Singapore

Politics:

• Analysis

  Singapore politics: Quick View - EU and Singapore conclude FTA talks

  Event

  The conclusion of talks between the EU and Singapore on a landmark free-trade agreement (FTA) paves the way for Singapore's 19th FTA, once it is ratified.

  Analysis

  Since 1993, when Singapore signed its first FTA under the Association of South-East Asian Nations (ASEAN) Free-Trade Area, the city state has actively sought to reduce barriers to trade and encourage a freer movement of goods and services. Having already signed FTAs with China and the US, Singapore has been keen to secure a similar relationship with the EU, its second-largest trading partner.

  Once the EU-Singapore Free-Trade Agreement (EUSFTA) is ratified-possibly by the end of 2013-Singaporean exporters will benefit from a removal of the EU's import tariffs over a five-year period, while EU exporters will immediately enjoy duty-free access for all of their Singapore-bound exports. A number of key manufacturing sectors in the city state will be hoping to benefit from the agreement, including electronics, pharmaceuticals, chemicals and processed food products.

  The EU commissioner for trade, Karel De Gucht-who was responsible for finalising the negotiations with Singapore's trade and industry minister, Lim Hng Kiang-noted that Singapore is already a dynamic market for EU companies. But he also emphasised the wider implications, adding that the agreement, by "unlocking the gateway to the region", could reinforce Singapore's status as a vital South-east Asian hub while serving as a catalyst for EU exports. According to the European Chamber of Commerce in Singapore, the city state already plays host to the operations of around 8,800 European companies.

  Singapore has signed FTAs with numerous countries and regions around the world, but the EUSFTA is the first of its kind between the EU and an ASEAN country. Negotiations began in March 2010, after region-to-region negotiations on an FTA between the EU and ASEAN countries were suspended. Having reached an agreement with Singapore, the EU will be keen to press ahead with more bilateral FTAs with ASEAN countries; negotiations are currently under way with Malaysia and Vietnam.

  December 18, 2012

• Background

  Singapore: Political forces at a glance

  Political outlook: Political forces at a glance

  The People's Action Party (PAP) was elected for another five-year term in May 2011 with around 60% of the popular vote, which gave it a disproportionate 81 of the 87 elected seats in parliament. The opposition parties put in their best performance to date, winning around 40% of the vote. The main opposition parties include the Workers' Party (WP), the Singapore Democratic Alliance, the Singapore Democratic Party and the Democratic Progressive Party. The six parliamentary seats that went to the opposition—all of them won by the WP—mean that there is a record number of opposition legislators in the new parliament. The position of the president is largely ceremonial in Singapore. That said, constitutional amendments made in 1991 gave the president certain reserve powers over government expenditure of financial reserves and appointments to important public offices—responsibilities that the president is expected to retain in the forecast period. The current holder of the post, Tan Keng Yam (known locally as Tony Tan), took office for a six-year term in September 2011. The prime minister, Lee Hsien Loong (the son of Singapore's first prime minister, Lee Kuan Yew), is a powerful voice within the PAP. Members of the Lee family hold several influential positions in Singaporean society.

  Election results since independence
  	Seats won		% of vote
  	PAPa	Opposition	PAPa	Opposition
  1972	65	0	69	21
  1976	69	0	72	28
  1980	75	0	76	24
  1984	77	2	63	37
  1988	80	1	62	38
  1991	77	4	61	39
  1997	81	2	65	35
  2001	82	2	75	25
  2006	82	2	67	33
  2011	81	6	60	40
  a People's Action Party.
  Sources: Ministry of Information and Arts.

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  June 26, 2012

• Structure

  Singapore: Political structure

  Official name

  Republic of Singapore

  Form of state

  Parliamentary democracy

  The executive

  The prime minister and the cabinet are appointed by the president and are responsible to parliament

  Head of state

  The president, Tan Keng Yam (known locally as Tony Tan), took office for a six-year term on September 1st 2011

  National legislature

  Unicameral parliament, which sits for five-year terms. Since the May 2011 general election the legislature has had 87 elected members: 12 members of parliament (MPs) are directly elected from single-member constituencies, and 75 are elected in teams of four to six to represent the 15 group representation constituencies (GRCs). At least one member of any group standing for a GRC must be of non-Chinese ethnicity. Nine nominated MPs and up to nine non-constituency MPs also sit in parliament but have only limited voting rights

