Singapore PESTLE Summary &

Analysis

Political
Current Landscape
Singapore is a multiparty parliamentary republic. It became an independent
nation in August 1965 after more than a century under British rule, a brief
occupation by the Japanese during World War II and two years under Malaysia.
Post- independence, the country's politics have been dominated by the Peoples
Action Party (PAP), making it a single party democracy. Successive PAP
governments have kept a tight hold on power while guiding Singapores
socioeconomic development.

The prime minister heads the government, and the cabinet holds executive
power. The role of the president is largely ceremonial. The parliament is
responsible for making laws through the introduction of bills. The Supreme Court
heads the judiciary. The impartiality of the judiciary in political matters has been
questioned at times, as it has often been alleged that the judiciary complies with
the interests of the government. The PAP has used judicial means like
defamation suits to suppress both opposition parties and dissenting voices in the
media.
 Sir Thomas Raffles signed a treaty with the ruling Sultan Hussein Shah of the
Malaccan Sultanate and began developing what was then a small fishing and
trading village into a busy trading post. Political control passed from the East
India Company to the British Crown in 1867
In 1959, Singapore gained self-governance under Prime Minister Lee Kuan Yew
in all state matters except defense and foreign affairs. Lee Kuan Yew
continued as prime minister of the country until 1990. This period saw
significant economic growth, along with reduced unemployment and racial
tensions. Lee Kuan Yew continued to wield significant influence on successive
governments between 1990 and 2004 as a senior minister under the
leadership of Prime Minister Goh Chok Tong.
The opposition has been too weak and fragmented to successfully challenge
the PAP.
In May 2011, the ruling PAP won 81 of the 87 seats in parliament. However,
opposition parties increased their vote share, leading the Prime Minister Lee
Hsien Loong to describe it as a "watershed election."

Political Structure
 The President is the head of state. The role has been largely ceremonial
but a 1991 amendment to the constitution made way for direct popular
elections to the post and gave the president more authority including veto
power on decisions like the use of national reserves and key judicial and
civil service appointments. Tony Tan Keng Yam was appointed president in
September 2011. He previously served as deputy prime minister of
Singapore, minister for finance, minister for education and minister for
defense.
Lee Hsien Loong is the third prime minister of Singapore. Lee entered
politics at the age of 32 in 1984. He was appointed minister of state in the
ministry of trade and industry and in the ministry of defense in 1984, by
his father Lee Kuan Yew. He was subsequently promoted as acting minister
for trade and industry and as the second minister for defensein 1986. On
August 12, 2004, Lee Hsien Loong succeeded Goh Chok Tong as the prime
minister of the country.

Structure of government
The Republic of Singapore is a parliamentary republic with a multiparty system.
The prime minister is the head of the government, which is vested with executive
power. Legislative power resides jointly with the government and the legislature,
which is called the parliament.

Legislative branch of government

The parliament is unicameral and has 87 members elected for five-year terms,
12 of whom are elected from single- member constituencies. The rest are elected
in teams of four to six from 15 group representation constituencies (GRCs). At
least one member from each group contesting a GRC seat should be from an
ethnic minority (non-Chinese). In addition, up to nine nominated members (NMP)
and up to nine non-constituency members of parliament (NCMP) are elected.
Generally, members of parties that come closest to winning seats are appointed
as NCMPs; while NMPs are appointed by the president to ensure that a wide
range of community views are presented in parliament. NMPs are independent
and non-partisan members.

The last election was held in May 2011. Legislation is made through the
introduction of bills into parliament by the cabinet or a member of parliament.
The bills must be passed through three readings to be approved as laws.

Executive branch of government

The government wields executive power in the form of a cabinet headed by the
prime minister. The president appoints the prime minister who, in his view, is
likely to carry the support of the majority of the parliament. He also appoints
cabinet members on the advice of the prime minister. The cabinet decides the
policies of the government and is answerable to the rest of the parliament. The
president is the head of state. The functions of a president have largely been
ceremonial, but after the formulation of an amendment in 1991, the president
was allowed to contest a direct popular election, a move that provided the
president with more authority.
PAP in the legislature
The PAPs policies have been guided by a sense of pragmatism and meritocracy.
In terms of economic ideology, the party used to believe in welfare spending and
state intervention, but it has adopted free-market policies to a large extent since
the late 1980s. While democratic institutions are now recognized, the party is
less liberal than its Western counterparts. Currently 80 seats out of 87.

Key Policies

Economic

The governments budget for 2013 has emphasized on a quality growth

programme that entails upgradation of businesses and creation of better
jobs. The government has realized that the increasing dependence on foreign
workers is not sustainable in the long-run. Thus, it has taken measures to
reduce it by raising foreign worker levies for all sectors, lowering dependency
ceilings (relating to the maximum foreign workers allowed in a particular
industry) and tightening eligibility requirements for S Pass (work pass for mid-
level skilled foreigners) and Employment Pass (work pass for foreign
professionals working in managerial, executive or specialized jobs).
Moreover, the government has taken special measures in the budget for
FY2013 to help businesses restructure their operations by announcing a
three-year transition package of S$5.3 billion ($4.2 billion). As a part of this
transition package, the government will co-fund 40% of wage increases given
to Singaporean employees earning a gross monthly wage of up to S$4,000
($3,201) under its Wage Credit Scheme (WCS). It also intends to provide
S$1.3 billion ($1.04 billion) worth of corporate tax rebates over the next three
years to help businesses in alleviating rising costs over the medium-term.
Under this scheme, companies will receive a rebate of 30% on their payable
tax; an amount, which is capped at S$30,000 ($24,009) for each company. It
also strengthened its Productivity and Innovation Credit (PIC) Scheme,
introduced in the 2010 budget, by allocating S$450m ($360.1m) during 2013
15 to assist businesses in payment of operating costs such as wages and
rentals, and supporting them to undertake improvement in productivity and
innovation. The support package termed as the PIC Bonus provides a dollar-
for-dollar matching cash bonus of up to S$15,000 ($12,004) for three years to
businesses that spend a minimum of S$5,000 ($4,001) in PIC activities each
year. This is in addition to 400% PIC tax deductions of up to S$400,000
($320,120) in six qualifying expenditures and/or cash conversion of 60% on
qualifying expenditure of up to S$100,000 ($80,030).
Furthermore, the government has taken several measures such as project
financing, trade financing and political risk insurance, and avoiding double
taxation to help in the internationalization of Singaporean companies. The
government has put special emphasis on improving the transport system of
the state. Furthermore, the government will keep a close watch on
 macroeconomic developments and will take policy decisions in response to
global developments.

Social

In recent years, Singapore's social policies comprised a mix of pragmatic and

populist measures. The budget for FY2013 aims to build a more inclusive
society through following measures: promoting social mobility, providing
better job opportunities for all Singaporeans, redistributing income through a
fair and progressive taxation system, and collaborating in community
initiatives such as provision of better facilities for underprivileged pre-
schoolers and conducting of house-to-house health screening programs. The
government has allocated S$5.7 billion ($4.6 billion) towards healthcare,
S$1.3 billion ($1.04 billion) towards culture, community and youth, S$1.8
billion ($1.4 billion) for social and family Development, and S$11.6 billion
($9.3 billion) towards education.

Foreign

The Lee Hsien Loong government has tried successfully to improve relations
with China in order to boost trade and investment in Singapore. Singapore
also enjoys close bilateral relations with India. Singapores prime minister
visited India in July 2012 to boost trade and investment ties. He again visited
India in December 2012 for the ASEAN-India Commemorative Summit in New
Delhi.
Singapore has also increased its commercial ties with the US since the
establishment of the US-Singapore free-trade agreement in January 2004. The
Singapore-US co-operation has been extended to new areas such as IT,
health, education, defense and security in recent years. The two countries
have entered into an agreement to jointly tackle issues such as terrorism and
the proliferation of weapons of mass destruction.
The countrys relations with Malaysia have improved further since the
resolution of the 20-year old railway land issue in mid-2010, and Singapore is
one of the biggest investors in Malaysia. Singapores international policies will
focus on reinforcing its position as one of the leading logistics and transport
hubs in South Asia.

