Where did Singapore's US$503b overseas investment go?
69% of it went to developing countries like Myanmar, Indonesia, and Malaysia.
A lot of the world’s foreign direct investment (FDI) into developing countries that goes to the improvement of their trade, productivity, and overall economy both stems from and passes through Singapore, making it an important investment “hub” along with Ireland, Luxembourg, Mauritius, and the Netherlands, SEO Amsterdam Economics revealed.
According to its study, even if Singapore only contributes 0.4% to the world GDP, it ate up 3% or nearly a trillion (US$976b) of the global total of inward FDI stocks in 2016. The stock of FDI that flowed outwards Singapore reached approximately US$530b.
The study observed that Singapore plays a crucial role in global cross-border FDI flows to developing economies. It held 69% of outward FDI stocks in developing countries and only 31% in developed countries.
China is the largest recipient (US$105b) of FDI stocks in Singapore, followed by Indonesia (US$62b), and India (US$35b). Other large non-”hub” recipients include Thailand (US$28b), Malaysia (US$26b), Russia (US$15b), Korea (US$12b), and Myanmar (US$9b).
For some of these countries, these investments also correspond to large shares in total investments. This holds especially true for Myanmar, Indonesia, Malaysia, and Thailand, where Singaporean outward FDI accounts for 33%, 25%, 21%, and 14% of the respective total.
This means FDI from Singapore contributes significantly to total FDI to developing regions such as East and South-Asia.
On the receiving end, Singapore got FDI stocks mainly from other “hub” and tax haven countries such as the British Virgin Island, the Cayman Islands, Hong Kong, the Bahamas, and Mauritius, with investments between US$20b and US$60b.
Singapore attracted 38% of its inward FDI from developing and transition economies. Other countries that make the top 10 include Malaysia, Mainland China, India, and Indonesia, with investments worth US$45b, US$37b, US$24b, and US$17b.
Singapore is also a top destination for FDI flowing out of Luxembourg, the Netherlands, and Mauritius. “The fact that Singapore features prominently in the ‘top destinations for hubs’ lists for these three countries… suggests that part of the FDI through Ireland, Luxembourg and the Netherlands reaches developing economies by way of Singapore,” Hers commented.
Singapore was the only Asian country selected for SEO Amsterdam Economics’ study due to the proportion of its FDI towards its GDP, along with its status as a tax haven, its business environment, and its connection to both high-tax and low-tax jurisdictions.
Singapore was studied along with Ireland, Luxembourg, Mauritius, and the Netherlands. “Together, the five hubs accommodate 35% of FDI towards least developed countries, thus significantly contributing to economic growth and tax revenues in these countries,” said researcher Johannes Hers.
The report noted that its study was limited by the fact that Singapore does not report observed outward FDI, so it cannot include the country consistently in aggregate statistics of global outward FDI. The study was commissioned by the Investment Facilitation Forum (IFF).