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A worker rides past seafront homes in Singapore’s Sentosa Cove area, where yachts and foreigners go hand in hand.
SINGAPORE, April 25 — This affluent city-state of 4.5 million people is aiming to be a sanctuary for the world’s wealthy and their money, Asia’s answer to Geneva and Zurich.
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Foreign workers building a seafront home in Sentosa Cove. A container loading dock and the city skyline are in the background.
Cricket anyone? A construction worker on a break at Sentosa Cove. Almost 40 private banks now have regional operations in Singapore.
Singapore, with its reputation for authoritarian order and safety, has long relied on luring multinational corporations for manufacturing jobs and economic growth. But with China’s rise as an industrial powerhouse, it started chasing a succession of economic fads — from technology to pharmaceuticals to stem-cell research — in search of a fresh elixir.
Now Singapore, a tiny enclave at the tip of the Malay peninsula, is trying to carve out a new niche for itself in the global economy by bolstering banking secrecy laws and offering generous tax incentives.
“I can’t think of any other place where private banking is growing so much as in Singapore,” said Henrik T. Mikkelsen, a private banker at Commerzbank in Singapore. “We want to be the Switzerland of Asia.”
It may lack the stunning Alpine scenery, but officials here hope that luring the wealthy and their bankers will not only diversify the economy but also help offset a declining birth rate and increase Singapore’s stagnant population with what is known here as “foreign talent.”
“It creates jobs, it builds a service industry, it generates income and, on the immigration issue, it also supplements our shortfall in fertility,” said Vivian Balakrishnan, Singapore’s minister for community development, youth and sports.
Almost 40 private banks now have regional operations in Singapore, including Swiss stalwarts like Bank Julius Baer. Citigroup’s headquarters for all private banking outside the United States is now in Singapore, as is the global banking headquarters of Standard Chartered Bank of Britain.
The estimated $150 billion in private wealth they manage here is still just a sliver of the $1.7 trillion managed by Swiss bankers. But by all accounts it is growing quickly, fed by wealth pouring in from Asia’s fast-growing economies, Middle Eastern oil money, and Japanese and Europeans fleeing new efforts to tax their offshore earnings.
The bankers cater to people like Robert V. Chandran, who emigrated to the United States from India and made fortunes in California real estate and the fuel oil business. In 2005, contemplating retirement, he moved his company and family here, bought a condominium downtown and space in a waterfront resort with parking for yachts. He traded in his American passport for one from Singapore.
Mr. Chandran said that he was lured by Singapore’s blend of Western conveniences with Asian values and by the government’s zeal for keeping Singapore competitive. “They don’t have global taxation,” he said, which means that his capital gains and interest income are not taxed here. (Singapore only imposes an income tax of 20 percent on income earned in Singapore.)
Singapore’s vision for the high life can be found at Sentosa Cove, a secluded development on the edge of a small island theme park off Singapore’s coast. Mr. Chandran is building his home there, among sites that sold for as much as $9.9 million each. Sentosa Cove has a 400-berth marina with 10 spots for megayachts, two golf courses and a casino resort on the way.
“The government wants to create Sentosa as a playground for the rich and famous,” said Joseph Tan, director of residential property at CB Richard Ellis. “They’re trying to build it as our Monte Carlo.”
Providing services for Asia’s superrich is undoubtedly a growth market. The booming region is churning out at least 200,000 new millionaires a year, according to a recent report from Merrill Lynch and CapGemini, prompting comparisons with America’s Gilded Age.
“The wealth of the wealthy in emerging markets is no different than the wealth of the wealthy in the Rockefeller days,” said Roman Scott, who left a job analyzing the industry for management consultant BCG last year to start his own investment advisory firm, the Calamander Group. “It’s the robber baron thing.”
In a region known for its poverty, corruption and political turmoil, this port enclave has long served as a refuge for wealthy ethnic Chinese from Malaysia and Indonesia, who rely on Singapore’s top-notch health care and schools. For many, Singapore’s gleaming infrastructure, efficient bureaucracy and stable government more than compensate for its lack of press freedom, political debate and artistic ferment.
While the latest influx of wealthy foreigners is pushing costs up, property prices are still low compared with London or New York. Tax rates are low as well. Singapore does not tax capital gains or interest income. Its top income tax rate is 20 percent, and it does not tax income earned outside Singapore.
