Super-rich
“We want more of them”
Economists worry what will happen to Singaporeans when the ballooning foreign wealth pulls out. By Seah Chiang Nee
Feb 8, 2014

(Synopsis: The government appears unfazed by foreign billionaires causing a bigger rift between rich and poor citizens.)

MONEY, plenty of it! So much is circulating around parts of Singapore – much of it from abroad – that some economists are worried.

After years of success luring in foreign wealth, the city is now experiencing what an analyst calls a “wealth bubble” that is continuing to grow.

Noted global economist Jesse Colombo warned that several bubbles were on the verge of popping, threatening the city with an Iceland-style economic meltdown.

He predicted in Forbes that this could happen within years.

They exist in property, Singaporean household debts and the bloated population of migrant workers.

“Singapore (also) has a wealth bubble,” added Colombo, who had earlier forecast America’s housing bubble.

For years, the republic had worked to attract high net-worth foreigners to its shores, a strategy that is unlikely to end any time soon.

Prime Minister Lee Hsien Loong said last year: “If I can get another 10 billionaires to move to Singapore and set up their base here ... Singaporeans will be better off...”

He indicated this would be pursued even if it worsens the rich-poor inequality.

(In the last 10 years, the wages of the bottom 20% fell by 10% in real terms, while those for the top one-fifth grew by some 30%.)

“I think Singaporeans will be better off, because they (foreign investors) will bring in business, bring in opportunities, open new doors and create new jobs,” Lee said.

“I think that is the attitude with which we must approach this problem.”

He’s following in his father’s footsteps.

In the early 1980s, Lee Kuan Yew started to attract wealthy foreigners here to make up for a shortage of land and natural resources.

Lee, now 90, used to invite wealthy entrepreneurs, including a number of Hong Kong billionaires, to witness the National Day parades as special guests – and gave them permanent residency.

With low taxes, minimal corruption, protective banking laws and the abolishing of estate tax in 2008, his successors have succeeded in attracting more of them here.

Today, Singapore has 27 billionaires, the fifth largest number in the world.

New arrivals included US investor Jim Rogers, a Facebook co-founder Eduardo Saverin, New Zealander Richard Chandler, Indian telecom tycoon Bhupendra Kumar Modi, several Australians and Hong Kong movie stars.

One in 30 Singaporean residents is today a millionaire – doubling from 2008 to 2012. It has the world’s highest number of millionaires per capita.

The government appears to be unfazed by warnings of potential trouble if foreign tycoons were to pull out one day.

China feels differently. It started to curb the entry of hot money on concerns that capital inflows pose a threat to China’s economy.

Not many Singaporeans agree with their prime minister that having more billionaires necessarily means more investment and jobs.

“Some do invest here, but most simply park their money here and run their businesses outside,” said a retired banker.

They drive up the cost of living for locals, especially in real estate and cars, he added.

Colombo said Singapore’s total wealth rose by 8.7% in the past year alone to reach an average of US$282,000 per adult.

The danger is that when Singapore’s bubble pops, it would cause “wealth to decline significantly”.

Lee Kuan Yew School of Public Policy associate dean Donald Low expressed concern about efforts to attract the super-rich here - even if they increase inequality.

“Relying on inflow of foreign monies to finance real estate domestically is often a recipe for financial disaster,” he told The Independent Singapore.

On perspective, the influx of so much money has some impact on the upper class, businessmen and property owners.

Generating investment and jobs rests more with global investors than billionaires looking for a safe place to park their money.

The Prime Minister is right in predicting that if more were to arrive, it would widen the economic gap between rich and poor Singaporeans.

Whatever benefits they have brought here are being unequally distributed, observers say.

“While the rich have fun, locals are struggling to keep up with the rising cost of living,” a foreign TV journalist wrote.

Earlier, under pressure from Europe, Singapore banks started to scrutinise foreign account holders as stricter tax evasion measures kicked in.

This is to decide whether to send high-risk clients packing, said one source.

The targets include wanted people accused of corruption elsewhere, criminals and drug traffickers.

Foreign politicians have charged that, as banking secrecy is lifted in Switzerland, some tax evaders are shifting their attention here.

Emotionally struggling Singaporeans are no different from people elsewhere when they see splurging wealth around them as they struggle to hold their jobs.

PM Lee’s remarks, saying the presence of 10 foreign billionaires is more desirable than levelling economic inequality, has hurt his popularity.

An undergraduate asked incredulously: “I don’t believe he said it. Was he quoted correctly?”

Adding to his woes is the growing class divide in society.

The recent misbehaviour of some wealthy residents – both foreigners and locals – in flaunting their wealth or thumbing their noses at ordinary people is adding public blame on his policies.

Law Minister K. Shanmugam told the Financial Times that the rich-poor gap is very obvious.

Recalling how he was cut off while driving one evening, first by a Ferrari and then by a Porsche, the minister added: “The middle class in Singapore has found costs rising because of energy, food and so on.”

They find themselves squeezed since they don’t get the government subsidies that the poorest 20% gets, he added.

This was first published in The Star).

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