Trade Policy Overview of Singapore in 2023
Singapore, traditionally a significant transshipment point for South-east Asia, ranks amongst the globe’s busiest container ports. Its role as a hub reflects the city-state’s limited natural resources and its heavy reliance on external trade. This characteristic is further underscored by Singapore’s high trade to GDP ratio, which is at 336.8% in 2022, one of the highest in the world.
Emerging as a critical manufacturing site, Singapore has also carved its niche as a regional centre for oil supply, servicing, and refining. The country’s trade landscape is evolving with a rising proportion of capital goods, notably industrial materials, machinery, oil-drilling equipment, and telecommunications. Concurrently, services have grown in prominence as manufacturers shift their focus to international rather than regional markets.
Singapore, being virtually a free port, adopts a free-trade policy. Besides the goods-and-services tax introduced in 1994 for imports, very few goods are subject to duties or restrictions. Most goods can be freely imported to and exported from Singapore. However, import or export activities require permits from the Customs and Excise Department and from Enterprise Singapore. TradeNet, an electronic-data-interchange network, is the platform for submitting and securing approval for these permits.
In 2022, Singapore’s merchandise exports stood at US$515.8 billion, up from US$457.3 billion in 2021. Similarly, merchandise imports grew to US$457.6 billion in 2022 from US$406.2 billion the previous year. This upward trend yielded a trade surplus of US$58.2 billion in 2022 (US$136.5 billion if measured in BoP). The services balance also remained in surplus at US$32.6 billion in 2022, a significant increase from last year.
Singstat data points to China as Singapore’s single largest export market in 2022, making up around 13% of exports. The other significant export markets were the US, the EU, Taiwan, and Malaysia. China was also the largest source for Singapore’s imports, accounting for 13.4% of the total, followed by Malaysia, Taiwan, the EU, and the US. Major export categories, excluding re-exports, include machinery and equipment, mineral fuels, and chemicals, which also figure prominently among Singapore’s major import categories.
Singapore is a member of several international trade bodies, including the WTO. Regionally, it is part of the 21-member Asia-Pacific Economic Co-operation (APEC) forum and the Asian Development Bank. Singapore also forms part of the Association of South-East Asian Nations (ASEAN), which includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Thailand, and Vietnam.
ASEAN officially created the ASEAN Economic Community at the end of 2015. This single market and production base are designed to facilitate the free flow of goods, services, and investment across the region. However, complete economic integration resembling the EU is likely several years away. ASEAN has effective free-trade agreements (FTAs) with Australia and New Zealand, China, Hong Kong, India, Japan, and South Korea. Singapore is part of the Regional Comprehensive Economic Partnership (RCEP), involving ASEAN and several other countries.
Singapore ratified the RCEP agreement in April 2021, and it has come into effect in 13 of the 15 participating countries as of mid-2022. Despite non-binding provisions and weak enforcement mechanisms, the RCEP helps bolster Singapore’s position as a trading hub, primarily through supply-side harmonization. Most tariff reductions between Singapore and major economies have already been enacted, so the RCEP isn’t expected to be transformative.
Singapore is also a signatory to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The CPTPP replaces the 12-member Trans-Pacific Partnership that collapsed following the US’s withdrawal in 2017. Singapore ratified the CPTPP agreement, which came into effect at the end of 2018. The city-state continues to actively advocate for China’s entry into the CPTPP, even as it engages with the Indo-Pacific Economic Framework proposed by the US.
It has 17 active bilateral trade agreements, including ones with Australia, China, India, Japan, and the European Free-Trade Association (comprising Iceland, Liechtenstein, Norway, and Switzerland), among others. The city-state signed a long-awaited FTA and an investment-protection agreement with the EU in 2018. The FTA was implemented in 2019, and the investment-protection agreement is awaiting ratification by EU member states.
In the context of ongoing US-China tensions, Singapore is well-positioned to benefit as a potential relocation destination. The bifurcation in the technology supply chain may prove advantageous to Singapore as Chinese companies increasingly choose to establish their international headquarters here, separating their operations from mainland China. Despite Hong Kong’s political uncertainty, Singapore appears to be a more attractive venue for regional headquarters. However, it is unlikely that Singapore will displace Hong Kong in financial services and associated investment flows, barring a few niche areas.
Import Taxes & Tariff
In Singapore, nearly 99% of goods imported into the country are duty-free. Only a few specific items, namely liquor, motor vehicles, petroleum products, and tobacco, are subject to import duties. Motor vehicles are subjected to ad valorem rates of duty, which means they are taxed as a percentage of the assessed value of the good. For other dutiable items, duties are applied at specific rates based on the item’s weight or quantity. Singapore employs the Harmonized System for import classification and utilizes the Customs Valuation Code to calculate customs duties.
