Singapore WT/TPR/S/67
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I. ECONOMIC ENVIRONMENT
(1) INTRODUCTION
1. Singapore has experienced a remarkable structural transformation in a relatively short period
of time.  Economic growth, based on export-orien ted manufacturing and services, has been rapid,
averaging around 7.5% annually between 1980 and 1998, with the exception of 1985 and 1986,
enabling Singapore to achieve one of the world's highest per capita incomes (S$36,560 or aroundUS$21,850 in 1998).  Production, initially led by labour -intensive, export-oriented manufacturing, has
increasingly moved to capital-intensive, higher value-added manufacturing activities and services,
based on skilled labour and capital.  The share of the workforce with secondary and higher education
skills grew from around 16% in 1975 to 62% in 1998 in line with the economy's structural
transformation.
2. Economic growth in Singapore has been supported, in the main, by high national savings and
investment, and liberal trade and foreign investment policies.  Singapore's exceptionally high savings
rate of over 50% of GDP has underpinned an in vestment to GDP ratio of over 35% on average.
1  The
substantial savings/investment surplus has also allowed significant outward investment by
Singaporeans.  In addition, the importance of inward  foreign investment is clear from Singapore's
liberal foreign investment regime, which has encouraged foreign investment to play a major role in
economic development:  foreign investment commitments in manufacturing have accounted for close
to 77% of the total since the 1980s.
3. Growth remained at around 8% until 1998, when it dropped sharply as a consequence of the
severe economic slowdown in the region.  The Government has, nevertheless continued its
programme of liberalization, and its flexible macroeconomic policies have helped Singapore to
withstand the worst effects of the regional slowdown and of financial contagion.  In particular,prudent fiscal policies, resulting in a significant accumulation of reserves, have enabled the
Government to implement short-term tax cuts, whil e monetary policy has been loosened to allow the
exchange rate to adjust to new macroeconomic conditions.  In addition,  Singapore has maintained a
consistent approach to liberalization, accelerating economic reform in key sectors, such as financial
services, despite its vulnerability to the regional economic crisis.
4. Short-term measures to reduce business costs appear to have alleviated, temporarily, cost
pressures, although in the longer run Singapore ma y face a loss of competitiveness in certain lower
value-added manufacturing activities.  This hypothesis appears to be supported in a recently
concluded study by the Committee on Singapore's Competitiveness, which has suggested stepped-up
efforts to encourage higher value-added activities.
(2) R
ECENT ECONOMIC DEVELOPMENTS
5. Between 1995 and 1997 Singapore's economy grew rapidly, averaging over 8% annually,
while inflation and unemployment remained low, averaging around 1.7% and 1.9%, respectively
(Tables I.1 and I.2).  This growth is largely attributable to sound macroeconomic policies and high
rates of investment, averaging almost 37% of GDP during the period.  Singapore's national savingsrates are among the highest in the world, at over 50% of GDP, due in great part to the Central
Provident Fund (CPF) scheme, which was established in 1955 to ensure old-age and sickness benefits
for the working population (Box I.1).  Under the scheme, employers and employees were each
required to contribute 20% of the employees' monthly income to the CPF.  As part of a cost cutting
initiative, the employers' contribution was reduced to 10% in January 1999.  However, evidence of a
                                                     
1 International Monetary Fund (1995).WT/TPR/S/67 Trade Policy Review
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tightening labour market in early 1999 prompted the Government to raise it by two percentage points,
to 12%, from April 2000;  the Government hopes to restore the employer's contribution to its former
20% within five years.2
Table I.1
Economic performance, 1995-99
1995 1996 1997 1998 1999Q11999Q21999Q3
Percentage change
Real GDP 8.1 7.6 8.9 0.3 0.6 6.7 6.7
Real domestic demand 9.0 12.1 10.2 -5.1 -7.7 6.0 13.4
Consumption expenditure 5.4 8.5 7.2 1.2 3.2 5.1 8.3
Gross fixed capital formation 11.2 23.3 10.2 -4.7 16.5 -3.7 1.7
Competitiveness
Labour productivity in
manufacturing6.5 2.9 5.5 1.6 14.3 20.4 19.3
Unit labour costs 2.6 2.4 0.6 2.7 -10.0 -13.6 -10.8
Unit labour cost index for
manufacturing (1998 = 100)124.5 127.5 128.7 127.3 115.7 92.5 93.2
Unit business cost index for
manufacturing (1998 = 100)122.8 125.4 126.5 124.6 115.5 104.0 104.2
GDP deflator 2.9 1.1 1.4 -1.0 .. .. ..
Inflation (CPI) 1.7 1.4 2.0 -0.3 -0.6 0.1 0.9
Nominal exchange rate index (1990
= 100)117.7 123.3 126.3 125.6 .. .. ..
Real effective exchange rate index
(1990 = 100)112.0 115.9 118.4 114.0 .. .. ..
Money and credit
Broad money (M3) 8.7 8.6 8.3 8.0 6.8 8.5 7.3
Credit to private sector 20.3 15.8 12.7 8.0 6.2 7.9 6.3
3-month interest rate 2.4 3.4 6.6 1.8 2.1 1.8 2.2
Per cent of GDP
Overall fiscal balancea 5.1 1.7 3.6 -0.3 -3.5 .. ..
Savings and investment
Gross domestic savings 50.0 50.7 51.1 51.3 .. .. ..
Gross domestic investment 34.5 37.0 38.7 33.5 .. .. ..
Balance of trade and payments
Total merchandise trade 13.2 5.1 5.7 -7.5 -9.4 8.0 10.4
Value of exports (S$ billion) 167.5 176.3 185.6 183.8 42.1 47.8 49.7
Value of imports (S$ billion) 176.3 185.2 196.6 169.9 40.2 46.0 49.7
Services balance (S$ billion) 17.1 14.5 16.5 0.6 0.7 2.1 2.5
Capital account balance (S$ billion) -0.1 -0.2 -0.3 -0.4 -0.08 -0.09 -0.07
Terms of trade, 1990 = 100 92.6 91.5 90.7 87.3 .. .. ..
Balance of payments (S$ billion) 12.2 10.4 11.9 5.0 -0.4 4.8 ..
Percentage of GDP 10.3 8.1 8.3 3.5 .. .. ..
Current account balance (S$ billion) 20.5 20.5 22.3 29.5 6.5 8.3 6.9
Table I.1 (cont'd)
                                                     
