mab assign 2

8/3/2019 MAB Assign 2

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Introduction:

Singapore is an immigrant society. When it was acquired by Britain during the year 1819 it was

populated about few hundred Malays living simple lives in fishing villages. In the 1990s it is a

thriving city-state, which had a population about 2.7 million, and the per capita income was

highest in Asia outside of Japan. It is Located at the foot of the Malay peninsula, separated from

the mainland by a narrow stretch of shallow water, it is the pivotal island in the Straits of

Melaka. Singapores history has revolved around turning its strategic location to its commercial

benefit while remaining on good terms with its larger neighbours.

Singapore has one of the best business environments in the world. It is one of the world's most

competitive, most profitable, most transparent, with world-class intellectual property protections.

The presence of many leading global companies and local enterprises here is a testimony to

Singapore's excellence in manufacturing and services. There are more than 7,000 Multi-National

Corporations in Singapore. In addition to the service and manufacturing excellence, the country

leverages its strength as the regional hub for services such as logistics and education, Singapore

is poised to become Asia's leading services hub, providing world-class services.

Political system of Singapore:

The political system of Singapore has given it the reputation of an authoritarian and

administrative state. Since the day of Singapores Independence (9 August 1965), its politics has

been dominated by the Peoples Action Party (PAP). During the 2006 election the PAP won 82

out of 84 seats in the nations Parliament. Earlier PAPs dealings with communists, its governing

philosophy for the last several decades can best be described as Socialist Democracy.

Singapore is under the leadership of Peoples Action Party (PAP), which possesses a distinct

political culture: authoritarian, pragmatic, rational and legalistic. Singapores power structure is

highly centralized, characterized by a top-down style. It features appointment rather than election

to most offices. Economic growth and political stability were maintained by the paternal

guidance of the PAP. Thus, Singapore is not administered by politicians, but by bureaucrats, in a

meritocracy where power is gained through skill, performance, and loyalty to the nation and its

policies. Singapore has a multi-racial and multi-religious character, which gives a fair treatment


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to all races in education, housing and health, which considered as very important. The minorities

are assured of equal representation in Parliament through the Group Representation Constituency

or GRC system. The formal Head of State of the Republic of Singapore is the President. Sellapan

Ramanathan is the current President and he was sworn in on 1 September 1999. The Prime

Minister and Head of Government is Lee Hsien Loong, who was sworn in on 12 August

2004.There is a dominance of government-controlled companies in the economy. But in spite of

its powerful position, the Singapore government has maintained a clean, corruption-free image.

The mode of decision making is by consensus, and the leadership style is collective.

Economic Overview of Singapore:

The Singapore economy is an example of vibrant free-market economy that is developing at a

rapid manner. The per-capita income of the country is the highest in ASEAN. The businesssector has been supported and strengthened by a corruption-free environment, an educated and

motivated workforce, and well-established legal and financial business framework.

Singapores economic history is linked with the economic history of the Malay States. The

Singapore merchant community had been started to advocate British acquisition of the western

Malay States from the 1840s. Chinese and Europeans in Singapore were significant investors in

the tin mining industry in the western Malay States and were increasingly facing the political

instability of the Malay States and consequent lost commercial opportunities. Britain finally

began to acquire control of the western Malay States in 1874 when the ambitions of the

Singapore merchant and financial community were made stronger by imperial fears of French

and German intentions in Southeast Asia. Singapore was a major beneficiary of the addition of

Malaya to the British Empire.

By the late 19th century Singapore was an important financial and commercial centre. It was a

major trans-shipment port, where the products of Southeast Asia were collected, packaged and

re-exported and from where the products of industrial Britain and Europe were distributed.

During the period of Second World War two-thirds of Malayas imports and exports went

through the port of Singapore. It became a major financial and commercial base for British

companies in Southeast Asia. It is a dynamic economy, with strong service sectors, has one of

the highest per capita gross domestic products (GDP) in the world. Its airport, port and road


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systems are among the best in the world. Singapores major industries include electronics,

financial services, petroleum refining, pharmaceutical manufacturing, processed food and

beverages, rubber products, transport and logistics and maritime services.

