SINGAPORE'S OUTWARD FOREIGN DIRECT INVESTMENT : STRENGTHS AND ADVANTAGES

Abstract

In past three decades, Singapore's economic growth has been largely export-oriented and investment-driven. Singapore has been the largest recipient of foreign investment into ASEAN. From 1984 to 1994, the total stock of foreign equity investment in Singapore increased 3.46 times from S$24,801.2 million dollars to S$85,843.5 million dollars. In recent years however, Singapore has emerged as a major provider of international direct investment in South East Asia. How and why should Singapore, a net recipient of foreign investment, become so actively engaged in equity investment in other countries? To understand this issue, it is important to access our own relative strengths and advantages in FDI business. The purpose of this Academic Exercise is to: examine the determinants of Singapore's foreign direct investment (FDI) activities abroad; investigate the sectoral and geographical distribution of Singapore's investment abroad and find out the strengths and advantages of Singapore as a foreign investor in the global market. Through a survey of newspaper reports on Singapore's FDI activities from 1st June 1995 to 1st June 1997, we try to identify the recent trends and interests of Singapore's investors. Using the data compiled from newspaper reports, it is found that company size (measured in terms of company sales) has little correlation with the size of FDI projects they are involved. Singapore government does play an important facilitating role in Singapore's regionalisation strategy. Through government-linked companies, Singapore government acts as a co-ordinator as well as an investor in FDI activities. Small companies especially in labour-intensive and low valued-added manufacturing industries begin to relocate their production overseas where land and labour costs are cheaper. This Academic Exercise seeks to identify popular sectors and geographical locations of Singapore's investors in overseas investment. From the recent newspaper reports, it is found that a large proportion of Singapore's FDI abroad is concentrated in construction & real estate and manufacturing sectors. China, Vietnam and Australia are favourite locations of Singapore's investors. By examining Singapore's outward investment by sectoral distribution and geographical location, we can identify Singapore's strengths and advantages in these overseas investments. By knowing our strengths and advantages, we are in a better position to face challenges and, excel in our investment strategy.