2 Republic of Singapore (1999a).Singapore WT/TPR/S/67
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1995 1996 1997 1998 1999Q11999Q21999Q3
International reserves and debt
Gross official reserves (S$ billion) 97.3 107.8 119.6 124.6 124.3 125.9 129.6
(In months of imports) 6.6 7.0 7.3 8.8 9.0 8.9 8.8
Gross external public debt
(S$ billion)0.0 0.0 0.0 0.0 0.0 .. ..
.. Not available.
a Financial year.
Source: Ministry of Trade and Industry, Economic Survey of Singapore,  various years;  and data provided by the
authorities.
6. Another important feature of Singapore's rapid growth is its openness to trade, which has
played an important role in growth.  Since 1990, on average, trade (exports in goods and services plus
imports in goods and services) has accounted for around 300% of GDP;  however, this share has beendeclining since 1995 (Chart I.1).  The decline in 1996 was largely due to the downturn in global
demand for electronics, which accounted for about 43% of Singapore's total trade.  As a consequence,
total export growth slowed significantly, to a modest 5% in 1996, in contrast to the strong
double-digit growth rates achieved during 1990-95.  GDP growth, however, was underpinned by
strong growth in construction and financial services.  The onset of the regional economic crisis inJuly 1997 weakened Singapore's trade in goods and services significantly in 1997 and 1998.  Trade in
services declined as a large percentage of these exports is destined for regional economies, which
were hard hit by the crisis.
7. During the first half of 1998, the economy e xperienced a sharp slow down, with real GDP
growth falling to 2.2%, the lowe st growth rate since the economic recession of 1985.  The economy
went into recession during the second half of 1998.  As a small open economy, Singapore is especially
vulnerable to external economic shocks.  Slower economic growth in 1998 and early 1999 has been
mainly attributed to recession in several Asian countries, which has depressed demand for exports
from Singapore;  sharp currency depreciations in major competing markets in the Asian region have
also cut into the cost competitiveness of exports from Singapore.  At the same time, globalover-capacity in the electronics industry contributed to a decline in Singapore's manufacturing sector,
which shrank by 0.4% in 1998.
3  Construction suffered the biggest drop, with growth falling from
15% in 1997 to 4% in 1998;  the sector contracted by 9.1%, 13% and 16% in the first three quarters of
1999.  Services, which are more dependent on demand in the region, also performed poorly, with
growth in financial services declining from 23% in 1997 to 8.8% in 1998.  Following average annual
growth of 6.3% in 1996 and 1997, the wholesale and retail trade shrank by 4.1% in 1998 (Table I.2).
8. The results of this slowdown are apparent from the rate of unemployment, which rose sharply
to 3.2% in 1998, compared to 1.8% the year before;  manufacturing accounted for a large share of job
losses (around 65%) largely because of lower economic activity in the electronics industry.  The
effect of the regional crisis was also felt in prices as a result of the overall impact of weaker demand.
The rate of inflation, as measured by the Consumer Price Index (CPI), fell from 2% in 1997 to -0.3%
in 1998.
9. Sectoral economic growth in 1999 was mostly positive.  The manufacturing sector appears to
have rebounded in early 1999, first and second quarter data showing growth of 6.7% and 14.5%, after
three consecutive quarters of contraction;  in the third quarter, manufacturing grew by 17%.  The
recent growth is mainly attributable to improved demand for electronics, chemicals, including
                                                     
3 Ministry of Trade and Industry (1999a).WT/TPR/S/67 Trade Policy Review
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pharmaceuticals, and petrochemicals, among Singapore's main trading partners, while domestic
demand also picked up after the second quarter.4  Recovery has also been apparent in several services
sectors, notably insurance and transportation and tourism, although growth in key sectors such as
banking services, has been slower.5  Overall growth for 1999 is expected to reach 5%.
Box I.1:  Compulsory saving through the Central Provident Fund (CPF)
The Central Provident Fund, a compulsory social security savings scheme to which both employees and
employers are required to contribute, was established by an Act of Parliament in 1955.
In 1997, the combined contribution rate to the CPF by employers and employees was 40% of wages for
employees aged up to 55 years, with employers and employees each contributing 20%.  For employeesaged 56 to 60, the CPF contribution was 20% of the salary, with employers and employees contributing7.5% and 12.5%, respectively.  Contributions for those between 61 and 65 were 15%, and 10% for thoseabove 65 years.  The maximum monthly contribution for all employees is based on a salary ceiling ofS$6,000 per month.
CPF members hold three accounts with the CPF Board:  Ordinary, Medisave and Special accounts.  In
addition, a Retirement Account is set up when the member turns 55.  Of the total 40% contribution made tothe CPF, 30% is credited to the Ordinary Account, while 6% and 4% are credited to the Medisave and
Special accounts, respectively.  Members over 35 are re quired to contribute 7% to the Medisave Account
and 29% to the Ordinary Account (8% and 28% respectively, for members over the age of 45).  Savingsaccumulated through the Ordinary Account may be used fo r housing, CPF insurance, tertiary education, for
topping up parents' Retirement Accounts and approved investment.  Approved investments are fully paid
ordinary and preference shares of Singapore incorpor ated companies listed on the SES Main Board and
SESDAQ and denominated in Singapore dollars;  and professionally managed instruments including CPFapproved unit trusts/fund management accounts, bank deposits, endowment policies, bonds guaranteed bythe Singapore Government and statutory board bonds.  The Medisave Account is primarily forhospitalization expenses, while funds from the Special Account are available for old age and contingencies.
For example, when the CPF contribution rate was reduced by ten percentage points in 1999, members
whose reduced Ordinary Account contributions were insufficient to meet their monthly mortgagerepayments were allowed to use their Special Account balances to meet the shortfall in repayments causedby the reduction.
The CPF has, in great part, contributed to Singapore's consistently high savings rate.  However, it appears
that investment returns on CPF funds are relatively lo w, raising concerns about the availability of adequate
retirement funds for Singapore's rapidly ageing population.  The interest on members' Ordinary andMedisave account balances is based on a weighted average of the rate for 12-month fixed deposits (80%),and savings deposits (20%) (which may be withdrawn upon demand).  To help members enhanceinvestment returns on their CPF funds, interest paid on savings in the Special and Retirement accounts is1.5% above the rate applied for the Ordinary and Medisave Accounts.  In addition, the CPF Investment
Scheme was liberalized in 1998 to give members access to  a wider pool of fund managers and unit trusts to
diversify their investment portfolios and reduce investment risks.  This would enable members to enhancereturns on their CPF savings by investing with experienced and reputable fund managers with a provenrecord of expertise.
Source: The Central Provident Fund, Annual Report 1998,  [Online].  Available at:  www.cpf.gov.sg/
Cor_info/Review Op.asp.
                                                     
4 However, important segments of the electronics market, notably disk drives, appeared to be
experiencing difficulty in export markets due to price competition.
5 Decreased activity was particularly evident in  the Asian dollar and foreign exchange markets.Singapore WT/TPR/S/67
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200240280320360400
1990 1991 1992 1993 1994 1995 1996 1997 1998100110120130140150160170180190200
Source :  Information provided by the authorities of Singapore.Chart I.1          
Trade in goods and non-factor services as share of GDP, 1990-98
Per cent
(XGS+MGS)/GDP (XGS)/GDP (MGS)/GDPLeft-hand scale: Right-hand scale:Per cent
10. One of Singapore's biggest challenges in the l onger run, however, is to compete with low-cost
producers in its principal markets.  In the United States and Japan, Singapore's exports have been
losing market share, primarily to low-cost producers of electronics products.6  During the first three
quarters of 1999, although manufacturing and electronics exports made a recovery, domestic exportsof disk drives, Singapore's largest single export, fell by 5.6%, reflecting increased competition from
lower cost exporters.  Furthermore, the Government expects key electronics products such as disk
drives and integrated circuits to remain under pressure due to intense competition faced by the
industry.
7  Although overall labour productivity remains high, there are indications that it has been
declining since 1993, except for an increase in 1997 (Chart I.2).  Unit labour costs have been risingsince 1993, although more slowly since 1996;  they are expected to have declined in 1999 in response
to a cut in wages in 1998 (section (4) below).
11. Thus, although the recent decline in exports, particularly of electronics, may, in part, be
cyclical, pressure from low-cost producers in some of the lower value-added electronics segments is
growing.
8  Singapore therefore needs to move production increasingly into high value-added areas and
                                                     
