capital and 2% of Ti er 2 capital, in accordance with the Basle Capital
Accord.
Source: Monetary Authority of Singapore, Annual Report 1997/98  and Annual Report 1998/99
                                                     
34 Legal support ratings are used by international rating agencies to assess the level of support from the
Government or shareholders a bank may have, if it were to encounter difficulties.
35 The QFB privileges were granted to Citibank, ABN Amro, Banque Nationale de Paris, and
Standard Chartered all of whom already operate bank br anches in Singapore.  According to the article, the
decision by MAS to select these particular banks was based on prudential considerations and "their currentcontribution and commitment" to Singapore ( Financial Times , 22 October 1999).
36 Each QFB will be allowed up to 10 locations, including up to five for branches and off-premises
ATMs;  free location of existing branches and sharing of ATMs among QFBs will be permitted.  In addition, nomore than two new branches and three off-premises ATMs may be established each year following the grantingof the QFB licence.  QFBs which already have more than five branches will not be allowed to increase theirbranches, but may have up to five off-premises ATMs.Singapore WT/TPR/S/67
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53. Offshore banks will be allowed to expand their wholesale banking business in
Singapore dollars.  The criteria used will be broadly the same as those for granting QFB privileges.
Other reforms for offshore banks include:  greater flexibility for wholesale business in Singapore
dollars;  increased Singapore dollar lending limits for qualifying offshore banks approved by the MAS
from S$300 million currently to S$1 billion, and unlimited Singapore dollar swaps;  increasedSingapore dollar lending limits to S$500 million for all other offshore banks, and permission to
engage in Singapore dollar swaps in respect of proceeds arising from the issue of Singapore dollar
bonds managed or arranged by them.
54. According to the MAS, although maintaining a strong local banking presence is a priority, the
foreign shareholding limit will be raised from its present level of 40%, primarily because the limit hasresulted in a two-tier market for local banks' shares and reduced liquidity in local share tranches;
distorted the true market value of local bank shares and raised the cost of funds for banks;  has made it
more difficult for local banks to implement competitive employee share option schemes;  and has
hindered local banks from forging strategic partnerships with foreign banks or to pay for foreign
acquisitions with shares.
37  However, local banks will only be allowed to remove the 40% foreign
ownership restriction from their Articles of Association once they amend the articles to include the
formation of nominating committees according to the MAS guidelines.  All the local banks, according
to the authorities, have already done so.  The nominating committee is to be approved by the MAS.
The Committee will appoint the board members of the bank, ensuring that the board comprises a
majority of Singapore citizens or permanent residents and a majority not related to or employed or
influenced by substantial shareholders of the bank (holders of 5% or over of the bank's shares), in
addition to customary "fit and proper" criteria.  In  this manner, MAS believes, that even if foreign
banks increase their share of local banks, national interest will continue to be safeguarded by the
presence of Singapore citizens and permanent residents on the board of directors.  Additional
safeguards, requiring approval from the MAS before any individual shareholder or group of
shareholders may increase their shares above 5%, 12% and 20% (previously 5% and 20%), according
to the authorities, will ensure that national inte rests are protected;  according to the authorities
"national interests" in this context refers mainly to prudential concerns about the systemic stability of
Singapore's financial system and MAS' ability to deal with financial crises.
55. Although the liberalization programme will be completed over five years, these reforms will
be carried out over the next three years, after which MAS will review the situation.  The Government
believes that if the liberalization results in a weakening of local banks and displaces them from theirpivotal role in the financial sector, it would have failed.  The MAS therefore hopes to see a local
banking presence accounting for at least 50% of total resident deposits.  The Authority considers that
the best means of achieving this is for local banks to grow and increase their competitiveness.
Emphasis is thus being placed on strengthening corporate governance, increased efforts to attract top
talent, both domestic and foreign, and to give banks the necessary mandate to allow them to makeprofessional management decisions.  In the longer  run, the MAS believes that the consolidation of
local banks would be necessary for them to withstan d increased competition from foreign banks.  The
Government is encouraging local banks to consolidate among themselves and took a first step by
merging the POSB w ith the DBS in 1998.  The Government believes that the size of Singapore's
domestic market and the growing economies of scale in banking make it unlikely that Singapore can
sustain more than two large local banks.
38
56. To complement banking reform, Singapore will permit foreign law firms to form joint
ventures and alliances with local firms to provide advisory services for financial transactions
                                                     
37 Monetary Authority of Singapore (1999b).
38 Monetary Authority of Singapore (1999b).WT/TPR/S/67 Trade Policy Review
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(section (ix)(b)).  The overall policy to attract foreign skilled personnel to Singapore is also being
pursued in the banking sector.
(c) Insurance
Structure
57. Singapore's insurance market comprises 59 companies, providing direct general and
life insurance, and nearly 100 reinsurers and captive insurers, which provide insurance mainly for
offshore business.  At end December 1998, 42 of the 59 direct insurers were foreign owned and
accounted for 54% of total insurance business in force;  44 of Singapore's 48 reinsurers were foreign
owned.  There are currently six direct composite insurers writing both life and general business.
58. The life insurance market is relatively concentrated, with the largest four companies
accounting for around 90% of all premiums written.  The companies are American International
Assurance Company Limited (AIA), with 37% of the total market;  Great Eastern Life Assurance
Company, with 27%;  Prudential Assurance Comp any, with 14%;  and NTUC Income Insurance
Cooperative Limited, with 12%.  Two of the four companies are locally owned.  According to the
authorities, the market for life insurance has been closed for several years to new entrants;  new
licences are generally granted for re-insurance services.
59. Growth was rapid during the period 1995-98, with total industry assets growing at an average
annual rate of 16%.  Considerable slowdown in new business sales was recorded during 1998 as new
annual premiums for life insurance declined by 38% to S$498 million.  General insurance was also
adversely affected by a slowdown in local dema nd, with the exception of miscellaneous accident
business.  Total annual domestic general premiums in force stood at S$41.5 billion at end 1998, a
decrease of 7.1% over the year, compared with an increase of 1.8% during the previous year.Offshore insurance business also recorded a decline of 10% during the year, with weaker regional
currencies among the factors affecting this sector.
39
60. The outlook for 1999 is positive although dependent on the strength of economic recovery,
both in Singapore and in the region.  Early indications are that the Singapore economy remains
healthy and there has been an improvement in th e regional economies.  The MAS expects domestic
insurance to pick up and predicts modest growth for offshore insurance by 2000.
Policy framework
61. The insurance sector is regulated by the MAS, which issues licences for new insurance
service providers and regulates the sector under the Insurance Act, 1994, and its Regulations.
Domestic and foreign insurers are subject to the sa me regulatory requirements.  Insurance companies
are required to submit a business plan to the MAS in the registration application process.  There are
minimum capital requirements of S$25 million for direct insurers and reinsurers, and S$400,000 for
captive insurers.  The applicant would expect to hear from the MAS within a month of submission of
the required information.  If the application is ap proved the MAS would issue an in-principle approval
letter and the applicant would be given six months to complete the registration requirements.  Theseinclude registration under the Companies Act and a statutory deposit of S$500,000 for each class of
business.  On completion of these requirements, the MAS would issue a licence to the insurance or
reinsurance company.  The insurer is also required to place a deposit with the MAS of a value not less
than S$500,000 once the licence is granted.  All established insurance companies are also required to
periodically submit details of financial documents to the MAS.
                                                     
39 Monetary Authority of Singapore (1998).Singapore WT/TPR/S/67
Page 105
62. There are certain market access restrictions for foreign companies.  According to
commitments made for life insurance and non-life insurance services under the WTO Agreement on
Financial Services, Singapore limits commercial presence by foreigners to 49% (on an aggregate
basis) of total equity in locally owned insurance companies, provided the acquisition does not make
any foreign party the largest shareholder in the co mpany.  Previously, foreign ownership of locally
incorporated insurers was unbound.  Corporations and individuals may purchase insurance directly
from insurers not registered in Singapore except fo r compulsory insurance, that is, non-life insurance,
third party insurance for motor vehicles, and workmen's compensation insurance, which may be
purchased only from licensed insurance companies in Singapore.  Reinsurance companies are allowed
to establish in Singapore as branches or wholly owned subsidiaries.
63. The MAS has not issued licences to foreign or domestic firms seeking access to Singapore's
direct insurance market for several years.  The exceptions were five specialist non-life direct insurers
that were granted licences, since the last Review, to write specialized risks in which incumbent direct
general insurers have no expertise or capacity.
64. Recent policy changes in the sector include the Insurance (Amendment) Regulations 1997,
which stipulate a higher paid-up capital of S$25 million for direct insurers and reinsurers.  The
previous requirement was S$5 million for direct insurers and S$10 million for reinsurers.  Insurersregistered before 27 October 1997 were given until January 2000 to comply with these new
requirements, while those registered on or after 27 October 1997 had to comply with the new
requirements immediately.  The authorities believe that the changes in minimum paid-up capital
requirements will strengthen insurers' finances and increase their capacity to support business growth.
Annual fees for direct insurers involved in life insurance was also raised, from S$50,000 per year to
S$60,000 per year, while those involved in both life and general insurance business will pay an
increased fee of S$110,000 compared with S$100,000 previously.  The higher fees, according to the
authorities, better reflect the larger proportion of  resources spent in regulating the life insurance
industry.
40  More changes are currently being planned, including a review of the admission policy for
direct life insurers with a view to possibly liber alizing and allowing new entrants to the market.  As
with banking, the Government appears to wish to develop a few local insurance companies that could
compete effectively with foreign companies and in foreign markets.41
(d) Capital markets
Recent developments and structure
65. Uncertainty in regional markets has also recently affected the performance of
Singapore's capital market.  Established in 1973, the Stock Exchange of Singapore (SES) has
expanded rapidly to become an important regional stock market.  It comprises the Main Board, which
is the largest market;  the Central Limit Order Book (CLOB International), an over the counter market
for international stocks;  the SESDAQ, a market for shares of small and medium-sized companies;
quotation of debentures, bonds, loans and transferable subscriptions rights;  and the Stock OptionsMarket. In addition, Singapore established Asia's first international monetary exchange, the Singapore
International Monetary Exchange (SIMEX), in 1984, which trades futures and options contracts.  At
the end of 1998, SIMEX had 35 corporate clearing members, of which 26 were foreign;  the latter
accounted for around 66% of total market share on the SIMEX by trading volume.
66. Singapore's capital markets have expanded rapidl y since the formation of the SES.  By the
end of 1998 there were 78 securities dealers, 148 investment advisers, and 53 futures brokers.  Market
                                                     
