singapore chapter 1 gp 6

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CHAPTER-1

ECONOMY OF SINGAPORE-OVERVIEW



ECONOMY OF SINGAPORE

It has an open business environment, relatively corruption-free and

transparent, stable prices, and one of the highest per-capita gross domestic

products (GDP) in the world.

Its innovative yet steadfast form of economics that combines economic

planning with free market has given it the nickname the Singapore Model.

Exports, particularly in electronics and chemicals, and services provide the

main source of revenue for the economy, which allows it to purchase natural

resources and raw goods which it does not have.

Singapore's largely corruption-free government, skilled workforce, and

advanced and efficient infrastructure have attracted investments from morethan 3,000 multinational corporations (MNCs) from the United States,

Japan, and Europe. Foreign firms are found in almost all sectors of the

economy. MNCs account for more than two thirds of manufacturing output

and direct export sales, although certain services sectors remain dominated

by government-linked corporations.

Manufacturing and financial business services accounted for 26% and 22%,

respectively, of Singapore's gross domestic product in 2000. The electronics

industry leads Singapore's manufacturing sector, accounting for 48% of totalindustrial output, but the government also is prioritizing development of the

chemicals and biotechnology industries.

TAXATION: Singapore introduced a Goods and Services Tax (GST) with

an initial rate of 3% on 1 April 1994, increasing government revenue by

S$1.6 billion (US$1b, €800m) and stabilizing government finance. The

taxable GST was increased to 4% in 2003, to 5% in 2004, and to 7% in

2007.

To maintain its competitive position despite rising wages, the governmentseeks to promote higher value-added activities in the manufacturing and

services sectors. It also has opened, or is in the process of opening, the

financial services, telecommunications, and power generation and retailing

sectors up to Foreign Service providers and greater competition. The

government has also attempted some measures including wage restraint

measures and release of unused buildings in an effort to control rising

commercial rents with the view to lowering the cost of doing business in

Singapore when central business district office rents tripled in 2006.



GROWTH IN GDP OF SINGAPORE:

Year

GrossDomesticProduct US Dollar

Exchange

Nominal

PerCapitaGDP

PPP

PerCapitaGDP

($millions)

(as % ofUSA)

(as %of

USA)

1980 25,117

2.14SingaporeDollars 39.65 55

1985 39,036

2.20SingaporeDollars 36.63 63.41

1990 66,778

1.81

SingaporeDollars 52.09 74.76

1995 1,19,470


2000 1,59,840


2005 1,94,360


2007 2,24,412

1.42

SingaporeDollars 74.61 107.92

2008 2,35,632


2009 2,68,900


2010 3,09,400


0

1,00,000

2,00,000

3,00,000

4,00,000

1980 1985 1990 1995 2000 2005 2007 2008 2009 2010



SINGAPORE’S FINANCIAL SYSTEM-WHETHER BANK-BASED/MARKET

BASED?

Total assets under management (DBU & ACU): $1200 billion (data averaged for12 months)

Total assets of DBUs: $785 billion (data averaged for 12 months)

Credit to Non-bank Customers: $326 billion (data averaged for 12 months)

Stock market capitalisation: $800 billion (data averaged for 12 months)

GDP: $303 billion

Banks have two units:1) Domestic banking units (DBU)2) Asian currency units (ACU)

Investment arm of government: TEMASEK HOLDINGS

Government ownership of Banks:Out of top 10 banks in Singapore 3 are Domestic and the rest are Foreign Banks.These top Domestic banks are:

1) DBS (Development bank of Singapore)

2) United Overseas Bank

3) OCBC (Overseas Chinese Banking Corporation)

Government Holdings in DBUs: 27% stake in DBS( 27% OF $34 BILLION)=9.18 BILLION

STATE OWNERSHIP: 0.014 (closer to that of the market-based financialsystems).So effectively there is Low Government stake in Domestic Bankingunits.

