“Majulah Singapura” - Onward Singapore

Singapore is one of the few first-world countries in Asia. With a highly efficient infrastructure, free market economy, stable politico-socio environment, low tax regime and per capita income among the top five nations in the world, the lion-city’s economy was the fastest growing in Asia last year [yes, even surpassing China at 14.5%.

The main source of revenue is exports of consumer electronics, information technology products, pharmaceuticals, and financial services. Another is its port, which is among the busiest in the world, in terms of tonnage handled.

Moreover, it's a thriving cosmopolitan city, brimming with diversity of culture, language, arts and architecture, where Asians feel right at home and those from beyond feel welcome. One in three persons here has come from abroad adding to the nation’s unique blend of different cultures, lifestyles and religions, all co-existing harmoniously.

The city-state is safe and orderly, and is also recognised as one of the cleanest and greenest cities in the world. It has an efficient and affordable public transport system, along with world-class healthcare services. Primary, secondary and tertiary education – each matches international standards making Singapore a great place to raise a family.

Detailed below is an exhaustive discussion on all things relevant for moving, settling, knowing, prospering and getting hooked on Singapore.

Entering Singapore

Singapore is open for business, and open to business people. In fact, it is consistently rated as one of the easiest places in the world for setting up and doing business by the World Bank. It also boasts a highly-skilled workforce, and welcomes global talent with open arms. It is regarded as one of the most desirable Asian cities to live, work and play, thus aiding recruitment. It also invests heavily in training and education to meet the evolving needs of businesses. With over 110,000 expatriates and 7,000 multinational companies operating, Singapore provides an excellent opportunity for global citizens to forge a rewarding career.

Furthermore, pro-business policies make it easy for corporations to do business in Singapore. For the investor within the company, Singapore offers several ways in which one can enter and re-enter the country with relative ease. Like the Global Investor Programme (GIP) which eases the way for foreigners to set up and operate businesses in Singapore. Under this scheme, applicants must invest at least
S$2.5 million in a new business or to expand an existing business operation, or
invest at least S$2.5 million in a GIP-approved fund.

Foreigners who have substantial personal net wealth may also apply for permanent residence under the Financial Investor Scheme. Applicants for this scheme have the option of either transferring at least S$10 million in assets to Singapore to be managed by a financial institution, or hold at least S$8 million in assets in Singapore and invest S$2 million in private housing properties here.

Other options are multiple journey visa, long-term visit pass for entrepreneurs and the EntrePass. The last one is designed to facilitate the entry and stay of entrepreneurs who will be actively involved in starting-up and operating a company in Singapore. The EntrePass has an initial validity period of up to 2 years and is issued upon the submission of a sound business proposal.

For individuals looking to work in Singapore, getting an employment pass eligibility certificate (EPEC) or a personalised employment pass (PEP) is worth considering. Foreigners with selected tertiary qualifications or skilled migrant visas can apply for the EPEC which gives them up to a year in Singapore to look for a job. While PEP is issued to overseas applicants who have a minimally last drawn monthly salary of S$7,000 or hold a skilled migrant visa

As regards to cost of living, Mercer's cost of living survey 2009 ranked Singapore as the tenth most expensive city in the world, for expatriates. Within Asia, Singapore remains the fifth most expensive, after Tokyo, Osaka, Hong Kong, and Beijing. The major expenses are likely to be house rent, transport - if owning a car, and children’s education.

A check-list after arriving in Singapore is - get the employment pass endorsed, do house-hunting, open a bank account and apply for a credit card, sign up for a mobile phone, register for various government services, and learn how to get around.

Various housing options include private condominiums and the subsidised Housing Development Board flats; major banks are DBS, OCBC, UOB and Citibank; and tele-communication service providers are Starhub, Singtel and M1.

Understanding Singapore

Even though the earliest known settlement in Singapore dates back to 2^nd century AD, its modern history is not very old. Founded in 1819 as a British trading colony by Stamford Raffles, it formed an important strategic trading and military base in the eastern borders of the British colonial empire. When the wave of decolonisation started after the Second World War, Singapore joined the Malaysian Federation in 1963. But owing to serious ideological differences with the ruling party in Malaysia, Lee Kuan Yew, the first prime minister of Singapore from People's Action Party (PAP), separated from the federation and declared the republic sovereign on August 9, 1965.

Since then, Singapore has adopted a Westminster system of unicameral parliamentary government representing 87 constituencies for which members are elected by popular vote to serve five-year terms. The head of the state is the president, also elected by popular vote for a six-year term. Presently serving president is S R Nathan, who is due to complete his second-term in office in August 2011.

