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Cablegate: Singapore - 2008 Investment Climate Statement

VZCZCXRO8414
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGP #0034/01 0100727
ZNR UUUUU ZZH
R 100727Z JAN 08
FM AMEMBASSY SINGAPORE
TO RUEHC/SECSTATE WASHDC 4695
INFO RUCPDOC/USDOC WASHDC
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPCIM/CIMS NTDB WASHDC

UNCLAS SECTION 01 OF 14 SINGAPORE 000034

SIPDIS

STATE FOR EB/IFD/OIA/JNHATCHER AND AKAMBARA
STATE PASS USTR FOR AUSTR WEISEL AND DAUSTR BELL
STATE PASS OPIC

SENSITIVE BUT UNCLASSIFIED
SIPDIS

E.O. 12958: N/A
TAGS: EINV EFIN ETRD ELAB KTDB PGOV OPIC USTR
SUBJECT: SINGAPORE - 2008 INVESTMENT CLIMATE STATEMENT

REF: STATE 158802

1. (U) In response to reftel instructions, this message is Post's
draft chapter of the 2008 Investment Climate Statement for
Singapore. As requested, we have also provided via email a
Microsoft Word version of the document to EB/IFD/OIA.

2. (SBU) Begin text of Statement:

Singapore

2008 Investment Climate Statement - Singapore

Introduction

Foreign investments, combined with investments through
government-linked corporations (GLCs), underpin Singapore's open,
heavily trade-dependent economy. With the exception of restrictions
in the financial services, professional services, and media sectors,
Singapore maintains a predominantly open investment regime. The
World Bank's report, "Doing Business 2007: How to Reform," ranked
Singapore as the easiest country in which to do business. The
U.S.-Singapore Free Trade Agreement (FTA), which came into force
January 1, 2004, expanded U.S. market access in goods, services,
investment, and government procurement, enhanced intellectual
property protection, and provided for cooperation in promoting labor
rights and the environment.

The Government of Singapore (GOS) is strongly committed both to
maintaining a free market and to taking a leadership role in
planning Singapore's economic development. The government actively
uses the public sector as both an investor and catalyst for
development. As of October 2007, the top six Singapore-listed GLCs
accounted for nearly 22 percent of total capitalization of the
Singapore Exchange (SGX). Some observers have criticized the
dominant role of GLCs in the domestic economy, arguing that it has
displaced or suppressed private sector entrepreneurship and
investment.

Singapore's aggressive pursuit of foreign investment as another
pillar of its overall economic strategy has enabled the country to
evolve into a base for multinational corporations (MNCs). The
Economic Development Board (EDB), Singapore's investment promotion
agency, focuses on securing major investments in high value-added
manufacturing and service activities as part of a strategy to
replace labor-intensive, low value-added activities that have
migrated offshore.

Openness To Foreign Investment

Singapore's legal framework and public policies are generally
favorable toward foreign investors; foreign investors are not
required to enter into joint ventures or cede management control to
local interests, and local and foreign investors are subject to the
same basic laws. Apart from regulatory requirements in some sectors
(see "Limits on National Treatment and Other Restrictions"), the
government screens investment proposals only to determine
eligibility for various incentive regimes (see Annex). Singapore
places no restrictions on reinvestment or repatriation of earnings
or capital. The judicial system upholds the sanctity of contracts,
and decisions are effectively enforced.

Limits on National Treatment and Other Restrictions: Exceptions to
Singapore's general openness to foreign investment exist in
telecommunications, broadcasting, the domestic news media, financial
services, legal and other professional services, and property
ownership. Under Singapore law, Articles of Incorporation may
include shareholding limits that restrict ownership in corporations
by foreign persons.

Telecommunications: Any foreign or domestic company can provide
facilities-based (fixed line or mobile) or services-based (local,
international, and callback) telecommunications services. Under the
Telecoms Competition Code, most recently revised in 2003 , the
former monopoly (and 62-percent government-owned) telecommunications
service provider, SingTel, faces competition in all market segments,
including fixed line, mobile and paging services. Its main
competitors, MobileOne and StarHub, are also GLCs. Singapore has
approximately 60 facilities-based and 110 services-based operators.


The FTA requires that Singapore take steps to ensure that U.S.
telecom service providers obtain the right to interconnect with
networks in Singapore at competitive rates and on transparent and
reasonable terms and conditions. Despite the Infocomm Development

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Authority's (IDA) requirement that SingTel offer wholesale prices
for local-leased circuits at reduced rates, U.S. industry is still
unable to avail itself of this more competitive pricing structure
due to certain uneconomical technical interconnection requirements
imposed by SingTel.

SingTel announced in June 2006 plans to consolidate its local
exchanges but failed to provide details of specific local exchanges
to be closed. This has put U.S. and other carriers' build-out plans
on hold. IDA issued a decision in June 2007 that increases the
notification period SingTel must provide from six to 18 months. IDA
has denied requests by U.S. and other companies for interconnection
at more centralized locations. Under the FTA, Singapore has also
agreed that dominant licensees (SingTel and Starhub) must offer
cost-based access to submarine cable-landing stations and allow
sharing of facilities. U.S. and other companies continue to have
problems with access to inter-exchange ducts as provided for in the
FTA.

U.S. and other companies remain concerned about the lack of
transparency in some aspects of Singapore's telecommunications
regulatory and rule-making process. In particular, there is no
obligation to make information publicly available concerning a
company's request for a stay of decision or the filing of an appeal,
to request public comments about such requests, or to publish a
detailed explanation concerning final decisions made by IDA or the
Ministry of Information, Communication and Arts (MICA).

Media: The local free-to-air broadcasting, cable and newspaper
sectors are effectively closed to foreign firms. Section 44 of the
Broadcasting Act restricts foreign equity ownership of companies
broadcasting to the Singapore domestic market to 49 percent or less,
although the Act does allow for exceptions. Individuals cannot hold
more than 5 percent of the shares issued by a broadcasting company
without the government's prior approval.

