00-1206 MOREPRESS RELEASE
EMBARGO:  NOT FOR PUBLICATION UNTIL
1300 GMT 31 MARCH 2000
PRESS/TPRB/130
22 March 2000
 SINGAPORE GAINS FROM ITS OPENNESS TO TRADE
AND FOREIGN INVESTMENT
Notwithstanding the repercussions of the Asian economic crisis, Singapore has continued to
pursue liberal trade and investment policies and to deepen internal reform, especially in key services.
A new WTO report on Singapore's trade policies says that Singapore has weathered the recent
economic crisis in the region well mainly due to its stable and sound macroeconomic policies and its
open trade and investment regime.
The report states that Singapore's economic success, which is reflected in one of the world's
highest per capita incomes, owes much to its high degree of openness. International trade in Singapore
is equivalent to 300% of GDP and in the manufactu ring sector foreign direct investment currently
accounts for around 70% of total investment.
The new WTO Secretariat report, along with a statement by the Government of Singapore,
will serve as the basis for the third trade policy review of Singapore, which will take place at the
WTO Trade Policy Review Body on 29 and 31 March.
The report notes however that in the longer term Singapore is likely to face competition from
relatively low-cost producers in the region. The reports says that in recent years, Singapore's relative
unit labour costs have been rising, putting pressure on the external competitiveness of lower value-
added exports.  In response, the Government of Singapore has established programmes aimed at
attracting investment into higher value-added activities.
Singapore's openness to international trade is reflected in the fact that border measures are,
with few exceptions, confined to those related to health and safety concerns, the report says. Apart
from tariff lines involving alcoholic products, Singapore's applied tariff is zero, although excise taxes
are levied on a number products, including motor vehicles, alcohol products, motor spirits, and motor
oil, a large percentage of which are not produced domestically.PRESS/TPRB/130
Page 2/3
MOREThe report notes that Singapore did not raise tariffs in the wake of the Asian economic crisis,
despite the considerable scope allowed for doing so within its existing bindings. On the contrary, the
Government removed tariffs on high-speed diesel in 1998.  Singapore's average bound tariff rate was
9.7% in 1999, and is projected to decline to 6.9% in 2005.  The report notes nevertheless that given its
applied tariff of zero for most products, Singapore's decision to keep bound tariffs higher and to bind
only 70.5% of its tariff lines lends a degree of uncertainty to its tariff regime.
Between 1995 and 1998, Singapore reduced the percentage of tariff lines subject to import
prohibitions (from 0.7% to 0.5%) and to automatic and non-automatic import licensing (from 19.7%
to 19.2%), the report states. In general, Singapore maintains import and export restrictions for
environmental or health and safety reasons;  however, imports of rice are licensed for food security
reasons and a ban is maintained on imports of motor vehicles that are three years old and above, for
safety and environmental reasons.
The report notes that foreign investment in Singapore is allowed in most sectors of the
economy, with restrictions in only few services sectors. Moreover, several of these restrictions are
being gradually reduced or removed. For example, in the financial services sector, a 40% limit on
foreign investment in any locally incorporated  banks was abolished and the limit on foreign
ownership of companies listed on the Singapore Stock Exchange was raised from 49% to 70%. In the
telecommunications sector, the Government announced its decision to abolish all restrictions on
foreign investment and to introduce full competition in April 2000 rather than maintaining a duopoly
until April 2002, as planned originally.
While an active member of the WTO, Singapore has also pursued trade and investment
liberalization on a regional level.  Singapore is a founding member of the Association of South East
Asian Nations (ASEAN) and a member of the Asia  Pacific Economic Cooperation (APEC). Although
in theory Singapore offers tariff preference to its ASEAN partners, in practice, as Singapore's applied
tariff is largely zero, such preference does not exist. In the APEC forum, Singapore plans to meet thedeadline agreed for developed country members to liberalize trade and investment by 2010. Singapore
was also a participant in APEC's Early Voluntary Sectoral Liberalization (EVSL) and Accelerated
Tariff Liberalization (ATL) initiatives, covering 15 and 9 sectors, respectively.
Along with a liberal trade and investment regime, the Government has sought to support
Singapore's economic development by implementing policies to encourage certain activities, the
report states. Government policy is implemented mainly by statutory boards, which regulate and
promote economic activities whose potential for strong economic growth is thought to be particularly
promising.  Policies include a range of tax incentives to encourage investment in the desired activities
and a small number of grants to small and medium sized enterprises.  In addition, the Government
remains indirectly involved in the economy through government-linked companies (GLCs).  The
GLCs were formed in the 1960s when the Govern ment invested directly in key sectors of the
economy.  Although the companies – which include some of the largest in Singapore – have since
been transferred to a holding company, and appear to be largely independent, concerns have been
raised about the possible advantages enjoyed by them in raising finance or competing with small local
firms.