Notably, the PAP has won all the elections and formed successive governments in Singapore ever since independence, with Goh Chok Tong succeeding Lee in 1990. Subsequently, Lee Hsien Loong, eldest son of Lee Kuan Yew, has been serving as the republic's third PM from 2004.

Singapore has also won accolades the world over for its highly efficient judicial and legal system, which is based on the English common law. The Supreme Court is the highest court of law, with its chief justice appointed by the president on the advice of the PM.

Singapore is a tropical country of 63 islands with total land area of 704km sq, coastline of 193km, and population of around 5 million. Among these, about 74.2% are of Chinese race, 13.4% Malay, 9.2% Indians and 3.2% others.

Also, according to the latest census data, Buddhism is the most widely practised religion in Singapore [33%] with Chinese Mahayana being the predominant form. This is followed by Christianity, 18%, Islam, 15%, Taoism, 11%, and Hinduism, 5.1%.

Singapore also has four official languages, with English being the dominant one as it is the language of governance and business, as well as the medium of instruction in schools.  Other languages spoken are Chinese, Malay and Tamil.

Transport

A people-centred land transport system is integral to Singapore’s development. Last year, the ministry of transport spent S$4,185.84 million on road and public transport infrastructure, among other projects, to provide an affordable, efficient and effective transport system for all. The ministry expects to spend another S$3,592.03 million this year as part of its plans for an inclusive, liveable and vibrant global city. Of this, S$1,976.04 million will be used for constructing more rapid transit system lines.

Healthcare

According to the latest World Health Report on health systems by WHO,  Singapore’s health-care system has been ranked the best in Asia and sixth out of  the 191 countries worldwide. The government heavily subsidizes the basic health-care at public hospitals and polyclinics to ensure access to all Singaporeans of various strata. But, in order to ensure sustainable financing, patients are required to  take a portion of the burden of medical services they use under the framework of 3M. Right now, the city state has achieved a near universal healthcare coverage with a health expenditure of below 4 percent of the GDP by following the twin philosophy of individual responsibility and affordable healthcare for all.

The government has evolved a mixed financing system with multiple layers of protection to make health-care affordable.

While the first tier of protection is the heavy government subsidies of up to 80 percent of the total bill in acute public hospital wards, the second tier if provided by Medisave. MediSave is a compulsory individual medical savings account scheme which allows practically all Singaporeans to pay for their share of medical treatment without financial difficulty. It’s a portable account across jobs where the employees and their employer contribute a part of the monthly wage, to save for future medical needs. According to the Ministry of Health (MOH), as on December 2008, an average Singaporean had approximately S$ 14,900 in his or her MediSave account, sufficient enough to pay for about ten acute hospitalisations.

Another layer of protection is provided by MediShield, which is a low cost medical insurance scheme for Singaporeans to risk-pool the financial risks of major illnesses.

Many middle and higher income Singaporeans also supplement their basic coverage by buying integrated private insurance policies for treatment in private sector, known as Integrated Shield Plans. But as per government policy,  Singaporeans must subscribe to the basic MediShield product before they can purchase the add-on private Integrated Shield Plans. This preserves the national risk pool and act against cherry-picking of healthy citizens by private insurers. Also, to insure against a severe disabilities, programs like ElderShield and ElderShield Supplements are put in place.

The final layer of protection is the Medifund, which is a medical endowment fund set up by the government to act as the ultimate safety net for needy Singaporean unable to  afford their medical bills despite heavy subsidies, Medisave and MediShield.

Singapore also has a central provident fund (CPF), which is a social security savings scheme in which all employees and their employers contribute a percentage of their salary. Employees 55 years and above contribute at lower rates. In addition to providing security for old age, this fund can also be used for healthcare, home ownership and asset enhancement. There are 3.34 million CPF members and the CPF balance stood at S$185.888 billion, as of December 2010.

Economy

“An exceptional year,” – this was how Singapore’s minister for finance, Tharman Shanmugaratnam, described the republic’s last year economic performance while delivering his budget speech in March, 2011. And indeed it has been!

After two weak years in 2008 and 2009, when growth was close to zero, Singapore’s GDP grew by a record 14.5% in 2010 driven largely by the  manufacturing sector. Due to a surge in electronics and biomedical manufacturing output, the manufacturing sector rebounded by 29.7% in 2010 following a 4.2% contraction in 2009. Growth in the construction sector continued in 2010, albeit at a more modest pace of 6.1% compared to 17.1% in 2009. The services producing industries grew by 10.5% in 2010, compared to the contraction of 0.7% in 2009. This was due to a broad-based expansion in all services sectors. In particular, the wholesale and retail trade sector grew strongly by 15.1%, amid improving external demand. The financial services sector also posted a robust growth of 12.2%, on the back of increased activities for fund management and commercial bank lending. Tourism-related services sectors such as the hotels and the arts, entertainment and recreation segments, were bolstered by strong visitor arrivals as well as the opening of the two integrated resorts – Marina Bay Sands and Resorts World Sentosa.