  Legal system

  Courts of first instance ultimately lead, on appeal, to the Supreme Court, members of which are appointed by the president

  National elections

  The most recent parliamentary election took place in May 2011, and a presidential election was held in August that year. The next parliamentary election must take place by 2016, while the next presidential poll will be held in 2017

  National government

  The ruling People's Action Party (PAP) won 60.1% of the vote in the 2011 election and has 81 seats in parliament. The new cabinet was unveiled in May 2011

  Main political organisations

  Government: PAP; opposition: Workers' Party (WP), Singapore Democratic Alliance (SDA), Singapore Democratic Party (SDP), Democratic Progressive Party (DPP)

  Main members of cabinet

  Prime minister: Lee Hsien Loong

  Prime Minister's Office: S Iswaran

  Deputy prime ministers: Teo Chee Hean

  Tharman Shanmugaratnam

  Key ministers

  Communication & the arts: Yacoob Ibrahim

  Defence: Ng Eng Hen

  Education: Heng Swee Keat

  Environment: Vivian Balakrishnan

  Finance: Tharman Shanmugaratnam

  Foreign affairs: K Shanmugam

  Health: Gan Kim Yong

  National development: Khaw Boon Wan

  National security & home affairs: Teo Chee Hean

  Trade & industry: Lim Hng Kiang

  Transport: Lui Tuck Yew

  Chairman of the Monetary Authority of Singapore

  Tharman Shanmugaratnam

  December 12, 2012

• Outlook

  Singapore: Key developments

  Outlook for 2013-17

  • The Economist Intelligence Unit expects the People's Action Party (PAP) to remain in power during the forecast period, following its victory in the May 2011 general election.
  • Policymakers will continue to monitor international economic developments closely. Singapore is among the countries in South-east Asia that are most vulnerable to low levels of demand in Western economies.
  • Owing to global weakness, we have downgraded our estimate for real GDP growth in 2012 to 1.5% and cut our forecast for 2013 to 2.9%. Reflecting stronger external demand, growth will rise to an average of 5.3% a year in 2014-17.
  • Reflecting prudent spending policies and growing fiscal revenue, Singapore will generate budget surpluses averaging 1.1% of GDP a year in 2013-17.
  • Although two major drivers of inflation-namely housing and transport costs-will continue to exert upward pressure on prices in the near term, annual inflation will slow to an average of 2.7% in 2013-17.
  • The Monetary Authority of Singapore (MAS, the central bank) will continue to use the exchange rate as its main policy lever. The Singapore dollar will appreciate in 2013-17, helping to reduce inflationary pressures.
  • The current account will remain substantially in surplus in the forecast period, owing to healthy surpluses on the merchandise trade account.

  Review

  • An illegal strike by mainland Chinese bus drivers-the first major industrial action in Singapore in 26 years-has focused attention on the treatment of lower-skilled foreign workers in the city state.
  • Revised estimates from the Ministry of Trade and Industry indicate that real GDP shrank by 5.9% on a quarter-on-quarter, seasonally adjusted annualised basis in July-September-much greater than the initially reported fall of 1.5%.
  • Industrial production fell by 2.1% year on year in October, led by declines in electronics and biomedical output.
  • The retail sales data for September revealed an increasingly cautious spending pattern among consumers, with overall sales growth slackening to 2.5% year on year (following a revised gain of 3.3% in August).
  • Inflation, as measured by the consumer price index (CPI), decelerated in October, helped by slower growth in the key housing component of the CPI.
  • Non-oil domestic exports were surprisingly strong in October, rising by 7.9% year on year, helped by a 12.7% surge in non-electronic exports.

  December 12, 2012

Economy:

• Background

  Singapore: Country fact sheet

  Fact sheet

  Annual data	2011a	Historical averages (%)	2007-11
  Population (m)	5.2	Population growth	3.4
  GDP (US$ bn; market exchange rate)	259.8	Real GDP growth	5.7
  GDP (US$ bn; purchasing power parity)	246.6b	Real domestic demand growth	5.0
  GDP per head (US$; market exchange rate)	49,948	Inflation	3.5
  GDP per head (US$; purchasing power parity)	47,405b	Current-account balance (% of GDP)	20.5
  Exchange rate (av) S$:US$	1.26	FDI inflows (% of GDP)	14.0
  a Actual. b Economist Intelligence Unit estimates.