40 Monetary Authority of Singapore (undated (b)).
41 Business Times , 8 November 1999.WT/TPR/S/67 Trade Policy Review
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capitalization of listed stocks and shares amounted to S$270.5 billion.  Given Singapore's relatively
open capital market, the regional financial crisis had an impact on investor confidence and resulted in
sharp declines in stock prices.  Trading of Malaysian shares, which dominated the CLOB
International, was suspended shortly after capital controls were imposed by the Malaysian
Government.42  The Straits Times Index fell by 21.5% in the second half of 1997 and by 37.7% in the
first nine months of 1998 as the regional financial crisis worsened.  Share prices began trending
upwards in the fourth quarter of 1998 following the strong performance of the U.S. equity market, low
domestic and external interest rates, renewed foreign interest in the region, and a better outlook for the
Singapore economy.  The Straits Times Index stood at 2,237 as at 30 November 1999, an increase of
16.4% from 1 July 1997.
Policy framework
67. Licensing and regulation of securities dealers and investment advisers is carried out under the
Securities Industry Act, while financial futures trading is governed by the Futures Trading Act.
Licensing requirements for member companies of the SES include a minimum paid-up capital of
S$30 million (up from S$10 million before February 1994);  a maximum eight-fold ratio of aggregate
indebtedness to adjusted net capital43;  and that member companies transfer at least 50% of their
after-tax profit to their statutory reserves if their paid-up capital is under S$30 million.
68. Foreign companies generally have the same right to establish and offer financial products as
domestic firms with respect to government securities, unit trusts, and financial futures.  However, SES
membership for fully owned foreign companies is re stricted to a category of "international members".
By the end of 1998, six out of 31 SES members were international members;  another ten had a
foreign equity share of between 12% and 70%.  Fo reign shareholdings in SES companies, other than
international members, is currently restricted to  70% of total equity.  Three local SES members
have holding companies that are listed on the exchange;  foreigners are allowed to acquire shares in
these holding companies.44  While authorized to trade for non-resident clients, the six SES
international members are permitted to trade Singapore dollar denominated securities for resident
clients only if the transaction value per contract is S$5 million or above.  The threshold of S$5 millionwill be reduced to S$500,000 in January 2000 and removed by January 2001.  Also, international
members of the SES may not vote in an election of  members to the SES Board of Directors.  In 1995,
the SES created a category of "approved foreign brokers" (AFB), which are permitted to trade only
non-S$ denominated stocks on the exchange.
69. Under the Futures Trading Act, futures brokers must meet minimum financial requirements of
paid-up capital of not less than S$5 million for SIMEX members and S$8 million for non-members.
In July 1998, the Futures Trading Regulations were amended to relax these requirements for futures
brokers whose activities were restricted to accepting and executing orders for equity index contracts
traded on SIMEX.  Such futures brokers are required to maintain a minimum paid-up capital and
                                                     
42 Singapore's Central Depository (CDP) entered into an agreement on 18 September 1998, with the
Securities Clearing Network Services (SCANS), a wholly owned subsidiary of the Kuala Lumpur StockExchange, for the shares to be transferred into a CDB Securities Account established by SCANS in Malaysia.Under the agreement SCANS would thereafter transfer th e shares into interim securities accounts of individual
CLOB investors who may then open their own trading acco unts with Malaysia's Central Depository and begin
trading.  SCANS has yet to "unfreeze" the shares by tran sferring them into interim securities accounts as stated
in the agreement.
43 As of January 2000, dealers need only inform the MAS when the ratio is greater than eight fold;  the
dealer's licence will lapse if this ratio exceeds ten times for four consecutive weeks.
44 The holding companies are Kim Eng Holdings, Kay Hian Holdings Limited, and GK Goh Holdings
Limited.Singapore WT/TPR/S/67
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shareholders' funds of only S$1 million each.  For trading on one's own account, there are no
limitations on cross-border supply and consumption abroad.
70. On the recommendation of the Stock Exchange of Singapore Review Committee (SESRC),
the SES and SIMEX were de-mutualized and merged into a single integrated privately held stock
company;  the integrated Singapore Exchange was launched on 1 December 1999.  The new exchangewill admit new members from July 2000.
45  Initially, new members will be able to trade directly with
local investors for a minimum value of S$500,000.  This limit will be reduced to S$150,000 after one
year, in July 2001.  The authorities have indicated that foreign financial institutions with long-term
interests in Singapore's financial sector will be gi ven an opportunity to become shareholders of the
merged Exchange;  access is expected to be completely liberalized by 1 January 2002.
(v) Transport
(a) General features
71. The transport and communications sector, including land, air, and maritime transport as well
as telecommunications services, accounted for 10% of GDP in 1998, compared to around 11% in
1995.  The sector provides employment to around 11% of Singapore's labour force.
72. Policies on transport and communications are, in general, formulated by the Ministry of
Communications and Information Technology (MCIT).  However, input and advice from the relevantstatutory bodies is sought on a regular basis.  Th e statutory bodies are the Civil Aviation Authority of
Singapore (CAAS), the Land Transport Authority (LTA), the Maritime and Port Authority of
Singapore (MPA), and the Public Transport Coun cil (PTC);  in addition, the Telecommunications
Authority of Singapore (TAS) and the Nati onal Computer Board (NCB) were merged on
1 December 1999 to form a new regulatory body for information technology and telecommunications.The new regulator, the Info-Communications Development Authority (IDA) of Singapore will come
under the purview of MCIT.  The move was take n in view of the rapid convergence between
information technology and telecommunications technologies and services.  The authorities believe
that the establishment of one regulatory, developmental, and promotional agency will improve policy
coordination and implementation, and will foster the integrated development and implementation ofinformation technology and telecommunications policies in Singapore.
(b) Land transport
73. Singapore's land transport policy is aimed at pr oviding "a world class land transport system"
despite the limitations of land area.  This include s a comprehensive road network, controlled growth
in the number of vehicles used, improved public transport, and integrated land use and transportplanning.  Land transport services are regulated by  the Land Transport Authority (LTA), established
in September 1995 to "plan, develop, implement and manage all public and private transport in
Singapore".
46  The LTA implements policies to regulate the growth of vehicle numbers, the use of
vehicles, and the entry of foreign-registered vehicles.  It also seeks to ensure an efficient public
transport service through licensing, training, and monitoring of drivers and conductors of publicservice vehicles, and by monitoring the public tran sport network.  Roadworthiness standards are set to
                                                     
45 There will be no quota on the number of new members but they must be brokers with the reputation
and financial strength to contribute to developing the market.
46 The LTA merges functions previously carried out by the Registry of Vehicles, the Public Works
Department's Road and Transportation Division, the Communications Ministry's Land Transport Division andthe Mass Rapid Transit Corporation (MRTC).WT/TPR/S/67 Trade Policy Review
Page 108
ensure road safety, in conjunction with the Traffic Police, through education, inspection, and
enforcement.  The LTA also assists the Ministry of Environment in vehicular pollution control.
74. Public transport, including the mass rapid transit (MRT) and light rail transit (LRT) systems
and public buses, is regulated by the LTA.  The Public Transport Council (PTC), established under its
own Public Transport Council Act, in August 1987, also establishes service standards and fares for
public transport.47  Fares are based on the consumer price index plus a component X which accounts
for cost factors such as wages, productivity, and service improvements.  The X component was fixed
at 2% by the PTC in April 1997 for a three-year period.
75. Given the pressure on land use, the Government aims to encourage the use of public transport
and reduce the use of private vehicles, all of which are imported.  Private vehicle ownership ismanaged through regulation of the number of vehicles registered each year by the LTA through
annual import quotas and a number of taxes and charges (Box IV.3 and Table AIV.1).
76. The Vehicle Quota System (VQS) has reduced the annual growth of Singapore's vehicle
population from 6% before 1990 to 3% at present, according to the authorities.  The Government
expects that a 3% annual growth rate will allow ve hicle ownership in Singapore to increase gradually
from one in every ten persons at present, to one in every seven by 2010.  Although the annual increase
of vehicles on the road has fallen since the introduction of the VQS, usage remains high.  It isestimated by the LTA that average usage is around 18,000 km per year, high by international
standards.
48  This is probably because users pay large sums of money to import their cars, and
compensate for the high up-front investment by "capitalizing" on this through usage.
77. To reduce road usage, the Electronic Road Pricing (ERP) system was introduced in
September 1998.  It replaced the coupon-based Area Licensing Scheme and the Road Pricing Scheme,which covered the Central Business District and three expressways, respectively.  In September 1999,
the ERP was extended further to include two ot her expressways, and congested areas on a second
cordon outside, and concentric with, the existing cordon around the Central Business District.  ERP
charges are adjusted quarterly, based on prevailing traffic conditions.  The objective is to maintain
average travel speeds of 45 to 65 km per hour on expressways and 20 to 30 km per hour on arterialroads.  According to the authorities, traffic studies have shown that road usage is optimal at these
speeds and at the least cost to motorists.
78. Current policy on public and private transport in Singapore is based on a Government White
Paper published in January 1996, which proposes a range of public transport services through
expansion of the public transport network.  In addition to taxi services, public transport includespublic bus services, operated by two bus companies, and the mass rapid transit (MRT) system.  A
light rail transit (LRT) system is also being developed to feed into the MRT network and to provide
transport over short distances.  Construction of the first LRT line was announced in February 1996
                                                     
