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Singapore

Singapore

Population 5.7 million
GDP 65,234 US$
A3
Country risk assessment
A1
Business Climate
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Synthesis

MAJOR MACRO ECONOMIC INDICATORS

  2018 2019 2020 (e) 2021 (f)
GDP growth (%) 3.4 0.7 -5.8 4.9
Inflation (yearly average, %) 0.4 0.6 -0.4 0.3
Budget balance (% GDP) 3.7 3.8 -12.3 -2.8
Current account balance (% GDP)* 17.2 17.0 15.5 15.1
Public debt (% GDP) 108.4 110.4 132.0 137.1

(e): Estimate (f): Forecast *Fiscal year from April 1 - March 31

STRENGTHS

  • High non-price competitiveness
  • High value-added industry (new technologies, finance, chemistry, pharmaceuticals)
  • Major goods transport and trading hub (air and sea), financial centre
  • Large FDI inflows thanks to the advantageous tax regime, political stability and excellent business climate
  • Asia's leading exporter of capital through sovereign wealth funds

WEAKNESSES

  • Dependent on exports and imports (energy and food)
  • Skilled labour and housing shortages, ageing population
  • Limited freedom of speech
  • Vulnerable to the structural slowdown of the Chinese economy and U.S.-China geopolitical tensions

RISK ASSESSMENT

Return to growth despite limited international trade

After a year marked by a severe recession amid a global pandemic, the Singaporean economy will return to growth in 2021. Despite a remarkably positive health record - at the end of November 2020, Singapore had the world's lowest ratio of deaths to total population - the country recorded a substantial fall in activity in 2020 linked to the contraction in world trade and the lockdown that went from early April to early June. As the quintessential small open economy, Singapore is highly sensitive to the world economic cycle and international trade developments, with imports and exports representing 150% and 160% of GDP respectively. While the country's health situation was under control at the end of 2020, pointing to a strong rebound in domestic activity, any expansion will be curbed by the deteriorating international economic situation due to the economic repercussions of the ongoing pandemic elsewhere in the world - particularly in North America and Europe for at least the first part of the year - and by uncertainties linked to the U.S.-China trade war. The manufacturing industry, especially machinery and electronics, which account for almost half of all exported goods, will be particularly affected by this environment. Conversely, the financial sector, which is the main source of the services surplus (USD 22 billion in 2019), and the pharmaceutical industry will continue to grow briskly, after acting as a shock absorber in 2020. However, private investment, which plays a particularly large role compared with the situation in other developed countries (23.4% of GDP in 2019), will remain hampered by economic and health uncertainty. Buoyed by a decline in the unemployment rate, which hit a 16-year high of 3.6% in the third quarter of 2020, private consumption, which represents only 34% of GDP, should rebound vigorously, despite consumers being tempted to set aside precautionary savings in the face of the uncertain health situation. In this setting, and in the absence of inflationary pressures, the central bank should maintain an accommodative monetary policy in 2021, after easing policy in March 2020.

 

Public finances temporarily in deficit to support activity

As announced by Prime Minister Lee Hsien Loong, the economic and health situation will force the government to post a public deficit in 2021, for the second consecutive year, in order to support the economy under a countercyclical approach. However, the deficit will be significantly lower than in 2020, when several successive stimulus plans were announced (direct benefits for households and the self-employed, partial unemployment scheme, aid to companies, moratorium on loan repayments), worth a total USD 70 billion (20% of GDP). Until that point, the only time over the previous three decades when public accounts had been in deficit was during the 2009 financial crisis. The government can therefore easily finance the deficit by drawing on the substantial fiscal reserves accumulated over the period – while the exact amount is secret, they were estimated at 300% of GDP before the pandemic. Although seemingly high, the public debt is actually mainly made up of long-term bonds and securities issued to develop local markets and provide a risk-free savings option for individuals, and of non-marketable bonds issued for the Central Provident Fund (CPF), a system of compulsory contributions to finance social protection. Constitutionally ring-fenced from the financing of government expenditure, the public debt is exclusively denominated in local currency and held by residents. At the same time, the country will continue to post a substantial current account surplus, thanks to a trade surplus exceeding 20% of GDP. Driven over the past two decades by vigorous demand for electronic components and consumer electronics, foreign trade is now facing protectionist headwinds and, more importantly, a maturing technology cycle, over and above the pandemic-related slowdown in world trade. As the country is easily a net recipient of FDI, the income balance is in deficit. Despite these FDI inflows, the financial account reflects significant net capital outflows (about 10% of GDP), mainly due to portfolio investment abroad.

