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Country Profile 2006 Singapore This Country Profile is a reference work, analysing the country’s history, politics, infrastructure and economy. It is revised and updated annually. The Economist Intelligence Unit’s Country Reports analyse current trends and provide a two-year forecast. The full publishing schedule for Country Profiles is now available on our website at www.eiu.com/schedule The Economist Intelligence Unit 26 Red Lion Square London WC1R 4HQ United Kingdom
The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where the latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 26 Red Lion Square The Economist Building 60/F, Central Plaza London 111 West 57th Street 18 Harbour Road WC1R 4HQ New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7576 8000 Tel: (1.212) 554 0600 Tel: (852) 2585 3888 Fax: (44.20) 7576 8500 Fax: (1.212) 586 0248 Fax: (852) 2802 7638 E-mail: london@eiu.com E-mail: newyork@eiu.com E-mail: hongkong@eiu.com Website: www.eiu.com Electronic delivery This publication can be viewed by subscribing online at www.store.eiu.com Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, online databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office Copyright © 2006 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author's and the publisher's ability. However, the Economist Intelligence Unit does not accept responsibility for any loss arising from reliance on it. ISSN 0269-7041 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK.
Comparative economic indicators, 2005
Gross domestic product Gross domestic product per head
(US$ bn) (US$ ’000)
South Korea Singapore
Taiwan Hong Kong
Indonesia South Korea
Hong Kong Taiwan
Thailand Malaysia
Malaysia Thailand
Singapore Indonesia
Philippines Philippines
Vietnam Vietnam
0 100 200 300 400 500 600 700 800 0 5 10 15 20 25 30
Sources: Economist Intelligence Unit estimates; national sources. Sources: Economist Intelligence Unit estimates; national sources.
Gross domestic product Consumer prices
(% change, year on year) (% change, year on year)
Vietnam Indonesia
Hong Kong Vietnam
Singapore Philippines
Indonesia Thailand
Malaysia Malaysia
Philippines South Korea
Thailand Taiwan
Taiwan Hong Kong
South Korea Singapore
0 2 4 6 8 10 0 2 4 6 8 10 12
Sources: Economist Intelligence Unit estimates; national sources. Sources: Economist Intelligence Unit estimates; national sources.
Country Profile 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006Singapore 1
Contents
Singapore
3 Basic data
4 Politics
4 Political background
6 Recent political developments
8 Constitution, institutions and administration
9 Political forces
13 International relations and defence
15 Resources and infrastructure
15 Population
16 Education
17 Health
17 Natural resources and the environment
18 Transport, communications and the Internet
20 Energy provision
20 The economy
20 Economic structure
21 Economic policy
28 Economic performance
29 Regional trends
29 Economic sectors
29 Agriculture
30 Mining and semi-processing
30 Manufacturing
32 Construction
32 Financial services
33 Other services
34 The external sector
34 Trade in goods
36 Invisibles and the current account
36 Capital flows and foreign debt
37 Foreign reserves and the exchange rate
38 Regional overview
38 Membership of organisations
42 Appendices
42 Sources of information
43 Reference tables
43 Population
44 Labour force
44 Transport statistics
44 National energy statistics
© The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 20062 Singapore
45 Productivity
45 Business costs
45 Government finances
46 Money supply
46 Interest rates
46 Gross domestic product
47 Real gross domestic product by expenditure
47 Nominal gross domestic product by expenditure
48 Gross domestic product by sector
48 Prices and earnings
49 Manufacturing production
49 Miscellaneous manufacturing statistics
49 Net investment commitments in manufacturing by sector
49 Investment commitments by country of origin
50 Construction statistics
50 Financial sector assets and liabilities
50 Stockmarket indicators
50 Retail sales
51 Tourism
51 Exports
52 Imports
52 Main composition of trade
52 Main trading partners
53 Balance of payments, IMF series
54 Balance of payments, national series
54 Foreign reserves
55 Exchange rates
Country Profile 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006Singapore 3
Singapore
Basic data
Land area 6,994 sq km (including smaller islands)
Population 3.6m (mid-year 2005 government estimate; 4.4m including non-residents)
Climate Tropical
Weather (altitude ten metres) Hottest month, May, 24-32°C (average daily minimum and maximum); coldest
month, January, 23-30°C; driest month, July, 70 mm average rainfall; wettest
month, December, 244 mm average rainfall
Languages English, Chinese, Malay and Tamil
Measures The metric system is now predominant
Currency Singapore dollar (S$)=100 cents. Average exchange rate in 2005: S$1.66:US$1.
Exchange rate on May 8th 2006: S$1.57:US$1
Time Eight hours ahead of GMT
Public holidays January 1st (New Year's Day); Chinese New Year; end of Ramadan; Good
Friday; Hari Raya Haji; May 1st (Labour Day); Vesak Day; August 9th (National
Day); Deepavali; December 25th (Christmas Day)
© The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 20064 Singapore
Politics
Singapore is a parliamentary democracy led by the People's Action Party (PAP).
Formerly a British colony, Singapore briefly became part of the Federation of
Malaya, Sarawak and Borneo (Sabah) in 1963, but achieved full independence
in 1965. Since then the PAP, guided by the ideas of Lee Kuan Yew, prime
minister from 1959 to 1990, has dominated politics in the country. The success
of the PAP has been founded on a combination of sustained economic growth
and an ability to restrict any expansion in support for the weak and divided
opposition parties. In 1990 Mr Lee was replaced as prime minister by Goh Chok
Tong. Mr Goh was initially seen simply as a short-term appointment, as a
placeholder for Mr Lee's eldest son, Lee Hsien Loong, but stayed in office for
almost 14 years. In August 2004 he finally handed over the leadership to Lee
Hsien Loong, but remains in the cabinet as senior minister. The most recent
general election was held on May 6th 2006, and, as in previous contests, the
PAP won almost all the parliamentary seats.