The Newspaper and Printing Presses Act restricts equity ownership
(local or foreign) to 5 percent per shareholder and requires that
directors be Singapore citizens. Newspaper companies must issue two
classes of shares, ordinary and management, with the latter
available only to Singapore citizens or corporations approved by the
government. Holders of management shares have an effective veto
over selected board decisions. The government controls
distribution, importation and sale of any "declared" foreign
newspaper, and significantly restricts freedom of the press, having
curtailed or banned the circulation of some foreign publications.
In September 2006, Singapore banned the Far Eastern Economic Review
on the grounds that the publisher contravened Section 23 of the
Newspaper and Printing Presses Act, whereby the offshore publisher
must appoint a person within Singapore authorized to accept service
of any notice or legal process on behalf of the publisher and post a
security deposit of S$200,000 (US$170,000). The government has also
"gazetted" foreign newspapers, i.e., numerically limited their
circulation. Singapore's leaders have threatened foreign publishers
with defamation suits for perceived slights, which has often
resulted in the foreign publishers issuing apologies and paying
damages.

MediaCorp TV is the only free-to-air TV broadcaster; the government
owns 80 percent and SGX-listed Singapore Press Holdings (SPH) owns
20 percent. StarHub Cable Vision (SCV), the sole pay-TV provider
since 1996, is a 100-percent owned subsidiary of StarHub Ltd, a
publicly-listed GLC. SingTel entered the pay-TV market in January
2007. Free-to-air radio broadcasters are mainly government-owned,
with MediaCorp Radio Singapore being the largest operator. BBC
World Services is the only foreign free-to-air broadcaster in
Singapore.

Banking: The Monetary Authority of Singapore (MAS) regulates all
banking activities as provided for under the Banking Act. Singapore
maintains legal distinctions between foreign and local banks, and
the type of license held by foreign banks -- full service,
wholesale, and offshore. As of November 2007, 24 foreign full
service licensees, 40 wholesale licensees, and 42 offshore licensees
operated in Singapore. All offshore banks are eligible to be
upgraded to wholesale bank status based on MAS criteria to enable
them to conduct a wider range of activities. Except in retail
banking, Singapore laws do not distinguish operationally between
foreign and domestic banks.

The government initiated a banking liberalization program in 1999 to
ease restrictions on foreign banks and has supplemented this with
phased-in provisions under the FTA. These measures include removal
of a 40-percent ceiling on foreign ownership of local banks and a
20-percent aggregate foreign shareholding limit on finance

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companies. It has stated publicly, however, that it will not
approve any foreign acquisition of a local bank. Acquisitions
exceeding prescribed thresholds of 5 percent, 12 percent or 20
percent of the shares or voting power of a local bank require the
approval of the Finance Minister.

Singapore has granted 24 full service licenses to foreign banks,
including four U.S. banks. Of these, six, including one U.S. bank,
have also been granted "qualifying full bank" (QFB) status. U.S.
financial institutions enjoy phased-in benefits under the FTA.
Since January 2006, U.S. licensed full service banks that are also
QFBs have been able to operate at an unlimited number of locations
(branches or off-premises ATMs). Non-U.S. full service foreign
banks with QFB status have been allowed to operate since January
2005 at up to 25 locations. U.S. and foreign full-service banks
with QFB status can freely relocate existing branches, and share
ATMs among themselves. They can also provide electronic funds
transfer and point-of-sale debit services, and accept services
related to Singapore's compulsory pension fund.

Locally incorporated subsidiaries of U.S. full-service banks with
QFB status have been able to apply for access to local ATM networks
since June 30, 2006; non-locally incorporated subsidiaries of U.S.
full-service banks with QFB status can begin doing so effective
January 1, 2008. Singapore on January 1, 2007 lifted its quota on
new licenses for U.S. wholesale banks. Singapore abolished quotas
on new licenses for full-service foreign banks in July 2005.

Despite liberalization, U.S. and other foreign banks in the domestic
retail banking sector still face barriers. Local retail banks do
not face similar constraints on customer service locations or access
to the local ATM network. Holders of credit cards issued locally by
foreign banks or other financial institutions cannot access their
accounts through the local ATM networks. They are also unable to
access their accounts for cash withdrawals, transfers or bill
payments at ATMs operated by banks other than those operated by
their own bank or at foreign banks' shared ATM network.
Nevertheless, full-service foreign banks have made significant
inroads in other retail banking areas, with substantial market share
in products like credit cards and personal and housing loans.

U.S. industry advocates enhancements to Singapore's credit bureau
system, in particular, adoption of an open admission system for all
credit lenders, including non-banks. Singapore's two credit
bureaus, Credit Bureau (Singapore) Private Ltd. ("CBS") and Credit
Scan, do not currently provide sufficient support to credit lenders,
including non-banks.

Securities and Asset Management: Singapore removed all trading
restrictions on foreign-owned stockbrokers in January 2002.
Aggregate investment by foreigners may not exceed 70 percent of the
paid-up capital of dealers that are members of the SGX. Direct
registration of foreign mutual funds is allowed, provided MAS
approves the prospectus and the fund. The FTA has relaxed
conditions that foreign asset managers must meet in order to offer
products under the government-managed compulsory pension fund
(Central Provident Fund Investment Scheme).