The growth outlook for Singapore remains positive in 2011 with the continuing recovery of the global economy. The steady pace of growth in the advanced economies is expected to lend support to Singapore’s manufacturing activities. In Asia, resilient domestic demand  continues to drive intra-regional trade flows and benefit Singapore’s wholesale trade sector. In addition, domestic factors such as capacity expansion in the electronics and biomedical manufacturing clusters is bolstering growth in the manufacturing sector in 2011.

Also, over the last year, the Singapore dollar strengthened considerably against most currencies – 10% against the US dollar and 5.5% against the Euro.

Owing to such strong economic performance, the unemployment rate in 2010 was only 2.2% (preliminary). The total labour force is around 3.1 million, making the labour force participation rate to be 66.2%.

Nevertheless, downside risks remain. First, sovereign debt concerns in the  peripheral EU economies persist. Second, the inflationary concerns in Asia  may prompt further monetary tightening. Domestically, the economy is also facing a tighter labour market. On account of these factors, the Ministry of Trade and Industry expects the Singapore economy to grow by 4 to 6% in 2011.

Businesses

Recognising that many companies have seen significant cost pressures in the last year, the Singapore government has decided to provide a set of one-off measures for companies this year which includes 20% corporate income tax rebate, capped at S$10,000 for Year of Assessment (YA) 2011; or SME cash grant amounting to 5% of their revenues in YA2011, subject to a cap of S$5,000. This is meant to help small companies which may not benefit fully from the corporate tax rebate as they pay very little taxes.

Also, to encourage employers to attract and keep older workers, the government will be providing employers with a one-off special employment credit (SEC) for older workers covered by the workfare scheme. Employers will receive a SEC of up to 50% of employer CPF contributions for workers aged 55 to 59, and up to 80% of employer CPF contributions for workers aged 60 and above. The credits will be paid out over three years.

In order to ensure continued support beyond the first five years for the long-term effort to restructure industries, the Government will top up the National Productivity Fund (NPF) with another S$1 billion this year. This will bring the total fund size to its target of S$2 billion.

As regards wage policies, there is a national wages council, which is made up of representatives from the government, employers groups and trade unions. The council advises the government on wage policies, and issues guidelines that are in line with long term economic objectives. There are 70 registered employees trade unions and three employer unions and a federation of employee trade union, also known as the National Trade Union Congress (NTUC). NTUC works closely with the government and business sector to look after workers’ interests.

From this year, the Productivity and Innovation Credit (PIC) will also be enhanced [S$520 million a year in total], which was introduced last year to promote investments in six productivity related activities – R&D, approved design, acquisition of intellectual property, registration of intellectual property, purchase/lease of prescribed automation, and  equipment training of employees. Additionally, PIC benefits can now be claimed for expenditure on R&D done abroad, in addition to spending in Singapore.

Businesses will be allowed to deduct from their taxable income 400% of the first S$400,000 of expenditure for each of the above six categories, up from the 250% tax deduction and the cap of S$300,000 of expenditure for each category currently. A company can now get S$680 in tax savings for every S$1,000 invested, up from S$425 currently.

For up to S$100,000 of qualifying expenditure incurred in the current year, businesses can apply to defer the same quantum of tax payable in the same year. This deferred tax is paid next year. The tax deferral applies for expenditures incurred between 2012 and 2015.

The Government will also enhance the current cash payout option under the PIC scheme. Instead of claiming tax deduction, businesses can opt for a cash payout of up to S$30,000 for the first S$100,000 of their investments, up from a maximum grant of S$21,000 currently.

Also, to support enterprise growth, the government will commit S$850 million as part of the Enterprise Development Fund (EDF) over the next five years, to be administered by SPRING Singapore and IE Singapore. This is a substantial increase of about 45% from the previous five-year tranche. One of the priorities of the EDF is to help high-growth enterprises in their overseas expansion.

Additionally, foreign tax credit pooling will be introduced to facilitate remittance of foreign income to businesses’ Singapore bases. Such pooling will give businesses greater flexibility in the use of their foreign tax credits, reduce their tax payable, as well as simplify tax compliance. This measure will take effect from 2012.

