In Singapore, a local Switzerland for Asia's wealthy

SINGAPORE: This affluent city-state of 4.5 million people is aiming to become a sanctuary for the world's wealthy and their money, Asia's answer to Geneva and Zurich.

Singapore, with its reputation for authoritarian order and safety, has long relied on luring multinational corporations for manufacturing jobs and economic growth. But with China's rise as an industrial powerhouse, it started chasing a succession of economic fads - from technology to pharmaceuticals to stem cell research - in search of a fresh elixir.

Now Singapore, is trying to carve out a new niche for itself in the global economy by beefing up banking secrecy laws and offering generous tax incentives.

Almost 40 private banks now have regional operations here, including Swiss stalwarts like Bank Julius Baer. Citigroup's headquarters for all private banking outside the United States is now in Singapore, as is the global banking headquarters of Standard Chartered Bank of Britain.

"I can't think of any other place where private banking is growing so much as in Singapore," said Henrik Mikkelsen, a private banker at Commerzbank in Singapore. "We want to be the Switzerland of Asia."

It may not have the stunning Alpine scenery, but officials here hope that luring the wealthy and their bankers will not only diversify the economy but also help to offset a declining birthrate and increase the island's stagnant population with what is known here as "foreign talent."

"It creates jobs, it builds a service industry, it generates income and, on the immigration issue, it also supplements our shortfall in fertility," said Vivian Balakrishnan, Singapore's minister for community development, youth and sports.

The estimated $150 billion in private wealth the banks manage here is still just a sliver of the $1.7 trillion managed by bankers in Switzerland. But by all accounts it is growing quickly, fed by new wealth pouring in from Asia's fast-growing economies, Middle Eastern oil money, and Japanese and Europeans fleeing new efforts to tax their offshore earnings.

The bankers cater to people like Robert Chandran, who emigrated to the United States from India and made fortunes in California real estate and the fuel oil business. In 2005, contemplating retirement, he moved his company and family to Singapore, bought a luxury condominium downtown and space in a waterfront resort with berthing for yachts. He traded in his American passport for one from Singapore.

Chandran said he was lured by Singapore's blend of Western conveniences with Asian values and by the government's zeal for keeping Singapore competitive.

"They don't have global taxation," he said, which means that his capital gains and interest income from outside Singapore are not taxed here.

Singapore's vision for the high-life can be found at Sentosa Cove, a secluded development on the edge of a small island theme park off Singapore's coast. Chandran is building his home there, among sites that sold for as much as $9.9 million each. Sentosa Cove has a 400-berth marina with 10 spots for mega-yachts, two golf courses so far and a casino resort on the way.

"The government wants to create Sentosa as a playground for the rich and famous," said Joseph Tan, director of residential property at CB Richard Ellis. "They're trying to build it as our Monte Carlo."

Roughly 60 percent of the buyers at Sentosa Cove are foreigners.

Providing services for Asia's super-rich is undoubtedly a growth market. The booming region is churning out at least 200,000 new millionaires a year, according to a recent report from Merrill Lynch and Cap Gemini, prompting comparisons to America's Gilded Age.

"The wealth of the wealthy in emerging markets is no different than the wealth of the wealthy in the Rockefeller days," said Roman Scott, who left a job analyzing the industry for BCG, a management consulting firm, last year to start his own investment advisory firm, Calamander Group. "It's the robber baron thing."

In a region known for its poverty, corruption and political turmoil, Singapore has long served as a refuge for wealthy ethnic-Chinese from Malaysia and Indonesia, who rely on its top-notch health care and schools. For many, Singapore's gleaming infrastructure, efficient bureaucracy and stable government more than compensate for its lack of press freedom, political debate and artistic ferment.

While the latest influx of wealthy foreigners is pushing costs up, property prices are still low compared with London and New York. Tax rates are low as well. Singapore does not tax capital gains or interest income. Its top income tax rate is 20 percent, and it does not tax income earned outside Singapore.

Blogs: Managing Globalization