By Raju Gopalakrishnan, Reuters
SINGAPORE - Along a sun-splashed cobblestone street in
central Singapore, coatless bankers with loosened ties quaff
imported beers in a neighbourhood of gaily painted
shophouses called Duxton Hill.
The scene is almost European. And for long-time residents of
this Southeast Asian city-state at the crossroads of some of the
world’s busiest shipping lanes, a bit bemusing. Just a couple of
years ago late-night revellers used to tumble out of ill-lit pubs
and grimy, illicit brothels on Duxton Hill.
The transformation is a microcosm of the reinventions Singapore
has undergone to keep an island with almost no resources and
roughly the size of New York City competitive in a neighbourhood of
fast-growing emerging markets.
Boutique funds, advisory firms and brokerages are putting down
roots in a revamped Duxton Hill, where opium and gambling dens run
by Chinese triad gangs flourished last century.
Singapore has attracted hundreds of such firms in the past
decade, lured by its light-touch registration requirements and
relatively benign regulatory climate, even as Switzerland, the
world’s leading wealth manager, gets tougher on bank secrecy.
“Our vision of this place is the Singapore version of London’s
West End,” said Ed Peter, 47, a Swiss-born fund manager who has
been buying up shophouses in Duxton Hill.
The neighbourhood, in truth, bears little resemblance to
London’s theatre district, but it’s also a far cry from its shady
past.
“It’s going upmarket. It’s cool. It’s funky,” said Peter,
speaking effusively at his office in a three-storey building which
housed an Elvis impersonator bar just two years ago. “You’ve got
half the financial community here.”
Next door, the raunchy Aristocats pub closed shop a few
months ago, providing space for Daun Consulting, a private equity
adviser, to expand from its upper-level offices.
Peter, Deutsche Bank’s head of asset management for Asia
Pacific, Middle East and Africa before setting up his own firm in
Singapore, manages about $650 million .
The squeaky clean city of 5.1 million, nicknamed the “nanny
state” for its propensity for micromanagement, is fast emerging as
one of the world’s hottest destinations for wealth — and the
wealthy, who now have casinos and theme parks for play, and seaside
mansions and penthouses to stay.
The Monetary Authority of Singapore at end-2009 — the most in
Asia and up about 40 percent from a year ago.
The Boston Consulting Group estimates private banks alone in
Singapore manage about $500 billion in assets. The numbers are
dwarfed by the estimated $2 trillion in private wealth managed in
Switzerland, but the growth in Singapore is startling, wealth
managers say.
“In the last 10-12 years I’ve seen Singapore really take a
leadership role in changing the landscape of the wealth management
industry,” says Deepak Sharma, chairman of Citi Private
Bank.
“The regulatory environment in Singapore is one of the finest.
It has one of the best standards in the world, but at the same
time, it is consultative. It engages the industry.”
GO EAST YOUNG MAN
The big players, including Swiss giants UBS AG and Credit
Suisse who have a global stranglehold on private wealth management,
are among those looking East. UBS, usually chary about its plans,
says it will hire 400 new staffers in the Asia-Pacific region in
the next few years.
Credit Suisse said net new assets from clients in Asia climbed
to 11.5 billion Swiss francs in 2009 from 8.4 billion in 2008. In
the first six months of this year, net new assets came in at 7.1
billion Swiss francs.
Morgan Stanley plans to double its Asia headcount in wealth
management over the next three years, largely focussing on the top
end of the market.
JPMorgan Chase & Co plans to triple its private banking
assets in Asia over the next five years and plans to increase its
headcount in the region by 40 percent over the current 400, a
company spokesman in New York said this week.
“I believe Singapore will be the true private banking hub,” said
Massimo Hilber, managing partner at private Swiss bank
Marcuard who, like Peter, has an office on Duxton Hill. “All
the big players are here, and the smaller players like us. You have
to be here.”
Why Singapore?
First, assets held by Asia-Pacific’s high net worth
individuals – people owning more than $1 million excluding
home, collectibles and durables – surged 31 percent in 2009 to
$9.7 trillion, overtaking Europe, according to CapGemini/Merrill
Lynch.
Second, high net-worth individuals seeking high-return
investments are turning to emerging markets. Accordingly,
portfolios of such individuals included 22 percent in
Asia-Pacific investments in 2009, up from 19 percent in 2008, and
will soon overtake Europe, the CapGemini study says.
Many of these changes are focussed on Singapore, which is at the
crossroads of new wealth being created in China, India and
Indonesia, some of the fastest growing economies in the world.