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  Background: Singapore is an island state located at the tip of the Malay peninsula. It was formerly a British colony and became internally self-governing in 1959. In 1963 Singapore joined the Federation of Malaysia, only to break away and become a fully independent country in 1965. Since then the People's Action Party (PAP), guided by the ideas of the prime minister from 1959 to 1990, Lee Kuan Yew, has dominated politics. The PAP's success has been founded on a combination of economic dynamism and its ability to restrict the growth in support for Singapore's weak and divided opposition parties.

  Political structure: The PAP dominates the single-chamber parliament, with 81 of the legislature's 87 elected members at present. Parliament also includes nominated and non-constituency members. The prime minister and the cabinet are answerable to parliament. The president has little power. The next parliamentary poll is due by 2016, and the next presidential election must be held by 2017.

  Policy issues: Political reform is inching up the agenda as the PAP seeks to maintain its legitimacy against a background of falling support in recent elections, but major electoral reforms are unlikely in 2013-17. The government recognises the need to import labour if the workforce is not to shrink after 2020, but inward migration is unpopular with the public and new restrictions have recently been placed on immigration. Policymakers succeeded in preventing a deep and prolonged domestic recession in Singapore during the 2008-09 global financial and economic crisis through the use of stimulus measures, but the fact that average inflation is forecast to remain relatively rapid in 2013 makes another big stimulus programme in the short term unlikely. The Monetary Authority of Singapore (the central bank) operates a managed floating exchange-rate regime. Since 201o the bank has pursued a policy of "modest and gradual appreciation" in the Singapore dollar's nominal effective exchange rate in order to help to contain inflationary pressures, the pace of appreciation being adjusted in line with expected trends in inflation.

  Taxation: The corporate tax rate stands at 17%. The top rate of personal tax is 20%. The goods and services tax stands at 7%.

  Foreign trade: Singapore recorded a merchandise trade surplus of US$67.4bn in 2011. Exports grew to US$429.3bn in that year, while imports reached US$361.9bn.

  Major exports 2011	% of total	Major imports 2011	% of total
  Mineral fuels	26.6	Machinery & transport equipment	41.1
  Electronic components & parts	20.7	Mineral fuels	32.6
  Chemicals & chemical products	12.6	Miscellaneous manufactured articles	7.0
  Miscellaneous manufactured products	7.0	Manufactured goods	6.7
  Leading markets 2011	% of total	Leading suppliers 2011	% of total
  Malaysia	12.2	Malaysia	10.7
  Hong Kong	11.0	US	10.7
  China	10.4	China	10.4
  US	5.4	Japan	7.2

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  December 12, 2012

• Structure

  Singapore: Economic structure

  Data and charts: Annual trends charts

  
  

  

  December 12, 2012

• Outlook

  Singapore: Country outlook

  Singapore: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The Economist Intelligence Unit expects the People's Action Party (PAP) to remain in power in 2013-17 following its victory in the May 2011 general election. Although the PAP secured a huge majority, winning 81 parliamentary seats out of 87, it did so with a smaller share of the popular vote than in the previous poll, at 60.1%, compared with 66.6% in 2006. Despite the handicaps imposed by Singapore's electoral system and limits on freedom of speech and assembly, the opposition managed to triple its representation from only two seats (out of 84) in the previous parliament. The opposition parties also increased their combined share of the vote from 33% to almost 40%. Two PAP cabinet members lost their seats, and for the first time an opposition party, the Workers' Party (WP), won a multi-seat constituency. The PAP failed to achieve a strong revival in its support in a by-election for an opposition-held constituency in May 2012, and as a result the WP retained the seat.

  ELECTION WATCH: The next parliamentary election is not due until 2016. In the absence of major changes to the political system the PAP, which has ruled continuously for more than 50 years, will continue to dominate politics in Singapore. The government will also maintain strict limits on freedom of speech and assembly, thereby hampering the opposition. To shore up its popularity, the PAP has recently implemented reforms designed to make it appear less hostile to political pluralism. Ultimately, however, the ruling party appears to be trying to balance two potentially contradictory aims. On the one hand, the reforms can be seen as a tacit acknowledgment by the PAP that it cannot remain overwhelmingly dominant as Singapore becomes a more open and diverse society. On the other hand, the ruling party remains unwilling to allow the opposition to influence significantly the direction of Singapore's political and economic development.

