Trade Policy – 2016
Singapore is a small and open economy, which is highly dependent on trade. Singapore's domestic and foreign trade policies are therefore closely intertwined. During the period under review, Singapore's domestic and foreign trade policies focused on four key priorities: enhancing productivity and innovation-led growth through economic restructuring; supporting the rules-based multilateral trading system to ensure a predictable and fair trading environment; promoting trade liberalisation to create opportunities for all Singapore-based companies; and modernising Singapore's domestic regulatory regime with a view to facilitate trade.
Navigating A Challenging Economic Environment :-
Trade contributes significantly to the Singapore economy. During the period under review, Singapore's trade to gross domestic product (GDP) ratio averaged around 368%. Trade accounted for approximately 60% of Singapore's GDP in value-added terms and half of employment in the same period.
The challenging global economic environment has had an impact on Singapore's economic performance. Sluggish global demand and sustained low oil prices have adversely affected significant sectors of the economy, such as the marine and offshore sector. Singapore's resource constraints in land, manpower and energy pose additional challenges to our efforts in sustaining economic growth. In 2015, the economy grew at a moderate pace of 2.0% compared to an average annual growth of 3.9% between 2012 and 2014.
The manufacturing sector recorded the weakest performance, contracting by 5.2% in 2015. This was a reversal from the average annual growth rate of 1.6% from 2012 to 2014. With the exception of the chemicals sector, all manufacturing sectors experienced declines in output in 2015. Growth in the construction sector was 2.5%, compared to an average annual growth rate of 6.9% from 2012 to 2014. This was attributed to a slowdown in private sector construction activities.
In contrast, the services sector expanded by 3.4% in 2015, a reduction from the average annual growth rate of 4.8% from 2012 to 2014. The wholesale and retail trade and the finance and insurance sectors registered the strongest growth. Notably, the wholesale and retail trade sector expanded by 6.1%, improving from the average annual growth of 4.0% from 2012 to 2014. Meanwhile, the finance and insurance sector grew by 5.3% – a significant fall from the average annual growth rate of 9.7% between 2012 and 2014.
Labour market conditions remained stable during the period under review. The annual average resident unemployment rate ranged between 2.7 and 2.8% from 2012 to 2015. Total employment expanded by an average annual growth rate of 3.2% from 2012 to 2015, down from 4.3% from 2008 to 2011.
Singapore's macroeconomic policies were stable during the period under review. Singapore's fiscal policy remained centred on ensuring macroeconomic stability, supporting economic growth, and redistribution to promote social equity, fiscal sustainability and microeconomic efficiency. Through Singapore's annual fiscal budget, the Singapore government has committed to boosting skills and productivity, reducing business costs, supporting small and medium enterprises (SMEs) in transition, supporting enterprise growth, and preparing for economic transformation.
Singapore's monetary policy, which is centred on the exchange rate, keeps inflation low and aims to maintain price stability over the medium term, which is key towards attaining sustained economic growth. Over 2010-14, the Monetary Authority of Singapore (MAS) maintained a generally tight monetary policy stance to dampen imported inflation amid increases in global oil, food, and other commodity prices. At the same time, such a policy stance helped to anchor inflation expectations and moderate domestic cost pressures arising from the short-term effects of economic restructuring. Singapore's monetary policy is accompanied by macro-prudential measures targeted at specific asset markets. Singapore has introduced property-related measures in the last few years to maintain a stable and sustainable market.