Political background
History before independence The Malacca Sultanate ceded Singapore to the British East India Company in
1819, through the efforts of Stamford Raffles. The island was soon brought
under the control of the British government, which surrendered to the
Japanese in 1942, but regained control in 1945. The 1955 election returned a
Labour Party government, which eventually reached agreement with the UK
over full internal self-government. Mr Lee's PAP won the 1959 election, and a
referendum in 1962 revealed overwhelming support for a merger with Sabah,
which was implemented in September 1963. However, tensions in the
federation soon became evident. Singapore withdrew and became an
independent country in 1965.
Political development, 1965-90 The PAP easily won the first post-independence election in 1968, and, through a
combination of rapid economic growth and the maintenance of a weak and
divided opposition, Mr Lee's party has dominated politics in Singapore ever
since. From 1968 to 1981 all members of parliament (MPs) were PAP members,
and the only opposition outside of parliament came from a small group of
maverick professionals, many of them lawyers. Two opposition MPs were later
elected, with a representative of the Workers' Party (WP), J B Jeyaretnam,
winning a seat in a by-election in 1981, and Chiam See Tong of the Singapore
Democratic Party (SDP) entering parliament in 1984. Despite these apparent
breakthroughs, the opposition has remained marginal, and there have never
been more than four elected opposition members in parliament.
When the previous rapid rates of economic growth began to slow in 1985-86,
the government reacted by making efforts to build a more consultative
political system, creating institutions such as the Economic Committee. From
1986 there was limited decentralisation of decision-making through the
establishment of town councils. However, the PAP kept hold of the real levers
of power, with institutional changes generally regarded as a ploy to bolster
Country Profile 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006Singapore 5
PAP support, rather than as a mechanism for the development of alternative
centres of power. Life remained difficult for any individuals or groups thought
to be against the PAP, with the government often suing dissident figures for
libel. Using this method, prominent opposition members were made bankrupt,
or forced to leave the country.
Political development, 1991-97 In 1990 the prime minister since 1959, Lee Kuan Yew, stepped down, to be
replaced by the supposedly more liberal Mr Goh. Mr Lee remained in the
cabinet as senior minister, and his influence behind the scenes was still
enormous: there was talk of Mr Goh surrendering the chair for parts of cabinet
meetings. It was therefore not clear who took the decision to hold an early
general election in 1991, but Mr Goh took the blame for the PAP's relatively
poor showing, with the party winning just 61% of the vote. The opposition
parties in effect conceded defeat in advance, contesting only 40 of the 81 seats.
Perhaps reassured that their vote could not end PAP rule, 37% of those voting
supported the opposition (with 2% of votes going to independents). A hesitant
process of cultural liberalisation (for example, on cinema films) was
subsequently reversed, although there was no official crackdown on dissidents.
Mr Goh remained in power, and as the months passed his position within the
PAP appeared to strengthen.
In the January 1997 election the PAP performed better, winning 65% of the vote.
This was partly owing to an increase in group representation constituencies
(GRCs); in these constituencies political parties are required to formulate five- to
six-candidate tickets, which is difficult for the opposition parties with their
limited resources and support. The PAP's performance was also boosted by the
explicit link made between the timing of the upgrading of Housing
Development Board estates and the loyalty demonstrated by individual
constituencies to PAP MPs. Mr Goh later said that this tactic was the "single
most important factor" in the increase in the PAP's share of the vote.
Lee Hsien Loong reasserts Following the election, the government became increasingly preoccupied with
his position the consequences of the 1997-98 Asian financial and economic crises. This
allowed Lee Hsien Loong, the eldest son of Mr Lee and long considered his
father's heir-apparent, to regain some of the political momentum that dissipated
after he was diagnosed with cancer in the early 1990s. The younger Mr Lee took
over the chairmanship of the Monetary Authority of Singapore (MAS, the
central bank) in early 1998 and proved an enthusiastic advocate of financial
sector restructuring. The government saw its domestic political standing shored
up by a couple of years of strong growth, but it remained generally intolerant of
dissent. A veteran opposition politician, J B Jeyaretnam, faced bankruptcy
because of damages resulting from a legal action brought against him by some
PAP members. A rising opposition figure, Chee Soon Juan, was sidelined by
smaller-scale legal action.
© The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 20066 Singapore
Important recent events
January 2002
The government reveals that it is holding 12 Singaporeans and one Malaysian on
terrorism charges.
May 2002
The People's Action Party (PAP) takes a political gamble with the budget for fiscal
year 2002/03 (April-March), which benefits business and the higher paid, rather than
the poor.
January 2003
The government unveils a white paper on dealing with terrorism.
August 2003
Goh Chok Tong confirms his plan to step down once Singapore's economy stabilises,
in effect stating that he will not be the prime minister ahead of the next general
election (due in 2007).
January 2004
The new prime minister of Malaysia, Abdullah Badawi, visits Singapore twice during
January, signalling a warming of ties between the two countries.
August 2004
Lee Hsien Loong takes over as prime minister. He reshuffles the cabinet, with
Mr Goh becoming senior minister.
April 2005
The government agrees to build two casinos in Singapore. The decision is politically
controversial, and opposed by many civic groups.
September 2005
S R Nathan is sworn in as president for a second term. He does not have to stand for
re-election, as would-be challengers are ruled ineligible to stand for this office.
May 2006
True to form, the PAP wins a general election, taking 67% of the votes cast and 82 out
of 84 parliamentary seats.
Recent political developments
Increased spending buys As the economy slumped in 2001, the PAP was still firmly in control. Its
political support in 2001-03 immediate political response to the downturn was a generous budget for fiscal
year 2001/02 (April-March), with spending later increased further by various
supplementary packages. The opposition parties chose to contest only 29 of the
84 parliamentary seats in the 2001 election, and won only two of these. The
government was quick to claim that the size of its victory gave it a clear
mandate for economic reform, and set up a committee to review economic
policy. The committee published its first responses in April 2002, and many of
its recommendations (including tax cuts) found their way into subsequent
budgets. The budgets were premised on the belief that the key to Singapore's
Country Profile 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006Singapore 7
future success is maintaining its attractiveness as a business location. The
electorate was asked to take some short-term pain (for example, through a rise
in the goods and services tax—GST) so that this long-term vision could be
realised.