The report says that Singapore aims to maintain the share of manufacturing at around 25% of
GDP (22% in 1998) and has actively promoted th e development of high value-added manufacturing
activities. This policy has been largely successful, with electronics dominating both manufacturing
output and merchandise exports.  As Singapore's trading advantage appears to be shifting towards
higher value-added electronics and services, long term development programmes have beenestablished to encourage investment in these activities.PRESS/TPRB/130
Page 4
MOREWith the manufacturing sector open to competition, Singapore has pursued reform in the
services sector, including financial services, transport and utilities. Currently, services account foraround 64% of GDP and provide employment to around 70% of Singapore's workforce. Liberalization
is most advanced in the financial and telecommunications services.
With regard to its WTO commitments, the report notes that Singapore amended its legislation
in the light of the TRIPS and customs valuation agreements ahead of the transition period available todeveloping countries. In services, Singapore has signed both the Agreement on Telecommunication
Services and Agreement on Financial Services but has, in practice, moved well ahead of its WTO
GATS commitments. Under the Agreement on Telecommunications Services, Singapore committed
to grant licenses for up to two additional operators for public switched services and leased circuit
facilities from 1 April 2000. This replaced the previous offer, under which exclusivity was granted to
Singapore Telecommunications until 2007. Under the Agreement on Financial Services, Singapore's
commitments include an offer to increase offshore bank lending limits to residents of Singapore fromS$100 million per bank to S$200 million, and to allow up to 49% aggregate foreign equity ownership
in locally owned insurance companies.  Given the importance of services for economic growth, the
report suggests that the predictability of Singapor e's trade and investment regime could be further
enhanced by an extension of Singapore's GATS commitments to the five services sectors currently not
covered in its schedule.PRESS/TPRB/130
Page 5
MORENotes to Editors
Trade Policy Reviews are an exercise, mandated in the WTO agreements, in which member
countries’ trade and related policies are examined and evaluated at regular intervals. Significant
developments which may have an impact on the global trading system are also monitored. For each
review, two documents are prepared: a policy stat ement by the government of the member under
review, and a detailed report written independently by the WTO Secretariat. These two documents are
then discussed by the WTO’s full membership in the Trade Policy Review Body (TPRB). These
documents and the proceedings of the TPRB’s meet ings are published shortly afterwards. Since 1995,
when the WTO came into force, services and trade- related aspects of intellectual property rights have
also been covered.
For this review, the WTO’s Secretariat report, together with the policy statement prepared by
Singapore, will be discussed by the Trade Policy Review Body on 29 and 31 March 2000. The
Secretariat report covers the development of all aspects of Singapore’s trade policies, including
domestic laws and regulations, the institutional framework, trade policies by measure and by sector.
Attached to this press release is a summary of the observations in the Secretariat report and
parts of the government's policy statement. The Secretariat report and the government’s policy
statement are available for the press in the newsroom of the WTO internet site (www.wto.org). These
two documents and the minutes of the TPRB’s disc ussion and the Chairman’s summing up, will be
published in hardback in due course and will be available from the Secretariat, Centre William
Rappard, 154 rue de Lausanne, 1211 Geneva 21.
Since December 1989, the following reports have been completed: Argentina (1992 and
1999), Australia (1989, 1994 and 1998), Austria (19 92), Bangladesh (1992), Benin (1997), Bolivia
(1993 and 1999), Botswana (1998), Brazil (1992 an d 1996), Burkina Faso (1998), Cameroon (1995),
Canada (1990, 1992, 1994, 1996 and 1998), Chile (1991  and 1997), Colombia (1990 and 1996), Costa
Rica (1995), Côte d’Ivoire (1995), Cyprus (1 997), the Czech Republic (1996), the Dominican
Republic (1996), Egypt (1992 and 1999), El Salvador (1996), the European Communities (1991,
1993, 1995 and 1997), Fiji (1997), Finland (1992), Ghana (1992), Guinea (1999), Hong Kong (1990,
1994 and 1998), Hungary (1991 and 1998), Icelan d (1994 and 2000), India (1993 and 1998),
Indonesia (1991, 1994 and 1998), Israel (1994 a nd 1999), Jamaica (1998), Japan (1990, 1992, 1995
and 1998), Kenya (1993 and 2000), Korea, Rep. of (1992 and 1996), Lesotho (1998), Macau (1994),
Malaysia (1993 and 1997), Mali (1998), Mauritius (1995), Mexico (1993 and 1997), Morocco (1989
and 1996), New Zealand (1990 and 1996), Namibia (1998), Nicaragua (1999), Nigeria (1991 and
1998), Norway (1991 and 1996), Pakistan (1995), Pa pua New Guinea (1999), Paraguay (1997), Peru
(1994), the Philippines (1993), Poland (1993), Ro mania (1992 and 1999), Senegal (1994), Singapore
(1992 and 1996), Slovak Republic (1995), the Solom on Islands (1998), South Africa (1993 and 1998),
Sri Lanka(1995), Swaziland (1998), Sweden (19 90 and 1994), Switzerland (1991 and 1996), Tanzania
(2000), Thailand (1991, 1995 and 1999), Togo (1999), Trinidad and Tobago (1998), Tunisia (1994),
Turkey (1994 and 1998), the United States (1989, 1992, 1994, 1996 and 1999), Uganda (1995),
Uruguay (1992 and 1998), Venezuela (1996) , Zambia (1996) and Zimbabwe (1994).PRESS/TPRB/130
Page 6
MORETRADE POLICY REVIEW BODY
SINGAPORE
Report by the Secretariat - Summary Observations
Introduction
Since its previous Trade Policy Review in 1996, Singapore has continued to pursue liberal
trade and investment policies, while deepening internal reforms, especially in key services sectors.
