Trade facilitation in Singapore

Singapore’s journey from a developing country to one of the world’s richest is an economic miracle, especially given its short 50 years of history. From the start, Singapore was handicapped – limited land mass, an ethnically and religiously diverse population, and an acute lack of natural resources. Despite these disadvantages, it had one crucial advantage – an excellent geographical location at the crossroads of global trading lanes, making it a natural port of call. That was why the British colonised Singapore back in 1819 and made it one of the crown jewels of the British Empire in East Asia. Despite its distinct geographical advantage, Singapore initially opposed to the idea of opening to trade. In the late 1980s, however, the new government earmarked trade as one of the key drivers of growth in Singapore’s early years. At the same time, the government also focused its effort on attracting foreign direct investment (FDI) from multinational companies. To grow and develop these two areas, Singapore needed to keep its business environment conducive. Policies and legislation had to be trade facilitative and applied in a consistent and fair manner. As a result, Singapore gradually became the location of choice for multinational companies to base their Asian headquarters. This paper provides an overview of Singapore’s economic transformation through the decades in terms of its openness to trade. Specifically, it gives some overall information and examines the implementation of TradeNet in Singapore, highlights some impacts of this measure on Singapore’s economy, and finally, draws out some lessons that other neighbouring countries including Vietnam can learn from.

TABLE OF CONTENTS

TradeNet and its role in Singapore trade facilitation journey 5

I Introduction

Singapore’s journey from a developing country to one of the world’s richest is an economic miracle, especially given its short 50 years of history From the start, Singapore was handicapped – limited land mass, an ethnically and religiously diverse population, and an acute lack of natural resources Despite these disadvantages, it had one crucial advantage –

an excellent geographical location at the crossroads of global trading lanes, making it a natural port of call That was why the British colonised Singapore back in 1819 and made it one of the crown jewels of the British Empire in East Asia

Despite its distinct geographical advantage, Singapore initially opposed to the idea of opening to trade In the late 1980s, however, the new government earmarked trade as one of the key drivers of growth in Singapore’s early years At the same time, the government also focused its effort on attracting foreign direct investment (FDI) from multinational companies To grow and develop these two areas, Singapore needed to keep its business environment conducive Policies and legislation had to be trade facilitative and applied in a consistent and fair manner As a result, Singapore gradually became the location of choice for multinational companies to base their Asian headquarters

This paper provides an overview of Singapore’s economic transformation through the decades in terms of its openness to trade Specifically, it gives some overall information and examines the implementation of TradeNet in Singapore, highlights some impacts of this measure on Singapore’s economy, and finally, draws out some lessons that other neighbouring countries including Vietnam can learn from

II Singapore’s story before TradeNet

1 The first days of independence

Singapore became independent in 1965, and like any other infant nations, it faced many challenges, especially in terms of economic development The limitation in resources can be considered one of the major obstacles Being an island nation, Singapore barely can rely on its natural resources The limitation in land area means small population size, which eventually leads to the insufficiency in human resources Besides, a small domestic market size also hinders the room for domestic businesses to expand

The difficulties does not stop there In 1985, Singapore experienced its first independence recession Early warning signs of a slowing economy were already evident in

post-1984, but a booming construction industry bolstered the overall numbers By the end of

1984, the construction market had become saturated and few projects were in the pipeline for completion Singapore was headed towards a recession By the second quarter of 1985, Singapore posted a growth rate of -1.4 percent, which dropped to -3.5 percent in the third quarter The sharp and sudden downturn took many by surprise Amid news of companies going bankrupt and the retrenchment of workers, Singapore’s unemployment figure rose to 4.1 percent in June 1985 from 2.9 percent in the previous four years

Figure 1: Singapore Economic Growth from 1985 to 2008

(Source: CrimsonLogic, 2012)

2 The backwardness in trade activities

In the event of the economic recession, trade activities in Singapore are a long way from being facilitated This can be best described through its required trade documentation In the mid 80s, despite being among the top 20 trading nations in the world, Singapore still proved itself a not very trade-friendly country The trade documents for import and export activities

in this country required the involvement of multiple parties, from traders, shipping lines, freight forwarders, to shipping agents, etc It also required multiple agencies’ endorsement,

to name a few, the Trade and Development Board (TDB), the Customs, and over 35 Controlling Agencies Coming along with the complexity in procedure was the quantity of papers required In 1987, about 10,000 declarations were issued daily, in which 4 to 20 documents had to be completed for each import or export consignment Remarkably, all these documents were handle manually without the assistance of any advanced technology