Mr Goh hands over the helm In August 2004 Mr Goh stepped down as prime minister and was replaced by
to Lee Hsien Loong Lee Hsien Loong in a smooth handover of power. Mr Lee then reshuffled the
cabinet, but the changes were relatively small-scale. Mr Goh became senior
minister; the displaced elder Mr Lee became "minister mentor in the prime
minister's office". Slightly lower down the rankings, familiar figures were very
much in evidence: Shanmugan Jayakumar became a deputy prime minister, for
example. Some slightly more surprising appointments were made at a more
junior level, but the PAP could not conceal a shortage of new talent.
An early general election is The PAP’s control of domestic politics remained tight. For example, in
held in May 2006 September 2005 S R Nathan was sworn in as president for a second term. He
did not have to fight an election, as all his would-be competitors were deemed
ineligible to stand for this office. The government has continued to underpin
this paternalistic approach with further attacks on the country’s few opposition
parties and a more subtle approach to handling the country’s Muslim minority.
With economic growth still very strong in the first quarter of 2006, Mr Lee
decided (as widely expected) to call an early general election. Wholly
predictably, the PAP won a massive majority in parliament—it won 82 of the 84
available seats and 67% of the vote. But the size of the PAP’s majority may
overstate the satisfaction of the population with the current government. As
usual, the opposition parties found it difficult to contest the multi-member
constituencies that return most MPs; those constituencies returning opposition
MPs also face effective economic sanctions. Leading government figures also
launched a disruptive libel action against the Singapore Democratic Party (SDP)
at the start of the campaign.
Election results since independence
Seats won Seats won by % of vote
by PAPa other parties won by PAPa
Apr 13th 1968 58 0 84.4
Sep 2nd 1972 65 0 69.0
Dec 23rd 1976 69 0 72.4
Dec 23rd 1980 75 0 75.6
Dec 22nd 1984 77 2 62.9
Sep 3rd 1988 80 1 61.8
Aug 31st 1991 77 4 61.0
Jan 2nd 1997 81 2 65.0
Nov 3rd 2001 82 2 75.3
May 6th 2006 82 2 66.6
a People's Action Party.
Sources: Ministry of Information and Arts and the Environment; press reports.
© The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 20068 Singapore
Constitution, institutions and administration
Parliament Singapore has a parliamentary system of government, although an intolerant
approach to opposition politicians has prevented the development of a
combative multiparty legislature. The single-chamber parliament has 84 elected
MPs. Single-member constituencies elect nine of these, with the remaining 75
returned by 14 GRCs. Parties must field a team of five or six candidates in each
of these GRCs; the winning team is elected en bloc by a first-past-the-post
system, as are individual MPs. In addition to the elected MPs, the constitution
provides for a number of non-constituency MPs (NCMPs) and nominated MPs
(NMPs) to sit in parliament. The first of these provisions, to allow in prominent
politicians who have failed to win a seat, has in the past only occasionally been
used. NMPs—usually eminent professionals—are now, however, an accepted
(and tamed) part of the parliamentary process.
The president Until 1993 the president was nominated by parliament. In August of that year
Ong Teng Cheong (previously a deputy prime minister and secretary-general of
the National Trades Union Congress—NTUC) easily won the first direct election
for the post, against only nominal opposition. Strict eligibility rules severely
restrict the number of Singaporeans who can stand for the post, and in mid-
1999 only one candidate—S R Nathan—was deemed appropriate to be Mr Ong's
successor. As a result, he was declared president without an election. This
strange process was repeated in September 2005, when Mr Nathan was sworn
in for a second term.
The president's theoretical right of veto over certain legislation and
appointments is not used. In 1995 a three-judge tribunal ruled that the president
had no power to withhold his assent to any bill that sought to restrict his
powers, and the president's authority over some financial matters (notably
Singapore's foreign-exchange reserves) has subsequently been eroded. This
process was not to the liking of the previous president, Mr Ong, who talked
openly in early 2000 of the sometimes strained relations between himself, the
government and the civil service. (Mr Ong died in February 2002.)
The judiciary The constitution of Singapore states that the judiciary should administer the
law independently of the executive. The chief justice and other Supreme Court
judges are appointed by the president of the republic. The chief justice from
1990 until April 2006 was Yong Pung How; his replacement is Chan Sek Keong,
formerly attorney-general. He will serve an initial three-year term. In the past
the government has placed restrictions on lawyers, but the growing demands
of the commercial sector, coupled with conditions attached to the free-trade
agreements (FTAs) that Singapore is eager to pursue, are producing a more
expansionary attitude towards training, and towards permitting those trained
overseas to practice law.
Country Profile 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006Singapore 9
Political forces
The structure of the PAP The PAP, which portrays itself as the only possible party of government, has a
variety of internal party bodies, the most important of which is the Central
Executive Committee (CEC). The membership of the CEC closely mirrors that of
the cabinet; a new CEC was elected in late 2004 after Mr Lee took over as
prime minister. Links between the military and the PAP are strong, and several
successful politicians have graduated from the ranks of the armed forces,
notably the current prime minister, Mr Lee, and the defence minister, Teo Chee
Hean. PAP membership is not, however, a prerequisite for career success within
the civil service.
The PAP's approach to dissent The PAP has been successful in demolishing alternative focuses of opposition
activity. Labour unions were brought to heel in the 1960s through tough
legislation. Professional groupings also follow the party line, which helps to
deter lawyers and others from entering politics on the side of the opposition. A
disciplinarian approach by university authorities has likewise deterred
academics from becoming too closely involved in the political process. The
PAP's response to the 1987 "Marxist conspiracy" marked the end of involvement
in politics by the organised churches. As already noted, however, race may
again be emerging as a focus for dissent and unexpected events also have the
potential to cause trouble. The debate in 2005 over whether to allow the
construction of casinos in Singapore was particularly sensitive because it gave
varying religious and civic groups a common cause, and because it also
revealed some soul-searching within the PAP.