Singapore, which has the world’s highest concentration of
millionaires, is poised to grow its own economy 13-15 percent this
year, possibly the fastest rate in the world.
Hong Kong is Asia’s other big financial centre, but tends to
focus on investment banking and deal-making in China rather
than in the management of private wealth, bankers say.
“Hong Kong probably makes great business sense from an
investment banker perspective, but I don’t think it has invested as
much in itself in creating a place for families to live,” says Nick
Pollard, Asia chief executive of private banker
RBS Coutts.
“What Singapore has done very well is that it has almost created
a whole infrastructure, not just a place to work, but also a place
to live, a place to educate your children, a place to have great
fun.”
FINE CITY
Stuffy. Staid. A “fine city” where every minor transgression
attracts a fine. Where the sale of chewing gum is banned, and
caning is prescribed for offences such as vandalism.
That was, and in some cases still is, Singapore.
But about five years ago, the government launched a concerted
effort to change the image. Two casinos sprang up this year at a
cost of about $11 billion in a city where gambling had been banned.
It’s the only country in the world where the Formula One Grand Prix
is held at night.
Singapore impeccably conducted its third F1 race on September
26, with Fernando Alonso winning on a balmy tropical night, driving
his Ferrari through 61 laps around the city’s business
district.
Top music acts including Mariah Carey, Sean Kingston, Chris
Daughtry and Adam Lambert performed at different areas around the
circuit. Some of the jet-setting crowd partied after the race at a
newly opened rooftop bar at the $5.3 billion Marina Bay Sands
casino resort, built by Las Vegas Sands on reclaimed land around
the mouth of the Singapore River.
Sentosa island, just offshore Singapore, is being
redeveloped as a home for the seriously wealthy, with golf clubs, a
sailing marina and sea-facing bungalows priced at $20 million and
more. Genting Singapore’s Resorts World casino and Universal
Studios theme park opened in February, raking in S$503.5 million in
the first three months.
“Rebranding Singapore as a global city and tourism hub fits
in very well with its natural advantage, which is its strategic
location in the centre of Southeast Asia and good transportation
links,” said Kit Wei Zheng, a Citigroup economist.
The aim is simple. Make the city more attractive for high-end
foreign talent and wealth. Turn tourism into a money spinner. Focus
on services as manufacturing shifts to lower-cost countries in the
region. And make it easy for foreigners to work.
It is the latest incarnation of a city that emerged from British
colonial rule in the 1960s as a gritty port town. Founding father
Lee Kuan Yew and his People’s Action Party — dressed in trademark
white shirts and pants — set out to scrub the city clean of
corruption in all its manifestations.
By the 1970s, the port had become one of the world’s busiest and
was soon complemented by the opening of top-ranked Changi
international airport.
By the 1980s, Singapore was a regional manufacturing hub,
particularly for electronics. Then it reinvented itself as a
financial hub, and by the 1990s was one of the world’s leading
centres for foreign exchange trading. A decade ago, the PAP
patriarchs began building an education and bio-tech hub.
NUMBER 10
The common denominator for each Singapore incarnation has been
to make it easy to do business. Be the fastest shipper, the most
proficient manufacturer, the state with the least red tape.
For the Singapore financial industry, that comes from what they
call “Number 10″. That’s 10 Shenton Way, not Downing Street but the
address represents an institution similarly powerful — the
headquarters of MAS, the central bank.
“The regulatory environment is fair as opposed to arbitrary,
random and difficult,” says Peter, the fund manager. “The rule of
law is incredibly important. This is probably the best-managed
country on the planet. It’s managed in a pro-active
business-friendly way.”
Funds with less than 30 institutional investors can set up shop
without a licence from MAS. While MAS is set to introduce tighter
rules next year, Singapore remains one of the easiest jurisdictions
for funds to begin operations.
But as regulation is tightened in Europe and the United States
following the 2008 financial crisis, and Switzerland responds to
concerns about its bank secrecy laws, Singapore, too, has come
under the spotlight.
In November, Singapore was taken off the OECD “grey list” of
nations not implementing international disclosure standards, but
has yet to sign a tax treaty with the United States.
“The business model for private bankers is going to change —
they can no longer tell customers just to put their money in
Singapore and they will make sure no one ever knows about it,” said
Edmund Leow, principal at law firm Baker & McKenzie, Wong &
Leow.
“Instead, bankers are already marketing themselves as providing
the best advice on how to legitimately minimize the amount of money
their customers have to pay in tax.
