Singapore's rebalancing is delicate act - Reuters

The Helix Bridge is seen next to the Marina Bay Sands integrated resort, during dusk in the central business district of Singapore, November 13, 2018. REUTERS/Kevin Lam

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MUMBAI, March 30 (Reuters Breakingviews) - Singapore’s centre of gravity is shifting. The pandemic burnished its reputation as a haven for rich Asians looking to park their money. But beyond its role as a “Switzerland of the East”, entrepreneurs, executives and investors — especially from China — are looking at the tiny country as a destination for more active business investment.

The Lion City, home to 5.5 million people at the tip of the Malay peninsula, has benefited enormously from political uncertainty and pandemic pains elsewhere. Take $68 billion DBS Group (DBSM.SI), the top local lender: net new money inflows into its private bank from overseas logged an astonishing 170% increase year-on-year in the first half of 2020, and remain robust. Single-family offices in the city multiplied fivefold between 2017 and 2019, and stood at around 400 in 2020, per official estimates. All the signs suggest that pace is picking up.

Singapore is also slowly shedding its unwelcome nickname “Singa-snore”, referring to the city’s easy pace. Frustrated Western finance executives fleeing Hong Kong’s ham-fisted Covid-19 policies have started relocating to the hub, generating flattering headlines. Much more significant, however, is Singapore’s increasing attractiveness to technology firms.

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The local stock exchange still struggles to attract hot initial public offerings. But that is less of a sore point now that tech champions like Grab , Sea (SE.N) and GoTo are using the city as a base to tap Southeast Asia, home to a population more than twice the United States. Alphabet's (GOOGL.O) Google and Zoom (ZM.O) are ramping up for similar reasons. The International Monetary Fund’s ASEAN-5 grouping, including Indonesia, Philippines and Vietnam, comprise a $3 trillion economy forecast to grow at almost 6% in 2022.

Cryptocurrency geeks are popping up too. Though regulators are being picky about approvals for licences to trade, shunning big names like Binance, they are tentatively embracing the industry with an eye on the potential of related blockchain technologies. That stands in sharp contrast to bans elsewhere. The absence of a tax on capital gains is a sweetener.

But the most striking trend, which gathered pace through the pandemic, is the scaling up of the mainland Chinese presence even as Singapore leans West diplomatically. The government ditched its famous neutrality to sanction Russia read more and Prime Minister Lee Hsien Loong was welcomed read more in the White House on Tuesday.

Some ultra-rich Chinese may be seeking a buffer between their wealth, businesses, and the constant crackdowns from Beijing: Singapore allows family office principals with net investible assets of at least S$200 million ($147 million) to apply for permanent residence. Yet the trend also coincides with excitement about the accelerating digitisation of developing Asia, so there’s a business logic too. ByteDance’s short-video streaming app TikTok has set up shop, while the city is home to Tencent’s (0700.HK) biggest office outside of China for its global interactive entertainment operations. Chinese investment funds are coming too: Sean Tong, co-founder of Chinese private equity firm Boyu, is among the high-profile investors to have relocated.

This is a natural extension of Singapore’s $150 billion relationship with its top trading partner, facilitated by another advantage the city has over Hong Kong; in Singapore 30% of the population speaks Mandarin - the most common dialect in mainland China – as the primary language, compared to only 2% of Hong Kong residents. This is reinforcing its advantage as a place where those doing business in India, Southeast Asia and China can comingle.

Its lenders and airlines look strong too, buttressing its hub image. DBS is leading an overseas push by Singaporean banks into India, China and Taiwan, making bolt on acquisitions partly filling in a retail banking gap left in markets abandoned by Citi (C.N). And its national carrier is in strong position to support regional connectivity. Sovereign wealth fund Temasek threw Singapore Airlines (SIAL.SI) a first-class financial lifeline early during the pandemic; Hong Kong’s Cathay Pacific (0293.HK), in contrast, is still struggling.

CHAMPAGNE PROBLEMS

Nothing complicates social relationships like success, however. While rich Singaporeans benefit from the increase in business, many nevertheless bemoan the tacky Bentleys acquired by mainland China arrivistes clogging parking lots. The cost of a large car permit has more than doubled in three years to about S$90,000 ($73,000). Rents for high-end property are soaring and slots at top private schools are growing scarce.

Among the nearly 80% of the population who live in government-developed housing, Singapore’s welcoming attitude to the monied risks driving up the overall cost of living. Headline inflation rose at 4.3% in February, its fastest pace in nine years. So while Singapore quietly courts the wealthy, it is loudly tightening up on employment visas. The government plans to raise goods and services taxes next year and is exploring ways to get more out of the wealthy.

The sustainability of Singapore’s advantage will get a more thorough test after the pandemic disruptions in Asia ease. For all the worries about immigration, the city’s population contracted a second consecutive year in the twelve months through June 2021, driven by a nearly 11% drop in non-residents. Other headwinds include crashing valuations in the tech sector and the risk that Beijing will get prickly about how the hub is helping Chinese capitalists hedge against government policies. Rebalancing Singapore is a delicate affair.

Follow @ugalani on Twitter

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

CONTEXT NEWS

- Singapore’s Prime Minister Lee Hsien Loong visited the White House on March 29.

- U.S. President Joe Biden planned to discuss Russia's invasion of Ukraine and China's role in the Indo-Pacific with Lee at the meeting, Reuters reported, citing a senior administration official.

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Editing by Pete Sweeney and Thomas Shum

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

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2022-03-30 05:43:00Z
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