Summary:
Most equity foreign direct investment (FDI) from Singapore into Malaysia does not reflect direct investment by Singapore-controlled firms. Instead, a large share consists of pass-through and round-tripping flows, reflecting Singapore’s role as a regional financial and investment hub through which capital is structured and routed.
This Chart of the Week looks beyond headline figures by decomposing Singapore’s equity FDI into Malaysia between 2015 and 2022 into three components: true Singaporean investment, pass-through capital, and round-tripping capital. Pass-through investment captures cases where Singapore-based entities channel capital from third countries into Malaysia, while round-tripping reflects Malaysian capital routed through Singapore before returning.
In fact, we find that a large share of pass-through FDI is associated with ultimate investors from countries such as the United States, Japan, and the United Kingdom. This decomposition offers a clearer picture of who ultimately stands behind Singapore-sourced FDI and helps explain why headline bilateral FDI statistics can mask the underlying sources of investment when regional financial hubs play a central role in channeling capital.
Highlights:
1. Pass-through capital accounts for the largest share of Singapore’s equity FDI into Malaysia. Across most years, equity FDI from Singapore is dominated by investments channeled through Singapore by entities whose ultimate owners are located elsewhere, consistent with Singapore’s role as a conduit for regional capital.
2. Much of this pass-through investment is linked to ultimate investors outside the region. A large share of pass-through FDI routed through Singapore into Malaysia can be traced to firms ultimately controlled in countries such as the United States, Japan, and the United Kingdom.
3. A smaller but persistent share of equity FDI from Singapore reflects Malaysian capital routed through Singapore before returning, illustrating how ownership structures can blur the distinction between domestic and foreign investment.
Article By Adam ROMZI
Graphic By HUANG, Yijia
ACI Perspectives 