47 The 13-member Council is appointed by the Ministry for Communications and Information
Technology and includes representatives from labour and grassroots organizations, major employers, andprofessionals as well as the four public transport companies.  The LTA and the PTC work closely together.  TheVehicle and Transit Licensing Division of the LTA acts as the agent for the Council in carrying out operating
decisions.  In addition, it is the technical advisor to the Council and provides technical expertise and support in
evaluating proposals submitted by the public transport operators.
48 This figure is equivalent to average usage in the United States and the United Kingdom, but
considerably higher than in France (around 13,000 km per year) and Japan (around 10,000 km per year) (LandTransport Authority, 1996).Singapore WT/TPR/S/67
Page 109
and was completed in November 1999.  Two subsequent LRT projects have been announced recently.
The Government also intends to provide higher grades of bus services.49
Box IV.3:  The vehicle registration system
All motor vehicles in Singapore must be registered with the Land Transport Authority (LTA).  Only motor
vehicles that are less than three-years old may be imported.  The vehicle must be accompanied by theappropriate documents, including inspection certificates from the country of manufacture.  An annual quotasystem and a range of taxes and charges apply, raising the price of an imported car by around 300% of theoriginal import value (Table AIV.1).
Vehicle quotas:  The Vehicle Quota System (VQS) was implemented on 1 May 1990 to ensure that the
increase of vehicles was kept in line with road capaci ty and traffic conditions.  Under the VQS, the number
of new registrations for vehicles is determined at the beginning of each year by the LTA.  According to theauthorities, the quotas are increased by an annual average of around 3%.  The exact quota for each yearvaries depending upon the number of old vehicles taken permanently off Singapore's roads and anadditional quota.  There are currently five categories of vehicle, each allocated a quota in proportion to that
category's share of all vehicles.  Certificates of Entitlement (COEs) are issued monthly by the LTA,
requiring persons interested in registering a new vehicle to bid for a COE.  The present bidding system
ranks the bids in descending order and the lowest-pri ce bid that qualifies for the quota allocated becomes
the quota premium.  Successful bidders will pay the quota premium.  The minimum bid must be at leastS$1.
Taxes:  In addition to the COEs, until 31 August 1998, vehicle owners were required to pay an upfront tax
(registration fee and additional registration fee) and annual road taxes.  The registration fee is fixed at
S$140 for all vehicle categories.  The additional registration fee is based on the open market value of thevehicle (ranging from 5% for light goods vehicles to 140% for cars).  Before 1 April 1998, the upfront taxranged from S$1,000 plus 150% of the open market value for private cars, to S$14,000 plus 5% of the openmarket value for heavy goods vehicles.  The open market value is assessed by the Customs and ExciseDepartment and takes into account the purchase price, fr eight, insurance, and all other charges incidental to
the sale and delivery of the car in Singapore.  The tax system for motor vehicles was amended as of
1 September 1998 mainly for the following reasons:  the previous tax system, by requiring high taxes upfront, placed greater emphasis on vehicle ownership rather than use;  and the previous system lacked aconsistent basis for charging taxes across different vehicle types.
The new tax system reduces fixed ownership and annual road taxes for most vehicles and places greater
emphasis on tax based on road usage through the electronic pricing system.
Electronic road pricing:  The Electronic Road Pricing (ERP) System was introduced in 1998 and is based
on road usage rather than vehicle ownership.  The ERP replaces the previous manual road pricing scheme
called the Area Licencing Scheme (ALS), introduced in June 1975, and the Road Pricing Systemintroduced on 1 June 1995.  The previous system required motorists to purchase and display a colour-codedlicence to enter a restricted zone in the city or to us e certain expressways or major roads.  The cost of the
licences varied depending on periods of heavy and ligh t road usage and the category of vehicle.  The ERP
scheme was completed at a cost of almost S$200 million and was built by a consortium consisting of
Philips (Singapore), Mitsubishi Heavy Industries, Miyoshi Corporation, and CSE Engineering (Singapore).
Source: Land Transport Authority, More About ERP [Online].  Available at: http://206.239.162.52/lta/erp/
erpwrtup.htm.
79. While the recent emphasis has been placed on encouraging the development of public
transport through the MRT and the LRT, the Government also plans to expand and develop a more
                                                     
49 Land Transport Authority (1996).WT/TPR/S/67 Trade Policy Review
Page 110
comprehensive road network.  Around S$1.1 billion will be spent by the year 2001 to expand the
current 3,000 km road network by 225 km.
80. In addition to managing the public and road transport system, the LTA establishes standards
to ensure the roadworthiness of Singapore's motor vehicles.  All cars between three and ten years old
must undergo a roadworthiness inspection every two years (every year for cars over ten years).Commercial vehicles and buses are subject to yearly inspections in the first ten years;  older vehicles
are subject to a bi-annual inspection, while motor cycles and scooters are inspected once after three
years and annually thereafter.  A ban is maintained on imports of all motor vehicles of three years and
older for environmental reasons according to the authorities.  However, in light of the frequent
mandatory testing required to ensure roadworthiness, the necessity of maintaining such a ban is notclear.  Indeed the ban might be counterproductive insofar as it prevents three-year-old second-hand
cars from replacing vehicles that are much older and therefore, presumably, more polluting and
susceptible to breakdown.
50
(c) Air transport
81. In 1997, Singapore's Changi International Airport handled over 25 million passengers, an
increase of 2.7% over the previous year, while the number of commercial aircraft that used the airport
increased by 3.6%, to 172,672 (Table IV.5).  Around 1.3 million tonnes of air cargo was handled bythe airport in 1997, ranking the airport fourth in th e world in terms of international air cargo tonnage
handled. Singapore has air links with 151 cities in 51 countries, with over 3,100 scheduled flights by
63 airlines.  The sector, like other services, was adversely affected by the regional economic crisis,
especially in the latter half of 1997 and in 1998.  Improvements were noted, however, during the first
half of 1999, when passenger and cargo services through Changi Airport grew by 8% and 11%,respectively.
Table IV.5
Air transport services, 1995-99
1995 1996 1997 1998 1999a
Aircraft movement (No.) 156,334 166,749 172,672 165,242 81,951
Passengers ('000) 23,196 24,514 25,174 23,803 11,740
Arrivals 10,920 11,587 11,916 11,292 5,887
Departures 10,823 11,542 11,883 11,231 5,852
Transit 1,453 1,384 1,375 1,280 754
Cargo services (tonnes)
Discharged 577,749 622,019 696,778 651,567 345,871
Malaysia 23,409 21,882 26,945 27,556 14,448
Thailand 44,934 47,096 51,049 41,902 22,419
Japan 58,314 58,375 71,259 63,021 30,930
Chinese Taipei 46,510 50,715 54,607 54,880 29,236
Australia 59,067 61,271 64,314 64,412 36,998
Europe 96,429 102,118 116,040 109,038 57,107
United States 47,944 49,779 57,087 35,451 19,089
Loaded 528,024 568,438 639,570 632,093 339,778
Malaysia 31,272 33,002 31,264 24,112 11,722
Table IV.5 (cont'd)
                                                     