Performance Governance Indicators

The World Bank report on governance used voice and accountability, political
stability and absence of violence, government effectiveness, regulatory
quality, rule of law, and control of corruption as indicators to assess the
quality of governance in 215 countries and territories over 19962012. Daniel
Kaufmann of the Brookings Institution, Massimo Mastruzzi of the World Bank
Institute, and Aart Kraay of the World Bank Development Economics Research
Group conducted the study. For any country, a percentile rank of zero
represents the lowest possible score and a percentile rank of 100 represents
the highest possible score.
 Singapore ranked in the 54.03 percentile for voice and accountability in 2012.
This measures the extent to which a country's citizens are able to participate
in selecting their government, as well as freedom of expression, freedom of
association, and freedom of the media. Singapore ranked relatively low due to
its strict attitude toward the press. In comparison, Taiwan had a better
percentile rank of 72.04.
Singapore ranked in the 96.88 percentile for political stability and absence of
violence in 2012. This measures perceptions of the likelihood that the
government will be destabilized or overthrown by unconstitutional or violent
means, including domestic violence and terrorism. Singapore fared better
than Taiwan, which received a percentile rank of 73.93.
Singapore ranked in the 99.52 percentile for government effectiveness in
2012. This measures the quality of public services; the quality of the civil
service and the degree of its independence from political pressures; the
quality of policy formulation and implementation; and the credibility of the
government's commitment to such policies. Singapores scores in this
indicator have been impressive over the last decade. Successive
governments have pursued similar economic policies, leading to stability in
policy formulation and implementation. In comparison, Singapore fared better
than Taiwan, which received a percentile rank of 83.73.
Singapore ranked in the 100.00 percentile for regulatory quality in 2012. This
measures the ability of the government to formulate and implement sound
policies and regulations that permit and promote private sector development.
A high ranking indicates fair implementation of policies and regulations for
the private sector. In comparison, Singapore ranked ahead of Taiwan, which
also received a favorable percentile rank of 86.12.
Singapore ranked in the 95.73 percentile for rule of law in 2012. This
measures the extent to which agents have confidence in and abide by the
societys rules, and in particular the quality of contract enforcement, the
police, and the courts, as well as the likelihood of crime and violence. Taiwan
trailed Singapore in this category as it received a percentile rank of 82.94.
Singapore ranked in the 97.13 percentile for control of corruption in 2012.
Control of corruption measures the extent to which elite and private parties
exercise public power for private gain, including both petty and grand forms
of corruption, as well as the appropriation of the state. In comparison,
Singapore performed better than Taiwan, which received a percentile rank of
73.68.

Outlook

The ruling PAP won a majority once again in the May 2011 election, securing
81 out of 87 seats to give it complete control over the government to
implement its policies. This was the PAP's 11th successive victory; however,
its vote share fell to 60.1%, which indicates that the opposition is gaining at
its expense. Opposition parties won 39.9% of the vote, which suggests that
the PAPs unrivalled power in the political landscape is withering away slowly.
The fact that the opposition parties' vote share increased from 33.4% to
39.1% indicates the beginning of a change and the government faces the
 prospect of a strong opposition in the coming years. Moreover, the PAP has
lost two by-elections since the May 2011 elections, which has reduced its seat
count to 80.
Relations with Malaysia have been difficult in the past, especially due to
personality clashes between the leaders of the two countries. However, in
recent years, relations have improved with greater economic integration,
which is expected to continue in the future. As suggested by its 2013 budget,
the city-state wants to reduce its dependence on foreign workers amid
citizens concerns over immigration. This could be a deterrent for foreign
businesses looking to operate in Singapore.

Political Analysis
Renowned for its stable politics and consistent policymaking
One of the most efficient Asian Governments
One party system (PAP dominance) raised concerns about political
freedom of citizens
Recent curbs on media freedom have drawn protests from community,
raising questions about the voice and accountability of the electorate
Relations with Malaysia have improved recently, resolving legacy issues,
mainly a consequence of consensus among political leaderships on both
sides
Immigrant-friendly image is at stake, because anti-foreigner sentiment is
increasing in Singaporeans

Current strengths Current challenges

Continuity in government policies
PAP in power since 1959
Under LKY, consistent policies led to the
foundation of a robust economy
During 1980s, Singapore politics
underwent a period of transition, with
younger PAP members helping to attract
FDI into the country
PAP fostered social stability, new
housings, increased employment
opportunities, rise in SOL, and thus
political continuity will allow
government to continue taking a long-
term view and control of economy and
society
Efficient governance
5th least corrupt nation among the 176
surveyed by Transparency International
in 2012, with 87 Corruption Perceptions
Index on a scale running from 0 (highly
Government restrictions on political
freedom
PAP controls 80 of 87 elected
seats in parliament, and this
political dominance portrays
both weak and fragmented
state of the main opposition
parties and the confidence of
much of the electorate in PAP
Restrictions on freedom of
speech, allowing only topics
discussed in public. These
deliberately ambiguous nature
of these limits indicate
prevalence of self-censorship,
especially regarding criticisms
against PAP
Laws are imposed on the media,
whereby the Media
Development Authority (MDA)
announced that internet sites
 corrupt) to 100 (highly clean)
Political leaders appointed based on
merit, capabilities, meritocratic in both
politics and the bureaucracy
PAP parliamentary candidates and
ministers selected based on their ability
through a stringent process, thus high
quality of political leadership reinforced
traditional respects for distinguishing
between inherited and created factors,
enabling country to develop competitive
advantages in many areas and to
attract FDI
Ability of government to create strong
economic fundamentals is one of
Singapores key strengths
Future prospects
Improving bilateral ties with Malaysia
Diplomatic ties between 2 countries
have been weak due to ideological
differences in political leaderships, and
legacy issues revolving the ownership of
the island of Pedra Branca, Singapores
reclamation work in straits of Johor,
water supply issues, and dispute over
the use of Singapore land by Malaysian
railways
However, since Abullah Ahmad Badawi
and his successor Najib Razak took
office as Malaysias PM, they worked to
resolve these disputes mutually, and
convert improved bilateral ties into
better economic engagement
Reclamation works: resolved in 2003
after both countries accepted the
International Tribunal for the Law of the
Sea (ITLOS) verdict on the issue,
allowing Singapore to continue its land
reclamation activities
Pedra Branca sovereignty: 2008
International Court of Justice (ICJ)
settled
20-year railway land issue also settled
when PM LSL and PM Najib Razak had a
bilateral talk
Singapore is the biggest foreign investor
reporting regularly on issues
involving Singapore and having
significant reach will need to
apply for a license and deposit a
performance bond of $50000.
The regulation attracted
protests from around 2000
people in June 2013
Ranked only 54.03 percentile on
the voice and accountability
indicator by World Banks 2013
Worldwide Governance
Indicators
Criticised within the
international community for its
lack of tolerance of political
dissent.
Future risks
Racial tensions and increasing
xenophobia
Though a multiracial society,
76.8% of population Chinese,
and also dominant in the
government, with only 13.9 and
7.9% ethnic Malays and Indians
respectively
Remains of high risk of
differences between Muslims
and non-Muslims
Harmony Centre opened in
2006 to alleviate tensions and
encourage interracial
cooperation in the government
But racial tensions remain high,
which can affect businesses
PM Lee warned of rising anti-
foreigner sentiment, especially
towards China and South Asia
immigrants, concerning rising
xenophobia that can hurt
Singapores international
reputation
Immigration policies a
contentious issue in politics, as
it puts pressure on
infrastructure and fuels unrest
among the Singaporean natives
 in the Iskander Malaysia development
zone (~16% of total investment), the
zone attracted increase investment
from Singaporeans residing in the area
High-speed rail link between Singapore
and Kuala Lumpur, ready by 2020, will
reduce travel time between 2 cities
from 240 to 90 minutes

Growing ties with China

Maintaining strong and substantive ties
since 1990, further supported by
strengthening economic ties, building
people-people exchanges, and frequent
high-level visits between officials
Chinese officials visiting Singapore in
September 2012: on improving defense
ties, boosting trade and cooperation in
social management, and offering a giant
panda couple (only the 9th country
receiving from China, reflecting closer
bilateral ties)
From January 2009, tariff-free access for
around 95% of SGs exports to China
Both countries embarked on a program
to build an eco-city in Tianjin, expected
completion by 2020
Expansion of economic engagement
between SG and China expected
towards other parts of China including
Sichuan, Shandong, etc

Economic

Current Landscape

Evolution of Singapores economy

On becoming independent in the 1960s, Singapore began to promote its

historically vibrant trading and export-based industries. It used its
strategic location on the Southeast Asian sea routes to overcome the
hurdles of its lack of natural resources and a small domestic market.
The countrys annual average real GDP growth was between 5% and 8%
from 1960 to 1997.
 The economy suffered from the East Asian financial crisis, and annual GDP
contracted by 2.1% in 1998. The government's endeavours to cut the cost
of doing business in the country helped the economy stage a recovery,
with growth rates of 6.2% and 9.1% recorded over the next two years.
In 2001, there was another slump due to the global recession. Singapore
was badly hurt due to the downturn in demand for electronics and IT, and
the economy contracted by 1.2%. The government responded with fiscal
expansion measures and efforts to diversify the economy towards services
and consumer industries.
Growth reached 4.2% in 2002, before another setback this time in the
form of the SARS outbreak curbed tourism and hurt the investor and
consumer confidence in 2003. The economy recovered due to reduced
interest rates, government spending, and a surge in exports. GDP grew by
9.1% and 7.1% in 2004 and 2005, respectively.
The strong economic performance continued in 2006, with a GDP growth
rate of 8.7% recorded for the year. Consumer price index (CPI) inflation
stood at around 1.0%, above the 2005 figure of 0.4% due to higher oil and
food prices. Exports, imports, and foreign investment in the economy
continued to grow strongly.

