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Cablegate: Singapore - 2010 Investment Climate Statement

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RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGP #0067/01 0190042
ZNR UUUUU ZZH
R 190042Z JAN 10
FM AMEMBASSY SINGAPORE
TO RUEHC/SECSTATE WASHDC 7675
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPCIM/CIMS NTDB WASHDC
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 14 SINGAPORE 000067

STATE FOR EB/IFD/OIA
STATE PASS USTR

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: EINV ETRD EFIN ELAB KTDB PGOV OPIC USTR SN

SUBJECT: SINGAPORE - 2010 INVESTMENT CLIMATE STATEMENT

REF: 09 STATE 124006

1. (U) In response to reftel instructions, this message is Post's
draft chapter of the 2010 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:

2010 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 "Doing Business 2010" report ranked Singapore as the
easiest country in which to do business. "The Global Enabling Trade
Report 2009" by the World Economic Forum ranked Singapore first for
having the most open economy for international trade and investment.
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 to
maintaining a free market but also takes 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 November 2008, the top six Singapore-listed GLCs
accounted for nearly 24 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.

Measure Year Ranking
TI Corruption Index 2009 #3
Heritage Economic Freedom 2009 #2
World Bank Doing Business 2009 #1

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: The Telecoms Competition Code opened the
industry in 2000 to foreign or domestic companies seeking to provide
facilities-based (fixed line or mobile) or services-based (local,
international, and callback) telecommunications services. Singapore
Telecommunications (SingTel), the former monopoly and currently
55-percent government-owned, faces competition in all market
segments. Its main competitors, MobileOne and StarHub, are also
GLCs. Singapore has approximately 46 facilities-based (group) and
234 services-based (individual) operators.

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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
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 did not 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.

Since 2007, SingTel has been exempted from dominant licensee
obligations for the residential and commercial portions of the
retail international telephone services. In August 2008, IDA granted
preliminary approval to exempt SingTel from dominant licensee
obligations for three of the 13 telecommunication services SingTel
provides to business and government end-users. SingTel appealed for
exemption of all 13 services. IDA decided in June 2009, following a
formal public consultation held in September 2008, that SingTel will
be exempted from dominant licensee obligations, ex ante, for three
of the 13 services, i.e., Terrestrial International Private Leased
Circuit, Backhaul, and International Managed Data Service.

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).

Infrastructure for the next generation access network, a national
broadband all-fiber network, is being built by OpenNet, a consortium
formed by Canada's Axia Netmedia (which holds 30-percent ownership),
SingTel (30 percent), Singapore Press Holdings (25 percent), and SP
Telecommunications (15 percent). The network will be operated by
Nucleus Connect, a wholly-owned subsidiary of StarHub. When
completed in 2012, the broadband network may allow fuller access to
telecom services providers to reach homes and businesses without
requiring access to SingTel-owned circuits. 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
five 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 five 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. The government
has also "gazetted" foreign newspapers, i.e., numerically limited
their circulation. Singapore's leaders have brought defamation suits
against foreign publishers. Such suits have 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. Pay-TV providers, StarHub Cable Vision (SCV) and MioTV
are wholly-owned subsidiaries of StarHub and SingTel, respectively.
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.

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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 December 2009, 25 foreign full
service licensees, 46 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
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 25 full service licenses to foreign banks,
including four U.S. banks. Of these 25, seven, 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 and non-locally incorporated subsidiaries of U.S.
full-service banks with QFB status can apply for access to local ATM
networks. However, no U.S. bank has come to a commercial agreement
to gain such access. Singapore lifted its quota on new licenses for
U.S. wholesale banks since January 2007. 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
lenders, including non-banks. There are currently two credit bureaus
in Singapore, Credit Bureau (Singapore) Private Ltd. ("CBS") and
Credit Scan. In October 2009 GE Money became the first non-bank
member of the CBS.

Securities and Asset Management: Singapore has no trading
restrictions on foreign-owned stockbrokers. 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 August, 2009, 17 of the 84 foreign law firms
in Singapore were from the United States. In December 2008,
Singapore granted Qualifying Foreign Law Practice (QFLP) licenses to
six foreign law firms (including two U.S. firms) to practice
Singapore law, although restrictions remain in certain areas,
including conveyancing, criminal law, family law and domestic
litigation. Foreign law firms can otherwise provide legal services
in relation to Singapore law only through a Joint Law Venture (JLV)
or Formal Law Alliance (FLA) with a Singapore law firm, subject to
the Ministry of Law's guidelines. Singapore relaxed some of these

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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 49 percent of total shares. Currently,
there is one U.S. Joint Law Venture and one U.S. Formal Law
Alliance. U.S. and foreign attorneys are allowed to represent
parties in arbitration without the need for a Singapore attorney to
be present.