Legal Services: As of November 2007, 16 of the 73 foreign law firms
in Singapore were from the United States. Foreign law firms face
certain restrictions. They cannot practice Singapore law, employ
Singapore lawyers to practice Singapore law or litigate in local
courts. Since June 2004, U.S. and foreign attorneys have been
allowed to represent parties in arbitration without the need for a
Singapore attorney to be present. U.S. law firms can provide legal
services in relation to Singapore law only through a Joint Law
Venture or Formal Law Alliance with a Singapore law firm, subject to
the Guidelines for Registration of Foreign Lawyers in Joint Law
Ventures to Practice Singapore Law. Singapore has relaxed some of
these guidelines for U.S. law firms under the FTA. Since July 2007,
foreign attorneys have been allowed to own equity in Joint Law
Ventures up to a maximum of 25 percent of total shares. Currently,
there is one U.S. Joint Law Venture and one U.S. Formal Law
Alliance.

With the exception of law degrees from designated U.S., British,
Australian, and New Zealand universities, no foreign university law
degrees are recognized for purposes of admission to practice law in
Singapore. Under the FTA, Singapore recognizes law degrees from
Harvard University, Columbia University, New York University, and
the University of Michigan.

Singapore relaxed its criteria for admission of attorneys to the
Singapore Bar, effective October 2006. One of the new criteria will
admit to the Bar Singapore-citizen or permanent-resident law school

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graduates of the above-mentioned designated universities who are
ranked among the top 70 percent of their graduating class or have
obtained lower-second class honors (under the British system). The
government allows highly skilled foreign lawyers meeting certain
criteria to practice Singapore corporate, finance and banking law.

Engineering and Architectural Services: Engineering and
architectural firms can be 100-percent foreign-owned. In line with
FTA provisions, and also applicable to all foreign firms, Singapore
has removed the requirement that the chairman and two-thirds of a
firm's board of directors be engineers, architects or land surveyors
registered with local professional bodies. Only engineers and
architects registered with the Professional Engineers Board and the
Architects Board, respectively, can practice in Singapore. All
applicants (both local and foreign) must have at least four years of
practical experience in engineering or architectural works, and pass
an examination set by the respective Board.

Accounting and Tax Services: The major international accounting
firms operate in Singapore. Public accountants and at least one
partner of a public accounting firm must reside in Singapore. Only
public accountants who are members of the Institute of Certified
Public Accountants of Singapore and registered with the Public
Accountants Board may practice in Singapore. The Board recognizes
U.S. accountants registered with the American Institute of
Certified Public Accountants.

Real Estate: In July 2005, the government relaxed certain
restrictions on foreign ownership of real estate. Under the
Residential Property Act, foreigners are allowed to purchase
condominiums or any unit within a building of six or more levels
without the need to obtain prior approval from the Singapore Land
Authority. For landed homes (houses) and apartments in buildings of
fewer than six stories, prior approval is required. Under an option
to the EDB's Global Investor Program, up to 50 percent of the S$2
million (US$1.38 million) investment required by a foreigner to
qualify for Permanent Resident status can be in private residential
properties. There are no restrictions on foreign ownership of
industrial and commercial real estate.

Energy: Singapore implemented the Gas (Amendment) Act in June 2007
to facilitate competition and move towards a fully liberalized
energy market, in part by opening access to gas pipeline
infrastructure. However, at least one U.S. company has encountered
difficulties in its access bid due to lengthy delays in the review
of its application by the Energy Market Authority. To date, no
non-incumbent operators have been able to secure access to the
Singapore section of the existing Sumatra-Singapore pipeline.

Conversion And Transfer Policies

The FTA commits Singapore to the free transfer of capital, unimpeded
by regulatory restrictions. Singapore places no restrictions on
reinvestment or repatriation of earnings and capital, and maintains
no significant restrictions on remittances, foreign exchange
transactions and capital movements. (See "Efficient Capital
Markets" for a discussion of certain restrictions on the borrowing
of Singapore Dollars (SGD) for use offshore.)

Expropriation And Compensation

The FTA contains strong investor protection provisions relating to
expropriation and due process; provisions are in place for fair
market value compensation for any expropriated investment.

Singapore has not expropriated property owned by foreign investors
and has no laws that force foreign investors to transfer ownership
to local interests; no significant disputes are pending.

Singapore has signed investment promotion and protection agreements
with a wide range of countries (see "Bilateral Investment
Agreements" below). These agreements mutually protect nationals or
companies of either country against war and non-commercial risks of
expropriation and nationalization for an initial period of 15 years
and continue thereafter unless otherwise terminated.

Dispute Settlement

All core obligations of the FTA are subject to the dispute
settlement provisions of the Agreement. The dispute settlement
procedures promote compliance through consultation and
trade-enhancing remedies, rather than relying solely on trade
sanctions. The procedures also set higher standards of openness and
transparency.


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Singapore enacted and subsequently amended the Arbitration Act of
2001 for domestic arbitration based on the United Nations Commission
on International Trade Law (UNCITRAL) Model Law. Singapore ratified
the recognition and enforcement of Foreign Arbitration Awards (New
York, 1958) on August 21, 1986, and the International Convention on
the Settlement of Investment Disputes on November 13, 1968. The
Singapore International Arbitration Center (SIAC) and the Singapore
Mediation Center (SMC) actively promote mediation and reconciliation
for settling commercial disputes.

Performance Requirements/Incentives

In general, Singapore complies with WTO Trade-Related Investment
Measures (TRIMS) obligations. The FTA prohibits and removes certain
performance-related restrictions on U.S. investors such as
limitations on the number of customer service locations for the
retail banking sector.

There are no discriminatory or preferential export or import
policies affecting foreign investors. The government does not
require investors to purchase from local sources or specify a
percentage of output for export. The government also does not
require local equity ownership in the investment. There are no
rules forcing the transfer of technology. Foreign investors face no
requirement to reduce equity over time and are free to obtain their
necessary financing from any source. Employment of host country
nationals is not required.

Singapore offers numerous incentives to encourage foreign investors
to start up businesses, particularly in targeted growth sectors (see
Annex).