PAP members have shown themselves prepared to take out court actions,
usually in the form of defamation cases, to hurt the opposition. This tactic has
resulted in the award of significant damages against opposition figures, which
has caused either the self-imposed exile of these individuals, or bankruptcy. A
law barring those declared bankrupt from serving as MPs has removed these
figures from the immediate political arena. The most prominent recent target
has been Chee Soon Juan, the secretary general of the SDP. In early 2005
Mr Chee was ordered to pay a total of S$500,000 (US$300,000) in damages to
senior PAP figures, for remarks made during the 2001 election campaign. In
February 2006 he was declared bankrupt, and later that month faced contempt
of court charges as a result of his remarks made during this bankruptcy hearing.
Mr Chee was sentenced to a day in jail and a S$6,000 fine; he refused to pay
this fine and served an additional week in jail. In April 2006 Lee Hsien Loong
and Lee Kuan Yew demanded an apology from Mr Chee for remarks made in
the SDP newspaper, The New Democrat.
© The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 200610 Singapore
Main political figures
Lee Hsien Loong (in the past often referred to as B G Lee)
Prime minister since August 2004 and finance minister. Son of Lee Kuan Yew, he had
long been prime minister-in-waiting. He has extensive ministerial experience, but
does not command the degree of popular respect enjoyed by his father. The result of
the 2006 general election was widely seen as a test of his popularity, as much as of
the government’s overall success.
Goh Chok Tong
Senior minister and head of the Monetary Authority of Singapore (MAS, the central
bank). Mr Goh, prime minister from 1990 to 2004, is a rather more relaxed political
figure than the younger Mr Lee. His foreign policy experience has proved useful, but
has yet to produce a breakthrough in relations with Malaysia.
Lee Kuan Yew
Prime minister from 1959 to 1990 and seen as the "father of the nation". He is no
longer senior minister and is beginning to play a much less prominent role in
politics. However, he will retain a residual importance, particularly when "moral"
issues are being discussed. He is the third highest-ranking person in the cabinet
through his post as minister mentor.
Wong Kan Seng
Deputy prime minister since September 2005, replacing Tony Tan. Minister for home
affairs since 2004. Praised for his effective handling of the SARS (Severe Acute
Respiratory Syndrome) crisis in 2003.
Shunmugan Jayakumar
The other deputy prime minister and the minister for law. Minister for foreign affairs
until 2004. Now 66, and considered a loyal supporter of Lee Hsien Loong, can have
no ambitions for the top job.
George Yong-Boon Yeo
Minister for foreign affairs since August 2004. Formerly minister for information and
the arts and minister for trade and industry. His ministerial career wobbled in the
1990s, possibly owing to his liberal views, but is now revived.
Tharman Shanmugaratnam
Appointed to the post of acting minister for education in 2003, and confirmed as a
full minister in 2004. The post is a politically sensitive one. He is one of the few
people to have faced problems with the government (as an official at the MAS) but
then to be accepted back into the fold.
Chee Soon Juan
Secretary-general of the Singapore Democratic Party (SDP). Currently the most
prominent critic of the government, but cannot hold a parliamentary seat owing to
bankruptcy conviction. By profession a neuropsychiatrist.
Country Profile 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006Singapore 11
Chiam See Tong
The longest-serving opposition member of parliament (MP), returned again by the
Potong Pasir constituency in the general election in May 2006. Head of the Singapore
People’s Party.
Low Thia Khiang
Head of the Workers' Party and opposition MP for Hougang. An effective and
resilient critic of government policies.
The opposition makes no Legal action against opposition politicians has helped to keep them divided.
headway in parliament Wrangling within the Singapore Democratic Party (SDP) led the party's then
leader, Chiam See Tong, to leave the party. Mr Chiam retained his seat as a
Singapore People's Party (SPP) MP in the 1997, 2001, and 2006 elections. Low
Thia Khiang of the Workers' Party (WP) accounted for the other opposition
victory at the November 2001 election, retaining the Hougang constituency (a
position he retained in the May 2006 election). The Singapore Democratic
Alliance (SDA) is a loose alliance consisting of the National Solidarity
Parliament, the Singapore Malay National Organisation and the SPP.
The opposition MPs often put up a creditable performance in parliament—they
have provided some interesting criticism of budgets and constitutional issues,
for example—but they are unable to force changes to government plans. The
opportunities for extra-parliamentary protest are limited. This is most clearly
demonstrated by the fate of the SDP secretary-general, Mr Chee, who has been
repeatedly fined and (briefly) jailed for speaking in public without a permit, in
addition to the punishments for his other misdemeanours.
Security risk in Singapore
Armed conflict
History suggests that Singapore should be wary of its much larger neighbours. The
separation from Malaysia in 1965 was painful, and anti-Singaporean sentiment
sometimes erupts in the Malaysian government and elsewhere. Singapore misplayed
its hand with Indonesia, getting far too close to the disgraced former president,
Soeharto, with the result that it has been treated with suspicion by his successors in
Jakarta, although relations are steadily improving. Despite Indonesia's larger size, the
main military threat is seen as coming from Malaysia. A particular long-standing
worry is that the Malaysian state of Johor could cut off supplies of water to
Singapore, something that would quickly bring the country to its knees. To deal with
this threat, Singapore has amassed a large amount of sophisticated military
hardware—including 350 light tanks and 125 combat aircraft. It is presumed that any
move to cut off Singapore's water supplies would be countered by Singapore
armoured vehicles invading Johor, with the Singaporean air force overwhelming its
Malaysian counterpart. Since 1998 housing developers have been required to build a
bomb-shelter in every new house, although the space that needs to be allocated for
this shelter was reduced in 2001.