 

Political stability despite breakthrough results for the opposition

Although it won 83 seats out of 95, the People's Action Party (PAP), which has ruled the country since independence in 1965, emerged relatively weakened from the July 2020 legislative elections, where it won 61% of the vote, down from 70% in 2015. These elections brought breakthrough results for the opposition parties, with the Workers’ Party (WP) winning ten seats, up from six in 2015, and the Progress Singapore Party, created a year earlier, entering parliament with two (non-constituent) seats. While he initially promised that he would relinquish power before turning 70 in February 2022, Prime Minister Lee Hsien Loong, son of founding statesman Lee Kwan Yew, ultimately said that he would not step down until the economic and health crisis was fully resolved. The business environment is a global benchmark: political stability, an apparent absence of corruption and a reliable legal framework put the country second in the World Bank's Doing Business ranking.
 

Last updated: March 2021

Payment

Cheques, cash and bank transfers are all frequently-used means of payment within Singapore. Bank transfers, fast and secure, are widely used for international transactions. Standby Letters of Credits and Irrevocable Letters of Credit are often used in export transactions. 

Debt collection

Amicable phase

The amicable phase begins with the seller contacting buyers in writing, by telephone and, where permissible, by visiting the buyer’s business premises. If there is no response from the buyer, a site visit and online searches are conducted to ascertain the operating and legal status of the buyer. If the buyer does not make attempts to settle the matter amicably, legal proceedings can be used to recover payments for goods sold and delivered in Singapore. It is, however, prudent to ensure that the buyer has sufficient assets to satisfy the debt before proceedings are initiated.

 

Legal proceedings

Singapore is a common law jurisdiction. Its laws are principally governed by Supreme Court of Judicature Acts, State Court Acts, other statutes which have procedural application (or contain procedural provisions), the Rules of Court, practice directions, case law and the court’s inherent powers.

Singapore’s courts comprise State (Subordinate) Courts and the Supreme Court. The Supreme Court is composed of the High Court and the Court of Appeal (the final appellate court). The High Court is a court of first instance, generally used for claims beyond the jurisdiction of the State Courts (although the High Court is a court of unlimited jurisdiction and may hear any claim).

 

Default Judgment

If a defendant fails to enter an appearance or fails to file a defence within the time specified in the writ, the plaintiff may enter default judgment against him. This can be a final judgment or an interlocutory judgment, depending on the nature of the claim.

 

Summary Judgment

If the defendant has entered an appearance and filed a defence, but it is clear that the defendant has no real defence to the claim, the plaintiff can apply to court for summary judgment. To avoid summary judgment being entered, the defendant must show that the dispute concerns a triable issue, or that there is some other reason for trial. An application for summary judgment must be filed within 28 days of pleadings being concluded (unless the court orders otherwise). 

Enforcement of a Legal Decision

Writs of Execution

A judgment can be enforced by a variety of writs of execution. These include a Writ of Seizure and Sale of movable and immovable property, a Writ of Delivery and a Writ of Distress. These writs authorise court officials to take appropriate measures to give effect to the judgment.

 

Garnishee Proceedings

This can be an appropriate solution when the debtor is owed a debt by a third party (the garnishee). When the creditor garnishes the debt, the garnishee must then make payments due to him, rather than to the debtor. To collect these debts, the creditor must first apply for a garnishee order nisi. This can be filed without the involvement of other parties and leads to “show cause” proceedings. If the garnishee confirms that there are monies due and owing to the judgment debtor at this stage, the Registrar may proceed to make the garnishee nisi absolute.

 

Registration of Judgment

If the creditor is not able to enforce his judgment in Singapore, he may be able to enforce it in a country where the debtor holds assets. This can be done by commencing fresh proceedings, or by registering the Singapore judgment in the foreign country (on the basis of reciprocity of enforcement between the two countries). 

Insolvency Proceedings

Schemes of Arrangement

Schemes of arrangement begin with an application to court, for an order summoning one or more meetings of the creditors, members of the company, or shareholders of the company. If the court agrees to the order, a proposal must then be tabled before the relevant meetings and approved by the requisite majority (unless the court orders otherwise) of the creditors, class of creditors, members or class of members, shareholders, or class of shareholders.

 

Judicial Management

When a company is in financial difficulty but has reasonable prospects of being rehabilitated, or if preserving all or part of its business as a going concern (or even that the interests of creditors would be better served than by resorting to a winding up), the company or its creditors can apply to court for an order that the company be placed under the judicial management of a judicial manager.

 

Liquidation

If an insolvent company is unable to overcome its difficulties, it can be dissolved. This enables the liquidation of its assets, so that creditors can be repaid, at least in part. This process is known as winding up or liquidation. A healthy company can also be subject to winding up if its members no longer wish the business to continue. When a company is wound up, its assets or proceeds are first used to pay off any creditors. Following this, any balance remaining is distributed pro rata amongst shareholders.

Corporate Insolvencies in Singapore
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