The economy remains relatively free of trade barriers and, indeed, notwithstanding the repercussions
of the Asian economic crisis, the percentage of tariff lines subject to import prohibitions and licensing
has declined. Foreign investment is allowed in most sectors of the economy, with restrictions in only a
few services sectors.  Since the previous Review, reform has been pursued in several services sectors,
for example, financial services, transport, and utilities, and restrictions on foreign investment have
been lifted in many instances. Singapore retains few other border measures.  It has also shown an
increased tendency to align standards with interna tional norms, where appropriate standards exist, and
measures such as those in the sanitary and phytosanitary area apply equally to imported and locallyproduced goods.
Along with a liberal trade and investment regime, the Government has sought to support
Singapore's economic development by implementing policies to encourage certain activities.  In the
past, this included direct government involvement in key sectors through government-linkedcompanies, which are currently managed by a holding company (Temasek).  In addition, the
Government created statutory boards to implement its policies;  their present role consists primarily of
regulating and promoting economic activities that are thought to have high growth potential, as well
as providing technical and marketing assistance.  In order to encourage investment in the desired
activities, a number of tax incentives have been provided.  Most recently, with rising unit labour costsrelative to other countries in the region, Singapore's trading advantage appear to be moving towards
higher value-added manufacturing and services sectors; the Government has responded to this by
establishing long-term development programmes, including tax incentives, to encourage investment in
higher value-added activities.
Economic Environment
During the review period, economic growth in Singapore was strong until mid-1997, when
the effects of the Asian economic crisis began to be felt.  Between 1995 and 1997, real GDP growth
averaged over 8% annually. Real GDP growth fe ll sharply to 0.3% in 1998, however, mainly as a
result of both weaker demand in the region and in demand for Singapore's main exports outside the
region.  Slower economic activity pushed unemployment up from 1.8% in 1997 to 3.2% in 1998.
Economic growth in Singapore is underpinned by a stable macroeconomic environment.  A
history of prudent fiscal and monetary policy enabled the Government to respond swiftly to the
economic crisis that hit the region in 1997, giving temporary tax cuts to businesses in the 1998 and
1999 budgets to tide them over the crisis.  As a consequence, the previously surplus budget isexpected to register a deficit of 3.5% of GDP  in 1999/2000.  In addition, monetary policy was
loosened to allow the exchange rate to fluctuate within a wider band, reducing pressure on the
currency.  The outcome is that the Singapore dollar has depreciated against major international
currencies, although the more substantial regional currency devaluations have eroded the external
competitiveness of Singapore's lower value-added exports.
As a result, inter alia, of the Government's budgetary measures, improved demand in
Singapore's major export markets for electronics, and signs of economic recovery in the Asian region,PRESS/TPRB/130
Page 7
MOREthe Singapore economy appears to be making a rapid recovery.  Overall real GDP growth projections
for 1999 are currently around 5%, substantially higher than 0.3% in the previous year.
The economic crisis in Asia and subsequent currency devaluations in neighbouring countries
has, nevertheless, highlighted concerns about the export competitiveness of some sectors, particularly
lower value-added manufactures, where lower cost regional producers are making in-roads.
Singapore's relative unit labour costs, especially with respect to other countries in the region, havecontinued to rise for much of the period under review.  While the recent temporary budgetary
measures have helped cut costs, longer term measures, including programmes such as Industry 21,
Information Technology 21, and Manpower 21, have also been taken to increase value-added
production in manufacturing and services.
Trade and Investment Policy Framework
Singapore's economic success owes much to its high degree of openness.  International trade
is equivalent to 300% of GDP, while foreign direct investment currently accounts for around 70% of
total investment in the manufacturing sector.  Trade and trade-related policies are the responsibility of
the Ministry of Trade and Industry, which coordina tes policy with other Ministries and statutory
bodies, and are implemented by the Trade Development Board (TDB).  Policies are generallyformulated upon consultation with Singapore's business community and other interested parties.  In
addition, national committees are formed from time to  time to address specific issues, most recently
on competitiveness; the committees include participants, and solicit advice, from a range of interests.
Singapore strongly supports the multilateral trading system and has been an active participant
in both the WTO and its predecessor, the GATT.  In general, Singapore extends most-favoured-nation
(MFN) treatment to all its trading partners;  in some aspects of intellectual property rights,
non-members of the WTO are granted less than MFN treatment.  Singapore has amended its
legislation in the light of its obligations undertaken in the context of the Uruguay Round, including in
the areas of intellectual property rights and customs valuation ahead of the transition period availableto developing country Members of the WTO.  Sin ce its previous Review, Singapore has notified the
WTO of changes to its legislation on trade remedies under the Countervailing and Anti-Dumping
Duties Act.  Singapore became a member of the WTO Government Procurement Agreement in
September 1997.
