Nation Analysis of Singapore

METROPOLITAN COLLEGE

Sovereign Analysis

of

Singapore

AD763 Multinational Finance and Trade

Instructor: Scott Schermerhorn

Introduction

Singapore’s strategic location at the entrance to the Strait of Malacca has helped it to become one of the most important shipping centers in Asia. The Port of Singapore, the world's busiest in terms of shipping tonnage, is a key component of Singapore’s prosperity and economic health. Singapore also is a leader in new biotechnologies, petroleum refining, and the manufacturing of computer components. Recognizing that Singapore’s future growth depends on overcoming resource limitations and a small domestic market, the Singaporean government has vigorously encouraged local firms to regionalize their operations and to invest abroad. China, India, and the ASEAN countries have been identified as priority countries in the regionalization drive.

Singapore Government Bonds

Singapore government bonds or Singapore Government Securities (SGS) bond pays a fixed rate of interest to the bondholder for every six months until maturity. At maturity, the bondholder will also collect the principal at par value. This may provide investors with a safe investment alternative that can give both capital protection and steady returns.

In general, governments in most countries issue debt securities to raise funds needed to pay off maturing debt and finance their operations and development expenditure. However, since the Singapore Government conducts a prudent fiscal policy and has consistently run budget surpluses over the years, it does not need to borrow to finance its expenditure. Unlike other countries, as known as European PIIGS, where the proceeds from the issue of bonds are used to finance government expenses, proceeds received are paid into a government securities fund instead. Any interest and principal repayments on the bonds are withdrawn from this fund.

Despite the fact that...