Foreign equity investment in Singapore in 2008 up 0.6%

Country’s FDI rose 1% but it saw lower returns of 14.3% in 2008.

Singapore’s stock of foreign equity investment (FEI) grew marginally by 0.6 per cent to $464.3 billion as at end 2008, according to Foreign Equity Investment in Singapore report of the Singapore Department of Statistics released this month. The bulk of FEI was in the form of direct equity investment (91.0 per cent or $422.3 billion) while portfolio equity investment constituted the remaining 9.0 per cent (or $42.0 billion).

Meanwhile, total stock of foreign direct investment (FDI) in Singapore inched up 1.0 per cent from $465.5 billion as at end 2007 to $470.3 billion as at end 2008. About 90.0 per cent ($422.3 billion) of total stock of FDI were contributed by direct equity investment while the remaining $48.0 billion were attributed to net lending from foreign parent companies.

In 2008, both net lending from foreign direct investors and direct equity investment registered positive growths of 3.9 per cent and 0.7 per cent respectively.

Distribution by Industry

The financial & insurance services sector accounted for 39.8 per cent ($187.2 billion) of Singapore’s total FDI stock in 2008, followed by manufacturing (22.7 per cent or $106.8 billion) and wholesale & retail trade (18.0 per cent or $84.6 billion). Foreign investors were also attracted to investment opportunities in transport & storage sector ($35.5 billion) and professional & technical, administrative & support services sector ($24.7 billion).

Within financial & insurance services sector, investment holding companies contributed the lion’s share (80.1 per cent) of total FDI in the sector, followed by banks (6.9 per cent) and insurance services (4.1 per cent).

Manufacturing of pharmaceutical products constituted 32.8 per cent or $35.0 billion of total manufacturing FDI as at end 2008. Electronics products & components and refined petroleum products accounted for 26.4 per cent and 14.6 per cent of FDI in manufacturing sector respectively.

Geographical Distribution
Europe and Asia remained as major sources of Singapore’s FDI as at end 2008.

Investment by European investors amounted to $193.5 billion (or 41.1 per cent) of total FDI while about $107.9 billion (or 22.9 per cent) of Singapore’s FDI originated from Asia. Other major sources of investment were South and Central America and the Caribbean (20.3 per cent) and North America (11.7 per cent).

The bulk of Singapore’s FDI from Europe were in financial & insurance services (32.0 per cent or $61.9 billion) and manufacturing (29.1 per cent or $56.3 billion) sectors.

European investors were also keen in wholesale & retail trade ($35.2 billion) and transport & storage ($18.4 billion) sectors. 2007 FDI originating from Asia were primarily in financial & insurance services (43.5 per cent), wholesale & retail trade (23.4 per cent) and manufacturing (14.2 per cent) sectors.

The bulk of Singapore’s FDI from Europe were sourced from United Kingdom (26.7 per cent or $51.7 billion), Netherlands (25.4 per cent or $49.1 billion) and Switzerland (15.7 per cent or $30.5 billion). There were also substantial investment recorded by Norwegian ($19.4 billion) and French ($9.2 billion) direct investors.

Japan ($48.8 billion) remained the leading source of FDI in Singapore from Asia, followed by India ($13.0 billion) and Malaysia ($11.2 billion). Japanese investors were mainly attracted to wholesale & retail trade (34.6 per cent of total FDI from Japan), manufacturing (22.7 per cent) and financial & insurance services (22.3 per cent) sectors while investment from Malaysia were primarily in financial & insurance services (60.5 per cent of total FDI from Malaysia) and wholesale & retail trade (16.9 per cent) sectors.

Return on FDI

Foreign direct investors saw lower returns of 14.3 per cent in 2008, compared to 19.2 per cent in 2007.

Most foreign investors experienced declines in their investment returns in 2008.

Investment from Europe yielded returns of 16.3 per cent, down from 17.7 per cent recorded a year earlier while return of FDI from Asia declined from 10.0 per cent in 2007 to 8.9 per cent in 2008. FDI from United States generated returns of 15.7 per cent in 2008, significantly lower than the 27.3 per cent registered in 2007.

Most major sectors generated weaker returns in 2008. The returns in manufacturing FDI dropped to 17.9 per cent in 2008 from 30.5 per cent in 2007. There was also a sharp decline in returns on FDI in real estate, rental & leasing from 23.9 per cent in 2007 to 7.9 per cent in 2008. The decrease in returns of FDI was more moderate in wholesale & retail (2007: 24.5 per cent, 2008: 20.9 per cent) and transport & storage (2007: 20.7 per cent, 2008: 14.9 per cent) services.