“This is a global trend. I think Singapore is doing what most
other countries are doing and shouldn’t be disadvantaged compared
with other wealth management centres.”
RISKS OF REINVENTIONS
Singapore’s seismic reinventions were possible because the
government nipped any political opposition in the bud and voters
who have seen their per capita incomes grow seven-fold over the
years were not inclined to grumble much.
But as Singapore undergoes its latest manifestation as a “global
city”, with an ever-mounting proportion of foreign residents
crowding the roads and competing for space and jobs, the government
is having to soothe escalating criticism from the “heartland”, the
sprawl of government housing blocks in the interior of the island
where much of the citizenry lives.
Take, for example, Pipit Road, where a public housing compound
is set amid factories and warehouses. People there live in tiny
one-room apartments and are among the least well-off in
Singapore.
Elderly residents shuffle along through corridors to the open
area at the ground level, many with vacant stares.
“Look at my life. Do you think I have the time?”, said
Seet Siew Buay, a 49-year-old woman when asked if she had
seen the casino resorts or heard of the F1 race. “I have to look
after them,” she said pointing to a 26-year-old son with learning
and speech disabilities and an unemployed common-law husband.
They subsist on the S$300 given to the son each month in
welfare, and Wong’s savings from his days as a carpenter. Singapore
households earn an average income of S$7,440 a month, according to
government statistics, but the bottom 20 percent earn only
S$1,274.
There is some anger in the Pipit Road housing block at what
is seen as the headlong rush to attract foreign investment
and wealth.
“The bloody government will get the money,” said a middle-aged
man, who called himself Jack. “We will get nothing. But somehow we
still vote for them.”
Having a super-rich pool of foreigners in the city poses the
risk of accentuating social tensions. Already, housing prices are
rising faster than in the rest of the region. Porsches, Jaguars and
Ferraris flash by in the streets. The number of international
schools in the city catering mostly to foreigners has risen
five-fold in the last decade or so.
The number of overseas workers — mostly for menial and blue
collar jobs — has also risen rapidly to around 1.8 million, a
figure that also includes foreigners who have become permanent
residents. That means one in three people in Singapore is a
foreigner, one of the highest such proportions in the world outside
the Middle East.
Prime Minister Lee Hsien Loong addressed those rising
concerns in his August 9 National Day speech saying that without an
inflow of workers to make up for “the shortage of workers and the
“shortfall of babies in our population”, the economy and society
would stagnate.
“I understand Singaporeans’ concerns about taking in so many
foreign workers and immigrants. Some of us wonder: Will it change
the ethos of our society? Will it mean more competition for us at
work, or for our children in schools? Will the new arrivals strike
roots here? Can they adjust to us, and we to them? These are valid
concerns which we must address.”
One way to ensure some trickle-down effect from Singapore’s
rapid growth is on public spending.
The government plans to spend $44 billion alone in the next
decade on extending the commuter rail network to cope with a
population projected to grow another 25 percent in the next few
years following a 25 percent increase the past decade.
“There is a certain degree of discontent, but it is not brewing
over and spilling out into unrest,” said Gerald Giam, an executive
councilor of the opposition Workers’ Party. “It is something we
need to keep a watch on.”
ST. JACK
Over at Duxton Hill, it’s getting to evening and executives
are winding their way home, some hailing a cab, one or two
clambering onto bicycles.
It’s still a ribald place around the edges. Some of the old bars
still operate. In a few corners, one can almost imagine Jack
Flowers, the protagonist of Paul Theroux’s novel “St. Jack” about
Singapore in the 1960s, rifling his deck of porno cards in a seedy
shophouse doorway and asking a tourist: “Can I get you anything?
Anything at all you need?”
For Peter, the fund manager, Singapore has what he needs.
“This place works,” he says, strolling down the cobbled street
on Duxton Hill. “Take a look at the airport. In how many countries
in the world do you find your luggage on the carousel when you come
out? In Geneva, you wait 25 minutes. In the US of A, you worry,
will your bags show up?”
Peter, who worked in private banking in Europe and Hong Kong
before setting up in Singapore in 2005, is also involved in a chain
of wine shops in Singapore, and vineyards in Australia.
On Singapore’s social tensions, he becomes reflective and says:
“It’s a new risk that’s worth watching. Is it a big risk? No.” Then
reverting to his natural ebullience, he says: “This place has the
potential to be Monaco and Luxembourg, and Geneva or even
London.”
