<<$1,000bn could flow over the next few years from such havens as Switzerland and Luxembourg into Singapore and Hong Kong, which between them hold an estimated $500bn in offshore wealth.>>
Singapore opens its doors to shifting wealth
By John Burton
Published: November 30 2003 21:41 | Last Updated: November 30 2003 21:41
LGT Bank, owned by the royal family of Liechtenstein, has become the latest European private bank to establish operations in Singapore, joining other recent arrivals such as Zurich-based EFG Private Bank and BNP Paribas Private Bank.
Although Singapore has a reputation for cracking down on its own tax cheats, the south-east Asian city-state is expected to be the biggest gainer from the European Union's drive against tax evasion, scheduled to take effect from 2005. "Singapore appears today as the key challenger to Switzerland in the global offshore environment," said IBM Business Consulting Services in a recent report.
Roman Scott, vice-president at the Boston Consulting Group in Singapore, estimates that $1,000bn could flow over the next few years from such havens as Switzerland and Luxembourg into Singapore and Hong Kong, which between them hold an estimated $500bn in offshore wealth.
While private banks in Singapore and Hong Kong now cater mainly for Asian clients, he says, "their governments have begun promoting their advantages as offshore centres further afield, marketing them to European investors. Singapore has been particularly active."
Singapore has no withholding tax on the interest income of non-residents, while "the bank secrecy laws are excellent, comparable to the stringent standards of Switzerland," says Didier von Daeniken, head of private banking for south-east Asia at Credit Suisse Private Banking. "Singapore will play a more important role than Hong Kong because of Chinese jurisdiction over Hong Kong. Chinese investors, for example, will prefer to place their money in Singapore."
Singapore's government has been clear about its ambitions. In a recent speech Lee Hsien Loong, the finance minister, said that Singapore could be "a global centre for wealth management activities" by building on its political stability, efficient legal system and well-regulated financial sector. The ambition is in response to the loss of b usiness from investment banking as foreign firms have relocated to Hong Kong to be closer to China, the biggest regional market for mergers and acquisitions and initial public offerings.
In September, Singapore created a Wealth Management Institute to train a local cadre of private bankers. The venture is supported by two of the city-state's most powerful state-run financial institutions - the Government of Singapore Investment Corporation, which manages more than $100bn in foreign reserves, and Temasek Holdings, the state holding company. Mr Lee is deputy chairman of GIC, while his wife is the Temasek executive director.
Foreign private banks were attracted to Singapore because of the estimated $10,000bn in assets held by wealthy individuals in Asia, about the same size as the market in Europe. But the planned introduction of the EU savings tax directive and a proposal by the Organisation for Economic Co-operation and Development on exchange of banking information have accelerated the influx.
"We have seen the presence of European private banks increase in Singapore in the last two years in anticipation of the new EU rules," said Justin Ong, a PwC adviser on banking and wealth management in Singapore. Credit Suisse in 2001 set up its first global private banking office in Singapore, making the city-state its largest private bank centre outside Switzerland. UBS and SG Private Banking have also expanded their wealth management operations.
However, Singapore is under pressure to improve transparency when it comes to the identity of account holders. The OECD is expected early next year to ask Sin gapore, a non-OECD member, to agree bilateral agreements with OECD countries on exchanging bank information. Switzerland and Luxembourg have refused to agree to an OECD proposal on information exchange because of fears that Singapore would attract funds if they did so. Officials in Singapore said it would be premature to comment on the OECD proposal, which they have not formally received.
"Singapore will not oppose bilateral agreements because it would contradict its economic strategy to engage trading blocs and embrace regulatory reform. There is no upside in opposing such moves. Its leaders are savvy enough to understand that," says one industry official. "But it's unlikely that Singapore will embrace the proposal in its entirety and instead will negotiate . . . a gradual approach to implementation, because it wants to ensure that its ambition to be a global centre for wealth management is not risked."
One Singapore-based private banker predicted that the OECD negotiations with Singapore would be "long and drawn-out . . it's the Asian way". |
