ABSTRACT
The primary focus of this book has been to examine the main determinants of FDI inflow and outflow in Singapore s economy. The empirical findings presented in Chapter 5 have shown that Singapore s overseas investments are determined by two sets ofphenomena. Firstly, that Singapore s firms respond to rate of return differentials between the “home” and the ‘foreign” locations. Secondly, that subjective factors such as limited domestic market, product diversification and risks, labour shortage, trade barriers, shared language, culture and religion, tax incentives and General System of Preference Status are some of the main push and pull motivations for investment abroad. However, it is concluded that Singapore s experience could be very relevant for other countries considering a liberalisation of policies toward FDIfor development in at least three aspects. Firstly, it shows the role of the state in laying the ground for economic growth and actually creating the country s comparative advantage. Secondly, it shows the importance of FDI by TNCs for development purposes. Thirdly, it shows the fact that a country s comparative advantage is never static, but evolves with capital accumulation and technological change where, as labour becomes more expensive in Singapore and capital is cheaper, firms in Singapore use less labour and more capital by substituting capital for labour.
