Singapore: a growing financial hub
As an international financial centre, Singapore offers financial institutions a conducive, pro-business environment, cost-competitiveness and a highly-skilled and cosmopolitan labour force. Furthermore, it has long been recognised as one of the best cities for business with a strategic geographical location, at the heart of the rapidly-developing Asian market. So, it seems that doing business in, or with, Singapore is a no-brainer – yet we here very little about the country in comparison with other Asian powerhouses. Families in Business spoke with Erina Han of the Monetary Authority of Singapore to find out what's on offer in Singapore for family businesses
Families in Business (FIB): What part do family
businesses play in Singapore's economy?
ERINA HAN (EH): Singapore has increasingly been seen as a compelling platform for companies big and small, foreign and local, from all over the world to come to interact, transact, feed off one another, spurring greater value creation. Family businesses are a part of this vibrant enterprise ecosystem.
FIB: Asia is a "hot topic" in the world of business today, with China opening its doors to the west, Japan's economic recovery gaining traction, and India's infrastructure becoming stronger. Where does Singapore fit in and should we be hearing more about Singapore?
EH: Singapore has always been globally connected to cities like New York, London, Tokyo, Frankfurt, Paris. Now that Asia is booming, Singapore is right in the heart of Asia to leverage on the deep links it has fostered with the Association of Southeast Asian Nations: Japan, China, Korea in the north and India in the south. We are also expanding our ties with the Middle East. With a diverse array of financial products and institutions which thrive under a regulatory regime and strong corporate governance framework, Singapore is well placed to serve the financial needs of businesses wishing to penetrate Asia.
In addition, Singapore offers a comfortable cosmopolitan environment for expatriates. The quality of life in Singapore attracts many foreigners and, as a result, expatriate families prefer to live in Singapore because it enables them to live in Asia without leaving their comfort zone.
FIB: What recent economic developments would make family business want to do business in, or with, Singapore?
EH: Singapore is internationally recognised as one of the world's strongest and most competitive economies in the world. It offers a top-ranking, globally-connected and pro-business environment, along with an effective, trusted and secure infrastructure and talented workforce. In fact, Singapore has received high scores in global and regional businesses worldwide.
Singapore recently hosted the 2006 Annual Meeting of the Boards of Governors of the International Monetary Fund (IMF) and the World Bank Group (WB). This meeting helped to further the position of Singapore as a global city with a world of opportunities and as a financial centre for the world.
FIB: Singapore has concluded Free Trade Agreements (FTAs) with many major economies and links with the Middle East. What do these involve and how will they affect Singapore?
EH: Singapore is a trade-dependent economy with the world's highest trade-to-GDP ratio. It is a free-trading nation in the truest sense of the phrase, implementing practically no barriers to the free flow of goods in and out of Singapore. This status as a trading nation is greatly strengthened by the multitude of bilateral FTAs with the world's largest economies.
FIB: Are family businesses growing in Singapore? What is the government doing to encourage their growth?
EH: The Singapore government constantly reviews and enhances our pro-business environment to encourage companies, including family businesses, to grow. These include implementing a variety of schemes to address industry needs and demands, such as the Innovation Commercialisation Scheme, Business Angel Scheme and the Start-up Enterprise Development Scheme (SEEDS).
Companies operating in Singapore benefit from its extensive double-taxation agreements with over 50 countries, including most in the region, such as China, India and Vietnam. Moreover, Singapore has a territorial basis of taxation. Another attraction is the absence of capital gains tax. To provide further incentives for businesses to incorporate here, Singapore has several tax-incentive schemes, besides a marginal corporate tax rate of 20%.
There are a range of schemes to facilitate immigration and entry of foreign entrepreneurs and business executives to Singapore. These include the Multiple Journey Visa, ideal for foreign businessmen who need to travel to and from Singapore to explore business opportunities, and the EntrePass, which facilitates the stay of entrepreneurs who are ready to start a new business in Singapore.
More importantly, the Singapore government has adopted policies that have fuelled growth in the local venture capital industry. Singapore's burgeoning entrepreneurial scene has attracted venture capitalists and funds of funds players from around the world to set up operations in Singapore. Today, Singapore ranks third in Asia in terms of the amount of managed capital and the number of venture capitalist professionals. There are approximately 160 venture capital firms operating out of Singapore, managing over S$17 billion of funds.
FIB: Estate and inheritance tax is always a concern for family businesses. Where does Singapore stand with this issue?
EH: For a person domiciled in Singapore, movable properties above S$600,000 and residential properties above S$9 million are liable to estate duty of 5% on the first S$12 million and 10% thereafter. Gifts made more than five years before death are exempt from tax. There has been a lively debate in Singapore on estate duty, citing both the merits and shortcomings of the system. The Government will continue to review the relevance of estate duty, in the context of Singapore's overall asset taxes regime.
FIB: Many family businesses control and invest their wealth through family offices. Why should family offices be aware of Singapore, and what in particular is attractive to investors and their financial institutions?
EH: The development of Singapore's financial sector began in the late 1960s. Today, Singapore is a significant wealth management centre, and is the world's fourth-largest foreign exchange trading centre. As an international financial centre, Singapore is able to offer a one-stop location to meet the wealth management needs of these families.
These wealth management needs are well supported by a full range of financial services. More than 600 of the world's top financial institutions are present in Singapore, and in the private banking arena Singapore is home to most of the top global private banks and Swiss boutique banks. Industry estimates private banking assets under management to be US$220 billion in 2005.
Institutions and investors are attracted by Singapore's success as a financial centre, which is built on a track record and reputation for integrity, rigorous supervision and strict enforcement. Singapore adopts international standards and best practices for regulation and supervision, including a comprehensive framework to combat money laundering and terrorism financing. A full member of the Financial Action Task Force (FATF), Singapore is committed to implementing the FATF recommendations, which are internationally accepted anti-money laundering standards. In addition, the customer's right to confidentiality is a cardinal principle of the Singapore banking sector. The tax environment is also highly competitive for companies and individuals alike.
FIB: What does the future hold for Singapore financially?
EH: As the gateway to Asia and the increasing opportunities arising from Asian countries, we are confident that Singapore will continue to grow as an important financial hub for the global community. As China, India, Japan and the Middle East's economies continue to prosper, businesses and individuals will prosper. The inter-generational wealth transfer that will take place in the next 50 years will also generate increasing needs for wealth management needs. All these opportunities present Singapore with the ability to grow even stronger as an international financial centre.
The Singapore government recognises the importance of a dynamic, competitive and innovative environment for businesses and financial institutions in Singapore and has built a strong partnership with the industry to facilitate this. With this progressive mindset in place, we believe that Singapore will remain a favourable business environment that is relevant to the ever-changing needs of the industry.
