News: Stock of US investment in Singapore takes a dive
Posted by inspir3d on August 14, 2006
“The stock of US direct investments in Singapore plunged 16 per cent from the year before to US$48 billion in 2005.
The fall is the only decline anywhere in the Asia-Pacific region which, on the whole, saw US investments rise from US$362.8 billion to US$376.8 billion in book value terms.”
Wow. This is shocking news. Even for a person like me who is skeptical about the strategy of relying on foreign investment to sustain the economy, these are truly shocking statistics! One would be concerned with a 1-2% decline, but a 16% decline? And the only country in the Asia-Pacific region to experience it? If this trend continues, Singapore’s economy will have to place a premium on entrepreneurship, and place less emphasis on trying to get a safe and secure job at an MNC or GLC. This signals a structural shift in the economic centre of gravity from the Government and MNCs towards the hands of entrepreneurs and SMEs. I have asked Singapore Economist and Singapore Entrepreneurs to comment on the article, hope they do.
You can find the entire article at Business Times here, but for the benefit of those who have not got BT subscription I have cut and paste the article below
Stock of US investments in S’pore takes a dive
It went down by 16% to hit US$48b in 2005
By CHUANG PECK MING
(SINGAPORE) The stock of US direct investments in Singapore plunged 16 per cent from the year before to US$48 billion in 2005.
The fall is the only decline anywhere in the Asia-Pacific region which, on the whole, saw US investments rise from US$362.8 billion to US$376.8 billion in book value terms.
The US Department of Commerce, which released the figures recently, said the decline was due to negative reinvested earnings of US holding companies. This uncommon turn of events slashed the growth of US investments worldwide to just one per cent last year, the slimmest recorded gain since 1982.
Historically, reinvested earnings have been one of the largest sources of growth in the US investment position abroad, according to the Department of Commerce. But they turned negative last year – especially in Europe and Latin America – as US foreign subsidiaries drew down cumulative retained earnings to fund distributions to US parent companies, to take advantage of tax incentives provided by the American Jobs Creation Act of 2004.
While US investments in Singapore fell in 2005, Singapore investments in the US rose from US$1.9 billion to US$2.4 billion – in line with the overall increase for Asia-Pacific investments, which went up 9.1 per cent to US$252.5 billion.
Singapore’s investments increased despite a relatively huge disinvestment of US$991 million in the manufacturing sector. The fall was apparently more than offset by jumps in investments in wholesale trade (US$425 million), banks (US$286 million) and other industries (US$876 million).
Japan accounted for the bulk – 75.3 per cent – of the region’s investments in the US. Australia (US$44 billion) was the second-largest Asia-Pacific investor, followed by South Korea (US$6.2 billion) and Taiwan (US$3.5 billion). Hong Kong, the fifth-biggest investor, overtook Singapore when it’s investments jumped from US$1.4 billion in 2004 to US$2.6 billion last year.
The single largest chunk of Asia-Pacific investments in the US were in wholesale trade (US$96.5 billion), followed by manufacturing (US$69.1 billion).
Worldwide, the stock of foreign investments in the US rose from US$1.5 trillion in 2004 to US$1.6 trillion last year. The United Kingdom (US$282.5 billion) was the single largest foreign investor in the US, followed by Japan (US$190.3 billion)
Though the US drew down its investment in Singapore last year, what remained was still the largest US investment in the region after Australia (US$113.3 billion) and Japan (US$75.4 billion).
US holding companies (nonbank) accounted for the single largest chunk (US$122.7 billion) of US investments in the Asia-Pacific region, followed by manufacturing (US$80.9 billion). A sizeable investment (US$65.7 billion) was in the finance business (except banks) and insurance business.
US holding companies also accounted for the bulk of the US investments in Singapore, while manufacturing took a sizeable US$14.3 billion. US companies have US$1.9 billion sunk in the wholesale trade here, US$1.6 billion in the information sector and US$1.2 billion in businesses grouped under the professional, scientific and technical services category.
Worldwide, US investments edged up from US$2.05 trillion to US$2.07 trillion. The largest chunk of these investments were sunk in the UK (US$323.8 billion), followed by Canada (US$234.8 billion).
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