The government has also decided to broaden its research agenda and increase the commercial outcomes from the Research, Innovation and Enterprise 2015 plan by topping up the National Research Fund by S$1 billion this year. It will also pool in S$2.5 billion under the Economic Development Assistance Scheme (EDAS) to continue its efforts to strengthen Singapore’s value proposition as an Asian base for corporate headquarters and other high-value activities. This will support new efforts, such as developing a talent pool of professionals and executives with a strong understanding of Asian markets and businesses, as well as attracting mid-sized global enterprises to set up their first Asian base in Singapore.

Also, maintaining its policy of “Singaporean first”, the government has decided to further increase foreign workers levy for all sectors. The average levy per foreign worker will be further raised by S$60 for the manufacturing sector, S$180 for the services sector and S$200 for the construction sector. These are over and above the earlier increases announced last year. To manage the continued increase in demand for S Pass holders, the government will also increase the levy rates for this category to S$300–S$450 by July, 2013.

Also, unleashing key tax changes in strategic business sectors,  the government has decided to help banks access more diversified funding sources for their lending business and strengthen Singapore’s position as a regional funding centre, by exempting from withholding tax all interest payments made by banks and similar financial institutions to non-residents for the purpose of their trade or business. The government will also extend the tax exemption schemes for captive insurers, specialised insurers and liability insurers to grow their technical expertise and underwriting capacity in Singapore.

A new maritime sector scheme has also been introduced to streamline and enhance existing maritime tax incentives. New tax benefits, such as certainty of withholding tax exemption for interest payments on loans to build or buy ships, will also be introduced to further entrench international shipping operators and encourage the growth of the shipping-related services sector in Singapore.

To further promote Singapore’s maritime sector, Singapore will expand the scope of GST zero-rating to repair and maintenance services performed on ship parts and components. To support growth in the biomedical sector, GST relief will be granted for importing clinical trial materials, as well as the approved contract manufacturer and trader schemes enhanced. Both these schemes will take effect from October 1, 2011.

To further enhance Singapore’s commodity markets, the government has decided to enhance the Global Trader Programme (GTP) to qualify all derivative trades under the scheme. This enhancement will apply to income from qualifying trades in the new qualifying derivative instruments, derived by a GTP company from 2012.

Corporate restructuring is also promoted further this year through measures encouraging mergers and acquisitions. For five years, a one-off tax allowance scheme is in place to help defray a portion of acquisition costs. The allowance is equal to 5% of the value of the acquisition, and is capped S$5 million in a single year. Stamp duty is also waived on the transfer of unlisted shares for deals worth up to S$100 million in any year.

Trade

A Free Trade Agreement (FTA) is a legally binding agreement between two or more countries to reduce or eliminate barriers to trade, and facilitate the cross border movement of goods and services between the territories of the parties.

Since the signing of her first FTA under the ASEAN Free Trade Area (AFTA) in 1993, Singapore’s network of FTAs has expanded to cover 18 regional and bilateral FTAs with 24 trading partners. Singapore’s FTAs have been instrumental in helping Singapore-based businesses strengthen cross-border trade by eliminating or reducing import tariff rates, providing preferential access to services sectors, easing investment rules, improving intellectual property regulations, and opening government procurement opportunities.

ASEAN was first formed in 1967 with six member countries: Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand and was subsequently joined by Cambodia, Laos, Myanmar and Vietnam. The first six members are commonly referred to as the ASEAN 6 while the latter four entrants are common known as the CLMV countries. The ASEAN member countries also signed an agreement on the Common Effective Preferential Tariff (CEPT) scheme in 1992 to eliminate tariffs and non-tariff barriers in the region. This agreement was subsequently updated in 2003

On May 17, 2010, ASEAN Trade in Goods Agreement (ATIGA) entered into force, upon the notification of the ratification of all ASEAN Member States. The ATIGA is an enhancement of the CEPT-AFTA into a more comprehensive legal instrument. With this, certain ASEAN agreements relating to trade in goods, such as the CEPT Agreement and selected Protocols would be superseded by ATIGA.

Singapore was also one of the original signatories of the Trans-Pacific Partnership (TPP) agreement along with New Zealand, Chile and Brunei in July, 2005. The TPP now includes the United States, Australia, Peru, Vietnam and Malaysia and these nations are aiming to conclude a high-standard regional trade agreement focusing on the Pacific economies. Singapore also commenced negotiations towards FTAs with Colombia and Taiwan in the first half of 2011.

Meanwhile, Singapore’s minister for trade and industry, Lim Hng Kiang, and the European trade commissioner, Karel De Gucht, met in July, 2011, to take stock of the negotiations on the EU-Singapore Free Trade Agreement (EUSFTA). The focus was on further improving access to each other’s markets for goods and service providers, as well as strengthening trade rules on issues such as intellectual property protection and rules of origin. Seven rounds of negotiations have been held since March, 2010 and a comprehensive FTA is expected by this year end.

