Singapore - the Last Bastion of Irrational Exuberance?

The music is back on for private bankers. Their favourite pastime of musical chairs has started. If activity in Asia's private banking sector is any gauge then the global financial crisis is over – at least in Asia.

It is reported that at least one quarter of RBS Coutts Singapore staff have resigned and joined a Swiss outfit, BSI. Recent media reports indicate that OCBC, another local lender, is interested in purchasing the Asian private banking business of ING. What competitive advantage OCBC may have in executing such a purchase is a question OCBC shareholders must be asking themselves. Shareholders must also be hoping that the management will not overpay for any acquisition.

Certainly, the market to serve wealthy individuals in Asia is a 'rich' market. By some estimates, wealthy individuals in Asia have approximately USD 7.4 trillion in assets. The Asia (ex-Japan) wealth totals approximately USD 4.5 trillion with China's amounting to USD 1.7 trillion.

The sums are large and the incentive to operate a successful private banking business is significant. Think of the potential fees private bankers can extract from such a large pie - at 0.5% the number is in the range of USD 22.2 billion! Most calculators don't permit so many zeros.

By hiring the RBS Coutts staff, BSI believes it is paying reasonable money for a part of this USD 22 billion. Or it is actually providing evidence that Singapore was spared a banking crisis during the recent downturn?

The global financial crisis affected the Singapore economy severely. The country's GDP has contracted for several quarters now. However, the banking sector was left unscathed.

Banking profitability was certainly affected but the capital structure and loan to deposit ratios remain relatively healthy. There was no hint of any Singapore registered bank needing government support to stay afloat.

Perhaps as a result of being bypassed by the global banking crisis Asian senior managers have reverted to 'exuberant' behaviour before their international counterparts. They are surely willing to pay large amounts to pursue the holy grail of a private banking business.

Certainly, Swiss banks like BSI have an incentive to strengthen their foothold in Asia given that their US and European franchises have been battered by allegations of tax evasion. The cracks in Switzerland's legal code governing banking secrecy have also not helped growth in their traditional markets.

A Swiss bank diversifying its revenue stream away from Europe and towards Asia is good, but only if a reasonable price is paid?

The Asian private banking industry does not operate in a vacuum. Any premiums paid by employers to 'talent' will 'reimbursed' by clients. Any bank will demand at least a 3:1cost to income ratio from these highly paid employees.

The environment is not conducive for collecting fees.

A wide gulf has recently emerged between clients and financial advisors. Lawsuits against the private banking arms of banks have become more common in the last few years. Even the regulators such as the Hong Kong Monetary Authority and the Monetary Authority of Singapore have been forced to step in to mediate disputes between investors and financial institutions.

At least two major forces are at work which will force a reduction in wealth management fees over the coming years. Client behaviour has changed and the regulatory atmosphere is tightening up.

Clients' are far less trusting of private bankers. Suspicion, especially of complex and hard to understand structured products, runs high. Few clients believe that private bankers are looking out for their interests, instead accepting that bankers are only pushing product to generate revenue.

The regulatory framework for investment products and financial advisors is slowly evolving to keep pace with the arrival of new products. Financial advisors are constrained in their ability to create and market complicated products with rich fee structures. The veil of opaqueness has been replaced by the glare of enforced transparency.

The traditional business model for private banking has crumbled, much like many of the institutions who were touting a few years ago. Tomorrow's successful wealth manager will look different from the financial supermarket of yesterday.

Will someone please educate Singapore's private bankers about the lessons learnt from the global banking crisis?

Kampong Siglap Mosque and Fire Safety Regulations

The recent tragic fire at the Kampong Siglap Mosque is an eye opener for the Islamic Religious Council of Singapore (MUIS). The event calls for a re-evaluation of Singapore's fire safety regulations.

It is reported that as a result of the fire MUIS is considering mandatory fire insurance for all mosques. MUIS must go further and install sprinklers in all of Singapore's mosques. Sprinklers will reduce the annual fire insurance premiums and may lower the possible 'out of pocket' cost of repairing buildings damaged in any future fire.

Many mosques, such as this one in Little India, are part of Singapore's architectural and cultural heritage

Subsequent to the Siglap Mosque fire, it is appropriate to conduct an in-depth review in order to make it mandatory to fit fire sprinklers in all public buildings where large groups of people gather from time to time, including mosques, churches, etc.

Existing fire safety measures and practices certainly helped to avert a human tragedy at the Kampong Siglap Mosque but we may not be so lucky in the future.

An excerpt from the above was published in the Straits Times on October 14, 2009.