Singapore's foreign investment regime is liberal, the exception being some services sectors
and real estate, where there are limits on foreign investment.  However, several of these restrictions
are being gradually reduced or removed.  Recent examples of this include the financial services
sector, where a 40% limit on foreign investment in any locally incorporated bank has been abolished
and the limit on foreign ownership of companies listed on the Singapore Stock Exchange raised from
49% to 70%; the previous cumulative 73.99% limit on foreign investment in the telecommunications
sector was abolished in January 2000.
Trade and Trade-Related Measures
Singapore's openness to international trade is reflected in the fact that border measures are,
with few exceptions, confined to those related to health and safety concerns.  Apart from four tarifflines at the HS 9-digit level involving alcoholic products, Singapore's applied tariff is zero;  the four
tariff lines carry specific rates of duty.  Excise taxes are levied on a number of products, including
motor vehicles, alcohol products, motor spirits, and motor oil, a large percentage of which are not
produced domestically.  Together, customs and excise duties accounted for 7.4% of total tax revenue
in 1999, down from 8.1% in 1995.  Singapore did not raise tariffs in the wake of the Asian economiccrisis, despite the considerable scope allowed for doing so within its existing bindings;  on the
contrary, the Government removed tariffs on high-speed diesel in 1998.  While tariff concessions arePRESS/TPRB/130
Page 8
MOREprovided for under the ASEAN's CEPT scheme, as Singapore's MFN tariff rate is virtually zero, no
tariff concessions are granted in practice to ASEAN products under CEPT.
As a result of the Uruguay Round, Singapore bound 70.5% of its tariff, a level below the
developing country average.  The average bound tariff rate was 9.7% in 1999, and is projected to
decline to 6.9% in 2005.  Bindings by individual HS chapters range from 100% for agriculture to 10%
and below for transport equipment and mineral products.  Given that the current applied tariff is zerofor the large majority of products, the decision to keep bound tariffs higher and to bind only 70% of
tariff lines lends a degree of uncertainty to the tariff regime, although this is presumably for future
negotiation purposes in the WTO.
Between 1995 and 1998, Singapore trimmed down the percentage of tariff lines subject to
import prohibitions (from 0.7% to 0.5%) and to automatic and non-automatic import licensing (from
19.7% to 19.2%).  In general, Singapore maintains import and export licensing for environmental orhealth and safety reasons;  however, licences are required for rice imports, for food security reasons.
In addition, a prohibition is maintained on imports of motor vehicles that are three years or older, on
environmental grounds.  But given the relatively stringent environmental and roadworthiness
standards applied by Singapore to older cars, the need for an outright ban on cars of three years and
over is unclear.  In order to control traffic congestion, motor vehicles under three years are subject toan import quota, which is increased by around 3% annually, as well as to high internal taxes.
Other Measures Affecting Trade
In conjunction with its overall policy to unilaterally reduce and eliminate border measures,
the Government provides a certain guidance to the economy.  While economic development in
Singapore has, by and large, been private-sector driven, the Government has, nonetheless, played, and
continues to play, an important role in providing private business with strategic guidance.
Government policy is implemented mainly by stat utory boards, which regulate and promote economic
activities whose potential for strong economic growth is thought to be particularly promising.Assistance is provided, to a large extent, through tax incentives for investors and through grants for
small and medium sized local enterprises.  In addition, during the 1960s, the Government invested
directly in sectors believed to be of strategic interest for economic development, and in which private
investment would prove to be insufficient, by taking a direct stake in companies involved in these
sectors.  Management of these government linked companies (GLCs) was transferred to a government
holding company, Temasek Holdings, in 1970.
Singapore has no over-arching competition policy legislation.  In services, where competition
has been introduced more recently than in the goods sector, Singapore has opted for a sectoral
competition policy framework, establishing regulatory authorities and rules in each sector to ensure
competition between the incumbent service providers, often a public sector monopoly, and newer
competitors.
In the goods sector, a liberal market-based policy has been sufficient to ensure competition,
although of late there has been some debate about the role of government involvement in the economy
through Temasek and the government-linked companies.  The companies, some of which are the
largest in Singapore and account for around 25% of the market capitalization of the Stock Exchangeof Singapore, appear to be largely independent and compete directly with private sector companies.
Temasek does, however, play a role in appointing management, such as the Chief Executive Officer
and the Chairman.  Concerns have also been raised about possible advantages enjoyed by these
companies in raising finance or competing with smaller local firms, through the Temasek group.
Temasek has attempted to address these concerns by recently changing its policy on the appointmentof the Chairman and Chief Executive Officer in the GLCs so as to improve corporate governance.