6 Geographical proximity has also been a factor in  explaining the growing market share of countries
such as Mexico in the U.S. electronics market (Ministry of Trade and Industry, 1999b);  increased electronics
trade between Mexico and the United States is presumably also because of the NAFTA.
7 Ministry of Trade and Industry (1999c).
8 Singapore's share of the electronics market in the United States and Japan, for example, has been
declining since 1996 (Ministry of Trade and Industry, 1999b).WT/TPR/S/67 Trade Policy Review
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has stepped up training and retraining in higher skills to meet this challenge.  The Government is also
actively engaged in attracting foreign skilled personnel to try and hasten this process.
Table I.2
Basic economic and social indicators, 1995-99
1995 1996 1997 1998 1999Q11999Q21999Q3
Nominal GDP (S$ billion) 118.6 129.0 142.5 141.3 .. .. ..
GDP per capita (S$)
At market prices 34,204 35,721 38,122 36,560 .. .. ..
At 1990 market prices 29,691 30,661 32,280 31,275 .. .. ..
Annual percentage change
Agriculture, fishing &
quarrying-3.1 3.5 0.1 -7.2 -10.1 -1.1 -4.2
Manufacturing 10.0 2.9 4.5 -0.4 6.7 14.5 16.7
Utilities 6.2 7.3 10.8 4.9 -0.3 2.1 6.1
Construction 8.8 22.0 15.3 4.0 -9.1 -13.3 -15.6
Services 7.6 8.1 10.2 -0.3 -0.6 5.7 5.3
Wholesale & retail trade 9.6 6.1 6.4 -4.1 -2.3 6.6 9.3
Hotels & restaurants 5.3 8.5 1.9 -3.3 -1.0 2.1 4.1
Transport and
communications10.6 8.5 9.2 5.3 5.7 6.4 7.6
Financial services 3.6 7.5 23.4 -8.8 -8.6 12.9 4.3
Business services 7.9 9.0 8.5 4.9 0.6 -0.2 1.2
Other services 6.2 10.4 7.0 4.2 2.3 3.3 2.8
Owner-occupied dwellings 5.2 5.9 5.8 7.4 7.5 7.8 7.7
Per cent
Share in GDP
Agriculture and fishing 0.2 0.2 0.2 0.2 .. .. ..
Manufacturing 23.1 22.5 21.6 21.7 .. .. ..
Utilities 1.6 1.7 1.8 2.0 .. .. ..
Construction 7.0 8.3 8.8 9.3 .. .. ..
Servicesa65.0 64.0 64.5 63.5 .. .. ..
Share in employment
Manufacturing 24.2 23.2 22.6 21.6 .. .. ..
Servicesa67.8 69.5 69.5 70.5 .. .. ..
Othersb0.3 0.2 0.3 .. .. .. ..
Social indicators
Population (million) 3.5 3.6 3.7 3.9 .. ..
Unemployment 2.0 2.0 1.8 3.2 3.3 4.6 2.9
Birth rate (per 1,000) 15.7 15.3 14.6 13.2 .. .. ..
Life expectancy at birth 76.4 76.7 77.1 77.3 .. .. ..
Table I.2 (cont'd)Singapore WT/TPR/S/67
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1995 1996 1997 1998 1999Q11999Q21999Q3
Education (% of labour force)
Primary 24.9 23.4 24.3 23.3 .. .. ..
Secondary 30.4 30.5 28.7 28.4 .. .. ..
Higher 33.3 30.6 31.9 33.9 .. .. ..
.. Not available.
a Wholesale and retail trade, hotels and restaurants, transport and communications, financial services, business services, and o ther
service industries.
b Agriculture, forestry and fishing;  mining and quarrying;  and other utilities and activities not adequately defined.
Source: Data provided by the Singapore authorities.
-4.0 -2.0 0.02.04.06.08.010.0
1990 1991 1992 1993 1994 1995 1996 1997 1998Chart  I.2
Labour productivity and cost indices, 1990-98
Source :  Data provided b y the authorities of Sin gapore.Annual percenta ge 
Unit labour cost index of overall econom y
Unit labour cost in manufacturin gUnit business cost index of manufacturin g
Total labour productivit y
(3) MACROECONOMIC INDICATORS
(i) Fiscal policy
12. Singapore has traditionally pursued a prudent fiscal policy, aimed at supporting sustained
non-inflationary economic growth, and keeping all operating and development expenditures well
within operating revenues.  The Government has been able to maintain the budget in surplus for most
of the period under review as a result of buoyant revenues linked to strong economic growth and
efforts to contain the size of the public sector to free up resources for private sector growth
(Table 1.3).  Substantial budgetary surpluses in the pa st have in turn allowed the Government to build
up reserves that could be used in contingencies such as the present economic downturn.WT/TPR/S/67 Trade Policy Review
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Table I.3
Fiscal balance, 1995-2000
(S$ billion)
1995/96 1996/97 1997/98 1998/99a1999/2000b
Operating revenue 25.3 28.9 29.2 27.9 24.1
(As percentage of GDP) (20.2) (21.5) (20.0) (..) (16.9)
Tax revenue 19.9 23.2 23.0 21.6 18.2
Customs and excise taxes 1.6 1.7 1.6 1.6 1.4
GST 1.6 1.7 1.9 1.7 1.7
Investment income 4.4 7.1 3.8 4.8 5.0
Other non-tax revenue 5.4 5.7 6.2 6.4 6.0
Capital receipts 11.5 11.7 19.3 8.6 5.3
Total expenditure 17.4 23.3 23.0 26.9 29.2
(As percentage of GDP) (13.9) (17.3) (15.8) (..) (20.5)
Operating expenditure 11.4 14.2 14.1 14.7 15.2
Debt servicing 1.2 1.1 1.0 1.0 1.0
Expenses on investment 0.2 0.2 0.2 0.2 0.3
Agency fees on land sales 0.1 0.1 0.1 0.0 0.0
Development expenditure 6.0 9.1 9.0 12.3 13.9
Net lending 6.4 8.6 13.5 10.9 14.9
Overall fiscal balancec6.4 2.3 5.3 0.9 -5.1
(As percentage of GDP) (5.1) (1.7) (3.6) (..) (-3.5)
.. Not available.
a Based on actual figures but GDP estimates for FY98 are not yet available.b Based on budget book estimates.
c Defined as operating revenues less total expenditures.
Source: Data provided by the authorities of Singapore.
13. In response to the current economic slowdow n, the Government has implemented a number
of short-term measures to stimulate demand through increased spending and reduced taxation in the1998/99 and 1999/2000 fiscal budgets.  The Government's budget surplus fell from S$5.3 billion
(3.6% of GDP) in 1997/98 to S$0.9 billion in 1998/99.
9  This largely reflects increased infrastructure
spending and tax breaks for companies and households to induce economic recovery after the effects
of the Asian crisis began to be felt in Singapore in 1998.  Expenditure in the 1998/99 budget was
almost 17% higher than in the 1997/98 budget.  Ad ditional one-off spending of S$2 billion was made
in June 1998 to reduce business costs, followed by a S$10.5 billion cost-reduction package in
November 1998 in response to recommendations of the Committee on Singapore's Competitiveness
(Annex I.1).  The budget deficit is projected to grow to around 3.5% of GDP (S$5.1 billion) in
1999/2000.  The Government emphasizes that once the economy has recovered from the crisis, there
will be a return to balanced budgets.
(ii) Monetary policy
14. Singapore's monetary policy has been anchored by the exchange rate, with price stability the
ultimate goal (Box I.2).  This has helped to limit inflation to an annual average of less than 2% during
the period under review.  In response to weaker demand conditions in the wake of the financial crisis
in the region, the Monetary Authority of Singapore (MAS) eased monetary policy in 1998, widening
the band within which the exchange rate fluctuates.  The three-month interbank interest rates, which
                                                     
