Pestle Singapore

8/19/2019 Pestle Singapore

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PESTLE Analysis

PESTLE Country Analysis Report: Singapore ML00002-024/Published 01/2015

© MarketLine. This report is a licensed product and is not to be photocopied Page 13

PESTLE ANALYSIS

Summary

Singapore is globally renowned for its stable political situation and consistent policymaking. The government is

considered to be one of the most efficient among the Asian countries. However, the one party system has raised

concerns about political freedom. Moreover, the recent curbs on media freedom have drawn protests, raising questions

about the government's commitment to the voice and accountability of the electorate. Relations between Singapore and

Malaysia have improved in recent times. This is mainly a consequence of consensus among leaders on both sides over

the resolution of legacy issues. Further co-operation in infrastructure development was taking place as of 2014.

Singapore's immigrant-friendly image is at risk as anti-foreigner sentiment is on the rise.

On the economic front, Singapore has always been a key investment destination given the ease of conducting business

in the country. Its banking system has remained highly resilient and well -capitalized. However, the openness of theeconomy has left it susceptible to cyclical demand and market sentiment. The government faces a major challenge in

reducing the dependence on foreign workers. The government's focus on productivity improvement for small- and

medium-sized enterprises (SMEs) should provide impetus to the sector. However, risks remain as household debt

remains elevated.

A strong education system has helped Singapore in increasing literacy rates and student turnout in all regions. However,

Singapore is troubled with a low birth rate, an aging population and declining population growth. There is also a high

degree of income disparity in the country. The government has introduced various measures to build an inclusive society

in the 2013 budget. Increased public expenditure to care for an aging population is likely to be a serious concern in the

future.

The country is home to a number of reputed scientific institutions, and is strongly backed by the private sector.

Singaporean firms are already world leaders in data storage and semiconductors, both of which have been successful in

establishing international technology roadmaps. The country is venturing into new areas of research such as IT services

and the space industry. Nevertheless, the city-state's high dependence on foreign researchers in Science, Technology

and Innovation (STI) pose a major challenge in terms of maintenance of sustained inflows of foreign talent. The problem

might be aggravated with increasing competition for skilled personnel from big economies like China and India.

Singapore has become one of the best trade hubs in Asia. As an economy, which is extremely dependent on trade for its

economic growth, Singapore has signed a number of free-trade agreements (FTA) in the last two decades. The most

recent additions to the list have been FTAs with Costa Rica and the Gulf Co-operation Council (GCC). The country also

has a very open and business friendly economy, which is proven by its high position in major indices such as the World

Bank's 2015 Doing Business and the Heritage Foundation's and the Wall Street Journal's 2014 Index of Economic

Freedom. Comprehensive tax treaties make it possible for resident companies to access worldwide technology expertise.

However, there are certain regulations in place that cause concern for investors.

Singapore's environmental policy focuses on conservation and waste management. However, emissions have been on

the rise in recent years, and atmospheric changes continue to affect the environment. The government is implementing

several measures to conserve the environment. Being an island nation, which depends highly on carbon fuels, climate

change is one of Singapore's main environmental challenges.


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PESTLE Analysis



Polit ical analysis

Overview

Singapore is globally renowned for its stable politics and consistent policymaking. The government is considered to be

one of the most efficient among the Asian countries. However, the one party system has raised concerns about the

political freedom of its citizens. Moreover, the recent curbs on media freedom have drawn protests from the community,

raising questions about the voice and accountability of the electorate. Relations between Singapore and Malaysia have

improved in recent times, with the resolution of the legacy issues, mainly as a consequence of consensus among political

leaderships on both sides. Further co-operation in infrastructure development was taking place. Singapore's immigrant-

friendly image is at risk as anti-foreigner sentiment is on the rise.

Table 3: Analysis of Singapore's political landscape

Current strengths Current challenges

▪ Continuity in government policies

▪ Efficient governance

▪ Government restrictions on political freedom

Future prospects Future risks

▪ Improved bilateral ties with Malaysia

▪ Growing ties with China

▪ Racial tensions and increasing xenophobia

Source: MarketLine M A R K E T L I N E

Current strengths

Cont inui ty in government pol ic ies

Political conditions in Singapore have been stable and consistent, with the PAP having been in power since 1959. Lee

Kuan Yew was the prime minister until the 1980s, and the consistent policies of his administration helped build a robust

economy. During the 1980s, Singaporean politics underwent a period of transition, with younger PAP members brought

into the picture. This new generation helped attract significant amounts of foreign direct investment (FDI) into the country.

