Inbound investments set to plunge this year: EDB

Sunday, Sep 03 2017 03:16 PM

SINGAPORE — The Republic is expected to suffer a plunge in inbound investments of as much as 30 per cent this year in light of the current uncertain economic conditions that have hurt sentiment among global enterprises, the Economic Development Board (EDB) said yesterday.

In its Year 2015-In-Review report, the EDB said fixed-asset investments (FAI) are forecast to total between S$8 billion and S$10 billion this year, or 13 to 30 per cent lower than the S$11.5 billion that Singapore secured last year.

Should EDB’s forecast materialise, this year will be the fourth consecutive year of decline in FAI into Singapore, with the investment totals for 2014, 2013 and 2012 at S$11.8 billion, S$12.1 billion and S$16 billion, respectively.

“I think it is fair to say that the global economy has had a rough start to 2016 and understandably, many businesses are cautious about the operating environment. But having said that, I think it is important for all of us not to lose track of the fact that we are in the region where there is still growth, albeit not as fast as before,” EDB chairman Beh Swan Gin said.

For this year, the EDB forecast total business expenditure per annum at between S$5.5 billion and S$6.5 billion. It expected value-added per annum, which measures the direct contribution to the economy excluding multiplier effects, at between S$12 billion and S$14 billion.

Last year’s FAI topped the EDB’s earlier forecast of S$9 billion to S$11 billion, helped by a surge in investments from the United States in the electronics sector. Investments from the world’s largest economy grew to S$7 billion last year from S$1.8 billion in 2014.

“Don’t put too much emphasis on the year-to-year (comparison). It is the trendline that is important. The trend is that the US is the single largest investor by source country, but the 2015 surge is really due to a few specific projects,” Dr Beh said.

“Broadly speaking, from the US, we typically would get electronics and chemicals investments, as well as biomedical. In 2015, it was due to the electronics sector,” he added.

However, the increase in US investments failed to lift overall FAI into Singapore, with the final 2015 total translating to a 2.5 per cent decline from the previous year. Total business expenditure per annum also fell to S$5.6 billion from S$7 billion. EDB said the expected value-added per annum slipped to S$12.3 billion from S$12.5 billion.

Despite the decline, economists whom TODAY spoke said the “Singapore Inc” story is intact.

CIMB Private Banking economist Song Seng Wun said: “We were never low-cost, we can never be low-cost, but despite year after year of Singapore being one of the most expensive places to do business in, we can still see investments … I suppose it is the whole framework — the infrastructure, the legal framework, protection of intellectual property, the skilled labour.

“We can’t compete in consumer products that are manufactured far cheaper in, say, Vietnam and other parts of Indochina, but the infrastructure here for businesses to come and set up head offices or for more specialised machinery or products is still the one that keeps investments coming through,” he added.

However, OCBC’s head of treasury research and strategy Selena Ling warned that domestic structural challenges may hinder Singapore’s prospects amid current cyclical headwinds. “Cost is one, and on the manpower front, the ability to attract and retain talent is another … but I think the fact that investments are still coming is testament to Singapore’s attractiveness.”

The Singapore economy grew by 2.1 per cent last year, advance estimates from the Ministry of Trade and Industry (MTI) showed last month, and it is expected to expand by 1 to 3 per cent this year.

As the Republic looks to its next phase of development, the Singapore Business Federation led the private sector to come up with recommendations to help local enterprises grow and reduce reliance on foreign investments for growth.

On the proposals, Dr Beh said the EDB agrees with the need to help local companies grow, but that does not have to come at the expense of foreign investments.

“Our view is that it’s not an ‘either-or’ ... Even in attracting international investors, international companies into Singapore, we are a lot more targeted because it is important to focus on the ones that have the best fit with the profile of our economy today. The presence of international companies in one city here actually create opportunities for local companies to form partnerships,” he said.

BY LEE YEN NEE

PUBLISHED: 4:15 AM, FEBRUARY 3, 2016

http://www.todayonline.com/business/inbound-investments-set-plunge-year-edb

 

(Click to Enlarge)

Should EDB’s forecast materialise, this year will be the fourth consecutive year of decline in FAI into Singapore, with the investment totals for 2014, 2013 and 2012 at S$11.8 billion, S$12.1 billion and S$16 billion, respectively.

(Click to Enlarge)

Should EDB’s forecast materialise, this year will be the fourth consecutive year of decline in FAI into Singapore, with the investment totals for 2014, 2013 and 2012 at S$11.8 billion, S$12.1 billion and S$16 billion, respectively.

(Click to Enlarge)

Should EDB’s forecast materialise, this year will be the fourth consecutive year of decline in FAI into Singapore, with the investment totals for 2014, 2013 and 2012 at S$11.8 billion, S$12.1 billion and S$16 billion, respectively.

(Click to Enlarge)

Should EDB’s forecast materialise, this year will be the fourth consecutive year of decline in FAI into Singapore, with the investment totals for 2014, 2013 and 2012 at S$11.8 billion, S$12.1 billion and S$16 billion, respectively.