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Singapore in market news - St. James's Place Wealth Management
On 9 August this year Singapore celebrated 50 years of independence with fireworks and events across the island. It has become independent twice; once from the British when it was decolonised in 1959, and then in 1965 when it was expelled from the Federation of Malaya.
Fifty years ago Singapore was a poor tropical island with few natural resources, no compulsory education and a potentially explosive racially and religiously diverse population. Today it is a stable country – a global financial and export centre with some of the world’s most highly skilled workers. It has also been successful; over the past five decades GDP per capita has increased at a 10% compound annual rate1.
That record is a tribute to Lee Kuan Yew, the country’s first Prime Minister, who died earlier this year. He set out to unite the different races and create a new, united nation. Economic success was regarded as essential, not just for economic development but to help stabilise the country politically.
Singapore was historically one of the world’s busiest ports, thanks to natural resources nearby like palm oil in Malaysia and oil in Jurong, but Lee’s government had more ambitious aims and set out to expand Singapore’s economic base. Initially, the government focused on attracting foreign manufacturing companies with a low-cost workforce, but competition from other Asian countries towards the end of the 1970s led to a realisation that it needed to evolve into a more highly skilled economy.
The government began to focus on education and eventually created a system that enabled the more academically gifted students to excel. Today, Singapore’s education system is one of the best in the world, with TIMSS (Trends in International Mathematics and Science Study) regularly rating its students top in both maths and science. This has helped Singapore to evolve over the past two decades into a leading centre for research, science and technology, with government incentives introduced to attract major pharmaceuticals and technology companies.
During the oil boom of the 1970s, Singapore became regarded as one of the most desirable locations for expatriates, enhanced by a combination of fiscal and regulatory incentives. With zero tolerance for crimes of any kind – including dropping chewing gum and litter in the street – Singapore became, and has remained, one of the safest places in the world.
Visitors are often struck by the general obedience of the population: staff smile at customers in shops (as they have been told to do) and comply with requests to share their cars in the rush hour. Lee’s government was one of ten referred to as a ‘benevolent dictatorship’2. Freedom of expression in Singapore is limited, but there is a communal interest in ensuring the island’s stability and civil order, essential for the livelihoods of the island’s working population of around 3.5 million, as well as for its 1.3 million expatriates3.
Lee’s government also set out to create a premier financial trading centre with tax incentives for foreign companies and zero tolerance of corruption. Last year, St. James’s Place acquired The Henley Group, the Singapore-based financial advisers, with offices also in Hong Kong and Shanghai. ‘Singapore is still a growing centre and a regional headquarters for many international companies,’ says Joel Carpenter, Group Marketing Manager of St. James’s Place Asia. ‘It’s an attractive place to work and Bali,
Thailand and Malaysia are all within easy reach.’
Some companies offer attractive packages to encourage expatriates to relocate, often including housing, medical care, education, flights home, a car and utility expenses.
Close links with China
In 1978 Deng Xiaoping, as leader of the Chinese Communist Party, made an official visit to Singapore just as he was embarking on the programme of radical economic reform that created modern China.
He remained interested in Singapore’s development from island backwater to a thriving international economy during his time as China’s leader. On Lee Kuan Yew’s death in 2015, the Chinese Communist Party lauded him as a ‘uniquely influential Asian statesman and a strategist, boasting both Eastern values and an international vision’.
Singapore’s aim of blending free-market capitalism with centralised control and domestic obedience, while managing its economic growth and still considerable inequality, carries plenty of lessons for China.
But the challenge for China with a population of 1.4 billion will be harder than it was for Singapore’s 5.5 million3.
“The need for personal financial planning for expatriates has never been greater”
Expatriates may find their disposable income is initially high while these living costs are covered. St. James’s Place Partner Daphne Ashford-Smith observes that, although many expatriates are on local two-year contracts, a growing number are deciding to stay on.
In terms of quality of life and government policy, there are some differences. The government encourages women to return to work after giving birth and offers some help towards this with tax relief on the employment of domestic workers; but paid maternity leave is only eight weeks and Ashford-Smith says that many families need to have both parents in work to help cover the costs of childcare if these are not covered. Working hours in Singapore tend to be long but Ashford-Smith says that having access to good and reasonably affordable childcare has helped her to return to full-time work with two children and another on the way, and enabled her to enjoy quality time with her children.
The availability of good education, compatible with the British system, has increased considerably over the past two decades, removing the perceived requirement to send children back to the UK for secondary education. In addition to well-established local schools like Tanglin Trust School, Marlborough College has opened a campus nearby in southern Malaysia. Pupils can migrate from the school in Asia to the main school in the UK if their parents return to the UK. Dulwich College has also opened a school in Singapore under franchise.
George Rippon, Partner at St. James’s Place Asia, has noticed that more and more people are coming out to set up their own businesses, so the need for personal financial planning for expatriates has never been greater. Overseas companies no longer see themselves as having to provide long-term financial security for non-nationals, he says. In any case, the majority of British expatriates will repatriate to the UK on retirement so are more likely to need financial arrangements there.
The challenges that faced Singapore when it first became independent may have been resolved but today it faces fresh social, economic and political challenges. Yet this tiny tropical island’s ability to evolve quickly and consistently suggests it will continue to thrive in our rapidly changing world.
1 The World Bank 2014
Category: Wealth management