With the exception of law degrees from a handful of 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 will admit to
the Bar Singapore-citizen or permanent-resident law school graduates
of those 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).

Engineering and Architectural Services: Engineering and
architectural firms can be 100-percent foreign-owned. 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: 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 completed efforts to liberalize its gas market
with the amendment of the Gas Act and implementation of a Gas
Network Code in 2008, which was designed to give gas retailers and
importers direct access to the onshore gas pipeline infrastructure.
However, key parts of the local gas market, such as gas retailing
and access to offshore gas pipelines, remain controlled by incumbent
Singaporean firms. In the past, the dominance of Singaporean
government linked corporations in this sector proved challenging for
American companies that tried to enter the power generation and gas
import business. To date there is little indication that the gas
market has substantially opened up to non-Singaporean firms.

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.


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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.

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 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 have
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-discriminatory 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 and established the Competition Commission
of Singapore in January 2005. The Act contains provisions on
anti-competitive agreements, decisions and practices; abuse of
dominance; enforcement and appeals process; and mergers and
acquisitions.

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

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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
stronger intellectual property rights (IPR) regimes in Asia,
although concerns remain in certain areas, such as business software
piracy and IPR enforcement. Singapore has taken steps to bring its
IPR laws in line with international standards, including amending
its Trademarks Act, Patents Act, the Layout Designs of Integrated
Circuits Act, Registered Designs Act, and new Plant Varieties
Protection Act. 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. The World
Intellectual Property Organization (WIPO) Secretariat opened offices
in Singapore in 2005. Amendments to 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 industry estimates, Singapore's piracy rate has
averaged about five to ten percent for audio and video products and
36 percent for business software. Business software piracy levels in
Singapore are among the lowest in Asia but are almost double the
estimated level in the United States. Business software losses were
estimated at $163 million in 2008. Rights holders have encountered
difficulties when attempting to prosecute intellectual property
cases based on tips provided by company insiders. Singapore
currently does not offer specific protection to "whistleblowers".
As a result, in some cases informants have refused to provide
crucial testimony in court. Rights holders have also stated that
maximum penalties for copyright infringement in Singapore are not
sufficiently high to deter future IPR violations. Music and film
industry representatives remain concerned that Internet piracy will
continue to rise as Singapore expands access to its high-speed
broadband network.

Unauthorized duplication of textbooks at some commercial copy
centers in Singapore remains an issue, though local educational
institutions, including government-operated institutions, have
signed agreements to comply with legal obligations to pay royalty
fees to publishers. The police have conducted multiple raids on
local copy centers near schools, but according to industry
representatives, the activity is lucrative enough to continue in
spite of the possibility of fines.

The FTA ensures that government agencies will not grant approval to
patent-violating products, but Singapore does allow 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.

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.

The government has 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

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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: Singapore has 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. The Monetary Authority of Singapore
(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 stood at $864 billion at
end-2008, a 26 percent year-on-year decline as a result of the
global financial turmoil. Over 80 percent of the funds managed in
Singapore are foreign sourced, with close to 52 percent of these
funds invested in the Asia-Pacific region. 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 only approximately US$11 billion in
SGD-denominated corporate debt instruments in 2008.

Singapore's banking system is sound and well regulated. Total
domestic banking assets were nearly US$461 billion as of August
2009. 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 third quarter 2009, the non-performing loans (NPLs) ratio of
local banks was 2.4 percent. Banks are statutorily prohibited from
engaging in non-financial business. Banks can hold 10 percent or
less in non-financial companies as an "equity portfolio
investment."

The Securities and Futures Act (SFA) of 2002 moved Singapore's
capital markets 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. Listed companies with

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more than US$44 million market capitalization are required to
prepare quarterly financial reporting. The SFA requires persons
acquiring shareholdings of five 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. The Act was further strengthened in 2009 to provide for
stronger market misconduct enforcement with the courts empowered to
order disgorgement of gains from illegal trades, and allowing the
transfer of evidence between the Commercial Affairs Department of
the police force and MAS.
Competition from State-Owned Enterprises
Singapore has an extensive network of government-linked corporations
(GLC) that are fully or partially owned by Temasek Holdings, a
holding company with the Singapore Ministry of Finance as its sole
shareholder. Singapore GLCs are active in many sectors of the
economy, especially strategically important sectors like
telecommunications, media, public transportation, defense, port and
airport operations. In addition, the GLCs are also present in many
other sectors of the economy, including banking, shipping, airline,
consumer/lifestyle, infrastructure and real estate.