The PAP has fostered social stability, new housing, employment opportunities, and a rise in l iving standards, and thepolitical continuity has allowed policymakers to take a long-term view of the economy and society.

Eff ic ient governance

High quality governance has been particularly important for the development of Singapore. This is evident from the

country's position as the seventh least corrupt nation among the 174 surveyed by Transparency International (TI) in

2013. The honesty and competence of the country's political leadership has worked well for the economy. The nation's

political leaders are appointed on the basis of merit and capabilities, with a meritocracy in both politics and the

bureaucracy. Increasingly, PAP parliamentary candidates and ministerial appointments are selected based on their

ability through a stringent process. The high quality of political leadership that the country offers has reinforced traditional

respect for distinguishing between inherited and created factors. These conditions have enabled the country to develop


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PESTLE Analysis



competitive advantages in several areas (including manufacturing and services) and to attract FDI. The majority of the

country's competitive advantages have developed as a result of the PAP's astute leadership. The ability of the

government to create strong economic fundamentals is one of Singapore's key strengths.Current challenges

Government res t r ic t ions on pol i t ica l f reedom

Although Singapore is among the freest places to do business in the world, the government reportedly restricts the

political freedom of its citizens. The PAP currently controls 80 of the 87 elected seats in parliament. Its political

dominance reflects both the weak and fragmented state of the main opposition parties and the confidence of much of the

electorate in the PAP. The government maintains restrictions on freedom of speech, allowing only out-of-bounds markers

which refer to topics that can be discussed in public (including religion and race). The deliberately ambiguous nature of

these limits indicates the prevalence of self-censorship, particularly concerning criticisms raised against the PAP.

The ruling party also regularly uses the country's defamation laws to undermine its critics. The government has imposedrestrictions even on media. An instance of this came to the fore in May 2013, when the Media Development Authority

(MDA), Singapore's media regulator, announced that internet sites "reporting regularly on issues involving Singapore and

having significant reach" apply for a license and deposit a "performance bond" of S$50,000 ($37,481.8). The regulation

drew protests from around 2,000 people in early June 2013. Not surprisingly, the country ranked in the 52.13 percentile

on the voice and accountability indicator in the World Bank's 2014 Worldwide Governance Indicators.

Despite being one of Southeast Asia's wealthiest economies, the nation - which has been ruled by the PAP since

achieving independence in 1965 - has been criticized within the international community for its lack of tolerance of

political dissent.

Future prospects

Improving bi la tera l t ies wi th Malaysia

Historically, diplomatic ties between Singapore and Malaysia have been weak due to ideological differences in their

political leaderships and legacy issues regarding the ownership of the island of Pedra Branca, Singapore's reclamation

work in the Straits of Johor, water supply issues and a dispute over the use of Singaporean land by Malaysian railways.

However, since Abdullah Ahmad Badawi took office as Malaysia 's prime minister in 2003, the countries have resolved

these disputes mutually. His successor, Najib Razak, has successfully managed to convert improved bilateral ties into

better economic engagement, which stands to benefit both nations.

Singapore and Malaysia settled their dispute on Singapore's land reclamation work in 2003 after both countries agreed to

accept the International Tribunal for the Law of the Sea (ITLOS) verdict on the issue, which unanimously decided in favor

of Singapore continuing its land reclamation activities. A 2008 International Court of Justice (ICJ) ruling also settled the

issue of sovereignty of Pedra Branca islands, while bilateral talks held between Singaporean Prime Minister Lee Hsien

Loong and Malaysian Prime Minister Najib Razak in May 2010 led to the resolution of the 20-year railway land issue

between Malaysia and Singapore. In light of the city-state's growing self-sufficiency in terms of water supply, the

contentious issue of water supply to Singapore has also gradually softened in recent years. Bilateral ties were put to test

in April 2012 following allegations made by some Malaysian blogs that Singaporean diplomats participated in a rally for

electoral reforms in Malaysia in the same month. This incident threatened to damage relations, but the proactive stance

of Singapore's foreign minister in clarifying the issue with his Malaysian counterpart and his prompt response in

Singapore's parliament greatly helped in strengthening the ties.