Banking and finance

Singapore is a well established and diversified financial sector. In just over four decades, Singapore has established a thriving financial centre of international repute, serving not only its domestic economy, but also the wider Asia-Pacific region and in some instances, the world. Singapore’s financial centre offers a broad range of financial services including banking, insurance, investment banking and treasury services.

A key aspect of Singapore’s financial centre is its deep and liquid capital markets. With one of the more well-established capital markets in Asia-Pacific, the Singapore Exchange (SGX) is the preferred listing location for more than 200 global companies. Today, Singapore has grown to be the largest real estate investment trust market in Asia (excluding Japan) and also provides an extensive offering of investments in business trusts of shipping, aviation and infrastructure assets.

Singapore’s bond market has also grown significantly. With an extensive range of both Singapore government securities and foreign corporate bonds available, Singapore offers fixed income investors a wide range of investment opportunities.

As one of the top five most active foreign exchange trading centres in the world, Singapore is also the second largest over-the-counter derivatives trading centre in Asia, and a leading commodities derivatives trading hub.

With total assets under management of around S$1 trillion, and which continues to see steady growth, Singapore is also recognised as one of the premier asset management location in Asia.

Taxation

With it’s advantage of geographical proximity to emerging Asian markets, Singapore has further strengthened its position by introducing progressive tax policies to kindle entrepreneurial spirit in its citizens. These measures include low tax rates, generous tax incentives and relief measures, no capital gains tax, and a wide network of 64 comprehensive double tax treaties with the neighbouring economies.

Also, even though Singapore’s headline corporate tax rate is 17 percent, the effective tax rate is in fact much lower due to favourable tax exemptions to the new start-ups. Since the private limited company is considered a tax resident, it is eligible for various tax exemptions. New start-ups pay zero tax on the first S$100,000 of chargeable income for the first three consecutive years. A further 50 percent exemption is given on the next S$200,000 of the chargeable income.

Moreover, as Singapore practices a single-tier corporate income tax system, tax paid by a company on its income is the final tax and all dividends are exempted from further taxation. Other tax incentives schemes include the Product and Innovation Credit, Pioneer Incentive, Development and Expansion Incentive, Investment Capital Allowances, and Approved Royalties Incentive, to name just a few. Singapore also grants a unilateral tax credit for certain income derived from countries that have not entered into tax treaties with Singapore. (in addition to the double tax treaties already in place)

Also, angel investments – a common and critical source of funds for local start-ups, are now tax-deductible. Under the new initiative, angel investors who put in a minimum of S$100,000 in eligible start-ups over a year will enjoy the 50% tax deduction, but only at the end of a two-year holding period. The Government hopes the new Angel Investors Tax Deduction Scheme, as the programme is called, will help generate S$600 million worth of angel investments over the next five years. For individuals to qualify as angel investors under the scheme, they need to have at least three years of experience in early stage investment, be entrepreneurs with a minimum five-year track record or senior management professionals with at least eight years of corporate experience. According to Spring, there are more than 100 angel investors here, and they typically invest between S$30,000 and S$50,000 in local start-ups.

The personal income tax is also low in Singapore by international standards, with only 44% of the resident work force taxed at progressive rates of up to 20% (above S$320,000) on income accruing in or derived from Singapore. A flat-rate of 15% is applicable to non-residents.

In view of strong growth in the past years, the government has announced a  package of individual income tax benefits for all Singaporeans, under which all resident individual taxpayers will be given a one-off personal income tax rebate of 20%, capped at S$2,000 per taxpayer, in 2011/12, and a new personal income tax rate structure will take effect from
2012/13. Marginal tax rates will be reduced for the first S$120,000 of chargeable income. While all taxpayers benefit, middle-income earners will enjoy the largest percentage reduction in taxes under the new rates.

Furthermore, to increase the resilience of taxes as a source of government revenue, Goods and Services Tax (GST) was introduced in 1994, whose current rate is 7%.

Interest, royalties, rentals from movable properties, management and technical fees, and director’s fees paid to non-residents (individuals or companies) are subject to withholding tax in Singapore.

The Income Tax Act of Singapore is the governing statute regarding corporate and individual taxation matters. The Inland Revenue Authority of Singapore (IRAS), formed in 1960, is responsible for collecting income tax, property tax, goods & services tax, estate duty (abolished since Febuary, 2008), betting taxes and stamp duties.

