101 of Investments: Singapore as an example

No modern economy can isolate itself from the need to import and export capital. So that capital movements between countries are two-way, with in one case the entities of a particular country appear as providers and, secondly, as users of capital. Under the international movement of capital, we mean the transfer of real and financial assets between entities of different countries with delayed counter-transfers for a certain period of time, in order to achieve certain economic and political interests of the participants in that transfer. Thus, the international movement of capital is the exchange of all types of goods, services and financial forms between different countries for the purpose of achieving benefits that benefit both sides.

The largest part of the international capital movement is between developed countries, that is, entities from these countries, which are the main suppliers (exporters) and users (importers) of capital on a global scale. Developing countries and countries in transition (except for a number of oil exporting countries) generally appear as users of capital, and relatively less as capital providers.

Depending on the influence of the owner of the capital on the use of the pledged funds. The following forms of capital exports are distinguish:

• international direct investments (foreign direct investments)
• international portfolio investment
• loans ( international loans)

Foreign Direct Investment (FDI)

They represent such a form of capital investment that ensures to a foreign investor the acquisition of ownership, control and management based on the invested capital. So these are investments aiming at gaining a lasting interest in a company operating outside the country of investors. With an important intention of investors to achieve effective management of the investee company. According to the definition of the International Monetary Fund, a foreign direct investment occurs when a particular investor (non-resident) owns 10 percent or more of the equity of the economic entity (resident).

Direct investments are often defined as investments motivated by the acquisition of control (complete or partial) over a company overseas. The main bearer of FDI is multinational companies. The main motive for multinational companies is, as with all other companies, maximizing profits and increasing the value of the capital of the company for its owners. In addition to this basic motive, when investing in multinational companies abroad. There are still strategic and economic motives, which are reflected in expanding (or increasing) the volume of operations based on providing resources, securing the market (conquering new markets or retaining existing markets) and achieving more efficient production and competitiveness (including the purchase of other companies).

GDP

This is the total value of all products and services available for final consumption that is producing in the territory of a country for a certain period of time. Regardless of whether the income from these products and services is obtaining by residents or non-residents. GDP or GDP (gross domestic product) is usually seen at the level of one year.

Emploment and active interest rates

Employment is usually seen as a situation between working and working age. Looking at Singapore, almost there is no unemployment problem, because unemployment is 1.9%. So, of the nearly 2.5 million people of working age, 1.8% are unemployed, which is excellent for their country. The active interest rate of banks is usually encountered in the short and medium term financial sector needs of the private sector. It usually differs from the borrower’s credit-worthiness and funding objectives. The terms and conditions of this rate differ from country to country, but also limit their comparability.

Export is the total quantity of products, goods, services, technologies and raw materials that a state is capable of producing and placing on the foreign and foreign markets. In fact, it is necessary for many reasons, and some of them are:

• Export-oriented countries are more quickly opposed to the crisis
• The number of jobs increases
• GDP growth
• The size of exports has a significant impact on the level of the national budget deficit

Import represents all products and goods that come from abroad. High imports point to the lack of competitiveness of the domestic economy. In fact, each country’s goal is to reduce imports and maximize exports in order to avoid or reduce the foreign trade deficit.

 

INFLUENCE OF DIRECT FOREIGN INVESTMENTS

The impact of foreign direct investment on the economy of each country has positive effects. Foreign direct investment brings huge amounts of capital and directly affects GDP, employment, imports and exports of each country. Looking at Singapore, it is a favorable country for attracting foreign investors due to various tax incentives for them. Namely, Singapore has a very low-income tax rate and offers very attractive double taxation contracts for international companies. However, these tax incentives function only because they have a well-trained workforce. A strong infrastructure and a sophisticated supplier system that multinationals need when deciding to locate in a country.

Table 1. Impact of foreign direct investment and GDP, in the period from 1998 to 2013

Time	GDP (current US$)	FDI (BoP, current US$)
1998	85707550881	7313866999
1999	86285332762	16577945946
2000	95835970989	16484457326
2001	89285087395	15086711251
2002	91941791944	6401974025
2003	97002305536	11941337976
2004	1,14187E+11	21026034944
2005	1,27418E+11	18090329984
2006	1,47794E+11	36923890241
2007	1,79981E+11	47733209770
2008	1,92231E+11	12200705252
2009	1,92406E+11	23821209700
2010	2,3642E+11	55075864345
2011	2,74065E+11	50367876463
2012	2,86908E+11	61159602602
2013	2,97941E+11	63772316791
Correlation:	0,886718282

Chart 1 The impact of foreign direct investment and GDP, in the period from 1998 to 2013

Correlation between foreign direct investment and GDP is 0.886718282, and it is positive and strong. According to the graph, we see that GDP grew with the increase in foreign direct investment, only in 2002 and 2008 saw a slight decline in foreign direct investment, while GDP continued to grow.

 

The impact of foreign direct investment on employment

Table 2. The impact of foreign direct investment on employment in the period from 1998 to 2013

Time	Lending interest rate (%)	FDI (BoP, current US$)
1998	7,44	7313866999
1999	5,8	16577945946
2000	5,83	16484457326
2001	5,65	15086711251
2002	5,35	6401974025
2003	5,31	11941337976
2004	5,3	21026034944
2005	5,3	18090329984
2006	5,31	36923890241
2007	5,33	47733209770
2008	5,38	12200705252
2009	5,38	23821209700
2010	5,38	55075864345
2011	5,38	50367876463
2012	5,38	61159602602
2013	5,38	63772316791
Correlation:	-0,358599891

 

Chart 3. Influence of foreign direct investments on active interest rates in the period from 1998 to 2013

The correlation between foreign direct investment and the active interest rate is very weak and negative, amounting to -0.358599891. It can be see from the graph that the interest rate from 2002 is slightly change and that foreign direct investments have almost no influence on the interest rate. Even though the most notable rises in the investment in Singapore was shown here. It went into an absolute craze in the last 4 years of time due to the fact that Singapore is now well-known investment heaven and also one of the richest countries in the world.

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