Much of the decision to promote private banking here was the result of an official reassessment conducted in 2002 in the midst of the global recession and China’s investment boom. Singapore convened an Economic Review Committee from the private sector and government to chart a new course.
“They were facing China with no real game plan,” said Robert Stein, a former head of Deutsche Bank’s Asian operations who headed the committee’s financial services working group.
The panel recommended that Singapore focus on luring hedge funds, private equity firms, insurers and private banks. Afterward, Singapore exempted foreign-earned income from taxation and modified its trust laws, guaranteeing the right of trust holders to determine who inherits their estate.
Bankers in Singapore say this is especially attractive to clients from Europe, where courts often overrule wills to give relatives a fair share, and from the Middle East, where Islamic courts sometimes pass over wives and children to hand over entire estates to a deceased’s father and brother.
Singapore had already strengthened its banking secrecy laws in 2001. While many banks are moving their back offices to India, bankers here say Singapore’s secrecy rules are so tight that they are moving the data centers handling their private banking transactions from India to Singapore.
Concerns have emerged, however, that Singapore may also be attracting wealthy individuals who have something to hide.
Before his arrest in 2005 on charges of corruption and fraud, Gianpiero Fiorani, the former chief executive of Italy’s Banca Popolare Italiana, stashed some of his assets in Singapore. The Japanese fund manager and shareholder activist Yoshiaki Murakami moved his fund, MAC Asset Management, to Singapore before his arrest last year on charges of insider trading. And in December, the police in Shanghai arrested an unidentified Singaporean for running an underground bank that shuttled money between China and Singapore.
Bankers here say they are under pressure to know the nature of their clients’ wealth — Singapore’s secrecy rules do not extend to anyone involved in terrorism or smuggling. And the authorities here say they are not trying to attract tax evaders.
“The Singaporeans have done an excellent job of balancing a pro-business stance with a regulatory environment that creates a well-disciplined environment for private banking,” said Mr. Stein, now a director in London at the German bank WestLB.
Still, many governments are unhappy about the prospect of losing tax revenue to another country. A “stop tax haven abuse” bill, introduced in February by three United States senators — two Democrats, Carl Levin of Michigan and Barack Obama of Illinois, and a Republican, Norm Coleman of Minnesota — includes Singapore (along with Hong Kong and Switzerland) in its list of “probable locations for U.S. tax evasion.”
Meanwhile, the European Union has been trying to persuade Singapore to follow the lead of Switzerland and other European tax havens, which have agreed to share information on accounts or collect a withholding tax.
Germano Mirabile, a policy officer at the European Union’s Taxation and Customs Union Directorate-General, said Singapore had not yet responded to Brussels’ overtures.
Because tax rates in Asia are generally low, Singapore’s lure to Asians is less about escaping taxes and more about protecting assets from political vagaries. Many Chinese, for example, keep some of their earnings in Hong Kong. But for those who fear Hong Kong is still within reach of Chinese authorities, Singapore has become increasingly popular.
“A lot of Chinese would like to come to Singapore because Hong Kong is still China,” said Kong Eng Huat, managing director of Merrill’s private banking operations in Singapore.
Some put more than their money in Singapore. Many wealthy Chinese executives have bought homes in Singapore and moved their families here. “They want their kids to have a safe environment, clean water, better air,” said Shi Xu, vice president of Singapore’s Hua Yuan Association, a club for mainland immigrants.
Singapore’s proximity to South Asia is also luring ethnic Indians, both those from India and those like Mr. Chandran from the Indian diaspora. Indian nationals recently emerged as the biggest group of foreign buyers of prime real estate in Singapore, after citizens of neighboring Indonesia and Malaysia.
Roughly 60 percent of the buyers at Sentosa Cove are foreigners, according to the development’s staff. Sentosa’s residents get a choice of two views; they can survey one of the world’s busiest container ports or one of the world’s busiest sea lanes.
That may suit shipping magnates like Mr. Chandran more than most, but as an added inducement, foreigners buying property in Sentosa Cove are put on a fast track by immigration authorities for permanent residency.
“They think of everything,” said Jackson Tai, the American chief executive of Singapore’s largest bank, DBS. Recalling B. F. Skinner’s utopian novel, “Walden Two,” he said, “Singapore is Walden Three.”
