Singapore - Openness to and Restriction on Foreign InvestmentSingapore - Foreign Investment
Attitude Toward Foreign Direct 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 (reference Limits on National Treatment and Other Restrictions), the government screens investment proposals only to determine eligibility for various incentive regimes (reference Annex). Singapore places no restrictions on reinvestment or repatriation of earnings or capital. The judicial system, which includes international arbitration and mediation centers and a commercial court, upholds the sanctity of contracts, and decisions are transparent and 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.
Since 2000, the implementation of the Telecoms Competition Code has allowed foreign and domestic companies seeking to provide facilities-based (fixed line or mobile) or services-based (local, international, and callback) telecommunications services, to apply for licenses to operate and deploy telecommunication systems and services. Singapore Telecommunications (SingTel) -- a GLC which is currently 51-percent owned by Temasek, a holding company with the Singapore Minister of Finance as its sole shareholder -- faces competition in all market segments. Its main competitors, M1 and StarHub, are also GLCs. As of February 2016, Singapore has 57 facilities-based (group) and 257 services-based (individual) operators. Since 2007, SingTel has been exempted from dominant licensee obligations for the residential and commercial portions of the retail international telephone services. SingTel is also exempted from dominant licensee obligations for wholesale international telephone services, international managed data, international IP transit, leased satellite bandwidth, terrestrial international private leased circuit, and backhaul services. 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, request public comments about such requests, or to publish a detailed explanation concerning final decisions made by the Infocomm Development Authority (IDA) or the Ministry of Communication and Information (MCI).
Infrastructure for the all-fiber national broadband network (NBN), has been developed since 2009 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 is operated by Nucleus Connect, a wholly-owned subsidiary of StarHub. Operational separation is imposed on Nucleus Connect to maintain its independence from OpenNet, and to ensure that it provide services to all downstream operators on the same prices and terms and conditions, with the same processes and access to information. Nearly all homes and offices are connected to the fiber-optic broadband network.
In November 2013, IDA approved the acquisition of the shares of OpenNet by NetLink Trust, -- a business trust that supported the roll-out of the NBN by providing the ducts and manholes through which the optical fiber cables pass to reach homes and buildings. NetLink Trust’s – purchase of OpenNet gives it control over all the steps involved in connecting users to the networks. Seven Singapore telecommunication firms, including M1 and StarHub, voiced their opposition to the consolidation, noting it would see SingTel becoming the 100 percent beneficial owner of the only other nationwide fixed telecommunications network in Singapore, apart from SingTel's own network, leading to discriminatory treatment and a lack of independence. In response, IDA established several conditions to allay concerns about anti-competitive practices and ensure that effective and non-discriminatory access is available to requesting licensees, including by establishing a monitoring board consisting of government representatives to ensure SingTel does not influence any decisions on service price as well as terms and conditions. SingTel must also divest its majority stake in NetLink Trust by April 2018.
In October 2015, Infocomm Development Authority of Singapore (IDA) fined NetLink Trust USD 327,320 (SGD 450,000) for failing to meet quality of service (QoS) benchmarks in 2014 in delivering residential and non-residential end-user connections. The fine is the fourth in three years for the company, the largest at nearly US$450,000 in 2013 not meeting its obligation to IDA to roll out the network to all homes and offices by the end of 2012.
In 2011, the GOS amended the Telecommunications Act, giving it more power to curb monopolistic behavior in the telecommunications sector and ensure continuity and competiveness in telecommunications services. The amendments allow the Minister for Communication and Information to issue a Separation Order to a telecommunications company (Telco) that engages in anti-competitive behavior, where the Ministry assesses that imposition of regulatory obligations in relation to the relevant market or business has failed and other regulatory actions would fail to achieve effective competition
The amendments allow the Minister of Communication and Information to issue Special Administrative Orders (SAOs) that ensure a key telecommunication network or service continues to be functional in the public national interest and revise the maximum administrative financial penalty on Telco that breach regulations to 10 percent of the annual business turnover for licensable services of a licensee, or USD 790,514 (SGD 1 million), whichever is higher.