Since 2015, Singapore's monetary policy was eased in a calibrated manner, in line with the changing macroeconomic environment. In an off-cycle move in January last year, MAS maintained the policy of a modest and gradual appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band, but reduced its rate of appreciation, as the inflation outlook had become more subdued given the sharp fall-off in global oil prices and a milder-than-expected pass-through of domestic costs to consumer prices. In October, MAS eased policy further by reducing the rate of appreciation of the S$NEER policy band slightly, in view of the weaker growth outlook and price pressures. In April 2016, MAS set the rate of appreciation of the S$NEER policy band at zero per cent. This was not a policy to depreciate the domestic currency, but only removed the modest and gradual appreciation path of the S$NEER policy band. The actual outcome of S$NEER movements over the six months since October 2015 has in fact been a zero per cent appreciation compared to the preceding six-month period. This move took into account the assessment that Singapore's GDP growth would be more modest than previously envisaged, while MAS Core Inflation would pick up more gradually over the course of 2016 than earlier anticipated, and would likely fall below 2% on average over the medium term. The cumulative effects of these policy moves would continue to ensure price stability over the medium term.
Economic Re-Structuring Towards Productivity & Innovation-Led Growth :-
Singapore views productivity-led growth as the most sustainable way to ensure long-term economic growth. This is especially crucial in view of Singapore's ageing society and manpower constraints.
· SkillsFuture A key pillar of Singapore's productivity drive is SkillsFuture. SkillsFuture aims to educate and equip the workforce with skills and knowhow for the future economy. Launched in November 2014, SkillsFuture seeks to provide guidance to individuals to make well-informed choices in their personal education, training and careers, develop an integrated high-quality system of education and training that responds to constantly evolving economic and global needs, promote employer recognition and career development based on skills and mastery, and foster a culture that supports and celebrates lifelong learning.
· Infrastructure Development Singapore has also developed infrastructure to optimize the use of scarce resources, strengthen our companies' competitiveness, and support new growth sectors. For instance, Jurong Town Corporation's (JTC) Surface Engineering Hub and Chemicals Hub consist of shared facilities, such as a centralised wastewater treatment plant and fire-water retention tanks. Companies can make use of these shared facilities and in turn, reduce their capital investment and operating costs. The 600-ha Jurong Innovation District is another initiative. When ready, the District will host several new growth sectors, including advanced manufacturing, robotics, urban solutions, clean technology and smart logistics. The District will also support Singapore's manufacturing value chains in these new growth sectors, including through functions such as research and development, design, prototyping, production and supply chain management. For instance, companies within the District will have access to the research and engineering capabilities of Singapore's Nanyang Technological University, a full-fledged comprehensive and research-intensive university.
· Research, Innovation & Enterprise Research, innovation and enterprise (RIE) remain cornerstones of Singapore's knowledge-based and innovation-driven economy. To this end, Singapore has committed S$19 billion in funding for the RIE2020 Plan (2016 to 2020) to develop research & design capabilities within industries and nurture innovative enterprises to spur economic growth. This is an 18% increase over the budget allocated in the previous 5 year plan (2011 to 2015). The RIE2020 Plan will focus on areas including Advanced Manufacturing and Engineering; Health and Biomedical Sciences; Urban Solutions and Sustainability; and Services and the Digital Economy. These research activities will be supported by programmes with a focus on human capital – namely, academic research, to ensure excellent science; manpower, to sustain a pipeline of skilled manpower; and innovation and enterprise, to maximise value creation.
· Preparing The Singapore Economy for the future The Committee on the Future Economy (CFE) was established in January 2016 to develop strategies to build a vibrant and resilient economy which would deliver sustainable growth, and create value and opportunities for all. The 30-member CFE is helmed by Minister for Finance Mr. Heng Swee Keat and his deputy chairman, Minister for Trade & Industry (Industry) Mr. S Iswaran. The CFE's work will focus on five key areas, namely: future growth industries and markets; corporate capabilities and innovation; jobs and skills; urban development and infrastructure; and global connectivity. The CFE will draw from a wide range of expertise across public and private sectors.
Supporting the Rules - based Multilateral Trading System :-
Singapore's trade policy is anchored in the rules-based multilateral trading system as embodied by the WTO. Singapore takes its WTO membership seriously and has actively participated in work across the full WTO agenda to support the multilateral trading system. Singapore was amongst the first to ratify the Trade Facilitation Agreement (TFA), a key deliverable from the Bali Ministerial Conference. Singapore has also submitted its notification on the granting of preferential treatment in Services to Least-Developed Countries (LDCs), in accordance with the Services waiver agreed to at the Geneva and Bali Ministerial Conferences.
