An incredibly insightful article written from an outside perspective which makes some social-political commentary on S'pore. I suspect the writer has been living in S'pore for some time now. You will never find comments like these in our local newspapers - touches on taboo subjects - like the issue of private banking laws in S'pore, immigration issues, politics, gay rights and exploitation of foreign labour. The article ends with an ominous warning that the current state of matters, if continued, pose an existential threat to S'pore's survivability in the long run. Oops, I mean, the ruling party.

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Command Control by Angus Grigg

Published in Australian Financial Review Magazine on 24 April 2008

Singapore's Command House, with its whitewashed walls and pristine lawns, is an historic symbol of power in the island republic. It was the home of General Arthur Percival when he surrendered to the Japanese in February 1942 and of Lord Louis Mountbatten when the British retook the colony, in September 1945. From independence, the colonial bungalow housed presidents and speakers of parliament. It is, in every sense, emblematic of Singapore - its history is a history of the island. Today, with its carp-filled ponds and collection of modern art, it is once again a centre of power.

Yellow Porsches and black BMWs line the drive but it's not the political elite who sip cocktails on the terrace and hit tennis balls around the court. Rather, it's the island's new financial commanders - the private bankers. Twelve months ago, UBS took over the house, which is the second-largest residential block in land-starved Singapore, and turned it into an academy for its new breed of banker. Here the world's largest private bank schools graduates and old hands in financial literacy, personal grooming, table manners and how to close a deal.



It is confirmation of the island's quiet emergence as the Switzerland of Asia, complete with the toughest banking secrecy laws in the world and a lack of transparency ideally suited for shampooing dirty money. "If I wanted somewhere to launder money, Singapore would be getting towards the top of my list," a British member of the European parliament, Glyn Ford, told The AFR Magazine. "Where there are dark corners of the financial world, dirty money tends to end up."

The country, which will open two super casinos next year, has already overtaken the United States as a private banking destination and some say Zurich may soon be known as the Singapore of Europe. It is yet another achievement for overachieving Singapore, a country that has increased its national income tenfold in the past 30 years. But the Singapore boom comes with a back story of overcrowding, exploitation of foreign labour, rising prices and a dominant government with a local constituency resentful that they are being left behind. It still may be the 'nanny state', the 'air-conditioned nation', even 'Disneyland with the death penalty' but it also looks like a nation that is reaching its limit and confused about its identity.

Section 47 of Singapore's Banking Act is titled 'Secrecy' and, in one plain-language sentence, it lays out the law. Customer information, it says, "shall not, in any way, be disclosed by a bank in Singapore". It couldn't be more straightforward and, as Prime Minister Lee Hsien Loong told parliament in 2001, there are "very few exceptions" to this rule. As such, section 47 is the backbone of Singapore's private banking industry,
which has grown rapidly in the past decade and now has more than $US300 billion
($328 billion) under management. The industry is growing at 30 per cent a year and could overtake Switzerland in the next decade. UBS head of private banking for South-East Asia, Tee Fong Seng says: "privacy is sacred" in Singapore. "Breaching it is a criminal offence."

Prime Minister Lee was the architect of these privacy laws during his tenure as finance minister, as the Cambridge-educated mathematician with a degree in public administration from Harvard has not been backward in telling the world. The upstart Singapore government has even taken its fight right up to the home of banking, Switzerland. At a Geneva seminar in 2002, the Monetary Authority of Singapore distributed promotional material saying it was a "jurisdiction that protects clients' interests". That was a less-than-subtle hint to those concerned about the taxman and a sly dig at changes afoot.

After years of forgoing tax revenue on funds held in Swiss banks, the European Union found its pressure point and in 2000 began a push to end client confidentiality and break open the country's famous numbered accounts. The Organisation for Economic Co-operation and Development (OECD) fell in behind the EU and called for an "exchange of information" about Swiss bank accounts. Though threatened with restrictions on the movement of goods and people if they did not comply, the Swiss resisted until 2005 and now impose a withholding tax on earnings for EU citizens. The tax began at 15 per cent and will eventually reach 35 per cent.

That was Singapore's break. One banker said this concession and a perception that banking secrecy was being eroded in Switzerland had been a boon for the city-state. "Prior to that, our Singapore desk in Europe was booking millions of dollars - now it's billions," says the private banker, who asked not to be named. "Singapore is one way of getting around the withholding tax," Raymond Baer, chairman of Zurich private banking group Julius Baer, told The Wall Street Journal in 2006.

In the borderless world of international finance, Singapore had found its niche. As well as offering confidentiality, the government charges no withholding tax, no capital gains tax and no tax on interest and investment earnings. There's no stamp duty either and, if you have a net worth of $S20 million ($15.8 million) and are prepared to put $S5 million into a Singapore-domiciled account, you get permanent residency.