9 Fiscal year in Singapore runs from 1 April to 31 March.Singapore WT/TPR/S/67
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rose sharply in early January 1998, at the height of the Asian economic crisis, declined significantly in
the second part of 1998 to below pre-crisis levels.  The CPI continued to register slightly negative
rates in the first quarter of 1999, reflecting weak demand, although it had picked up to 0.1% and 0.9%
by the second and third quarters.  Domestic interest rates have been increasing steadily since July
1999 to rates closer to historical levels.  As the financial and currency markets also became more
stable, the MAS narrowed the policy band back to its pre-crisis width and has adopted a neutralmonetary policy stance since mid-1999.
Box I.2:  Exchange regime
There have essentially been no changes in Singapore's exchange and financial arrangements since the last
Review.  Singapore's currency, the Singapore dollar, was pegged initially to the pound sterling and then tothe U.S. dollar until 1973, when it was floated.  Since 1980, the Monetary Authority of Singapore (MAS)has focused on the exchange rate as an intermediate target of monetary policy.  The MAS monitors the rate
of the Singapore dollar against a trade-weighted basket of currencies within a target band.  The target band
is set according to current and projected  inflation pressures, control of in flation being the ultimate target of
monetary policy.  MAS intervenes in the foreign exchange market to influence the value of the Singaporedollar to keep the trade-weighted index value of th e Singapore dollar within the target band and, when
necessary, to smooth out excessive fluctuations in the exchange rates.  The currency of intervention is
usually the U.S. dollar.
In 1998, in response to increasing volatility in financial markets resulting from the financial crisis in Asia,
the MAS widened the band within which the exchange rate of the Singapore dollar is allowed to fluctuate.
There are no formal exchange controls, restrictions  on current account transactions or foreign exchange
surrender requirements except under UN Security reso lutions.  Neither are there restrictions on capital
transfers or on direct or portfolio investment either by non-residents in Singapore or by Singapore residents
abroad, except in real estate.  However, approval  must be obtained from the MAS before financial
institutions grant loans in excess of S$5 million to non-residents for purposes that do not constituteeconomic activities in Singapore.  There are no restrictions on Singapore dollar loans extended to residentsfor any purpose.
Singapore has accepted the obligations of Article VIII, sections 2, 3 and 4 of the IMF Agreement.Source: IMF (1999), Exchange Arrangements and Exchange Restrictions, Annual Report 1999,
Washington, D.C.
(iii) Balance-of-payments and exchange rate movements
15. The considerable gap between national savings and investment is reflected in Singapore's
current account surplus.  In 1997 and 1998, the current account surplus grew to S$22 billion and
S$29.5 billion, respectively (from around 16% of GDP to 21%), mainly due to a substantial decline in
imports as producers ran down their inventories in response to falling demand for important exportslike electronics (Table I.4).  In contrast, the serv ices surplus fell from S$16.5 billion (12% of GDP) in
1997 to S$0.6 billion (0.4% of GDP) in 1998.  The general uncertainty in the region in the aftermath
of the crisis also contributed to a large net outflow of funds from the capital account, of almost
S$30 billion, more than offsetting the improvement in the current account.  As a result, the overall
balance-of-payments surplus declined considerably in 1998.
16. Following a sharp drop in the first quarter of 1999, compared to the corresponding period in
1998, exports grew by 5.8% and 5.9% in the second and third quarters.  Imports, which declined by
21% in the last quarter of 1998 compared with the last quarter of 1997, registered strong growth ofWT/TPR/S/67 Trade Policy Review
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11% and 16% in the second and third quarters of 1999 over the corresponding period in 1998, an
indication of improved demand in the economy.  The services balance also showed signs of a rebound
in early 1999, mainly due to increased activity in the transportation, insurance, and tourism sectors.
The overall balance-of-payments position improved from a deficit of S$415 million in the first quarter
of 1999 to a surplus of S$4.8 billion in the second quarter.  This was mainly due to an increase in the
current account surplus and a reduction in capital outflows.  Official reserves at the end of the thirdquarter of 1999 were substantially lower, but more than adequate, at S$130 billion, equivalent to
8.8 months of current imports.
10
Table I.4
Balance-of-payments, 1995-99
(S$ billion)
1995 1996 1997 1998 1998Q31998Q41999Q11999Q21999Q3
Current account 20.5 20.5 22.3 29.5 8.7 8.4 6.5 8.3 6.9
Merchandise trade 1.4 3.1 1.7 24.6 7.1 6.5 4.6 4.9 3.6
Exports 167.9 177.7 186.7 184.7 47.5 45.2 42.3 48.1 50.3
Domestic
exports98.5 103.6 107.5 105.9 27.1 26.6 25.2 28.6 29.7
Re-exports 69.0 72.7 78.1 77.9 20.2 18.3 16.9 19.2 20.0
Imports 166.5 174.5 185.0 160.2 40.3 38.6 37.8 43.3 46.7
Services balance 17.1 14.5 16.5 0.6 0.6 0.9 0.7 2.1 2.5
Receipts 42.3 42.2 45.3 30.7 8.2 8.8 7.9 10.5 10.7
Payments 25.2 27.8 28.8 30.1 7.6 7.9 7.3 8.4 8.2
Income balance 3.2 4.4 5.9 6.3 1.5 1.5 1.8 1.7 1.3
Current transfer
(net)-1.3 -1.5 -1.8 -2.0 -0.5 -0.5 -0.5 -0.5 -0.5
Capital and
financial account
balance-6.8 -4.6 -6.0 -29.9 -5.2 -5.0 -17.6 -1.5 0.0
Capital account
(net)-0.1 -0.2 -0.3 -0.4 -0.1 -0.1 -0.1 -0.1 -0.1
Financial account
(net)-6.7 -4.4 -5.7 -29.5 -5.1 -4.9 -17.5 -1.4 0.0
Direct investment
(net)1.3 2.3 7.4 6.9 1.7 1.6 3.4 1.6 1.6
Portfolio
investment (net)-10.4 -14.5 -17.0 -12.5 -3.8 -3.6 -1.9 -4.0 -2.2
Other investment
(net)2.4 7.9 3.9 -23.9 -3.1 -2.9 -19.0 1.0 0.5
Net errors and
omissions-1.5 -5.5 -4.5 5.4 -2.6 -0.9 10.7 -2.1 -6.9
Overall balance 12.2 10.4 11.9 5.0 0.9 2.6 -0.4 4.8 0.0
Percentage of
GDP10.3 8.1 8.4 3.5 .. .. .. .. ..
.. Not available.
Source: Data provided by the Ministry of Trade and Industry; and Singapore Department of Statistics.
17. The external value of the Singapore dollar is managed against a trade-weighted basket of
currencies, comprising Singapore's major trading partners.  Between 1995 and 1997 both the nominal
and real effective exchange rates (REER) of the Singapore dollar continued to appreciate (Chart I.3).
                                                     
