General Policy Framework

Sitting astride one of the major shipping lanes of the world, Singapore has long adopted export-oriented
free-market economic policies that encourage two-way flows of trade and investment. These policies
have allowed this small country to develop one of the world's most successful open trading and
investment regimes. Over the past decade real GDP grew at an average annual rate of seven percent;
1994's economic growth rate was 10.1 percent. Singapore actively promotes trade liberalization in the
region through its activities in APEC and ASEAN. It ratified the Uruguay Round GATT agreement in
October 1994 to become one of the founding members of the World Trade Organization.

Taking into account a lack of natural resources and a small (3.2 million population) domestic market,
Singapore's policies have created a climate encouraging economic growth, including an open trade and
investment environment, a corruption-free pro-business regulatory framework, political stability, public
investment in infrastructure, high savings and prudent fiscal management, a trained labor force, and
significant tax concessions to foreign investors. Singapore's fiscal policies have enhanced export and
investment growth. The government has had a budget surplus for most years since the 1970's. The
country's reserves ($56.0 billion in 1994) are conservatively invested by the Singapore Government
Investment Corporation. The Central Provident Fund (CPF) compulsory savings program is the basis for
the national savings rate of 50 percent of GDP.

The Monetary Authority of Singapore (MAS), the country's central bank, engages in limited money-
market operations to influence interest rates and ensure adequate liquidity in the banking system. There
are no controls on capital movements. The MAS maintains a strong currency to check inflation,
particularly imported inflation, given Singapore's extreme exposure to international trade. Although
inflation is moderate by international standards (3.1 percent based on 1994 C.P.I. numbers and 2.3
percent so far in 1995), an acute labor shortage and rising property values have intensified inflationary
pressures.

Singapore has become a major center for electronics, oil refining and financial services, acting as a hub
for the growing Southeast Asian market. Singapore's sound economic policies (which promote private
investment, including incentives to foreign investment) have attracted about 1,000 U.S. companies to
Singapore, with cumulative investments of $12 billion in 1994. The U.S. is Singapore's second largest
trading partner, accounting for 17 percent of total trade in 1994. U.S. imports to Singapore in 1994 were
$13.0 billion and Singapore's exports to the U.S. were $15.7 billion.

. Exchange Rate Policy

Singapore has no exchange rate controls. Exchange rates are determined freely by daily cross rates in
the international foreign exchange markets. The MAS uses currency swaps and direct open market
operations to keep the Singapore dollar within a desired trading range, guarding against the
internationalization of the Singapore dollar so as not to lose control over its monetary and economic
policies.

The Singapore dollar appreciated 22.9 percent against the U.S. dollar from 1989 to 1994. In 1994 the
Singapore dollar strengthened 10 percent against the U.S. dollar. This has not seriously affected
Singapore's economy as nearly all of its production inputs are imported. The strong Singapore dollar has
helped to make U.S. products more competitive in the Singapore market.

Structural Policies

Singapore's prudent economic policies have allowed for steady economic growth and the development
of a reliable market, to the benefit of U.S. exporters. Singapore was the tenth largest customer for U.S.
products in 1994. Prices for virtually all products are determined by the market. The government lets
bids by open tender and encourages price competition throughout the economy.

Singapore's tax policy is designed to maintain its international competitive position. Foreign firms are
taxed on the same basis as local firms. The corporate tax is currently at 27 percent. The government
aims to bring the corporate tax down to 25 percent in the next few years. There are no taxes on capital
gains, turnover, or development. The government implemented a three percent value-added Goods and
Services Tax (GST) in 1994 but reduced corporate and personal taxes. Tariffs exist for only a few
products. Excise duties are levied on cigarettes, alcohol, petroleum products and motor vehicles
primarily to control social behavior and restrict motor vehicle use. There are no nontariff barriers to
foreign goods.

Many of Singapore's public policy measures are tailored to attract foreign investments and ensure an
environment conducive to their efficient business operations and profitability. Investment policies are
direct and designed to benefit both investors and Singapore. Although the Government seeks to develop
more high-tech industries, it does not impose production standards, require purchases from local
sources, or specify a percentage of output for export.

Debt Management Policies

Singapore's external public debt was a negligible $3.2 million at the end of 1994. Its debt service ratio is
less than 0.1 percent. Singapore's budget surpluses and mandatory savings have allowed the
government wide latitude in supporting infrastructure, education, and other programs contributing
significantly to national development.

Barriers to U.S. Exports

Singapore has one of the world's most liberal and open trade regimes. Nearly 99 percent of imports
enter duty-free. Import licenses are not required, customs procedures are minimal and highly efficient,
the standards code is reasonable and the government actively encourages foreign investment. All major
government procurements are by international tender. The Government ratified the Uruguay Round
GATT accord on October 18, 1994.

Singapore maintains some market access restrictions in the services sector. No new banking licenses for
local retail banking have been issued for more than two decades (although Singapore allows the
establishment of offshore banking) because the Monetary Authority considers Singapore over-banked.
Foreign banks hold over half the retail licenses, but hold less than half of total assets and operate with
much lower profit margins. U.S. banks hold only three out of 35 full licenses. Foreign retail banks are not
allowed additional branches or ATM machines although local banks are allowed to expand. No new
licenses for direct (general) insurers are being issued, although reinsurance and captive insurance
licenses are freely available. Foreign companies hold about three-quarters of the 58 direct insurance
licenses.