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 ordinary 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 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.
While local media is heavily government influenced, in practice there are few restrictions on the internet, and Singaporeans generally have uncensored access to international media. However, the Media Development Authority (MDA), which is responsible for regulating Internet service providers, has blocked various websites containing objectionable material, such as pornography and racist and religious hatred sites. In a high-profile case in 2016, the government charged and sentenced to 10 months imprisonment a foreign operator of an online media news site for sedition on the grounds of generating ill-will and hostility.
Licensing Scheme for News Websites
The Media Development Authority implemented in 2013 a regulation requiring certain internet news sites to obtain an individual license. MDA asserts the new regulation was intended to put online news sites on a more consistent regulatory basis with traditional media such as print and television, which are also individually licensed. This requirement applies to sites, both commercial news and other sites, that publish on average over a two-month period one article per week relating to issues in Singapore and which receive a two-month average of at least 50,000 monthly site visits from unique addresses of Singapore-based internet providers. The license requires these sites to submit a bond of USD 40,000 (SGD 50,000) and to adhere to new requirements to remove prohibited content within 24 hours of notification from the MDA. Some viewed this regulation as a way to censor online critics of the government. In June 2013 more than 2,500 persons participated in a protest against the new regulation. The Minister for Communications and Information publicly stated that the new regulation was not intended to target individual bloggers or blogs.
MediaCorp TV is the only free-to-air TV broadcaster; the government via Temasek Holdings (Temasek) owns 100 percent of it. Pay-TV providers StarHub Cable Vision (SCV) and SingNet 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.
To rectify the high degree of content fragmentation in the Singapore pay-TV market, and shift the focus of competition from an exclusivity-centric strategy to other aspects such as service differentiation and competitive packaging, the Media Development Authority (MDA) implemented cross-carriage measures in 2011 requiring pay TV companies designated by MDA to be Receiving Qualified Licensees (RQL) – currently SingTel and StarHub -- to cross carry content subject to exclusive carriage provisions. Correspondingly, Supplying Qualified Licensees (SQLs) with an exclusive contract for a channel are required to share that content with other pay TV companies. Content providers consider the measures an unnecessary interference in a competitive market that would deny content holders the ability to negotiate freely in the marketplace, and an interference with their ability to manage and protect their intellectual property. More common content is now available across the different pay-TV platforms, and the operators are beginning to differentiate themselves by originating their own content, offering subscribed content online via PCs and tablet computers, and delivering content via fiber networks.
The Media Development Authority (MDA) finalized in March 2016 its recommendations to enhance pay-TV consumer protection measures under the Media Market Conduct Code (MMCC) to address consumer concerns including unilateral contract changes, forced upgrades of non pay-TV services and the lack of awareness of the terms and conditions of contracts. According to MDA, these recommendations were based on feedback received from a public consultation held from September to November 2014.
Under the proposed changes MDA will require pay-TV operators to allow consumers to exit fixed term contracts without paying Early Termination Charges (ETCs) if unilateral contract changes by the operators are detrimental to subscribers due to: increase in subscription fee; removal of material channel(s); removal of material sports content within a channel; or removal of at least 20 percent of total number of channels in entire pay-TV service since the point of subscription. Pay-TV operators will also be required to provide consumers with options for 12-month or shorter contract terms for all packages or bundles as an alternative to longer term commitments.
The MMCC prevents operators from requiring subscribers to upgrade their non pay-TV services such as broadband or phone service contracts to modify the terms of their pay-TV services. The MMCC also requires operators to provide consumers with a critical information summary (CIS) clearly highlighting key terms and conditions, provide consumers a copy of the contract and the CIS within 14 days of contracting, and obtain consumers' confirmation that they understand contract terms.