50 However, a ban is transparent co mpared to equivalent measures used in other countries, notably a
specific duty levied at a prohibitive rate on imported second-hand cars.Singapore WT/TPR/S/67
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1995 1996 1997 1998 1999a
Thailand 36,446 37,207 38,125 30,661 17,022
Hong Kong, China 45,106 47,708 56,109 54,633 26,970
Chinese Taipei 36,626 35,251 45,671 45,968 27,986
Australia 35,423 37,636 46,006 49,730 26,126
Europe 82,938 85,833 101,670 113,620 57,999
United States 34,408 39,140 51,896 51,529 27,263
a Preliminary (January–June).
Source: Singapore Department of Statistics (1998), Yearbook of Statistics, 1998;   and the Singapore authorities.
82. The sector is regulated by the Civil Aviation Authority of Singapore (CAAS), formed in
September 1984 under the Civil Aviation Authority of Singapore Act.  The CAAS regulates and
provides safety oversight over Singapore registered aircraft, Singapore aircraft operators, and
aerospace companies in Singapore;  it also licenses Singapore aviation personnel.  In addition, the
CAAS regulates and promotes the development of  air transport and supporting infrastructure,
provides air traffic control services, and search and rescue services, and manages Singapore Changi
and Seletar airports.  The CAAS advises the Government on matters relating to civil aviation andparticipates in all negotiations concerning air services agreements and multilateral fora on civil
aviation matters.
51  There have been no major changes to legislation governing regulation in the sector
since the previous Review.  The Air Navigation Act regulates aviation in Singapore, including aircraft
registration, airworthiness, licensing and opera tion, aircraft crew, and control of air traffic.
83. Singapore's designation criteria for air carriers under various bilateral agreements include:  a
requirement that the carrier be substantially owned and effectively controlled by the respective
contracting parties and/or their nationals;  and that the carrier, be incorporated in and have itsprincipal place of business in the contracting party designating the carrier, and be effectively
controlled by the contracting party and/or its nationals.  Airline operators in Singapore are permitted
to set their own tariffs.  Carriers may be required to file their tariffs with and obtain approval from the
CAAS, depending on the tariff regime adopted in the relevant bilateral agreement.  However,
according to the authorities, Singapore adopts a liberal policy towards the approval of air tariffs,ensuring that consumers' interests are well protected and that there is ample competition and capacity
in the market.  According to the CAAS none of the tariffs filed with the CAAS have been rejected
thus far.  Air cargo tariffs have not been regulated since 1987 although carriers are required to inform
the CAAS of their rates.
84. Singapore Airlines (SIA) is the national airline and is publicly listed.  The Government holds
a majority share of 53.8% through its holding comp any, Temasek Holdings.  SilkAir, a wholly owned
subsidiary of Singapore Airlines, operates to shor t-haul, secondary points in the region.  The share of
passengers travelling through Changi Airport that are carried by the two airlines has been rising
steadily, from an estimated 46% in 1995 to around 52% in 1998.  The Government has a liberal
regime with regard to airline companies operating in Singapore and does not grant preferentialtreatment to either airline.  Government employees on official travel may travel by any airline;  the
choice of carrier is made by the respective department.  A tax incentive administered by the TDB is
available for aircraft leasing companies on income derived from offshore aircraft leasing
(Chapter III(3)(vi)).  Approved companies, which need to apply to the TDB for this incentive, may
also depreciate aircraft bought during the incentiv e period over 20 years, instead of five years.
                                                     
51 Civil Aviation Authority of Singapore (undated).WT/TPR/S/67 Trade Policy Review
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85. Airport slots for Changi Airport are allocated by a Schedules Coordination Committee,
chaired by CAAS, comprising representatives from SI A, as the slots coordinator, and Changi Airport's
two ground handling agents.  Slots are allocated on the basis of IATA scheduling procedures.  Key
elements of this procedure include historical precedence ("grandfather rights"), standardized timing,
use-it-or-lose-it principles, and priority for regular scheduled air services.
86. Singapore is a party to most major international aviation conventions, including the
Warsaw Convention, Chicago Convention, Tokyo Convention, the Hague Convention, and the
Montreal Convention.  In addition, bilateral air services agreements have been signed with
90 countries, including open skies agreements wi th Brunei, New Zealand, and the United States.52
The bilateral agreements cover market-access issues such as routes, traffic rights, capacity and
frequency, and commercial operations such as the right to establish offices, to sell and market
air transport services, and to transfer funds from and to Singapore.
87. Ground handling services at Changi Airport are currently provided by two companies, the
Singapore Airport Terminal Services, run by SIA, and the Changi International Airport Services, run
by the Port of Singapore Authority and foreign carriers.53  According to the authorities there are no
legislative restrictions on other companies applying for a licence to provide ground handling services
at Changi Airport.54
(d) Maritime transport and port services
88. Singapore's merchant fleet is the seventh largest in the world;  annual growth has averaged
around 10% since 1989.  As of 31 December 1998, there were 3,412 vessels (Table IV.6).55  T h e
volume of maritime transport has also grown, with total cargo handled by Singapore increasing from
305 million tonnes in 1995 to 312 million tonnes in 1998.  The total number of vessels calling at thePort of Singapore increased from 104,000 to 140,922 over this period.
89. The maritime transport sector is under the purview of the Ministry of Communications and
Information Technology (MCIT) and the Ministry of Trade and Industry (MTI).  The Maritime and
Port Authority (MPA) of Singapore, a statutory body within the MCIT, was established in 1996 and
took over the activities of the Marine Department, the National Maritime Board, and some of thefunctions of the Port of Singapore Authority (PSA).  The MPA is responsible for the regulation of
port and shipping services, while the PSA manages and operates the container/cargo terminals and
other business and commercial activities.
56   The MPA is divided into seven principal divisions,
Corporate Services, Information Technology, Policy,  Port, Shipping, Technology, and Training.  In
addition, commercial aspects of shipping services, including representation in international fora suchas the World Trade Organization, are handled by the Trade Development Board, a statutory body
within the MTI.
                                                     
52 At the time of the last Review, 84 air services agreements had been concluded with trading partners.
53 The foreign carriers shares are Air France (40%), China Airlines (4.4%), Garuda Indonesia (4.4%),
Lufthansa (4.4%), and KLM Royal Dutch Airlines (4.4%).
54 The authorities would take into account such factors as their economic contribution, space
constraints, safety and security implications etc. when  considering additional applications.  However, they note
that the two ground-handling companies are currently able to provide the full range of passenger and cargo
handling and ground services at Changi Airport.  Moreover, ground handling rights are often included as part of
the landing rights package i.e. "hard rights", which should be negotiated for under bilateral air servicesagreements.
55 Singapore International Chambers of Commerce (1998).
56 WTO (1996).Singapore WT/TPR/S/67
Page 113
Table IV.6
Shipping and maritime transport services, 1995-98
1995 1996 1997 1998
Vessel arrivals (No.) 104,014 117,723 130,333 140,922
Shipping tonnage ('000 GT) 710,573 768,521 808,305 857,655
Total cargo ('000 tonnes) 305,484 314,164 327,507 312,322
General and non-oil bulk 179,109 184,286 197,720 185,154
Mineral oil 126,375 129,878 129,787 127,168
Total container throughput ('000 TEUs) 11,846 12,944 14,136 15,136
Bunker sales ('000 tonnes) 17,489 16,939 16,941 18,064
Singapore ship registry (end of period)
Number 2,910 3,157 3,380 3,412
Tanker 384 434 470 480
Cargo 386 432 500 505
Passenger/ferry 78 88 94 98
Tug 495 561 636 700
Other 1,567 1,642 1,680 1,629
Gross tonnage ('000) 14,964 18,239 20,774 22,025
Source: Singapore Department of Statistics (1998), Yearbook of Statistics, 1998;  and data provided by the Maritime and
Port Authority of Singapore.
90. The main legislation regulating the sector includes the Merchant Shipping Act and its
Regulations and the Carriage of Goods by Sea Act.  In addition, there is a law on the prevention ofpollution, the Prevention of Pollution of the Sea Act and its Regulations, and on pollution liability, the
Merchant Shipping (Civil Liability and Compensation for Oil Pollution) Act and Regulations.
91. According to the authorities, there are no laws or regulations restricting foreign participation
in international shipping.  Shipping companies wishing to provide shipping services in Singapore
need not be registered with the MPA.  Inclusion in the Singapore Registry of Ships requires provisionof supporting documents to the Shipping Division  of the MPA, including details of the owning
company;  bill of sale/builder's certificate;  deletion certificate of previous registry;  certificate of
classification;  certified carving and marking note;  and trading certificates.  Registration appears to be
rapid, often within two hours of submission of all the relevant documents.
57  At the end of 1998, there
were 3,412 ships on the Singapore Registry, an equivalent of 22 million gross tonnes.
92. There are no restrictions on freight charges, and freight companies are not required to file
their freight rates with the Singapore Government.  No competition laws affect the carriage of
commercial cargo.  For government cargo, in theory, "nominated" carriers have a first right of
refusal.58  However, in practice, according to the aut horities, government cargo is carried by the most
competitive companies, and the nominated companie s have to compete with all other companies on
cost and delivery times.
93. Singapore's commitments in the GATS negotiations for this sector include shipping agency
brokerage services as well as ocean freight transportation, except cabotage services.  For the first three
modes of supply there are no limitations on market access or national treatment for these services.  On
the presence of natural persons, national treatment is unbound and market access is subject to
Singapore's horizontal commitments.  Singapore was an active participant in the subsequent
                                                     
57 Singapore International Chambers of Commerce (1998).
58 The list of nominated carriers is not published.WT/TPR/S/67 Trade Policy Review
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WTO Negotiating Group on Maritime Transport Services.  Its offer covered three main areas, access
to and use of port facilities, auxiliary services, and ocean transport.  Singapore left its offer on the
table when negotiations were suspended.
94. Bilateral shipping agreements are currently in place with China, India, the Republic of Korea,
Myanmar, and Viet Nam.  There are no measures prescribing any form of cargo sharing with partnercountries in any of these agreements.  Singapore does not implement any policy measures that relate
to liner conferences.
Port services
59
95. Singapore is the world's busiest ports in terms of shipping tonnage handled annually.  In 1998,
140,922 vessels called at the port of Singapore, representing a shipping tonnage of 858 million grosstonnes.  The port is also the busiest container port in the world, one of the world's largest bunkering
ports, and the third largest oil-refining centre with most of the world's major oil-producing companies
represented.  A total of about 18 million tonnes of bunkers were supplied in 1998, while oil-refining
capacity is currently over 1.25 million barrels per day.
96. The overall policy goal of the Government of Singapore and the MPA is the strengthening of
Singapore's position as a regional hub port and as a premier international maritime centre, and to work
towards a more conducive business environment in Singapore for the maritime industry.  The MPAbelieves that the corporatization of the Port of Singapore Authority (PSA), on 1 October 1997, should
enable it to compete more effectively in the regi on.  The PSA Corporation Limited is currently owned
by the Government through its holding company, Te masek.  Its main activities are container terminal
operations;  development, operation and management of international port terminals;  and
warehousing and logistics management.  In this regard, the PSA was issued with three public licencesupon corporatization for the operation of cargo and passenger terminals and the provision of pilotage
and towage services.  The MPA regulates the activities of the PSA to ensure competition in liberalized
services and to maintain Singapore's status as one of the largest and most efficient ports in the world.
97. The liberalization of tug services, announced by the MPA in 1997, was carried out in three
phases.  Under phase 1, restrictions on the purchase of new tugs for replacement purposes and oncharter or time-share of new tugs with the PSA, were lifted on 1 September 1997.  This was followed
by permission for tug operators with public licences to service vehicles at Jurong Port and all
shipyards and oil terminals, introduced under phase 2 in March 1998.  As of 1 March 1999, six tug
operators with public licences have been allowed to service ships calling at all sectors within the port
waters, including ships that call at PSA's conventional container and cruise passenger terminals.Criteria for issuing public licences include:  the company's experience in tug operations to assist in
berthing and unberthing of vessels, and quality of service;  the tug fleet and its operational
capabilities;  the company's business plan;  and the financial stability of the company.  According to
the authorities, this liberalization has resulted in more competitive rates and better service levels.
Pilotage services continue to be provided only by  the PSA Corporation although the authorities state
that the MPA is constantly reviewing other sectors of the port that could be liberalized, including
pilotage services.
98. In an effort to keep Singapore attractive to ships and to keep costs competitive as a premier
hub port, the MPA introduced a concession of 20% on port dues to all container vessels (excluding
long-staying ships) from May 1996.  The concession was extended up to 2000.  In addition, a tax
exemption is provided by the Trade Developm ent Board for approved international shipping
                                                     