For Europeans wanting to disinherit an errant child or put money aside for a mistress, Singapore is the place. Its trust laws get around Europe's 'forced heirship', which does not allow children or spouses to be disinherited. These trusts are also attractive for Middle Eastern investors, as Sharia courts often pass over wives and children in favour of brothers and fathers. It's a package few other places can match. "There's a saying that if you throw a rock in Singapore, you will hit a private banker and, if you throw another one, you will hit a headhunter trying to recruit a private banker," says another banker. UBS's Tee says he's signed more than 100 supporting letters for permanent residency. That's a minimum of $S500 million for one bank as a result of one policy.

Tee plays down the money flowing from Europe for tax reasons and says new clients come mainly from India and China. "For those who have made money in China, Hong Kong is a little too close for comfort," says Ong Choon Fah, research director at property group DTZ. She says that since 9/11, Middle Eastern investors have found it harder to travel to the US where, in any case, banking laws have been tightened in an effort to crack down on the financing of terrorism. "This has certainly helped Singapore," she says.

Since banking laws changed in 2001, the number of private banks has doubled to more than 50. Standard Chartered has established its global headquarters there;
Credit Suisse moved its head of international private banking to the city-state; and, for UBS, it's the corporation's second-biggest office and regional hub. Some estimate there would be more than 10,000 private bankers on the island and it's these cashed up money shufflers, and the associated professional services firms that feed off them, that are driving Singapore's unprecedented boom.

All this looks great on paper but, with every economic shift, Singapore's competitiveness in other areas is being eroded. House prices have risen 60 per cent in the past year, residential rents have doubled and the island's office space is now more expensive than Zurich, Boston or downtown New York. Ong, from DTZ, says this trend is a concern. She says that in just one year, the island state went from having the 53rd most expensive office space in the world to the 13th. Now it is seventh. "We are starting to see resistance. Businesses are moving to fringe areas and many expatriates can no longer afford to live around Orchard Road [Singapore's popular shopping hub]." It's easy to see why. The rent on a typical two-bedroom apartment has jumped from $S3,500 a month to $S8,000. But this boom in property prices has also brought the big names to town. Ong says property watchers were stunned when New
York-based St. Regis Hotels and Resorts sold Singapore apartments off-the-plan for $S3,000 a square foot in 2006. That looked cheap a year later when the Ritz-Carlton group sold residences for $S5,100 a square foot - that's a $S12 million apartment, plus $S2,500 a month in service fees.

It's all part of Singapore's attempt to shed its grey, middle-market image and age-old tag as the world's dullest city. Prime Minister Lee has often said he is after some X-factor and so Singapore, as only it could, has set about manufacturing cultural life. The quays along the river have been turned into entertainment precincts, complete with a Hooters restaurant and a Ministry of Sound nightclub. The Singapore Flyer, said to be the world's tallest Ferris wheel at 42 storeys high, has just opened and, in September, the city will host the world's first night-time Grand Prix on its spotless streets. Construction has begun on a new national stadium, which will host European
soccer, rock concerts and international cricket.

And the St. Regis hotel has taken opulence to a new level. The 299-room establishment, with its Frank Gehry sculpture, air-conditioned tennis court and vast private art collection, is no postcard for understated elegance. It flies in daily supplies of scallops from Brittany, yoghurt from Normandy and Dammann Frères tea from Paris. Its Remède Spa - the first in Asia - invites guests to relax on warm marble benches and serves champagne and handmade truffles to its patrons - not necessarily while they are lying down. The hotel's fleet of Bentleys, in St Regis bronze, will for a 'very reasonable' $S265 run guests to and from the airport.

It's over-the-top and an outrageous success and, since opening its brass front doors in December, occupancy has been running above 80 per cent ahead of an expected 25 per cent increase in hotel beds in Singapore over the next five years. The boom is being further sustained by a population that grew by 130,000 last year, and has increased 14 per cent since 2000. But here the strain is really beginning to show.

Already the world's fourth most densely populated country with 6,400 people in each of its 704 square kilometres, Singapore is aiming for a population of 6.5 million over the coming decades. That's another 2 million, mostly foreign residents, in a city where traffic jams and overcrowding are becoming an issue.

"The rate of immigration is already high enough to be noticeable and to cause resentment," says political commentator and activist Alex Au. Au, despite his button-down shirt and wire-rimmed glasses, is something of a radical in Singapore. He says locals are beginning to feel marginalised. "Immigration is causing overcrowding on public transport and driving up the cost of living," he says. "And some locals feel they are being overlooked for promotion."

