INTRODUCTION

For a long time, inward foreign direct investment (IFDI) has more often been studied than outward foreign direct investment (OFDI) in Southeast Asia as most countries in the region are developing countries. IFDI can generate technology transfer and positive spillovers to domestic firms (Blomstrom and Kokko 1997; Alfaro et al. 2003) and promotes economic growth in developing countries (Balasubramanyam, Salisu and Sapsford 1996). Most Southeast Asian countries are still experiencing net inward FDI, with the exception of Singapore. From a comparative advantage perspective, Singapore is a small and open economy with factor endowments skewed towards human and physical capital. Thus, it is not surprising that the country has received and still receives the largest amounts of OFDI in the region. However, given the uniqueness of the Singaporean economy — a city state entrepôt and regional financial centre — a question that arises is whether the country's experience is similar to that of other countries.1 This question can be answered partially by an econometric analysis of the determinants of Singapore's OFDI.

A number of studies have been conducted on this issue, both qualitatively and quantitatively. None of these studies have, however, covered sectoral OFDI beyond the Global Financial Crisis (GFC). This paper seeks to examine the state and determinants of Singapore's OFDI using a dynamic panel data estimation for the period 1994–2012. This study compares the determinants of OFDI stock and flow. It also provides an analysis of total and sectoral OFDI to uncover sector-specific determinants.

The outline of the rest of the paper is as follows. Section 2 presents a discussion on the Singaporean government policy towards OFDI. Trends and patterns are discussed in Section 3. The general and country-specific literature on the determinants of OFDI is discussed in Section 4. This is followed by a presentation of the modelling strategy employed in Section 5. The empirical results are discussed in Section 6. Section 7 concludes.