The Government has also indicated in Parliament that it may be willing to sell its stake in "non-
strategic" GLCs to a single or group of shareholders to ensure that they "remain in good hands".PRESS/TPRB/130
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MOREPolicies to improve corporate governance are also being pursued in the financial services sector, with
improved disclosure requirements being a key factor in recent banking reforms.
Sectoral Policies
In 1998, manufacturing accounted for 22% of GDP.  Singapore aims to maintain the share of
manufacturing at around 25% of GDP and has actively promoted the development of high value-added manufacturing activities.  This policy has been largely successful, with electronics dominating
both manufacturing output and merchandise exports.  Notwithstanding a cyclical decline in export
demand in 1998,  electronics and electronic products accounted for 43% of value added in
manufacturing; office machines, including electronic products and telecommunications equipment
accounted for almost 62% of merchandise exports.
As in the case of manufacturing, government policies in services have encouraged investment
in high value-added sectors.  Currently, services account for around 64% of GDP and provide
employment to around 70% of Singapore's workforce.  The importance of services in the economy
and the need to encourage the development of higher value-added activities has highlighted the need
for accelerated liberalization in this sector.  Reform in services has been deliberately gradual,
however, so as not to cause unnecessary disruption and to ensure an orderly transition to fullcompetition.  Liberalization is most advanced in financial and telecommunications services.  In other
sectors, such as energy and water, which are important business inputs to manufacturing and services
activities, reform is taking place more gradually.
In general, services reform has been carried out unilaterally and has gone beyond that
scheduled by Singapore under the General Agreement on Trade in Services (GATS) in the WTO.
Under the GATS, Singapore made commitments in 7 of the 12 sectors;  commitments were not made
in distribution services, education services, environmental, health-related and social services, and
other services.  In addition, only partial commitments were made in some sectors, notably transport,
where commitments were made only in maritime transport, while no commitments were made incertain professional services, such as legal services.  Since the previous Review, Singapore has signed
the Fourth Protocol to the GATS (Agreement on Telecommunications Services) and the Fifth Protocol
(Agreement on Financial Services).  Under the Fourth Protocol on basic telecommunications services
Singapore committed to grant licences for up to two additional operators for public switched services
and leased circuit facilities from 1 April 2000; this replaced the previous offer, under whichexclusivity was granted to Singapore Telecommunications (SingTel) until 2007.  Under the
Agreement on Financial Services, Singapore's commitments include an offer to increase offshore
bank lending limits to residents of Singapore from S$100 million per bank to S$200 million, and to
allow up to 49% aggregate foreign equity ownership in locally owned insurance companies.
In practice, Singapore has moved well ahead of its WTO GATS commitments.  For example,
recent reforms have abolished foreign ownership restrictions in banking services, previously restrictedto 40%, and strengthened bank disclosure requirements to improve transparency.  Similarly, while
Singapore planned to introduce competition by mean s of a duopoly in basic telecommunications until
April 2002, in January 2000 the Government announced its decision to abolish all restrictions on
foreign investment and to introduce full competition in April 2000 rather than April 2002, as planned
originally.
Trade policies and trading partners
A strong supporter of the multilateral system, Singapore also believes that accelerating trade
liberalization through regional fora benefits, rather than impedes, multilateral negotiations andliberalization undertaken within the multilateral framework.  As a founding member of the
Association of South East Asian nations (ASE AN), and a member of the Asia Pacific EconomicPRESS/TPRB/130
Page 10
MORECooperation (APEC) forum, Singapore participates actively in reducing trade and non-trade barriers
between the member countries of these fora.
Within ASEAN, in theory Singapore offers tariff preferences under the CEPT;  in practice,
however, as Singapore's applied tariff is largely zero, its ASEAN partners receive no such
preferences.  Singapore also pursues trade links through participation in efforts to harmonize ASEAN
customs procedures and valuation.  Cooperation between the member countries is also being pursuedthrough:  the ASEAN Framework Agreement on Se rvices (AFAS), which includes seven services
sectors;  the Framework Agreement of the ASEAN Investment Area (AIA), which will extend
national treatment in investment to investors from ASEAN countries by 2010 and subsequently to all
investors by 2020;  and the ASEAN Framework Agreement on Mutual Recognition Agreements.
In the APEC forum, Singapore plans to meet the deadline agreed for developed country
members to liberalize trade and investment, by 2010.  Singapore was also a participant in APEC'sEarly Voluntary Sectoral Liberalization (EVSL) and Accelerated Tariff Liberalization (ATL)
initiatives, covering 15 and 9 sectors, respectively.
In addition to regional agreements, Singapore's size and resource constraints have led to the
formation of regional alliances such as the Indone sia-Malaysia-Singapore growth triangle, formed in
1994, which allows all three countries to benefit from each others' resource complementarities.  A
free-trade agreement is also currently being negotiated with New Zealand and feasibility studies for
free-trade agreements with Mexico and Japan are being conducted.  In addition, Singapore is
examining the possibility of setting up a tri-party agreement with New Zealand and Chile.