In January 2016, citing the convergence of the infocomm technology (ICT) and media sectors and a desire to expand the reach of the digital economy to more people, MCI announced that it restructure the Infocomm Development Authority of Singapore (IDA) and the Media Development Authority of Singapore (MDA) to become the Infocomm Media Development Authority (IMDA) and the Government Technology Organization (GTO) in the second half of 2016.
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 (i.e., full service, wholesale, and offshore) held by foreign banks. As of March 28, 2016, 28 foreign full service licensees, 53 wholesale licensees, and 38 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. Foreign banks with a significant retail presence in Singapore are required to locally incorporate their retail operations.
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, including removal of a 40-percent ceiling on foreign ownership of local banks and a 20-percent aggregate foreign shareholding limit on finance companies. The Minister in charge of the Monetary Authority of Singapore must approve the merger or takeover of a local bank or financial holding company, as well as the acquisition of voting shares in such institutions above specific thresholds of 5 percent, 12 percent or 20 percent of shareholdings. Although the GOS has lifted the formal ceilings on foreign ownership of local banks and finance companies, the approval of controllers of local banks ensures that this control rests with individuals or groups whose interests are aligned with the long term interests of the Singapore economy and Singapore’s national interests. Of the 28 full service licenses granted to foreign banks, four have gone to U.S. banks. Ten of the 28 full service licensees (including one U.S. bank) have been granted qualifying full bank (QFB) status. U.S. financial institutions enjoy phased-in benefits under the FTA. Since 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) versus 25 for non-U.S. full service foreign banks with QFB status. 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. In 2007, Singapore lifted the quota on new licenses for U.S. wholesale banks.
In April 2015, MAS announced a framework for identifying and supervising domestic systemically important banks (D-SIBs) - banks that are assessed to have a significant impact on the stability and functioning of the financial system and economy in Singapore -- and the inaugural list of D-SIBs, which includes DBS Bank, Oversea-Chinese Banking Corporation, United Overseas Bank, Citibank, Malayan Banking Berhad, Standard Chartered, and The Hong Kong and Shanghai Banking Corporation. The MAS will apply additional supervisory measures on D-SIBs, including higher capital requirements for locally-incorporated D-SIBs.
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. Despite liberalization, U.S. and other foreign banks in the domestic retail banking sector still face barriers. Under the enhanced QFB program launched in 2012, MAS will require QFBs it deems systemically significant to incorporate locally. If those locally incorporated entities are deemed “significantly rooted” in Singapore, with a majority of Singaporean or permanent resident members, Singapore may grant approval for an additional 25 places of business, of which up to 10 may be branches. Local retail banks do not face similar constraints on customer service locations or access to the local ATM network. As noted above, U.S. banks are not subject to quotas on service locations under the terms of the FTA. Holders of credit cards issued locally by foreign banks or other financial institutions sometimes 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.
Securities and Asset Management
Singapore has no trading restrictions on foreign-owned stockbrokers. There is no cap on the aggregate investment by foreigners regarding 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).
As of end February 2016, 17 out of the 121 foreign law firms operating in Singapore were from the United States. In December 2008, Singapore granted Qualifying Foreign Law Practice (QFLP) licenses to six foreign law firms (two U.S. firms) to practice domestic law. Restrictions remain in certain legal fields including; conveyance, penal law, and domestic relations. In the first quarter of 2013, Singapore awarded another four QFLP licenses, stemming from applications submitted in 2012. As of 2015, there are nine QFLPs in Singapore, including five U.S. firms.
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 2016 report ranked Singapore as the easiest country in which to do business. "The 2015-2016 Global Competitiveness Report ranks Singapore as the second-most competitive economy globally.
The 2004 U.S.-Singapore Free Trade Agreement (FTA), 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 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 February 2016, the top four Singapore-listed GLCs accounted for about 13.7 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.