Singapore is well advanced with e-filing for tax returns. IRAS has disclosed that more than 870,000 taxpayers e-filed their tax returns by the due date of April 18, 2011, setting a new e-filing rate high of 96%. This represents an increase of 2% from last year’s 94% e-filing rate. However, including the 38,000 taxpayers who filed paper returns, the overall filing rate this year is 88%, about the same as last year.

Double Taxation

The development of international trade and multinational corporations has increased the issue of double taxation. To avoid this and also make clear the taxing rights between Singapore and her treaty partner on different types of income arising from cross-border economic activities, Singapore currently has comprehensive avoidance of double taxation agreements with 67 countries [as on July 15, 2011]. This enable companies to access relief from double taxation, either by way of tax credit, tax exemption or a reduced tax rate.

This include Australia, Canada, China, France, Germany, India, Indonesia, Israel, Italy, Japan, South Korea, Malaysia, New Zealand, Russia, Saudi Arabia, South Africa, Sweden, Switzerland, Thailand, UK and Vietnam, among others. Singapore also has limited treaties, covering income from shipping and/or air transport, with Oman, Chile, Hong Kong, U.A.E., Bahrain and U

Investments

Investing in Singapore residential property can be a highly profitable investment, provided one understands the merits and limitations of such investments. Of the many important considerations for a local or foreign investor investing in residential property would be the future economic growth of its location. And more so when the supply is increasing rapidly. This year, 35,000 private units (condos and landed properties) have already been sold, with 45,000 more in the pipeline.

Also, to meet strong demand from developers and property buyers, URA has just announced its Government Land Sale Programme for the second half of this year. This will inject another 8,000 private residential units into the market. Together with committed investments, some 53,000 units will be looking for buyers over the next couple of years or so.

As for public housing, 25,000 units are being launched this year, averaging 1,800 units per month. Another option is the HDB resale flats, which as per the minister of national development, Khaw Boon Wan, “too lively.” Last year, for example, about 89,000 units were sold.

Amidst such supply and fears that the property market could be overheating, Singapore’s government announced immediate measures in 2010 aimed at maintaining price stability.

With effect from August 30, 2010, the ministry of finance increased the holding period for the imposition of seller’s stamp duty (SSD) from one year to three years. Specifically, the SSD levied on a residential property was revised so that, if it is sold within the first year of purchase, the full SSD rate – 1% for the first S$180,000 of the consideration, 2% for the next S$180,000, and 3% for the balance – was imposed. Property sold within the second year of purchase became liable for two-thirds of the full SSD rate; and property sold within the third year of purchase, became liable for one third of the full SSD rate.

In addition, for property buyers with one or more outstanding housing loans at the time of a new housing purchase, the minimum cash payment was increased from 5% to 10% of the valuation limit, and the loan-to-value (LTV) limit was decreased, for housing loans granted by financial institutions to these buyers from 80% to 70%.

The holding period for the imposition of seller’s stamp duty (SSD) has therefore been increased from three years to four years; and the SSD rates have been raised sharply to 16%, 12%, 8% and 4% of the sales consideration for residential properties which are bought on or after January 14, 2011, and are sold in the first, second, third and fourth year of purchase, respectively. The impact of the SSD is especially significant as it is
payable regardless of whether the property is eventually sold at a gain or loss.

The above measures took effect on January 14, 2011.

Meanwhile, investors streamed back into the commercial property market in 2010 on the back of the economic rebound and the improving rents it brought. A new report said the number of transactions of strata-titled commercial real estate – shops, shop-houses and offices – jumped 57% to 1,219 last year over a muted 2009. The total value of sales more than doubled to S$2.5 billion. Experts say investors favour strata-titled units because they are a relatively cheap way to enter the commercial market and are not affected by the  recent cooling measures. Estimated rental yields of between 4 to 6 % – trumping the residential sector’s 3% – have spurred interest as well. Offices were the star performer last year with transactions up 85% over 2009 to 387, while their total value rocketed 165% to S$850 million.

Hedge fund

Singapore hedge fund start-ups are on the rise after the central bank approved new rules that didn’t impose a licensing requirement on most funds. Seven new hedge funds were set up in May and June last year, after the Monetary Authority of Singapore (MAS) proposed in April that managers with less than S$250 million and serving not more than 30 qualified investors will be able to choose not to be licensed by submitting a “notification” to the MAS. They and their bigger licensed counterparts will need to maintain a minimum base capital of S$250,000 and have at least two directors.

Singapore is vying with Hong Kong for a slice of the global S$1.7 trillion hedge-fund industry as the region’s growth leads the world. Singapore has made it easier for hedge funds to set up shop on the island than in other Asian cities such as Hong Kong, where hedge-fund managers face the same licensing requirements as mutual-fund managers.