Outlook
Singapore has weathered the recent economic crisis in the region well mainly due to its stable
and sound macroeconomic policies as well as its open trade and investment regime;  the
Government's rapid reaction to the crisis through the introduction of short-term cost cutting measuresalso assisted businesses in adjusting to increased price competition as a result of currency
devaluations in the region.  These measures, together with Singapore's strong economic fundamentals,
have helped it to emerge from the economic downturn more rapidly than many of its neighbours, with
growth expected to be 5% in 1999, lower than 8% achieved during 1997, but considerably higher than
the 1998 level of 0.3%.
In the longer term, however, one of Singapore's main challenges remains competition with
relatively low-cost producers in the region.  In recent years there has been concern that Singapore's
relative unit labour costs have been rising, putting pressure on the external competitiveness of lower
value-added exports.  To address these concerns, the Government established the Committee on
Singapore's Competitiveness (CSC), which made its recommendations in November 1998.  The
Committee found that in comparison with several of its neighbours, unit labour costs in Singapore,especially in manufacturing, had been rising more rapidly in recent years.  It concluded that there was
a need to upgrade capabilities to keep ahead of competition by ensuring that productivity gains were
not outstripped by growth in business costs.  Th e Government's response to the decline in external
competitiveness has been to establish programmes such as Industry 21, Information Technology 21,
Manpower 21, and tax incentives aimed at attracting investment to higher value-added activities.
Given the strong role played by Singapore's open trade and investment regime in fostering its
economic development by, inter alia, facilitating a shift towards higher value-added activities, the
stability and predictability of this regime could be much enhanced by Singapore undertaking greater
bindings at the WTO.  More specifically, Singapore might usefully increase its tariff bindings fromthe current level of 70.5% of tariff lines and bring bound tariff rates more into line with applied rates;
Singapore could also extend its GATS commitments to the five sectors not yet covered in its
Schedule.PRESS/TPRB/130
Page 11
MORETRADE POLICY REVIEW BODY
SINGAPORE
Report by the Government - Part I
I. IMPACT OF THE REGIONAL CRISIS ON SINGAPORE
(1) A C RISIS OF CONFIDENCE
1. Despite our strong fundamentals, Singapore did not escape unscathed from the crisis that
buffeted the region, due to our close economic interdependence with the neighbouring economies.
Between 1 July 1997 and 31 December 1998, our stock market fell by 28%, while the
Singapore dollar lost about 14% of its value agains t the U.S. dollar.  Real GDP growth fell sharply
from 8.9% in 1997 to 0.3% in 1998.  But we were less badly hit than many of our neighbours, who
slipped into negative growth for the first time in more than a decade.
2. Recovery, however, has been relatively quick, qu ite against initial expectations.  After two
quarters of negative growth in the second half of 1998, the Singapore economy returned to positive
territory in 1999.  The V-shaped recovery was driven by a sharp global electronic upturn, whichfuelled not only our manufacturing activities but boosted recovery in other Southeast Asian countries
as well.  Our cost-cutting measures, implemented in the thick of the crisis, had also enabled
Singaporean exporters to benefit from the surge in external demand.
(2) F
IRST TECHNICAL RECESSION SINCE 1985
3. The full impact of the crisis was felt in 1998, as deepening recessions in most parts of Asia
led to a slump in Singapore’s external demand.1  The sharp depreciation in the regional currencies
eroded our relative cost competitiveness.  The global  over-capacity in the electronics industry further
contributed to the decline in Singapore’s manufacturi ng sector.  As a result, real GDP growth slowed
significantly as the year progressed – from 4.4% in the first quarter of 1998 to 0.1% in the second
quarter, -2.1% in the third quarter and -1.1% in the fourth quarter.  On an annual basis, real GDPgrowth fell sharply from 8.9% in 1997 to 0.3% in 1998.  About 29,000 workers were retrenched in
1998, close to three times that recorded in 1997, while the seasonally adjusted unemployment rate
rose to 4.4% in December 1998 compared with 2% in December 1997.  Our inflation rate and
productivity growth slipped into negative territory.
4. The key economic indicators from 1995 to 1999 are listed in Table 1.
Table 1
Key Economic Indicators
Indicator 1995 1996 1997 19981999
Q1-Q3
Gross Domestic Product:
At Current Market Prices (S$ million) 118,601.9 129,022.9 142,451.0 141,328.0 NA
Annual Change (per cent) 11.2 8.8 10.4 -0.8 NA
At 1990 Market Prices (S$ million) 102,941.9 110,722.7 120,587.4 120,888.9 94,445.9
Annual Change (per cent) 8.1 7.6 8.9 0.3 4.7*
                                                     
1 A significant proportion of Singapore's external demand is attributed to Asia.  In 1996, Singapore's
trade with Asian countries accounted for approximately 60% of our total world trade.PRESS/TPRB/130
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MOREIndicator 1995 1996 1997 19981999
Q1-Q3
Per Capita GNP in S$ 35,139.3 36,931.8 39,714.1 38,198.4 NA
Gross Fixed Capital Formation:
Table 1 (cont'd)
At Current Market Prices (S$ million) 39,973.3 49,548.5 54,382.1 52,260.2 NA
Average US$/S$ 1.4174 1.4101 1.4848 1.6736 1.7020
Inflation Rate (CPI Change, per cent) 1.7 1.4 2.0 -0.3 0.1
Unemployment Rate (per cent) 2.0 2.0 1.8 3.2 3.6
Productivity (Annual Change, per cent) 3.0 1.3 2.6 -2.5 NA
* Full year preliminary estimate is 5.6%, as announced by Singapore Prime Minister Goh Chok Tong on 31 December 1999.