59 Unless otherwise indicated, this section is based on Maritime and Port Authority of Singapore
(1997).Singapore WT/TPR/S/67
Page 115
companies (Chapter III(3)(vi)).  A number of steps have also been taken to improve port management
and accommodate efficiently the growing number of ships calling at Singapore.  These include:
extending Singapore port's geographical limits in July 1997;  creating two new anchorages for ships
calling at Singapore for bunkering, crew change, and supplies;  and widening the northern part of the
Jong Fairway to accommodate the expected increase in shipping to and from a new container terminalunder construction at Pasir Panjang.  Measures have also been taken since 1997 to strengthen
Singapore's position as the top bunkering port.  Some of these include the removal of overside bunker
wharfage;  implementation of the Bunker Quality Inspection Scheme (BQIS), which helps ensure the
quality of bunkers supplied within Singapore port waters;  and the introduction of a licensing scheme
for category 'A' bunker tankers, which ensures that bunker tankers are well equipped.  In addition,concessional port dues were revised in 1997 for vessels taking bunkers at designated anchorages.
60
Other measures include the use of information technology to increase efficiency in port managementand in the submission and processing of declaration forms by shipping agents;  the development and
enforcement of high standards regarding safety and the environment;  and maritime and port training
to ensure high personnel and port safety standards.
99. Singapore, through the MPA and the TDB, also participates in international fora to safeguard
and promote its port and maritime interests.  It has been a member of the International MaritimeOrganization since 1966, and participates in regional meetings of ASEAN Senior Transport Officials
and in the APEC Transportation Working Group.  The MPA also maintains close links with the
international shipping, port, and maritime industry through participation in the ASEAN Ports
Association (APA) and the International A ssociation of Ports and  Harbours (IAPH).
(vi) Telecommunications
(a) Market structure
100. Singapore has one of the highest telephone densities in the world at around 57 lines per 100
inhabitants (Table IV.7).
61  The use of mobile telephone services has also risen rapidly, from around
9.5 per 100 in 1995 to 38 per 100 in 1999, mainly as a result of increased competition in the market.
The national telephone network was fully digitalized in late 1994 and all of Singapore's 27 localexchanges are currently linked by optical fibre.
101. Singapore Telecommunications Limited (SingTel ) has a monopoly over the provision of all
public basic telecommunication services (PBTS).
62  This monopoly will cease on 31 March 2000,
seven years in advance of the date originally scheduled in Singapore's GATS commitments.63  In this
                                                     
60 Under the scheme, intended to boost Singapore's bunkering industry, the gross-tonne limit for vessels
that take bunkers at designated anchorages and that enjoy special concessionary port dues of S$1 instead of
S$2.20 per 100 gross tonnes, was reduced from 30,000 gross tonnes to 20,000 gross tonnes.
61 For example, the figures are around 62 per 100 in the United States and 56 per 100 in the
United Kingdom.
62 PBTS licensees provide the full range of basic telecommunication services, including public
switched telephone, message, and integrated services di gital network (ISDN) services, leased circuit services,
public switched data services, and public radio communication services.
63 The decision to shorten SingTel's monopoly by seven years, to 31 March 2000, was taken in
response to the growing importance of telecommunications as a tradeable sector and of maintaining Singapore's
position as a business hub.  It was also a response by Singapore to rapid technological advances and theincreased pace of liber alization worldwide.WT/TPR/S/67 Trade Policy Review
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connection, a licence for PBTS was granted in April 1998 to one of three applicants, the StarHub
consortium (section (b) below).64
Table IV.7
The telecommunications sector in Singapore, 1995, 1998 and end July (1999)
(S$ and per cent)
1995 1998 1999
Total number of telephone lines 1,360,000 1,709,200 1,805,600
Penetration rates (per 100 inhabitants)
Direct exchange lines (DEL) 47.0 54.0 57.1
Pagers 30.0 41.0 39.8
Mobile telephones 9.5 22.0 38.3
Internet service accounts .. 9.5 14.7
Tariffs (S$)
Direct exchange lines
Residential rates (peak hours)a0.04 0.04 0.04
Business rates (peak hours)b0.03 0.03 0.03
Mobile telephones (peak hours)c0.2 0.2 0.2
Paging services (monthly rental as at 31 December 1997) 16.0 13.0 13.0
.. Not available.
a Based on average call duration of 3 minutes.
b Based on average call duration of 2 minutes.
c Based on charge per minute.
Source: Telecommunications Authority of Singapore (1998), Annual Report 1997/98;  and data provided by the
authorities.
102. The mobile telephone services market was liberalized on 1 April 1997;  currently, services are
provided by SingTel Mobile and Mobile One.  Two further public cellular mobile telephone services
(PCMTS) licences were granted in April 1998, to StarHub and to P2P, to begin operating on
1 April 2000;  however, the licence for P2P was withdr awn later because of local partners' difficulties
in forming the consortium.65  Radio paging services were also liberalized on 1 April 1997, when three
additional public radio paging services (PRPS) operators, Mobil One, ST Sunpage, and HutchisonIntraPage, were licensed to offer commercial paging services to compete against SingTel Paging.  In
addition, there are three internet service providers (SingNet, PacificNet and Cyberway)
(section (vii) below).
(b) Policy framework
103. The principal legislation covering telecommunication services in Singapore is the
Telecommunications Act, 1999, which defines the role of the Info-communications Development
Authority (IDA) in licensing, regulating, and promoting telecommunications and postal services.
66
                                                     
64 The other two submissions, from pre-qualified companies, were from Directline and TelecomOne
(Telecommunications Authority of Singapore, 1998).  According to the authorities StarHub was selectedprimarily due to its aggressive roll-out plans for an extensive fibre network to homes, offices, and other
buildings by 2002.  StarHub also offered a comprehensive range of services at competitive prices and a higher
quality of service standards.
65 Telecommunications Authority of Singapore (1998).  All tenders for PBTS and PCMTS licences
were examined by a Tender Evaluation Committee including members of the (then) TAS Board of Directors andrepresentatives from the (then) Ministries of Communications, Finance, and Trade and Industry.
66 Public postal services are provided by Singapore Post, a wholly owned subsidiary of SingTel.Singapore WT/TPR/S/67
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The IDA, which replaced the Telecommunications Authority of Singapore (TAS) and the National
Computer Board67, is empowered to grant, modify or suspend licences of telecommunication and
postal services operators.  The IDA also plays an important role in ensuring competition in the sector,
through guidelines on fair practices and conduct, regulating interconnection charges, and ensuring
equal and fair access to telecommunication networks.
104. Liberalization of the telecommunications sector has been deliberately phased and gradual, so
as to establish a competitive landscape that is fair, effective, and sustainable.  The authorities believe
that a progressive liberalization approach would maximize consumer welfare, optimize the use of
scarce resources, avoid unnecessary duplication of infrastructure, and ensure long-term infrastructure
development.  As a first step, the IDA will introduce full service and facilities-based competition in2000.  Once this is in place, IDA is committed to further liberalizing the industry, both at the service
and facilities levels, in 2002.
105. There have been several changes with regard to competition in the telecommunications
market in Singapore since the previous Review.  On 1 April 1997, the sector was opened to private
mobile telecommunications service providers and for value-added services, such as cellular and radio
paging services.  The opening of this segment of the market ended the monopoly of Singapore
Telecom (SingTel) over these services.  Although SingTel has a monopoly over the provision ofpublic basic telecommunication services, Singapore plans to fully liberalize this market by
1 April 2000 and has initiated the process by granting a basic telecommunications licence to the
StarHub consortium in April 1998.
68  Other services falling outside the ambit of SingTel's monopoly
have been fully liberalized.69  In view of the substantial investment to be made by StarHub, IDA
initially committed to a two-year moratorium within which no new PBTS operators would belicensed.  This two-year lead time would allow StarHub to fully roll out its nationwide network.
However, in order to maintain Singapore's edge in the info-communications sector, in January 2000
the Government decided to speed up liberalization further.  The principal changes include bringing
forward the introduction of full market competition in the telecommunications sector from
1 April 2002 to 1 April 2000, and lifting direct and indirect foreign equity limits for all PBTS licencesas of 21 January 2000.
70  The Government is also willing to compensate StarHub and SingTel for any
potential loss of profits resulting from these change s as well as to review StarHub's existing roll-out
and capital expenditure commitments.
106. In June 1999, the Government liberalized chain payphone services in Singapore.  Interested
parties may install and operate payphones in multiple consumer premises with the approval of thebuilding owners.  Such companies will be required to comply with the conditions of the Public Chain
Payphone Service Provider Class Licence, which sets out quality of service standards as well as
coverage and equal access obligations.  Registration with the IDA is required for payphone providers
of IDD/STD services but not for local calls only.  Liberalization has also taken place in several
internet-related services (section (vii) below).  Plans for further liberalization include the introductionof additional basic and cellular telephone operators in the year 2002 to increase competition in the
market.  Until January 2000, direct foreign investment was limited to 49% of total equity for all
services in which competition had been introduced;  in addition indirect investment of up to 24.99%
                                                     
