./.RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/SGP/10
27 May 1999
(99-2142)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Replies to Follow-Up Questions from the EUROPEAN COMMUNITY1
Regarding the New and Full Notification of SINGAPORE2
The following communication, dated 25 May 1999, has been received from the Permanent
Mission of Singapore.
_______________
Q1. Pioneer incentive
A condition for receiving this incentive is  that either there are no companies in
Singapore performing a similar activity, or that those companies performing a similar activity
are/have been awarded a pioneer incentive.
This would seem to imply that if there are already companies in Singapore performing a
certain activity which have not received this incentive, no other company operating in this
sector is eligible.  On this basis, the criteria for eligibility are not objective, but depend, in a
purely arbitrary manner, on the sector of activity concerned.  Singapore is requested to explain
why there is no specificity under Article 2 of the Agreement in such circumstances, since access
to the subsidy is clearly limited to certain ent erprises i.e. those engaged in the eligible sectors,
and it is known in advance that certain enterprises will be inelig ible, due to the nature of their
activities.
Reply
The pioneer incentive is not specific within the meaning of Article 2 of the Agreement on
Subsidies and Countervailing Measures ("the Agreement").  The objective of the pioneer incentive is
to encourage creation of industries not yet established in Singapore or not established on a scale
adequate for Singapore's economic needs.  It has two criteria:
1. Project introduces into an industry technology, know-how or skills which are
substantially more advanced than the average industry level.
2. There are either no companies in Singapore performing a similar activity, or companies
performing a similar activity are/have been awarded a pioneer incentive.
Criterion 1 is economic in nature and applies horizontally to all companies.  There is no
limitation whatsoever.  Consequently, any project that introduces "technology, know-how or skills"
                                                     
1 G/SCM/Q2/SGP/9
2 G/SCM/N/38/SGPG/SCM/Q2/SGP/10
Page 2
that is substantially above the average industry level qualifies.  Criterion 2 is logically derived from
the objective of the incentive.  It states that wh en no company performing a similar activity exists in
Singapore, then the benefit should be granted.  Therefore it is clear that the pioneer incentive is not
only available to new industries but also to all existing industries in Singapore.
Based on the above, the EC's stated premise that "if there are already companies in Singapore
performing a similar activity which have not received the incentive, no other company operating in
this sector is eligible" is inaccurate.  The term "s imilar activity" is used in reference to the level of
technology, know-how or skills introduced by the company, and not just on the sector of activity.  As
long as a company introduces "technology, know-how or skills" that are substantially more advanced
than the average industry level, it will be eligible for the incentive.
It is therefore clear that the pioneer incentive does not discriminate between industry sectors,
but serves to encourage enterprises that substantially advance the level of "industry technology, know-
how or skills" in that industry in Singapore.
Q2. Local enterprise technical assistance and finance schemes (LETAS and LEFS)
Access to this subsidy is limited to certai n enterprises i.e. those with not more than
70 per cent foreign shareholding.  Can Singapo re explain why this criteria is objective, in
accordance with footnote 2 of the Agreement?
Reply
The Local Enterprise Technical Assistance Scheme (LETAS) and the Local Enterprise
Finance Scheme (LEFS) are consistent with Si ngapore's obligations under footnote 2 of the
Agreement.3
The condition of "not more than 70 per cent foreign shareholding" falls within the definition
of "objective" as defined in footnote 2 of the Agreement.  Such a condition is economic in nature (i.e.
based upon shareholder data and investment) and applies horizontally to all industries in Singapore.
There is no "enterprise or industry or group of industries" that is favoured in the application of thecondition.  All are subject to the same "neutral" condition.
The EC's question suggests that any condition that separates certain enterprises into those that
qualify and those that do not result in a specific subsidy.  Obviously, this cannot be the meaning of
"objective criteria or conditions".  The two examples provided in footnote 2 illustrate that the EC's
question is misplaced.  A programme that establishes a minimum "number of employees" or "size of
enterprises" obviously also segregates enterprises into those that qualify and those that do not.  This isnot the basis for finding that a programme is specific.  These two examples highlight that a condition
of "not more than 70 per cent foreign shareholding" is similar in that it is neutral, does not favour
certain enterprises, and is economic in nature and horizontal in application.
__________
                                                     
3 Footnote 2 of the Agreement states that "objective criteria or conditions, mean criteria or conditions
which are neutral, which do not favour certain enterprises over others, and which are economic in nature andhorizontal in application, such as num ber of employees or size of enterprise".