Source: Singapore Department of Statistics Manpower Research & Statistics Department, Ministry of Manpower Monetary
Authority of Singapore.
(i) Sectoral performance
5. Growth in all sectors moderated significantly in 1998, with the manufacturing, financial
services, wholesale and retail trade, and hotels and restaurants sectors contracting.  The manufacturing
sector was plagued by oversupply in the electronic s industry and weak regional demand for petroleum
and petrochemical products.  The financial services sector was affected by the severe curtailment in
offshore lending.  The decline in entrepot trade and visitor arrivals affected the wholesale and retail
trade, hotels and restaurants, and transport and communications sectors, while the smaller pipeline ofprojects lowered construction growth.
6. The sectoral performance indicators from 1995 to 1999 are listed in Table 2.
Table 2
Annual percentage change in sectors of the Singapore economy;  at 1990 market prices
Sector 1995 1996 1997 19981999
Q1-Q3
TOTAL 8.1 7.6 8.9 0.3 4.7*
Goods Producing Industries 9.5 7.1 7.3 0.9 5.4
Manufacturing 10.0 2.9 4.5 -0.4 12.8
Construction 8.8 22.0 15.3 4.0 -12.7
Utilities 6.2 7.3 10.8 4.9 2.6
Other Goods Industries -3.1 3.5 0.1 -7.2 -5.2
Services Producing Industries 7.6 8.1 10.2 - 0.3 3.5
Wholesale & Retail Trade 9.6 6.1 6.4 - 4.1 4.4
Hotels & Restaurants 5.3 8.5 1.9 -3.3 1.7
Transport & Communications 10.6 8.5 9.2 5.3 6.6
Financial Services 3.6 7.5 23.4 -8.8 2.8
Business Services 7.9 9.0 8.5 4.9 0.5
Other Services Industries 6.2 10.4 7.0 4.2 2.8
Owner-Occupied Dwellings 5.2 5.9 5.8 7.4 7.7
* Full year preliminary estimate is 5.6%, as announced by Singapore Prime Minister Goh Chok Tong on 31 December 1999.
Source: Singapore Department of Statistics.PRESS/TPRB/130
Page 13
MORE1. Merchandise trade
1. Our external merchandise trade in 1998 contracted by 7.5%, caused primarily by a sharp drop
of 14.6% in our trade with the crisis-hit economies (which make up about 40% of our total trade).
Fortunately, our trade with other markets in the U. S. and Europe remained healthy, which helped to
cushion the decline.  It was a severe downturn from the period 1994 to 1997, during which growth in
our external trade averaged 10.4% per annum.  Singapore's trade performance from 1995 to 1999 is
listed in Table 3.
Table 3
Singapore’s trade performance, 1995-99
TRADE Singapore’s trade performance
(at current prices, S$ billion)Annual percentage change
in trade (%)
1995 1996 1997 1998Jan-Nov
19991995 1996 1997 1998Jan-Nov
1999
TOTAL TRADE 343.8 361.5 382.2 353.6 345.5 13.2 5.1 5.7 -7.5 6.6
Imports 176.3 185.2 196.6 169.9 170.2 12.7 5.0 6.2 -13.6 9.5
Exports 167.5 176.3 185.6 183.8 175.3 13.7 5.2 5.3 -1.0 3.9
Domestic Exports 98.5 103.6 107.5 105.9 105.0 11.2 5.2 3.8 -1.5 8.3
Non-oil 84.8 87.0 91.6 92.4 91.5 13.7 2.7 5.3 0.9 8.0
Oil 13.7 16.6 15.9 13.5 13.5 -1.9 20.6 -3.9 -15.3 9.8
Re-Exports 69.0 72.7 78.1 77.8 70.3 17.4 5.3 7.4 -0.3 -2.0
Source: Singapore Trade Development Board.
(b) Exports
2. Our exports in 1998 only dipped slightly.  In fact, non-oil domestic exports registered a
marginal increase of 0.9%, as our export markets are diversified, with about 40% of our exports going
to the crisis-hit economies and 40% to the U.S. and Europe.  The effects of depressed demand fromthe crisis-hit economies were thus cushioned by sustained demand from developed markets in the
West.
3. The demand from developed markets was mainly in non-electronic products such as
pharmaceuticals.  Export demand for our key electronic products, which make up 69% of our non-oil
domestic exports, was weak, plagued by oversupply in the global electronics market.  Our domesticexports of oil also declined significantly due to the plunge in oil prices as well as sluggish demand
from the Asian economies, which accounted for about 80% of our oil domestic exports.  Our
re-exports also fell marginally in 1998, as the crisis weakened the import-ability of the affected
economies, especially for domestic consumption.