10 Ministry of Trade and Industry (1999d).Singapore WT/TPR/S/67
Page 11
In 1998 the value of the Singapore dollar declined against the U.S. dollar in real and nominal terms
due to the effects of Asian economic crisis.  However, although it declined by around 11% against the
U.S. dollar in 1998, in addition to a depreciation of 5% in 1997, against a trade-weighted basket of
currencies it appreciated slightly, making Singapore's exports relatively less cost-competitive in these
markets.11  Moreover, the REER remained higher than its 1995 level.  In early 1999, the Singapore
dollar continued to depreciate against most currencies, including regional currencies and those of itsmajor industrialized country markets;  however it appreciated by around 5% against the
Indonesian Rupiah.  Continued depreciation of the Singapore dollar against regional currencies and
against the U.S. dollar in the first half of 1999 probably contributed to the recent surge in Singapore's
exports.
9092949698100102104106108110
1992 1993 1994 1995 1996 1997 1998Index 1995=100, average periodChart I.3
Exchange rates of the Singapore dollar, 1992-98
Source :   International Monetary Fund, International Financial Statistics.Real effective rate Nominal effective rate
(4) STRUCTURAL AND REGULATORY POLICIES
(i) Economic development policies
18. Singapore's economy is characterized by proactive and pragmatic policies, which have guided
economic development over the years.  These policies have been pursued by statutory boards and
other government agencies, among which the Economic Development Board (EDB), created in 1961,
plays a prominent role.  The Government also took an active entrepreneurial role in the
industrialization drive in the early 1960s, by taking a stake in a wide range of companies in themanufacturing and services sectors.  These were later consolidated under a government holding
                                                     
11 Ministry of Trade and Industry (1999a).WT/TPR/S/67 Trade Policy Review
Page 12
company, Temasek Holdings.  The economic policies pursued have evolved to address the specific
challenges of the time, shifting from import substitution to export orientation and subsequently
towards value-added manufacturing, indigenous technology, and cluster development.  While the
economic thrusts have been fine tuned over the years, the underlying strategy has been to provide an
environment conducive to business, with competitive prices and tax incentives, and more importantly,
underpinned by political stability, social cohesion, stable financial systems and transparent legal andcorporate frameworks.  (Chapter III(4)(iii)).
19. Since the 1980s, in response to rapidly rising unit labour costs, government policy has been
used to guide the economy toward higher value-added activities such as information technology and
services.  In its latest efforts, the Government aims to encourage the development of high value-added
manufacturing through the Industry 21 programme, which places manufacturing activities within
"clusters" that provide linkages to one another.  Included in some of these clusters are the electronics,
engineering, chemicals, life sciences, healthcare, communications and media, and logistics sectors;
and information technology, through the Information Technology 21 Programme, which links
electronics with telecommunications services and electronic commerce.  The EDB estimates that
knowledge-driven industries will contribute around 40% of Singapore's annual GDP over the next tenyears and will provide significant employment opportunities especially for highly trained
professionals.
(ii) Regulatory reform
20. Although the impact of the financial crisis in the region has been relatively muted in
Singapore compared with other neighbouring countries, the Committee on Singapore's
Competitiveness recently proposed six strategic responses to the crisis, allowing Singapore to take a
proactive stance with regard to the current decline in output and to address issues of decliningproductivity in the longer run.  These include a reduction in business costs to tide viable companies
over the crisis and minimize unemployment;  en suring that the framework for economic activity
continues to function effectively;  maintaining investor confidence in the economy;  accelerating the
ongoing process of capability building and restructuring;  diversifying exports out of the region;  and
using market opportunities in regional economies to form strategic partnerships.  Specific stepssuggested by the Committee to improve competitiveness include a reduction in taxes and overall costs
of production;  improved access to working capital;  capabilities building;  market diversification;
and investment promotion.
12
21. The Committee's longer term recommendations suggest a continuation of the policy initiated
in the 1980s to stress value-added and improved labour productivity in order to improvecompetitiveness in higher value-added products.  Relative unit labour costs have continued to rise for
much of the period since the previous Review.  Thus, the emphasis remains on improved labour
productivity through improved education and skills -upgrading programmes, funded by the statutory
boards.  Singapore has also gradually liberalized several services sectors, and despite the recent crisis,
continued its liberalization of financial services, recognizing their important role in the economy.
22. Although the authorities feel that it is overall la bour productivity that needs to be raised in the
long run, several changes have been made to labour policies in recent months to lower business costs
and help companies through the economic crisis.  The policies include changes to the wage structure
in line with recommendations by the National Wages Council (NWC ) (Annex I.2).  NWC guidelines
have generally been adhered to and have been in line with productivity increases for most of the
1990s;  in 1998, against the backdrop of the economy's worsening performance due to the Asian
                                                     
12 Ministry of Trade and Industry (1998a).Singapore WT/TPR/S/67
Page 13
economic crisis, rising unemployment, declining productivity, and deteriorating cost competitiveness,
the NWC suggested a cut in total wages of between 5% and 8% as compared to 1997.  In 1999, the
NWC also recommended the implementation of a more flexible wage system with the introduction of
the Monthly Variable Component, which could be used henceforth, to make quick adjustments to
wage costs in the event of sudden and severe business downturns.  The Government also created the
Ministry of Manpower in 1998, replacing the Ministry of Labour.  The change was made primarily toimplement the Manpower 21 programme, which aims to provide Singapore's manufacturing and
services sectors with highly skilled personnel.  The policy has two goals:  first, to develop training and
skills-development programmes for Singapore's 1.9 million workers;  and second, to encourage the
recruitment of skilled foreign workers to support rapid technological growth.  For the former,
Singapore estimates that around 65% of the domestic workforce would have to be skilled in the nextdecade or so, compared with 34% in 1998.  In the case of foreign workers, steps have already been
taken to reduce foreign workers' levies, especially for skilled foreign labour (Annex I.2).
13
23. Higher value-added activities are also likely to be enhanced through continued liberalization
and regulatory reform, particularly in key services sectors.  Liberalization has been continued in
services in which Singapore believes it has a comparative advantage, notably financial services,telecommunications, and electronic commerce.  Singapore continued to liberalize financial services in
1998 and 1999 to build on its strength in the region, despite the economic crisis.  In other important
services such as energy and water, liberalization has been slower, although it is expected to accelerate
in the coming two years.  Importantly, liberalization has been accompanied by regulatory reform to
ensure that competition is not limited.  Competition is also encouraged in the manufacturing sector
and appears to thrive despite the lack of a competition law.
14
24. Nevertheless, questions have been raised recently, both by the private sector and by Members
of Parliament, on the role played by the Government's holding company, Temasek Holdings, which
has interests in many of the largest firms in Singapore involved in most manufacturing and services
sectors.  For its part, Temasek has introduced new practices in the appointment of chief executive
officers and board members in companies under its umbrella to improve corporate governance and
presumably transparency (Chapter III(4)(vii)).
(5) DEVELOPMENTS IN TRADE
(i) Composition of trade
(a) Goods
25. Singapore's trade in goods grew steadily between 1995 and 1997, before falling in 1998.
Exports increased in value from US$118 billion in 1995 to US$125 billion in 1997 and declined toUS$110 billion in 1998.  The value of imports grew from US$124 billion in 1995 to US$132 billion
in 1997 before falling to US$102 billion in 1998.  Weaker overall demand in the region as a result of
                                                     
