International Business' Statistics of Import and Manufacturing Process

Introduction

Cambridge dictionary defines international business as the activity of trading goods and services between countries. However international business is beyond this definition, it has a very wide scope. Basically, international business is a cross border transaction between individuals, business or government entities. The transaction can be of anything that has value example including goods, services, resources, people, ideas and technologies across national boundaries ('What is International Business', 2019).

According to Cavusgil et. al (2015), international business refers to the performance of trade and investment activities by firms across national borders. Since the most conspicuous aspect of international business is the crossing of national boundaries, international business is also referred to as cross-border business. They seek foreign customers and engage in collaborative with foreign business partners. While international business is primarily carried out by individual firms, government and international agencies also engage in international business transactions. Firms and nations exchange many physical and intellectual assets, including products, services, capital, technology, know-how and labor.

While international business has been around for centuries, it has gained great speed and complexity over the past three decades. Firms seek international market opportunities more today than ever before, touching the lives of billions of people around the world. Daily chores as shopping, and leisure activities such as listening to music, connect you to the global economy. International business gives access to products and services from around the world and profoundly affects your quality of life and economic wellbeing.

The contributing factors for the development of international business are market development, purchasing of resources, competition pressures, technological changes, social changes and changes in government trade and investment policy. Market development is the main catalyst towards the development of international business. When the production capacity has outgrown the size of the local market, companies will find new market opportunities overseas. This apply to small countries like Singapore, Switzerland and Netherlands will find the need to expand their market outside the borders of their countries.

The purchasing of resources by advanced countries from developing countries have developed the activities of international business. Companies find that they depend on foreign resources due to the lack of resources in their own countries or find that such resources could be cheaper and easily available abroad. For example, Japan buys forestry products from Canada while companies around the world buy oil from the Middle east, or companies buy telecommunications tools from Nortel because it is cheaper and easier to purchase from one company rather than several companies.

Due to the rapid technological changes, especially in the areas of communication, transportation and information processing, eases the management of business today. International business transactions can be done faster and easier. Social changes have also enabled international business to expand. The borderless international business enables consumers from various countries to easily obtain and enjoy products of high quality. Changes in the government’s trade and investment policy have also contributed to the development of international business. With trade liberalization many governments have reduced their import tariffs and abolished foreign investment obstacles of their countries.

Singapore as One of Malaysia Trading Partner

Singapore or officially known as Republic of Singapore, is a sovereign island in Southeast Asia. The country situated at the southern tip of the Malay Peninsula, with Indonesia’s Riau Islands to the south and Peninsular Malaysia to the north. Singapore's territory consists of one main island along with 62 other islets. Since independence, extensive land reclamation has increased its total size by 23%. Modern Singapore was founded in 1819 by Sir Stamford Raffles as a trading post of the British East India Company. After the Company's collapse in 1858, the islands came under direct British control as a crown colony known as the Straits Settlements. During the Second World War, Singapore was occupied by Japan, following which Britain occupied it again. Singapore gained independence from the British Empire in 1963 by joining Malaysia along with Sabah and Sarawak, but separated two years later over ideological differences, becoming a fully sovereign state in 1965. After early years of turbulence and despite lacking natural resources and a hinterland, the nation developed rapidly as an Asian Tiger economy, based on external trade and its workforce.

The economy of Singapore is a highly developed free-market economy. Singapore’s economy has been ranked as the most open in the world, third least corrupt, most pro-business with low tax rates which is 14. 2% of Gross Domestic Product (GDP) and has the third highest per-capita GDP in the world in terms of Purchasing Power Parity (PPP). APEC is headquartered in Singapore. There is also a scarcity of land, in part being addressed by the expansion of Pulau Semakau with land fill. Singapore has limited arable land that resulted in Singapore dependent on the agrotechnology park for agricultural production and consumption. Human resources are another vital issue for the health of the Singaporean economy.

The economy of Singapore ranks second overall in the Scientific American Biotechnology ranking in 2014, with the featuring of Biopolis. Singapore could thus be said to rely on an extended concept of intermediary trade to entrepot trade, by purchasing raw goods and refining them for re-export, such as in the wafer fabrication industry and oil refining. Singapore also has a strategic port which makes it more competitive than many of its neighbors in carrying out such entrepot activities. Singapore ratio is among the highest in the world trade to GP, averaging around 400% during 2008 to 2011, and Singapore has the second busiest cargo tonnage in the world.

Singapore's total trade in 2014 amounted to S$982 billion. Despite its small size, Singapore is currently the fifteenth-largest trading partner of the United States. In 2014, Singapore's imports totaled $464 billion, and exports totaled $519 billion. Malaysia was Singapore's main import source, as well as its largest export market, absorbing 18% of Singapore's exports, with the United States close behind. Malaysia is Singapore's biggest trading partner, with bilateral trade totaling roughly 91 billion US dollars in 2012, accounting for over a fifth of total trade within ASEAN. Singapore's trade with major trading partners such as Malaysia, China, Indonesia and South Korea increased in 2012, while trade with EU27, United States, Hong Kong and Japan decreased in 2012.