It's a potentially dangerous cocktail for Singapore's ruling People's Action Party, which has only been able to maintain its absolute hold on power by continuously improving the lot of locals - even if that never ran to full democratic rights or those usually associated with progressive liberal values. Now that patronage is being eroded at the same time as the ruling conservative Christian elite is being forced to tolerate a more liberal society so as to attract the creative class it so desires. "This place is pragmatism gone mad," says Au. "They are loosening up, not because they believe in the values of liberalism, but because they can get a few more pennies. Every liberalisation has been driven by money."

Poet and gay rights activist Cyril Wong agrees that recent liberalisations are more to do with economics and attracting talent. "The government wants to pitch Singapore as a vibrant cosmopolitan city," he says. That means all-controlling Singapore now has no restrictions on the internet and satellite television, as the free flow of information is vital for financial markets to operate. It has also liberalised liquor licensing laws, opened up restaurant and entertainment precincts and allowed the screening of Brokeback Mountain, which was banned in neighbouring Malaysia. But tolerating a gay-themed film and legalising homosexuality are quite different matters.

The latter was a step too far for Singapore, although it did precipitate a rare genuine debate on the subject in parliament in 2007. Attempts to change section 377a of the penal code, which says homosexuality is "against the law of nature", were ultimately blocked after a vocal campaign by church groups and conservatives. Homosexuality therefore remains "an act of gross indecency", punishable with two years' jail. Prime Minister Lee, wearing a much-discussed open-neck lavender shirt, told parliament in November last year that gays should have "adequate" space to live their lives.

They would not, however, be considered a "minority" with the rights of a minority protected under law. His father, former prime minister Lee Kuan Yew, who is now the country's Minister Mentor, said the state should not act as the "moral police" and "barge into people's bedrooms". So the law remains, it's just that it won't be enforced.
It's a hopeless compromise for a city that supposedly has more gay bathhouses and massage parlours than New York. "It's a gay hub," says Wong. "The party scene is pretty extreme here."

And it's not the only example of the double standard, Singapore style. Consider the 'integrated resorts' that will open at Marina Bay in the city and on the southern island of Sentosa next year. The government wants foreign gamblers but clearly despises gambling and so the nanny state will slug locals S$100 just to enter a casino. "They are absolutely sure the social ills are terrible but they absolutely want the money," says Au. "The result is that no one is quite sure about the underlying principles of this country as they are constantly subject to change." Democracy is the exception. Nothing has changed in this respect, because, according to Au, there's no money in it. The result is a government that has allowed open debate on social issues that won't challenge its authority, such as homosexuality and gambling, but talking about the country's quasi-democracy, its 'first family' and associated nepotism are taboo. The Financial Times, The Economist, the International Herald Tribune and Bloomberg have all paid large out-of-court settlements for even suggesting that some government appointments have not been made on merit.

Prime Minister Lee - the eldest son of Lee Kuan Yew, who was the country's first prime minister - is the world's highest-paid politician, earning just over $S3 million a year. His wife Ho Ching is the chief executive of Temasek Holdings, while his brother Lee Hsien Yang ran SingTel for almost a decade before retiring in April last year. But these are matters that cannot be discussed in Singapore.

The country's reliance on cheap, unskilled and often exploited foreign labour is another emerging issue. The 700,000 guest workers, making up 16 per cent of the population, are very much an underclass. The president of the Transient Workers Count Too organisation, John Gee says the government has deliberately kept employment regulations vague. There is no minimum wage, maximum working hours or basic conditions. It's not quite Dickensian England, but there is bonded labour exploitation and abuse.

"There's no law granting staff one day off a week," says Gee. "Half the country's domestic staff would work 15 hours a day, seven days a week for two years." For this, Indonesian workers receive around $S250 a month while Filipinos, who are usually better educated, get $S350.

And the exploitation doesn't end there. Immigration agents, who provide visas, transport and 'training', will often take the first nine months of a worker's salary. "The government is worried about being stricter on workers' rights as it might inconvenience Singapore," says Gee. He says an employer has absolute power and a worker no recourse if abused or exploited. Cyril Wong says these conditions are symptomatic of Singapore's inherent racism. "Most people see migrant workers as a necessary evil. 'We just have to tolerate them' is the attitude of many," he says.

It means the government conveniently ignores labourers from South India and Bangladesh sleeping 20 to a room and maids living in hallways. In a country where you can be fined $S500 for not flushing a public toilet or $S120 for not wearing a seatbelt, the government allows 15 construction workers to ride in the back of a truck. In a country that relies on its neighbours for labour, raw materials and prosperity, it also at the same time exploits their corruption and weakness.

The government preaches openness and transparency but has refused to sign an
extradition treaty with Indonesia. That's no coincidence, when 19,000 Indonesian millionaires with a combined worth of $US93 billion reside in the city-state.

This is how Singapore, forged out of adversity, has survived. It has looked after itself at the expense of others but, as the previous residents of Command House learnt, the shifting sands of power can be swift and lethal.