Right To Private Ownership And Establishment

Foreign and local entities may readily establish, operate, and
dispose of their own enterprises in Singapore. Except for
representative offices (where foreign firms maintain a local
representative but do not conduct commercial transactions in
Singapore), there are no restrictions on carrying out remunerative
activities.

All businesses in Singapore must be registered with the Accounting
and Corporate Regulatory Authority. Foreign investors can operate
their businesses in one of the following forms: sole
proprietorship, limited liability partnership, incorporated company,
foreign company branch or representative office.

Private businesses, both local and foreign, compete on a generally
equal basis with GLCs, although some observers have complained that
GLCs benefit from cheaper financing due to an implicit government
guarantee. Singapore officials reject such assertions, arguing that
the government does not interfere with the operations of GLCs or
grant them special privileges, preferential treatment or hidden
subsidies; they claim that GLCs are subject to the same regulatory
regime and discipline of the market as private sector companies.
Many observers, however, have been critical of cases where GLCs had
entered into new lines of business or where government agencies have
"corporatized" certain government functions, in both circumstances
entering into competition with already existing private businesses.

The FTA contains specific conduct guarantees to ensure that GLCs
will operate on a commercial and non-discriminative basis towards
U.S. firms. GLCs with substantial revenues or assets are also
subject to enhanced transparency requirements under the FTA. In
accordance with its FTA commitments, Singapore enacted the
Competition Act in 2004 which was implemented in three phases.
Phase I established the Competition Commission of Singapore in
January 2005. Phase II implemented provisions on anti-competitive
agreements, decisions and practices, abuse of dominance,
enforcement, and the appeals process in January 2006. Phase III
provisions, which address mergers and acquisitions, came into effect
in July 2007.

Singapore has an extensive network of GLCs that are active in many
sectors of the economy. Some sectors, notably telecommunications,
power generation/distribution, and financial services, are subject
to sector-specific regulatory bodies and competition regulations
typically less rigorous than those being implemented under the
Competition Act.

Protection Of Property Rights

In line with its FTA commitments and obligations under international
treaties and conventions, Singapore has developed one of the
strongest intellectual property (IP) regimes in Asia. Amendments to

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the Trademarks Act, the Patents Act, the Layout Designs of
Integrated Circuits Act, Registered Designs Act, a new Plant
Varieties Protection Act, and a new Manufacture of Optical Discs Act
came into effect in July 2004. The amended Copyright Act and
Broadcasting Act came into effect in January 2005. Singapore
further amended the Copyright Act in August 2005. Singapore's IP
laws should help alleviate problems related to the availability of
pirated optical discs, use of unlicensed software by businesses, the
transshipment of pirated material through Singapore, and removal of
infringing material from Internet sites. In accordance with its FTA
obligations, Singapore has implemented Article 1 through Article 6
of the Joint Recommendation concerning Provisions on the Protection
of Well-Known Marks of 1999. It has signed and ratified the
International Convention for the Protection of New Varieties of
Plants (1991) and the Convention Relating to the Distribution of
Program-Carrying Signals Transmitted by Satellite (1974).

Singapore is a member of the WTO and a party to the Agreement on
Trade-Related Aspects of Intellectual Property Rights (TRIPS). It
is a signatory to other international copyright agreements,
including the Paris Convention, the Berne Convention, the Patent
Cooperation Treaty, the Madrid Protocol and the Budapest Treaty. In
September 2002, Singapore set up a specialized court (IP Court)
under the Singapore Supreme Court to handle IP disputes. The WIPO
Secretariat opened offices in Singapore in June 2005. Amendments to

SIPDIS
the Trademark Act, which took effect in January 2007, fulfill
Singapore's obligations in WIPO's revised Treaty on the Law of
Trademarks.

According to recent industry estimates, Singapore's piracy rate
averaged about 5-10 percent for audio and video and 39 percent for
business software. Software piracy levels in Singapore, while among
the lowest in Asia, are almost double the estimated level in the
United States. Business software losses were estimated at nearly
$125 million in 2006. Rights holders have encountered difficulties
when attempting to prosecute IP cases based on tips provided by
company insiders. Singapore currently does not offer specific
protection to "whistleblowers." As a result, many informants refuse
to provide crucial testimony in court.

U.S. industry has raised concerns that Internet piracy in Singapore
is on the rise as a result of the increasing availability of the
country's broadband facilities. Industry groups also claim that the
Copyright Act violates FTA obligations by permitting entities in
Singapore to "simulcast" performances over the Internet without
paying the proper license fees.

While a number of local educational institutions (the majority
government-operated) have signed agreements to comply with legal
obligations to pay royalty fees to publishers, unlawful duplication
of textbooks at some commercial copy centers continues. The police
have conducted multiple raids, but according to industry
representatives, the activity is lucrative enough to continue in
spite of the possibility of large fines.

Although it is a major global transshipment and transit point for
sea and air cargo, Singapore does not collect information on the
contents and destinations of most transshipment and transit trade,
which accounts for 80 percent of cargo passing through the port.
This lack of information makes enforcement against transshipment or
transit trade in infringing goods virtually impossible. In
addition, goods in transit are not subject to seizure under the
Copyright Act, although it may be possible if a search warrant is
obtained in advance. Under its FTA commitments, Singapore amended
Section 31 of the Import/Export Act in November 2003 to facilitate
information-sharing with the U.S. Customs and Border Protection and
other country officials with which it has relevant trade agreements.


The FTA ensures that government agencies will not grant approval to
patent-violating products. Singapore allows parallel imports.
Under the amended Patents Act, the patent owner has the right to
bring an action to stop an importer of "grey market goods" from
importing the patent owner's patented product if the product has not
previously been sold or distributed in Singapore.