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PESTLE Analysis



Economic analys i s

Overview

Singapore has always been a top investment destination given the ease of conducting business in the country. The

banking system has remained highly resilient and well-capitalized. However, the openness of the economy has left it

susceptible to cyclical demand and market sentiment. The government has also been facing a major challenge to reduce

dependence on foreign workers. Nevertheless, strong corporate balance sheets help mitigate negative developments in

the global macroeconomic environment to a certain extent. The government's focus on productivity improvement for

small- and medium-sized enterprises (SMEs) should provide impetus to the sector. However, highly indebted households

may find it difficult to pay off their debt as house prices has started cooling, which may limit their debt servicing ability.

Table 4: Analysis of Singapore's economic landscape


▪ Healthy corporate balance sheets

▪ Resilient banking system

▪ Reliance on external trade

▪ Overdependence on foreign workers


▪ Focus on SMEs ▪ Household debt


Current strengths

Healthy co rpora te balance sheets

The corporate balance sheets of Singapore-listed companies in SGX are very healthy; this is reflected from the fact that

debt-equity ratios of these firms stood at around 38.8% by the first half of 2014. Stress test conducted by the Monetary

Authority of Singapore (MAS) of the corporate balance sheets suggests that debt servicing ability of the corporates

remains strong, even when firms are subject to interest rate and earnings shocks. The low leverage bodes well for

mitigating external vulnerabilities resulting from global macroeconomic developments.

Resi l ient banking sys tem

According to the MAS, as of September 2014, banks in Singapore were well-capitalized and had strong liquidity buffers.

The Regulatory Tier I Capital to Risk-Weighted Assets (RWA) of the local banking sector was 13.5%, while the

Regulatory Capital to Risk-Weighted Assets (RWA) was 16.0%. Furthermore, all the banks in the country had

implemented the Basel III capital standards and capital adequacy ratios set by MAS (which are stricter than Basel III

regulations), from the beginning of 2013. While NPLs are at a low of 0.9% as of September 2014, suggesting that the

Singaporean banking system is quite healthy in comparison to its European peers, and is thus capable of handling

external and domestic shocks better.


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PESTLE Analysis



Current challenges

Reliance on external trade

Singapore is a highly trade-dependent economy, with one of the highest trade-to-GDP ratios (337.84% of GDP in 2014,

which includes trade of merchandize as well as services) in the world. In 2014, the country exported merchandize worth

$539.04 billion, while imports were worth $498.92 billion. Of this, China accounted for around 21.1% of the total trade.

Furthermore, the US and the EU together accounted around 15%. In a scenario, where the Chinese economy seems to

be slowing, the US recovery is still in its early stages and demand in the Eurozone is on the weaker side, an external

demand shock can put downward pressure on Singapore's GDP growth.

As long as Singapore's industries rely on overseas export markets, they will remain sensitive to global swings in cyclical

demand and market sentiment and therefore, this reliance on a growth model based on trade will keep the economy

vulnerable to external shocks.

Overdependence on fore ign workers

Singapore has largely been dependent on foreign workers due to a consistent labor crunch. According to data from

Ministry of Manpower, non-resident foreign workers' share was more than one third of the total labor force as of June

2014, one of the highest in the world. According to the IMF, this overdependence has led to a continuous fall in total

factor productivity, as more labor has been substituted instead of the better implementation of technologies and

increased efficiency. The overdependence on foreign workers and consequent rising inflow of the same has increased

the pressure on Singapore's infrastructure, which in turn has led to a rise in real estate prices. The overdependence has

led the government to impose curbs on foreign workers; this is expected to have a negative impact on GDP growth in the

medium term, although the government has taken steps to upgrade the skills of local workers to negate the impact.

Reducing this dependence will be a major economic challenge, given that the economy has attained a high level of

competiveness based on a large inflow of skilled foreign workers.

Future prospects

Focus on SMEs

The government has taken special measures since the 2014 budget to help SMEs restructure their operations by

extending the Enhance Productivity and Innovation Credit (PIC) Scheme, which was supposed to lapse in 2015 until

2018. The scheme entails 400% tax deductions/allowances on up to S$400,000 ($299,855) expenditure per year in each

of the six activities namely training of employees, purchase/leasing of PIC IT and automation equipment, acquisition/in-

licensing of intellectual property, registration of intellectual property, research & development and approved design

project.