GLCs operate on a commercial basis and have no specific advantage in
competing with private enterprises based on their government
ownership. However, some private sector companies have said they
encountered unfair business practices and opaque bidding processes
that appeared to favor incumbent, government-linked firms.

GLCs' corporate governance is guided by policies developed by
Temasek Holdings. However, there are differences in corporate
governance disclosures and practices across them and GLC boards are
allowed to determine their own governance practices. GLC board
seats are not specifically allocated to government officials,
although retired officials are often represented on boards and fill
senior management positions.

There are two sovereign wealth funds (SWF) in Singapore, the
Government of Singapore Investment Corporation (GIC) and the
previously mentioned Temasek Holdings. The government established
the two SWFs to manage Singapore's substantial investments, fiscal
and foreign reserves.

GIC, Singapore's largest SWF with an estimated $220 billion in
assets, does not invest domestically. GIC manages Singapore's
international investments, which are generally passive
(non-controlling) investments in publicly-traded entities. Its
investment is entirely overseas, with the United States as its top
destination, accounting for 38 percent of GIC's portfolio as of
March 2009. Although not required by law, since 2008 GIC has
published an annual report describing its management and governance,
and how it invests Singapore's foreign reserves.

Temasek began as a holding company for Singapore's state-owned
enterprises, but has since branched to other asset classes and
generally focuses on holding significant (often controlling) stakes
in companies. As of March 2009, Temasek's exposure to Singapore was
31%, with the rest of Asia accounting for 43% of its portfolio.
Temasek's stated goal is to hold and manage the government's
investments in companies for the long-term benefit of Singapore, to
create jobs, and contribute to Singapore's economic survival,
progress and prosperity. Temasek formerly focused on managing
industries to promote economic development, but has shifted emphasis
to commercial objectives and principals. Temasek exercises its
shareholder rights to influence the strategic directions of its
companies but does not get involved in the day-to-day business and
commercial decisions of its firms and subsidiaries. Temasek
publishes an annual report, but only provides consolidated financial
statements, which aggregate all of Temasek's subsidiaries into a
single financial report.

Corporate Social Responsibility
The awareness and implementation of CSR in Singapore has been
increasing since the government's formation of the Singapore
Compact, a national society promoting CSR in Singapore. In May
2004, the National Tripartite Committee on CSR was established to
study the issues holistically and address any gaps at the national
level. The initiative provides strategic direction and overall
coordination for various CSR programs, which include helping SMEs
adopt good CSR practices. In January 2005, the Singapore Compact for
Corporate Social Responsibility was set up to provide a forum for
collaboration, support and information sharing on good CSR
practices.
In October 2008, a National CSR Survey released by the Singapore
Compact showed that 40% of the 507 Singapore-based companies

SINGAPORE 00000067 009 OF 014


surveyed were aware of CSR. The awareness level among large
companies was twice that of small and medium-sized enterprises.
Among the companies that were aware of CSR, about two-thirds have
implemented CSR in areas such as sustainable development, fair
employment and corporate philanthropy. Their main motivation was
corporate culture and to increase branding. The other one-third who
did not implement CSR felt that it was not relevant to their
business or because they lacked the funding and training resources.
A survey by the American Chamber of Commerce found that 59% of U.S.
companies were involved in CSR activities.
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 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 35
countries, including the United States. 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 that include investment
chapters with Australia, China, the European Free Trade Area
(Switzerland, Norway, Lichtenstein, and Iceland), the Gulf
Cooperation Council (comprising Bahrain, Kuwait, Oman, Qatar, Saudi
Arabia and the United Arab Emirates), India, Japan, Jordan, New
Zealand, Panama, Peru, South Korea, and the United States. Singapore
is negotiating FTAs with Canada, Mexico, Pakistan, and Ukraine.
Singapore is a member of the Association of Southeast Asian Nations
(ASEAN), which has concluded FTAs with Australia and New Zealand,
China, India and South Korea, and a Comprehensive Economic
Partnership Agreement with Japan. Singapore is also party to the
Transpacific Strategic Economic Partnership Agreement with Chile,
New Zealand and Brunei. Singapore has signed tax treaties with a
number of countries, but not with the United States.

