2008 Index of Economic Freedom

Here's some basic information you need to know about our economy

Singapore's economy is 87.4 percent free, according to our 2008 assessment, which makes it the world's 2nd freest economy. Its overall score is slightly higher than last year, reflecting improved scores in five of the 10 economic freedoms. Singapore is ranked 2nd out of 30 countries in the Asia–Pacific region, and its overall score is much higher than the regional average.
Singapore is a world leader in all 10 areas of economic freedom. Virtually all commercial operations are performed with transparency and speed, and private enterprise has boomed. Inflation is low, and foreign investment is welcomed and given equal treatment. There are no tariffs. Singapore's legal system is efficient and highly protective of private property, and corruption is almost nonexistent. The labor market is highly flexible, and dismissing workers is costless.

Singapore could do slightly better in financial freedom, which at 50 percent is the only one of 10 economic freedoms below 80 percent. It is a world leader in foreign exchange transactions, and the government is promoting Singapore as a global financial hub, but state influence in the banking system persists.

Background:
Singapore, a city-state of 4.5 million, is the most well developed, prosperous country in Southeast Asia. While nominally a democracy, the island nation has been ruled by the People's Action Party since gaining its independence from Malaysia in 1965. Singapore boasts the freest economy in Southeast Asia, with a well-earned reputation for efficient administration and clean governance. While the service sector dominates the economy, the country is also a major manufacturer of electronics and chemicals. The most heavily trade-reliant country in the world, Singapore has led the global trend toward bilateral and multilateral free trade agreements.

Business Freedom - 97.8%

The overall freedom to start, operate, and close a business is strongly protected by Singapore's regulatory environment. Starting a business takes an average of five days, compared to the world average of 43 days. Obtaining a business license takes much less than the world average of 19 procedures and 234 days. Bankruptcy proceedings are easy and straightforward.

Trade Freedom - 90%

Singapore's weighted average tariff rate was zero percent in 2005. Tariffs are generally low, but import restrictions, import taxes, import licensing, export incentive programs, issues involving intellectual property rights, service market barriers, sanitary and phytosanitary rules, and non-transparent regulations add to the cost of trade. An additional 10 percentage points is deducted from Singapore's trade freedom score to account for non-tariff barriers.

Fiscal Freedom - 90.3%

Singapore has low tax rates. The top income tax rate is 20 percent, and the top corporate tax rate is 20 percent, which will be reduced to 18 percent for the Year of Assessment 2008. Other taxes include a value-added tax (VAT) and a property tax. In the most recent year, overall tax revenue as a percentage of GDP was 12.9 percent.
Freedom from Government - 93.9%

Total government expenditures, including consumption and transfer payments, are low. In the most recent year, government spending equaled 14.4 percent of GDP. The state remains involved in the economy through Singapore's many government-linked companies.

Monetary Freedom - 88.9%

Inflation is low, averaging 0.9 percent between 2004 and 2006. Relatively stable prices explain most of the monetary freedom score. The government influences prices through regulation and state-supported enterprises and can impose controls as it deems necessary. An additional 5 percentage points is deducted from Singapore's monetary freedom score to account for policies that distort domestic prices.

Investment Freedom - 80%

Foreign and domestic businesses are treated equally, there are no production or local content requirements, and nearly all sectors are open to 100 percent foreign ownership. The government screens investment for incentive eligibility. Foreign investment is limited in broadcasting, newspaper services, foreign law firms and lawyers practicing in Singapore, and sectors dominated by government-linked companies. The government is trying to attract high-value-added manufacturing and services. Foreign ownership of certain landed properties is subject to approval. Residents and non-residents may hold foreign exchange accounts. There are no controls or requirements on current transfers, payments, or repatriation of profits.

Financial Freedom - 50%

Singapore is among the top five foreign exchange trading centers. There were 109 commercial banks in mid-2006, 104 of them foreign. One of the three banking groups is the government-controlled Development Bank of Singapore (the largest domestic bank group and publicly listed), and two have significant government-held minority shares. Foreign banks now have greater freedom to open branches and offer services, but the government seeks to maintain the domestic bank share of deposits above 50 percent, and the majority of domestic bank board members must be Singapore citizens and residents. License quotas for full-service foreign banks were eliminated in July 2005, and the quota for U.S. wholesale banks was eliminated in January 2007. Foreign banks are allocated to three categories that specify the services they can provide; 48 merchant banks offer a range of investment-banking services. A free trade agreement with the U.S. has loosened restrictions on U.S. banks. Foreign firms compete aggressively in insurance, fund management, and venture capital. Capital markets are well developed, and the Singapore Exchange is increasing its ties with other Asian exchanges. A single institution regulates the securities exchanges.

Property Rights - 90%

The court system is efficient and protects private property. There is no expropriation, and contracts are secure. Singapore has one of Asia's strongest intellectual property rights regimes, and foreign and local entities may establish, operate, and dispose of their own enterprises.

Freedom from Corruption - 94%

Corruption is perceived as almost nonexistent. Singapore ranks 5th out of 163 countries in Transparency International's Corruption Perceptions Index for 2006. Singapore enforces strong anti-corruption laws. It is a crime for a citizen to bribe a foreign official or any other person, whether within or outside of Singapore.

Labor Freedom - 99%

Highly flexible employment regulations enhance overall productivity growth and employment opportunities. The non-salary cost of employing a worker is low, and dismissing a redundant employee is not burdensome. Regulations related to the number of work hours are very flexible.

http://www.heritage.org/index/country.cfm?ID=Singapore
Charlene Tan :)