(b) Imports
4. Our imports shrank by 13.6% in 1998, as a consequence of sluggish industrial activity and
weak consumer demand in Singapore (for retained imports), as well as weak demand from the region(for re-exports).  The decline was largely in imports of oil, printed circuit board assembled (PCBAs),
disk drives, parts of semiconductors, disc media products, parts of colour televisions (CTVs), radios
and video cassette recorders (VCRs), cigarettes and parts of aircraft.
(c) Trade balance
5. Unlike the preceding years in which we recorded a trade deficit, our trade balance recorded a
surplus of S$13.9 billion in 1998.  Manufacturers ran down inventory in 1998 in view of the uncertain
economic conditions.PRESS/TPRB/130
Page 14
MORE2. Services trade
6. Singapore’s total trade in services shrank by almost 18% in 1998, compared with 5.8%
growth in 1997.  The crisis resulted in a 32% fall in exports of services, compared with growth of
7.2% in 1997.  The decline was due to several factors.  First, lower receipts from travel services as a
result of the fall in visitor arrivals.  Second, lower receipts from freight and port services as a result of
the sluggish regional trading environment.  Third, lo wer receipts from financial services as a result of
dampened foreign interest in the stock market.  Meanwhile, although imports of services continued togrow, this masked the slower growth in payments fo r travel services as a result of fewer Singaporeans
travelling abroad.
(c) Service balance
7. The surplus in our trade in services amounted to only S$553 million in 1998.  This largely
reflected the widening of the transportation deficit to S$2.6 billion and the travel deficit of
S$744 million.
8. Singapore's trade in services from 1995 to 1999 is given in Table 4.
Table 4
Singapore’s trade in services, 1995-99
Indicator Singapore’s trade in services
(at current prices, S$ billion)Annual percentage change
in trade in services (%)
1995 1996 1997 1998 1999* 1995 1996 1997 1998 1999*
Total Trade in Services 67.44 70.02 74.08 60.79 53.12 19.5 3.8 5.8 -17.9 20.6
Exports of Services 42.26 42.24 45.28 30.67 29.21 20.1 -0.1 7.2 -32.3 33.8
Transportation 7.27 7.32 7.66 7.45 5.67 17.7 0.8 4.6 -2.7 0.9
Travel 10.98 10.55 9.45 7.68 6.48 6.0 -3.9 -10.5 -18.7 12.8
Insurance 0.50 0.56 0.66 0.70 0.58 -0.3 11.4 18.1 5.7 11.8
Gov't Services 0.13 0.14 0.14 0.14 0.10 -17.6 4.6 0.0 1.4 0.3
Other Services 23.39 23.67 27.37 14.70 16.38 29.9 1.2 15.6 -46.3 66.4
Imports of Services 25.17 27.78 28.80 30.12 23.90 18.6 10.4 3.7 4.6 7.6
Transportation 8.40 9.86 8.86 10.01 7.87 14.7 5.5 5.9 6.7 6.1
Travel 7.12 8.07 8.35 8.43 6.38 20.5 13.3 3.5 0.9 4.0
Insurance 1.38 1.42 1.48 1.23 0.98 17.2 2.5 4.9 -17.4 5.9
Gov't. Services 0.17 0.14 0.17 0.19 0.14 11.6 -18.1 21.1 13.1 -3.2
Other Services 8.10 9.30 9.41 10.27 8.54 21.6 14.7 1.3 9.0 12.4
* First three quarters data.
Source: Singapore Department of Statistics.
B. BEYOND THE CRISIS
9. Against most expectations, the Singapore economy staged a strong recovery in 1999.  It grew
by a preliminary 5.6%, helped by several positive external factors – the strong upswing in the global
electronics industry, the gradual recovery in the regional economies including Japan, continuedgrowth in the U.S. and the EU, as well as our ow n cost-cutting measures.  The growth momentum for
most of our key economic sectors has clearly turned stronger, although the construction sector is still
languishing and there are pockets of weakness in the manufacturing sector.PRESS/TPRB/130
Page 15
END10. Singapore is now out of the woods and firmly on the road to economic recovery.  The outlook
for 2000 is positive.  The strong demand for electronics products is expected to continue.  The global
economy is expected to expand further on the back of continued robust growth in Europe and the
U.S., although there is some lingering risk of a sharp fall in U.S. stock prices.  The regional
economies are expected to recover further.  Taking all factors into account, the preliminary GDP
forecast for 2000 is 4.5% to 6.5%.
11. While the outlook for 2000 is encouraging, the reality is that the economic landscape in the
region has changed.  In the aftermath of the Asian crisis, many regional countries are now
restructuring their economies, and will become more formidable competitors.  The advances in
technology and the momentum of globalization have also continued unabated.  Singapore recognizes
that we must transit into a Knowledge-based Economy, in order to remain globally competitive.  It
cannot be business as usual.