13 Levies per month range from S$100 for employee s classified as skilled to between S$330 and S$470
for unskilled workers, depending upon the activity.  These were reduced in November 1998 to a range ofS$30-100 for skilled workers and S$240-470 for unskilled wo rkers (Ministry of Trade and Industry, 1999a).  In
addition, companies are subject to "dependency ceilings"  restricting foreign employees to a certain percentage
of their total workforce (Singapore International Chamber of Commerce, 1999).  The Ministry of Manpower
estimates that Singapore's dependence on unskilled foreign workers is growing while it has not sufficiently
tapped the market for skilled foreign workers (Ministry of Manpower, 1998).
14 The authorities note that Singapore's competition policy is essentially based on harnessing
competitive forces through open market access, coupled with sectoral regulation.  Rather than enact a specificcompetition law, the Government believes in pragmatic policies that can enhance competition.WT/TPR/S/67 Trade Policy Review
Page 14
the financial crisis is one of the main reasons for the declines experienced both in export and import
values in 1998.
26. Domestic exports, as a share of total exports, fell slightly, from 59% to 58%, during this
period.  The largest category of domestic exports continues to be computers and peripherals, followed
by electronic components and parts;  re-exports co nsist largely of electronic components and parts,
and other machinery and equipment (Chart I.4).  Singapore imports mainly electronic components and
parts, and other machinery and equipment, whose combined share increased from 42% in 1995 to
44% in 1998.
(b) Services
27. Singapore classifies trade in services under five broad categories:  transportation, travel,
insurance, government services, and other services;  the latter presumably includes banking services.Singapore's exports of services grew steadily between 1995 and 1997, followed by a sharp contraction
in 1998 (Chapter IV(4)(i)).  Total exports of serv ices fell by 32% in 1998 although growth has been
positive in the first three quarters of 1999 following economic recovery in the region.  The largest
export category in 1998 was travel, at 25% of the total, followed by transportation at 24%;  "other
services" account for almost half of Singapore's exports of services.  Singapore's services importsconsist mainly of transportation (33%) and travel (25%);  "other services" imports accounted for 34%
in 1998.
(ii) Direction of trade in goods and services
(a) Goods
28. Singapore's main trade partners are in the east Asian region, accounting for around 49% of
merchandise exports and 55% of merchandise imports in 1998 (Chart I.5).  The ASEAN countries
account for the largest share of Asian trade.  Their share in Singapore's exports dropped, however,from 30% in 1995 to 24% in 1998 while imports changed little, from 22% in 1995 to 23% in 1998.
15
The share of the United States in total exports increased from 18% in 1995 to 20% in 1998, while itsshare in imports grew from 15% in 1995 to 18%  in 1998.  Another growing export market for
Singapore is the European Union, which accounted for around 14% of exports in 1998.
(b) Services
29. Data on Singapore's trade in services by major trading partner are not available.
                                                     
15 The ASEAN countries included are:  Brunei Darussalam, Cambodia, Laos, Malaysia, Myanmar,
the Philippines, Thailand and Viet Nam.Singapore WT/TPR/S/67
Page 15
Other 
machinery & 
equipment
23.7%
Food & 
beverages & 
tobacco
4.0%Other
15.8%Radio & TV 
receivers & 
parts
2.7%Electric 
generators
5.2%
Mineral fuels
8.1%Chemicals
6.5%Manufactured 
goods
10.9%Aircraft & 
vessels
2.7%Electric 
components & 
parts
18.3%
Industrial 
machines
2.2%Manufactured 
goods
8.9%Industrial 
machines
2.6%Radio and TV 
receivers & parts
1.8%
Chemicals
6.1%Mineral fuels
8.0%Food & 
beverages & 
tobacco
4.1%Other
14.9%Electric 
generators
5.4%Electric 
components & 
parts
19.2%Aircraft & 
vessels
4.3%
Other machinery 
& equipment
24.7%
Other machinery 
& equipment
11.3%Computers & 
peripherals
34.0%
Radio & TV 
receivers & parts
5.2%Electric motors 
& resistors
2.3%Manufactured 
goods
3.0%Chemicals
5.7%
Mineral fuels
13.9%
Other
9.8%
Electric 
components & 
parts
14.9%Computers & 
peripherals
37.7%
Electric motor s
& resistors
2.3%
Radio & TV 
receivers & 
parts
2.6%Electric 
components & 
parts
16.2%Other 
machinery & 
equipment
8.2%Other
11.1%Manufactured 
goods
2.4%Chemicals
6.8%
Mineral fuels
12.7%
Computers & 
peripherals
10.9%Industrial 
machines
3.0%
Other
12.7%Manufactured 
goods
11.1%
Crude materials
2.6%
Food & 
beverages & 
tobacco
6.0%Chemicals
6.3%Radio & TV 
receivers & 
parts
4.8%Electric 
components & 
parts
19.2%
Other 
machinery & 
equipment
23.4%Chart I.4
Trade by product group, 1995 and 1998
1995 1998
Imports
Sourc e:Singapore Trade Development Board.Per cent
Domestic exportsTotal: US$124.4 billion T otal: US$101.5 billion
Total: US$69.5 billion Total :US$63.3 billion
Total: US$48.7 billion Total: US$46.5 billionOther
16.0%Manufactured 
goods
7.4%
Chemicals
6.0%
Food & 
beverages & 
tobacco
5.2%Crude materials
1.6%Other machinery 
& equipment
20.4%Electric 
components & 
parts
22.4%Industrial 
machines
2.8%Radio & TV 
receivers & parts
3.7%
Computers & 
peripherals
14.6%Re-exportsWT/TPR/S/67 Trade Policy Review
Page 16
South Asia
2.1%Oceania
3.1%Other
4.5%
Other East Asia
13.2%
Chinese Taipei
3.9%
Japan
9.2%
Malaysia
13.6%Hong Kong, China
9%Middle East
1.1%EU15
16.2%United States
24.6%Chart I.5
Direction of merchandise trade, 1995 and 1998
East Asia
48.5South Asia
3.0%Oceania
2.8%
Other East 
Asia
12.8%
Japan
6.6%Chinese 
Taipei
3.6%
Hong kong, 
China
8.2%Malaysia
11.9%Middle East
1.3%EU15
19.2%United States
26.2%Other
4.4%
East Asia
43.1Total:   US$124.4 billionTotal:   US$101.5 billion
Japan
5.8%Hongkong, 
China
8.7%Malaysia
27.1%Chinese 
Taipei
4.3%Other East 
Asia
20.7%South Asia
3.9%Oceania
2.9%Other
5.6%United States
9.2%
EU15
9.4%
Middle East
2.4%
East Asia
66.5Middle East
2.9%EU15
11.2%United States
11.2%Other
7.4% Oceania
4.7%
South Asia
4.8%
Other East 
ASIa
17.6%
Chinese 
Taipei
5.3% Japan
6.6%Hong kong, 
China
8.6%Malaysia
19.7%East Asia
57.8Total:   US$69.5 billion Total:   US$63.3 billion
Source :  Singapore Trade Development Board.Per cent
Re-ExportsEU15
13.3%
Other Europe
2.4%
Middle East
6.5% Japan
21.1%Malaysia
15.5%Thailand
5.2%China
3.2%Other East 
Asia
13.4%Other
4.4%United States
15.0%
East Asia
58.4United States
18.4%
EU15
13.9%
Other Europe
2.0%
Middle East
6.6%Japan
16.7%Malaysia
15.5%China
4.8%
Thailand
4.8%Other East 
Asia13%Other
4.6%
East Asia
54.5
Total:   US$46.5 billion Total:   US$48.7 billionDomestic Exports Imports1995 1998Singapore WT/TPR/S/67
Page 17
(6) DEVELOPMENTS IN FOREIGN INVESTMENT
(i) Trends in inward and outward investment
30. Singapore's economic development has relied heavily on foreign investment;  it continues to
be one of the largest recipients of foreign direct investment (FDI) in the region.16  The total stock of
inward direct investment grew from S$63 billion in 1993 to S$112 billion in 1997 (Table AI.1).  Net
investment flows have fluctuated considerably during this period, with net portfolio investment
outflows rising sharply in 1997 to S$17 billion (abo ut US$11.7 billion) as investors withdrew their
money from the region before slowing to S$12.5 billion (around US$7.5 billion) in 1998 (Chart I.6).
The moderation in 1998 was principally due to a decline in Singapore residents' purchases of foreign
equity securities in addition to a rise in foreign investment in local stocks.  FDI net inflows have risen
steadily since 1995.  The first quarter of 1999 shows st abilization in investment with an increase in
net FDI flows, and a smaller net outflow of portfolio investment.17  Most of the FDI originates in the
European Union, Japan, and the United States.  Their shares have remained relatively unchanged over
the period covered by the present Review.
-14-12-10-8-6-4-20246
1992 1993 1994 1995 1996 1997 1998US$ billion
Foreign direct investment Portfolio investmentChart I.6
Foreign direct and portofolio investment, 1992-98
Source :  Singapore Department of Statistics, Yearbook of Statistics Singapore (various years).
31. The share of net foreign investment commitm ents in manufacturing has been declining
gradually, from almost 72% of the total in 1996 to 67% in 1998.  The largest investor in the sector is
                                                     
