Foreign investment, human capital and manufacturing sector growth in Singapore

Abstract

Foreign investment has been long regarded as the main driver of Singapore's manufacturing sector growth. By making use of annual data for the period 1980–2005, this paper argues that in addition to foreign investment, human capital is also playing a significant role in foresting manufacturing sector growth in Singapore. Empirical analysis shows that foreign investment, human capital and value added in manufacturing are cointegrated. The paper also argues that continued growth into the future requires further diversification of the manufacturing sector and increased spending on R&D and advanced education.