Wooing wealth misses the point: Billionaires and businesses

Jeremy Chen

On 5 Jul 2013, Prime Minister Lee Hsien Loong, speaking at the DBS Asia Leadership Dialogue, said:

“I don’t think it will make us a society where everybody is absolutely equal and I don’t think we want to do that. In fact if I can get another 10 billionaires move to Singapore and set up their base here… I think Singapore will be better off because they will bring business, they will bring opportunities, they will open new doors, they will create new jobs, and I think that’s the attitude with which we must approach this problem.”

While it is hard to argue with the common sense notion that chasing equality of outcome destroys incentives, PM Lee’s argument was aimed at knocking down a straw man which the PAP has been doing for years.

I’d like to discuss the real economics of the real economy, giving a simple common sense take on bringing in billionaires and bringing in businesses.

Wooing wealth misses the point

It is often claimed that the major benefits to Singapore associated with billionaires moving here are job creation and revenue from income and consumption taxes. These are, however, tiny unless, of course, those billionaires are here to spend their billions in a big way.

Unfortunately, billionaires who relocate to Singapore do not conduct business here commensurate to the size of their net worth. Furthermore, they make use of accounting “magic” (tax engineering) on their personal income to change most of it into capital gains or anything that is taxed at a lower rate.

Additionally, if the businesses accompanying them pay parent or sibling companies located overseas for “intellectual property”, then the Singapore end is left with little or no corporate profit to tax.

It is hard to make the case of wooing billionaires to relocate to Singapore as a strategy. Wooing wealth misses the point. Wealth is a mere proxy for what would be useful to Singapore as these profits are “accounted” away to Bermuda or any other corporate tax haven. What is useful would be bringing in businesses that will be domiciled in Singapore.

Wooing businesses: The art and the benefit

Inviting appropriate types of businesses to set up shop in Singapore (through temporary incentives, for instance) has obvious benefits. Such businesses would generate high enough value to contribute to the economy and to create good jobs that can be filled and such businesses might provide the impetus for human capital to evolve.

The type of businesses we bring in would have to take into account our “human capital pipeline” which includes the stock of Singaporean students in local and overseas universities, polytechnics and ITEs, and the courses they are reading. It also includes the current stock of Singaporeans in the workforce and their capabilities as well as information about how long they are expected to stay in the workforce.

In fact, understanding the human capital pipeline is the most important consideration to be successful in attracting businesses to set up shop in Singapore. The businesses we bring in will have to fit with what is in Singapore’s human capital pipeline. Otherwise, Singaporeans will not be getting jobs in those businesses and we will have to import foreign labour to fill the vacancies.

Some of the businesses we bring in should also be developmental, meaning that they might require skills that Singaporeans will be able to develop quickly given what is in the pipeline. Specifically, these skills correspond to incrementally higher capability requirements. This nudges capability development upwards. (Of course, natural business evolution via competition also serves that role.)

A few of the businesses we bring in might, in some cases, be aspirational, entailing the next step up in the pipeline and supporting the evolution of our human capital. These should entail high value jobs that Singaporeans can fill with the right training. Initially, operations might be small and consist of foreign labour, but they would be filled with Singaporeans in the years to come. This means an incentive-driven “pull-up” in terms of capability development.

These are the three elements of “business attraction” that we have to be aware of. In addition, we have to be aware that jobs shape human capital. Many students pick fields of study based on jobs available.

Shaping the human-capital advantage

The strategy of luring businesses should be used to plug “business gaps” in the economy which occur when a large number of Singaporeans are under-employed. Underemployment occurs when a worker’s capabilities and education are not necessary for his/her current job. Such a response to underemployment  grows the economy because some existing work is replaced with higher value work.

On the other hand, it is unclear that the government is capable of picking future winners. While I believe that huge government-led pushes should not take place, it does not preclude “experiments” to assess whether certain types of businesses would thrive. It also does not preclude “piling-on” proportionately to reinforce and accelerate a reasonably strong private-sector led trend.

There is also a “deeper” strategic aspect to this. A nation like Singapore that depends on human capital must be proactive in shaping, maintaining and extending a human-capital advantage. Choosing what businesses to woo is useful for shaping human capital. If done right, it means lasting prosperity for Singapore.

Thought has to be put in to consider the kinds of skills that will be needed in future, and the kinds of capabilities that are easy or difficult to build up elsewhere. We do not want to invest in skills that would be easy for 240 million Indonesians to pick up. Rather, we would like the over 600 million people in South East Asia to depend on 3.3 million Singaporeans.

It is not outrageous to seek to become a regional centre of excellence that other nations depend on for crucial expertise. Studying where other nations are in their development and deducing where they are going is only preliminary groundwork in this difficult task. I will not pretend to know exactly how to do it, but it is clear that it is a matter of gradual positioning.


By now it should be clear that wooing appropriate businesses leads to far more direct and certain effects than simply wooing wealth. This is not an anti-wealth tract, but rather an anti-wealth-fixation tract. Rather than chase the uncertain and often unlikely benefits of billionaires relocating to Singapore, we should woo businesses that will bring good high-value jobs for Singaporeans.

Jeremy Chen is pursuing his PhD in Decision Science at the NUS and is a member of the SDP’s housing policy panel.