Declining tourism, rising inflation, fluctuating exports, dropping property prices, unsure COE prices, and allegations of being a tax-haven. These dominated the business headlines in Singapore this year. Singapore Airlines, one of country's success stories, went for an business overhaul and entered into a joint venture with India's big business house Tata. Finally, when on October 22, Monetary Authority of Singapore (MAS) announced the Chinese decision to extend its prized offshore renminbi scheme to the city-state, it highlighted Singapore's success in balancing its economic relationships with China and Taiwan. Singapore-Taiwan free-trade agreement was signed two weeks later.
The tourism sector in Singapore is reeling under pressure from a changing landscape. The Monetary Authority of Singapore figures for the second quarter registered a decline in tourism-related activities. Air passenger arrivals declined by 0.4% quarter-on-quarter seasonally- adjusted annualised rate in this period, largely due to fewer tourists from China and the EU. Consequently, demand for accommodation services also moderated slightly, with hotel occupancy rates dipping to 86.3%. Even the newer attractions such as Resorts World at Sentosa (RWS) and Marina Bay Sands (MBS) saw a decline in local patronage due to the novelty factor wearing off and other safeguards such as entry levies, exclusion orders and visit limits.
Amid growing concern internationally on the use of financial centres to hide illicit funds or evade taxes, the Singapore government initiated stringent efforts this year to ensure that the country remains a clean and trusted financial centre. These included making laundering proceeds of tax evasion and tax fraud a crime in Singapore; signing the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters in order to enhance the international cooperation on the exchange of tax related information; and introducing a proposal to amend the Income Tax Act so as to allow the Inland Revenue Authority of Singapore (IRAS) to obtain bank and trust information from financial institutions without having to seek a Court Order.
The city-state also concluded with US an inter-governmental agreement that will facilitate financial institutions in Singapore to comply with the Foreign Account Tax Compliance Act, a US law which requires all financial institutions outside of the US to pass information about financial accounts held by US persons to the US Inland Revenue Service on a regular basis.
According to the MAS, the growth forecast for 2013, as indicated in its latest survey of economists have been revised from 2.9% to 3.8%. Going into 2014, economists have also raised the GDP forecast from 3.5% to 3.9%. Meanwhile, Consumer Price Index-All Items inflation and MAS Core Inflation are expected to come in at 2.4% and 1.7% respectively in 2013.
Also, as compared to 2012, non-oil domestic exports for 2013 registered a decline of 3.9%. Other key macroeconomic indicators [compared to the previous year] include manufacturing – 1.4%, finance services – 10.7%, construction – 5.6%, accommodation & food services – 2.9%, wholesale & retail – 5.3%, and private consumption – 2.5%.
Off-shore renminbi hub
Singapore's development as an offshore Yuan hub was kick-started in May, when the Industrial and Commercial Bank of China started its Yuan-clearing services in the city-state. In October, the pact was signed under which China agreed to allow Singapore-based investors to buy renminbi-denominated securities, thus paving the way for direct trading between the two countries’ currencies.
Other bilateral projects between the two countries such as China-Singapore Suzhou Industrial Park, Sino-Singapore Tianjin Eco-city and Sino-Singapore Guangzhou Knowledge City, are also on track and progressing well.
Singapore also signed a trade pact with Taiwan in November to be called the Agreement between Singapore and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu on Economic Partnership (ASTEP). It contains 17 chapters including market access conditions for trade in goods, cross-border trade in services, government procurement and e-commerce, issues related to trade rules, cooperation in intellectual property protection, and dispute settlement provisions.
The national carrier, Singapore Airlines, announced a joint-venture (JV) airline with India's Tata Group in a 49:51 stake deal. With the Foreign Investment Promotion Board of India clearing the JV in October, the new carrier is expected to take to the skies by mid-2014.