Trade, Investment, S&T;, and Economic Overview

	Economy
	Trade
	Investment
	Science and Technology (S&T;)

Economy

At US$107 billion, Singapore's GDP in 2004 was the third largest in Southeast Asia (after Indonesia and Thailand), providing its four million residents with a per capita income of about US$25,000 (by far the highest in Southeast Asia, and comparable to Canada's). Manufacturing and services sectors dominate the economy and account for 26% and 63% of GDP, respectively. Electronics and chemical products are the main contributors to the manufacturing sector, while wholesale and retail trade and business services are the greatest contributors to the services sector. Agriculture is negligible, contributing less than 1% to GDP. Government expenditure accounts for about 14% of GDP.

Singapore's formula for growth is an export-based economy fuelled by foreign investment in the high tech and petrochemical sectors, largely from the US, Japan and EU. Singapore's dependence on trade in 2004 is shown by its US$343 billion in imports and exports of goods and services, of which almost half is accounted by transhipments. Of its approximately US$100 billion in domestically processed exports, electronics account for 46%. As Singapore's exports have become more sophisticated, in the last few years a number of labour intensive companies have moved to lower labour cost locations.

Singapore traditionally runs a positive balance of payments, with a positive current account (26% of GDP) more than compensating for outflows on the capital account. As well as being a major destination for foreign investment, its high domestic savings (44% of GDP) makes it a major source of outward direct investment, about half of which is invested in Asia. Official foreign reserves rose to about US$110 billion at the end of 2004, equivalent to eight months of imports.

Following very high growth rates in the 1980s and early 1990s, Singapore's GDP growth has been limited first by the 1997 economic crisis in Asia, then by the downturn in the global electronics market in 2001, and then by SARS in 2003. In 2004, GDP growth rebounded by 8.4% as exports of goods and services increased by 22% due to strong activity in the United States and in the global ICT sector. The forecast for GDP growth for 2005 is 3.5% - 5.5%.

The Singapore government pro-actively shapes and guides the economy through its shares in government linked companies (GLCs), its use of incentives to attract foreign investment, its investments in the bio-tech sector and strong moral suasion. A high profile Economic Review Committee in February 2003, made up of government and non-government representatives, recommended immediate measures to reduce costs and improve competitiveness, and longer term measures to expand external ties and promote the twin engines of growth: services and manufacturing.

Over the next 50 years, Singapore's economic challenge is to harness the growth in China, India and Southeast Asia and to position itself as a beachhead for doing business in these countries.

Trade

As a small country with very limited natural resources, Singapore is a heavily trade-dependent economy. It is therefore no surprise that Singapore has one of the world's most liberal and transparent trade regimes and levies customs duties on only six tariff lines (stout & porter, beer & ale, and various samsu products). All imported goods are also subject to 5% GST.

In addition, the Singapore government actively pursues FTAs to further liberalize and facilitate trade and investment. Singapore also uses FTAs as building blocks in strategic alliances with key geopolitical partners. The Government has signed FTAs with ASEAN, Australia, the European Free Trade Association, Japan, Jordan, New Zealand, and the United States (Singapore has also concluded negotiations with Korea and Panama and the agreements are likely to be signed later in 2005). It is currently negotiating several other FTAs including with Canada, India, and China. Singapore is also an active member of the WTO and regional economic fora such as APEC and ASEAN. Singapore's largest national trading partners are (in order) Malaysia, the U.S., Japan, and China.

Singapore is Canada's second largest export market in Southeast Asia and 21st largest worldwide. In 2004, Canada's merchandise exports (including re-exports) to Singapore were valued at C$614 million, up 38% from 2003, and at record highs. Canada's top exports to Singapore include: machinery and mechanical appliances, electronic equipment, aircraft and equipment, optical and medical equipment, and nickel. Canadian merchandise imports from Singapore dropped slightly to C$977 million in 2004. Some of Canada's principle import items from Singapore include: machinery and mechanical appliances, electronic equipment, optical and medical equipment, and organic chemicals.

Canada's exports of services to Singapore amounted to C$223 million in 2002 (the last year for which statistics are available). During the same year, Canada's services imports from Singapore were valued at C$897 million. Bilateral trade in services is concentrated in international transportation and government services.

Canada and Singapore have been negotiating an FTA since early 2002 and have so far held six rounds of negotiations. Such an agreement has the potential to yield some meaningful economic and strategic benefits to Canada. Given Singapore's free-port status, economic gains to Canada would be concentrated in the areas of investment and services. Benefits could also be realised through an increase in business activity that usually occurs as a result of an increase in profile pursuant to the signing of a free trade agreement. In addition, as a gateway into Asia, Singapore is a strategically placed trading partner for Canada, and an FTA would complement Canada's efforts to solidify links in the Asia-Pacific region.

The Commercial and Economic Section at the Canadian High Commission focuses its efforts on six priority sectors where there are growing opportunities in Singapore and where Canadian companies are most active in seeking out these market opportunities. These are: information and communications technologies (ICT), aerospace/defence, agri-food, biotechnology/life sciences, cultural industries and environmental industries.