3 Opportunities arise in times of crisis

Right in the middle of the recession, Singapore government decides to take actions to lift itself out of the ciris A high-powered Economic Committee was established, identifying improvement in external trade as a major goal, charting new strategies to improves the country’s economic competitiveness, and highlighting that the use of IT could make a significant contribution to Singapore’s long term competitive position At the same time, in

1986, Hong Kong revealed that it was creating a trade oriented EDI system called HotLine (now known as TradeLink) This event strengthened Singapore’s resolve to improve their trade mechanism As a result, the Trade Development Board (TDB), now known as the International Enterprise Singapore, was given the task of mobilizing the trade community and became the coordinating point among various agencies such as Customs and Excise, Port of Singapore Authority, and Civil Aviation Authority of Singapore All the aforementioned events have acted as an important mobilizing factor to the realisation of Singapore’s single window, which was implemented in 1989 under the name of TradeNet This was the world’s first nationwide electronic single window

The following part of this paper will go into detail about the concept of Single Window and particularly TradeNet in the case of Singapore, its legal basis, structure, approach, and operation

III TradeNet and its role in Singapore trade facilitation journey

1 General information on TradeNet

1.1 The concept of Single window

In many countries, trade procedure in international trade usually involved companies preparing and submitting large volumes of information and documents to governmental authorities to comply with import, export and transit-related regulatory requirements Additionally, this information and documentation often has to be submitted through several different agencies, each with their own specific (manual or automated) systems and paper forms As a consequence, these complicated and extensive requirements, along with their compliance costs, can result in a serious burden to both governments and the business community and can also create a serious barrier to the development of international trade One approach to address this problem is the establishment of a Single Window whereby trade related information and/or documents need only be submitted once at a single entry

point A Single Window is defined in UNECE Recommendation No 33 as “a facility that allows parties involved in trade and transport to lodge standardized information and documents with a single entry point to fulfil all import, export, and transit-related regulatory requirements If information is electronic, then individual data elements should only be submitted once” This can enhance the availability and handling of

information, expedite and simplify information flows between trade and government and can result in a greater harmonisation and sharing of the relevant data across governmental systems, bringing meaningful gains to all parties involved in cross-border trade The Single Window is therefore a practical application of trade facilitation concepts meant to reduce non-tariff trade barriers and can deliver immediate benefits to all members of the trading

community

The Single Window is generally managed centrally by a lead agency, enabling the appropriate governmental authorities and agencies to receive or have access to the information relevant for their purpose In addition, participating authorities and agencies should coordinate their controls In some cases, the Single Window may provide facilities for payment of relevant duties, taxes and fees A Single Window does not necessarily imply the implementation and use of high-tech information and communication technology (ICT), although facilitation can often be greatly enhanced if Governments identify and adopt relevant ICT technologies for a Single Window

The implementation of a Single Window can be highly beneficial for both Governments and trade For Governments, it can bring better risk management, improved levels of security and increased revenue yields with enhanced trader compliance Trading communities benefit from transparent and predictable interpretation and application of rules, and better deployment of human and financial resources, resulting in appreciable gains in productivity and competitiveness The value of such a facility for governments and traders has taken on increased importance in the new security environment with its emphasis on advance information and risk analysis

1.2 TradeNet Definition

TradeNet is Singapore’s National Single Window for trade declaration In details, it is an electronic data interchange system that links traders, hauliers, shipping lines, freight forwarders, airlines and handling agents with government agencies like the Trade Development Board (now known as International Enterprise Singapore), Singapore Customs, and the air and sea port authorities TradeNet functions as an electronic clearing house for trading papers to be processed and approved by the relevant government agencies Philip Yeo, then chairman of the National Computer Board, posited that TradeNet would reduce paperwork and shorten the time taken for goods to move between the consignor and consignee, resulting in time and money savings as well as enabling businessmen to trade more competitively in the global market

Figure 2: TradeNet Declaration and Clearance Process

(Source: CrimsonLogic, 2014)

In March 1988, Singapore Network Services Pte Ltd (now known as CrimsonLogic Pte Ltd), a company jointly owned by the Trade Development Board (55%), Telecommunication Authority of Singapore which runs the telecommunication system (15%), Civil Aviation Authority of Singapore which runs all airport facilities (15%) and Port of Singapore Authority which runs the port facilities (15%), was incorporated to specifically develop and operate the TradeNet system By creating such company as an independent profit center, the government would not have to bear the cost of running and operating a nationwide network infrastructure and services The beneficiaries, namely, trading companies, would pay for use of the services without incurring developmental or maintenance costs TradeNet was implemented in stages, and International Business Machines Corporation (IBM) was appointed the main contractor for systems integration and software development