© The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 200612 Singapore
Terrorism
The government is well aware that Singapore is a tempting target for terrorists.
Buildings in the central business district or Changi airport could be vulnerable. The
government has responded by detaining a number of people (almost all Singaporean
citizens) under the provisions of the Internal Security Act (ISA). Anti-terrorist co-
operation with Indonesia has much improved, as demonstrated by the extradition of
a high level terrorist suspect from Indonesia to Singapore in early 2006. Co-operation
between the Singaporean and Malaysian anti-terrorist forces appears to be good,
despite the ongoing political spats between the two countries. Marine piracy will
also remain an important problem in the waters surrounding Singapore, and
Singapore has been pressing for better international maritime security practices: the
nightmare scenario is a nuclear device on a boat berthed at Singapore. The navies of
Singapore and its neighbours are small and the topography of the area—with a large
number of small islands—would seem to favour the pirates. Singapore is pushing for
increased regional co-operation on this issue.
Civil unrest
There has been no civil unrest in Singapore for many years. If there were in future,
the police or armed forces would crack down on it heavily. The authorities view the
most likely fissure lines to be those associated with race—this was the issue that
sparked the well-known 1960s race riots. The government is keen to maintain a
dialogue with representatives of the Malay and Indian communities, but the obvious
Chinese dominance of the government continues to cause resentment. Official
Muslim bodies moved quickly to condemn the alleged terrorists arrested in
December 2001, and the international furore over the Danish newspaper cartoons of
the Prophet Mohamed in 2005 caused no violence in Singapore. In the longer term,
the most likely external trigger for civil unrest remains increased racial strife in either
Malaysia or Indonesia. A prolonged economic downturn would also significantly
increase the risk of civil unrest.
Violent crime
Violent crime is not a problem for business. Guns are not in wide circulation, and
recent murders have been exclusively "domestics", with no business or political
component. Some firearms sentences carry a mandatory death sentence. Other
violent crime is generally limited to vandalism, often alcohol-related.
Drug-smuggling and organised crime
Singapore has long imposed a mandatory death penalty for drug-smuggling, and has
not shirked from carrying it out. Amnesty International, a London-based human
rights organisation, claimed in 2004 that Singapore had the world's highest execution
rate per head of population. There is some organised cigarette-smuggling from
Indonesia, and some illicit gaming, but in general Singapore's organised criminal
groups are small, poorly organised and stand no comparison to their counterparts in,
for example, China or Japan. Singapore's police force is also considered highly
effective.
Country Profile 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006Singapore 13
International relations and defence
Relations with Malaysia Singapore has long had a difficult relationship with Malaysia, its closest neigh-
remain difficult bour, with a mixture of major and trivial disputes centred around water supply,
the position of the Malaysian passport control in the Tanjong Pagar railway
station (the station is currently in the centre of Singapore, but the land is still
owned by Malaysia), and the extent to which the Singaporean air force can
overfly Malaysia, among other things. Leaders on both sides have sometimes,
intentionally or unintentionally, exacerbated the situation with remarks seen as
derogatory to the other country.
In early September 2001 an outline agreement on resolving existing disputes
was reached between Singapore's then senior minister, Lee Kuan Yew, and the
previous prime minister of Malaysia, Mahathir Mohamad. However, hopes of a
speedy resolution quickly receded. In 2003 both governments' attention was
diverted by a dispute over whether Singaporean land reclamation was
prejudicing shipping lanes into a Malaysian port, Tanjung Pelepas. (The
International Tribunal on the Law of the Sea ruled in Singapore's favour.)
From early 2004 there was a warming in relations. There were several visits to
Singapore by the prime minister of Malaysia, Abdullah Badawi. Mr Abdullah,
who replaced Dr Mahathir in November 2003, has adopted a more conciliatory
approach towards Singapore. Reciprocal visits were made by Mr Goh (who has
been given special responsibility for this issue), by Lee Hsien Loong and, in
April 2005, by Lee Kuan Yew. But agreement on outstanding problems has
proved elusive, and the two sides have now found something else to row
about: Malaysian plans to build a “half-bridge” to replace the existing causeway
between the two countries. (Singapore, for various reasons, does not want to
build a bridge connection.) In January 2006 Malaysia started work on this half-
bridge but halted work in April, with the government also saying that possible
deals on other areas would now be put on hold. Malaysian domestic politics
suggest that it could take some time before serious discussions start again.
Mr Abdullah's domestic position is not strong, and he will, for example, be
unable to concede to Singapore on territorial issues, or on the price of water
supplied from Malaysia.
Relations with Indonesia are Singapore also has a difficult relationship with Indonesia. Following the com-
not warm plete breakdown of relations in the 1960s, Singapore's government made great
efforts to develop relations with Indonesia's president, Soeharto, and his
regime. To this end, Indonesian islands to the south of Singapore were jointly
developed, and Singaporean government-linked companies (GLCs) invested in
Indonesia. Singapore also became an important offshore financial centre for the
Indonesian Chinese business elite. However, when Soeharto was toppled in
1998, Singapore discovered that such links were a hindrance. Soeharto's
successor, B J Habibie, was openly dismissive of Singapore and its government.
After a good start, relations with the next president, Abdurrahman Wahid,
deteriorated in late 2000. Relations were then slowly rebuilt, with the signing of
two major gas deals in early 2001, but relations with Mr Wahid's successor,
Megawati Soekarnoputri, were businesslike rather than warm. However,
relations may improve in future. The current Indonesian president, Susilo
© The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 200614 Singapore
Bambang Yudhoyono, visited Singapore in early 2005 to sign an investment
protection agreement. It is hoped that Indonesia's parliament will soon agree to
an extradition agreement between the two countries: in the interim, there have
been more one-off extraditions. A few years ago Singapore started trying to
build up relations with individual Indonesian provinces, in the hope of
bypassing the political uncertainties of Jakarta, but is now downplaying this
approach, as it courts Mr Yudhoyono.