Singapore is committed to advancing rule-setting and trade-liberalising efforts at the WTO. As part of the Friends of Anti-Dumping Negotiations (FANs), Singapore has actively pushed for greater disciplines on transparency and due process in anti-dumping actions. Singapore has also maintained a pragmatic and open approach at the WTO. Singapore's participation in plurilateral initiatives where benefits are multilateralized, such as the expansion of the Information Technology Agreement (ITA) and the ongoing Environmental Goods Agreement (EGA), reflect its view that such efforts will contribute to greater liberalisation at the WTO and strengthen the multilateral trading system.
Singapore has also supported the WTO's regular work in trade monitoring, dispute settlement and capacity building. Singapore is part of the Friends of Safeguards Procedures (FSP), which has organised informal sessions on the sidelines of the regular Safeguards Committee meetings since 2013 to discuss and understand Members' practices in safeguard proceedings. During the period under review, Singapore has also stepped up its third party participation in the WTO dispute settlement system. 4.4. Singapore is committed to helping developing country Members integrate into and benefit from the multilateral trading system through technical assistance and capacity building activities. Under the Singapore-WTO Third Country Training Programme (TCTP), Singapore has collaborated closely with the WTO Secretariat to conduct a variety of programmes primarily for developing country Members in the Asia-Pacific region. These include the WTO-Singapore Trade Policy Dialogue, which brings together senior trade officials for strategic discussions ahead of Ministerial Conferences, short trade policy courses, and courses on specific issues of interest, such as trade in services. To date, Singapore and the WTO have jointly conducted 37 courses for 740 officials.
Promoting Trade Liberalization
As a trading nation, open markets are key to Singapore's trade policy. Free flow of goods and services in and out of Singapore contribute not only to the Singapore economy, but to a wider regional and global network of businesses and economies. Besides the WTO, Singapore has continued to pursue liberalisation efforts through regional and bilateral platforms to help companies based in Singapore trade freely and expand beyond Singapore to new markets.
a. Association of Southeast Asian Nations (ASEAN) :-
Singapore is an active member of the Association of Southeast Asian Nations (ASEAN). We work with other ASEAN Member States (AMS) on the ASEAN Economic Community (AEC), i.e. the realisation of a single market and production base, with a free flow of goods, services, and investment in the region. ASEAN has committed to more than 600 economic integration measures captured in an AEC 2015 Blueprint. The measures are in the following areas: trade in goods; trade in services; investment; standards & conformance; trade facilitation; skilled labour; financial integration; information & communication technology; food, agriculture & forestry; energy cooperation; competition policy; consumer protection; intellectual property rights; and strengthening of ASEAN's relations with Dialogue Partners via economic cooperation and Free Trade Agreements (FTAs). As of 31 December 2015, ASEAN had collectively implemented 82.3% of the Blueprint's measures. Looking forward, ASEAN will work on the remaining AEC 2015 Blueprint measures and pursue further economic initiatives for an AEC 2025.
ASEAN has, in the period of review, made progress in deepening internal integration and strengthening external relations. Among ASEAN's achievements were: (i) ASEAN's elimination of tariffs on almost 96% of tariff lines traded among AMS, via the ASEAN Agreement on Trade in Goods (ATIGA); (ii) ASEAN's completion of the 9th package of commitments to remove restrictions to services trade in AMS, under the ASEAN Framework Agreement on Services (AFAS); (iii) the entry-into-force, in 2012, of the ASEAN Comprehensive Investment Agreement (ACIA), which commits AMS to liberalise, protect, facilitate, and promote ASEAN-based investments in their countries; (iv) improvements to ASEAN's FTAs with China, Korea, and Australia-New Zealand; (v) negotiations, which are currently ongoing, of an ASEAN-Hong Kong FTA and the Regional Comprehensive Economic Partnership (RCEP) Agreement, a 16-Party RTA comprising all AMS and ASEAN's six FTA partners (Australia, China, India, Japan, Korea, and New Zealand).