Singapore’s Doctors as Big Brother: Electronic Health Records

George Orwell's 1984 is a distant memory for most of us. Human emotion is not yet illegal but in many respects the Information Age is closer to Orwell's vision than we may wish to admit.

The ubiquitous closed circuit television (CCTV) camera is a part of modern life. Most modern gadgets, including the cell phone, computer and each swipe of a credit card leave a unique electronic signature which can be used to piece together our life.

The news is not all bad.

Take the case of health care records. The Singapore government has revealed that by November 2010 a national electronic health record (EHR) database will go live. The EHR will contain health data for each individual from birth to death, including doctor's visits, use of medication, previously diagnosed ailments and laboratory test results.

Next year's initial rollout will be limited to two public hospitals, two community hospitals, and some polyclinics and GPs. By 2014, the system will be available to all healthcare facilities island wide.

The impact on the efficiency of health care delivery will be enormous. Irrespective of which clinic or doctor a patient consults their complete medical history will be accessible in real time. For starters, the information will reduce the likelihood of being incorrectly diagnosed or given inappropriate medication.

The possibilities for future enhancements to the delivery of health care services are endless. The dangers associated with such a database are also very real.

Imagine your entire medical records, including personal medical matters falling into the wrong hands. The data is highly confidential and unauthorized disclosure is a violation of personal privacy.

One may argue that consolidating the data will help policy makers and health care researchers make more informed decisions. True, but at that level the data can be used anonymously and need not be connected with specific individuals.

Singapore's Ministry of Health has assured Singaporeans that an adequate 'audit trail' will be created for all viewings and uses of the information. The Ministry is implementing sufficient safeguards regarding what category of persons, i.e. doctors, specialists or Ministry, can access what level of detailed information.

The issue of personal privacy and data protection is broader than just electronic health records. It gets to the heart of a wired society in the Information Age.

Singapore is a leader in e-government and e-services. Most basic government services are available online to all residents. Buried in the e-government assumption is that a multitude of data is floating around the internet and is made available to anyone authorized to view it.

Undoubtedly, the Singapore government has control mechanisms in place to see that the data is secure.

Are the existing methods sufficient for a constantly evolving online environment? It may be time to review personal privacy laws to ensure that the penalties associated with the unauthorized distribution and use of personal data is severely punished.

Singapore's attractiveness as a regional business hub is to a large degree dependent on its transparency and respect for rule of law. The laws for the next decade will be different from those that got us this far.

The US Dollar, Human Rights and Capital Punishment in China

New reports suggest that the People's Republic of China (PRC) has sentenced six persons to death for instigating the riots in Urumqi, Xinjiang in July 2009.

Xinjiang, located in China's southwest, has a large indigenous Turkic speaking Muslim population

To many it may seem strange that within five months of the act such harsh penalties are meted out – and that too in a relatively unpublicized trial that probably lacked any courtroom drama (and much evidence beyond a few state witnesses).

The PRC is a large geographic area populated by approximately 1.4 billion people. If Beijing wishes to continue to control the country its behaviour must play to the population at large. The Emperor, whether of royal descent or head of the Communist Party, must be responsive to his citizenry's outcry.

This is not a case of a rich young man running over a peasant in his car. It is about the delicate relations between the Han and Uighur ethnic groups. A swift, intimidating response is how Beijing perceives its interests to be best served.

One may criticize and scream 'human rights violations' but it is the Chinese way. Executions will certainly stop anyone marginally predisposed to fomenting ethnic trouble to think twice before doing so.

At a time when the US economy is being kept afloat by PRC wealth it is difficult for anyone to speak too loudly about fundamental rights – or carry a big stick at the same time.

‘Khalwat’ on Singapore’s Subway

It started just like any other journey on the MRT. I boarded the train and sat on the nearest available empty seat.

A pretty young woman was sitting on my left. She was tired and dozed off intermittently. As she nodded to sleep, her head kept slumping to her right until she jerked herself awake.

Subway, 1934. Oil on canvas by Lily Furedi

The routine continued for a few stations until she finally feel asleep with her head resting on my shoulder. I evaluated my options:

1.   Wake her up and suggest that my bed might be a more comfortable place for her to nap if she would just like to accompany me there!

2.   Wake her up and ask for her telephone number.

3.   Ignore her and pretend nothing unusual was happening (the correct answer is always the most boring).

Being a shy type I took little time in deciding that doing nothing until she wakes up is the best course of action. I had several more stations to travel anyway.