In the recent years, Government had made certain efforts to reduce reliance on the manufactureand export of electronics by developing its services sector, as well as its biotechnology, chemical

and petrochemical industries. The key objective of Singapores Government is to achieve a

position that the country as a regional hub and pace setter in economic development and reform.

In particular, the Government had introduced measures to enhance Singapore's position as a hub

for education, financial and transport services. Recently it has also taken measures to improve

the education and training of Singaporeans, with a focus on developing a knowledge and

innovation-based economy and improving productivity.

Singapore's small population and dependence on external markets and suppliers has pushed it

towards economic openness, free trade and free markets. As well as government policies that

foster economic development, have been key factors for Singapore's strong economic

performance. The Government has continued to pursue an outward-looking, export-oriented

economic policy that encouraged two-way flows of trade and investment. An integral part of

Singapores trade policy is its bilateral approach to establishing Free Trade Agreements (FTAs)

with a range of states.

In December 2009, Singapore and the European Union have agreed to start negotiations for a

FTA. In March 2010, the EU Trade Commissioner, Karel De Gucht, visited Singapore to

formally launch the start of bilateral trade talks with Singapores Minister for Trade and Industry

Lim Hng Kiang.The FTA created additional trade and investments, as the ASEAN market has

been identified as priority market for EU exporters and Singapore made as the natural choice of a

hub from which to serve the Southeast Asia region.

Singapore is one of the economies that recovered the fastest from the crisis. After 2009 the

growth was negative (-1.1%), Singapore witnessed an exceptional year in 2010, with a GDP

growth of 14.5% and a decrease in unemployment to before crisis levels.


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In 2010, 0.1 percent of the labour force worked in agriculture, with a further 30.2 percent in

industry and 69.7 percent in services. Although the population is growing at the moment,

Singapore faces the problem of a declining population, and by extension a declining labour force,

if fertility rates do not improve and the influx of immigrants is stopped.

The labour force is vital to Singapore to continue its present path of economic growth. Despite a

relatively small land area of 687 sq km, Singapore aims to be a global and regional hub for

multiple activities, particularly trade and finance. Limited land area in Singapore has led to

strong government planning and regulation for land use. Singapore is also increasingly turning to

land reclamation from the sea in order to meet the nations demands.

In recent years, the Singapore government has invested heavily in diversifying the economy.

This has led to growth in the tourism industry, the pharmaceutical industry with a particular focus on biotechnology, financial services, business consultation services, education,

multimedia, retail and leisure, and the medical technology industry.

International Air Service Agreements in Singapore

Singapore has a liberal aviation policy in support of its aviation industry. The country has signed

in the region of 90 air service agreements with other nations, of which 20 are open skies

agreements. Recently Singapore has signed open skies agreements with the Thailand, United

Kingdom, the United States, United Arab Emirates, Chile, New Zealand, Denmark, Iceland,

Sweden, Portugal, Kuwait, Oman, Sri Lanka, and others. In other cases, when an open skies

agreement has not been achieved, a more liberal bilateral has still been signed (e.g., Malaysia,

Australia). Singapore is also a signatory to the MALIAT agreement with Brunei, New Zealand,

Chile and the United States which allows unlimited traffic rights between each country under

third, fourth, fifth and sixth freedoms, as well as unlimited seventh freedom traffic rights for

cargo-only flights. While Singapore has signed a large number of liberal ASAs a number of major markets still have restrictive agreements including Indonesia, China, Malaysia, Hong

Kong, India, Australia and Japan. There are no limits on foreign ownership and control of

airlines imposed by the Singapore government. However, Singapore Airlines maintains a

corporate policy to restrict foreign ownership to less than 50%.