Further, another extension of the scheme name PIC+scheme was also introduced from 2015, eligible SMEs that invest in

excess of the combined cap of S$1.2m ($899,564) in any of above mentioned six activities will get enhanced

deductions/allowances on an additional amount of S$200,000 ($149,927) for each qualifying activity. The schemes

designed to incentivize them to procure productivity-enhancing capital goods, in addition to investing in skill-upgrading

training programs. The measures are expected to significantly boost SME innovation and productivity, in addition to

making them competitive enough to survive international competition.

Future risks

Household debt

Indebted households pose a grave threat to the Singapore financial system as any interest rate shock or any other


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PESTLE Analysis



adverse macroeconomic scenarios could threaten their payment abilities. The household debt-to-income ratio has gone

up from 1.9 times in 2008 to 2.3 times in 2013. As of Q32014, it is close to 80% of GDP, much higher than Hong Kong

which is a little above 60% of GDP by the end of Q32014. However, household wealth has also gone up with rising debtlevels as private residential property prices have soared by more than 120% between 2008 and 2013, while public

residential property prices have risen by 70% during the same period. This rise in real estate prices has happened on the

back of strong demand among foreigners and locals, and prevalence of low interest rates since the global financial crisis.

The MAS has implemented many rounds of measures to curb the overheating in property prices since September 2009

and they have managed to slow down the pace of growth in residential markets. Owing to the measures, house prices in

Singapore which have been increasing continuously since 2008 have started to cool down since 2014. But declining

house prices poses a grave risk to over-indebted households, who may find i t extremely difficult to pay off its debt.

Already NPLs in housing loans has seen an uptick of late, which is suggestive of the fact that over-indebted households

are getting strained because of cooling house prices. The MAS needs to monitor this situation, which otherwise could

pose a threat to the overall financial system.


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PESTLE Analysis



Socia l analys is

Overview

A strong education system has helped Singapore in increasing literacy rates and student turnout in all regions. However,

Singapore is troubled with a low birth rate, an aging population and declining population growth. There is also a high

degree of income disparity in the country. The government has introduced various measures to build an inclusive society

in the 2014 budget. However, age-related expenditure is likely to be a serious concern in the future.

Table 5: Analysis of Singapore's social landscape


▪

Sound education policy▪

Low birth rate▪ Income disparity


▪ Government initiatives toward an inclusive society ▪ Economic cost of the aging population


Current strengths

Sound educa tion po l i cy

The government has given special significance to education, allocating nearly one-fifth of the country's annual budget to

the sector. Primary education in the country is heavily subsidized. Students are provided with the option of studying in

private schools at secondary and pre-university levels; public secondary education provides multiple paths to students,

depending on their abilities and goals, ranging from gifted student programs to vocational school programs. Under the

gifted student program, the education system lets students learn at their own pace; the objective of the program is to

provide leadership in the education of intellectually gifted children.

University education is provided by four universities: the National University of Singapore; the Nanyang Technological

University; the Singapore Management University; and the Singapore Institute of Management University. The strong

support given to the education sector has provided the country with a skilled labor force and highly t rained scientific

personnel. Furthermore, the country's brand of education is attracting interest from traditional strongholds such as the

US, the UK and Australia, and many universities from these countries have tied up with Singapore University for

exchange programs.

Current challenges

Low b ir th ra te

Singapore has a declining birth rate and an aging population. The average birth rate (the number of births per 1,000

members of the population) dropped from 18.7 in 1990 to 8.1 in 2014, according to CIA - The World Factbook. The

government had promoted family planning with a degree of success in the 1980s and 1990s, by encouraging residents to

have more children. However, the fertility rate declined rapidly during 2001-14. Any decrease in population would put


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PESTLE Analysis



pressure on the country's labor market. Singapore's founding Prime Minister Lee Kuan Yew expressed disappointment

over the declining birth rate. Looking at the grim scenario, the government has taken steps to encourage families to have

more children.Income dispar i ty

The biggest criticism of Singapore's social strategy is its immigration policy, which takes a conservative approach

towards population growth while allowing individuals willing to work for cheaper rates to settle in the country. This policy

has resulted in the creation of a growing income gap between those at the bottom of the economic pyramid and those at

the top. Despite a GDP per capita of $62,400 (purchasing power parity, 2013 —the highest in Asia Pacific —Singapore

suffers from high income inequality. According to MarketLine estimates, Singapore's Gini coefficient rating (a measure of

income inequality, with a score of zero equating to absolute equality and a score of hundred equating to absolute

inequality) stood at 46.3 in 2013. Singapore's ASEAN counterparts like Malaysia (46.2), the Philippines (44.8) and

Indonesia (36.8) had better Gini scores than Singapore. The prevailing income disparity in Singapore remains a cause

for concern.