A total of 50 companies participated in the pilot run of TradeNet, which commenced on 1 January 1989, making Singapore one of the first countries to launch an integrated system linking private companies to the relevant authorities for cargo clearance

On 17 October 1989, TradeNet was officially launched by then Acting Minister for Trade and Industry Lee Hsien Loong By then, over 500 users, including importers, exporters, manufacturers, retailers and courier service operators, were linked up to the system, with plans to connect the system to international electronic data interchange networks At the time, about 34 percent or 80,000 of all business transactions in Singapore were already channelled through TradeNet

1.3 The legal basis of TradeNet

As a national single window, TradeNet is subjected to a number of legal frameworks Firstly, section 25(1) Electronic Transactions Act 2010 Electronic Transactions Act (ETA) stipulates that any public agency that, pursuant to any written law, accepts the filing of documents, or obtains information in any form may carry out that function by means of electronic records or in electronic form The ETA also provides that any such public agency that, pursuant to any written law, issues any permit, licence or approval, may issue such permit licence or approval by means of electronic records or in electronic form The ETA, which is based on the UNCITRAL Model Law on Electronic Commerce (1996), provides for the legal recognition of the electronic functional equivalents of written documents and written signatures through a number of provisions The validity of a transaction entered into

by electronic means is determined by the substantive law of the transaction such as law of contract or legislation governing the transaction The ETA provides that electronic communications are functionally equivalent to communications in paper form, and that an electronic document or transaction shall not be denied of its validity for the sole reason that

it is in electronic form

Secondly, various provisions in the relevant legislation provide authorisation for the establishment and operation of a computer service, and for the relevant documents to be made, served or submitted by electronic means Section 86(1) of the Customs Act authorises the Director-General of Customs to establish and operate a computer service and make provision for any manifest, return, list, statement, declaration, direction, notice, permit, receipt or other document required or authorised by the Customs Act to be made, served or submitted by electronic transmission (referred to in the Act as an electronic notice) It also

said that a registered user may make and serve an electronic notice to the computer account

of the Director-General, and vice versa Section 8(1) of the Regulation of Imports and Exports Act (“RIEA”) is similar to section 86(1) of the Customs Act, and authorises the Director General of Customs to establish and operate a computer service and make provision for any document required or authorised by the Act or any regulations made thereunder to be made, served or submitted by electronic transmission Section 8 RIEA contains provisions relating to service of electronic notices that are similar to section 86 of the Customs Act Section 42 of the Goods and Services Tax Act authorises the Comptroller

of Goods and Services Tax to provide an electronic service for the filing or submission of any return, declaration or document, and the service of any notice, direction, order, permit, receipt or document by the Comptroller

1.4 The structure of TradeNet Steering Committee

A TradeNet Steering Committee was created to oversee the process Three working subcommittees, one each for sea and air shipping, and various government agencies were formed to specify functional requirements and propose data standards The staff of the National Computer Board were appointed to support each subcommittee Each subcommittee developed a profile of essential trade documentation activities, which were integrated into an “Integrated Procedures Report.”

Figure 3 TradeNet Structure (Source: CrimsonLogic, 2009)

1.5 The approach of TradeNet

The approach of TradeNet aligns with the principles of Single Window which aims to

simplify the procedures in international trade In details, Single Form refers to the only one

online form that serves nearly all trade documentation needs in Singapore, from the initial

20 forms, which was made possible by the procedural reform efforts made according to the

work of “Integrated Procedures Report” Secondly, by Single Submission and Single

Interface, the whole process can be completed once via TradeNet platform The permit

processing sub-module of TradeNet provides an intelligent routing agent that automatically determines the workflow required for that particular permit application and routes it to the relevant authorities for their processing A set of rules embedded in the rules engine will then execute the processing requirements for each of the controlling agencies involved in the processing In other words, there is only one process to 35 controlling agencies for

TradeNet users This allows for the fourth approach which is Single Process

Figure 4 Single process of TradeNet (Source: CrimsonLogic, 2014)

1.6 The operation of TradeNet

Figure 5 TradeNet Operation (Source: CrimsonLogic, 2008)