67 The Telecommunications Authority Act, (Cap 323) was repealed on 1 December 1999.
68 StarHub's network is expected to cover 100% of the central business district areas and 64% of
residential lines by April 2000;  full network coverage is expected by April 2002.  The company plans to invest
around S$2.6 billion in infrastructure over the next  seven-ten years to support its growth (Sitathan, 1999).
69 These include internet, paging, cellular, trunked radio, value-added network, satellite
uplink/downlink for broadcasting purposes, VSAT, and mobile data services as well as the resale of SingTel'smonopoly services.
70 Ministry of Communications and information Technology (2000).WT/TPR/S/67 Trade Policy Review
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was allowed, amounting to an indirect cumulative total foreign investment of 73.99%.  As of
21 January 2000, direct and indirect equity restrictions for all PBTS licences have been lifted.71
SingTel is subject to the same restrictions;  the Government currently  maintains a golden share in
SingTel.
107. To ensure competition between the incumbent telecom provider and new entrants in the
market, the IDA Act and individual licences, require operators to provide mutual interconnection and
access to their telecommunication networks.  This is to ensure that users enjoy transparent and
seamless telecommunication services regardless of the network to which they are connected.  It also
promotes the development and establishment of a level playing field.  In January 1997, the TAS
published a framework on interconnection access and infrastructure sharing for PBTS.  Theframework set out the procedures for all interc onnection negotiations between IDA's licenced
telecommunication operators, including the principles governing interconnection, the duties and
obligations of telecommunication licensees in respect of interconnection and infrastructure, the
powers and role of the IDA in the negotiation proce ss, and the time-frames for different phases of the
negotiations.
108. The IDA has also established interim "ben chmark" interconnection charges for the PBTS
interconnection to serve as a reference point for the market to determine prices and avoid delays in theroll-out of the new entrant's network.  The benchmark interconnection charges will apply for the first
three years following the introduction of competition from 1 April 2000 to 31 March 2003.
Thereafter, interconnection charges will be commercially negotiated between operators.  The
interconnection charges are based on forward looking economic cost (FLEC) and long run average
incremental cost (LRAIC) principles.  Operators also  have to comply with the IDA's network practice
standards and a set of minimum quality-of-service standards.  Penalties may be imposed in the case of
non-compliance.
72  The IDA also reviews its policies and regulations on a regular basis to ensure that
the needs of the industry and consumers are addressed.73
109. Under the IDA's price regulation framework, all prices regarded as vital to promoting the
competitiveness of the industry, including basic services such as international direct dial services andleased circuits, are subject to price controls.  The IDA establishes a price control framework and
guidelines to ensure that prices remain competitiv e internationally.  While the IDA does not establish
tariffs, it instructs operators to adjust their tariffs if these are considered to be outside its guidelines,
and approves requests for tariff increases only if the increase is seen to be justified.
74
110. The IDA actively supports the development of Singapore's communication network and
infrastructure.  Under its Development Grant Scheme, the IDA provides assistance to encourage the
local telecommunications industry to upgrade its network infrastructure;  to encourage research and
development in advanced telecommunications;  and to encourage the development of enhanced
capabilities and innovative services.75  All companies registered in Singapore may apply for the grants
                                                     
71 Ministry of Communications and Information Technology (2000).
72 Sitathan (1999).
73 For example, the IDA plans to reduce mobile and pa ging licence fees to a flat 1% of annual gross
turnover from 1 April 2000, saving the operators around S$300 million per year (Telecommunications Authority
of Singapore, 1998).
74 Info-communications Development Authority (undated).
75 Generally up to 50% of the qualifiable direct project costs are provided by the IDA, with
co-financing provided by the recipient.  The proj ects range, on average, between one and three years.Singapore WT/TPR/S/67
Page 119
and must meet one of two criteria.76  The IDA has made available over S$250 million for the industry
thus far under this programme.
(c) Fourth Protocol to the GATS
111. In its improved offer under the WTO Agreement on Basic Telecommunication Services
(Fourth Protocol), which came into effect on 5 February 1998, Singapore included basictelecommunication services (including fixed line and mobile telephony), in addition to value-added
services.
112. Improvements were made with respect to commercial presence, through early liberalization of
public switched services and leased circuit facilities.  Licences for these services were to be provided
for up to two additional operators commencing 1 April 2000, instead of the previous offer underwhich broadcasting operators and other public telecommunication licensees could have provided these
services, subject to market conditions,  ahead of the expiry of the exclusivity granted to the current
licenced operator in 2007.  In addition, the maximum indirect share that may be held by foreign
investors was raised to a cumulative total of 73.99% (based on a maximum direct foreign equity limit
of 49% and a maximum indirect foreign equity limit in the local partner of 49% ).
113. In mobile telephone services no limits were placed on market access through commercial
presence except for public cellular mobile telephone services for which more licences are expected tobe granted from 1 April 2000.  As for basic teleco mmunications services, the maximum direct foreign
equity limit was placed at 49% with a cumulative indirect foreign investor share of 73.99%.  These
restrictions were lifted as of 21 January 2000.  In all these cases, licensing must take place through a
public tender process and the number of licences may be limited due to scarce resources, such as
frequencies and rights of way.
114. Singapore has also committed itself to all the regulatory principles in the WTO Basic
Telecommunications reference paper.
(d) Telecommunications equipment and standards
115. In order to provide high-quality services and ensure consumer protection, all
telecommunications equipment intended for local use must be approved by the IDA.  In 1997/98 theTAS type-approved 960 models of telecommunications equipment.  Retailers are required to clearly
label such approved equipment and display it separately from equipment intended for export.  The
IDA also conducts regular inspections to ensure compliance with its guidelines.  Between April 1997
and March 1998, TAS enforcement officers conducted 684 inspections, from which 56 cases of
violation were identified.  The IDA interacts on a re gular basis with the industry regarding standards,
and also liaises with other standards-setting bodies for harmonizing standards domestically and
internationally.  Additional input is sought from the Telecommunications Standards Advisory
Committee (TSAC) and the Radio Communication Standards Advisory Committee (RSAC) with
respect to technical standards and regulatory issues for line terminal equipment and radio equipment,
                                                     
76 The criteria are:  to foster the strategic development of info-communication and postal infrastructure
and services and enhance the competitiveness of Singapore as a global and regional business hub;  and to fosterinnovation and advancement of technology and enhance the capability, efficiency and quality ofinfo-communication services (Telecommunicatio ns Authority of Singapore (undated (a)).WT/TPR/S/67 Trade Policy Review
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respectively.77  Members of the two committees comprise representatives from network operators,
manufacturers, suppliers, research institutes, academia, and government agencies.
116. In a separate development, a Memorandum of Understanding (MOU) was signed by the
Productivity and Standards Board (PSB) and the TAS on 1 August 1997, to encourage and promote
cooperation in telecommunications product testing, standards, technical information, training,technology development, and any other field  of mutually agreed interest.  The PSB recently set up a
Telecommunications Product Testing Centre, to enable manufacturers and suppliers to have their
products tested in Singapore;  previously, teleco mmunications products had to be sent to overseas
testing laboratories during the development stage or before being exported.  The PSB's testing centre
offers services, to manufacturers and suppliers, for testing telecommunications products to overseasstandards for export purposes.  In addition, the centre can provide testing service for products destined
for the local market.
117. Singapore also works actively in the region to improve mutual recognition of
telecommunications standards and testing with its major trading partners, and was a participant in
APEC's Mutual Recognition Agreement in Telecommunications Services.
(vii) Electronic commerce
78
118. Singapore believes that its future competitiveness lies in information technology, and aims to
become an international hub for electronic commerce.  In the WTO, Singapore participated actively in
preparations for the work programme on electronic commerce for the Ministerial Conference in
Seattle in November 1999.  It has suggested a moratorium on customs duties on electronic commerce
until at least 2001, as well as the creation of a working group to study the application of WTO rules
and principles for electronic commerce.79
119. The Electronic Transactions Act, which came into force in July 1998, created a legal
framework for electronic commerce transactions in Singapore.  The Act sets out a commercial code
for transactions and for Certification Authorities to verify and certify the use of digital signatures.
The Act also created a Controller of Certification Authorities whose duties include licensing and
monitoring the Certification Authorities.  Responsi bility for appointing the Controller lies with the
Info-communications Development Authority (IDA the statutory board created on 1 December 1999,
combining the responsibilities of the Telecommunications Authority of Singapore and the National
Computer Board).  Other relevant legislative changes include the Evidence Act, which was amended
in 1996 to allow the use of electronic records as evidence in a court of law;  and the Computer Misuse
Act, which was strengthened in 1998.
120. The NCB (now part of the IDA), in conjunction with other government agencies, launched the
Electronic Commerce Masterplan in September 1998 to bring about the strategic adoption of
electronic commerce by Singapore's industry.  To  support the development of electronic commerce,
the Government launched Singapore ONE, a natio nwide broadband internet network connecting
homes, schools, offices, and libraries.  The network is supported by the NCB/IDA, the NationalScience and Technology Board, the Economic Development Board and the Singapore Broadcasting
Authority.  Singapore ONE comprises two levels, the broadband infrastructure, and a second level of
                                                     