16 The World Investment Report, for example, estimates that Singapore was the second largest recipient
of FDI in the region on the basis of FDI flows in 1998, although considerably less than China, the largestrecipient in the region (United Nations, 1999).
17 Monetary Authority of Singapore (1999a).WT/TPR/S/67 Trade Policy Review
Page 18
the United States, whose share in total FDI rose  from 43% to 44% between 1995 and 1998, followed
by Japan, from 24% to 35% (Table I.5).  However, investment in manufacturing, which used to
account for the largest share of foreign direct investment, appears to have been overtaken by
investment in financial and insurance services.  These accounted for around 41% of total FDI in 1996,
followed by manufacturing at 35% (Table AI.2).  FDI is also important in commerce, which
accounted for around 13% of the total in 1997.  Outwar d investment is mainly confined to the Asian
region (Table AI.3).
Table I.5
Net investment commitments in manufacturing, by country, 1995-99
1995 1996 1997 1998 1999a
Total (S$ million) 6,809 8,085 8,488 7,829 6,404
Per cent of total
Domestic 28.7 28.4 29.7 33.4 21.6
Foreign 71.3 71.6 70.3 66.6 78.4
of which:
United States 42.8 40.3 40.6 44.0 62.6
Japan 23.8 33.9 34.1 35.0 15.3
Europe 31.5 24.0 23.9 20.0 17.3
European Union (15) 31.1 22.8 23.5 16.9 16.9
United Kingdom 15.9 6.9 7.5 0.2 0.7
Netherlands 8.1 8.9 6.5 0.8 0.3
Germany 3.8 4.3 2.0 10.0 12.5
France 2.9 1.0 4.6 2.7 1.6
Italy 0.3 0.9 2.9 1.7 1.7
Switzerland 0.3 1.0 0.4 3.0 0.4
Others 2.0 1.8 1.4 1.1 4.9
a First nine months.
Source: Singapore Department of Statistics (1999), Statistics Singapore, 1998;   and data provided by the Economic
Development Board.
32. Singapore is a significant outward foreign direct  investor, with investment of S$147 billion in
1997.  Outward investment from Singapore continues to be concentrated in financial services, whilemanufacturing accounts for a declining share of ou tward FDI (Table AI.4).  Over half of the
investment goes to Asian countries (around 52% in 1997), with ASEAN accounting for the largest,
albeit declining share.  The highest shares were f ound in Malaysia;  China;  Hong Kong, China;  and
Indonesia.  Concentrations were in financial services in Hong Kong, China and Indonesia, in financial
services and manufacturing in Malaysia, and in manufacturing and real estate in China.  In Europe,investment was concentrated in the United Kingdom (financial services) and the Netherlands
(business services).
18
(7) OUTLOOK
33. While the economy remains robust and the policy mix adopted by the Government and the
Monetary Authorities has provided some stimulus to demand, as a small open economy, Singaporeremains highly dependent on its traditional trading partners.  Economic conditions in the Asian region
have improved considerably since the onset of the Asian financial crisis, although pockets of
                                                     
18 Singapore Department of Statistics (1999).Singapore WT/TPR/S/67
Page 19
uncertainty remain.  Growth in other key markets, notably the United States and the European Union,
remain relatively strong and the recent resurgence of activity in the electronics sector boosted
manufacturing growth in Singapore in early 1999.  However, there appears to be some concern about
dependence on the region for trade and investment and the authorities are thus working to diversify
into other regions and other markets.
34. The authorities are also concerned about productivity, especially in relation to low cost, low
value-added products in which Singapore's share in its main export markets appears to be suffering a
drop.  Competitiveness in these products may have been eroded further with the onset of the economic
crisis, which has seen significant depreciation of competing currencies, adding to competitive
pressures in export markets.  Signs of such a loss of market share have been evident in recent years,
especially in key markets, such as the United States and Japan, which are large purchasers ofSingapore's electronics exports.  The Government of Singapore has already responded to the decline
in competitiveness through initiatives such as the Industry 21 and Manpower 21 programmes to
encourage upgrading and high value-added activities in order to deepen the chain of manufacturing
and service activities and ensure better employment opportunities for the population.  The new
Manpower 21 programme will also endeavour to develop a highly skilled labour force to support thedevelopment of high value industries and services.WT/TPR/S/67 Trade Policy Review
Page 20
Annex I.1:  Tax reform and incentives in the 1998/99 budget1
Tax reductions announced in the 1998/99 budget
Corporate tax reductions and incentives
- Incentives to promote fund management;
- Incentives to promote the bond market;- Taxation of unit trusts (tax imposed on resident individual unit holders for 10% of the
distributions paid out of gains from the disposal of securities was removed.  Withholding
requirement on taxable distribution made to unit holders who are tax residents of Singaporewas also removed);
- Exemption scheme for syndicated offshore credit and underwriting facilities;- Deduction for general provisions made by banks and merchant banks;- Tax holiday for Singapore International Monetary Change (SIMEX) extended up to 2003;
- Tax incentive for venture capital funds (concessionary tax rate of not more than 10%)
extended for five years beyond current ten years;
- Transport and logistics including for freight uplift, international freight and logistics
operators and for income derived from writing offshore marine hull and liability insurance
business;
- Tax incentive for exhibition organizers;- Concessional tax rate of 10% on offshore trading income for companies under the Approved
Cyber Trade Scheme;
- Double tax deduction for employing skilled workers from abroad;
- Accelerated depreciation allowance for one year on investments in industrial noise and
chemical hazards control.
Individual tax reductions and concessions
- Across the board income tax rebate of 5% in 1998 assessment year;
- Rebates on Housing and Development Board (HDB) Services and Conservancy charges and
rentals for citizens staying in HDB flats;
- Rebates on utility rates were granted for HDB tenants until June 1999;- Final instalment of the Pre-Medical Top-Up Scheme would be paid in January 1999, as
scheduled;
- Revision of CPF interest rate premium for the Special Account and Retirement Account to
1.5% (interest rates for the Special Account and Retirement Account, which used to be
pegged at 1.25% above the regular rate for Ordinary and Medisave CPF Accounts, have been
revised to 1.5% above this rate);
                                                     
