SINGAPORE intra-company transfers. U.S. firms ship components and capital goods to plants in Singapore, and finished products are re-exported to the United States. Overall, multinational firms account for 71 percent of Singapore's export production. Recognizing the link between investment and trade patterns and the danger of relying excessively on a single market, Singapore has sought to diversify its export markets in recent years by balancing its sources of foreign investment. But the United States still accounts for almost a fifth of Singapore's total trade and a third of its non-oil exports (excluding re-exports). To maintain the country's economic expansion with dwindling land and labor supplies, the government is promoting Singapore as a high-tech manufacturing and service hub for the expanding Southeast Asian region. The 1991 budget, the first under Prime Minister Goh Chok Tong, who succeeded Singapore's founding father Lee Kuan Yew in November 1990, called for increased spending on education, training, and research and development and offered new incentives for foreign companies to set up regional trading, sales, marketing and securities operations. Income from trading, managing, placing and underwriting international securities is now taxed at a preferential rate of 10 percent, and income from operating non-Singapore flag ships is exempted altogether. Despite cries from the business community for measures to offset rising labor costs, the budget offered no general tax relief and left the levy on foreign workers untouched. In fact, the employer's share of the Central Provident Fund (CPF) payroll tax was increased to 17.5 percent from 16.5 percent. The budget did eliminate double taxation on repatriated profits from foreign investments, however, an inducement to shift production offshore. Since then, the government has tinkered with worker levies in selected sectors with little net effect. In the shipyard sector, it reduced the levy on skilled workers and raised it for unskilled workers. More recently, the government announced it would introduce a "two-tier" scheme that will allow manufacturing employers to increase their proportion of foreign workers slightly (to 45 percent from 40 percent) in exchange for a higher levy per worker. But the message is clear. The government does not want to perpetuate low-wage manufacturing in Singapore. Such jobs should move to less developed neighboring countries while Singaporeans move on to more remunerative activities. Singapore's external public debt was a mere US$40 million at the end of 1990, and its debt service ratio is less than 0.1 percent. The country has run current account surpluses for most of the past decade, and thanks to steady inflows of investment capital, it has enjoyed overall balance of payments surpluses for practically its entire independent history. Official foreign reserves have grown sharply in recent years, topping US$27 billion at the end of 1990 -- nearly US$10,000 per capita. Singapore is now using a portion of those accumulated reserves to expand its direct investments overseas, both within Southeast Asia and farther afield in SINGAPORE China, Europe and North America. 5. Barriers to U.S. Exports Singapore maintains one of the world's most open trade policies. About 91 percent of imports enter duty-free. Import licenses are not required, customs procedures are minimal, the standards code is reasonable and the government actively encourages foreign investment. All major government procurements are by international tender. U.S. exports to Singapore grew 14 percent in 1990 to US$9.7 billion. Imports from Singapore, meanwhile, increased 7.7 percent to US$11.2 billion. Over the last three years, the U.S. trade deficit with Singapore has gradually shrunk from US$2.5 billion in 1988 to US$1.5 billion in 1990. By early 1991, U.S. trade with Singapore was in surplus, largely because of a contraction in U.S. imports due to the U.S. economic recession. Singapore does restrict market access for certain services, however. U.S. accountants, lawyers, doctors, and architects have experienced problems in obtaining local certification of their professional qualifications. And foreign law firms cannot hire or form partnerships with Singaporean attorneys to practice local law. A locally accredited lawyer is effectively disbarred upon going to work for a foreign firm. This prevents U.S. law firms from offering a full range of legal services. The parastatal Singapore Telecom maintains a monopoly in "basic telecommunications services", a term the government defines broadly. It also restricts the sale of value-added network services and imposes volume-sensitive charges on the sale of leased-line data services to third parties. Although telecommunications policy has been liberalized in recent years and Singapore Telecom is scheduled to be privatized in 1992, U.S. firms are still excluded from a number of lucrative markets. Singapore also denies national treatment to foreign firms in banking and financial services. Foreign penetration of the banking industry is high. But foreign banks cannot open new branches or freely relocate existing branches or participate in automated teller networks. No foreign bank has received a full banking license since 1973 (no domestic bank has either). New entrants receive restricted licenses that limit them to a single branch and forbid them from offering general savings accounts or other retail services. Foreign brokerages and insurance companies also receive restricted licenses. government only recently opened up membership on the Stock Exchange of Singapore to foreign firms subject to a number of restrictions and it limits foreign ownership of Singapore banks and other companies it deems to be of strategic import to a fixed percentage. The U.S. cigarette manufacturers complain that the structure of import duties and excise taxes on tobacco products effectively discriminates against imported cigarettes. The duty on an imported cigarette is based on its full weight SINGAPORE (including the paper and filter), whereas local cigarette manufacturers pay duty only on the tobacco. U.S. industry sources estimate this puts them at a disadvantage of S$9.50 per kilogram, roughly equivalent to a 5 percent tariff. Singapore's Economic Development Board uses tax and other incentives to attract investment in areas favored in its master development plan. But this does not appear to have had an adverse effect on U.S. trade or investment. In fact, a number of U.S. firms have profited from the incentives. 