For items classified as gifts or legitimate trade samples valued under S$400, there is no requirement for import or export trade documentation. These items are also currently exempt from goods-and-services tax, but this exemption will cease in 2023, and the tax will be applicable to low-value goods.
Singapore is a member of the Association of South-East Asian Nations (ASEAN) Free-Trade Area (AFTA), which was established in 1993 to enhance ASEAN’s competitiveness as a global production base. The principal tool for achieving AFTA’s objectives is the Common Effective Preferential Tariff (CEPT) Scheme. Under this scheme, participating countries are committed to reducing intra-ASEAN tariffs to a range of 0–5% on all manufactured goods.
Since 2003, tariffs on 99.6% of products listed in the Inclusion List of the ASEAN-6 (which comprises Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand) have been reduced to the 0–5% range. The 10-X Principle, introduced in 2002, enables ASEAN countries that are ready for liberalization to proceed at their pace. Concurrently, the Initiative for ASEAN Integration supports less developed countries that need assistance. However, as of mid-2022, full integration had yet to be achieved.
Singapore enforces no quota restrictions, and the majority of goods can be imported under a general open license. However, certain items are banned from importation. These include chewing gum (though sugarless gum is permitted under the US-Singapore Free-Trade Agreement, albeit only available via prescription), chewing tobacco and imitation tobacco products, pistol or revolver-shaped cigarette lighters, fireworks, controlled drugs and psychotropic substances, and endangered wildlife species.
Certain products require specific import licenses. These include animals, birds and their by-products; plants; meat and meat products; fish and seafood products; fruits and vegetables; arms and explosives; bullet-proof clothing; toy guns, pistols, and revolvers; other weapons; pre-recorded audio cassettes; newspapers, books, and magazines; films, video tapes/discs, laser discs, CD-ROMs, and video games; telecommunications and radio communications equipment; toy walkie-talkies; medicines; pharmaceuticals; and poisons.
The processing of import licenses typically completes within two days of application submission. All supplies of goods and services in Singapore, as well as goods imported into the country (with some exceptions), are subjected to a goods-and-services tax of 7%. The tax value for imports is determined based on the cost-insurance-freight value. This calculation also incorporates all other costs, charges, and expenses related to the sale and delivery of goods up to the port or place of importation, plus any applicable customs and/or excise duties.
In Singapore, imported food, drugs, liquor, paints, and solvents must meet specific labelling requirements. Manufacturers are obligated to provide information regarding the content, country of origin, and the name and address of the manufacturer or vendor.
Singapore is home to nine free-trade zones (FTZs), which include the Brani Terminal, Keppel Distripark, Pasir Panjang Terminal, Sembawang Wharves, Tanjong Pagar Terminal, Keppel Terminal, Jurong Port, Airport Logistics Park of Singapore, and the Changi Airport Cargo Terminal Complex.
The Port of Singapore, under the supervision of the Maritime and Port Authority of Singapore, includes 53 berths managed by PSA International, a state-owned company. These berths are spread across its container terminals in Tanjong Pagar, Keppel, Brani, and Pasir Panjang. Jurong Port is operated by JTC Corporation, while the Changi Airfreight Centre is under the purview of the Civil Aviation Authority of Singapore.
In 2003, Singapore inaugurated the Airport Logistics Park of Singapore, its first logistics park with FTZ status, at a cost of S$35m. This 26-hectare checkpoint within the FTZ enables third-party logistics providers to leverage Singapore as a hub for time-sensitive and high-value logistics. Goods in transit that are discharged in an FTZ are exempt from customs formalities, including the necessity to declare a TradeNet permit.
Adhering to the United Nations’ sanctions policy, Singapore has implemented an export ban on certain goods to various countries. The prohibited goods include arms, related materials of all kinds, military equipment, and spare parts for these items. The countries subject to this ban are the Central African Republic, Democratic Republic of Congo, Iran, Iraq, Lebanon, Libya, North Korea, Somalia, South Sudan, Sudan, and Syria.
Moreover, if exporters aim to export or transship goods that are listed on the Strategic Goods Control List, which includes munitions and dual-use products and technologies, they must obtain a strategic goods permit. The export of some chemicals is also regulated under the Chemical Weapons Convention, necessitating a license.
Export Credits & Insurance
In Singapore, various commercial providers offer export insurance and export factoring services. Additionally, Singapore is a member of the Multilateral Investment Guarantee Agency (MIGA), a World Bank agency. Consequently, Singapore-based companies can secure their foreign investments against long-term political risk through MIGA. This provision is particularly beneficial for investment projects situated in countries with which Singapore does not have bilateral investment-guarantee agreements.