Singapore’s hedge-fund industry grew to S$43 billion at the end of 2009, from about S$10 billion in 2005, according to MAS. There were 320 hedge-fund managers in the city- state last year, compared with fewer than 20 before 2001.

Gold

Investing in Gold is not simply a matter of buying a piece of the metal to lock in a safe place. There are many ways to own gold and, quite often, you do not see the actual thing at all. For instance, Singaporeans can buy gold by using their Central Provident Fund Ordinary Account savings to invest in gold savings accounts or gold certificates. Their value mirrors any rises or falls in gold prices.

One way to get your hands on gold is to buy products such as gold bullion coins and gold bars in various sizes and weights. These investments – unlike a paper gold investment – are subject to goods and services tax (GST) in Singapore, which means an investor will lose 7% of his investment upfront. But when you buy a gold certificate, you do not incur GST. However, there is an annual administration fee of S$30 per kg of gold.

For retail investors, an Exchange-traded fund (ETF) offers a convenient way to buy gold with relatively modest sums, and without the custody, storage and insurance charges that typically accompany bullion investments.

An ETF is listed on a stock exchange, and is bought and sold just like shares. ETFs are tracker funds that invest in the component stocks of an index. Investors need not pay a sales charge, unlike with a unit trust. They are, however, subject to a brokerage charge. Overhead costs are typically a fraction of those for unit trusts.

But while planing to invest in gold, one must also be aware of its pitfalls.

Gold investment comes with the risk of parting money for fake gold. A report by the Financial Times early this year said that hundreds of ounces of fake gold are making their rounds among goldsmiths in Hong Kong – the most sophisticated counterfeit that they have seen in decades. One of Hong Kong’s biggest jewellers – Luk Fook Group – was hoodwinked into buying US$11,500 worth of fake gold this year, the report said.

Offshore Banking

Financial investors have plenty of options when it comes to offshore banking investments. For sophisticated investors who are looking beyond the domestic market for investments, offshore banking investments are certainly worth including in one’s personal financial investment portfolio.

Forex

Singapore is the fourth largest forex centre in the world and the second largest in Asia after Tokyo. It is easy to find brokers regulated by the MAS to trade with. Regulated brokers are required to place customers’ funds in a segregated account so the money is protected. The required amount to fund varies from all brokers. Some requires a huge amount while other requires as low as S$50 or no minimum funding. One is required to sign a risk disclosure form 13 before starting to trade in forex in Singapore. .

Stocks

The Singapore Exchange (SGX) will be implementing a series of safeguards to ensure that snail-paced retail investors are not run over by high speed traders, who buy and sell stocks at lightning speeds. Its move to protect small investors is in preparation for its new $250 million trading engine, reputedly the world’s fastest, which roars into life this year.

SGX plans to introduce circuit breakers to halt trading if share prices were to suddenly plunge in turbulent market conditions. This will limit the fallout from such a nose-dive that will hit innocent bystanders such as small investors.

Another move involves ‘pre-execution checks’ on stock orders to ensure everything is in order. This aims to ensure that high speed traders do not use their super-fast computers to manipulate stock prices, for instance.

The SGX has announced a number of other initiatives recently as it seeks to boost its attractiveness to international investors, including the addition of eight more American Depository Receipts (ADRs) to its GlobalQuote board. All the ADRs are fungible with those listed in the US and allow investors, for the first time, to manage their exposure to these companies round-the-clock. Five of these ADRs are of major Japanese companies
including the world’s biggest automaker Toyota Motor Corporation. Two of the new ADRs are from major China companies which only have US listings. Their quotation on SGX will give investors their first-ever opportunity to manage exposures to these companies during the Asian time zone, when news flow relevant to the companies is likely to occur. The eighth ADR is from a major South Korean company, POSCO, one of the world’s largest steel makers.

By September, 2011, SGX will also become the world’s first exchange to start the clearing of Asian Foreign Exchange Forwards, a move intended to enhance Singapore’s global standing as a market for trading of interest rate derivatives and foreign exchange. The clearing of Asian FX Forwards will include the non-deliverable currencies traded in the region, namely the Chinese Yuan (renminbi), Indonesian Rupiah, Indian Rupee, Korean Won, Malaysian Ringgit, Philippine Peso and Taiwanese Dollar.

The Singapore Mercantile Exchange (SMX) announced in late 2009 that it had received in-principle regulatory clearance from the MAS to operate the first Pan-Asian multi-product commodity derivatives exchange, following the extension and enhancement in 2009 of the tax incentives on commodity derivatives trading (CDT). The CDT incentive scheme, originally contained in the 2004 budget, was introduced to promote the establishment of a commodities derivatives market and, thereby, improve
Singapore’s standing as an offshore financial centre. The scheme was improved in 2009 by relaxing certain restrictions on CDT companies in exchange-traded commodity derivatives, and by extending the 5% concessionary corporate tax rate to December 31, 2013.