b. Asia-Pacific Economic Cooperation :-
Singapore plays an active role at the Asia-Pacific Economic Cooperation (APEC), and remains committed to achieving the Bogor Goals of free and open trade and investment in APEC by 2020. Singapore has contributed to APEC's initiatives to advance regional economic integration by providing leadership and targeted capacity building in the areas of trade facilitation, supply chain connectivity and regulatory reform. In addition, Singapore supports the vision of a Free Trade Area of the Asia Pacific (FTAAP) and has contributed to the Collective Strategic Study on Issues Related to the Realisation of the FTAAP.
c. Pacific Alliance :-
Singapore joined the Pacific Alliance (PA) as an observer in February 2014 to deepen Singapore's economic linkages with Latin America and strengthen the existing trade-enabling infrastructure between Singapore and the four PA members. Since then, Singapore has participated in the 9th and 10th Pacific Alliance Summits in 2014 and 2015 respectively.
d. Regional and Bilateral Free Trade Agreements / Economic Partnerships :-
During the period under review, Singapore concluded four regional and bilateral free trade agreements and economic partnerships, namely: (i) the Agreement between Singapore and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu on Economic Partnership (ASTEP); (ii) the European Union-Singapore FTA (EUSFTA); (iii) the Turkey-Singapore FTA (TRSFTA); and (iv) the Trans Pacific Partnership (TPP).
The ASTEP was signed on 7 November 2013. It is a high-standard and comprehensive agreement covering areas such as trade in goods and services, e-commerce, government procurement and customs procedures.
The EUSFTA was concluded on 17 October 2014. It will improve Singaporean and European companies' access to each other's markets and provide a stable and fair regime for foreign investors while preserving the right of the parties to regulate in the public's interest. As the first FTA that is concluded between the EU and an ASEAN country, the EUSFTA signals the EU's commitment to step up its engagement with Southeast Asia and is a building block towards a potential EU-ASEAN FTA.
The TRSFTA is a comprehensive agreement covering areas such as goods and services, e-commerce, competition and transparency. It was signed on 14 November 2015. The TRSFTA will help Singapore companies leverage on Turkey's strategic location as a gateway to the larger regional markets in Europe, Central Asia, the Middle East and Africa. Likewise, Turkish firms are able to use Singapore as their base to seek opportunities in the surrounding Asia and ASEAN region.
The TPP, was concluded on 5 October 2015, and includes 12 countries in the Asia-Pacific region. TPP signatories comprise 40% of global GDP and one-third of world trade, making it the largest regional trade agreement to date. Trade with TPP signatories account for over 30% of Singapore's total goods trade. As a high-standard, ambitious and comprehensive agreement that goes beyond traditional FTA elements to include disciplines that assure the growth of the modern economy, the TPP marks an important milestone for regional trade liberalisation.
In addition, two FTAs entered into force in the same period: (i) the Singapore-Costa Rica Free Trade Agreement (SCRFTA); and (ii) the Gulf Cooperation Council-Singapore Free Trade Agreement (GSFTA). Singapore sees these regional and bilateral agreements as building blocks towards broader regional and multilateral trade liberalisation.
e. Bilateral Investment Treaties :-
Singapore concluded bilateral investment treaties (BITs) with Iran, Colombia, Burkina Faso and Ivory Coast during the period under review. The BITs with Kuwait, Russia and the United Arab Emirates also entered into force during this period. These BITs enhance Singapore's attractiveness as an investment destination and ensure greater protection for investors and their investments overseas.