Future prospects

Government in i t ia t ives toward an inclus ive socie ty

The realization of the fact that income inequality poses a grave risk to social cohesion has led to initiation of government

reforms in recent years. The budget for FY2014, like the previous one, aims to build a more inclusive society through the

following four measures: promoting social mobility, enhancing healthcare affordability, support for the aged community

and support for persons with disabilities.

In order to promote social mobility, the government plans to enhance its spending on the pre-school sector and higher

education, mainly intended towards affordability of pre-schools for lower- and middle-income families. It has alsoincreased healthcare affordability by providing permanent subsidies for lower- and middle-income groups so that

premiums remain affordable. The budget has also announced considerable monetary support for the aged population

through top-ups and subsidies.

Future risks

Economic cos t o f t he ag ing popu la t ion

Singapore, like many Western nations, is likely to face long-term fiscal challenges as a result of its aging population.

Singapore will have the second highest percentage of individuals aged 65 and above (at around 19%) in Asia by 2030,

behind only Japan. These estimates suggest that the overall government expenditure will increase sharply in line with

rising pension, healthcare and old age care costs. Also, there are estimated to be only 2.1 working-age people (aged 20-64) to support one elderly citizen (aged 65 and above) in 2030 against 5.1 in 2012, according to the government

estimates, which will put pressure in terms of tax collection to satisfy the needs of the aging population. In such a

scenario, the government will have to resort to easy immigration policies to support its shrinking labor force, which is

again a major issue of contention with the resident population. Therefore, major reforms and policy changes are required

to avoid a large financial gap and to secure the sustainability of public finances.


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PESTLE Analysis



Techno logical analys is

Overview

The country is home to a number of reputed scientific institutions, and is strongly backed by the private sector. The

country is venturing into new areas of research such as IT services and the space industry. The government is also

playing its part in promoting R&D by providing companies, especially cash-constrained firms, with tax incentives and

cash conversion schemes. It has also increased its allocation towards R&D in recent years. Nevertheless, the city-state's

high dependence on foreign researchers in Science, Technology and Innovation (STI) poses a major challenge. The

problem might be aggravated with increasing competition for skilled personnel from big economies like China and India.

Table 6: Analysis of Singapore's technology landscape


▪ Strong scientific institutions

▪ Building R&D competencies

▪ Excessive dependence on foreign researchers


▪ Emphasis on space industry ▪ Increasing competition from emerging nations


Current strengths

Strong sc ient i f ic ins t i tu t ions

The government has established scientific institutions such as the Science and Engineering Research Council (SERC)

and the Biomedical Research Council (BMRC) to generate innovative products. The SERC is responsible for developing

new capabilities to satisfy industry needs as projected by the aforementioned roadmaps, and promotes research in

nanotechnology to help overcome physical barriers for incumbent technologies like silicon chips. The BMRC, on the

other hand, helps to bridge the gap between basic biomedical research and clinical practice through the development of

useful and commercially viable applications. The presence of research institutions in the country has enabled fast-paced

development and rapid advancement in R&D.

Building R&D competencies

Singapore's government has been building R&D capabilities in the country by increasing their investment. As a result,

Singapore's research intensity, which is defined as gross expenditure on R&D as a percentage of GDP, increased from

2.09% in 2010 to 2.70% in 2013. This research intensity is on par with the Eurozone average.

The major areas of research in both public and private sector were electronics, infocommunications and media (ICM),

chemicals, biomedical sciences, and precision and transport engineering. Increased investment in R&D has also led to

growth in the number of research personnel. This bodes well for Singapore as it develops a strong base for technological

development.


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PESTLE Analysis



Current challenges

Excess ive dependence on fo re ign researchers

Although Singapore has a large pool of full-time researchers on a per million capita basis (6,437.7 in 2012), which is

second only to that of Finland, the majority are not permanent residents. As of 2013, around one quarter of the students

in the Computing, Science and Engineering courses at NUS, NTU and SMU are foreigners; this reveals the excessive

dependence on external talent for STI development. According to UNESCO, Singapore faces significant challenges in

terms of maintaining the sustained inflow of foreign talent for STI development, especially due to a rapid rise in demand

for skilled personnel in big economies like China and India.

