Foreign direct investment in Singapore

Out-Law Guide | 01 Mar 2022 | 3:07 pm | 5 min. read

Compared to other countries in the Southeast Asia region, Singapore has relatively minimal foreign direct investment (FDI) controls save in a few specific sectors.

These sectors relate, in one way or another, to infrastructure assets accessible by the public or areas where national security concerns may lie. In general, the Singapore government maintains a level of oversight and control over FDI in two ways:

  • legislative restrictions: FDI is restricted in certain sectors such as real estate or media; and
  • licensing regime: the government controls certain sectors through rigorous licensing regimes, applying both qualitative and quantitative criteria depending on the sector involved. A licensing regime is in place for example in the banking and telecommunications sectors, and both foreign and domestic investors are required to seek specific approvals from the respective regulatory bodies.

That said, even in these specific sectors, the Singapore government generally promotes a consultative approach between foreign investors and the regulatory bodies, where each application is assessed on a case-by-case basis to ensure that it is assessed on its merits.

The Singapore government maintains a level of oversight and control over FDI in two ways: legislative restrictions and a licensing regime.

In addition, the Singapore government has and continues to encourage FDI through the implementation of various initiatives. These include incentives granted by the Economic Development Board of Singapore (EDB); and maintenance of an overall investor-friendly tax regime which support the business community, from start-ups to mature companies looking into expansion plans to multinationals moving their businesses or headquarters to Singapore.

The list of sectors set out below is by no means exhaustive, but includes key sectors where foreign investment controls are imposed.

Real estate

The main regulatory bodies for this sector are the Singapore Land Authority, the Housing and Development Board (HDB) and the Jurong Town Corporation, depending on the type of real estate involved.

Generally, specific legislative restrictions on foreign ownership apply to certain types of residential property including vacant land; land zoned for residential purposes; landed residential properties; public residential units known as HDB housing, and other real estate such as workers' dormitories.

FDI in private high-rise residential units (condomiums); housing on Sentosa Island, and industrial and commercial real estate is generally not restricted.

Broadcasting

Info-communications Media Development Authority (IMDA) is the regulatory body for this sector.

Specific legislative restrictions on foreign ownership apply to broadcasting companies in Singapore, pursuant to the Broadcasting Act (Cap. 28) (BCA). Under the BCA, a broadcasting licence will not be granted if the company is controlled by foreign sources or if foreign sources hold more than 49% shares or voting power of the company. Other controls include:

  • prior approval is required before a person can become a substantial shareholder or controller of a broadcasting company;
  • prior approval is required in respect of any funds from a foreign source for purposes of financing any broadcasting service owned or operated by a broadcasting company;
  • prior approval is required for the appointment of the chief executive officer or director of a broadcasting company; and
  • a requirement for the chief executive officer and at least one-half of the directors of a broadcasting company to be Singapore citizens.
Domestic media

Info-communications Media Development Authority (IMDA) is the regulatory body for this sector.

Similar to the broadcasting sector, specific legislative restrictions on foreign ownership apply to newspaper companies in Singapore. Ownership of companies in the newspaper publishing industry in Singapore is regulated by the Newspaper and Printing Presses Act (Cap. 206) (NPPA). Under the NPPA, a newspaper company must have two classes of shares, with one class of shares held only by Singapore citizens or approved corporations. Other controls include:

  • prior approval is required before a person can become a substantial shareholder or controller of a newspaper company;
  • prior approval is required in respect of any funds from a foreign source; and
  • requirement for all directors of a newspaper company to be Singapore citizens.
Financial services and banking

The Monetary Authority of Singapore (MAS) is the regulatory body for this sector.

Financial services and banking related activities are primarily regulated by MAS under several pieces of legislation including, but not limited to, the Monetary Authority of Singapore Act (Cap. 186), the Banking Act (Cap. 19) and the Finance Companies Act (Cap. 108).

The types of banking activities that local and foreign financial institutions are allowed to carry out are tied to the conditions of the relevant licences granted to them. For example, wholesale banks are not allowed to operate retail banking facilities denominated in Singapore dollars, while foreign full banks may obtain 'qualifying full bank' privileges under the qualifying full bank scheme in order to access more customer services locations and local ATM networks in Singapore.

There are also certain restrictions on equity participation, by locals and foreigners, in Singapore-incorporated banks. For example, regulatory approval is required for any merger or takeover of a local bank or financial holding company, as well as for individuals becoming a 12% controllers, 20% controller or indirect controller of designated financial institutions.

Professional services

The Legal Services Regulatory Authority (LSRA) is a department, established under the Ministry of Law, which oversees the regulation, licensing and compliance of all law practice entities and the registration of foreign lawyers in Singapore.

All law practices are subject to a licensing regime that determines the Singapore law-related services that they can offer. For example, a foreign law firm that is seeking to establish in Singapore may apply to the LSRA to operate as a foreign law practice (FLP). FLPs may offer legal services in the area of foreign and international law, but cannot practice Singapore law except in the context of international commercial arbitration. In order to be able to undertake Singapore law-related legal services, FLPs will require either a qualifying foreign law practice (QFLP) licence or to enter into a joint law venture or formal law alliance with a Singapore law practice (SLP).

While FLPs and regulated foreign lawyers may hold interests in SLPs, they are subject to certain threshold requirements including limits on the ratio of regulated foreign lawyers to Singapore qualified lawyers as well as restrictions relating to directorships, partnership interests and shareholdings in SLPs. The QLFP scheme is not currently open for applications, and there are no details available regarding further rounds of application for the scheme at this time.

Separately, all entities that provide public accountancy services must be under the control and management of partners who are public accountants residing in Singapore. If the firm has more than two partners, two thirds of the partners must be public accountants residing in Singapore. Only public accountants who are members of the Institute of Singapore Chartered Accountants in Singapore and registered with the Singapore Accounting and Corporate Regulatory Authority may practice in Singapore as an auditor of financial statements and as a judicial manager under the Accountants Act (Cap. 2).

Legal consequences

In cases where foreign ownership restrictions are imposed as legislative restrictions, non-compliance with such restrictions is an offence. Further, in cases where real estate is acquired in contravention of the foreign ownership restrictions, the transfers will be null and void and any person contravening such restrictions will be guilty of an offence.

Separately, in cases where controls are implemented through the licensing regimes, a licence will not be granted and it is an offence to carry out licensable activities without a licence. 

The penalties for committing an offence include fines and imprisonment terms. The amount of fines or length of imprisonment term imposed vary, and are set out in the various laws governing each sector.

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