1 Ministry of Trade and Industry (1999), Economic Survey of Singapore, 1998 , February.Singapore WT/TPR/S/67
Page 21
- Other tax changes including cuts in property taxes, stamp duties, duties on cigarettes, and
vehicle taxes.
June off-budget measures
Tax rebates
- Additional property tax rebate of 40% on commercial and industrial property for the year
commencing 1 July 1998 was granted;
- Rental rebates on industrial property by Jurong Town Corporation and the Housing and
Development Board;
- Rental rebates by the Civil Aviation Authority of Singapore (CAAS) of 15% on offices,
warehouses and retailing units extended for 12 months from 1 July 1998;
- Rate reductions offered by Singapore Telecoms for telecommunication services;  Singapore
power for electricity tariffs;  port services for use of Jurong Port;  and suspension of theparking surcharge scheme as electronic road pricing came into effect in Singapore.
Infrastructure development
- Development projects already initiated would continue and the Government would speed up
public sector infrastructure projects;
- Training to continue through an additional S$20 million grant to expand training facilities
under the Skills Redevelopment Programme (SRP).  Support also provided to local companies
through the Local Enterprise Financing Scheme giving companies access to bank creditthrough co-sharing of the risk by the Government;
- Additional funds to be provided for the EDB's Economic Development Assistance Scheme,
which provides loans and grants for companies, and to the Trade Development Board fortrade promotion.
November Cost Reduction Package
- Central Provident Fund contributions by employers reduced by ten percentage points from
1 January 1999 to remain in place for two years;
- National Wage Council (NWC ) recommendation to reduce wages by 5-8% to be
implemented;
- Tax rebates of 10% on corporate income for assessment year 1999 (excluding dividend
income earned in Singapore);  55% tax rebate on commercial and industrial properties
extended to 30 June 2000;  property tax exemption for land under development to continue;
suspension of stamp duty on contract notes for share transactions extended up to30 June 2000.
- Other measures include a reduction in the foreign workers levy;  rental concessions on
industrial land;  transport services;  reduction in customs duty on motor vehicles;  and rebates
for utilities announced in 1998 were to be continued.WT/TPR/S/67 Trade Policy Review
Page 22
Annex I.2:  Changes in labour market policy1
Singapore's industrial relations have been based on a tripartite partnership between the Government,
trade unions, and employers.  Wages are based on two components: monthly salaries and a year-end
bonus.  In addition, employers and employees are re quired to make compulsory contributions to the
CPF scheme.
The National Wages Council and wage adjustments:   The National Wages Council (NWC) is a
tripartite advisory body, including representatives from the Government, employers, and the labour
movement.  It was formed in 1972 and makes annual wage recommendations to the Government
based on reviews of annual wage trends in relation to economic performance and projections.  The
NWC was established mainly to counter rapid wage increases in the 1960s as the government-led
industrialization programme contributed to rising employment and wage increases;  and to allow fororderly wage adjustments "in line with Singapor e's long term economic and social development".
Factors taken into consideration by the NWC in its annual wage analysis include domestic economic
growth rates, relative productivity, domestic employment, and inflation, as well as domestic, regional
and world economic growth projections.  Its recommendations form the basis for wage negotiations
between employers and trade unions.  According to the authorities, flexibility is recommended inimplementing the suggestions of the NWC.  Other activities of the NWC include giving advice to the
Government on appropriate incentive systems to promote operational efficiency and productivity in
enterprises.
Skills development Levy:   The Skills Development Fund (SDF) was set up in 1979 to support
worker training and skills upgrading.  The SDF is funded through the Skills Development Levy
(SDL), imposed on employers for every worker earning a salary of less than S$1,000 per month.  The
rate is currently 1% of the worker's gross salary;  the levy has been revised five times since 1 October1979.  However, over the years, as personnel skills have improved, the base of the SDL, i.e. the
number of workers earning salaries below S$1,000 has declined.  In 1998, the SDL was committed to
supporting training for 560,000 workers over the year , at a cost of over S$88 million;  however,
revenue from the levy was only S$20 million during that year.
In November 1999, therefore, the Government announced that the salary ceiling for SDL
contributions would be raised progressively from S$1,000 to S$2,000 between 1999 and 2004;  the
first increase, from S$1,000 to S$1,500 would come into effect on 1 July 2000.  The change is
expected to increase revenue by around S$28 million per year.  The salary ceiling would be raised to
S$1,800 in 2002 and to S$2,000 in 2004.  The Government plans to continue revising the salary
ceilings for the SDL periodically after 2004 in line with wage increases.
Foreign workers:   In light of Singapore's policy to attract foreign, especially skilled, workers, and in
response to cost pressures resulting from the Asian economic crisis, a number of changes were made
to policy regarding employment and entry of foreign workers.  These include, principally:
Foreign workers levy:   In addition to other costs, employers are required to pay a foreign workers
levy for every foreign worker employed.  In 1998, the levy was reduced by S$70 per month for skilledforeign workers and by S$90 for unskilled workers in manufacturing and services.  The levy for
unskilled construction workers and domestic workers remains unchanged at S$470 and S$345 per
month, respectively.
                                                     
1 Republic of Singapore "Managing the Economic Recovery" [Online].  Statement by DPM Lee Hsien
Loong in Parliament, 23 November 1999.  Available at:  app2.internet.gov.sg/scripts/ sprinter/ 99112302.htm;Ministry of Manpower (1998), Manpower 21;   Ministry of Trade and Industry (1998), Economic Survey of
Singapore  1999Singapore WT/TPR/S/67
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Man-Year Entitlement Scheme:   Implemented for the construction sector on 1 April 1998, the scheme
allocates a certain number of foreign workers to the main contractor, based on the project value of the
construction contract.
Basic Skills Certification Requirement:   The requirement for construction workers requires
contractors seeking to bring in foreign workers fro m non-traditional sources to ensure that at least
50% of these workers obtain this certification, which is issued by the Construction IndustryDevelopment Board.  The 50% requirement is expected to be raised to 100% in April 2000.
Manpower 21 :  The Ministry of Manpower was created in April 1998, replacing the Ministry of
Labour and taking over some activities from the Prim e Minister's Office.  The aim of Manpower 21 is
to help Singapore to develop a highly skilled labour force to support high value-added industries and
services through an integrated programme of skills training and job flexibility, and by attractinghighly skilled international personnel to Singapore.