MODERNISING REGULATORY REGIME AND FACILITATING TRADE THROUGH DOMESTIC POLICIES
Singapore continually reviews and reforms its already liberal regulatory regime, which does not maintain any export subsidies, exchange restrictions or price ceilings. This is to ensure that Singapore's regulatory regime keeps pace with the changing business environment and remains conducive for business activities. Singapore has been ranked first in the World Bank's Ease of Doing Business index from 2006 till today.
Customs and trade facilitation :-
Singapore is committed to improving its already liberal and facilitative trade regime through active engagement with businesses, robust regulations and effective risk-based enforcement. This holistic approach facilitates the movement of legitimate cargo while keeping out dangerous and undesirable cargo from entering or leaving the country.
To raise the overall proficiency and professionalism of the declaring agents and declarants, Singapore implemented the Declaring Agent Governance Framework in 2013. The Framework ensures the accuracy, completeness and integrity of trade declarations. In addition, to further support the industry's need for rapid turnaround time for air cargo, the permit exemption threshold for export of non-controlled and non-dutiable goods by air was increased from S$400 to S$1,000 (total value of goods).
Non-tariff measures :-
In order to address the global rise of non-tariff measures, the Ministry of Trade and Industry established a Non-Tariff Measures (NTM) Unit in October 2014 as an inter-agency undertaking to identify and address NTMs faced by companies based in Singapore, and to ensure that Singapore's trade policies are consistent with Singapore's international obligations.
Intellectual property (IP) :-
Singapore has completed several major reviews to update Singapore's IP policies to ensure that they remain robust and effectively support businesses and innovators in the protection of their IP. International surveys consistently rank Singapore's IP regime as one of the best in the world; the World Economic Forum's Global Competitiveness Report 2015/16 ranked Singapore 4th globally for IP protection. The introduction of the patent positive grant system in 2014 has raised the quality of granted patents in Singapore. Further, the completion of the designs review in March 2016 will support creativity and innovation in Singapore's designs ecosystem, and allow businesses to obtain design protection in Singapore and overseas markets more easily and effectively.
Singapore has built comprehensive international networks to help companies protect their IP overseas. Businesses can obtain patent, trade mark and design protection around the world with ease as Singapore is a party to the relevant World Intellectual Property Organization's international filing and registration systems, such as the Patent Cooperation Treaty (PCT), the Madrid Protocol for trademarks, and the Hague system for industrial designs. Singapore also has arrangements with ASEAN and other major trading partners – such as the Global Patent Prosecution Highway and the ASEAN Patent Examination Cooperation programme – that facilitate the use of their IP protection regimes. In addition, Singapore has been operational as an International Searching and International Preliminary Examining Authority (ISA/IPEA) under the PCT since September 2015.
Singapore has enhanced IP support services for businesses and the industry, such as through the building of IP manpower capabilities. In 2015, the Intellectual Property Office of Singapore (IPOS) launched the professional conversion programme to support the training of patent agents and the IP technology consultant registry to help professionals with a science and engineering background gain IP management skill sets. Singapore has also launched the IP Financing Scheme in 2014 to increase businesses' access to capital by enabling them to pledge their patents as collateral for loans. This Scheme has the added benefit of helping financial institutions become familiar with handling IP assets. IPOS also has complimentary business and legal clinics to advise companies on IP management. In relation to IP dispute resolution, IPOS introduced the IP Mediation Promotion Scheme in April 2016 to fund businesses which opt for mediation in IP disputes. Mediation can enable businesses to achieve favourable outcomes, as well as cost and time savings in the resolution of disputes.
Legal services :-
Singapore has expanded its range of dispute resolution services to support the growth of business activities in Singapore and in the region. In November 2014, the Singapore International Mediation Centre (SIMC) was established to provide international commercial mediation services. At the same time, the Singapore International Mediation Institute was set up to ensure the quality of the SIMC's mediators. In January 2015, Singapore established the Singapore International Commercial Court and supplemented the Singapore bench with a number of international judges to hear international commercial disputes. Foreign lawyers have rights of audience in certain circumstances. Together with the existing Singapore International Arbitration Centre and the WIPO Arbitration and Mediation Centre, Singapore now offers disputing parties a complete suite of dispute resolution services to choose from based on their business needs.
