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Singapore Currency, Trade, and Investment Regulation
Singapore had an exceptionally open economy.
Fundamentally
strong, the currency reflected a sound balance of payments
position, large reserves, and the authorities'
conservative
attitude. From 1967 until June 1973, the Singapore dollar
was tied
to the United States dollar, and thereafter the currency
was
allowed to float.
The Monetary Authority of Singapore, the country's
quasicentral bank, pursued a policy of intervention both
domestically
and in foreign exchange markets to maintain a strong
currency. This
multifaceted strategy was designed to promote Singapore's
development as a financial center by attracting funds,
while
inducing low inflation by preventing the erosion of the
large
Central Provident Fund balances. Furthermore, the strong
currency
complemented the high wage industrial strategy, forcing
long-term
quality rather than short-term prices to be the basis for
export
competition.
Given Singapore's dependency on imports, however,
setting an
exchange rate always generated controversy. The 1986
Report of the
Economic Committee did not clarify official thinking. It
recommended that the exchange rate should "continue to be
set by
market forces, but its impact on [Singapore's] export
competitiveness and tourist costs should be taken into
account. The
[Singapore] dollar should, as far as possible, be allowed
to find
its own appropriate level, reflecting fundamental economic
trends."
After 1978, when the government abolished all currency
exchange
controls, Singaporean residents (individuals and
corporations) were
free to move funds, import capital, or repatriate profits
without
restriction. Likewise, trade regulations were minimal.
Import
duties applied only to a few items (automobiles, alcohol,
petroleum, and tobacco), and licenses were required only
for
imports originating from a few Eastern bloc countries.
There were
no export duties. As the government played an active part
in
promoting exports, there was an extensive system of
supports
including an export insurance plan.
The government promoted investment vigorously through a
whole
range of tax and investment allowances and soft loans
aimed at
attracting new investment or at helping existing
businesses upgrade
or expand. There was no capital gains tax. Special
incentives
existed for foreigners, including concessionary tax
arrangements
for some nonresidents, relief from double taxation, and
permission
to buy commercial and certain residential property. In
1985
extensive tax reductions were introduced to reduce
business costs.
Data as of December 1989
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