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Singapore: a nation of entrepreneurs or wealth managers?

Dr. Lai Kok Fung is currently CEO of BuzzCity, a Singapore-based multinational company specialized in mobile advertising. He is also adjunct professor in the school of computing at the National University of Singapore. He started his career as an applied researcher in the Information Technology Institute, a now-defunct applied research institute funded by the government of Singapore. His writings on innovation are collected in a blog titled Innovation.

Singapore skyline

Singapore’s skyline is a symbol of the country’s prowess as a financial center.

I wrote several articles recently on how government monopolies in media and telecommunications are stifling innovation in Singapore’s startup ecosystem. One of my respected mentors disagreed with me, pointing out the cutting-edge innovations in Singapore’s wealth management clusters.

According to data from WealthInsight, Singapore’s wealth management industry grew 22 percent in 2012 to S$1.63 trillion (US$1.29 trillion).  Singapore, a millionaire haven for years, could dislodge Switzerland as the wealth management capital of the world by 2020.

This is caused by both push and pull factors. Swiss private banks have steadily lost European clientele in recent years as a clampdown on tax dodging puts pressure on banking secrecy, long the bedrock of its private banks. Singapore’s rise, on the other hand, is fueled by rapid growth of wealth in China, India, Indonesia and other Southeast Asian markets. The rise attracts controversy; Singapore supposedly practices ‘selective transparency’ by offering a variety of secrecy facilities, tax-avoidance and evasion opportunities to select clientele.

Wealth management, in turn, is supported by key clusters in security (the Singapore Armed Forces and police force), entertainment (integrated resorts, Formula One), real estate, air travel, legal, and medical. Witness the two integrated resorts, the world’s first night Formula One circuit, Changi Airport, and Marina Bay. At first glance, these may appear to be different from innovations like WhatsApp. However, they all require strategic discipline and out-of-the-box thinking.

Singapore does spend a few billion dollars every year on research and entrepreneurism. The amount is not small by any means, but it just does not appear to be the country’s core focus. Just observe where the top leaderships and trusted lieutenants spend most of their time (GIC, Temasek, SAF, Home Team), and compare this to the ranking of VIPs tasked to officiate startup events. While many government agencies are keen to promote entrepreneurism, the top management almost never cross over from GLCs or statutory boards to run startups.

As a result, most of our top talents have been sucked into the wealth management clusters. This is not a bad or wrong outcome since it is our core business.

“I don’t want that to be my marketing line”

While seldom shying away from trumpeting its wins to the world, Singapore is uncharacteristically modest in its wealth management achievements. In a dialogue with DBS chief executive Piyush Gupta, Singapore’s Prime Minister Lee Hsien Loong responded to the question of whether Singapore could soon overtake Switzerland as the top wealth center. He said, “I don’t think that’s true. I don’t want that to be my marketing line”. He continued, quoted by The Straits Times, “We are quite happy to continue our way quietly in the world.”

There’s another reason: politics. People are concerned about worsening income inequality and concentration of wealth, making it politically unpalatable to boast about success in wealth management.

The “Occupy Wall Street” movement in many countries targets social and economic inequality as well as greed from the financial services sector. Singapore must be keen to avoid similar demonstrations, which will surely jeopardize its standing as a calm and stable oasis amidst the relative chaos of Southeast Asia.

We’ve seen such unease in the different responses to two incidents that involves discontent from relatively well-off immigrants. In the first case, Sun Xu, a scholar from China, compared Singaporeans to “dogs”. Consequently, his scholarship was terminated by NUS, but Singaporeans were in turn urged to be more gracious. Anton Casey, a private banker who posted about “poor people” and the “stench on public transport”, was not so lucky. He earned a swift and sharp rebuke from a heavyweight minister, K. Shanmugam, who was “terribly upset and offended”.

Different and contradictory skill sets

Political palatability aside, if wealth management has been identified and developed as strategic core competency for Singapore, shouldn’t the startup communities leverage and value-add to this sector? Perhaps we can excel in high-end products in financial yield management and fraud detection, or develop sophisticated technologies to make SAF more efficient. We can develop drones to protect gentrified neighborhoods in Sentosa Cove.

The fact is, entrepreneurs and wealth managers are two very different “animals”. The attitude and aptitude required in these two fields are drastically different, if not contradictory.

Entrepreneurs constantly question the way things are done. While some business successes are based on incremental change, good entrepreneurs dare to challenge the Goliath and look for discontinuities to bring about revolutionary change. They thrive in open markets which are usually egalitarian, noisy, and sometimes messy. Some successful entrepreneurs become exceedingly wealthy. Society typically admires rather than resents them, so long as they are perceived to have battled in a fair and competitive environment using their grit, intelligence and even luck.

Wealth managers, on the other hand, thrive in orderly and stratified societies.The value pyramid of these societies consist of various low-skilled workers at the base, to increasingly senior wealth managers towards the top, with the rich and ultra-rich at the peak. The most important yardstick is the amount of wealth accumulated at the apex, for this is where the trickling down begins. The job descriptions were aptly immortalized by Tang Dynasty poet Tu Fu (杜甫):

朝扣富儿门,暮随肥马尘

Translation: knocking doors of rich sons in the morning, and chasing dust behind fat horses in the evening. Bottom line: money matters, nothing else. Remember an MP who said: “if the salary of a minister is only $500,000, it may pose some problems when discussing policies with media CEOs who earn millions or dollars”? Or that nursing was labeled as a low-skilled job in the Population White Paper?  These were not random mistakes, but systemic reflections of the ruling elite’s mindset.

What are our choices?

Are we heading towards a nation of wealth managers (and their humble servants), or entrepreneurs who create the wealth? These are hard choices. The implications are all encompassing, extending far beyond the allocation of resources. Do we train more engineers and programmers, or bankers and accountants? Do we value creativity and diversity, or place a premium on compliance and productivity? Do we invest in our citizens so that our knowledge becomes more valuable and experience more highly-prized as we age? Or do we treat citizens as units of labor whose cost grows with seniority and therefore must be replenished by immigration?

Neither choice is morally superior then the other. It is just what it is: a choice. However, we do need honest, transparent, and constructive discussions on the topic.

Editing by Terence Lee, photo by Peter Gronemann

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