Motives and drivers for companies to invest abroad

Some invest abroad for financial motives.

Asian corporations have led the field in investing abroad.

It also indicated the increasing preference of leading SINTNCs to grow through acquisitions rather than new subsidiaries abroad.

Corporate employers are even complaining about not being able to attract overseas talent.

Outward foreign direct investment (OFDI) by Singaporean companies has a long history.

To describe the nature and trends of OFDI by indigenous Singaporean enterprises

Regional and global players What drives companies to invest abroad?

Some SMEs follow TNCs as their supplier firms in going abroad.

Push factors relate to economic environments in the home country as well as corporate strategies that encourage firms to go abroad.

While American economists, politicians, and business leaders have for years sought to sell their model of management abroad, many companies elsewhere have not been buying it.

The Government of Thailand has been encouraging and supporting OFDI by Thai companies.

Panellists debated the impact of incentives on the decision by transnational corporations to move services abroad.

Other supportive measures include streamlining OFDI approval procedures and the conditions governing equity ownership of affiliates abroad.

Many Chinese, Indian and Russian companies are investing abroad to access strategic assets and natural resources.

These instruments include tax exemption on income remitted into the country by Malaysian companies investing overseas, the provision of investment guarantees and investment promotion missions abroad.

In particular, the Thai Exim Bank and the Board of Investment have been providing facilities (e.g. information, outward investment missions) to help Thai firms venture abroad.

On the other hand, companies might face domestic opposition when they decided to move certain services abroad.

This geographical concentration of OFDI suggests that while OFDI by Singaporean firms has a strong historical tie, it is happening to only a limited range of Singaporean companies.

But, as an outsider, I am amazed at the apparent intensity of lobbying, and at the amounts of money that firms and their associations spend.

This encourages local companies to explore overseas investment opportunities that will enable them to enhance their competitiveness expand and grow.

First, the country's limited domestic market is a very significant push factor in propelling Singapore enterprises to expand their markets abroad.

Some two thirds of SINTNCs in the survey agreed that OFDI had increased their companies' competitive advantages.

Firms that reach that point, and that know themselves, then return more of their cash hoard to their investors, who invest it elsewhere.

The Singapore Government and Singaporean companies, both large and SMEs, have a keen interest investing abroad.

OFDI allows many services SINTNCs to build stronger relationships with their existing customers and to develop new markets in the host countries.

Reasons for OFDI by SINTNCs, by host regions

German firms reacted by outsourcing the labor intensive parts of their production chains and curtailing their investment in Germany.

In addition to participating directly in financing investments, IDC helps companies identify investment opportunities abroad.

What are the main obstacles to internationalization through OFDI, and how can they be removed? Are there any differences between OFDI by large companies and SMEs?

The OFDI motivations for SMEs are in general similar to those for larger firms.

Some Brazilian firms invest abroad to enhance their capabilities and reach, such as Odebrecht (construction), Gerdau (steel) and Ambev (beverages).

One fifth of respondents named these factors as an outcome of their OFDI activities.

For outward FDI, protectionism involves measures that require domestic companies to repatriate assets or operations to the home country, or that discourage certain types of new investments abroad.

An expert stated that Republic of Korea SMEs account for a significant percentage of OFDI by Korean firms.

And the Indian government played a large part in fueling rupee appreciation by easing companies ability to borrow abroad.

For overseas branches, the net amount due to the local parent companies is taken as an approximation of the magnitude of direct investment.

Only a stronger Europe will at last implement the principle of reciprocity in order to protect European businesses and prevent them from relocating, which has been the main cause of unemployment.

That includes strategies addressing structural weaknesses, integrated forms of production and distribution networks, such as TNC SME linkages, clusters and global value chains, and direct outward investment from developing country firms.

In order to transform the funds into renminbi outflows, the firms then increase the scale of renminbi settlements in cross border trades.

And Chinese firms too often state owned are seeking greater investment opportunities abroad in major industries, particularly energy.

OFDI had contributed to increasing familiarity and experience with international business, which enhance firm specific assets, including improving the reputation and brand image of Singaporean enterprises. Such internationalisation has also helped strengthen managerial and marketing expertise and market access.

The expert indicated that Korean OFDI had led to a trade surplus because of intra firm trade.

Experts also discussed the impact of OFDI on firms' competitiveness and how it could be measured.

Assistance to smaller firms with little experience in investment projects abroad and with limited financial means is particularly important, especially in the first stages of the investment process.