I stumbled across this CNN/Money column from a post on Reddit, and it struck me as… problematic.
Peter Pham of AlphaVN (a Vietnamese-focused investment blog – is Vietnam still an investment destination after the Vinashin default and years of >20% inflation? And wasn’t there some sort of bills/NDF arbitrage trade explosion in 2008?) takes a quite amazingly rosy view of Singapore’s investment climate:
[…] Singapore not only receives more financial foreign investment than any other major financial center in the world, it receives more than New York, London, Frankfurt and Switzerland… combined.
This is because Singapore is actively courting new capital in response to the abuse that is being dished out to investors in the West.
Wow, the “abuse being dished out to investors”? I mean, I get that the Volcker Rule is making people unhappy, but calling it “abuse” is a bit hyperbolic.
For example, Singapore’s central bank, The Monetary Authority of Singapore, […] plans to treat [precious metals] as currencies — and not commodities — by removing the 7% goods and services tax that was collected on all precious metals transactions.
After October 1, bullion quality gold and silver will be freely exchanged without taxation on Singapore’s exchanges[…] The increased transparency and volume of bullion trading along an open exchange is just one example of treating investors like royalty.
Last I checked, neither the USA nor the EU has a VAT or a GST on gold bullion. I’m not sure how Singapore bringing its tax regime into line with the rest of the world counts as “treating investors like royalty”.
Another is the MAS’ plan to create a clearing house system for over-the-counter derivatives, like credit default swaps.
[…] On an open exchange, people legitimately interested in hedging their bond default risk will welcome this evolution like a man coming in from the desert.
I haven’t heard anything about the SGX creating an “exchange” for CDS, so I can only assume Pham’s confused CDS trading with CDS clearing (and the MAS with the SGX, because the MAS isn’t in the business of running clearing houses). And again, ICE and the CME have been clearing CDS for years now, so this is not a uniquely Singaporean development.
But despite his non-sequitur arguments and errors of fact, Pham has a point. Singapore probably is hoovering up financial FDI dollars from all over the world, and cash is definitely flooding into Singapore in vast amounts, but that’s not because of anything special about Singapore’s regulatory regime – it’s because Singapore has minimal taxes and a worryingly lax attitude toward questionable money.
I live in central Singapore. I can look out my window right now and see nearly two thousand multi-million-dollar apartments being built between the CBD and the tony Orchard Road shopping strip. Those are not being bought by local Singaporeans – they’re being bought by overseas buyers, frequently for cash.
The money flowing into Singapore is money that’s trying to avoid the IRS’s scrutiny in Switzerland (though they’re looking here now as well). It’s businessmen’s fortunes from Indonesia that were a bit too closely tied to the Suhartos. It’s the junta’s profits from Myanmar. It’s the cash siphoned off by corrupt Chinese local government officials. It’s Robert Mugabe’s money (he was over here for surgery just a few weeks ago). There’s even, apocryphally, Russian money starting to flow in here.
So, sure, there’s truckloads of investment coming into the little red dot. But it’s not the sort of investment you want to see.