OPIC And Other Investment Insurance Programs

Under the 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 September 2009, Singapore's labor market totaled 2.95 million
workers; this includes nearly one million foreigners, of which about
85 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

SINGAPORE 00000067 010 OF 014


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.
About 18 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$35.4 billion in 2007
(latest available data). According to U.S. Department of Commerce
statistics (USDOC), U.S. firms (manufacturing and services) in 2008
had cumulative total investments in Singapore of $106.5 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)

2004 2005 2006 2007
---- ---- ---- ----

Total FDI 169,433 194,581 241,570 317,113

United States 25,107 24,381 24,990 35,429
Canada 1,736 1,556 1,784 2,169

Australia 1,637 1,711 2,164 2,940
New Zealand 81 891 1,112 1,123

Europe 73,758 84,117 113,481 136,102
European Union 59,807 65,465 85,684 104,624
France 3,886 4,208 5,276 6,892
Germany 4,455 4,921 4,950 6,406
Netherlands 19,317 19,314 31,710 35,836
Norway 3,805 5,147 9,922 11,920
Switzerland 10,065 13,384 17,680 18,506
United Kingdom 26,885 29,800 34,079 43,618

Asian Countries 38,103 47,022 53,785 72,210
China 220 547 1,102 1,542
Hong Kong 1,957 2,825 4,119 4,308
Japan 22,954 26,927 29,323 32,285
South Korea 518 762 509 2,034
Taiwan 3,508 4,333 4,917 5,563
India 294 783 1,681 8,884
Asean 5,059 6,832 7,901 11,693
Brunei Darussalam 219 229 202 211

SINGAPORE 00000067 011 OF 014


Indonesia 668 411 662 1,208
Malaysia 3,080 4,903 5,485 8,530
Philippines 433 445 568 604
Thailand 634 823 965 1,055
Vietnam 20 13 7 18
Cambodia 0 0 0 0
Myanmar 5 9 11 65

South & Central
America/Caribbean 25,507 30,130 39,695 60,684

Other Countries Nec 3,504 4,775 4,558 6,455

Source: Department of Statistics, "Foreign Equity Investment in
Singapore, 2007"


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

2004 2005 2006 2007
---- ---- ---- ----

Total FDI 166,338 211,151 257,058 317,113

Manufacturing 57,226 67,597 74,767 80,270
Construction 678 603 526 1,052
Wholesale &
Retail Trade 26,010 35,569 43,650 51,435
Hotels &
Restaurants 1,516 1,333 1,939 2,086
Transport &
Storage 7,866 11,510 16,115 20,761
Information &
Communications 2,071 2,408 2,471 3,298
Financial &
Insurance Srves 61,236 79,329 101,920 133,354
Real Estate,
Rental & Leasing
Srves 4,737 5,395 7,080 12,275
Professional/
Technical/Admin
Support 4,563 5,000 6,573 7,097
Others 90 275 680 1,314

Source: Department of Statistics, "Foreign Equity Investment in
Singapore, 2007"


TABLE C
-------

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


2004 2005 2006 2007
---- ---- ---- ----
Total Direct
Investment 110,015 121,392 158,900 206,461

Asia 52,227 62,770 76,735 94,578

Asean 24,151 28,733 34,181 43,399
Brunei 39 38 74 90
Indonesia 7,360 8,792 10,909 12,677
Malaysia 9,018 10,743 12,340 14,682
Philippines 1,825 1,980 2,182 2,589
Thailand 4,420 5,132 6,760 10,662
Vietnam 934 1,032 1,083 1,349
Cambodia n.a. n.a. n.a. n.a.
Myanmar 430 880 650 1,132
Laos n.a. n.a. n.a. n.a.
Hong Kong 7,203 9,208 10,158 12,153
Taiwan 2,335 2,830 3,405 3,472
China 13,577 16,377 21,856 27,265
Japan 1,380 1,527 1,648 1,667
South Korea 1,732 2,035 2,174 2,095
India 400 757 1,625 2,940


SINGAPORE 00000067 012 OF 014


Europe 10,159 10,525 22,050 30,938
European Union 6,876 7,482 17,960 27,106
Netherlands 607 1,522 1,994 2,152
United Kingdom 4,420 4,338 13,170 21,656
France 146 158 146 91
Germany 241 365 391 430
Switzerland 366 375 387 2,983

United States 5,918 5,905 5,574 9,373
Canada 75 143 147 162

Australia 6,782 5,369 7,089 10,957
New Zealand 788 809 827 1,015

Caribbean/
Latin America 26,174 28,418 34,944 36,583

Other Countries
Nec 7,893 7,454 11,535 22,855

Source: Department of Statistics, "Singapore's Investment Abroad,
2007"; Yearbook of Statistics, 2009

TABLE D

GDP AND FDI FIGURES, 2003-2007
(US$ Million)