The FTA ensures protection of test data and trade secrets submitted
to the government for product approval purposes. Disclosure of such
information is prohibited for a period of five years for
pharmaceuticals and ten years for agricultural chemicals. Singapore
has no specific legislation concerning trade secrets, but rather
protects investors' commercially valuable proprietary information
under common law by the Law of Confidence. U.S. industry has
expressed concern that this provision is inadequate.


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Transparency Of The Regulatory System

The FTA enhances transparency by requiring regulatory authorities,
to the extent possible, to consult with interested parties before
issuing regulations, to provide advance notice and comment periods
for proposed rules, and to publish all regulations.

Singapore in the past lacked a formalized system whereby it
published proposed regulations for public comment. Beginning in
April 2003, the government established a centralized Internet portal
-- http://www.reach.gov.sg -- to solicit feedback on selected draft
legislation and regulations, a process that is being used with
increasing frequency. As noted in the "Openness to Foreign
Investment" section, some U.S. companies, in particular, in the
telecommunications and media sectors, are concerned about the
government's lack of transparency in its regulatory and rule-making
process.

Singapore strives to promote an efficient, business-friendly
regulatory environment. Tax, labor, banking and finance, industrial
health and safety, arbitration, wage and training rules and
regulations are formulated and reviewed with the interests of both
foreign investors and local enterprises in mind. Starting in 2005,
a Rules Review Panel, comprising senior civil servants, began
overseeing a review of all rules and regulations; this process will
be repeated every five years. A Pro-Enterprise Panel of high-level
public sector and private sector representatives examines feedback
from businesses on regulatory issues and provides recommendations to
the government.

Local laws give regulatory bodies wide discretion to modify
regulations and impose new conditions, but in practice agencies use
this positively to adapt incentives or other services on a
case-by-case basis to meet the needs of foreign as well as domestic
companies.

Procedures for obtaining licenses and permits are generally
transparent and not burdensome, but some exceptions apply.
Procedures can be faster for investors in areas considered national
priorities. Singapore has established an online licensing portal to
provide a one-stop application point for multiple licenses --
http://licences.business.gov.sg.

Corporate Governance: In January 2003, Singapore established a
private sector-led Council on Corporate Disclosure and Governance to
implement the country's Code of Corporate Governance. Compliance
with the Code is not mandatory but listed companies are required
under the Singapore Exchange Listing Rules to disclose their
corporate governance practices and give explanations for deviations
from the Code in their annual reports.

Accounting Standards: Singapore's prescribed accounting standards
("Financial Reporting Standards" or FRS) are aligned with those of
the International Accounting Standards Board. Companies can deviate
from these standards where required to present a "true and fair" set
of financial statements. Singapore-incorporated, publicly-listed
companies can use certain alternative standards such as
International Accounting Standards (IAS) or the U.S. Generally
Accepted Accounting Principles (US GAAP) if they are listed on
foreign stock exchanges that require these standards. They do not
need to reconcile their accounts with FRS. All other
Singapore-incorporated companies must use FRS unless the Accounting
and Corporate Regulatory Authority exempts them.

Efficient Capital Markets And Portfolio Investment

Singapore actively facilitates the free flow of financial resources.
Credit is allocated on market terms and foreign investors can
access credit, U.S. dollars, Singapore dollars (SGD), and other
foreign currencies on the local market. MAS formulates and
implements the country's monetary and exchange rate policy, and
supervises and regulates the country's sophisticated financial and
capital markets.

Total assets under management in Singapore grew 24 percent to $581
billion between 2005 and 2006. Over 80 percent of the funds managed
in Singapore are foreign sourced, with close to 60 percent of these
funds invested in Asia. The government has sought to boost the
country's asset management sector by placing with foreign-owned
firms a significant portion of government reserves managed by the
Government of Singapore Investment Corporation (GIC). Financial
institutions issued more than US$16.8 billion in SGD-denominated
corporate debt instruments in 2006.

Singapore's banking system is sound and well regulated. Total

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domestic banking assets were US$359 billion as of June 2007. Local
Singapore banks are relatively small by regional standards, but are
reasonably profitable and have stronger capital levels and credit
ratings than many of their peers in the region. As of June 2007,
non-performing loans (NPLs, net of bank-to-bank loans) as a
percentage of total loans were 2.2 percent (compared to 3.4 percent
in June 2006).

A statutory requirement prohibiting banks from engaging in
non-financial business took effect in July 2001. As of January 1,
2006, banks could hold 10 percent or less in non-financial companies
as an "equity portfolio investment."

The Securities and Futures Act (SFA), implemented in 2002,
introduced a host of policy reforms in Singapore's capital markets,
moving them to a disclosure-based regime. The SFA allows for
imposition of civil or criminal penalties against corporations
listed on the Singapore Exchange (SGX) that fail to disclose
material information on a continuous basis. Since January 2003,
listed companies with more than US$44 million market capitalization
have been required to prepare quarterly financial reporting. The
SFA requires persons acquiring shareholdings of 5 percent or more of
the voting shares of a listed company to disclose such acquisitions
as well as any subsequent changes in their holdings directly to the
SGX within two business days. The SFA also contains enhanced market
misconduct provisions.

Political Violence

Singapore's political environment is stable and there is no history
of incidents involving politically motivated damage to foreign
investments in Singapore. The ruling People's Action Party (PAP)
has dominated Singapore's parliamentary government since 1959, and
currently controls 82 of the 84 regularly contested parliamentary
seats. Singapore opposition parties, which currently hold two
regularly contested parliamentary seats and one additional seat
reserved to the opposition by the constitution, do not usually
espouse views that are radically different from the mainstream of
Singapore political opinion.

