SINGAPORE INVESTMENTS IN MALAYSIA

Abstract

Singapore's regionalisation drive is a response to the changing domestic and international economic environment. Regionalisation serves as a tool to speed up economic restructuring. The Singapore government acts as a facilitator by providing various financial incentives, such as loans, grants and tax incentives. The Government Linked Companies (GLCs) led the regionalisation drive by investing in large infrastructural projects abroad. These GLCs also form joint ventures and consortia with other Singapore companies for overseas ventures. The growth triangle concept was also initiated by the Singapore government, and the SIJORI grouping aims to attract greater amount of foreign investments to this region. As a result, Singapore firms were encouraged to invest within the grouping, as part of the regionalisation drive. With such aggressive efforts, Singapore's direct investments abroad have increased drastically, since the late 1980s. Malaysia remains as the top recipient country, despite falling share as Singapore's outward investments continue to diversify in location. Malaysia is also the largest recipient of direct equity investments from Singapore's manufacturing sector, as more than half of Singapore manufacturing ventures abroad were located there between 1990 to 1993. From the perspective of Malaysia, Singapore is the fourth largest investor after the Japanese, Taiwanese and Americans respectively. Nevertheless, Singapore's stake in Malaysia's manufacturing sector has increased steadily over the last decade. The largest recipient state is Johor with almost half of the total Singapore investments in Malaysia between 1984 to September 1995. The Electronics & Electrical industry leads other industries in the investments amount over the same period. The investment determinants of Singapore investments in Malaysia were discussed along Dunning's Eclectic framework surveyed in Chapter II. Singapore firms are more familiar and understand the Malaysian business environment better when compared to other foreign investors, due to Singapore's historical, social and cultural linkages with Malaysia. Secondly, some Singapore firms developed their ownership-specific advantages by adopting niche strategy in the development of their products and technology.