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

2003 95,474 144,747 1.52
2004 113,456 169,433 1.49
2005 120,967 194,581 1.60
2006 144,199 244,538 1.70
2007 174,584 303,418 1.74
Footnote: *GDP at Current Market Price
**Based on Singapore dollars
2007 FDI data latest available
Source: Department of Statistics

Table E
-------
TOP 20 FOREIGN INVESTORS BY TOTAL ASSETS
(US$ Billion)

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

Citicorp
Singapore U.S. 29.21 Banking
Glaxo Wellcome Mfg. U.K. 24.20 Healthcare Products
Prudential
Assurance Co. U.K. 9.37 Insurance
Shell Eastern
Trading Netherlands 6.70 Chemicals
Shell Eastern
Petroleum Netherlands 6.13 Chemicals
Credit Suisse
Singapore Switzerland 6.13 Banking
BP Singapore U.K. 4.53 Chemicals
ING Asia Netherlands 4.29 Banking
Citigroup
Investment U.S. 3.41 Banking
Citigroup
Holding U.S. 3.33 Finance
Seagate
Singapore U.S. 3.28 Electronics
Texas Instruments
Singapore U.S. 3.23 Electronics
National
Australia
Merchant Bank Australia 2.97 Banking
Kuok Singapore Cook Islands 2.74 Multindustry
Aviva Ltd U.K. 2.40 Insurance
Vitol Asia Netherlands 2.36 Chemicals
Motorola Trading
Center U.S. 2.28 Electronics
Asia Food &
Properties BVI 2.28 Multindustry
GE Pacific U.S. 2.16 Multindustry
Source: DP Information Group, "Singapore 1000, 2009"


SINGAPORE 00000067 013 OF 014

ANNEX: INVESTMENT INCENTIVES
----------------------------
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 Approved New Derivative Products traded
on the Singapore Exchange
G. Tax Incentive Scheme for Finance and Treasury Centers
H. Tax Incentive Scheme for Approved Trustee Companies
I. Tax Incentive Scheme for Syndicated Facilities
J. Innovation in Financial Technology & Infrastructure Grant Scheme

K. Tax Incentive for Trading Debt Securities
L. Financial Sector Development Fund
M. Financial Investor Scheme for Singapore Permanent Residence
N. Foreign Charitable Trust Incentive
O. Tax Incentive for Approved Fund Managers
P. Over-the-Counter (OTC) Financial Derivative Payments
Q. Insurance and Re-insurance Broking Tax Incentive
R. Wealth Management Tax Incentive
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
P. Writing Down Allowance (WDA) for IP rights acquisition

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 for Overseas Investment and
Market Development
B. Export Coverage Scheme
C. Enterprise Fund
D. Loan Insurance Scheme 3
E. Loan Insurance Scheme Plus
F. Internationalization Finance Scheme
G. International Business Fellowship

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

INCENTIVES ADMINISTERED BY THE MEDIA DEVELOPMENT AUTHORITY (MDA)
A. Market Development Scheme (MDS)
B. TV Content Industry Development Scheme
C. Digital Content Development Scheme
D. Digital Technology Development Scheme
E. INVIGORATE - PC Casual Game Initiative
F. Synthesis - Online Content Initiative
G. Film in Singapore! Scheme
H. International Cooperation Agreement
I. Short Film Grant

SINGAPORE 00000067 014 OF 014


J. Overseas Travel Grant
K. New Feature Film Fund
L. Script Development Grant
M. Overseas Travel Grant
N. SCREEN - Scheme for Coinvestment in Exportable Content
O. Media Education Scheme
P. 360-degree TV
Q. IDEAS (Animation Development)
R. Futurescape
S. Microsoft XNA Development Initiative
T. SPINE
U. 35mm Fulfillment Fund
V. Stereoscopic 3D Film Development Fund

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

INCENTIVES ADMINISTERED BY INFOCOMM DEVELOPMENT AUTHORITY OF
SINGAPORE (IDA)
A. Infocomm@SeaPort
B. Infocomm@SME
C. Integrated Clinic Management Systems Program
D. Digital Manufacturing Program
E. Collaborative High Tech Manufacturing Plan
F. Retail eSCM Ecosystem
G. RFID Initiative

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
B. Approved Shipping and Logistics Scheme
C. Maritime Cluster Fund
D. Maritime Enterprise IT Development Program
E. Maritime Innovation and Technology Fund
F. Maritime Finance Incentive
Further information, details and guidelines are available at
http://www.mpa.gov.sg

EHRENDREICH

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