Singapore spurs ASEAN into Singapore was a founder member of the Association for South-East Asian
action over trade liberalisation Nations (ASEAN) but during the 1990s grew increasingly frustrated with the
organisation's tardy progress on freeing up regional trade. Accordingly,
Singapore began to display an increasing enthusiasm for bilateral FTAs, the first
of which (with New Zealand) was concluded in late 2000. An agreement was
reached with Japan in October 2001 and a wide-ranging deal with Australia at
the end of 2002. Singapore concluded an FTA with the US in 2003, which came
into force in January 2004, and a Comprehensive Economic Cooperation
Agreement (CECA) with India in 2005. This bilateral approach initially
complicated relations with Singapore's fellow ASEAN members, but their
attitudes towards trade liberalisation are changing. An ASEAN free-trade area
(AFTA) has been in place since the start of 2003, and will be significantly
deepened over the next few years. The driving force now is fear of the impact
of the dynamic Chinese economy; in 2005 ASEAN and China agreed plans to
create a free-trade area by 2010. Plans for an ASEAN-India deal are currently
stymied by Indian concerns over agricultural imports.
Singapore will continue to Despite the expansion of the Chinese economy, Singapore needs no reminding
look to the West that its prosperity still depends on continued investment in the island by
Western and Japanese multinationals, and on the openness of OECD export
markets. In the past Singapore has taken a keen interest in the Asia Pacific
Economic Co-operation (APEC) forum and the World Trade Organisation (WTO).
Occasional differences with developed-country trading partners, for example,
over intellectual property rights (IPRs) and restrictions to entry into Singapore's
financial sector, have not been allowed to develop into major problems.
Terrorist threat reinforces Singapore's enthusiasm for the US is motivated by military as well as economic
defence links with US reasons. Given the country's small size, and potentially troublesome neigh-
bours, self-defence remains a priority. Singapore's military has close links with
the US armed forces; particular reassurance is provided by the US Navy's use of
Changi naval base. (This relationship may, however, increase the risk of
Singapore's being a terrorist target.) The island is a member of the Five-Power
Defence Agreement (FPDA), which groups Singapore with the UK, Australia,
Malaysia and New Zealand, and provides a convenient forum for joint military
exercises. Military co-operation within ASEAN has proved difficult. Although
Singapore, Malaysia and Indonesia have been carrying out co-ordinated naval
patrols in the Malacca Strait since July 2004, Singapore's efforts to upgrade this
relationship to include, for example, the involvement of other countries, have
been rejected by the island-state's neighbours. The country's regular armed
forces are complemented by some 250,000 reservists. Equipment is modern
and defence spending is high as a proportion of GDP.
Country Profile 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006Singapore 15
Resources and infrastructure
Population
Racial issues are of concern Ethnic issues have been of concern in Singapore since the race riots that just
predated independence in 1965. Although the government has allowed the
Chinese to consolidate their dominance over the political system and much of
business, it has also encouraged individual ethnic groups to form their own
associations, provided these constitute no challenge to the government. In early
2001, amid signs of growing racial intolerance in Malaysia, the government
started a more formal dialogue with the Malay community in Singapore, and
this has continued. (In mid-2005 Malays accounted for 13.6% of the total
population and Indians accounted for 8.8%.)
Efforts to boost the birth rate In the mid-1980s the government abandoned its "stop at two" family limitation
have failed programme, replacing it with tax incentives to "go for three". Fear of future
labour shortages and increasing aged-dependency ratios prompted the author-
ities to offer cash payments to mothers on a sliding scale, with younger
mothers receiving more. There were also efforts to encourage the better-off to
have more children. Such financial inducements, however, failed to boost the
birth rate. The fertility rate reached a record low of 1.24 children per resident
female in 2004. The fertility rate has now been below the notional replacement
rate of 2.1 since 1976.
In recent years, the government has given greater emphasis to making life easier
for working parents—this approach should have more immediate gains, if it
attracts more women back into the labour force. In 2000 it announced that the
number of childcare places would be boosted, and the civil service was to be
allowed more flexible working patterns. Recent government budgets have also
extended subsidies available for childcare. The issue remains important—the
low birth rate is already contributing to an ageing of the population, which has
forced the government to raise the amount that individuals must hold in their
Central Provident Fund (CPF) accounts for retirement. To ease the problem in the
short term, the government has also taken an increasingly relaxed attitude to
immigration, particularly of skilled workers. City planners therefore continue to
work on the assumption that the population will increase sharply over the next
few decades, despite the low birth rate.
Population by age and ethnic group
('000; end-Jun 2005)
Chinese Malay Indian Others Total
0-14 481.9 127.4 71.3 18.4 698.9
15-29 529.0 111.2 61.9 12.3 714.2
30-44 714.4 117.4 88.3 24.9 944.9
45-59 621.1 87.8 55.5 13.3 777.8
60+ 338.7 40.9 32.3 6.1 417.7
Total 2,684.9 484.6 309.3 74.7 3,553.5
Note. Totals may not sum owing to rounding.
Source: Department of Statistics, Monthly Digest of Statistics.
© The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 200616 Singapore
Education
School education is The current state of children's education appears satisfactory. Primary education
highly efficient begins at six, with an emphasis on numeracy and literacy. Secondary education
starts from the age of 12, when students are streamed—special and express
courses take students to Ordinary Level examinations in four years; other
courses allow an extra year. Pupils then spend two years in a junior college or
three years in a centralised college, preparing for the Advanced Level exams,
which determine whether or not they can proceed to tertiary education.
University education is The National University of Singapore (NUS) was founded in 1980, merging the
stepped up University of Singapore with Nanyang University. It has around 22,000
undergraduate students and 8,000 graduate students. The Nanyang
Technological Institute became the Nanyang Technological University (NTU) in
1991. This second-string institution offers courses with a more vocational bent.
The private-sector Singapore Management University opened in 2000.