Future prospects

Emphas i s on space indus t ry

In order to boost its economic potential in high-technology sectors, Singapore is looking to venture into the capital-

intensive space industry, a sector that generates annual revenues of around $300 billion and is dominated by Western

firms. To this effect, the government established the Office for Space Technology and Industry (OSTIn) in February 2013

that will emphasize on designing and manufacturing small satellites and on providing satellite-based services. The initial

target of the agency is to fulfill the ever-increasing demand for high-speed Internet and high-resolution images used in

surveillance systems, environmental monitoring, forestry and resource exploration. Singapore will also leverage its

proficiency in precision engineering, electronics and ICT to meet its space exploration goals. Leading satellite operators

such as France-based Eutelsat Communications, the British Inmarsat and the homegrown Singapore

Telecommunications already have a base in the city-state, which can be utilized by the broadcasters to transmit their

programs and by ships to communicate with other vessels.

The national research foundation, A*STAR has already established space-related R&D programs in collaboration withtwo local state-funded universities —the National University of Singapore (NUS) and the Nanyang Technological

University (NTU). The space industry holds great potential for Singapore, which could drive future investment in a new

range of R&D-intensive manufacturing industries.

Future risks

Increas ing com pet i t ion f rom emerging nat ions

Many emerging economies in Asia and Latin America have been investing heavily in R&D, and recent predictions

indicate that around 90% of an emerging global middle class will live in developing nations by 2025. With the growth of

emerging economies, the global scientific landscape will change dramatically. Singapore should prepare to face fierce

competition from these countries, which can offer advantages in terms of low cost skilled labor and large domesticmarkets.


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PESTLE Analysis



Legal analysis

Overview

Singapore has become one of the best trade hubs in Asia. The country has a very open and business-friendly economy,

highlighted by its position in major indices such as the World Bank's 2015 Doing Business and the 2014 Index of

Economic Freedom published by the Heritage Foundation and the Wall Street Journal. While the former ranked

Singapore first in the world out of 189 nations in terms of ease of doing business, the latter placed Singapore second on

its list. Comprehensive tax treaties make it possible for resident companies to access worldwide technologies and

expertise. However, there are certain regulations in place that cause concern for investors. Nevertheless, as an economy

which is dependent on trade for growth, Singapore signed a number of free-trade agreements in the last two decades.

The most recent additions to the list have been Costa Rica and the Gulf Co-operation Council (GCC).

Table 7: Analysis of Singapore's legal landscape


▪ Top destination for business investment

▪ Double taxation agreements

▪ Political interference in the judiciary


▪ New FTAs to liberalize trade further ▪ Increasing flaws in business regulations


Current strengths

Top dest inat ion for business investment

Several factors make Singapore a favored destination for business investment. According to the World Bank's 2015

Doing Business report, Singapore ranked first in the world out of 189 nations in terms of ease of doing business. The

country also ranked first in the world in terms of trading across borders and enforcing contracts. Singapore's labor market

is highly flexible, the non-salary cost of employing an individual is low, and regulations related to work hours are very

flexible. In addition, the number of days required in categories such as dealing with construction permits, getting

electricity, registering property, paying taxes, trading across borders, enforcing contracts, and resolving insolvency arelower in Singapore than the East Asia and Organisation for Economic Co-operation and Development (OECD) averages.

Singapore has regulations in place for protecting investor rights, and the country ranks second in the world on this

parameter.

Double taxat ion agreements

The country had signed double taxation agreements with 77 countries, as of December 2014. The agreements will help

transnational companies avoid being taxed twice. Moreover, the agreements are likely to smooth capital flows and

technical knowhow. The number of tax treaties gives investors certainty in tax rights while operating in cross-border trade

and investment in and out of Singapore.


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PESTLE Analysis



Current challenges

Pol i t ica l in terference in the jud ic iary

Singapore's judiciary is reportedly vulnerable to political pressure. There have been doubts about its impartiality in cases

of arbitration where the government is one of the concerned parties, and even more so in non-commercial cases like

public law, where the judiciary has been accused of being compliant with the interests of the government. The PAP has

often filed defamation cases against members of the opposition and the media and sought large damages that have

silenced dissenters. Political interference in judicial decisions is currently jeopardizing legal freedom of the country.