6. Export Subsidies Policies Singapore does not subsidize exports, although it does actively promote them. The government offers significant incentives to attract foreign investment, almost all of which is in export-oriented industries. It also offers tax incentives to exporters and reimburses firms for certain costs incurred in trade promotion. But it does not employ multiple exchange rates, preferential financing schemes, import-cost-reduction measures or other trade-distorting policy tools. Singapore is not a signatory to the GATT subsidies code and has consistently opposed efforts to restrict the use of export subsidies and incentives in the Uruguay Round negotiations on Trade-Related Investment Measures (TRIMS). Although it does not employ any of the sorts of measures that U.S. negotiators are seeking to prohibit in the TRIMS talks, Singapore argues that the right to employ such measures is a "sovereign prerogative." 7. Protection of U.S. Intellectual Property Singapore enacted strict, comprehensive copyright legislation in 1987, following close consultations with the U.S. Government. The new law relaxed the burden of proof for copyright owners pressing charges, enacted stronger civil and criminal penalties and made unauthorized possession of copyrighted material an offense in certain cases. The trademark law was similarly strengthened in January 1991, and the government is reportedly considering legislation to improve patent protection as well. U.S. manufacturers have set the pace in cracking down on copyright violations under the new system, which relies heavily on copyright owners to combat infringement. Industries or individuals discovering pirating may press claims through civil or criminal courts; the Commercial Crime Division of the Ministry of Law, when presented with evidence, investigates copyright violations and then refers the case to the Attorney General's office for a decision on prosecution. The response from the government when manufacturers have uncovered illegal operations has been positive. Many pirating operations have shut down or moved out. The government also launched a highly publicized and largely successful campaign against sales of counterfeit designer watches and leather goods during 1988 and 1989. But "copy watches," as well as pirated software, are still readily available in certain well SINGAPORE known shopping areas. Some U.S. pharmaceutical manufacturers have complained that a loophole in Singapore's patent law (Compulsory License Act) allows government hospitals to buy "copycat" drugs when convenient, costing them considerable sales. In overall terms, Singapore's protection of intellectual property is positive and improving. The government wants to encourage foreign investment in high-tech industries. It is therefore in its interest to protect intellectual property rights in order to inspire investor confidence. But concerns remain with regard to the adequacy of enforcement. Therefore, the U.S. Government included protection of intellectual property on the "immediate action agenda" of the bilateral Trade and Investment Framework Agreement concluded with Singapore in October 1991. The two governments must meet to discuss the issue by February 1992. The United States also encourages the Government of Singapore to work in the GATT to establish international standards on intellectual property protection, and to join international conventions on IPR. 8. Worker Rights a. Right of Association Singapore's Constitution gives all citizens the right to form associations, including trade unions. Parliament may, however, impose restrictions based on security, public order or morality grounds. The right of association is delimited by the Societies Act and labor and education laws and regulations. In practice, Communist labor unions are not permitted. The national work force comprises about 1.5 million workers, of which some 213,000 are organized into 83 trade unions. Some 74 of these, representing about 98 percent of unionized workers, are affiliated with an umbrella organization, the National Trade Union Congress (NTUC), which has a close relationship with the Government. Workers have the legal right to strike but rarely do so. b. Right to Organize and Bargain Collectively The Trade Unions Act authorizes the formation of unions with broad rights. Collective bargaining is a normal part of management-labor relations in Singapore, particularly in the manufacturing sector. On the average, collective bargaining agreements are renewed every two to three years. The Industrial Relations Act makes it an offense to discriminate against anyone who is or proposes to become an officer of a trade union. C. Prohibition of Forced or Compulsory Labor Singapore law forbids the use of forced or compulsory labor, and such labor is not practiced. SINGAPORE d. Minimum Age for Employment of Children The Government enforces the Employment Act which sets the minimum age for the employment of children at 12 years. e. Acceptable Conditions of Work The Singapore labor market offers relatively high wage rates and working conditions consistent with accepted international standards. Singapore has no minimum wage or unemployment compensation. Because of a continuing labor shortage, wages have generally stayed high. The standard legal workweek under the Employment Act is 44 hours. The Government enforces comprehensive occupational safety and health laws. Enforcement procedures, coupled with the promotion of educational and training programs, have reduced the frequency of job-related accidents by one-third over the past decade. The average severity of occupational accidents has also been reduced. f. Rights in Sectors with U.S. Investment U.S. firms have substantial investments in several sectors of the economy, including petroleum, chemicals and related products, electric and electronic equipment, transportation equipment, and other manufacturing areas. Labor conditions in these sectors are the same as in other sectors, except that the labor shortage induces employers in the electronics industry to hire many unskilled foreign workers. The Government controls the number of foreign workers through immigration regulations and through levies on firms hiring them. Foreign workers face no legal wage discrimination, but the low-skilled jobs they generally hold and the extra cost of hiring them suggest that they are in general paid less than Singaporeans. |