SMX said that it is the first such commodity derivatives exchange to be based in the region, offering unrestricted cross-border trading to market participants using an electronic platform developed by Financial Technologies India Limited (Financial Technologies), its 100% shareholder that has invested S$75 million in the venture.

SMX offers a comprehensive platform for trading a diversified basket of commodities including futures and options contracts on precious metals, base metals, agriculture commodities, currencies and commodity indices.

Reits

Singapore is emerging as a genuine player in the real estate finance market that is developing across the Asia-Pacific region. In 2005, a report by Standard & Poor’s Ratings Services noted that Singapore, with over $1 billion in capital raised since 2002, was increasingly being seen as a key player in the region’s real estate investment trusts (Reits) and securitised real estate market arena.

Reits are in the main publicly traded companies that own and, in most cases, actively manage income-generating commercial real estate. Generally speaking, the majority of a firm’s income is passed onto investors without taxation at the corporate level. In Singapore, Reits’ dividends are tax-free provided more than 90% of the firm’s income is distributed to investors. Most of the city’s many listed Reits have chosen to do this.

Keen to encourage foreign interest in the domestic Reit scene, the government has announced in 2005 that foreign non-individual investors would be encouraged to invest in the Singapore property market with a cut in the withholding tax on Reit distributions to 10% from 20%, for a period of five years. Additionally, to attract more Reit listings, the government wants to waive stamp duty on the instruments of transfer of
Singapore properties into Reits to be listed, or already listed on the Singapore Exchange, for a five-year period.

As a result, Singapore-listed Reits are shaping up to be among the top choices for investors this year. Thanks to the improved economy and low interest rates, Reits have refinanced their debt and made aggressive acquisitions last year. Their overall business has also strengthened on the back of rebounding rental rates.

The FTSE ST Reits index, which measures the value of 17 Singapore-listed Reits, has jumped 10% since the start of the year, outperforming the real estate developers’ index’s 6% gain.

Structured deposits

A structured deposit is a combination of a deposit and an investment product, where the return is dependent on the performance of some underlying financial instruments. They include market indexes, equities, interest rates, fixed-income instruments, currencies, or a combination of these. Structured deposits typically offer returns that are potentially higher than those on traditional fixed deposits. Investors should note that the issuer is obligated to repay the principal in full only upon the maturity of the structured deposit. Examples of such products are UOB’s Growth Deposit Series 9 and POSB Invest Yield Series 9.

Bonds

When a firm issues bonds, it borrows money directly from investors. In return, it promises to pay it back after a specified period of, say, three to 10 years. In the interim, it provides a regular flow of cash ‘coupon’ payouts which are typically higher than the fixed and savings deposit rates. Corporate bonds are usually offered to well-heeled and institutional investors in big sizes of $250,000 or more. But this is set to change as the retail bond market takes off.

Recently, Singapore Airlines issued a corporate bond. Due to hot demand, retail investors have been offered S$150 million out of its S$300 million bond offering. The minimum subscription was S$10,000 for the retail tranche and the bond yields an annual rate of 2.15% over five years. The rate is lower than some other corporate bonds but is still more appealing than putting money in the bank.

Bond funds

As its name suggests, a bond fund is a unit trust that invests in bonds, usually with the objective of providing stable income with minimal capital risk. It is suitable for the retail investor as the minimum required sum is often small, at S$1,000. The bank or financial institution that sells the fund typically charges a sales fee of between 1 and 5 percent.

Cheaper home loans

Low interest rates are bad news for depositors but good news for home loan borrowers. Having a lower rate mortgage means that home owners can enjoy a positive cash flow if their rental yields are higher than their monthly mortgage instalments. Still, home-owners should be mindful that interest rates may shoot up, say, two years from now, after a period of low interest rates.

Conclusion

In the above discussion, we have thrown some light on the quality of life, economics, trade, commerce, and investment scenario in Singapore. In addition, the leisure and sporting scene is also thriving and growing here. The city is a big gastronomic draw, with a lively dining and entertainment scene that offers some of the best cuisine in Asia along with unique street food. It’s warm weather also makes all-year-round water and outdoor sports possible. There are a wide variety of well-tended green spaces and exercise facilities such as the east coast park and botanical gardens. Singapore is also ploughing resources into state-of-the-art sporting facilities such as the sports hub in Kallang, which will be ready in 2014.

All the above makes Singapore a hugely popular migration, business-friendly and tourism destination.

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