Singapore remains the top choice for US investments in Asia

Singapore remains the biggest catchment area for American direct investments in Asia.
SEPTEMBER 12, 2018 - 5:22 PM


SINGAPORE remains the biggest catchment area for American direct investments in Asia. Some US$15 billion were poured into factories and offices in the city state last year, raising the level of investments from the United States to a book value of US$274.3 billion in Singapore - more than the combined US investments in China (US$107.6 billion) and Japan (129.1 billion), the world's second and third biggest economy respectively.

But at the same time, from 2016 to 2017, Singapore's direct investments in the US slipped from US$23.6 billion to US$22.4 billion, according to the US Department of Commerce's latest figures.

Uncertainty over the US tax policy during the year spooked foreign firms wanting to invest or expand in the country. While total foreign investments continued to climb in the US, the pace slowed from 12.2 per cent in 2016 to 6.9 per cent in 2017.

"The prospect of US tax law changes, which were passed at the end of 2017, may have slowed inward investment, particularly for investments structured - at least in part - to take advantage of lower tax rates abroad," says a report in the August issue of the the Survey of Business, a publication of the Department of Commerce's Bureau of Economic Analysis.

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The moderation in growth was also reflected in the data that takes into account investments traced to ultimate beneficial owners who are foreigners. But such numbers show that Singapore's investments in the US jumped from US$82.8 billion in 2016 to US$88.6 billion last year.

Total foreign investments in the US based only on parent company, or its members, increased from US$3,765.1 billion in 2016 to US$4,025.5 billion. The investment numbers for the two years stayed the same when data based on ultimate foreign ownership are taken into consideration. They are different only for investments from the Asia-Pacific region.

Based on parent company and its members figures, Asia-Pacific investments in the US rose from US$627.9 billion in 2016 to US$684.6 billion in 2017. Including the ultimate foreign ownership data, the investments jumped from US$725.9 billion to US$793.6 billion.

The Department of Commerce indicated that the three biggest increases in the region came from Japan, South Korea and Singapore.

While the US tax change gave pause to foreign companies in the US, a strong global economy fanned US investments overseas.

Direct investments by US corporations worldwide grew 5.6 per cent to US$5,332.2 billion in 2016. They rose 7.6 per cent to US$6,013.3 billion in 2017.

Reinvestment of earnings accounted for the bulk - 72 per cent - of the increase. Equity investment increases other than reinvestments, including greenfield investments, amounted to US$85.7 billion, or 20 per cent of the the rise in investments.

Financial transactions, capital gains and foreign exchange adjustments also contributed to the increase.

Over half of the US investments abroad were sunk in the Netherlands (the top host country), the United Kingdom, Luxembourg, Ireland and Canada. US investments in Singapore made up 4.5 per cent of the global total.

Across all countries, US holding companies accounted for nearly half of the US investment stock as at end-2017.

US investments jumped in five of the six major geographic areas last year , with Europe seeing the biggest jump. The next biggest increase was in Latin America, followed by Asia & Pacific.

Africa was the only major area where US investments fell in 2017.

Latin America (US$1,001.1 billion) overtook Asia & Pacific (US$941.2 billion) last year to become the second biggest recipient of US investments. Europe (US$3,553.4 billion) remained the biggest recipient.