What about custody in Singapore?
One of the questions that I received after my recent Fireside Conversation with Sune Sorensen, where we covered the critical importance of the safe custody of one’s assets, was whether Singapore was also a good jurisdiction for custody. In brief, I do not recommend Singapore as a particularly good place for custody, but let me explain…
Singapore has established itself as one of the preferred and most successful financial centers in the world. The country that has only been around for a relatively short time yet has benefitted greatly from the economic development in its region, and most of all, the growth and international trade of China.
As discussed in the Fireside Conversation with Sune, custodial security depends on various dimensions. The three primary realms I consider in this context are 1) jurisdictional safety, 2) institutional safety, and 3) contractual safety.
The question regarding Singapore therefore relates to the first of the three listed dimensions: jurisdictional safety. When it comes to jurisdictional safety for the custody of your assets, you want to consider a country’s risk, or more specifically, the exposure your custodied assets may have to a jurisdiction’s risks.
Obviously, in this context, you will need to consider a number of things like rule of law, geopolitical risks, long-term political and social solidity, and financial stability, not to mention a tradition of respect and legal protection of private property. Finally, you also need to consider your ability to seek legal recourse in that particular jurisdiction which may depend, to some degree, on your own country of citizenship and/or residency.
When comparing Singapore to other financial centers that are known for safe custody, such as Switzerland, the UK, or possibly even the US and Canada, there are a few things that are especially important to consider:
Singapore is relatively well-positioned in terms of geopolitical risk exposure compared to other countries. It is a small and open economy, and its economic and political stability is generally well-regarded. Additionally, Singapore is a regional financial hub that has strong ties to the US, China, and other countries in the region.
It participates in regional integration initiatives, and it is a member of the Association of Southeast Asian Nations (ASEAN). Singapore also has a strong diplomatic presence in the region and is a major participant in global organizations such as the United Nations. Overall, the small nation has a low geopolitical risk profile.
Singapore’s political system is based on a parliamentary system, with executive power vested in the Prime Minister and cabinet. The ruling party, the People’s Action Party (PAP), has been in power since 1959 and has dominated the political landscape since then. This concentration of power can be seen as a potential risk to Singapore’s political system, as it could lead to the government becoming increasingly authoritarian and unaccountable.
In response to this, the government has implemented a variety of measures to ensure checks and balances are in place, such as the establishment of an independent judiciary and the introduction of an electoral system with a non-partisan Presidential Council.
Singapore is in the top ten debtor nations, according to recent statistics by the IMF. Only a few years ago, in 2019, Singapore’s debt-to-GDP level was at about 50%. When looking at Singapore's net public debt, however, the country still looks very stable.
Top Ten Debt-to-GDP Nations
Source: IMF World Economic Outlook Report (October 2021)
In conclusion and getting to the quick-and-dirty answer, I consider Singapore a solid jurisdiction, particularly if you have reasons to favor a jurisdiction in that region, (for example, if you live there).
However, the rise of its gross public debt does raise questions. And, the somewhat autocratic tendencies of the country might be considered a reason for “custody concerns”.