To update and modernise the regulatory framework for the legal profession in Singapore, Singapore amended the Legal Profession Act to provide a streamlined disciplinary framework for all lawyers, and an integrated licensing regime for all law practice entities in Singapore. A new regulatory body – the Legal Services Regulatory Authority – was set up in November 2015 to administer the integrated licensing regime that brings together certain regulatory functions previously undertaken by the Attorney-General's Chambers' Legal Profession Secretariat and the Law Society of Singapore. To provide law practices with the flexibility to attract and retain non-lawyer talent with strong management or finance backgrounds, since November 2015, non-lawyers have been allowed to become partners, directors or shareholders in, or to share in the profits of, law practice entities (up to prescribed limits).
Accountancy services :-
The Singapore Accountancy Commission (SAC) was established in April 2013 to develop a vibrant accountancy sector in Singapore. The SAC focuses on both the vertical segment (accounting entities) and the horizontal segment (professional accountants working in the finance, internal audit, business valuation and risk management functions of organizations) of the accountancy sector.
For the vertical segment, the SAC has initiated efforts to raise the productivity and innovation levels in accounting entities (also known as accounting firms) in helping them to deliver higher value-added services to their clients, and helping them to succeed. For both the vertical and horizontal segments, the SAC has launched programmes to raise the levels of talent and competencies of accountancy professionals. These Programmes include the Singapore Qualification Programme, the Asia Internal Audit Leadership Programme, the Chartered Valuer and Appraiser Programme, and the SME Business and Financial Management Programme.
The Singapore Qualification Programme, which provides a pathway for the training, qualification and recognition of Chartered Accountants of Singapore, will now allow both university graduates and polytechnic graduates with either accountancy or non-accountancy backgrounds to embark on the programme. Both local and foreign candidates are allowed to embark on the programme with the condition that candidates must attain the relevant working experience with an Accredited Training Organisation. The SAC is also working with other global accountancy professional bodies to achieve mutual recognition of qualifications across jurisdictions to facilitate chartered accountants to operate in and out of Singapore more effectively to support businesses.
Singapore has put in place policies to reduce its Greenhouse Gas Emissions by switching from fuel oil to natural gas. Today, about 95% of Singapore's electricity is generated from natural gas. To meet the longer term demand for natural gas, Singapore has put in place a Competitive Licensing Framework to allow flexibility in importing Liquefied Natural Gas (LNG) supplies on a tranche-by-tranche basis. This allows suppliers to bid in an open and competitive process to supply the next tranche of LNG to Singapore.
The Energy Market Authority of Singapore (EMA) has implemented numerous initiatives to enhance market competition to benefit end consumers. EMA is progressively opening the retail electricity market to competition to give consumers the option of buying electricity packages with different prices and services from a variety of retailers, instead of only being able to purchase electricity from Singapore Power Services at the regulated tariff. EMA aims to open up the retail electricity market completely by 2018.
An electricity futures market was launched in April 2015 to facilitate the entry of new independent retailers to enhance competition in the retail market. It also allows the industry stakeholders to better manage their risks. This has resulted in more competitively priced electricity retail packages for end-consumers.
Encouraging innovation and adoption of technology by SMEs :-
To help SMEs based in Singapore achieve innovation-led growth, Singapore has policies in place to enhance SMEs' access to innovation expertise by providing technology consultancy and researcher secondment opportunities; facilitate SMEs' access to technologies by helping to match-make them with both local and international IP that suits their needs; and help SMEs tap on ready plug-and-play technology solutions to increase their productivity. This ensures that SMEs based in Singapore remain resilient in the face of economic pressures and are well-positioned to seize future opportunities.