Financial system

The financial system in Singapore is strong and well-administered, remaining

unaffected by short-term disturbances due to improved macroeconomic
conditions, prudent and transparent macroeconomic policies, and historically low
interest rates. The financial system is regulated and monitored by the Monetary
Authority of Singapore (MAS).

GDP and growth rate

The global economic crisis had a drastic effect on the Singaporean economy. Real
GDP dropped from 8.8% in 2007 to 1.7% in 2008 and the economy contracted by
1.0% in 2009. Due to favorable external conditions, Singapores economy
registered a growth rate of 14.8% in 2010; however, the negative
macroeconomic developments pulled the growth rate down to 5.2% in 2011 and
further to 1.3% in 2012.

The services sector contributed 73.13% of GDP in Singapore during 2012,

followed by the industrial sector with 26.84% and the agricultural sector with
0.03%.
In Singapore, agriculture constituted only 0.03% of GDP in 2012. The country's
main agricultural products include rubber, copra, fruits, orchids, vegetables,
poultry, eggs, and ornamental fish. Total agricultural output decreased from
S$107.6m ($86.1m) in 2008 to S$99.5m ($79.6m) in 2012.

The country's key industries are electronics, chemicals, oil drilling equipment,
petroleum refining, rubber processing and rubber products, processed food and
beverages, ship repair, offshore platform construction, and life sciences. External
demand has been the main driver of growth for a number of years, while
investment demand has increased on the domestic front. Singapore's total
industrial output increased from S$67.6 billion ($54.1 billion) in 2008 to S$90.7
billion ($72.6 billion) in 2012. The sector registered a growth rate of 4.6% year-
on-year in 2012.
The services sector has become even more important due to Singapores
emergence as a regional hub for financial and professional services. Tourism,
banking, and finance are the major constituents of the services sector. Services
sector output increased from S$186.8 billion ($149.5 billion) in 2008 to S$247.4
billion ($198.0 billion) in 2012. The sector registered a growth rate of 6.2% year-
on-year in 2012.

Fiscal situation

External trade has played an important role in Singapores emergence as a

developed economy. Singapore ranks among the world's top 20 exporting and
importing nations. Exports totaled $603.9 billion in 2012, while imports totalled
$537.3 billion. Total trade increased to $1,141.2 billion in 2012, up from $1,018
billion in 2011.

According to Singapore's Department of Statistics, by the first quarter of 2013,

the country's gross external debt stood at S$1.47 trillion ($1.17 trillion).
Monetary situation

Inflation rate fell from 5.3% in 2011 to 4.5% in 2012. The major contributors to
consumer price inflation in Singapore are housing costs (7.8% increase from
2011), transportation costs (7.1%), healthcare expenses (4.5%), and education
and stationery costs (3.4%). Food prices rose at a moderate rate of 2.3% in 2012,
according to data from Statistics Singapore.

Singapore is one of the top financial centers in the world, and a key Southeast
Asian banking hub. The country has a highly developed banking system, with
more than 700 local and foreign banking and financial institutions providing
services ranging from consumer banking and asset management to foreign
exchange, investment banking and specialized insurance services. As of March
2013, the country had 123 banks, out of which 117 were foreign-owned. The
total assets of domestic banking units, as of March 2013, were S$911.0 billion
($729.1 billion). The MAS is the regulatory agency responsible for banking,
financial institutions and foreign exchange.

Singapores unemployment rate has always been on the low side. The average
unemployment rate during 200111 stood at 2.8%. The unemployment rate in
2012 stood at 2.0%. Employment growth has been supported by strong
recruitment in the construction sector buoyed by rising prices. A number of
ongoing public projects are supporting strong employment growth.

International investment situation

There has been a strong foreign presence in Singapore since colonial times, as
the country has been a gateway to the rest of Asia Pacific due its strategic
location and ports. The country has a world-class physical infrastructure, an
efficient regulatory system, and a high density of skilled labour. Its intellectual
property laws are strict, unlike in other parts of Asia, which has led to a number
of multinationals locating their entire operations from research and
development and manufacturing plants to marketing and supply chain
management within the country. The petrochemicals and electronics sectors
have majorly drawn foreign companies (Singapore contributes 40% of the worlds
hard disk media production). Other knowledge-based industries such as
biosciences and nanotechnology are also setting up bases in the country.

Precision engineering in the aviation and maritime sector has been another
significant boon in terms of foreign direct investment (FDI). Singapore is one of
the biggest producers of offshore rigs, and is the world leader in shipping and
aviation maintenance, repair, and overhaul companies. In the services sector,
Singapore has drawn large investments in ICT and digital media. Several
companies have located their development centers, data centers, and business
continuity centers in the country.

Furthermore, the logistics sector has a huge presence in order to capitalize on

Singapore's port, which is the worlds busiest and is connected to 700 other ports
worldwide. As a result of these developments, the country attracted FDI inflows
worth $55.9 billion in 2011 and therefore, secured third place in the FDI
Attraction Index, according to the United Nations Conference on Trade and
Development (UNCTAD), in 2011. FDI inflows increased further to $56.7 billion in
2012, which increased the total FDI stock in the country to $682.4 billion.

Economic outlook

The economy has very strong fundamentals, with the budget balance and the
current account being in surplus as of 2012. However, the city-states economic
openness has left it susceptible to external macroeconomic shocks. The
economic events in the US and the EU, therefore, could determine the pace of
recovery in Singapore. MarketLine estimates that the city-state will improve its
GDP growth rate to 2.1% in 2013 from 1.3% in 2012. In the budget for FY2013,
the government has proposed to focus on improving productivity by supporting
businesses with a three-year transition package of S$5.3 billion ($4.2 billion),
which is expected to help small businesses prosper.

The economys robust banking sector is a reflection of prudent governance and

monitoring by the MAS. However, rising household debt is a matter of concern
for the central bank, which has implemented eight rounds of measures since
September 2009 to curb the mortgage-fuelled rise in house prices. The MAS
estimates that a hike in interest rates could increase the proportion of
overleveraged population by around 10 percentage points. Such a scenario could
hurt private consumption, which accounts for around 40% of the countrys GDP
as the borrowers spend more on mortgages. This is likely to have a negative
impact on the countrys GDP growth.

Economic Analysis
 o A top investment destination given the ease of conducting business in
the country
o Banking system remains highly resilient and well-capitalised
o Openness of the economy has left it susceptible to cyclical demand and
market sentiment
o Strong corporate balance sheets help mitigate negative developments
in the global macroeconomic environment
o The government's focus on productivity improvement for small- and
medium-sized enterprises (SMEs) should provide impetus to the sector
o Risks remain as housing prices and household debt are on the rise; this
has been moderated due to policy measures introduced by the MAS

