THE INTELLIGENT SINGAPOREAN

Powered by the Plogosphere

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).

Advertisements

22 Responses to “News: Stock of US investment in Singapore takes a dive”

  1. bleongcw said

    Hi Intelligent Singaporean,

    You are spot on about the point that the Singapore economy might have to place a premium in Singapore in the future. However, there are a couple of other factors which might be instrumental to this situation:

    1. Since there is more Singapore investment in the US, it can also mean that the Singapore companies such as Temasek Holdings are investing in the US economy. For example, the acquisition of Global Crossing is about US$2 billion. If there are more Singapore companies are acquiring US companies, it might be actually that our economy is doing well, and now maturing towards the next stage of growth, like what Lenovo did in acquiring IBM PC.

    2. The lack of investment can also mean that the transition to knowledge based economy is not complete. For example, the biomedical sciences and physical sciences have not reached critical mass such that the US companies will put money here to do R&D. The competition is still on with the emerging powers of China and India, because they are currently consolidating their manufacturing industry.

    3. Of course, one reason is that there is a recession two years back in the US. Usually, it also means that the US companies might tighten their pockets and hence they did not invest so much in Singapore. It is just a drip down effect.

    Thought that this might shed some light to the subject.

  2. […] Recent Comments bleongcw on News: Stock of US investment in Singapore takes a divesphgirl on The Digital Dividelecturer on The Digital Dividelecturer on The Digital Dividethe brotherhood on The Digital Divide […]

  3. inspir3d said

    Hmm yes, agree with all points. but would like to point out why all your points indicate a very tricky future for Singapore’s economy.

    1. if there is so much capital investment by Singapore’s companies overseas (i think a lot of that investment is driven by GIC and Temasek), that means that Singaporean capital is not creating Singaporean jobs: it is creating American jobs. The government should be channeling capital back into the local economy to create local jobs.

    2. Yes the transition to the knowledge economy is not complete, and this is very dangerous for Singapore because this indicates that Singapore has been far too dependent on foreign investment and an influx of foreign capital to create jobs, and has not cultivated a strong local capability base. Foreign capital is unsentimental and this rate of disinvestment will displace many workers. see Mr Wang’s post How Utterly Unconvincing

    3. Yes US companies may tighten their pockets. But every country in Asia-Pacific faces the effects of such a tightening. The Singapore has been the hardest hit (by far) by such tightening, compared to other countries, sheds a lot of light about the (lack of) competitiveness of our economy.

  4. The Brotherhood said

    IS,

    “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?”

    There is nothing surprising abt this – infact, it can be argued this is a sure sign many of our intellectual assets in Singapore has reached a point of intellectual and capital maturity – since they require less resources to function effectively.

    Besides relying on FDI figures in isolation doesnt really tell one anything.

    To get a clearer pic, you also need to examine how much money has flowed out of singapore into non singaporean firms and if possible determine the exact form of this outflow.

    In most cases these outflows are motivated by corporate expansion programs which may either be asset or knowledge driven.

    If that is the case, in the short term singapore may appear to suffer a deficit in real monetary terms, but in the long term it will be able to consolidate it’s position through the acquisition of complementary assets and technologies to further allow local firms to compete in the global business environment.

  5. inspir3d said

    brotherhood,

    yes your points are all valid.

    but i think it is difficult to attribute such a drastic change solely to a ‘maturity of intellectual assets’ – other news reports in the press of companies leaving singapore (like maxtor, for example) also point towards a significant element of disinvestment.

    my concern arises not because of the shift towards a knowledge economy, but rather because this significant drop in FDI may indicate that economic restructuring is occurring at an extremely rapid rate.

    this means that those that who are not equipped with the skills necessary to thrive in a knowledge-based economy are being displaced very quickly, regardless of the quality of our intellectual assets.

    it is not without reason that the population earning the lowest third has seen their incomes decline – can we really call singapore a first world economy when our ministers chide our citizens for not taking jobs which only earn a few hundred dollars a month?

  6. loupgarou said

    shudders, you mean our pap govt and long term stability not good enough for the USA or is it a non issue..?

    *sarcasm*

  7. the brotherhood said

    The case of Maxtor pulling out of Singapore is driven by a mix of economic and manufacturing realities. You need to appreciate certain realities – the price of hard drives have been falling exponentially for the last 10 years while the manufacturing cost continues to escalates.

    All firms directly or indirectly related to the hardware industry face generally the same set of manufacturing constraints – diminishing returns in a highly mature market.

    Hence survival (for lack of a better word) boils down to one equalizer – find the cheapest place to produce the same thing – in this case China. I will not be surprised if Chartered Semicon will have to serious consider this manufacturing strategy. The same applies to Creative Tech.

    “this means that those that who are not equipped with the skills necessary to thrive in a knowledge-based economy are being displaced very quickly, regardless of the quality of our intellectual assets.”

    This is a valid observation – a perennial concern which has confounded many economist, mathematicians and scientist.

    In a nutshell the conundrum can be simply summarized as this, how can the social cost be managed in the face of rapid economic shifts?
    What do we do? If the government institutes a barrage of protective measures to modulate the social impact, it could be said they are unduly interfering with the free market economy and there are plenty of historical precedents to suggest these measures don’t work.