Liberalization of the telecommunications sector began in 1989. Singapore Telecom's (ST) monopoly to
provide wireline domestic and international telecommunications facilities and services will not end until
2007. There are six wireless operators licensed to provide voice, data and paging services. Provision of
value-added services has been liberalized, but suppliers must operate using ST's monopoly facilities.
Foreign investment in basic telecommunications facilities and services is limited at 49 percent. Singapore
Telecom is partially privatized, with a majority of shares controlled by the government. Singapore
Telecom is an active overseas investor, with over $1 billion in equity interests in basic telecom operators
in Europe, the United States and other APEC economies.

Export Subsidies Policies

Singapore does not subsidize exports although it does actively promote them. The government offers
significant incentives to attract foreign investment, almost all of which is in export-oriented industries. It
also offers tax incentives to exporters and reimburses firms for certain costs incurred in trade
promotion, but it does not employ multiple exchange rates, preferential financing schemes, import-cost-
reduction measures or other trade-distorting policy tools.
Protection of U.S. Intellectual Property

Singapore continues to take concrete measures to improve its level of intellectual property protection
and strengthen enforcement. Singapore is a member of the World Intellectual Property Organization
(WIPO), and has ratified the Uruguay Round Accord including the TRIPS provisions. Singapore is not a
party to the Berne Convention or the Universal Copyright Convention. In 1987, following close
consultation with the U.S. Government, Singapore enacted strict, comprehensive copyright legislation
which relaxed the burden of proof for copyright owners pressing charges, strengthened civil and
criminal penalties and made unauthorized possession of copyrighted material an offense in certain
cases. In January 1991, Singapore similarly strengthened its Trademark Law. In 1994 Singapore enacted
a new Patents Act.

Patent Law: Singapore's 1994 Patent Act is not fully TRIPS consistent; chief areas of concern are in
compulsory licensing provisions. In April 1995, Singapore notified the United States of its intent to
amend its patent law to make it fully consistent with the TRIPS agreement by the end of 1995; such
amendments were subsequently introduced in Parliament, and were expected to be enacted by
December 1995.

Copyrights: As a result of stepped up enforcement, copyright infringement in the computer and

software areas was significantly reduced in 1994. While the Government of Singapore continues to take
an active stance in protection of computer software in Singapore, there was an upsurge of pirated CD
ROMs from China in the first half of 1995. Industry and government are working to close off the increase
in illicit software. In response to motion picture and phonographic industry requests that the Singapore
government do more to stem the importation and transshipment of pirated videos and CD's, Singapore's
Board of Censors instituted additional procedures to screen for pirated materials and make it easier to
get convictions for transgressors. In a recently completed civil suit brought by the International
Federation of the Phonographic Industry, Singapore's High Court ordered a local distributor of pirated
compact discs to pay $673,000 in damages, the largest penalty ever in Singapore for copyright
infringement. Singapore needs to amend its copyright law to make it fully consistent with the TRIPs
agreement.

Estimated losses to the U.S. due to compulsory licensing provisions of the patent law totaled
approximately $3 million in 1994. Software piracy losses were estimated by U.S. industry to be $32.2
million in 1993. We have no industry estimates for this year.

Worker Rights
a. The Right of Association: Article 14 of the Singapore's constitution gives all citizens the right to form
associations, including trade unions. Parliament may, however, based on security, public order, or
morality grounds, impose restrictions. The right of association is delimited by the Societies Act and labor
and education laws and regulations. In practice, communist labor unions are not permitted. Singapore's
labor force numbered 1.69 million in 1994, with some 234,000 workers organized into 85 trade unions.

Ninety-nine percent of these workers in 80 unions are affiliated with an umbrella organization, the
National Trades Union Congress (NTUC), which has a symbiotic relationship with the government. The
NTUC's leadership is made up mainly of Members of Parliament belonging to the ruling People's Action
Party (PAP). The Secretary-General of the NTUC is also an elected Minister without Portfolio in the Prime
Minister's Office.

b. The Right to Organize and Bargain Collectively: The Trades Union Act authorizes the formation of
unions with broad rights. Collective bargaining is a normal part of labor-management relations in
Singapore, particularly in the manufacturing sector. Collective bargaining agreements are renewed every
two to three years, although wage increases are negotiated annually.

c. Prohibition of Forced or Compulsory Labor: Under sections of Singapore's Destitute Persons Act, any
indigent person may be required to reside in a welfare home and engage in suitable work.

d. Minimum Age for Employment of Children: The government enforces the Employment Act which
prohibits the employment of children under 12 years and restricts children under 16 from certain
categories of work.

e. Acceptable Conditions of Work: The Singapore labor market offers relatively high wage rates and
working conditions consistent with international standards. However, Singapore has no minimum wage
or unemployment compensation. Because of a continuing labor shortage, wages have generally stayed
high. The government enforces comprehensive occupational safety and health laws. Enforcement
procedures, coupled with the promotion of educational and training programs, reduced the frequency
of job-related accidents by one-third over the past decade. The average severity of occupational
accidents has also been reduced.

f. Rights in Sectors with U.S. Investment: U.S. firms have substantial investments in several sectors of the
economy, including petroleum, chemicals and related products, electric and electronic equipment,
transportation equipment, and other manufacturing areas. Labor conditions in these sectors are the
same as in other sectors. The growing labor shortage has forced employers mainly in the electronics
industry to hire many unskilled foreign workers. Over 360,000 foreign workers are employed legally in
Singapore, 22 percent of the total work force. The government controls the number of foreign workers
through immigration regulation and through levies on firms hiring them. Foreign workers face no legal
discrimination, but, because they are mostly unskilled workers, are generally paid less than
Singaporeans