Current strengths Current challenges

Healthy corporate balance sheets
The corporate balance sheets of
Singapore-listed companies in SGX
are very healthy; with debt-equity
ratios of these firms at around 35%
in 2012
An August 2012 International
Monetary Fund (IMF) simulation
result showed that even if interest
rates in Singapore rise by 300 basis
points, business earnings would be
above interest payments, providing
a buffer to tackle a crisis
The low leverage bodes well for
mitigating external vulnerabilities
resulting from global
macroeconomic developments
Resilient banking system
MAS: as of June 2013, banks in
Singapore were well-capitalized and
had strong liquidity buffers. The top
three banks in Singapore, namely
DBS, Oversea-Chinese Banking
Corporation (OCBC) and United
Overseas Bank (UOB), which
comprise one-third of the total
assets of the banking sector,
reported high capital adequacy
ratios and healthy earnings, besides
boasting the best investment grade
ratings, as of Q2 2013.
The banking sector is resilient due
to its limited exposure to troubled
Eurozone nations. The total
Reliance on external trade
Dependence is high with the highest
trade-to-GDP ratios (414.7% of GDP
in 2012, which includes trade of
merchandize as well as services) in
the world
In 2012, the country exported
merchandize worth S$510.3 billion,
while imports were worth S$474.6
billion compared to its nominal GDP
of S$346.1 billion. Of this, China
accounted for around 21.1% of the
total trade. Furthermore, the US and
the EU together accounted for
14.3% of the exports and 22.8% of
the imports.
In a scenario, where the Chinese
economy seems to be slowing, the
US recovery is still in its early
stages and demand in the Eurozone
is much weaker compared to 2012,
an external demand shock can put
downward pressure on Singapores
GDP growth.
As long as Singapores industries
rely on overseas export markets,
they will remain sensitive to global
swings in cyclical demand and
market sentiment and therefore,
this reliance on a growth model
based on trade will keep the
economy vulnerable to external
shocks.
Overdependence on foreign workers
 exposure of Singapore banks to the
Eurozone is only 6% of total assets,
while Eurozone banks' share in the
funding of Singaporean banks is
only 7.5%, according to IMF data.
This indicates that any turmoil in
the European banking system is
likely to have only a mild impact on
Singapore's banks.
As of Q1 2013, the loan-to-value
ratio for outstanding mortgages
stands at an average of 48%well
below the regulatory requirement of
80% for the first-time mortgage
buyers. This suggests that the
fallout from a correction in house
prices will be limited. Recent stress
tests suggested that the country's
banks are well protected against
higher interest rates and greater
unemployment.
The Singaporean banking system is
quite healthy in comparison to its
European peers, and is thus capable
of handling external and domestic
shocks better.
Future prospects
Focus on Small and Medium
Enterprises (SMEs)
The government has taken special
measures since the 2010 budget to
help SMEs restructure their
operations by introducing the
Enhance Productivity and
Innovation Credit Scheme, which
totalled S$470m in 2012.
Largely dependent on foreign
workers due to a consistent labour
crunch. Non-resident foreign
workers' share was 37% of the total
labour force as of 2012 out of a
total labour force of 3.36 million,
the second highest in the world next
to Saudi Arabia.
According to the IMF, this
overdependence has led to a
continuous fall in total factor
productivity, as more labour has
been substituted instead of the
better implementation of
technologies and increased
efficiency.
The overdependence on foreign
workers and consequent rising
inflow of the same has increased
the pressure on Singapores
infrastructure, which in turn has led
to a rise in real estate prices.
The overdependence has led the
government to impose curbs on
foreign workers; this is expected to
have a negative impact on GDP
growth in the medium term,
although the government has taken
steps to upgrade the skills of local
workers to negate the impact.
Reducing this dependence will be a
major economic challenge, given
that the economy has attained a
high level of competiveness based
on a large inflow of skilled foreign
workers.
Future risks
Rising house prices and household
debts
House prices in Singapore have
been increasing continuously since
2008. Private residential property
prices have soared by more than
120% between 2008 and the first
quarter of 2013, while public
residential property prices have
 The scheme entails granting tax
allowances for mergers and
acquisitions, a renovation and
refurbishment deduction scheme,
offering training support, providing
special grants for upgrading, and
offering one-time cash grants (of
5% of yearly revenue). The schemes
include tax credits and rebates for
SMEs in order to incentivize them to
procure productivity- enhancing
capital goods, in addition to
investing in skill-upgrading training
programs.
In addition, the government is also
implementing schemes for the SMEs
to ride out the labour crunch by
giving employment credits for hiring
older Singaporean workers.
Through its Partnership for
Capability Transformation (PACT)
Scheme, it is also promoting
collaboration between large
enterprises and SMEs, which is
expected to improve the SMEs
productivity and capabilities.
The government also plans to link
up SMEs with public sector research
institutes to increase their
competitiveness.
The measures are expected to
significantly boost SME innovation
and productivity, in addition to
making them competitive enough to
survive international competition.
risen by 70% during the same
period.
This rise in real estate prices has
happened on the back of strong
demand among foreigners and
locals, and prevalence of low
interest rates since the global
financial crisis.
The MAS has implemented eight
rounds of measures to curb the
overheating in property prices since
September 2009 and although, they
have managed to slow down the
pace of growth in residential
markets, demand is still strong. This
has raised concerns about a
housing bubble in the city-state.
This rise in asset prices has also
increased the size of household
balance sheets; however, it has
come at the cost of increase in
mortgages. According to data from
Credit Bureau Singapore, around
49,000 people in the country with a
population of just over 5.0 million
had at least two mortgages, which
is 78% more than the number
recorded in 2008.
Consequently, Singapores
household debt has risen from
64.4% of GDP in 2008 to 77.2% of
GDP by Q1 2013 and the fact that
mortgages constitute around 75%
of this household debt render them
vulnerable to a hike in interest
rates.
The MAS, as of July 2013, estimates
that 510% of the borrowers could
already be at risk of default (people
with debt servicing burden of more
than 60%), a number which could
increase to 1015% in case of a
three-percentage interest rate hike.
In such a scenario, private
consumption, which accounts for
around 40% of the countrys GDP
could also shrink (as the borrowers
 spend their income on higher
mortgage payments), which can
have a negative impact on the
countrys GDP growth. The MAS
needs to monitor household debt to
keep the economy on track.

Social
Current Landscape

Evolution

The Ministry of Community Development, established during the 1970s, acts as

the regulatory authority and a supervising body for social welfare in Singapore.
Besides institutionalized care, the ministry administered and encouraged housing
service schemes for needy young people between 1970 and 1990. Social welfare
assistance was also provided by mutual-benefit organizations and voluntary
services like the Council of Social Service. Furthermore, the country's social
system sought to strike an ideal balance between equity and efficiency
objectives by financing healthcare services through a mixture of personal
payments, limited insurance coverage, and employment benefits that included
company plans for workers and their families. The National Health Plan, started
by the government in 1983, provided healthcare services of the highest quality
to all sections of the population. In 1986, the government operated more than 80
childcare centers and three welfare homes for aged and destitute individuals.
However, the social services system is primarily funded by the private sector and
by non-profit organizations.

Structure and policies

Age and gender composition

According to Statistics Singapore, the population of Singapore was 5.31 million as

of June 2012, an increase of 2.5% over the previous year. Permanent residents
constitute 71.9% of the population, while non-residents account for the
remaining 28.1%. As per MarketLine estimates, around 78.4% of the population
was in the 1564 age group and more than 7.6% were older than 65. The sex
ratio in Singapore was around 97 males per 100 females, as of 2012. The life
expectancy of the total population is around 83.8 years, with an average age of
81.5 for males and 86.2 for females.
Religious composition

Education

Singapores education system is based on merit and is seen by the government

as the most important vehicle for improving the social status and standard of
living of its citizens. English is used as the primary medium of instruction in order
to connect students from different ethnic and cultural backgrounds and to
integrate Singapore with the world economy. The Ministry of Education directs
the education policies of the country, controls the administration of government-
funded public schools, and plays an advisory role to private schools.

The Singaporean education system has been appreciated for its ability to provide
compulsory 10-year education to almost all of its population in its 360 schools.
The average literacy rate of the population aged 15 years and above has
improved from 83.0% in 1990 to 93.1% in 2012, as a result of these efforts.

The ability of Singaporean students at the primary and secondary levels in terms
of math, science and reading abilities have also proven to be among the best in
the world. In the 2011 Progress in International Reading Literacy Study (PIRLS)
survey that covers 49 countries, Singapores Grade 4 primary students came first
in mathematics, trailed only South Korea in science and ranked fourth in terms of
reading abilities. In a an another survey, Trends in International Mathematics and
Science Study (TIMSS) that evaluated math and science abilities of Grade 8
students from 63 countries, Singapore led in science and came second in math.
The city-states two universities, NUS and NTU, are also ranked among the top 20
in Asia and have been praised for employability of their students. The
government has been able to achieve this result despite spending just 3.3% of
GDP on education, which is a proof of the efficiency of the system. According to
MarketLine estimates, the government had spent nearly $8.6 billion on education
in 2011.

Healthcare

Singapores healthcare system comprises both public and private segments, and
is complemented by high standards of living, safe water supply and sanitation,
and preventive medicine. The system is one of the most successful in the world
in terms of both efficiency in financing and public health outcomes. The key facet
behind Singapores successful healthcare system is the emphasis placed on the
individuals to assume responsibility for their own health and healthcare
expenditure. Unlike most developed countries, in Singapore, private healthcare
expenditure financed by individuals and their employers is higher than public
expenditure. Overall, healthcare is financed by a combination of taxes, employee
medical benefits, compulsory savings in the form of Medisave, insurance and
out-of-pocket payments.

Primary healthcare is mostly provided by the private sector (80%) in Singapore.

