In the last 50 years, an amazing transformation has taken place. The result? A country rife with contradictions… and opportunity.
In 1965, when Singapore achieved independence from Malaysia, it was one of the world’s poorest countries. Now it’s one of the wealthiest.
Singapore is tiny (only 276 square miles, less than one-fourth the size of Rhode Island), with few natural resources. How did it transform itself so quickly into an economic powerhouse?
Good leadership and sound economic thinking helped immensely. The free market policies that former Prime Minister Lee Kuan Yew followed after independence helped attract foreign capital and industrial investments. Lee slashed tariffs and provided tax incentives to companies setting up in Singapore. His government also reined in labor disputes by giving employers greater authority to hire and fire workers. Lee also made ending corruption and ensuring the rule of law a high priority.
Singapore didn’t ignore tax policy, either. Today, the top rate on personal income is only 20%. On corporate income, it’s only 17%. What’s more, tax is imposed only on local income – not international income.
I’ve just spent a week in Singapore and can attest to the state-of-the-art physical and financial infrastructure the country has put in place. Not to mention what appears to be a very high standard of living for its residents.
I was there to explore the opportunities available for US investors to invest or take up residence in this tiny super-state. Sadly, with one exception – precious metals purchase and storage – they’re quite limited. As with Hong Kong, which I wrote about in last week’s essay, most Singapore banks and financial service companies no longer do business with US-resident or citizen clients.
Gold and Silver Storage in Singapore
The good news, though, is that Singapore is home to the most sophisticated offshore precious metals storage facility I’ve seen that caters to individual investors. And it accepts US clients, at least for now. It’s brand new, with an impressive array of services available to its clients, including:
- True “allocated” storage of metals. The company has gone to extraordinary lengths to avoid any possible claim by its creditors against customer metals stored in its vault.
- Both vault and safe deposit box storage. US investors may wish to opt for safe deposit box storage, as it is legally non-reportable as an offshore “account.”
- Authentication service. I saw with my own eyes how easy it is to be fooled by gold and silver counterfeits. And I witnessed how this facility employs three levels of authentication to detect even the most sophisticated fakes.
- Protection against government confiscation. Most vaults have force majeure contracts that indemnify the facility against any type of “governmental action.” This one doesn’t – and appears to have no exposure to the US.
- Comprehensive insurance. Most insurance policies for vaults come with a large number of exceptions. Not this one. It even covers the “mysterious disappearance” of metals – an unexplained loss that’s usually due to some type of insider theft.
Now for the Bad News…
Any type of asset management services appears to be off limits to US persons. I met with one banker who told me he had a staff of Asian-based financial analysts working to construct managed portfolios for his clients. But if you’re a US citizen or permanent resident, you’ll be politely shown the door.
US persons can still open a regular bank account in Singapore. With one exception (a US-owned bank, unfortunately), you must make a personal visit to set up the account. In addition, it’s not easy to set up an account through an offshore company unless it’s incorporated in Singapore. On the plus side, deposit minimums are very low: on the order of S$5,000 (about US$4,000).
One big reason I prefer securities accounts over bank accounts is that securities usually aren’t carried on the balance sheet of brokers. Assets you deposit in a bank, however, become part of the bank’s balance sheet. That means those assets – your money – might become available to the bank’s creditors if the bank becomes insolvent. That said, Singapore banks as a group are well capitalized. What’s more, deposits in Singapore dollars are insured up to S$50,000 per customer, per bank.
Incidentally, one securities broker I met with does permit US citizens to open accounts and offers trades on more than a dozen Asian exchanges. But only self-managed accounts are available.
Living in Singapore
Because of its sophisticated infrastructure and the high wages paid to its workforce, Singapore is a haven for well-educated immigrants. Mercer’s annual quality of living survey ranks Singapore as first in the world for infrastructure development and 25th for overall quality of life. It also has a very low crime rate. But with more than one-third of the 5 million people living in Singapore born in other countries, political opposition to immigration has increased.
Several options are available to obtain temporary residence, but the path to permanent residence isn’t easy. Higher-paying positions generally permit you to acquire a work pass and bring your dependents with you to Singapore. Unfortunately, most work passes don’t qualify for permanent residence – although they may be renewable.
Another possible path to residence is the “Entrepass,” issued to foreign entrepreneurs who set up a new business in Singapore. The Entrepass is renewable, but only if your business grows and generates consistently greater taxable income on an ongoing basis. And the Entrepass doesn’t necessarily lead to permanent residence.
The surest way to qualify for immediate permanent residence is also the most expensive: the Global Investor Program. This requires that you demonstrate a proven track record as an entrepreneur. This involves annual turnover of S$50 million in a qualifying business for at least three years. You must then invest at least S$2.5 million in a new business or in a fund that invests in Singapore-based companies.
After a period of permanent residence ranging from two to six years, you can obtain Singapore citizenship and passport. The Singapore passport is one of the world’s premier travel documents, providing visa-free access to 170 countries. However, you must renounce all previous citizenships when you obtain Singapore nationality.
A Restrictive Society
The price of a high quality of life and relatively low taxes, however, is a militaristic and strictly regimented society. All adult males over 16 must perform mandatory military service. Singapore imposes strict limits on public assemblies and authorizes prolonged detention of suspects without trial. Censorship of the media and the Internet is pervasive. The government controls all television stations and has even banned satellite dishes except through one heavily censored network.
Singapore represents a unique combination of economic freedom and low taxes, combined with significant restrictions on civil liberties. Despite these shortcomings, Singapore continues to attract investment and wealthy entrepreneurs from all over the world. Its future appears bright.
Mark Nestmann
Nestmann.com