  INTERNATIONAL RELATIONS: Relations with Malaysia--Singapore's closest neighbour--have warmed recently, partly owing to the substantial opportunities that are emerging in the Iskandar Malaysia (IM) development zone in the southern Malaysian state of Johor. The area is proving a magnet for investment by Singaporean manufacturers and is acting as a focus for increased collaboration between the two governments. Although the IM zone is still in its early stages, greater connectivity between the two countries will improve crossborder access and promote economic integration, bringing together Singapore's investment and capital and Malaysia's land and other natural resources.

  POLICY TRENDS: Singapore is expected to record modest fiscal surpluses in the forecast period. The government is targeting a budget surplus of S$1.3bn (US$1bn), equivalent to 0.4% of GDP, in fiscal year 2012/13 (April-March). The budget for the current fiscal year is socially minded, focusing on providing expanded health services, insurance, wage subsidies and tax relief to low-income and elderly citizens. Although schemes to boost investment and productivity are being introduced, the authorities' spending plans fall short of a major short-term stimulus effort. Excluding a range of special transfers (such as growth dividends), officials plan to raise total spending in 2012/13 by 5.8%, to S$50.3bn, and expect revenue to increase by 5%, to S$53.1bn. We forecast a budget surplus equivalent to 0.7% of GDP in 2013. As revenue expansion accelerates and spending remains contained, the annual fiscal surplus will rise to 1.2% of GDP on average in 2014-17.

  ECONOMIC GROWTH: Reflecting the high degree of exposure of Singapore's economy to negative global developments, economic activity has weakened and employment growth has recently slowed. Revised GDP estimates reveal that the economy shrank by an annualised 5.9% in quarter-on-quarter, seasonally adjusted terms in the third quarter of 2012. The pace of job creation also decelerated in July-September, with the number of workers added by the manufacturing and services sectors down by 20% and 35%, respectively, compared with the previous three months. Against this backdrop, we have revised down our estimate for real GDP growth in 2012 to 1.5%, from 2.4% previously. We have also cut our economic growth forecast for 2013--to 2.9%, from 4% previously--in line with the Economist Intelligence Unit's more gloomy assessment of global economic prospects next year. In particular, we now expect the euro area to suffer a second successive year of negative growth in 2013, with a GDP contraction of 0.4%. Nonetheless, intra-regional trade will remain supportive of Singapore's economy, helping to prevent a repeat of the large reversal that occurred in late 2008 and early 2009. If signs of a sharp slowdown in consumption or investment do start to emerge, policymakers are likely to provide support, mainly through tax measures.

  INFLATION: Two major drivers of inflation, namely housing and transport costs, will continue to exert upward pressure on prices in the near term. The rise in transport costs is directly linked to the government's policy of restricting the number of vehicles on Singapore's roads by limiting the supply of car-ownership permits (the +prices of which have consequently soared). However, in terms of housing costs, official attempts to cool the property market through fiscal and macro-prudential measures appear to be having some effect, with the imputed rents on owner-occupied rental properties falling in recent months. In addition, core inflation (which excludes accommodation and private transport costs) has fallen sharply since the start of 2012, and at 2.2% year on year in October it is now below the MAS's forecast of 2.5% for 2012 as a whole. After an estimated annual average increase of 4.5% in 2012, we expect headline consumer price inflation to decline to 3.7% in 2013. Relatively subdued global commodity prices and a sustained appreciation in the value of the Singapore dollar will contribute to a further fall in inflation over the remainder of the forecast period, to an annual average rate of 2.5% in 2014-17.

  EXCHANGE RATES: As reflected in its monetary policy decision in October, the MAS will continue to support the steady appreciation of the Singapore dollar, partly in order to counteract imported inflationary pressures. We therefore expect the local currency to rise in value against the US dollar in 2013, to an average of S$1.23:US$1. Assuming that inflationary pressures moderate, the authorities will attempt to bolster the city state's international competitiveness by limiting the pace of the currency's appreciation against the US dollar in 2014-17. The Singapore dollar will nevertheless continue to strengthen gradually, to reach an average of S$1.16:US$1 in 2017. Exchange-rate management could be complicated by factors influencing the values of other currencies. Imbalances in the US and European economies could also lead to periods of turbulence for the US dollar and the euro, in turn causing volatility in Asian currency markets.

