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Country Commercial Guides for FY 2000: Singapore Report prepared by U.S. Embassy Singapore, released July 1999 Note*

Chapter VIII. Trade and Project Financing

Brief Description of Banking System
As a result of the Government's decision in the late 1960's to open Singapore to foreign banks, the banking sector has been a major growth sector for the Singapore economy. Financial activities have become an important adjunct to Singapore's export-oriented industries and development as a manufacturing centre. The Monetary Authority of Singapore (MAS) performs all the functions of a central bank except currency issue, which remains in the domain of the Board of Commissioners of Currency. The unit of legal tender is the Singapore dollar. The MAS is a wholly-owned and controlled statutory board under the Ministry of Finance, and is responsible for all matters relating to banks and other financial institutions. It licenses and supervises banks, merchant banks, finance companies, insurance companies, money changers, securities dealers, investment advisers, futures companies, and other financial institutions. The MAS also formulates and implements Singapore's monetary and exchange rate policies.

Singapore does not have a deposit insurance program. Banks are very well supervised by the MAS in Singapore. The MAS requires foreign banks operating in Singapore to meet the minimum BIS standard of 8.0% but local banks have to meet a more stringent ratio of 12%. Financial statements are in compliance with international standards and audits are performed by internationally recognised accounting firms. In 1998, loans to the private sector accounted for 85.4% of the banking system's assets while 14.6% went to the government. There is no separate category for state-owned enterprises as they are run like a private company.

Foreign Exchange Controls Affecting Trade
There is free movement of capital and profits in Singapore. Banks are required to consult the Monetary Authority of Singapore before considering Singapore dollar credit facilities exceeding S$5.0 million to any non-resident, or to a resident where the Singapore dollars are to be used outside Singapore.

General Availability of Financing
Three types of commercial banks operate in Singapore, depending on the type of license they possess. There are 142 commercial banks in Singapore, comprising 31 full-license banks (of which 9 were locally incorporated), 13 commercial banks with restricted licenses, and 98 with offshore licenses. Three U.S. banks operate full licensed branches in Singapore. Several large commercial banks offer a variety of banking services to manufacturing firms and other clients. Most banks extend credit for five to ten years at competitive interest rates covering up to 50 percent of plant and machinery costs and up to 65 percent of the value of factory buildings. Higher percentages are available for particularly desirable projects and for expansion loans. Many larger Singapore banks have subsidiaries that carry out merchant banking, insurance, property development, securities trading as members of the stock exchange, and underwriting issues of government bonds. Sixty-nine merchant banks provide a wide range of services not covered by some commercial banks, including investment portfolio management, investment advisory services, advice on corporate restructuring, mergers and acquisitions, financing, lending or participating in syndicated loans, capital equipment leasing, and underwriting and floating bond and stock issues.

MAS engages in limited money market operations to influence interest rates and ensure adequate liquidity in the banking system. The Government does not set targets for monetary aggregates. Money supply and domestic interest rates are primarily determined by international, rather than local conditions. The exchange rate is the MAS's most important tool for controlling inflation.

How to finance exports/methods of payment
Singapore has a well developed financial system and Singapore offers the whole range of export finance instruments. Shipments are generally made under letters of credit and sight drafts, depending on the exporter's preference and the extent of past dealings with the purchaser. Standard credit terms are generally 30 to 90 days. Quotations are generally made on a C.I.F. basis. The prices given are in U.S. dollars but should be clearly stated. Exporters making quotations in Singapore dollars should consult their banks for the prevailing exchange rate. Singapore uses the metric system, so it is often beneficial for price/quantity quotations to be prepared accordingly.

Types of available export financing and insurance
U.S. government agencies like the Export-Import Bank of the United States and the U.S. Department of Agriculture, as well as state and local bodies like the Small Business Administration offer a variety of programs to assist exporters with their financing needs. Firms seeking such assistance should contact the nearest Export Assistance Centers.

Types of project receiving financing/Availability of project financing Singapore is considered a developed country and does not receive development assistance from multilateral institutions.

List of Banks with correspondent U.S. banking arrangements

Please see Appendix E.