Future prospects

New FTAs to liberalize trade further

As an economy which is extremely dependent on trade for its growth, Singapore has always taken measures to sign new

free-trade agreements since the last two decades, which has in turn provided lucrative business and investment

opportunities for its firms. Since the signing of ASEAN Free Trade Area (FTA) in 1993, Singapore's network of FTAs has

expanded to cover 20 regional and bilateral FTAs with 31 trading partners. The most recent additions to the list have

been Costa Rica and the Gulf Co-operation Council (GCC). While the FTA with Costa Rica was effective from July 1,

2013, the FTA with the GCC was effective from September 1, 2013. Moreover, the city-state has also completed

negotiations with the EU over a free trade agreement in October 2013.

The FTA with Costa Rica has eliminated 90.6% of its tariff lines for Singapore, with the tariffs for remaining products to

be eliminated over the next ten years. Singapore, on the other hand, has granted tariff-free access for all imports from

Costa Rica. As the trade between the two nations has increased gradually in recent years, this agreement represents

good trade prospects for both economies. The trade aspect is supplemented by liberalization of investment flows

between the two nations. As a part of this deal, Singapore will be able to venture into Costa Rica's potentially profitablesectors such as oil refining, infrastructure, energy, transport and logistics, e-services and tourism.

The FTA with the GCC that comprises six Middle East nations —Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the

United Arab Emirates —has eliminated approximately 93.9% of tariff lines immediately and will eliminate a further 2.7%

by 2018. The negotiations on the FTAs as of December 2014 is ASEAN-India Services & Investment, ASEAN-Japan

Services & Investment, Canada, Mexico, Pakistan, Trans Pacific Partnership and Ukraine.


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PESTLE Analysis



Future risks

Increas ing f laws in bu siness regula t ions

Although the country's business environment is considered one of the best in the world, there has been a gradual

increase in business regulations. Some of the obstacles that might deter an entrepreneur from starting a business in

Singapore include the following:

Irrespective of the company's status in its home country, it must be registered as a private limited company in

Singapore, which is one of the several options in most other countries. All company names require approval,

and must end with "private limited" or "pte limited" labels.

Annual accounts and returns are required to be filed by all businesses. Moreover, according to the laws passed

in 2007, returns have to be filed with both the registry of companies and the income tax authorities. As a result,

the confidentiality that businesses may wish to maintain can be compromised.

To start a limited liability company in Singapore, two directors are required, with one either a resident of

Singapore, a native Singaporean, or someone who has a Singapore Employment Pass. This puts pressure on

the company to compromise on its existing management and other human resources.


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PESTLE Analysis



Future prospects

Comm itments towards a c leaner environment

Urbanization in Singapore has resulted in various problems in traffic management, air and water pollution, and energy

efficiency. In December 2014, the authorities have stated that Euro VI emission standards for diesel vehicles will be

effective from January 2018 and for petrol vehicles it will be effective from September 2017. In 2014, the government has

signed the Memorandum of Understanding with Belgium's public waste agency of Flanders. In September 2014, the

government established a national standard for the management of electronic waste. All these initiatives show the

commitment by the government to reduce the carbon footprint.

Future r isks

Changing c l imat ic condi t ions

Climate change is one of Singapore's main environmental challenges, by virtue of the fact that it is an island nation with a

high economic dependence on carbon fuels. The government has adopted a four-pronged strategy to tackle climate

change, which involves adapting to climate change, mitigating carbon emissions, raising awareness and building

competency. Air quality is good, but efforts made by the government have failed to reduce particulate emissions from

diesel vehicles. Moreover, with an increasing immigrant population, vehicular pollution is on the rise. The changing

climatic conditions could be a potential environmental risk for the country.


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C o p y r i g h t o f S i n g a p o r e C o u n t r y P r o f i l e i s t h e p r o p e r t y o f b u s i n e s s a n d i t s c o n t e n t m a y n o t b e c o p i e d o r e m a i l e d t o m w i t h o u t t h e c o p y r i g h t h o l d e r ' s e x p r e s s w r i t t e n p e r m i s s i o n d o w n l o a d , o r e m a i l a r t i c l e s f o r i n d i v i d u a l u s e .

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