Corruption

Singapore typically ranks as the least corrupt country in Asia and
one of the least corrupt in the world. Singapore has, and actively
enforces, strong anti-corruption laws. The Prevention of Corruption
Act, and the Drug Trafficking and Other Serious Crimes (Confiscation
of Benefits) Act provide the legal basis for government action by
the Corrupt Practices Investigation Bureau, an independent
anti-corruption agency that reports to the Prime Minister. These
laws cover acts of corruption both within Singapore as well as those
committed by Singaporeans abroad. When cases of corruption are
uncovered, whether in the public or private sector, the government
deals with them firmly, swiftly and publicly, as they do in cases
where public officials are involved in dishonest and illegal
behavior.

Singapore is not a party to the OECD Convention on Combating
Bribery, but the Prevention of Corruption Act makes it a crime for a
Singapore citizen to bribe a foreign official or any other person,
whether within or outside Singapore.

Bilateral Investment Agreements

Singapore has signed Investment Guarantee Agreements (IGA's) with
all other ASEAN member nations, the Belgium-Luxembourg Economic
Union, and the following economic partners: Bahrain, Belarus,
Bulgaria, Canada, China, the Czech Republic, Egypt, France, Germany,
Hungary, Latvia, Mauritius, Mongolia, The Netherlands, Pakistan,
Peru, Poland, Saudi Arabia, Slovakia, Slovenia, Sri Lanka,
Switzerland, Taiwan, Ukraine, the United Kingdom, the United States,
Uzbekistan and Zimbabwe. These agreements mutually protect
nationals or companies of either country against war and
non-commercial risks of expropriation and nationalization.

Singapore has signed free trade agreements, including investment
chapters, with Australia, the European Free Trade Area (Switzerland,
Norway, Lichtenstein, and Iceland), India, Japan, Jordan, New
Zealand, Panama, Peru, South Korea, the United States, and
Uzbekistan, as well as a Trans-Pacific Strategic Economic
Partnership agreement (P-4) with Brunei, New Zealand, and Chile.
Singapore is negotiating FTAs with Canada, China, the Gulf
Cooperation Council, Mexico, Pakistan, and Ukraine. Singapore is a
member of the Association of Southeast Asian Nations (ASEAN), which
has concluded portions of FTAs with China and South Korea, and is
negotiating FTAs with Australia/New Zealand, India, and Japan.

SINGAPORE 00000034 009 OF 014


Singapore has signed tax treaties with a number of countries, but
not with the United States.

OPIC And Other Investment Insurance Programs

Under a 1966 investment guarantee agreement with Singapore, the U.S.
Overseas Private Investment Corporation (OPIC) offers insurance to
U.S. investors in Singapore against currency inconvertibility,
expropriation and losses arising from war. Singapore became a
member of the Multilateral Investment Guarantee Agency (MIGA) in
1998.

Labor

As of mid-2007, Singapore's labor market totaled 2.61 million
workers; this includes nearly 760,000 foreigners, of which about 80
percent are unskilled or semi-skilled workers. Local labor laws are
flexible, and allow for relatively free hiring and firing practices.
Either party can terminate employment by giving the other party the
required notice. The Ministry of Manpower must approve employment
of foreigners.

Singapore imposes a ceiling on the ratio of unskilled/semi-skilled
foreign workers to local workers that a company can employ, and
charges a monthly levy for each unskilled or semi-skilled foreign
worker. The government also provides incentives and assistance to
firms to automate and invest in labor-saving technology.

Labor-management relations in Singapore are generally amicable.
More than 20 percent of the workforce is unionized. The majority of
unions are affiliated with the National Trades Union Congress
(NTUC), which maintains a symbiotic relationship with the PAP ruling
party. Although workers, other than those employed in the three
essential services of water, gas and electricity, have the legal
right to strike, no workers have done so since 1986.

Singapore has no minimum wage law; the government follows a policy
of allowing free market forces to determine wage levels. Singapore
has a flexible wage system in which the National Wage Council (NWC)
recommends non-binding wage adjustments on an annual basis. The NWC
is a tripartite body comprising a Chairman and representatives from
the Government, employers and unions. The NWC recommendations apply
to all employees in both domestic and foreign firms, and across the
private and public sectors. While the NWC wage guidelines are not
mandatory, they are widely implemented. The level of implementation
is generally higher among unionized companies compared to
non-unionized companies.

Foreign Trade Zones/Free Trade Zones

Singapore has five free-trade zones (FTZs), four for seaborne cargo
and one for airfreight. The FTZs may be used for storage and
repackaging of import and export cargo and goods transiting
Singapore for subsequent re-export. Manufacturing is not carried
out within the zones. Foreign and local firms have equal access to
the FTZ facilities.

Foreign Direct Investment Statistics

The United States is one of Singapore's largest foreign investors,
with over 1,500 U.S. firms in operation. According to the Singapore
Department of Statistics (Singapore DOS), U.S. cumulative foreign
direct investments in Singapore totaled US$25.7 billion in 2005
(latest available data). According to U.S. Department of Commerce
statistics (USDOC), U.S. firms (manufacturing and services) in 2006
had cumulative total investments in Singapore of $60.4 billion.
Discrepancies between USG and GOS FDI numbers are attributable to
differences in accounting methodologies.

