Government and Institutions

Observations from Singapore

James Dyson, the British billionaire entrepreneur, has announced that his company will relocate its HQ to Singapore. Having just returned from the financial services hub of South East Asia, it’s not hard for me to understand the appeal.

Within one generation, this city state has transformed itself from a third world country to one of the most advanced economies in the world. Singapore is focused on maintaining its rapid rate of economic growth, and it has a lot going for it, not least a highly skilled workforce.

Citizens’ standard of living ranks among the highest in the world, with Mercer, the global consulting group, once again awarding it first place with respect to best places to live in Asia.

Singapore is committed to attracting foreign direct investment. There is no capital gains tax, no inheritance tax and corporation tax is charged at a mere 17 per cent with a range of further allowances to reduce the final bill. What’s more, the top rate of income tax is levied at 22 per cent, and this only kicks in for those earning over £180,000 a year, making it one of the most attractive tax jurisdictions worldwide.

In December, UK Finance, the banking lobby group, issued a report indicating that the tax burden for banks operating out of London was now running at more than 50 per cent of profits, twice the prevailing rate in low-tax international centres such as Singapore. The clear message is that Singapore is mounting a real competitive challenge to European financial centres, not least London.

Singapore: a shimmering city that excels

Looking around Singapore one sees a constant stream of activity with new buildings and facilities going up each year. Downtown Singapore is reminiscent of a US city with banks dominating the skyline. Singapore is well connected, with one of the world’s largest maritime ports, and an international airport with flights to a wide array of cities across the region and beyond. Meanwhile, the first phase of the Cross Island Line, Singapore’s eight mass transport link, stretching 50 km, is scheduled to be completed by 2029.

Singapore plans for the long term. Whole neighbourhoods have been developed to accommodate the city’s fast expanding services sector, which comprises three quarters of the economy and employs a similar proportion of the population. Policy makers currently fret about the source of the next wave of innovation: they are highly aware of the need for lateral thinking and creative thinking. This welcome self-awareness is refreshing.

Regulatory threats

While Singapore remains the envy of many cities in the region, leading business figures are concerned about maintaining the country’s reputation for robust regulatory standards, reflected in its consistently high score in surveys such as the WJP Rule of Law Index 2018.

Business leaders are concerned about damaging cases such as the one relating to the mighty Goldman Sachs’ involvement in the 1Malaysia Development Berhard (1MDB) embezzlement scandal and how this might inflict on Singapore’s reputation for transparent transactions. The Malaysian authorities are seeking billions in compensation from Goldman, whose Singapore office was paid an inflated $600 million in fees for arranging bonds to fund the launch of 1MDB, a government enterprise initiative. The US Department of Justice is also investigating the bank’s Singapore operation and is prosecuting one of its former senior partners based in Singapore, who has admitted guilt with respect to two counts of conspiracy.

Given the perceptions of corruption surrounding neighbouring countries such as Malaysia, Indonesia and Myanmar, it is crucial that Singapore is seen to be observing the highest standards of financial probity and dispel concerns over any moves to launder money through this regional financial centre.

As the recently published 2019 Index of Economic Freedom observes, “Singapore owes its success as a highly developed free-market economy in large part to its remarkably open and corruption-free business environment, prudent monetary and fiscal policies, and a transparent legal framework”. Singapore is ranked second worldwide, a reflection of its public reputation for financial probity and its popularity as an international arbitration centre.

However, Singapore must be constantly vigilant, and in this respect, the absence of a critical, independent press is a big minus. Singapore’s media, including The Straits Times, tends not to be sharply critical of the government, which is hardly surprising given the fact that it is owned by the state investment arm Temasek Holding. What’s more, all television and radio channels are government owned while the Media Development Authority (MDA) maintains a close eye on press and social media. Private Eye would probably find life challenging if it was to open up a sister publication in Singapore.

This year the spotlight is likely to be shone intensely on Singapore and its reputation for high regulatory standards as the US Department of Justice and other investigators dig into the details of what precisely took place in the 1MDB case. It will be worth watching what steps are taken by the regulatory authorities concerned to ensure that, looking ahead, on behalf of all investors, the highest standards are observed and met.


IEA Regulation Fellow

Keith is an IEA Fellow and economist, the author of over one hundred publications on public policy and planning issues, economic development and regulatory policy. Keith has contributed to publications including The Financial Times, The Wall Street Journal, The Times, The Daily Telegraph, City AM, and is the Africa Editor of The Journal of World Economics. An alumnus of the London School of Economic (LSE), Keith is the founder of Keith Boyfield Associates Limited, a consulting firm bringing together specialist Associates based across the globe.

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