If this city island nation in Southeast Asia wants to survive, extraordinary efforts should be made to make the country extraordinary, Singapore's founding father, Lee Kuan Yew, wrote in his memoirs. This can also apply to Singapore's current efforts to maintain its competitiveness in global financial markets, reports Global Times.
Singapore has positioned itself as a one-stop service center for the rich in Asia. In the 1990s, the rise of China created a new generation of wealth, and Singapore also worked to make itself a regional base of private wealth.
Indeed, in terms of private wealth management, Singapore is learning from Switzerland, especially after the "earthquake" caused by the collapse of the controversial Swiss bank secrecy. Assets amounting to tens of billions of dollars of the European rich have left Switzerland.
In order to attract high-value customers, the world's largest banks are moving to the emerging markets in Asia and the Middle East. In Asia, the wealth management industry is seeing a boom, thanks to the growing number of rich people. And with Switzerland providing less competition, Singapore's private banking industry has also been booming.
Singapore is a more and more popular destination for hidden money. According to the Boston Consulting Group (BCG), Singapore's stringent bank secrecy laws have attracted $1.1 trillion in foreign capital, and its growth rate is bypassing that of Switzerland. According to BCG, Singapore will become the world's largest multinational financial center by 2028. For foreign capital, Singapore's management is relatively lenient. Singapore immigration authorities only generally check "the first pot of gold" of the immigrant applicants.
The protection of wealthy property privacy in Singapore is stronger than in Switzerland. The Singapore banking industry has been "blocking" the OECD regulations on bank customer information to enforce bank secrecy regulations. Even its neighbor Malaysia has complained that Singapore banks' customer information confidentiality is tighter than that of Swiss banks, and that this has caused problems for Malaysia's anti-corruption investigations.
Another reason for the flow of international wealth toward Singapore is the special tax system it offers. Singapore's tax rate is low, so corporate income tax and personal income tax in the country is very attractive for the rich. What's more, there is no inheritance tax in Singapore and citizens or green card holders' overseas income is also tax-free. To attract global wealth, Singapore has adopted a series of measures to meet the needs of the rich, such as constructing high-end apartments with private yachts. This prompted the IMF to put Singapore on its blacklist of "tax havens," along with Liechtenstein and Monaco and various other countries. The US is even considering adopting anti-tax avoidance measures toward Singapore.
The Financial Action Task Force, a multinational advisory group established to combat money laundering, has said that Singapore's financial institutions have little knowledge of the risk of inflows and outflows of illicit funds. Some insiders said that since the US began to investigate Swiss banks' collusion with tax evasion a few years ago, Singapore has started to filled the gap. There can be little doubt that the rapid development of private banks will lead to an increasing risk of illegal capital inflows, even though Singapore would not want its financial systems to be used as a refuge or channel for illegal cash.
In our opinion, in addition to the transfer of global wealth, Singapore is also supported by the rapid growth of private wealth from the Asia-Pacific region (excluding Japan), especially the strong wealth management needs from the Chinese mainland.
According to the 2016 billionaire report from UBS Group and PricewaterhouseCoopers (PwC), the total wealth of Asia's ultra-high-net-worth group in 2016 was about $4.84 trillion. This means a huge amount of private wealth will need to be managed in the Asian region.
Despite the pressure it is facing, Singapore has maintained its bank secrecy laws, low tax environment and private banking business with a tenacious attitude, which could allow it to gradually replace Switzerland as the main global private wealth management center.