INDICATORS OF FINANCIAL STRUCTURE:

STRUCTURAL SIZE: Market capitalisation = 2.453= log 2.453= 0.389

Bank creditLow state ownership of domestic banks indicates that Singapore economy is

essentially a market-based economy



FINANCIAL SYSTEM OF SINGAPORE:

FINANCIAL INSTITUTIONS

MONETARY AUTHORITYOF SINGAPORE

COMMERCIALBANKS

LOCALBANKS FOREIGN BANKS

FOREIGNFULL BANKS

WHOLESALEBANKS

OFFSHOREBANKS

MERCHANTBANKS

SOVERIGN

FUND OFSINGAPORE

TEMASEKHOLDINGS

ASSOCIALTIONOF BANKS IN

SINGAPORE(ABS)



STRUCTURE OF FINANCIAL MARKETS:

FINANCIAL INSTRUMENTS TRADED IN THE SINGAPORE MARKETS:

FINANCIALMARKETS

CAPITALMARKET

BONDSMARKET

SINGAPOREGOVERNMENTSECURITIES(ISSUED BYMAC ONLY)

T-BILLS (1-YR.,2-YR.)

GOVERNMENTBONDS

CORPORATE BONDMARKET

SINGAPOREEXCHAGELIMITED

(SGX)

FOREIGNEXCHANGE

MARKET

SIBOR (

SINGAPOREINTERBANKOFFERED

RATE)

SFEMC (SINGAPORE

FOREIGNEXCHANGE

MARKETCOMMITTEE)

COMMODITIESMARKET

FINANCIALINSTRUMENTS

CENTRALPROVIDEN

T FUND

EQUITIES

EQUITYINDEX

FUTURES/OPTIONS

DIVIDEND INDEXFUTURES/OPTION

S

FIXEDINCOME

SECURITIES

CORPORATEBONDS

EXCHANGE TRADED

FUNDS

INTEREST

RATEFUTUR

ES



FINANCIAL REGULATIONS:

CORPORATE FUNDRAISING

Any public company that desires to have its shares listed on the SGX may apply for a listing

either on the SGX Main Board or on Catalist (formerly SGX SESDAQ). The criteria forlisting are found in the SGX Listing Manual.

FOREIGN EXCHANGE RATE:

Though Singapore maintains a freely floating exchange rate due to the high imports and high

exports (due to Entrepot), monetary authority still interferes whenever the exchange rate

crosses certain limit. So in reality it can be seen as a Managed float or dirty float.

HEDGE FUND REGULATION:

Singapore has stood out from most of the world's other hedge fund centers for its light-touchregistration requirements and relatively benign regulatory climate. Managers serving 30 orless sophisticated investors -- as opposed to retail clients -- can operate without having alicense from the Monetary Authority of Singapore (MAS) regardless of their total level of

assets under management.

This has made it one of the easiest jurisdictions for hedge funds to start up in, attracting morethan 200 funds over the past decade.

SECURITIES REGULATION:

Once a company is listed, it becomes subject to the jurisdiction of the SGX. Timelydisclosure of price-sensitive information is the cornerstone of SGX’s regulatory policy. To

ensure that such information is released to the market on a timely basis, listed companies are

obliged to comply with the SGX’s Corporate Disclosure Policy in Chapter 7 and Appendix

7.1 of the of the SGX Listing Manual



KEY ECONOMIC AND FINANCIAL INDICATORS:

Items Date of

Latest

Most

Recent

Period

%

Change1

Previous

Period

%

Change2

Gross Domestic Product (GDP)