Since 2009, the value of exports exceeds imports for Singapore's trade with China. In comparison, the value of imports exceeds exports for Singapore's trade with the US since 2006. Singapore's largely corruption-free government, skilled workforce, and advanced and efficient infrastructure have attracted investments from more than 3, 000 multinational corporations (MNCs) from the United States, Japan, and Europe. Foreign firms are found in almost all sectors of the economy. MNCs account for more than two-thirds of manufacturing output and direct export sales, although certain services sectors remain dominated by government-linked corporations. The rapidly growing economy of India, especially the high technology sector, is becoming an expanding source of foreign investment for Singapore. The United States provides no bilateral aid to Singapore, but the US appears keen to improve bilateral trade and signed the US-Singapore Free Trade Agreement. Singapore corporate tax is 17 per cent.

Economy Statistics (Recent Years): Year 2016 To Year 2018

Year GDP Nominal (Billion)(S$) GDP Nominal Per Kapita (S$) GDP Real (Billion) (S$) GNI Nominal (Billion) GNI Nominal Per Kapita (S$) Foreign Reserves Billion (S$) Avg. Exchange Rate (1US$ to S$) Economy statistic for Singapore from 2016 to 2018 which showing steady increasing GDP annually. Starting from 2016 with S$439. 412 Billion to S$467. 306 Billion, with increasing of S$27. 894 Billion. In 2017 to 2018 there is increasing with S$23. 868 Billion. This show that Singapore economy is increasing, and this will eventually bring positive income as one of Malaysia’s major trading partner.

Currently, Singapore is considered a global financial center due to the excellent financial services offered by their banks and other financial institutions. As the matter of fact, the nation was third in terms of competitiveness of their financial sectors in Global Financial Centers Index of 2017. Only New York City and London were ranked above. The services offered by the financial institutions include things like internet banking, multiple currency support, savings accounts, checking accounts, wealth management systems, and many more services.

Trading Performance of Malaysia With China From 2016 To 2018

The real growth rate of Singapore for export are slightly decreasing each year with RM21, 18 Million decrease on 2017 and RM4, 621 Million on 2018. In 2017 there are 1. 9% and 1. 8% decreasing respectively. Meanwhile there are increasing of growth rate for import with RM20, 331 Million increase in 2017 from 2016 and RM10, 342 Million on 2018 with increasing of 1. 9% and 1. 8% respectively.

Malaysia exports to Singapore in 2016. The top Malaysia exports to Singapore are led by capital goods with 49. 41% ($13, 626, 604. 08) and followed by Machinery and Electrical Equipment which contributed 49. 07% ($13, 535, 346. 85). At the same time, Consumer Goods are worth $10, 047, 354. 96 with a percentage of 36. 43%. Besides that, the export of fuels to Singapore has contributed $5, 161, 792. 54 (18. 72%) and the fifth place of Malaysia export to Singapore was intermediate goods with 9. 01% ($2, 483, 819. 59).

Malaysia exports to Singapore in 2017. The top Malaysia exports to Singapore are led by Capital Goods with 53. 23% ($16, 493, 456. 89) and followed by Machinery and Electrical Equipment which contributed 52. 577% ($16, 290, 554. 61). At the same time, Consumer Goods are worth $10, 164, 085. 13 with a percentage of 32. 80%. Besides that, the export of fuels to Singapore has contributed $5, 720, 057. 20 (18. 46%) and the fifth place of Malaysia export to Singapore was intermediate goods with 8. 00% ($2, 477, 503. 00).

Malaysia exports to Singapore in 2018. The top Malaysia exports to Singapore are led by Electric & Electrical Product with 16. 8% ($64, 135M) and followed by Not Electrical & Electrical Product which contributed 14. 1% ($64, 373M). And the last top three products value Malaysia Export to Singapore in 2018 is Raw Petroleum with 11. 1% ($4, 058M).

Malaysia has imported from Singapore with the total values of US$17, 453, 435. 33 Million in 2016 and within that, the main import is capital goods with 41. 07% ($7, 168, 030. 55). Meanwhile, consumer goods were the second-highest import that has contributed to 40. 57% ($7, 061, 030. 55). Then, the data followed by machinery and Electrical Equipment with 29. 83% ($5, 206, 733. 22). Besides that, fuels also impact the Malaysia import value which has contributed to 29. 83% ($5, 206, 733. 22) and the last top-five of Malaysia’s imports from China were intermediate goods with 17. 26% ($3, 015, 215. 97).

Malaysia has imported from Singapore with the total values of US$21, 447, 491. 25 Million in 2017 and within that, the main import is capital goods with 44. 31% ($9, 502, 411. 07). Meanwhile, Machinery and Electrical Equipment were the second-highest import that has contributed to 42. 30% ($9, 071, 596. 91). Then, the data followed by Consumers Goods with 39. 78% ($8, 531, 523. 66). Besides that, fuels also impact the Malaysia import value which has contributed to 30. 76% ($6, 597, 532. 50) and the last top-five of Malaysia’s imports from China were intermediate goods with 14. 87% ($3, 188, 615. 39). The top Malaysia exports to Singapore are led by Petroleum Product with 44. 50% ($38, 252M) and followed by Chemical and Chemical Products which contributed 10. 8% ($8, 934M).

Conclusion

The main cause for international business is that countries cannot efficiently manufacture all that they need. Countries find it much more beneficial to manufacture goods and services where they have cost advantage and trade the excess in such goods and services with other countries in exchange of goods and services which other countries can manufacture more efficiently, because of the differences in resources endowments and labor productivity. International business benefits both the nations and companies. Nations benefit by way of earning foreign exchange, more efficient use of domestic resources, better prospects of growth and more room for job opportunities. The benefits to the business companies comprise of scope for higher profits, greater use of manufacturing capacities, way out to extreme competition in domestic market and better business outlook.