    The Russians tried it in a big way, they called it collectivism, it failed big time. So did the British trade unions during the 70’s and again it failed.

    If economic history teaches us anything at all – it is simply this, governments should never interfere with the free market economy. Pls understand, there are three of us here who use this handle, “the brotherhood”. We have been seeded here by order of the Council for one objective,

    “to establish cordial relations with those who choose to visit blogoshpere”.

    I will not exceed the terms of my mandate, but what I can safely say is this, none of us in the brotherhood believe the government is in a position to create jobs or even set the course of our economic destiny.

    They can manage the context by providing a first class infrastructure, legal framework and business friendly legislation, but that is all they can do.

    To assume otherwise is to confer upon them a power that simply doesn’t exist (even their brightest scholars know this) – the capacity to command and control a free economy. It wouldn’t be called the free economy if the laws of equilibrium were not allowed to operate without encumbrances.

    They don’t have this power – and this is where as citizens we must appreciate the true nature of this sinister creature, we have all inadvertently created named globalization in all it’s beauty and terror – the die is cast – it is every man for himself.

    Long live the brotherhood!

  8. gong kia brother said

    “to establish cordial relations with those who choose to visit blogoshpere”.

    Hahahhahahahahahhahahahhaha…….this must be vollariane’s cracked brained idea, win over the bloggers by inserting a bunch of fascist and who did he choose?

    The Waffen SS of the brotherhood! Good luck lah losers! We don’t need more scholars here, we just need real ppl stupid!

    Btw I am a brother!

  9. inspir3d said

    I see. It is an honor to be received by The Brotherhood. Have a good stay at the I.S. 😀

  10. passerontheby said

    globalization is bad, it displaces people, destroys communities. All in the name of economic progress. Not everyone subscribes to the free market theory. The brotherhood should instead familiarize themselves with the various counter arguments out there, instead of simply jumping on the band wagon.

  11. bleongcw said

    IS,

    1. if there is so much capital investment by Singapore’s companies overseas (i think a lot of that investment is driven by GIC and Temasek), that means that Singaporean capital is not creating Singaporean jobs: it is creating American jobs. The government should be channeling capital back into the local economy to create local jobs.

    This is one difficult issue which the government need to sort out. Should they channel the money to create the jobs for Singaporeans or for foreign investment? For them, it is a really win-lose situation. If one believes that the Singaporean government to momentarily driven, how they decide between job creation and investing US companies, it will be decided upon the decision that will give a better profit and they fulfill their key performance indicator (KPI).

    They have to start thinking “win-win” for the people. Of course, Singaporeans like to complain how low they are paid, and they are afraid to give more. But here is the catch 22 situation. If some institutions like the one I am working in can start realizing that they need to pay Singaporeans better, there is no way that these organizations are going to reach the government linked companies that made it big like Lenovo. I did not realize that the Chinese government has a hand in Lenovo 20 years back, until I started reading a book about their history. If a control-freak country China can do it, I really wonder why Singapore cannot. 🙂

  12. The brotherhood said

    passerontheby,

    We will not disagree with you.

    Globalization is controversial, strip it down to it’s bare essentials and what do you have?

    A redux version of the Darwinian theory, where only the fittest survive and the weak perish.

    We agree. Sure. Absolutely. You are right.

    However as corrosive as it is, globalization as a school of thought is not going to suddenly disappear, sending us all back to a cottage economy. Nor are we going to un-invent free trade, the internet and beat our computers into ploughshares.

    So what can we do? Can you perhaps share with us bc even amongst our ranks there is great divisions regarding this topic.

    Where we part waves my friend is perhaps in where we choose to stand to see the same problem.

    You believe we have a choice. We on the otherhand do not.

    There lies the folly of those who choose to see the world as it is, rather than to see the world as it should be.

  13. broken light bulb said

    Nice one the brotherhood – but it still rings hollow.

    What he is trying to say passerontheby on one level is this – someone has sold you a one way ticket. The train has to travel to this pie in the sky station. Because there are only one set of tracks, you don’t have a choice. So better roll up your sleeves and start shovelling coal.

    At another level and I must warn you, there are many levels in the brotherhood which you may not be fully conscious of this is how the “kradaharn” aka mind warriors operate –

    They are using the “Turing turn” on you. The most basic of mind tricks commonly the preferred tool of cult churches, prostitutes and loan sharks.

    The idea is if they are able to successfully convince you, you have no other option except to be the man you are, then by controlling the context, they would be able to control your words, actions and deeds.

    At the center of this tool is the need to blur the edges of the truth. For example, if I can show you both a computer and a human are trying to convince you they are the same and you can’t tell the difference, the they are actually the same.

    The truth in this case is only valid, if you define humanity as a simple matter of data processing. That after all is the grand scheme of globalization, the systematic reductionism of the individual into aggregate parts which eventually form together to create one super mass called the brotherhood and sisterhood of sameness.