This includes preventive healthcare and health education, and is administered
through over 2,000 private clinics and some 18 outpatient polyclinics. The
outpatient polyclinics are subsidized government-run health centers providing
multiple services such as outpatient care, follow-up of discharged patients,
immunization, screening and preliminary investigation, education, and pharmacy
services. While government subsidies are available to keep basic healthcare
supportable, patients need to pay part of their medical expenses.

Medium- and long-term healthcare services are delivered through a range of

residential- and community-based services. These include community hospitals,
chronic illness hospitals, nursing homes, sheltered homes for the formerly
mentally ill, inpatient hospice institutions, home medical, home nursing, and
home hospice care services, day rehabilitation centers, dementia daycare
centers, psychiatric daycare centers, and psychiatric rehabilitation homes.

In 2011, the country had spent $6.6 billion on healthcare, up from $6.3 billion in
2010, according to MarketLine estimates. As a percentage of GDP, this amounts
to just 2.5% of the nations GDP. Although this is very low compared to other
developed nations considering the fact that the US spends nearly 17% of its
GDP on healthcare the healthcare system has been hailed for its efficiency and
its financing philosophy, which is based on individual responsibility and
community support.

Social welfare

Medisave is a compulsory national medical savings scheme that helps individuals

save part of their income to meet future medical expenses. It is a subset of the
mandatory government pension scheme called the Central Provident Fund (CPF).
Both employers and employees contribute to the scheme with rates for
employees varying from 520% and that for employers varying from 6.516%
depending on their age-group. Out of this, a contribution of 79.5% (depending
on age group) of an individuals monthly salary is directed towards a personal
Medisave account; this amount can be used to pay the hospital bills of the
account holders and their immediate family members. Medisave covers around
85% of Singapores population. The rest goes to ordinary account which is
created to pay for public housing, investment and education, and a special
account to invest in retirement-related financial products.

Other government-managed schemes exist to cover healthcare expenditures

exceeding Medisave balances. These include MediShield, a low-cost catastrophic
illness insurance scheme for major or prolonged illnesses; ElderShield, a
disability insurance scheme that covers old age individuals who need long-term
care; and Medifund, an endowment fund that acts as a safety net for those who
cannot afford even the subsidized bill charges. MediShield and ElderShield are
self-financed private insurance schemes, whereby premiums can be paid from
Medisave accounts. Private insurers also offer insurance schemes, some of which
cover expenses not covered by the government schemes.

Income distribution and standard of living

The biggest criticism of Singapore's social strategy is its immigration policy,

which takes a conservative approach towards population growth while allowing
individuals willing to work for cheaper rates to settle in the country. This policy
has resulted in the creation of a growing income gap between those at the
bottom of the economic pyramid and those at the top. Despite a GDP per capita
of $61,400 (purchasing power parity)which is the highest in the Asia Pacific
Singapore suffers from high income inequality. According to MarketLine
estimates, top 20% of the population accounts for 52.2% of income, while the
bottom two quintiles account for only 13.0% of the total income.

According to MarketLine estimates, Singapores Gini coefficient rating (a measure

of income inequality, with a score of zero equating to absolute equality and a
score of hundred equating to absolute inequality) stood at 47.8 in 2010.
Singapores ASEAN counterparts like Malaysia (46.2), the Philippines (44.0) and
Indonesia (39.4) scored better. Other wealthy Asian nations such as Japan, South
Korea and Taiwan had healthy Gini coefficient ratings of 37.6, 31.0 and 34.2
respectively. The prevailing income disparity in Singapore remains a cause for
concern.

Social Outlook

Singapore has an excellent social system, with strong educational and healthcare
facilities. However, rising immigration is fueling unrest among the native
Singaporeans. The government has taken measures to encourage families to
have more children, but the effect of the policies on the fertility rate is yet to be
seen. Income inequality is another major social issue, but reducing inequality
through grants and subsidies may not be viable in the long run, hence the
government is adopting structural measures to reduce variation in incomes. The
economic and social costs of an aging society will be a major issue for Singapore
in the next two decades.

Social Analysis
A strong education system has helped Singapore in increasing literacy rates and
student turnout in all regions. However, Singapore is troubled with a low birth
rate, an aging population and declining population growth. There is also a high
degree of income disparity in the country. The government has introduced
various measures to build an inclusive society in the 2013 budget. However, age-
related expenditure is likely to be a serious concern in the future.

Current strengths Current challenges

Sound education policy
The government has given special
significance to education, allocating
nearly one-fifth of the country's
annual budget to the sector.
According to the Ministry of
Finance, Singapore has allocated
S$11.6 billion ($9.3 billion) to
education in 2013.
Primary education in the country is
heavily subsidized.
Under the gifted education
program, the education system lets
students learn at their own pace;
the objective of the program is to
provide leadership in the education
of intellectually gifted children.
University education is provided by
four universities: the National
University of Singapore; the
Nanyang Technological University;
the Singapore Management
University; and the Singapore
Institute of Management University.
The strong support given to the
education sector has provided the
country with a skilled labour force
and highly trained scientific
personnel.
Furthermore, the country's brand of
Low birth rate
Singapore has a declining birth
rate and an aging population.
The average birth rate (the
number of births per 1,000
members of the population)
dropped from 18.7 in 1990 to
10.8 in 2012.
The government had promoted
family planning with a degree of
success in the 1980s and 1990s,
by encouraging residents to
have more children.
However, the fertility rate
declined rapidly during 2001
12.
According to MarketLine
estimates, the fertility rate
(births per resident female)
stood at 0.78 in 2012, which is
less than half of the
replacement rate of 2.1 required
to maintain the population.
Any decrease in population
would put pressure on the
countrys labour market.
Singapores founding Prime
Minister Lee Kuan Yew
expressed disappointment in
August 2012 over the declining
 education is attracting interest from
traditional strongholds such as the
US, the UK and Australia, and many
universities from these countries
have tied up with Singapore
University for exchange programs.
Future prospects
Government initiatives toward an inclusive
society
The realization of the fact that income
inequality poses a grave risk to social
cohesion has led to initiation of
government reforms in recent years.
The budget for FY2013, like the previous
one, aims to build a more inclusive
society through the following four
measures: promoting social mobility,
providing better job opportunities for all
Singaporeans, redistributing income
through a fair and progressive taxation
system, and collaborating in community
initiatives such as provision of better
facilities for underprivileged pre-schoolers
birth rate. Looking at the grim
scenario, the government has
taken steps to encourage
families to have children.
Income disparity
The immigration policy takes a
conservative approach towards
population growth while
allowing individuals willing to
work for cheaper rates to settle
in the country.
This policy has resulted in the
creation of a growing income
gap between those at the
bottom of the economic
pyramid and those at the top.
Despite a GDP per capita of
$61,400 (purchasing power
parity)the highest in Asia
PacificSingapore suffers from
high income inequality.
According to MarketLine
estimates, Singapores Gini
coefficient rating (a measure of
income inequality, with a score
of zero equating to absolute
equality and a score of hundred
equating to absolute inequality)
stood at 47.8 in 2010
Future risks
Economic cost of the aging
population
Singapore, like many
Western nations, is likely
to face long-term fiscal
challenges as a result of
its aging population.
According to the
government estimates,
around 900,000 out of its
current citizen population
of around 3.3 million will
retire between 201230,
which will result in
Singapore having the
second highest
 and conducting of house-to-house health percentage of individuals
screening programs. aged 65 and above (at
around 19%) in Asia by
In order to promote social mobility, the 2030, behind only Japan.
government plans to double its spending These estimates suggest
on the pre-school sector during 201317 that the overall
to more than S$3.0 billion ($2.4 billion). government expenditure
As a part of this measure, the government will increase sharply in
plans to expand the capacity of pre-school line with rising pension,
centers and improve the quality of healthcare and old age
teachers by providing them with salary care costs.
grants, scholarships and training grants.
The government also plans to support the Also, there are estimated
education of underprivileged students. to be only 2.1 working-
age people (aged 2064)
While Singapore boasts of a large to support one elderly
population proportion of skilled workers, citizen (aged 65 and
little has been done historically to support above) in 2030 against
those at the bottom rung of the labour 5.1 in 2012, according to
force, which is mainly filled by lower- the government
educated older workers. estimates, which will put
To address this issue, the government pressure in terms of tax
introduced the Workfare Income collection to satisfy the
Supplement (WIS) in 2007 to supplement needs of the aging
wages and retirement savings of older population.
low-wage population. In such a scenario, the
As a part of this scheme, the government government will have to
provides supplementary income to low- resort to easy
wage elderly population earning less than immigration policies to
S$1,900 ($1,520.6) per month. support its shrinking
Furthermore, the three-year WTS labour force, which is
(Workfare Training Support) scheme was again a major issue of
introduced in 2010 to provide a structured contention with the
training program to unemployed resident population.
individuals or those with limited skills. Therefore, major reforms
The government is also planning to and policy changes are
enhance the Public Assistance (PA) required to avoid a large
scheme in 2013 to provide a basic level of financial gap and to
financial assistance to individuals who secure the sustainability
have permanently lost their ability to of public finances.
work. The program also provides free
services like medical treatment in
polyclinics and restructured hospitals.

Measures have also been taken to

increase the affordability of healthcare
services for lower and middle-income
 groups. The government has proposed to
top up Medifund (the healthcare
endowment fund for the low-income
groups) by S$1.0 billion ($800.3m) in
2013, which will bring its total size to
S$4.0 billion ($3.2 billion).
The government has also decided to top
up Eldercare Fund by S$250m ($200.1m)
in 2013 to support patients depending on
subsidized nursing homes and other long-
term care services, bringing its total size
to S$3 billion ($2.4 billion).
In addition, the Enhancement for Active
Seniors Programme has also been
initiated to provide subsidies for installing
features in homes that are elderly
friendly.

Technological
Current Landscape
Science and technology is seen as a national priority in Singapore, and the
government considers it a method of transforming the country into a knowledge-
based economy. Singapore's research and development (R&D) policy is designed
to attract and create high value industries. The government has been building
R&D capabilities in the country by increasing investment. Gross expenditure on
R&D increased to 2.28% of GDP in 2011, up from 2.09% of GDP in 2010. The
private sector is the biggest spender on R&D, and the focus areas include
biomedical sciences, electronics, and engineering; these sectors have been
identified as the priority research areas.

Singapore has a strong telecommunications industry. Penetration rates for

broadband and mobile phones are very high. The government aims to further
leverage the ICT sector in order to add value to the country's society and
economy. It aims to double the value added to the industry to S$26 billion ($20.8
billion) by 2015. In order to facilitate these goals, the government has instituted
plans for a next generation national telecommunications infrastructure, which
will include a high-speed broadband network and a pervasive wireless broadband
network.

Evolution

In 1967, the Ministry of Trade and Industry in Singapore established a special

Science Council. The council was established to advise the ministry on scientific
and technological matters relating to R&D and training and utilization of
manpower. During the 1970s, the Singapore National Academy of Science was
established, under which the Singapore Association for the Advancement of
Science was founded in 1976. The academy mainly concentrated on R&D
concerning advanced technologies. In 1985, two new research institutionsthe
Institute of Systems Science (which conducts research in the area of IT) and the
Institute of Molecular and Cell Biology (a center for biotechnological research)
were established. The Singapore Science Park was developed in 1987 for the
protection of rare species. More recently, public research centers were
interlinked with various technology institutes to conduct advanced R&D.

Structure and policies

Intellectual property

Patenting activity is strong, especially within Singapore, more particularly in

semiconductor and other electronics industries. The residents of the country
need written authorization before filing an application for a patent overseas. The
private sector accounted for around 80% of all patents awarded. Singapore was
granted 810 patents by the US Patent and Trademark Office (USPTO) in 2012.
Measured on the basis of patents received per million capita, Singapore (152.5)
performed better than France (82.5), but lagged behind Japan (397.5), the US
(385.5), South Korea (264.6) and Germany (168.7).

Research and development

The Singaporean government encourages innovation and advanced R&D in the

country, and has been implementing five-year plans since 1991 to serve this
purpose. Recently, the government announced its fifth five-year plan called the
Research, Innovation and Enterprise 2015 Plan (RIE2015) for which it has
allocated a sum of S$16.1 billion ($12.9 billion) till 2015, which is 19% higher
than the previous five year plan. RIE2015 lists six key programs for
strengthening R&D in Singapore.

Investing in basic science to expand the intellectual capital that forms the
basis for future innovations by supporting scientists and giving them
higher autonomy to pursue research in areas with long-term economic and
societal impact;
Continued emphasis on the attraction and development of scientific talent
to meet the needs of Singapores industry and public sector research
institutions by providing deserving young scientific talent with funding at
renowned institutions both locally and overseas;
Greater emphasis on competitive funding to spur innovation and bring out
the best ideas for further support and development for which a greater
proportion of R&D funding will be available on a competitive basis, while
maintaining an appropriate level of assured funding for core capabilities;
Strengthening synergies across various R&D performers in the public
sector research agencies and industry to prioritize multidisciplinary and
collaborative efforts;
 Focusing a greater proportion of R&D on economic outcomes. This means
greater support for private sector R&D, closer collaborations between
public and private sector R&D, and added emphasis on commercialization
of IPs, leading to new and better products and services. Within public R&D,
the Industry Alignment Fund will encourage public researchers to work
more closely with industry;
Providing stronger support for scientists to take their ideas from basic
research to commercialization, through increased funding to technology
transfer offices, translational and innovation centers, and enterprise
incubators and accelerators.

Performance

Computer software market

According to MarketLine, the Singaporean software market had total revenues of

$717m in 2011, representing a compound annual growth rate (CAGR) of 10.3%
between 2007 and 2011. In comparison, the Chinese and South Korean markets
recorded CAGRs of 18.9% and 8.5% respectively over the same period to reach
values of $14.6 billion and $3.3 billion in 2011. The network and database
management segment was the market's most lucrative in 2011, with total
revenues of $186.1m, equivalent to 26% of the market's overall value. The
operating system software segment contributed revenues of $160.9m in 2011,
equating to 22.4% of the market's aggregate value.

Computer hardware market

According to MarketLine, the Singaporean computer hardware market is
estimated to have generated total revenues of $520.9m in 2011, representing a
CAGR of 8.8% between 2007 and 2011. In comparison, the Chinese and South
Korean markets have grown with CAGRs of 15% and 2.8%, respectively, over the
same period to reach values of $13.5 billion and $2.6 billion in 2011. The
computers segment is expected to be the market's most lucrative in 2011, with
total revenue of $276.4m, equivalent to 53.1% of the market's overall value. The
peripherals and devices segment will contribute revenue of $154m in 2011,
equating to 29.6% of the market's aggregate value.

Consumer electronics
According to MarketLine, the Singaporean consumer electronics market
experienced moderate growth during 2011; which decelerated further in 2012.
The Singaporean consumer electronics market is estimated to have generated
total revenues of $463.6 million in 2012, representing a compound annual
growth rate (CAGR) of 3.6% between 2008 and 2012. The Chinese and South
Korean markets, in comparison, grew with CAGRs of 6.4% and 3.2%, respectively,
during over the same period, to reach respective values of $36.1 billion and $5.9
billion in 2012. The audiovisual equipment segment is estimated to be the
market's most lucrative in 2012, with total revenues of $430.8m, equivalent to
92.9% of the market's overall value. The games consoles segment contributed
revenues of $32.8m in 2012, equating to 7.1% of the market's aggregate value.
Mobile phones
According to MarketLine, the mobile phones market had generated total
revenues of $0.4 billion in 2011, representing a compound annual growth rate
(CAGR) of 3.6% between 2007 and 2011. Whereas, the Chinese and South
Korean markets grew with the respective CAGRs of 17.9% and 1.3% and reached
values of $44.8 billion and $5.8 billion in 2011, respectively. Market consumption
volumes have increased with a CAGR of 6.2% between 2007 and 2011 to reach 1
million units in 2011.

Internet access
Internet subscribers reached 3.89 million in 2011, up from 3.61million in 2010.
More than three-quarters of the population has internet access, which the
government aims to increase to 90% by 2015. Subscribers grew at a rate of 7.8%
in 2011.

Outlook

The government of Singapore is recognized for its vision and role in enhancing
ICT penetration and leveraging it for economic and social modernization and
competitiveness. The government has put in place a strategy called Singapore
iN2015. Under this strategy, the government aims to increase the value added
by the ICT industry to S$26 billion ($20.8 billion), to increase ICT exports to S$60
billion ($40.8 billion), to create 80,000 new jobs from 2005 levels, to achieve a
household broadband penetration rate of 90% and to achieve 100% computer
ownership in homes with school-going children by 2015. The country aims to
become the best in the world in harnessing ICT. To this effect, the Singaporean
government is also making efforts to stimulate demand for ICT services by
sponsoring a range of programs such as e- learning, e-health, and e-governance.
The e-logistics program, for example, aims to manage supply chain processes in
the logistics industry in order to increase manufacturing productivity in
Singapore. The governments strategy for developing ICT is expected to reap
significant economic benefits over the coming years.

According to the World Economic Forums Global Information Technology report

for 2012, Singapore was second in the world in the Networked Readiness Index
by virtue of its impressive innovation and development strategies. The index
indicates how prepared countries are to effectively use ICT. Government
spending on R&D has been on par with developed nations; however, Singapore
faces significant challenges in terms of maintaining the sustained inflow of
external talent for STI development, especially due to a rapid rise in demand for
skilled personnel in big economies like China and India.

Technological Analysis
The country is home to a number of reputed scientific institutions, and is strongly
backed by the private sector. Singaporean firms are already world leaders in data
storage and semiconductors, both of which have been successful in establishing
international technology roadmaps. The country is venturing into new areas of
research such as IT services and the space industry. The government is also
playing its part in promoting R&D by providing companies, especially cash-
constrained firms, with tax incentives and cash conversion schemes. It has also
increased its allocation toward R&D in recent years. Nevertheless, the city-states
high dependence on foreign researchers in Science, Technology and Innovation
(STI) poses a major challenge in sustaining the inflow of foreign talent. The
problem might be aggravated with increasing competition for skilled personnel
from big economies like China and India.

Current strengths Current challenges

Strong scientific institutions Excessive dependence on
The government has established scientific foreign researchers
institutions such as the Science and Although Singapore
Engineering Research Council (SERC) and the has a large pool of
Biomedical Research Council (BMRC) to full-time researchers
generate innovative products. on a per million capita
Singaporean firms are already world leaders basis (6,030 in 2011),
in data storage and semiconductors, both of which is second only
which have been successful in establishing to that of Finland, the
international technology roadmaps. majority are not
The SERC is responsible for developing new permanent residents.
capabilities to satisfy industry needs as As of 2010, 80% of
projected by the aforementioned roadmaps, the PhD students at
and promotes research in nanotechnology to NTU and 70% of the
help overcome physical barriers for PhD students at NUS
incumbent technologies like silicon chips. were foreign
The BMRC, on the other hand, helps to bridge nationals; this reveals
the gap between basic biomedical research the excessive
and clinical practice through the development dependence on
of useful and commercially viable external talent for STI
applications. development.
The presence of research institutions in the According to UNESCO,
country has enabled fast-paced development Singapore faces
and rapid advancement in R&D. significant challenges
in terms of
Building R&D competencies maintaining the
Singapores government has been building sustained inflow of
R&D capabilities in the country by increasing foreign talent for STI
their investment. According to the Agency for development,
Science, Technology and Research (A*STAR), especially due to a
gross expenditure on R&D increased by rapid rise in demand
14.8% in 2011 to reach S$7.4 billion ($5.9 for skilled personnel
billion), from S$6.5 billion ($5.2 billion) in in big economies like
2010. China and India.
As a result, Singapores research intensity,
which is defined as gross expenditure on R&D
as a percentage of GDP, increased from
2.09% in 2010 to 2.28% in 2011.
This research intensity is on a par with the
 Eurozone average.

Public expenditure in R&D, as a percentage of

GDP, increased from 0.82% in 2010 to 0.86%
in 2011, while business expenditure in R&D
expenditure increased at a faster pace to
reach 1.42% in 2011 from 1.27% in 2010.
The major areas of research in both public
and private sector were electronics, info
communications and media (ICM), chemicals,
biomedical sciences, and precision and
transport engineering.
Increased investment in R&D has also led to
growth in the number of research personnel;
the number of researchers grew 4% from
30,801 in 2010 to 32,023 in 2011. This bodes
well for Singapore as it develops a strong
base for technological development.

Future prospects Future risks

Emphasis on space industry Increasing competition from
In order to boost its economic potential in emerging nations
high-technology sectors, Singapore is looking Many emerging
to venture into the capital- intensive space economies in Asia
industry, a field that generates annual and Latin America
revenues of around $300 billion and is have been investing
dominated by Western firms. heavily in R&D, and
To this effect, the government established the recent predictions
Office for Space Technology and Industry indicate that around
(OSTIn) in February 2013 that will emphasize 90% of an emerging
on designing and manufacturing small global middle class
satellites and on providing satellite-based will live in developing
services. nations by 2025.
The initial target of the agency is to fulfill the With the growth of
ever-increasing demand for high-speed emerging economies,
Internet and high-resolution images used in the global scientific
surveillance systems, environmental landscape will change
monitoring, forestry and resource exploration. dramatically.
Singapore will also leverage its proficiency in Singapore should
precision engineering, electronics and ICT to prepare to face fierce
meet its space exploration goals. competition from
these countries,
Leading satellite operators such as France- which can offer
based Eutelsat Communications, the British advantages in terms
Inmarsat and the homegrown Singapore of low cost skilled
Telecommunications already have a base in labour and large
the city-state, which can be utilized by the domestic markets.
 broadcasters to transmit their programs and
by ships to communicate with other vessels.

The national research foundation, A*STAR has

already established space-related R&D
programs in collaboration with two local
state-funded universitiesthe National
University of Singapore (NUS) and the
Nanyang Technological University (NTU).
In addition, Singapore Technologies
Electronics (Satellite Systems), the company
responsible for the successful launch of
Singapore's first satellite X-SAT in 2011, has
also entered into a joint venture with the NTU
and DSO National Laboratories to design and
develop the countrys first commercial
remote-sensing satellite named TelEOS- 1, by
2015.
The space industry holds great potential for
Singapore, which could drive future
investment in a new range of R&D-intensive
manufacturing industries.

Strengthening of the PIC scheme

The government provides tax incentives for
innovative businesses under its Productivity
and Innovation Credit (PIC) program.
As a part of this, the government provides a
substantial tax deduction on expenditure on
six qualifying activities: acquisition or leasing
of automation equipment; employee training;
acquisition of intellectual property rights;
registration of patents, trademarks, designs
and plant varieties; R&D activities and
investment in approved design projects.
In specific terms, tax deductions of almost
400% are made available for the initial
S$400,000 ($320,120) of expenditure related
to the aforementioned activities, which can
allow companies to fund around 68% of their
R&D activities through only these
deductions/allowances.
For expenditures above S$400,000
($320,120), tax deductions can reach up to
150% for R&D investments or up to 100% for
other eligible activities.
Eligible businesses can also apply for a cash
 conversion option, which allows businesses to
convert up to S$100,000 ($80,030) of their
total expenditure in the six qualifying
activities into a non-taxable cash payout at a
rate of 60%, which means that a maximum
non-taxable payout of S$60,000 ($48,018) is
available each year.
This option is in place mainly to support cash-
constrained small and growing businesses to
innovate and improve productivity.
In addition, businesses, especially the SMEs
can defer up to S$100,000 ($80,030) of their
tax payments into the next assessment
period.

Environmental
Current Landscape
Singapore faces a number of environmental challenges; however, its
performance to date has been excellent. The United Nations Environment
Programme has recognized Singapore as a leader and an inspiration for other
nations in achieving sustainable development. The Ministry of Environment and
Water Resources (MEWR) leads policymaking and program implementation in the
environmental arena.

Evolution
Environmental regulations in Singapore started with the establishment of an anti-
pollution unit in 1970. The unit was established to provide regulations on
environmental health. In the same year, the Singapore Clean Campaign was
introduced as one of the first public initiatives to keep the city clean. The
formation of the Ministry of Environment in 1972 led to the introduction of many
clean air standards and regulations, sewage programs, and regulations on
drainage systems. In 1976, the government formulated trade effluent regulations
in anticipation of a boom in international trade. In 1986, a special pollution
control department was setup within the Ministry of Environment. During the
1990s, the government had imposed several regulations on toxic wastes,
pollution in the sea, and the use of unleaded petrol, as well as formed a special
waste minimization department.

Structure and policies

Environmental regulations
The MEWR is responsible for the development of a high quality environment and
public health. It was earlier known as the Ministry of Environment, but its role
was expanded in 2004 to include the management of water as a strategic
national resource. The MEWR is assisted by the National Environment Agency
(NEA) and the Public Utilities Board (PUB). The NEA functions as the
implementation arm for environmental policies, while the PUB is the national
water agency. The NEA has three divisions: Environmental Protection,
Environmental Public Health, and Meteorological Services.

Policy
The Environmental Protection division is responsible for monitoring, reducing,
and preventing pollution. It oversees the operation of Singapores four refuse
incineration plants and its sole offshore landfill site. Other functions of the
division include the implementation of programs for minimizing waste generation
and maximizing recycling, as well as energy conservation. The Environmental
Public Health division carries out ground surveillance and ensures overall civic
cleanliness and hygiene in the food retail industry. Its flagship programs include
the Hawker Centers Upgrading Program and the Clean Public Toilets Program.