Plans for a fourth university, unveiled in 2002, were abandoned in early 2003.
Instead, the plan is now to create 3,500 additional university places by adding
facilities to the two main existing national universities, NUS and NTU. The NUS
is to have two new campuses, one dedicated to scientific research at Buona
Vista, and one for medicine at Outram. More importantly, 2,000 of the new
places are to be awarded to polytechnic students, the group for which the
fourth, abandoned, university had been planned.
There is a desire to increase The school system has a high international reputation, but will not be immune
"creativity" to change. The government is concerned that the traditional basis of rote
learning and written examinations is stifling the creativity seen as necessary for
success in a modern developed economy. There have therefore been various
moves to "revitalise" education, including substantial investment in information
technology (IT) for schools. The curriculum is being modified, and methods of
assessing pupils other than examinations are to be introduced.
Islamic schools are a point There is also a long-standing debate about the merits of insisting that each pupil
of friction become competent both in English and in a "mother tongue" (Chinese, Tamil or
Malay). It is hard to be certain whether this twin-track approach has reduced
overall standards. A separate battle continues about the fate of the madrasahs,
Islamic schools that exist outside the main school system. The government
wants them to improve their relatively poor exam pass rates, but is unlikely to
push them too hard, given current worries about terrorism: Singapore
madrasahs are seen as bastions of mainstream, moderate Islam. Debate has also
focused on the use of "Singlish"—English mixed with local dialects—which the
government wants to discourage.
Country Profile 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006Singapore 17
Health
The public sector dominates The healthcare system is a hybrid of public and private provision. The private
hospital healthcare sector provides around 70% of primary healthcare, but only 20% of hospital
care, the bulk of which comes from state-run facilities. There are three general-
purpose government hospitals, three specialised hospitals and a number of
specialist centres. Treatment is good, but there has sometimes been a reluctance
to use some of the most modern techniques, primarily for reasons of cost.
The CPF provides some health Each member of the CPF has two or three accounts to which both employer
insurance and employee contribute. One is the Medisave Account, withdrawals from
which constituted 3.4% of total CPF withdrawals in 2005. Medisave Accounts
are designed to cover the basic hospital costs of individuals and their families;
funds can be used to buy cover from the private sector or from the principal
public health insurance scheme, Medishield, in case of long-term “catastrophic
illness” treatment. Individuals are also permitted to use Medisave funds to
purchase an additional state scheme, Medishield Plus, or private insurance
policies. In 2002 a new ElderShield scheme was launched, targeted at the
elderly. A government endowment fund, Medifund, covers the costs of poorer
Singaporeans who are unable to pay for their treatment. Charges in public
hospitals are largely determined by the class of ward.
Natural resources and the environment
A new Green Plan is drafted Primary industries have never been important in Singapore. However,
attention has long been given to the one natural resource that Singapore is
capable of promoting—a relatively clean and pleasant environment. In 1991 a
broad-brush National Green Plan was published, committing the government
to limiting carbon dioxide emissions, phasing out controlled
chloroflourocarbons (CFCs) and improving procedures for the storage,
handling and transportation of hazardous products.
There has been progress towards some of these targets, with the import of
CFCs, for example, banned in January 1996. The Green Plan has also been
complemented by more specific schemes in areas such as water conservation
and recycling. Leaded petrol was phased out in 1998 and diesel has a low
sulphur content. New pollution regulations came into force in January 2001,
and existing industries were given up to three years to comply with these.
However, Singapore remains vulnerable to environmental degradation from
elsewhere—such as smog from forest fires in Indonesia.
The next Green Plan, to 2012, was officially released in August 2002. Three "key
thrusts" were identified:
• "quality living environment"—setting new air pollution policies, promoting
the use of natural gas, maintaining the quality of coastal and inland water,
reducing the need for landfill through recycling; and keeping down ambient
noise levels;
© The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 200618 Singapore
• "working in partnership with the community"—developing a community-
centred approach and ensuring public feedback; and
• "doing our part for the global environment"—working to enhance
international and regional environmental governance.
These rather broad, if laudable, objectives are complemented by a few specific
targets. By 2012 natural gas is to account for 60% of electricity generation; 25% of
water supply will come from "non-traditional" sources (for example,
desalination); and 50% of solid waste will be recycled. Considerable progress
has already been made on recycling water, and on desalination. The
government has been promoting the use of potable recycled water, branded as
Newater, and claims to have invested S$2.7bn (US$1.6bn) in outsourced water
projects between 2002 and 2005. A major desalination plant was opened by a
local company, Hyflux, in Tuas in late 2005.
Transport, communications and the Internet
A slightly more relaxed The government has considered deeply the problems of car usage. It has taken
approach to car ownership various measures to limit this, including implementing a variety of taxes and
introducing certificates of entitlement (COEs). A number of these documents
are released each month through auction; those wanting to put a motor vehicle
on the road must bid for them. The budget for fiscal year 2002/03 (April-March)
reduced car taxes and promised a slight increase in the number of COEs (in
return for higher usage charges); the budget for 2003/04 cut vehicle taxes by a
further 3-5%; and the budget for 2004/05 saw the Additional Registration Fee
(ARF)—paid when a car is first registered—lowered from 130% to 110% of its
Open Market Value (OMV). The 2005/06 and 2006/07 budgets contained no
new initiatives: as the 2006/07 budget points out, the cost of a medium-sized
car is now about half of what it was eight years ago.
The emphasis now seems to be changing to a “pay per usage” approach.
Charges have long been levied on cars entering the central area, but this
approach was extended significantly in April 1998, when electronic road pricing
(ERP), which uses a smart-card system to charge cars as soon as they enter
restricted areas, was introduced on the East Coast Expressway. ERP was
imposed on other highways later in the year and, despite some initial problems,
has proved a success for the authorities.