77 The committees were appointed by the TAS (now the IDA), to advise on matters relating to radio
communication and line telecommunication stan dards for customer equipment and cabling.
78 Unless otherwise indicated, electronic commerce is understood to mean "the production, distribution,
marketing, sale or delivery of goods and services by electronic means" as defined by the Ministerial Declarationon Electronic Commerce in Singapore, December 1997.
79 WTO document WT/GC/W/247, 9 July 1999;  and Business Times , 8 November 1999.Singapore WT/TPR/S/67
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advanced applications and services that take advantage of the infrastructure's high speeds and high
capacity capabilities.80  In addition to providing S$150 million in infrastructure and other funding for
Singapore ONE, these government departments reached a Memorandum of Understanding (MOU)
with 17 companies, in 1998, to provide support of over S$100 million to develop advanced
technologies and applications for the network.  Singapore ONE was initially launched as a pilotprogramme in June 1997;  it became fully operational in December 1998.
121. Recent efforts to expand internet services have  been supported by liberal policies regarding
licensing and foreign investment in the sector.  The provision of public internet access services was
first liberalized in September 1995 and further liberalized in 1998.  In October 1998, the Government
announced that no limits would be placed on the number of licences to be granted in the sector.  Anyparty meeting the minimum criteria set by the IDA would be issued an Internet Access Service
Provider (IASP) licence.  The internet reseller's market in Singapore is also fully liberalized.  The
resale of internet services does not require a licence from the IDA.  In September 1999, Singapore
also lifted all controls on foreign ownership of key internet infrastructure, previously capped at 49%
for direct equity and 73.99% for indirect foreign equity, both for nternet Access Service Providers
(IASPs) and Internet Exchange Service Providers (IXPSs).
81  There are currently six internet service
providers in Singapore and more than 100 internet resellers.  The provision of international internetexchange services was also liberalized in June 1999.  Any interested party may apply to the IDA for
an IXSP licence to provide internet exchange services in Singapore.
82
122. As with other services, liberalization has been accompanied by the creation of a "light touch"
regulatory framework to ensure that minimum st andards are maintained by Internet Service and
Content Providers.  The framework is based on a combination of self-regulation by industry, public
education, and an Internet Class Licence Scheme a nd Code of Practice to provide minimum standards.
The Internet Class Licence Scheme, which is administered by the Singapore Broadcasting Authority,
a statutory board in the Ministry of Information and the Arts, includes a Code of Practice with which
licensees are expected to comply.83  Singapore is also working actively to harmonize cross-border
e-commerce laws, policies and infrastructure with other countries bilaterally and through internationalfora like APEC.
123. The Government expects widespread use of electronic commerce to increase demand for
Singapore ONE broadband services.  According to the authorities, electronic commerce is already
expanding rapidly;  total electronic commerce transactions increased by one third from S$912 million
in 1997 to S$1.2 billion in 1998.  By May 1999, there were almost 450,000 subscribers to the internet,and connection is being extended to schools, public libraries, and community centres.
(viii) Tourism
124. Receipts from tourism services have been declining since 1995, although as a share of total
services receipts, tourism's contribution has climbed back up to 28%, around the same as in 1995
(Table IV.8).  Tourist arrivals to Singapore declined consecutively by 1.3% and 13.3% in 1997 and1998, after peaking in 1996 at 7.3 million visitors.  The declines were mainly due to pollution caused
by forest fires in the region and the Asian economic crisis which affected travel in the region.  The
majority of arrivals are from ASEAN countries, at around 30% in 1998, followed by Japan and the
                                                     
80Telecommunications Authority of Singapore (undated (b)).
81 Financial Times,  14 September 1999.
82 International Internet Exchange (IXS) are physical  interconnection sites for Internet Access Service
Providers (IASPs) to access the global internet backbone and exchange traffic with one another.
83 Licences are granted automatically to all websites.  Political and religious websites are also
automatically licensed but are required to regi ster with the Singapore Broadcasting Authority.WT/TPR/S/67 Trade Policy Review
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United Kingdom.  Visitors on holiday account for around 45% of all arrivals while business visitors
accounted for around 16.5% of the total in 1998.  The average hotel occupancy rate in 1998 had fallen
to 69% as a result of declining tourist activity;  figures for 1999 appear to show an increase.
Table IV.8
Singapore's tourism industry, 1995-99
1995 1996 1997 1998a1999
Tourism receipts (S$ million) 11,830.5 11,216.4 10,191.0 8,568.2 7,459.5b
(percentage of services receipts) (28.0) (26.6) (22.5) (27.9) ..
Number of gazetted hotels (end of year) 81 90 94 101 98c
Number of rooms available (gazetted hotels) 27,309 28,999 29,583 30,123 30,345d
Average hotel occupancy rate (per cent) 84.1 82.2 79.5 69.0 74.7c
Visitor arrivals ('000) 7,136.5 7,292.4 7,197.5 6,242.2 6,341.9
Percentage of total arrivals
ASEAN 30.7 30.9 32.3 30.2 31.5
Japan 16.5 16.1 15.2 13.5 12.4
United States 4.8 5.1 5.2 5.5 5.1
United Kingdom 4.1 4.3 4.6 5.7 5.9
.. Not available.
aP r e l i m i n a r y .
b January-September.
c January-November.
d Forecast.
Source: Singapore Department of Statistics (1997) Yearbook of Statistics, 1997;  and Singapore Annual Report on Tourism
Statistics 1998.
125. Singapore's tourism development and promotion is the responsibility of the
Singapore Tourism Board (STB) in the Ministry of Trade and Industry, which replaced the
Singapore Tourist Promotion Board in November 1997.  In addition to promoting Singapore as a
tourist destination, the STB markets Singapore as a centre for business and, given its strategic
location, as a tourism hub for the region.  The Board has launched several worldwide communicationscampaigns to develop interest in Southeast Asia and Singapore as a tourist destination.  Particular
niches of interest include business meetings, conventions, and exhibitions;  the country holds the
position of seventh most popular convention city in the world.
126. The STB also plays a regulatory role, licensing tourist enterprises, guides, and travel agencies,
and ensuring that high standards are maintained by tourist enterprises.  Hotels are required to renew
their licences through the Hotel Licensing Board at the beginning of each year;  for travel agenciesand tourist guides, licence renewals are required every two years and three years, respectively.  The
STB enforces its high standards by carrying out ad hoc checks on hotels and by requiring audited
accounts of travel agencies every month in addition to ad hoc checks by the authorities.  Tourist
guides are required to fulfil a number of conditions for renewal of their licences.  Under the Singapore
Tourism (Cess Collection) Act and Regulations, the STB collects cess from hotels, foodestablishments, and public houses, for accommodation and food and beverage consumption.  Locally
owned as well as foreign companies and agencies are subject to the same rules and regulations.  There
are no restrictions, including on the purchase of land, on foreign investment in the sector.
127. Recent efforts to expand tourism have focused on six strategic thrusts outlined by Tourism 21,
a blueprint to take the tourism sector into the 21
st century.84  Tourism 21 identified Singapore as being
                                                     
84 Singapore Tourist Promotion Board (1996).Singapore WT/TPR/S/67
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a premier destination for holidaymakers, for business and for investment, and a strategically
positioned base for travel in the region.  Its recommendations aim to develop further these three
aspects of tourism in Singapore.  In this respect,  the six strategic thrusts identified by the STB are:
redefining tourism;  reformulating the product;  developing tourism as an industry;  configuring new
tourism space;  partnering for success;  and championing tourism.  The Board believes that the bestway to realize this strategy is to adopt a cluster development approach around tourism, to encourage
upgrading of business know-how a nd tourism-oriented skills of workers, to attract international
investment in Singapore's tourism industry, and to  market the Singapore brand name aggressively,
especially through the internet.
85
128. To develop partnerships, the STB plans to form a Destination Marketing Council with
participation from the public and private sectors to promote Singapore regionally.  To encourage
regular contact with the private sector with respect to policy-making, the STB will organize a series of
Singapore Tourism Conferences, annually, to encourage debate on sector-specific and general policiesinfluencing the development of tourism.  The STB will also develop its role as a one-stop agency for
tourism development, offering updated information on industry development and incentives for
investors in the industry.
86
(ix) Professional services
(a) Accountancy services
129. Regulation in the accountancy sector is carrie d out by the Public Accountants Board (PAB)
established under the Accountants Act, 1987, and by rules established under the PAB and the Institute
of Certified Public Accountants of Singapore (I CPAS) Rules, 1989, as amended.  Accountants may
register as non-practising or practising Certified Public Accountants (CPAs) of the ICPAS.  However,
all practising CPAs are required to be registered with the PAB and be members of the ICPAS, which
monitors professional, ethical, and technical developments in the profession.  To qualify as a
practising CPA, relevant work experience is required in accounting, auditing, and taxation.  Auditing
and liquidation licences for practising CPAs of the ICPAS are issued by the PAB to successfulapplicants.
130. Under Singapore's GATS Schedule there are no limitations on market access for the first three
modes of supply, except that practising CPAs must practice substantially in Singapore.  There are no
national treatment limitations on the first three modes of supply;  the presence of natural persons is
unbound except as indicated in the horizontal schedule.  Accountants qualify for registration with the
ICPAS and the PAB, in the case of practising CPAs, if they have passed either the final examinationof a qualifying institution in Singapore or the foreign equivalent, and acquired relevant experience.
87
There are no nationality or citizenship requirements nor any restriction on foreigners practising inSingapore, as long as they fulfil the conditi ons of registration with the PAB and the ICPAS.
                                                     
