Singapore has seen a boom in family offices. The number of investment vehicles that oversee assets exclusively for the benefit of a single ultra-rich household has risen 22-fold over the past five years, thanks to liberal tax exemptions. But what have the wealthy brought to the table?

The short answer: Very little. The assets of those who claim these fiscal sops made up barely 2% of the US$4 trillion managed in the Asian city-state in 2021, and their linkages with its economy are practically non-existent. While opposition lawmakers would love to blame the uber-affluent foreigners for some of the property-market froth and high cost of living, the reality is that no family office has done a local residential-property transaction in the past six years, a government minister informed parliament in May.

No wonder then that authorities are coaxing them to do more. The Monetary Authority of Singapore last week promised $2 in incentives for every $1 family offices put into climate-related projects where they don’t even expect to see their money back, let alone hope for a return on it. Similar concessions will also be on offer if they invest in locally traded equities, either directly or via funds. But it won’t be a free lunch. Rules were tightened just last year; and they may be tweaked again. New entrants will have to notify the central bank when they start operations as well as maintain a relationship with an MAS-regulated financial institution, according to a Bloomberg report.

In 2018, Singapore had 50 family offices. Last year, it had 1,100, though the real number may be higher as these investment vehicles don't require a license to operate in the city. They need the monetary authority's pre-approval only if they intend to seek tax breaks. In 2019, James Dyson, the chairman of the vacuum cleaning giant Dyson arrived with his Weybourne Group. Google cofounder Sergey Brin’s Bayshore Global came in late 2020. Around the same time, Ray Dalio, the billionaire founder of Bridgewater Associates, started a Singapore office to run his investments and philanthropy throughout the region. Mukesh Ambani, the richest Indian tycoon, followed suit last year.

Among them, Dyson had the most ambitious plans. Not only did he move his money to the island — and bought a penthouse — his technology firm also announced a US$2.5 billion electric-car project. But that venture flopped, and Dyson sold the house a year after the purchase. In late 2021, Weybourne transferred shares of Dyson’s major real estate and farming businesses to the UK from the city-state. Brin and Ambani have kept a low profile, while the Dalio Family Office is currently looking for a chief of staff. (According to LinkedIn, more than 200 people have applied.)

Now may not be a good time to seek more bang for billionaires’ bucks. Until last year, Hong Kong faltered in responding to its traditional rival because of its draconian Covid-zero policy. The imposition of a Beijing-sponsored national security law and President Xi Jinping’s crackdown on the tech industry also soured investment sentiment in the Chinese special administrative region. However, by hosting decision makers for more than 100 super-wealthy families at its Wealth for Good summit in March, Hong Kong signaled that it was back in the contest. It has since followed up with a friendly tax regime that doesn’t set any local investment norms or require any pre-approval. It only insists on HK$240 million in assets anywhere in the world.

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According to Singapore's rules that were revamped last year, the threshold for the so-called 13U tax exemption is at least $50 million in assets, and 10% of it or $10 million — whichever is lower — should be invested in locally listed securities or startups. There had been no such stipulation earlier. Depending on their size, family offices must also spend $500,000 to $1 million in the domestic economy each year, up from $200,000. (Hong Kong asks for roughly US$255,000 in annual operating expenditure.) Of the minimum three investment professionals they’re required to hire in Singapore, at least one must now be a nonfamily member.

Hong Kong doesn't care if the employees managing the investments are family — or, for that matter, citizens or permanent residents. It wants to fill up the local talent pool after the exodus of the past couple of years. Immigration issues in Singapore, on the other hand, are more complex — and more fraught with domestic politics. Like with any industry, lawmakers want to know how many jobs family offices are creating for locals. (Answer: 900 in three years through June 2022.) Also, given the already wide income gaps, the government doesn’t want its red carpet to become an easy pathway to citizenship — only 30 family-office owners have been granted permanent residency under the city’s Global Investor Program.

By being too choosy, Singapore may lose out. While it’s known today as a planners’ delight, the island’s own history is littered with serendipity. Tan Chin Tuan, the banking czar and philanthropist who would come to be known as “Mr OCBC” wasn’t even from the rubber-baron Lee family that had founded Oversea-Chinese Banking Corp. — he joined the business in 1925 as a junior clerk. Forrest Li, the Tianjin-born and Shanghai-educated founder of US-listed gaming and e-commerce firm Sea, came to Singapore with US$100,000 in student loans, not wealth.

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The real value of the super rich is that they help attract other talented people. But then, most global cities around the world are pulling out all stops to lure the wealthy. Dalio, the hedge fund billionaire, has decided to open a branch of his family office in Abu Dhabi. For Singapore to stay in the game, planners might need to ask for less and get more. One way to do that may be to load their family-office package with vanity boosters like prestigious naming rights, instead of bigger tax breaks and tighter mandates on local spending.

Regardless of how juicy Singapore's carrots are, Ambani will take his green-hydrogen bets in India, and buy country clubs in the UK. But he might still be persuaded to hear a pitch for Ambani Scholars in clean energy at the National University of Singapore for a chance to recreate Schwarzman Scholars, Blackstone Inc. boss Stephen Schwarzman’s eponymous program at Beijing’s Tsinghua University.

Without a rethink on Singapore’s part, Hong Kong may actually end up with a smarter strategy, out of its sheer desperation for money and talent — and, most importantly, relevance. All the things that its competitor is at risk of taking for granted.

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