In accordance with current legislation, foreign law firms can provide legal services under Singapore law only through a Joint Law Venture (JLV) or Formal Law Alliance (FLA) with a domestic law firm. The Joint Law Venture is collaboration between a Foreign Law Practice and Singapore Law Practice. There is not a clear indication regarding how share percentages can be held in this type of partnership. The Attorney-General will consider all the relevant circumstances including the proposed structure and its overall suitability to achieve the objectives for which Joint law Ventures are permitted to be established in deciding on its approval. Currently, there are two U.S. law firms with Joint Law Ventures in Singapore. 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 Singapore professional bar- a 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.
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 were 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.
Other Investment Policy Reviews
Singapore has not conducted an investment policy review through OECD or UNCTAD in the past three years. Singapore is a World Trade Organization (WTO) member since 1995. The last Trade Policy Review was conducted in 2012.
Laws/Regulations of Foreign Direct Investment
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. There are no reports of government or executive interference in judicial proceedings affecting foreign investors.
Singapore’s online business registration process is clear and efficient, and allows foreign companies to register. All businesses must be registered with the Accounting & Corporate Regulatory Authority (ACRA) through the website https://www.acra.gov.sg/home/, including any individual, firm or corporation that carries out business for a foreign company. Applications are typically processed immediately after the application fee is paid, but may take between 14 days to 2 months if the application needs to be referred to another agency for approval or review. A step-by-step guide to registering a business or company in Singapore is provided at the SME Portal (formerly known as the EnterpriseOne Portal): https://www.smeportal.sg.
Additional information on registering a branch of a foreign company is available through the Singapore’s Economic Development Board (EDB):
Singapore’s Economic Development Board (EDB), an investment promotion agency that facilitate foreign investment into Singapore (https://www.edb.gov.sg), generally targets multinational companies (MNCs), but will consider investments on a case by case basis. EDB provides incentives including grants, allowances, awards, tax exemptions, and reduced tax rates for investments in certain sectors or categories (https://www.edb.gov.sg/content/edb/en/why-singapore/ready-to-invest/incentives-for-businesses.html). The Global Investor Programme (GIP) allows foreigners interesting in starting a business or investing in Singapore to apply for Permanent Residence (PR) status (https://www.edb.gov.sg/content/dam/edb/en/why%20singapore/entering-singapore/GIP-Global-Investor-Programme-Factsheet-EN.pdf).
Small and Medium Enterprises (SMEs) are defined as companies with annual Sales turnover not exceeding S$100 million, or staff numbering less than 200. SPRING Singapore is an agency under the Singapore’s Ministry of Trade and Industry to promote Singapore enterprises and products through assistance in financing, capability and management development, technology and innovation, and access to markets. SPRING also provides these services to foreign SMEs which meet the SME criteria stated above, and are registered and based in Singapore with at least 30% local shareholding (http://www.spring.gov.sg/About-Us/Pages/spring-singapore.aspx).
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.
As part of the government's strategy to develop Singapore into a premier financial center, the GOS offers tax incentives for financial institutions looking to set up operations. Further information, details and guidelines are available at: http://www.mas.gov.sg/Singapore-Financial-Centre/Value-Propositions/Setting-Up.aspx.
Limits on Foreign Control and Right to Private Ownership and Establishment
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.
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.
Singapore's Government-linked corporations (GLCs) are active in many sectors of the economy, especially strategically important sectors including 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 compete on a generally equal basis with private businesses, both local and foreign. The GLCs are fully or partially owned by Temasek, a holding company with the Singapore Ministry of Finance as its sole shareholder. Some observers have complained that GLCs benefit from cheaper financing due to an implicit government guarantee. Singapore officials counter that the government does not interfere with the operations of GLCs or grant them special privileges, preferential treatment or hidden subsidies, asserting 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 implemented under the Competition Act.
Screening of FDI
Singapore has a generally open investment regime, and no overarching screening process for foreign investment.
The U.S.-Singapore 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 implemented under the Competition Act.
Singapore Economic Development and Investment Law