Investment

Singapore has one of the world's most open investment regimes and actively encourages foreign investment, particularly in leading-edge technologies and knowledge-based fields. Among investors, Singapore is well known for its highly developed infrastructure, strong intellectual property protection, and good corporate governance. There are no local equity requirements for setting up a business in Singapore and no restrictions on foreign ownership or control, except in a few sectors where a special government licence or approval is required, namely in banking, finance, and insurance. Foreign investment limits exist in broadcasting and newspaper services, and foreign investment in some of Singapore's government linked companies (GLCs) is also subject to restrictions.

Attracting targeted foreign investment is a key Singapore government priority -- initially to spearhead industrialization, but now to climb the technological ladder and move up the value chain. The Economic Development Board (EDB) is the lead Singapore government statutory body for attracting investment and has a sophisticated investment promotion strategy to attract major investments into strategic, value-added manufacturing and services sectors, namely: biotechnology, electronics, ICT, chemicals, engineering, and financial and professional services. The EDB also provides incentives, such as tax exemptions, to encourage incoming fixed investments. A majority of investments originate from (in order) the U.S., Japan, the U.K., and the Netherlands.

Canadian direct investment in Singapore is significant, valued at C$3.8 billion in 2004, up from C$3 billion in 1999. In fact, Singapore is now Canada's second largest investment destination in Asia, after Japan. Much of this investment is in the form of regional offices and manufacturing facilities, primarily in the services (financial & insurance), aerospace, and ICT sectors. An estimated 70 Canadian companies have established operations in Singapore, including: Manulife, the Bank of Nova Scotia, CIBC, RBC, TD, Bell Helicopter Canada, Pratt & Whitney Canada, Standard Aero, Celestica, Cognos, Hummingbird, Mitel Networks, Nortel Networks, Telus, Nova Chemical, Blueprint, MDS Pharma Services, Canpotex, Bata, and Four Seasons Hotels & Resorts.

Canada is not a priority investment market for most Singaporean companies, which tend to focus their attention on China, India, the Southeast Asia region, and the United States. From 1993 to 2001, Singapore's investments in China grew by an extraordinary 50% each year. Singapore's stock of FDI into Canada, which is at its lowest level in many years, valued at only C$44 million (2004), is concentrated in transportation, communications, financial and insurance services, and real estate.

Science and Technology (S&T;)

Singapore recognizes that to sustain its economic growth and to further enhance its economy’s competitiveness, it needs to create, own, and exploit intellectual capital. Singapore has been promoting and expanding their scientific capabilities in key economic sectors, namely: electronics, ICT, chemicals, biotechnology and life sciences, and engineering. In its 2005 Budget, the Government again demonstrated its commitment to S&T; by allocating S$660 million (C$485 million) to Singapore's Agency for Science, Technology and Research (A*STAR) to strengthen public R&D; capabilities.

A National R&D; Survey, released in December 2004, showed that Singapore’s public and private sectors both continue to invest heavily in R&D; and that the number of players engaging in R&D; activities is growing annually. The survey highlighted the increase in gross R&D; expenditure, which rose to S$3.4 billion (C$2.5 billion) in 2003, equivalent to 2.2% of GDP (compared to 1.87% of GDP in 1999). The report also showed a considerable increase in the number of research scientists and engineers (RSEs) in Singapore which rose to 98 RSEs per 10,000 labour force (compared to 70 RSEs per 10,000 in 1999).

Singapore has dedicated extensive resources to build the infrastructure and research centres to support further S&T; growth. In addition to its 12 established public research institutes, Singapore has allocated enormous resources to a project, known as One North. The first phase of the One North project, called Biopolis, was built at a cost of about C$400 million and is the epicentre of Singapore's biomedical research activities. It comprises a seven-building complex where close to 2,000 researchers from the public and private sectors are co-located. The second phase of One North, Fusionpolis, is currently being built and is envisioned to be the regional centre for ICT and media research activities.

Another S&T; priority for Singapore is to nurture, attract, and retain the human capital necessary to generate innovative ideas and support its continued S&T; growth. In 2004, Singapore's Agency for Science Technology and Research (A*STAR) created a new body called the A*STAR Graduate Academy (A*GA), whose main thrust is to advance Singapore's S&T; manpower development, such as through its scholarship, fellowship, and attachment programs and by encouraging research careers for young Singaporean students.

Canada has a positive S&T; relationship with Singapore and we share information, collaborate on research projects, and establish linkages between our S&T; communities. At the federal government level, the bilateral relationship has been established through the signing of an MOU between Canada's National Research Council (NRC) and A*STAR. Since the signing of this MOU by Dr. Arthur Carty in 1997, Canadian and Singaporean public research institutes have collaborated on many research projects, adding value to our respective innovation systems.

In addition to the projects under the MoU, Canada and Singapore have also developed university, private sector, and provincial government R&D; collaborative projects and networks in various disciplines and sectors. Furthermore, many senior Canadian S&T; leaders, including senior NRC officials, university presidents, and senior researchers, have visited Singapore and help generate new opportunities for bilateral R&D; cooperation.