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Impact of International Air Service Liberalisation on Singapore

Through the influence of liberalisation, there remain considerable government restrictions on

airline operations and ownership. Many ASAs still follow the constrictive model establishedover 50 years ago and most governments still apply restrictions on the ownership and control of

airlines. To address the impact of further liberalisation, analysis was undertaken to estimate the

traffic and economic impacts resulting from the further liberalisation of the Singaporean

international air market.

In Aviation Sector there is an increase in economic activity which is generated by the servicing,

management and maintenance of the additional air services.

Tourism Sector enables air service which facilitates the arrival of larger numbers of tourists to aregion or country; this includes business as well as leisure tourists. The spending of these tourists

can support a wide range of tourism related businesses: hotels, restaurants, theatres, car rentals,

etc.

Catalytic Impacts includes the role of air transportation in facilitating growth and productivity in

the general economy by increased trade, business activity and greater personal productivity.

There are no limits on foreign ownership and control of airlines imposed by the Singapore

government.

In general, liberalisation of air service agreements there is a wider impact on home carriers such

as Singapore airlines exposes to greater competition. Many of the benefits of liberalisation such

as fare reductions and increased services levels are driven by the competitive forces unleashed

when markets are deregulated. While this increased competition has the potential to weaken the

market position and profitability of the national carriers, liberalisation also offers a number of

offsetting benefits to national carriers:

Access to new markets liberalising ASAs can offer home players to access to new routes that previously were unavailable. In addition, fifth freedom rights can provide opportunities to serve

markets that previously had been uneconomical.

Improve access to capital removing ownership restrictions will allow them to access a wider

range of investment options at lower cost.


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Access to world-class expertise removal of ownership and control restrictions will provide

them with greater access to managerial and technological knowledge and best practice.

Singapore Airlines:

Singapore Airlines, currently the world's largest airways service provider. SIA has diversified

airline-related businesses, such as aircraft handling and engineering. Its wholly owned

subsidiary, SilkAir , manages regional flights to secondary cities with smaller capacity

requirements. Subsidiary Singapore Airlines Cargo operates SIA's dedicated freighter fleet, and

manages the cargo-hold capacity in SIA's passenger aircraft. SIA has around 49% shareholding

in Virgin Atlantic and engages the low-cost carrier sector through its stake in Tiger Airways,

which ranks amongst the top 15 carriers worldwide in terms of revenue passenger kilometers, and 10th in the world for international passengers carriers. On 15 December 2010,

Singapore Airlines was announced by the International Air Transport Association as the world's

second largest airline in the world by market capitalization with a worth of 14 billion US dollars.

However, Singapore Airlines maintains a corporate policy to restrict foreign ownership to less

than 50%. In large part, this is to ensure the airline complies with national ownership requires in

the ASAs.

Political factors:

This refers to the policies by the governments where the company operates. It is directly

proportional to the degree of intervention the government has in the companys operation. It also

reflects the extent to which the Singapore Airlines can use or allocate its finances to various

deals both within and outside it domestic territories. Currently being an international airline the

company always needs to take care of the political situations and policies. It differs from onecountry to another where it flies. Sometime back the company had pulled out from its stake

purchase bid of the Indian Airlines which was a small blow to the privatisation plans of the

Indian Government. Similarly the company faces several issues for its expansion across the

American continent especially in United States of America. The company is also facing issues to

fly to Australia from USA as it currently has dominated by the Quantas Airways and the UAL


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Corps united airlines due to the policy adopted by the Australian and American government of

granting only these companies the right to fly freely in the route. However Singapore Airlines is

yet to get access to this route.

Economical Factors:

The economic factors include the interest rates, taxation structures, economic growth, exchange

rates, and the inflation. Economically the company seems to be very strong and has made few

attempts for acquisitions beyond its territory. Acquisition bid for China Eastern Airlines was one

example.Also these factors have actually reflected in the earnings. Although the company has

always made profits but the costs have always increased. With the global recession in place,

increased interest rates and the aviation fuel rates the costs of the company has risen significantly

over the years of its operations. The company has been well managing the balance of its

economic investments and expenditure depending on each region where they operate in.

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