Singapore
Singapore’s economic freedom score is 89.4, making its economy the 2nd freest in the 2014 Index. Its score is 1.4 points better than last year, reflecting improvements in investment freedom and labor freedom that outweigh small declines in monetary freedom and business freedom. Singapore is ranked 2nd out of 42 countries in the Asia–Pacific region.
Over the 20-year history of the Index, Singapore’s economic freedom has advanced by nearly 3 points. The areas of market openness and limited government have advanced by double digits. High levels of trade freedom and regulatory efficiency continue to underpin Singapore’s competitiveness in global commerce and ensure resilient economic growth. Recording four consecutive years of score improvements since 2010, Singapore has achieved its highest economic freedom score ever in the 2014 Index.
A strong tradition of minimum tolerance for corruption is institutionalized in an efficient judicial framework, sustaining the rule of law in the dynamic economy. Openness to global investment has facilitated the emergence of a more competitive financial sector and continues to ensure economic growth and development. However, state ownership or involvement in key sectors remains considerable, hampering achievement of Singapore’s full economic potential.
Singapore is a nominally democratic state that has been ruled by the People’s Action Party (PAP) since independence in 1965. The PAP won 81 out of 87 seats in the May 2011 elections, although its percentage of the vote (just over 60 percent) was its lowest in history. The opposition won another seat in 2013 during a special election. Certain civil liberties, such as freedom of assembly and freedom of speech, remain restricted, but the PAP has embraced economic liberalization and international trade. Singapore is one of the world’s most prosperous nations. Its economy is dominated by services, but the country is also a major manufacturer of electronics and chemicals.
Rule of Law
Singapore has traditionally been lauded for its lack of corruption, though transparency remains a concern. The government’s overwhelming success in court cases raises concerns about judicial independence. Lawsuits against opposition politicians and parties can bankrupt them. Contracts are secure, there is no expropriation, and commercial courts function well. Singapore has one of Asia’s best intellectual property rights regimes.
Limited Government
Singapore’s top individual income tax rate is 20 percent, and its top corporate tax rate is 17 percent. Other taxes include a value-added tax (VAT) and a property tax. Overall tax revenues make up 13.8 percent of the total domestic economy. Government expenditures amount to 17 percent of GDP. Changes in some property and excise taxes appear to have targeted the wealthy.
Regulatory Efficiency
Launching a business takes three days and three procedures, and no minimum capital is required. There is no statutory minimum wage, but wage adjustments are guided by the National Wage Council. Inflation is under control despite the challenging external environment. The government funds generous housing and health care subsidy programs and influences other prices through regulation and state-linked enterprises.
Open Markets
Singapore’s average tariff rate is 0 percent, and there are few non-tariff barriers. Foreign investment in several economic sectors is restricted by the government. As a leading global financial center, the highly competitive financial sector offers a wide range of financing options. The government has been opening the domestic market to foreign banks; over 115 of 122 commercial banks are now foreign.
Population:
5.4 million
GDP (PPP):
$326.5 billion
1.3% growth
4.3% 5-year compound annual growth
$60,410 per capita
Unemployment:
2.0%
Inflation (CPI):
4.6%
FDI Inflow:
$56.7 billion
Source: 2014 Index of Economic Freedom