85 Cluster development for example, would include tourist attractions based on themes such as
eco-tourism, resorts, cultural tourism, with supporting services such as information technology, travel agencies,
hotels and catering, etc.
86 As part of its role in collecting information on the industry, the STB has established a
Tourism Satellite Account (TSA) with the Department of Statistics.  The Account will help the STB to collectand maintain updated information regarding the tourism industry.
87 According to Singapore's response to the questi onnaire on accountancy services, recognized foreign
accountancy institutions include the Institutes of Chartered Accountants in Scotland, England, Wales and
Ireland, the Chartered Association of Certified Accountant s, the Institute of Chartered Accountants in Australia,
the Australian Society of Certified Practising Accoun tants, the Institute of Chartered Accountants of
New Zealand, the Canadian Institute of Chartered Accountants, the American Institute of Certified PublicAccountants, and the Chartered Institute of Management Accountants of the United Kingdom(WTO document S/WPPS/W/7/Add.21).WT/TPR/S/67 Trade Policy Review
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131. At the end of 1998 there were 12,237 accountants registered with the Institute.  The majority
of registered accountants are employed in indust ry or commerce (65% in 1998) with around 23% in
public practice.  The remaining 12% were employed in the public sector, academia, and others.
(b) Legal services
132. In 1998 there were 3,401 registered lawyers in Singapore.  The legal profession is regulated
under the Legal Profession Act by the Board of Legal Education, established in 1967.  Functions
carried out by the Board include the registration of qualified persons seeking admission as advocates
and solicitors, and to provide training, education, and examination of qualified persons intending topractice law in Singapore.  All entrants to the legal profession in Singapore must fulfil the necessary
qualifications specified under the Act and the required postgraduate training before admission to the
Bar.  Under the Legal Profession (Recogniti on of Foreign Qualifications) (Consolidation)
Notification, Singapore recognized legal certificates from a number of foreign universities, including
from Australia;  Canada;  Hong Kong, China;  Malaysia;  New Zealand;  and the United Kingdom.
88
According to the authorities, as of 1 May 1993, only university degrees of at least a second upper
from 15 universities from the U.K. are recognized;  in addition, practitioners from Malaysia and Hong
Kong, China, with at least three years experience may apply for admission as advocates and solicitors.
All entrants to the Bar must apply for a practising certificate from the Registrar of the Supreme Court
through the Law Society of Singapore as a prer equisite for practising law in the country.
133. Foreign law firms may set up offices in Singapore to advise clients only on the laws of their
home country or international law.  They are not permitted to hire or form partnerships with
Singaporean lawyers to practice local law in Singapore, although they may enter into operational
agreements with local firms on a project-by-project basis.89  In 1999, however, in relation to
liberalization in financial services, the Government  announced that top foreign law firms with a good
track record in financial work will be allowed to enter into joint ventures or establish formal alliances
with similar top Singapore law firms;  in such cases,  certified foreign lawyers participating in the joint
venture may, on completion of prescribed courses on Singapore law, practice Singapore law with theexception of representation before judicial or regulatory bodies.  The number of such joint ventures
will be restricted to five, a condition to be reviewed in five years.  The legislation is expected to be
enacted by Parliament in early 2000.  The issue of whether foreign law graduates from universities
other than those already recognized by Singapore may qualify for admission to the Singapore Bar is
currently being examined by a Committee on the Supply of Lawyers, chaired by the Attorney Generalof Singapore.
134. Singapore made no commitments with regard to legal services in its GATS Schedule.
(c) Engineering services
135. Engineering services are regulated by the Professional Engineers Board (PEB), established in
1970.  Professional engineers meeting the PEB requirements, including those trained overseas, must
register with the PEB in order to engage in professional engineering works and submit plans and
certificates to the building authorities in Singapore, regardless of whether practising as individuals orin partnership with other registered professional engineers.
136. Under Singapore's GATS commitments, sectors covered are civil, production, mechanical,
electrical, electronic, aeronautical, marine, naval, industrial, and chemical engineering services.  Otherthan its horizontal commitments, Singapore has residency requirements for all professional engineers.
                                                     
88 First and second schedules of the Legal Profession (Recognition of Foreign Qualifications)
(Consolidation) Notification, 1985.
89 In 1999 an estimated 60 foreign companies were practising offshore law in Singapore ( Wall Street
Journal , 1 June 1999).Singapore WT/TPR/S/67
Page 125
Furthermore, commercial presence limitations on market access for limited corporations include the
requirement that:  the chairman and at least two thirds of the board of directors must comprise
engineers, architects, or land surveyors registered with local professional bodies;  and that
professional engineering work in Singapore be under the control and management of a director who is
a registered professional engineer ordinarily resident in Singapore and has a valid practisingcertificate.  For unlimited corporations and partnerships, similar restrictions relating to residency and
registration requirements apply, in addition to the requirement that for unlimited corporations,
professional engineering work must be under the control and management of a corporation directorwith a valid share.
137. Singapore amended its laws in April 1995 to liberalize the licensing of engineering firms.  A
requirement that not less than two thirds of the shar es of a corporation be owned by directors of the
corporation, who must be professional engineers or allied professional engineers, was removed.  A
requirement that all directors must be professional engineers or allied professionals was also relaxedto require only two thirds of the directors to be professional engineers or allied professionals.
(x) Energy and water
138. Because of the vital role played by energy and water as a business input, reform of these
services has become necessary to improve overall productivity in the economy.  Electricity, which is
regulated by the Public Utilities Board (PUB), a statutory body set up in 1963, is gradually being
exposed to competition.  Competition is being introduced in stages, beginning with the corporatizationof PUBs electricity undertakings.  There are current ly three electricity generation companies, two of
which are owned by Singapore Power, a public sector company under Temasek Holdings, the
government holding company
90;  one transmission and distribution company, Power Grid Limited,
owned by Singapore Power;  and one electricity supply company, also owned by Singapore Power.91
In March 1999, the Government decided that Singapore Power should fully divest itself of Power
Senoko and Power Seraya, the two generating comp anies it currently owns.  Separating ownership
between the generation and transmission and distribution companies is, the authorities believe, animportant step in the evolution of the electricity industry to further enhance competition.  Competition
is currently allowed between electricity generators and suppliers under the Singapore Electricity Pool,
which commenced operations on 1 April 1998.
92  Overseas power producers operating power plants
outside Singapore may supply electricity through the SEP.  For system security, the total supply to
Singapore from all overseas power producers is restricted to 600 MW in the first instance.
139. The non-fuel prices of generation companies and the prices of Power Grid for transmission
and distribution of electricity are currently subject to price regulation, which is based on the consumer
price index minus efficiency gains.  The factors taken into account when measuring efficiency gains
include, inter alia,  labour productivity and technology improvements.  Power Supply's margin in the
franchised market is regulated, while prices in the non-franchised market will not be regulated.  Price
regulation is expected to be in place until there is effective competition.
140. The PUB remains the sole supplier of water in Singapore.  Water is obtained from sources in
Singapore and the Malaysian state of Johor.  Water tariffs were restricted from 1 July 1997 with the
                                                     
90 Semb Corp Cogen, which holds a public licence to generate electricity, is scheduled to commence
commercial operations in 2001.
91 Power Supply Limited, the only supplier of electricity, holds the franchise to supply consumers
whose maximum power requirement does not exceed 5 MW ("franchised customers").  The Government may
consider lowering this threshold, thereby allowing more  consumers to choose their electricity suppliers, in due
course.
92 The SEP is under the governance of the Singapore Electricity Pool Executive Committee (SEPEC)
which includes representatives from the generating and supply companies, the transmission and distributioncompany, and the PUB.WT/TPR/S/67 Trade Policy Review
Page 126
aim of encouraging consumers to treat water as a precious, strategic resource and to encourage
conservation.  Restructuring will be implemented over four years and it is expected that by
1 July 2000 the present three-tier system for domestic consumers will become flatter and the price of
water will be the same for all consumption levels, except for consumption above 40 cubic metres per
month.  Water tariffs for businesses will remain unchanged throughout this period.93  The
Government's policy is to price water not only to recover the full cost of producing and supplying it,
but also to reflect its scarcity and the high marginal costs associated with additional supplies of water.
                                                     
93 Before 1 July 1997 domestic consumption up to 20 cubic metres per month was charged a rate of
S$0.56 per cubic metre;  consumption between 20 and 40 cubic metres per month and above 40 cubic metres permonths was subject to rates of S$0.80 cents and S$1.17 cents per cubic metre, respectively.  In comparison,
commercial rates were S$1.17 cents per cubic metre for all consumption.  Under the new pricing regime, the
rate for domestic consumers will be gradually increased until 1 July 2000 when all consumption, domestic and
non-domestic, will be subject to a single rate of S$1.17 cents per cubic metre.  In addition, domestic consumers,but not businesses, will be charged S$1.40 cents per cubic metre for any consumption over 40 cubic metres permonth in an effort to encourage water conservation.Singapore WT/TPR/S/67
Page 127
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