The shipping and trade community sends in the trade declaration via any TradeNet End (FE) software These are software provided by any Singapore Custom’s approved service providers The FE software offers the users a variety of data submission methods, i.e via the internet/web application, client based input or host-to-host connection Having submitted the data, the FE system sends their trade declarations via the TradeNet SEW for automated processing by the various authorities

Front-The Permit Processing sub-module of the TradeNet system provides an Intelligent Routing Agent that automatically determines the workflow required for that particular permit application and routes it to the relevant authorities for their processing A set of rules embedded in the Rules Engine will then execute the processing requirements for each of the Controlling agencies involved in the processing

With the in-built intelligence that enables automated processing, 90% of the declarations do not require manual intervention and users are able to receive and print their approved cargo clearance permit within 10 minutes There are also options for declarants to transmit data directly via their host systems in any structure data format Web Portal Services are

provided for traders to process their permits, check on the transaction status and make billing enquiries It also allows download of code tables (e.g country, port, harmonized system codes, etc) The portal also enables the authorities to process the declarations and to make enquiry

2 Chronology of implementation

2.1 The initiation of TradeNet

The idea of the TradeNet System originated back in 1979 Given the constraint Singapore faced in terms of its size, the Singapore Government realised that Information Technology (IT) could provide special opportunities for the economy A Committee on National Computerization (CNC) was established in 1979 to develop specific recommendations on ways in which Singapore could pursue a future in the IT field In 1980, the CNC issued a report stating that Singapore could become a world leader in the creation and use of IT To

do so, it would have to mobilize its efforts and create a coherent plan of development A special statutory board, the National Computer Board (NCB), was created to develop programmes to build Singapore into an IT society Its first major effort was to bring computerization to government agencies under its Government Computerization Project One of the areas targeted for improvement was external trade This resulted in concentrated

efforts to implement IT in the port and airport, an important factor leading to TradeNet The

Singapore Trade Development Board (STDB) (which has been renamed as International Enterprise Singapore) was the government agency responsible for trade facilitation STDB was mindful that while Singapore maintained its status as a reliable trading nation of integrity, the manufacturers and exporters were unduly hampered with cumbersome systems and procedures in their conduct of external trade Therefore, it established service standards for the processing of trade documents, i.e two days for normal service and two hours for urgent service

However, with the shortage of labour looming in the 1980s and the need for quicker turnaround of goods for just-in-time (JIT) stock inventory management, the STDB realized

the service standards for the approval of permits (2 – 4 days) were not satisfactory A

quicker processing system was required

In addition, in 1985 Singapore experienced its first recession The Government’s response was the establishment of a high-powered Economic Committee to review the weaknesses of the Singapore economy and to chart new strategies to improve its economic competitiveness One of the recommendations was to expedite the use of IT to improve trade competitiveness In 1986, Hong Kong, China, a major shipping competitor, revealed that it was creating a trade oriented EDI system (TradeLink), which further strengthened Singapore’s resolve to implement TradeNet

In 1986, to emphasise the Government’s commitment to this project, Mr Lee Hsien Loong, then the Minister for Trade and Industry (presently the Prime Minister), announced publicly that the TradeNet project would be completed within a two year timeframe This had the effect of speeding up the work of various committees and officials involved It also gave the TradeNet team full authority and resources to proceed STDB was given the task of mobilizing the trade community and became the coordinating point among various agencies such as Customs and Excise, Port of Singapore Authority, and Civil Aviation Authority of Singapore In 1986, a core team comprising representatives from relevant government agencies and interested parties from the private sector were formed to conceptualise a nationwide Electronic Data Interchange (EDI) system for traders to submit trade declarations electronically to the regulatory authorities

A TradeNet Steering Committee was created to oversee the process In the subsequent year, three working subcommittees, one each for sea shipping, air shipping, and various government agencies were formed to specify functional requirements and propose data standards The staff of the National Computer Board was appointed to support each subcommittee Each subcommittee developed a profile of essential trade documentation activities, which were integrated by the NCB staff into an “Integrated Procedures Report.” This became the focal point of procedural reform discussions Efforts were made to reduce the 20 forms used in international trade into a single online form to serve nearlade

documentation needs in Singapore This single administrative document formed the core of the new computerized system

Figure 6: The Development of TradeNet (Source: www.tradenet.gov.sg)

A fully web-based electronic certificate of origin (ECO) system was launched in April 2003

by CrimsonLogic and the Chambers of Commerce, to allow exporters to apply for and print certificates of origin from any computer anytime, thus saving the trading community time and money This ECO platform, was built on Public Key Infrastructure and supporting security related technologies such as print control and optical watermarks, enabling secure