    In this global architecture of money, culture and values, we all speak one language, there is no need to question the prevailing logic of work, life and play. All these things have been questioned and answered and if they haven’t it simply means they aren’t important.

    At the heart of the deception, it’s a classic circular argument:

    Human beings are not so different from machines, so it’s fine if we simply treat them like machines.

    Go with it – I know it doesnt quite make sense I know, passerontheby, but I am not really speaking to you, am I…

    Tell me where lies the beginning of the end in globalization?

    Now you chaps are going to say, I am playing with your head………………

  14. The brotherhood said

    Who are you broken light bulb? You know our ways, you know it only too well.

    Who are you?

    I don’t understand your question, but I know it is a riddle, bc the words bear similarities with certain passages in the book of ages.

    Who are you?

  15. The brotherhood said

    It’s brother darkness himself – I am outa of here! He is just toying with us brother 1, we need to get out now!

  16. The brotherhood said

    Don’t fuck with him – ny the time he has finished with you – your brain will be like char kueh teow – lets get out now.

    Lord Darkness we didnt mean any disrespect.

    long live the brotherhood!

  17. Broken Light Bulb said

    Calm down Kradahans – am I to understand the quality of mind warriors has deteriorated to such an extent, on the first sign of trouble all of you will simply run back to mother?

    This is shocking!

    I asked a question in simple english, where lies the beginning of the end in globalization? Who I am is irrelevant, I have asked a question and according to the Kradahan code an answer must follow a question. It is written.

    If you haven’t asked yourself this question, then how do you expect to inspire confidence in others. They will simply dismiss your arguments as facile and superficial, lacking the requisite quality of scholarship.

    To answer the question, firstly you need to be able to define the components of what is termed “globalization” – then you need to ask yourself why is the construct so compelling to certain governments? What are the competing schools of thoughts against globalization, can they be successfully harmonized or are they paradoxes – if so discuss.

    Start first by looking into the paradox of globalization.

  18. The brotherhood said

    We will have to come back to you. Do bear with us brother darkness. Meanwhile I have informed the council of your visit here.

    The 3rd degree navigator extends his heart felt wishes, you will remain here longer as there is much to discuss in Primus.

    My your command. It has been a privilege to serve – Ensign 9044432789

    Long live the brotherhood!

  19. The brotherhood said

    Cobweb equation has been used as a basis to explain the phenomenon known as globalization.

    Pls refer to the below paranthesis for further information:

    (Ezekiel 1938, Goldberg 1986).

    A class of behaviors related to this equation is known as “Cobweb phenomena”.

    There is however one modification we propose to the Goldberg equation to reflect real world events to endeavor to answer your question.

    The incorporation of a control feature in the form of an integer variable at the point where the demand and supply curve intercepts.

    Operational Assumptions:

    Where the level of state interference exceeds the AQL (acceptable quantity level), events will no longer correspond to binomial class behaviors.

    Linear programming logic to define these class of hog cycles are not exhaustive and there remains infinite permutations based on our simulations.

    Proviso:

    However the presence of a fractal pattern appears to be consistently showing up in our simulations to suggest within this equation, there is at least one or two robust assumption which will be a key feature in every phase of globalization.

    The reason for this anomaly is because, if the utility derived from one country sharing technology with another results in a unquantifiable deficit e.g national security, sensitive defense technology, then it could said the hog cycle is prematurely sabotaged and the equilibrium point will shift. It is difficult to determine the exact tolerances of these shifts from the zero point. This will vary from one country to another depending on what they define as sensitive assets.

    Another note worthy observation is although technology is supposed to be freely disseminated in a globalize construct. The reverse can occur, where legislation specifically prevents technology or skill sets from being transferred. Again this will result in a shift to the zero point.

    Summary:

    With each cyclical curve, three observations will be noted:

    creativity and innovation will be stifled due to global harmonization of legislation pertaining to intellectual property.

    Firms can keep goods and services at artificially high levels or even influence the sphere of research and development.

    Rich will get richer, the poor will get poorer. The middle class will stagnate.

    Ensign 9044432789

  20. The brotherhood said

    I just want to say one thing – it has been a privilege to serve the father of the game.

    Long live the brotherhood!

  21. brokenlightbulb said

    I count at least 4 Kradahans here – excellent work – may I ask the following to seek further clarification?

    – how many aggregates were used for the sim?
    – was the cobweb equation sim in “reverso”?
    – creativity and innovation will be stifled due to global
    harmonization of legislation pertaining to intellectual
    property.Attribution? Biblio? Please.
    – I understand why the cobweb was used, but does a fractal
    suggest the presence of chaos theory??? Is it applicable here.
    I dont want to sound dim, but the last Asian contagion in 97
    very much perception driven, so was this factored into the
    weightings?
    – I also require an applet to input max/min data based on a
    linear scala.
    – was LP relevant??????? I would have imagined the cobweb would
    be sufficient to explain the characteristic of gbl? No or yes.
    Attribution pls et all this time.

    Many thanks, great work.

  22. The brotherhood said

    The blogging community in sg is going ballistic again – we have just received a message capsule from Primus. We need to…………

Sorry, the comment form is closed at this time.

 
%d bloggers like this: