Returns hit 5-year high for S'pore investments in US

After plunging to US$9 million in 2005, the returns on Singapore companies' direct investments in the United States bounced back with a vengeance in 2006, hitting a 5-year high of US$174 million, according to latest figures released by the US Department of Commerce.

The sharp rise in last year's investment income (without current-cost adjustment and net of withholding taxes) came as Singapore firms pumped more money into a booming US economy, especially in manufacturing, raising their investments from a book value of US$2.18 billion in 2005 to US$2.41 billion.

The latest increase in investment returns marked the third straight year in the black for Singapore companies in the US, after suffering losses of US$267 million in 2002 and US$184 million in 2003.

Singapore companies reversed their losses in 2004, posting an income of US$41 million from their US investments. But just when they thought they had stemmed the bleeding and got back on their feet, Singapore companies' investments in the US looked shaky again as their returns plunged in 2005.

Last year's surge in investment income - up 21 times from 2005 - was the steepest climb among Asia-Pacific companies in the US, which together saw a jump in the returns on their US investments from US$17.37 billion in 2005 to US$21.29 billion in 2006.

Still, Singapore companies have not made enough in the past three years to recover their losses in 2002 and 2003. They still have a shortfall of US$228 million.

Also, in terms of the rate of return (income divided by investments), the 7.2 per cent Singapore companies earned on their investments last year, while higher than the Europeans' 7 per cent, was below the global average of 7.3 per cent and the Asian's average of 8.3 per cent.

Japan, which sank US$211 billion in investments in the US by 2006, or 81.2 per cent of the Asian total, accounted for the bulk - US$17.07 billion - of the Asian investment income last year.
Australian companies, the second biggest Asian investors in the US, made US$3 billion on their investments in 2006, down from US$3.5 billion in the previous year. Hong Kong, South Korea and Taiwan also suffered a drop in their investment income in the US last year.

China, whose direct investments in the US slipped from US$0.71 billion in 2005 to US$0.55 billion in 2006, lost US$29 million last year after recording a return of US$12 million in 2005.

Globally, foreign companies' investment income in the US went up from US$106.34 billion in 2005 to US$130.82 billion last year as they raised their investment commitments from US$1.59 trillion to US$1.79 trillion. European investments yielded an income of US$88.92 billion last year, up from US$78.34 billion in 2005.