Investment Statistics

TABLE A
-------

STOCK OF FOREIGN DIRECT INVESTMENT (FDI) IN SINGAPORE BY COUNTRY
(As at Year-end, Historical Cost)
(US$ million)

2002 2003 2004 2005
---- ---- ---- ----
Total FDI 135,390 147,961 174,977 186,927

United States 20,170 22,151 27,636 25,691
Canada 1,594 1,532 1,754 1,551
Australia 1,451 1,233 1,653 1,621

SINGAPORE 00000034 010 OF 014


New Zealand 113 85 87 135

Europe 54,596 62,501 74,615 80,529
European Union 43,985 49,586 60,588 62,691
France 2,893 3,164 3,412 3,395
Germany 4,245 3,633 4,481 4,548
Netherlands 14,576 16,219 19,747 19,064
Norway 1,639 2,745 3,818 4,718
Switzerland 8,761 9,959 10,128 13,010
United Kingdom 18,917 23,147 27,663 30,137

Asian Countries 31,827 34,365 39,304 44,451
China 552 510 233 244
Hong Kong 2,793 2,381 2,806 2,939
Japan 19,037 19,973 22,961 24,710
South Korea 661 989 518 790
Taiwan 2,908 3,474 3,508 4,290
India 233 207 293 772
ASEAN 5,292 5,001 5,391 6,704
Brunei
Darussalam 209 201 219 229
Indonesia 1,018 981 672 756
Laos 0 0 0 0
Malaysia 3,076 2,680 3,150 4,300
Philippines 554 536 686 683
Thailand 413 586 640 714
Vietnam 16 14 20 12
Cambodia 0 0 1 0
Burma 4 4 5 9

Carribbean/Latin
America 23,380 23,466 26,417 28,245

Other Countries 2,260 2,627 3,510 4,703

Source: Department of Statistics, "Foreign Equity Investment in
Singapore, 2005"

TABLE B
-------

STOCK OF FOREIGN DIRECT INVESTMENT (FDI) IN SINGAPORE BY INDUSTRY
(As at Year-end, Historical Cost)
(US$ million)

2002 2003 2004 2005
---- ---- ---- ----

Total FDI 135,390 147,961 174,977 186,927

Manufacturing 49,496 53,926 59,324 62,253
Food, Beverages
& Tobacco 271 274 305 362
Textiles,
Wearing
Apparel &
Leather 49 49 49 50
Wood & Wood
Products 0 2 3 1
Paper & Paper
Products,
Printing &
Publishing 441 373 408 479
Petroleum &
Petroleum
Products 7,269 8,020 8,366 8,385
Chemicals &
Chemical
Products 3,174 3,414 4,329 4,830
Pharmaceutical
& Biological
Products 13,503 17,240 19,509 23,243
Rubber &
Plastic
Products 523 568 632 530
Basic Metals 16 21 24 13
Fabricated Metal
Products 813 735 891 836
Machinery &
Equipment 1,536 1,636 1,648 2,091
Electrical
Machinery &
Apparatus 766 941 1,011 916
Electronic
Products &

SINGAPORE 00000034 011 OF 014


Components 18,313 17,437 18,306 17,518
Transport
Equipment 943 1,125 1,463 933
Instrumentation,
Photographic
& Optical
Goods 1,430 1,658 1,962 1,581
Others 447 433 489 486
Construction 1,123 829 691 631
Commerce 21,921 23,572 28,153 29,328
Wholesale
Trade 19,886 21,561 25,998 27,535
Retail Trade 700 532 610 564
Restaurants &
Hotels 1,335 1,480 1,545 1,229
Transport, Storage &
Communications 5,028 6,017 8,029 10,164
Water
Transport 4,139 5,098 6,994 9,023
Land & Air
Transport -20 -47 -28 -50
Warehousing
Post & Courier
Services 909 965 1,064 1,192
Information &
Communications -397 1,734 2,115 2,084
Financial &
Insurance
Services 47,534 52,697 66,494 71,591
Financial
Services 45,817 50,616 64,057 68,567
Banks 4,866 5,282 5,448 5,414
Investment
Holding
Companies 36,567 40,640 52,158 56,698
Other Financial
Services 4,384 4,694 6,451 6,454
Insurance
Services 1,717 2,081 2,437 3,024
Real Estate 4,030 3,787 4,173 3,935
Business Services 3,798 4,576 5,035 5,884
Others 90 89 92 95

Source: Department of Statistics, "Foreign Equity Investment in
Singapore, 2005"

TABLE C
-------
STOCK OF DIRECT INVESTMENT ABROAD BY COUNTRY
(As at Year-end, Historical Cost)
(US$ Million)

2002 2003 2004 2005
---- ---- ---- ----

Total Direct
Investment 85,761 91,553 107,250 111,225

Asia 40,926 45,636 52,369 57,238

ASEAN 17,786 20,505 24,373 26,236
Brunei 82 36 39 36
Indonesia 4,430 6,109 7,366 8,360
Malaysia 7,674 7,992 9,054 9,551
Philippines 1,649 1,898 2,002 2,081
Thailand 2,363 2,767 4,422 4,607
Vietnam 798 860 934 1,032
Cambodia 149 137 75 73
Burma 611 666 430 446
Laos 29 39 51 49

Hong Kong 6,896 6,610 6,708 7,361
Taiwan 1,926 2,168 2,335 2,664
China 10,392 11,653 13,584 15,297
Japan 946 1,161 1,394 1,464
South Korea 1,427 1,503 1,734 1,879
India 235 670 766 1,063

Europe 8,919 7,986 8,294 7,445
European Union 6,575 6,053 6,946 6,480
Netherlands 700 440 618 661
United Kingdom 4,016 4,472 4,438 4,255
France 143 242 146 133
Germany 65 63 241 247
Switzerland 306 354 230 197

SINGAPORE 00000034 012 OF 014

United States 4,748 5,310 5,867 5,607
Canada 13 63 75 141

Australia 1,915 2,733 5,307 4,403
New Zealand 509 627 788 713

Caribbean/Latin
America 24,263 24,965 26,655 28,040

Other Countries 4,468 4,231 7,896 7,639


Source: Department of Statistics, "Singapore's Investment Abroad,
2005"

TABLE D
-------

GDP AND FDI FIGURES, 2002-2006
(US$ Million)

Year GDP* FDI FDI as ratio to GDP**
---- ---- --- -------------------

2002 90,811 135,390 1.49
2003 98,512 147,961 1.56
2004 111,115 174,977 1.57
2005 116,717 186,927 1.60