  EXTERNAL SECTOR: The current account will continue to post large surpluses in the forecast period, owing to healthy surpluses on the merchandise trade account. Although export revenue will continue to rise, the pace of growth will be modest in the near term as economic activity remains weak in Singapore's major export markets. After sluggish growth in 2013, the import bill will expand strongly in 2014-17 as a result of a steady increase in local demand. The value of exports will continue to exceed that of imports by a wide margin, resulting in a large merchandise trade surplus. The services account will remain in the black in the next five years, boosted by plentiful tourism receipts and strong external demand for the city state's financial services. By contrast, the income account will stay in deficit throughout 2013-17. Income from abroad is forecast to grow as local companies and the MAS enjoy a rise in returns on overseas investments, but income payments will also increase, in line with the profits made by foreign companies with subsidiaries in Singapore.

  December 07, 2012

• Forecast

  Singapore: Country forecast summary

  Country forecast overview: Highlights

  • The political scene in Singapore will remain fairly stable in the next five years. The People's Action Party (PAP) won another huge parliamentary majority at the general election in May 2011 and holds 81 of the 87 elected seats in parliament. The Economist Intelligence Unit expects the PAP to remain in power throughout the forecast period.
  • In the short term, there are unlikely to be notable changes to the political system. In the long term, however, the mismatch between the PAP's continued parliamentary dominance and its declining share of the popular vote seems politically unsustainable. Minor political reforms may be undertaken by the government in 2013-17 as it seeks to address this problem.
  • The threat of a major dispute with a nearby country in 2013-17 remains small. Singapore's relations with its closest neighbours, Malaysia and Indonesia, should continue to improve in general. If the domestic political situation in these two countries remains stable, it will be easier for Singapore to resolve more of its prickly and long-running bilateral disputes with them.
  • Policymakers are expected to monitor closely economic developments in the EU, where real GDP is expected to register a further contraction in 2013, and in the US, which is expected to post below-average growth for a third consecutive year. Singapore is among the countries in South-east Asia most vulnerable to weak demand in Western economies.
  • The weak global economic backdrop in 2013 will be partly offset by a continued expansion in intra-regional trade and comparatively resilient domestic demand. Nonetheless, we expect real GDP growth to reach just 2.9% next year, below our previous forecast of 4%. In 2014-17 the pace of expansion will accelerate to an average of 5.3% a year, reflecting faster export growth.
  • We forecast that consumer price inflation will slow to an average of 3.7% in 2013, as currency appreciation and official efforts aimed at curbing inflationary pressures help to offset a renewed upturn in industrial raw materials prices. Price rises are expected to moderate further in 2014-17, averaging 2.5% a year, although inflationary risks will be skewed to the upside.
  • The current account will remain firmly in the black in the forecast period, averaging the equivalent of 10.7% of GDP annually in 2013-17, owing to healthy surpluses on the merchandise trade and services accounts. The Singapore dollar will remain strong against the US dollar during the five-year period.

  

  December 12, 2012

View detailed map

Country Briefing

Land area

710.2 sq km (including smaller islands)

Population

5.2m (mid-2011 government estimate; 3.8m excluding non-residents)

Climate

Tropical

Weather (altitude 10 metres)

Hottest month, May, 24-32°C (average daily minimum and maximum); coldest month, January, 23-30°C; driest month, July, 70 mm average rainfall; wettest month, December, 244 mm average rainfall

Languages

English, Chinese, Malay and Tamil

Measures

The metric system is now predominant

Currency

Singapore dollar (S$); S$1 = 100 cents. Average exchange rates in 2011: S$1.26:US$1, S$1.58:¥100

Fiscal year

April-March

Time

8 hours ahead of GMT

Public holidays

January 1st (New Year's Day); January 23rd-24th (Chinese New Year); April 6th (Good Friday); May 5th (Vesak Day); May 1st (Labour Day); August 9th (National Day); August 19th (Hari Raya Puasa); October 26th (Hari Raya Haji); November 13th (Deepavali); December 25th (Christmas Day)

March 08, 2012