Public transport is efficient Public transport is famously effective. A complex bus network benefits from the
continuing programme of road upgrading. The Mass Rapid Transport (MRT)
system is a much-envied underground and overground commuter railway
system; existing lines are being extended and new lines built. Light Rail Train
(LRT) lines are also being run into some areas of the country that are not served
by the MRT.
Changi must cope with the Changi airport is regarded by many as the world's best airport. It currently has
needs of budget airlines two full-service terminals. The threat of low-cost airlines being established in
neighbouring countries has also resulted in the government acknowledging the
need for Changi to accommodate these new carriers, and a new terminal
Country Profile 2006 www.eiu.com © The Economist Intelligence Unit Limited 2006Singapore 19
dedicated to budget airways opened in March 2006. Another full-service
terminal is being built at Changi and is scheduled for completion in 2008.
The government accepts that budget airways will have a major role in regional
air travel. The national carrier, Singapore Airlines (SIA), has formed its own low-
cost airline, Tiger Airways, with Indigo Partners (a US-based private equity firm)
and Irelandia Investments (the investment firm of Tony Ryan, owner of Ryanair,
a budget airline based in Ireland). Other Singapore-based budget airlines
include Jetstar Asia (in which an Australian airline, Qantas, has a 49% stake) and
Valuair. The government’s investment arm, Temasek Holdings, appears to be
hedging its bets: it has significant stakes in both Tiger Airways and JetStar Asia.
Despite the growth of budget carriers, Changi's development is still closely
linked to the fortunes of SIA. SIA is one of the world's leading medium-sized
airlines, and has sought alliances to extend its international reach. Its most
notable acquisition so far has been a 49% share in a British airline, Virgin
Atlantic; it has also tried to develop links with Australasian airlines, but got its
fingers burnt by the New Zealand government's de facto renationalisation of Air
New Zealand (in 2001), in which it had a substantial stake. Another setback was
the decision by the Australian government in February 2006 not to give SIA
access to the lucrative Australia-US routes.
SingTel remains dominant in Telecommunications are regarded as too important to be left wholly to the
telecoms private sector. In the highly successful "privatisation" of Singapore Telecom
(SingTel) in 1993, only around 7% of the company's share capital was sold,
although the government's share has been further watered down since. Despite
the government's heavy presence in terms of ownership, attempts are being
made to increase competition in the market. SingTel's monopoly on basic
services (for example, telephone lines) ended in 2000. Starhub was the first
competitor in 2000, having been promised that a duopoly would be
maintained until April 2002. However, in June 2000 an additional licence was
awarded to Singapore Cable Vision (which resulted in the government's paying
compensation to Starhub). Competition in mobile telephone services has for
some time been intense, following the ending of SingTel's monopoly in mobile
telephone and pager services in April 1997. In 2001 SingTel bought the second
largest Australian telecoms firm, Optus. It has made several other overseas
acquisitions. A significant development in early 2005 was the awarding of more
power to the Infocomm Development Authority (IDA), the sector's regulator.
The IDA will now be able to force existing telecoms licence holders to share
their infrastructure.
The government has been active in developing Singapore as a "wired" economy.
Among its initiatives has been the establishment of a broadband network,
Singapore ONE ("One Network for Everyone"), designed to enable Singaporeans
to access a wide range of official and commercial online services through
terminals in public places and in homes. The government has also launched an
"electronic commerce plan" to drive the pervasive use of electronic commerce in
Singapore, and to strengthen Singapore's position as an international
e-commerce hub. However, Singapore’s initial information technology (IT) lead
over other countries in the region may be starting to evaporate: South Korea is
© The Economist Intelligence Unit Limited 2006 www.eiu.com Country Profile 200620 Singapore
now more advanced in IT usage. In 2005, 74% of Singapore's households had
access to a computer and 66% had Internet access; these shares have increased
only very slightly in the last few years.
Energy provision
The electricity market is Major changes have been under way in power generation and distribution.
opened up to competition Until early 2001 the Public Utilities Board (PUB) ran a monopoly. The system
now has a new regulator, the Energy Market Authority. The generating sector is
gradually being opened up to competition, with existing public-sector
generators sold off. Electricity supplies to larger customers have already been
opened up to competition, with competition allowed in this wholesale market
(for around 250 customers) since 2003.
Despite government efforts to discourage excessive use of electrical power,
consumption has continued to rise. According to the latest annual data, total
electricity sales were 34.8bn kwh in 2005, up by 4.7% on the 2004 level. Piped
gas sales were stable in 2005, after falling slightly in 2004.
The economy
Economic structure
Main economic indicators, 2005
Real GDP growth (%) 6.4
Consumer price inflation (av; %) 0.5
Current-account balance (S$ m) 55,373
Exchange rate (S$:US$) 1.664
Population (m; residents only) 3.6
Sources: Ministry of Trade and Industry, Economic Survey 2005; Department of Statistics, Population Planning Unit; IMF,
International Financial Statistics; Economist Intelligence Unit, CountryData.
Singapore is still highly Singapore has a highly industrialised economy; agriculture and mining are of
dependent on electronics minimal importance. Manufacturing is the most important sector, followed by
wholesale and retail trade, business services, transport and communications,
and financial services. (Manufacturing accounted for 26.8% of nominal GDP in
2005, compared with 14.8% for wholesale and retail trade.) The most important
manufacturing sector is electronics. During the 1990s Singapore was the world's
leading producer of disk drives. More recently, there have been significant in-
vestments in wafer-fabrication plants. However, this dependence on electronics
is a weakness as well as a strength—when world demand for electronics
declines (as happened in 2001-02), Singapore is hit hard. Oil refining and
chemicals are important industries, and a significant pharmaceutical sector has
emerged in recent years.
The country is exceptionally dependent on foreign trade. The total value of
trade in goods (exports plus imports) was equivalent to 368% of GDP in 2005,
compared with less than 20% in Japan, for example. This total, however,
includes a large volume of re-export trade, encouraged by Singapore's location
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