Footnote: *GDP at Current Market Price
**Based on Singapore dollars
Source: Department of Statistics

Table E
-------

TOP 20 MAJOR FOREIGN INVESTORS BY TOTAL ASSETS
(US$ Billion)

Country Total Business
Company of Origin Assets Activities
------- --------- ------ ----------

Citicorp
Singapore U.S. 30.17 Banking
J.P. Morgan
Securities Asia U.S. 28.42 Finance
Glaxo Wellcome Mfg. U.K. 21.62 Healthcare Products
Exxonmobil Asia
Pacific U.S. 9.43 Chemicals
Hewlett-Packard
Singapore U.S. 8.88 Electronics
Prudential
Assurance Co. U.K. 7.81 Insurance
Shell Eastern
Trading Netherlands 5.90 Chemicals
National
Australia Merchant
Bank Australia 4.98 Banking
Credit Suisse
Singapore Switzerland 4.54 Banking
Asia Food &
Properties BVI 4.33 Multindustry
ING Asia Netherlands 3.81 Banking
Citigroup
Holding U.S. 3.61 Finance
Shell Treasury
Centre East Netherlands 3.39 Finance
BP Singapore U.K. 3.27 Chemicals
Motorola Trading
Center U.S. 3.14 Electronics
Hewlett-Packard
International U.S. 2.82 Electronics
Texas Instruments
Singapore U.S. 2.58 Electronics
Kuok Singapore
Cook Islands 2.15 Multi-industry
Vitol Asia Netherlands 2.15 Chemicals
Aviva Ltd U.K. 2.03 Insurance

Source: DP Information Group, "Singapore 1000, 2007"

ANNEX: INVESTMENT INCENTIVES

SINGAPORE 00000034 013 OF 014


----------------------------

INCENTIVES ADMINISTERED BY THE MONETARY AUTHORITY OF
SINGAPORE (MAS)

As part of the government's strategy to develop
Singapore into a premier financial center, MAS offers
tax incentives for financial institutions looking to
set up operations here.

A) Financial Sector Incentive ("FSI") Scheme
B) Tax Incentive Scheme for Qualifying Processing
Services Company
C) Tax Incentive Scheme for Offshore Insurance
Business
D) Tax Exemption Scheme for Marine Hull & Liability
Insurance Business
E) Abolition of Withholding Taxes on Financial
Guaranty Insurance Contracts
F) Tax Incentive Scheme for Commodity Derivatives
Trading
G) Tax Incentive Scheme for Approved New Derivative
Products traded on the Singapore Exchange
H) Tax Incentive Scheme for Finance and Treasury
Centers
I) Tax Incentive Scheme for Approved Trustee Companies
J) Tax Incentive Scheme for Syndicated Facilities
K) Innovation in Financial Technology & Infrastructure
Grant Scheme
L) Tax Incentive for Trading Debt Securities
M) Financial Sector Development Fund
N) Financial Investor Scheme for Singapore Permanent
Residence
O) Foreign Charitable Trust Incentive
P) Tax Incentive for Approved Fund Managers
Q) Over-the-Counter (OTC) Financial Derivative Payments

Further guidelines and application information are
available at http://www.mas.gov.sg.

INCENTIVES ADMINISTERED BY THE ECONOMIC DEVELOPMENT
BOARD (EDB)

A) Pioneer Status
B) Development & Expansion Incentive
C) Investment Allowance Incentive
D) Approved Foreign Loan Scheme
E) Approved Royalties Incentive
F) Entrepreneurship Investment Incentive
G) HQ Program
H) Double Deduction for Research and Development (R&D)
Expenses
I) Research Incentive Scheme for Companies
J) Exemption of foreign sourced interest and royalty
income for R&D purposes
K) Innovation Development Scheme
L) Initiatives in New Technology
M) Integrated Industrial Capital Allowance
N) Special Goods & Services Tax Scheme for 3rd Party
Logistics Service Providers
O) The Enterprise Challenge (TEC) Scheme

Further guidelines and application information are
available at http://www.sedb.com.

INCENTIVES ADMINISTERED BY INTERNATIONAL ENTERPRISE
SINGAPORE (IE Singapore)

A) Double Tax Deduction (DTD) Scheme
B) Global Trader Program (GTP)
C) International Marketing Activities Program (IMAP)
D) International Partners Program
E) Manpower for Internationalization Program
F) Regionalization Finance Scheme
G) iFinance Consulting Program
H) Design for Internationalization Program
I) Branding for Internationalization Program

Further guidelines and application information are
available at http://www.iesingapore.gov.sg.

INCENTIVES ADMINISTERED BY THE MEDIA DEVELOPMENT
AUTHORITY
(MDA)


SINGAPORE 00000034 014 OF 014


A) Market Development Scheme (MDS)
B) TV Content Industry Development Scheme
C) Digital Content Development Scheme
D) Digital Technology Development Scheme

Further guidelines and application information are
available at http://www.mda.gov.sg.

INCENTIVES ADMINISTERED BY INFOCOMM DEVELOPMENT AUTHORITY OF
SINGAPORE (IDA)

A) Connected Homes
B) iLIUP (infocomm Local Industry Upgrading Program)
C) Overseas Development Program
D) SAFE (Securing Assets for End-Users) Program
E) WEAVE (Web Services)
F) Wired With Wireless Program
G) Digital Exchange
H) RFID Development Plan
I) Pilot and Trial Hotspots (PATH)
J) The Competency Centre Program (CCP)

Further information, details, and guidelines are
available at http://www.ida.gov.sg.

INCENTIVES ADMINISTERED BY MARITIME PORT AUTHORITY (MPA)

A) Approved International Shipping Enterprise Scheme

Further information, details and guidelines are available at
http://www.mpa.gov.sg

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