Singapore has a blueprint for sustained economic development called the

Singapore Green Plan 2012. The MEWR first instituted the green plan in 1992 in
order to bring together the public and private sectors and the general public to
create a comprehensive environmental protection and sustainable development
plan. The second 10-year period started in 2002, and the plan was updated in
2005 after a three-year review. It has six action programs, covering clean air and
climate change, water, waste management, nature conservation, public health,
and international environmental relations.

Measures on climate change

With much of its land area less than 15 meters above the sea level, and given
that it has 150km of coastline, Singapore is vulnerable to rising sea levels. The
increased incidences of tropical diseases due to higher temperatures are also a
risk. The limited land area of the country is blanketed with extensive green
cover, which functions as a carbon sink, although its effect is limited. In the
absence of alternate energy sources, the governments strategy for offsetting
greenhouse gas emissions has been to promote higher energy efficiency. This is
encouraging the use of natural gas (which produces less greenhouse gases) and
introduction of efficient processes for power generation, such as co- generation
and combined cycle gas turbine technology. It has also instituted an Energy
Labeling Scheme for consumer appliances and a Fuel Economy Labeling Scheme
for vehicles. Other measures include offering incentives for adopting clean
technologies, energy efficient housing design, and the promotion of public
transport. These efforts contributed to a 15% improvement in carbon efficiency
between 1990 and 2002, and a further 10% reduction by 2012.

Water resources management

Singapore has limited water resources and imports more than 50% of its potable
water requirements from Malaysia; therefore, great importance is given to the
efficient use and conservation of water resources. The PUB is responsible for
providing an adequate and reliable supply of potable water. Water from local
sources and from Johor in Malaysia meets most of the country's requirements.
Dams have been constructed on the estuaries of some rivers to serve the dual
purpose of storing water and preventing sea water infiltration.

Around two-thirds of the island, including 6% of protected areas, functions as

catchments. Raw rainwater from these areas flows through a storm water
collection network. It is stored in reservoirs and then treated before being
supplied as potable water to all parts of Singapore. The quality of this water has
consistently been well within World Health Organization limits. Desalinated
water, which is high grade water reclaimed from sewage effluents, has been
developed as an additional source to meet future requirements. In early 2000,
Singapore built its first wastewater recycling plant (NEWater). It managed to turn
wastewater into purified water that is potable, although most of it is utilized by
industry.

Flood management
The estuary dams and the storm water drains help prevent inland floods, but a
rise in sea levels could hamper the country's drainage system. Flood prone areas
have been reduced by raising platform levels in the course of land development.
In other low-lying areas, pumped drainage systems and tide gates have been
installed to prevent inundation. All new land developments are required to have
adequate drainage systems, and the entire system is carefully monitored.

Measures to conserve biodiversity

While Singapore, by virtue of its tropical location, has rich biodiversity, it has
suffered a great deal of biodiversity loss due to urbanization ever since it became
a trading post in the 19th century. To address this issue, the government of
Singapore has made efforts to conserve the remaining habitats, flora, and fauna.
In 1995, the country ratified the Convention on Biological Diversity, which was
formed during the 1992 Rio Earth Summit.

In addition, conservation of nature was one of the focus areas under the
Singapore Green Plan (SGP) 2012. The SGP 2012 listed several action points
concerning the conservation of natural areas, interconnecting nature parks,
raising biodiversity awareness and creating a biodiversity hub. The hub, known
as the National Biodiversity Reference Centre (NBRC), was established in May
2006, and forms part of the National Parks Board, which manages Singapores
green areas for conservation and recreation. Apart from managing all
biodiversity-related information, the NBRC is responsible for the conservation of
terrestrial and marine flora and fauna. The city-state has also developed a City
Biodiversity Index, a self-assessment tool, for cities across the world to monitor
and evaluate their progress in conservation of urban biodiversity against their
estimated targets.

Performance
According to the 2012 Environmental Performance Index, Singapore ranked 52nd
among 132 countries. The country secured first place in the environmental
health parameter; however, it performed very badly in terms of ecosystem
vitality (placed 109th). This reflects the fact that although the country has done
exceedingly well in parameters such as air pollution (effects on human health)
and environmental burden of disease and water (effects on human health), it has
performed badly on indicators including forests, fisheries, biodiversity and
habitat, and air (ecosystem effects).

Outlook
Singapore has a scarcity of fresh water within the country, making water
resource management an important area of focus. An extensive storm water
collection and purification system is in place to deliver potable water. New
sources of water are being developed through processes including desalination
and recycling in order to meet the growing demand.

Waste management has become an important concern in many Asian nations. In

June 2010, the Waste Management and Recycling Association of Singapore and
the National Environment Agency signed a memorandum of understanding with
the International Solid Waste Association to establish a training and advisory
center for environmental and waste management. The recycling of household
wastes and the reduction of packaging waste are other initiatives that have been
introduced in the waste management space. Moreover, the Inter-Ministerial
Committee on Sustainable Development has set a target of increasing energy
efficiency by 35% by 2030 from 2005 levels, a recycling target of 70% and
reducing the per person per day consumption of water from 147 liters to 140
liters. In addition, various other targets with regards to open space, the reduction
of fine particles, and others have been taken up.

The government of Singapore is making efforts to pursue renewable energy

development as part of its recent plan to ensure energy security and
environmental sustainability. The plan involves the construction of a homegrown
energy industry and investment in energy research and development. Along with
expanding its energy trading to include liquefied natural gas, biofuels, and CO2
emissions credits, the government is also pursuing growth opportunities in clean
and renewable energy, including solar, biofuels, and fuel cells. The development
of renewable energy sources will decrease Singapore's dependence on fossil
fuels.

Environmental Analysis
Singapores environmental policy is focused on biological conservation and waste
management. However, the countrys emission levels have been on the rise in
recent years, and atmospheric changes continue to affect the environment. The
government is taking several new initiatives to manage environmental
conservation in the country. Being an island nation dependent on carbon fuels,
climate change is a key focus area of the government.
Current strengths Current challenges
Waste management initiatives Increasing greenhouse gas emission
The municipal waste management levels
infrastructure includes sewerage Over the years, greenhouse gas
and solid waste management emissions have been on the rise
systems. The sewerage network in Singapore. As per estimates
has more than 2,500km of sewers, from the US Energy Information
139 pumping stations, and six Administration (EIA), the level of
sewage treatment works. CO2 emissions increased from
Wastewater is collected and around 110.3 million metric tons
treated before being discharged in 2002 to 212.4 million metric
into the sea. Solid waste is tons in 2011.
collected and disposed primarily The manufacturing industries and
through incineration due to the vehicular emissions account for
scarcity of land for landfills. 70% of the overall greenhouse
The incineration plants have flue gas emissions in Singapore.
gas cleaning devices, and the Electricity generation is the
heat released is used to generate biggest source of CO2 emissions
electricity. Moreover, the in the country, followed by
polluter pays principle is applied industries and transportation.
to both residential and industrial The Singapore government must
areas for wastewater collection introduce initiatives to reduce
and treatment. Non-residential CO2 emissions in the country.
premises are charged at rates that
are proportional to the quantity of
waste generated.
Other waste management efforts
include increased recycling. The
recycling rate was 49% in 2005;
by 2012, it had increased to the
government-set target of 60%.
Centralized recycling bins are
being set up in Housing
Development Board estates to
encourage household recycling.
The government is also working
with the Packaging Council of
Singapore to reduce the amount
of packaging used and to increase
the recovery of packaging
materials.

Future prospects Future risks

Clean energy and clean water initiatives
Urbanization in Singapore has
resulted in various problems in
traffic management, air and water
pollution, and energy efficiency.
In order to address such issues,
the government has launched a
program titled Energy Resilience
for Sustainable growth, which
aims to improve the energy
efficiency, reduce CO2 emissions
and develop alternative sources of
energy within a time-frame of 20
years by deploying cost
competitive solutions.
The government has allocated a
sum of S$300m ($240.1m) during
201115 for this purpose.
Furthermore, the government has
also taken initiatives to reduce its
dependence on Malaysia for water
by launching the Strategic
Research Programme on Clean
Water, which aims to build the
city-state into a global hydro-hub
by 2015.
Changing climatic conditions
Climate change is one of
Singapores main environmental
challenges, by virtue of the fact
that it is an island nation with a
high economic dependence on
carbon fuels.
The government has adopted a
four-pronged strategy to tackle
climate change, which involves
adapting to climate change,
mitigating carbon emissions,
raising awareness and building
competency.
Air quality is good, but efforts
made by the government have
failed to reduce particulate
emissions from diesel vehicles.
Moreover, with an increasing
immigrant population, vehicular
pollution is on the rise.
The changing climatic conditions
could be a potential
environmental risk for the
country