REGIONALISATION : DEVELOPING AN EXTERNAL ECONOMY

Abstract

There is a national consensus in Singapore that growing an external wing is crucial to the next phase of the Republic's economic development. Media coverage on Singapore investments abroad have heightened, with impetus on the regionalisation drive coming from Senior Minister Lee Kuan Yew and the government. Developing an external economy is necessary to overcome Singapore's limited size in terms of land and labour, as well as to stay ahead of the intensified competition from other newly industrialising economies. As the fastest growing region in the world, the Asia-Pacific offers local companies vast scope for expansion. With more than thirty years of economic development, Singapore possesses the capabilities for successful regionalisation. It is plugged firmly into the international network of trade, industry, banking and financial services. Singapore is also a leader in several areas of interest namely infrastructure development & management, financial services, manpower training and industrial development to the region. In view of the need to develop an external economy, this study was undertaken to identify important variables influencing the local manufacturers' decision to invest overseas. The understanding of important motivations and factors affecting overseas investments would facilitate policy makers to implement appropriate measures and thereby spur more local businesses to venture into the region. A questionnaire survey was conducted with forty local manufacturing companies and the issues covered include the motivations for overseas investments, the selection criteria for a host country and factors influencing the decision to invest overseas. The respondents were also asked to express their views on the government's regionalisation efforts and on the ways in which the government can assist their overseas ventures. The motive analysis of the forty local manufacturing companies showed that host pull factors such as labour availability, cheap labour & land and the size & potential of the host country's market were more significant than home push factors. The respondents with overseas operations viewed better management skills, greater flexibility & adaptability, longer experience in production & operation and more advanced technologies to be important competitive advantages in the host countries. There is general consensus among the respondents that business connections, explicit business rules, language & cultural affinity and good infrastructure & amenities are important variables in their decisions to invest overseas. They were in general supportive of the government's regionalisation effort and looked forward to some form of government assistance in their overseas ventures. The suggested ways in which the government can assist local companies include assistance with market information, organising trade fairs and financing assistance.