GDP at Current Market Prices S$m Q1/11 81,192.7 11.2 78,174.0 8.9

GDP at 2005 Market Prices S$m Q1/11 73,323.1 8.371,822.3

12.0

Items Date of

Latest

Most

Recent

Period

%

Change1

Previous

Period

%

Change2

External Trade

Total Trade @ Current Prices S$m Jun/11 82,372.4 5.0 81,605.0 13.5

Total Exports @ Current Prices S$m Jun/11 43,516.9 6.2 42,323.6 9.6

Total Imports @ Current Prices S$m Jun/11 38,855.5 3.7 39,281.4 18.0

Items Date of

Latest

Most

Recent

Period

%

Change1

Previous

Period

%

Change2

Manufacturing

Industrial Production Index (2007=100) May/11 117.4 -17.5 124.8 -9.5

http://www.singstat.gov.sg/stats/latestdata.html#note1






http://www.singstat.gov.sg/stats/themes/economy/ess/essa11.pdf









http://www.iesingapore.gov.sg/wps/portal/PressRelease?WCM_GLOBAL_CONTEXT=/wps/wcm/connect/ie/My+Portal/Main/Press+Room/Press+Releases/2011/Singapore+External+Trade+-+June+2011








http://www.edb.gov.sg/edb/sg/en_uk/index/news/articles/monthly_manufacturing_performance_may_2011.html

http://www.edb.gov.sg/edb/sg/en_uk/index/news/articles/monthly_manufacturing_performance_may_2011.html












Items Date of

Latest

Most

Recent

Period

%

Change1

Previous

Period

%

Change2

Employment & Productivity

Employment '000 Mar/11 3, 134.2 3.6 3,105.9 3.9

Unemployment

(seasonally adjusted) (quarterly)

% of labour

forceMar/11 1.9 - 2.2 -

Labour Productivity Growth % Q1/11 4.5 - 7.8 -

Wages/Earnings (monthly

average for the quarter)S$ Q1/11 4,677 8.5 4,474 7.5

back to top

Items Date of

Latest

Most

Recent

Period

%

Change1

Previous

Period

%

Change2

Price Index

Consumer Price Index (2009=100) May/11 107.4 4.5 106.8 4.5

Domestic Supply Price Index (2006=100) May/11 105.5 7.6 108.2 8.0

Items Date of

Latest

Most

Recent

Period

%

Change1

Previous

Period

%

Change2

Services

Retail Sales Index at Current PricES (2010=100) May/11 103.9 10.0 100.1 8.5







http://www.mom.gov.sg/newsroom/Pages/PressReleasesDetail.aspx?listid=368



http://www.singstat.gov.sg/stats/latestdata.html#top













http://www.singstat.gov.sg/news/news/mrsmay2011.pdf

http://www.singstat.gov.sg/news/news/mrsmay2011.pdf













Domestic Wholesale Trade Index at

Current Prices(2007=100) Q1/11 104.6 8.3 101.9 -2.0

Foreign Wholesale Trade Index at

Current Prices (2007=100) Q1/11 118.5 16.8 115.9 17.4

Business Receipts Index (2008=100) Q1/11 110.9 8.2 110.8 9.3

Items Date of

Latest

Most

Recent

Period

%

Change1

Previous

Period

%

Change2

Government Operations

Total Revenue and Grants S$m May/11 8,251.5 - 4,016.1 -

Expenditure & Net Lending S$m May/11 2,965.0 - 4,692.9 -

Deficit (-) or Surplus S$m May/11 5,286.5 - -676.8 -

Total Financing S$m May/11 -5,286.5 - 676.8 -

Domestic Financing S$m May/11 -5,286.5 - 676.8 -

Total Net Borrowing S$m May/11 4,734.5 - 8,500.1 -

Use of Cash

BalancesS$m May/11 -10,021.0 -7,823.3 -

Foreign Financing S$m May/11 0.0 - 0.0 -

Items Date of

Latest

Most

Recent

Period

%

Change1

Previous

Period

%

Change2



















Government Debt

Central Government Debt S$m Q1/11 331,163.0 16.4 321,182.3 10.2

External Debt S$m Q1/11 0 - 0 -

Domestic Debt S$m Q1/11 331,163.0 16.4 321,182.3 10.2

Registered Stocks &

BondsS$m Q1/11 263,376.3 16.4 253,841.3 10.3

Treasury Bills S$m Q1/11 57,900.0 12.0 57,100.0 9.6

Advance Deposits S$m Q1/11 9,886.7 53.5 10,241.0 9.5

Domestic Debt (Excluding

Advance Deposits)S$m Q1/11 321,276.3 15.6 310,941.3 10.2

1 year maturity or less S$m Q1/11 77,015.5 -0.6 80,915.5 10.6

More than 1 year maturity S$m Q1/11 244,260.8 21.8 230,025.8 10.1

Items Date of

Latest

Most

Recent

Period

%

Change1

Previous

Period

%

Change2

Financial Statistics

Money Supply (M1) S$m May/11 121,643.7 19.4 120,955.8 22.0

Money Supply (M2) S$m May/11 422,716.1 10.8 422,475.6 11.0

3-month Interbank Rate % p.a Jun/11 0.44 -0.13 0.44 -0.13

3-month US$ SIBOR % p.a Jun/11 0.25 -0.29 0.26 -0.28

5-year Govt Bonds Interest Rate % p.a Jun/11 0.99 0.23 1.14 0.23











Exchange Rate

S$ per US$ (as at end-month)S$ per US$ Jun/11 1.2292 -12.3 1.2328 -12.0

back to top

Items Date of

Latest

Most

Recent

Period

%

Change1

Previous

Period

%

Change2

External Accounts

Balance of Payments S$m Q1/11 5,619.5 -73.3 16,476.9 37.5

Imports of goods and

servicesS$m Q1/11 143,489.7 9.5 142,871.4 12.5

Exports of goods and

servicesS$m Q1/11 166,240.7 11.5 164,082.2 11.3

Current Account Balance S$m Q1/11 17,679.9 16.6 15,723.2 0.8

Net Receipts from

Current TransfersS$m Q1/11 -1,837.8 - -1,753.0 -

International Reserves

(increase in assets is

indicated by a minus

[-] sign)

S$m Q1/11 -5,619.5 - -16,476.9 -

Financial Transactions S$m Q1/11 -14,085.9 - 1,491.2 -

Official Foreign Reserves US$m Jun/11 242,286.9 21.2 239,943.2 21.0

THE IMPACT OF THE CRISIS AND THE GOVERNMENT’S RESPONSE













With the onset of the financial crisis, Singapore experienced a severe economic

downturn, with GDP contracting by 9.5 percent in the first quarter and 3.3 percent in

the second quarter of 2009. This was the sharpest downturn among ASEAN economies,

though more recent data point towards a recovery, with GDP growing by 0.6 percent in the

third quarter of 2009. Singapore is one of the most important economies in ASEAN, withGDP accounting for 12 percent and trade for 28 percent of the group’s total. Its economy is

highly integrated with the rest of global economy and as such was more exposed compared to

many ASEAN Member States to the slowdown in global demand. Singapore attracts 41

percent of all foreign direct investment (FDI) to ASEAN Member States, and its trade to

GDP ratio is around 360 percent, compared with the ASEAN group average of 110 percent.1

Singapore’s economy has been negatively affected by the reduced global demand for

manufacturing exports. The service sectors have also been affected by the sharp contraction

in global and regional finance and by the downturns in intra-Asian trade and tourism.

The Singapore economic downturn varied in degree from sector to sector. As can beseen in Figure 2, output in the manufacturing and, particularly, utility sectors declinedsignificantly, while the agriculture sector has been resilient. While the construction sectorgrew unusually strongly relative to many other countries, the hotel and restaurant sectorshave continued to decline into the second quarter of 2009. Within the manufacturingsector, there were also sharp differences between sub-sectors, with textile, apparel, leatherproduct, and wood product hit most strongly, with reductions in output of between 20 to50 percent. Output declines of this magnitude will have inevitably resulted in job lossesand reduced earnings, and individuals who made their living in these sectors mayexperience significant hardships as a result. In 2008, 19.9 percent of the employed workedin the manufacturing sector, 12.2 percent in construction and 67.3 in the services sector.

1 ASEAN website http://www.aseansec.org/19230.htm.

http://www.aseansec.org/19230.htm




singapore chapter 1 gp 6

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