Singapore Fdi

SINGAPORE

AIMS AND OBJECTIVES

This economic assignment will use Singapore as its country to focus on, as it was a country all members of the group were keen to expand their knowledge on due to its increasing economic performance. Also as the East economy is rapidly expanding become a major competitor to those countries in the west, it was felt that this country was an excellent representation of this and so could provide some insight into why and how this has come about. The main aim of this project is for the group to work co-operatively together to complete this project in a tactful and descriptive manner completing our objectives providing a well deserved grade. Our preliminary objective is to answer the assignment task, meeting all the requirements to both sections. We will do this by applying our current economic, political and cultural knowledge as well as further up to date information and statistics found supporting our work. In section B the two Trans National Corporations we will be analyzing from Singapore are Siemens, with special attention to the pharmaceutical aspect of the company, and Motorola applying relevant theory and terms.

INTRODUCTION

Singapore is an island of 240 sq miles populating 4,426,000 people, with many of these working primarily in service, commerce and manufacturing. Singapore has fewer than 5% employed in agriculture due to the main reason of there being little of no exploitable resources available in the country therefore making this type of work very difficult. Singapore is well adapted with good transportations means such as roads, rail roads and rapid transit systems encouraging economic growth within the country.

Singapore is an independent republic country headed by the People’s Action Party, however only became independent in 1965 from the Malaysian Federation (its previous owner). Previous to this Singapore was a British purchased island, transferring its status in the 1800’s so that trade excelled that of Malacca and Penang combined due to Singapore becoming a major port in the East. This prosperity was further enhanced by the opening of the Suez Canal (1869) which launched transit trade industry to expand due to steamships being a vital part of transporting goods in which the canal eased the transportation process. The British adopting Singapore saw the Straits Settlement dissolving, encouraging Penang and Malacca to become members of the Malayan Union, whilst Singapore became its own British Crown Colony. In 1953 Singapore became self governing, forming Malaysia in 1963 by joining the independent federation of Malaya, Sarawak and Sabah. This new federation caused conflict with Indonesia arguing that the federation caused trade with Malaysia to suffer, impacting Singapore as Indonesia was its second largest trading partner. Trade resumed in 1966 when the dispute was resumed. However the ongoing dispute and friction between Singapore and the Kuala Lumpur central government came to head and in 1965 Singapore became an independent republic.

Singapore is a prosperous country of the millennium and is also a country with some of the strongest international trading links, with its port acting as the world’s busiest tonnage handling port. The port is also a major port in the world due to increase in demand for rubber (by automobile industries) and tin (from packaging industries) as it was cheaper in this part of the world and more sources were available. This has contributed to its GDP which has currently expanded by 9.1% in 2006 first quarter, equal to Western Europe leading nations. Different sectors have also been influenced. The manufacturing sector has had a strong growth in biomedical, transport engineering and electronic sectors, with an estimation of 16.0% expansion. Expansion in retail and the wholesale trade sector has increased the service producing industry by 7.6% in the first quarter of 2006. These figures combined with the increase in domestic demand and expanding developments in the external economic environment have increased the governments 2006 GDP growth forecasts up 2% to 6%. The increase in GDP has also encouraged a reduction in the unemployed, by the boosting job growth and wage increases, falling 2.5% in the fourth quarter of 2005.

Singapore’s future economic strategies are including becoming a hopeful financial centre which will compliment India, thereby being a conduit for investment overseas, as can be seen in their combined involvement in the development of the IT Park in Bangalore and the CECA (Comprehensive Economic Co-operative Agreement) proposal being signed a year ago. It is also hopeful that the two countries co-operation will encourage great potential of growth for Singapore countries such as logistics, growing to $50 billion in future years.

Inward FDI can be encouraged by countries or restricted. Restriction could be through ownership restraints in certain fields or performance requirements. Our chosen country

Inward FDI in Singapore

Singapore is a major recipient of FDI due to the fact that local level of education is high, language difficulties less as English is widely spoken. Singapore has both a strong manufacturing industry as well as services, despite some misconceptions that Singapore is only interested in the service sectors due to its small city-state status. Currently, manufacturing makes up 26% of Singapore’s Gross Domestic Product (GDP), this is supported by a huge logistics network bolstered by the presence of the busiest shipping port in the world with 400 shipping lines to over 700 worldwide destinations. Singapore also hosts the third largest petrochemical manufacturing centres (oil-refineries) second only to Houston and Rotterdam.

Its attributes with regard to green field investments and joint ventures are an advantage. This is encouraged as Mr Tan of Motorola says, “There is a business attitude of wanting to get to the market first”, thereby become a fast market share capturer.

FDI Magazine: “Motorola stays the course in Singapore” April-05 2004. Online

http://www.fdimagazine.com/news/fullstory/php/aid/641)Motorola_stays_the _course_in_Singapore.html (Date accessed29/03/2006).

Key economic indicators Average Forecast

1994-98 1999 2000 2001 2002

Real GDP growth 7.0 5.9 9.9 5.0 5.0

Inflation 1.6 0.0 1.3 1.7 1.5

Current