Japan and China in East Asian Integration

4. Japanese Foreign Direct Investment and Japanese-Style Management in Singapore

79 Japanese Foreign Direct Investment and Japanese-style Management in Singapore 79 CHAPTER 4 Japanese Foreign Direct Investment and Japanese-Style Management in Singapore Introduction Foreign direct investment has contributed greatly towards Singapore’s rapid economic development.1 Foreign investment commitments have dominated (in value) investment commitments to Singapore’s manufacturing sector with the lowest of 65.6 per cent and the highest of 86.1 per cent in the 1980s. During the period 1975–1984, foreignowned establishments (with more than 50 per cent of foreign capital investment) comprised 23 per cent of establishments, but generated 55 per cent employment, 73 per cent of gross output, and 65 per cent of capital expenditure.2 The US, Japan, and Europe have been the predominant investors in Singapore. These three were responsible for 90 per cent in 1988 and 97 per cent in the first quarter of 1989 of total FDI in Singapore’s manufacturing sector. The US had been the largest investor during the period 1980–1985 but was overwhelmed by Japan during the period 1986–1988. In 1980, Japan’s investment commitments to Singapore’s manufacturing sector were just 27 per cent of that of the US. The drastic yen appreciation in 1985 prompted Japan’s investment in Singapore and in 1986 Japan exceeded the US with a new record of 42 per cent, leaving the US behind with 37 per cent and Europe with merely 18 per cent. The Japanese presence in Singapore has accordingly attracted much attention. The adaptation to Singapore of Japanese-style management in Japanese companies in Singapore has become a 04 Japan&China Ch 4 11/6/07, 12:21 PM 79 80 Japan and China great concern of not only the Singapore government but also the Japanese investors. The aim of this chapter is, therefore, twofold: first, to examine the characteristics and recent development of Japanese FDI in Singapore, and second, to analyse the possibility of adapting the Japanese-style managerial system in Japanese enterprises to the heterogenous society of Singapore. Investment Motivators for Japanese Foreign Direct Investment Two comprehensive surveys have been conducted by Japanese organizations concerning the investment motivation of the Japanese in Singapore. Survey I This survey3 was conducted just before the drastic yen appreciation began in September 1985. Issues such as “political stability” and favourable “economic infrastructure” are somehow excluded in this survey. Japanese firms regard Singapore as an important base of entrepôt trade, especially for exporting their manufactures to third countries, and as an important production base for supplying industrial parts and components (the combined affirmative responses to these two questions amounted to 33 per cent of the total number of responses received). Singapore is also regarded by the Japanese firms, as expected, as an important information centre, due to its strategic location and well-established transport and telecommunications system. Affirmative responses to these questions comprised 31 per cent (282 cases) and indicated the most important motivation for Japanese investment in Singapore. This is straightforwardly reflected in the rapid increase of Japanese liaison offices and branch offices in Singapore during the period 1979–1984. Besides, it is interesting to note that out of 282 cases, 196 cases (70 per cent) were non-manufacturers (Table 4.1). It is believed that, because a large proportion of Japanese liaison offices 04 Japan&China Ch 4 11/6/07, 12:21 PM 80 81 Japanese Foreign Direct Investment and Japanese-style Management in Singapore 81 and branch offices is set up by non-manufacturers, one of their main activities must be related to information gathering and data analysis aiming for regional and global business expansion. Industrial restructuring and drastic economic changes in Singapore and in the region have prompted Japanese firms to treat the region more seriously. From time to time, Japanese firms are keen to make timely decisions conducive to business expansion. With this in mind, Japanese firms perceive Singapore as the most reputable information centre, despite the fact that operation costs in the country are the highest among Southeast Asian countries. The survey also indicates that Japanese firms are rationally concerned about the supply of industrial parts and components in Singapore (92 cases, 10 per cent). Obviously, Japanese manufacturers in Singapore realize that a sufficient supply of high-quality and sophisticated industrial parts and components for its high-technology Table 4.1 Japanese Investment Motivations in Singapore, 1985 Investment Motivation Manufacturer Non-Manufacturer Total Low labour cost 14 6 20 As...