The incident is an innocent tale of 'business as usual' in a normal social setting. Yet, in some societies interaction between the sexes is severely curtailed and civil rights are often infringed by religious zealots.

Consider the law of 'khalwat' in Malaysia. The law is not atypical in the Islamic world and similar versions can be found on the statute books of many Islamic nations. However, the level of enforcement varies considerably within different jurisdictions.

Malaysia's Shariah Criminal Provisions Act (Federal Territories), Section 27, states: "Any man who is found together with one or more women, not being his wife or mahram [family member or close relative]; or any woman who is found together with one or more men, not being her husband or mahram, in any secluded place or in a house or room under circumstances which may give rise to suspicion that they were engaged in immoral acts shall be guilty for an offence and shall on conviction be liable to a fine not exceeding three thousand ringgit or to imprisonment for a term not exceeding two years or to both."

It may be surprising to note that even the otherwise liberal metropolis of Kuala Lumpur has its fair share of khalwat cases, including instances of dating couples holding hands or kissing in the gardens of the Petronas Twin Towers. (Some will suggest that the police seem to be more interested in such cases around Hari Raya when household expenses increase due to exchanging of gifts.)

As one will expect, khalwat is most actively enforced in the states controlled by Malaysia's Islamist party, PAS. In Terengganu the PAS Youth wing has reportedly mobilized members of the Youth Welfare Association to create vigilante squads to 'discourage' the spread of khalwat.

In many other nations the legal framework is not as relevant as social practices. The existence of an organization like the Revolutionary Association of the Women of Afghanistan (RAWA) does little to change the ground reality for women in most parts of the country, despite the assertions of equality under Afghanistan's post-Taliban Constitution.

The battle lines are drawn within mainstream Islam.

The niqab, or the full veil is most commonly found in Arab societies

The extreme right is represented by clerics who want to make the niqab (the full veil) 'one eyed.' The Saudi cleric, Sheikh Muhammad al-Habadan, suggested that revealing both eyes encourages the use eye make-up to make females look seductive.

The progressive strand of Islam is personified by the spiritual leader of the world's Sunni Muslims, the Grand Mufti of al-Azhar University, Egypt. He recently suggested that trousers are acceptable dress for Muslim women and there is no requirement for a Muslim woman to cover her face via a full face veil.

To be sure, a subway carriage is not a secluded place and my circumstances were hardly suspicious. Still, enforcing a legal system based on imprecise and controversial religious moralities is a recipe for social disaster.

The right to eat freely during Ramadan should be available to all 1.57 billion Muslims. Whether any Muslim chooses to exercise that right is a personal choice – not an obligation enforceable by the state.

Nobel Peace Prize: Reserved Exclusively for Politicians?

I don't like to be a naysayer but Obama winning the Nobel Peace Prize - what's that about?

Ok, so he broke the 'glass ceiling' that may have existed for black Americans, or other minorities who complained about discrimination, but isn't awarding the Peace Prize taking these achievements too far?

The peace prize is now as political as the United Nations General Assembly. In the last decade it has been awarded to Al Gore, Mohammad Al Baradei, Shirin Ebadi and Kofi Annan among others. I am not suggesting they are not worthy recipients.

Just that they are politicians and not 'old school' humanitarians.

Martin Luther King Jr. received the Nobel Peace Prize in 1964. Read his Acceptance Speech here

Obama is now in the august company of Nelson Mandela and Martin Luther King Jr. Those are the sort of names that I associate with making a difference to the dispossessed and weak – not politicians.

I am not an expert on US politics but I am aware that Obama's mercurial rise within the US Democratic Party was in no small way dependent on the Chicago Democratic Party machinery. I cannot imagine he managed the Chicago Democratic Party apparatus without dirtying his hands somewhere along the way.

Obama has been given a bonus for 'effort' and the revenue has yet to come. Let us hope he delivers on the promises he has made along the way.

Singapore’s Underworld – Turning Sharks into Nemos

Many minor but significant changes are taking place in the Singapore political landscape. The political culture is rapidly evolving and public debate among citizens about important national issues is more commonplace.

However, currently much of the debate is confrontational and 'anti-establishment' in nature. Much of the online debate often reflects a sense of helplessness and frustration by the participants. This is a result of the domain in which the discussions are taking place, the cyber world.

Cyberspace is a parallel world. In Singapore, the overlapping space shared by the New Media and the traditional media is small.

The tone and nature of the online discussions suggest that political efficacy among Singaporeans is low. A seemingly illogical idea, as in democratic countries with small populations citizens generally feel more empowered and able to influence change.  

Political efficacy refers "generally to citizens' beliefs in their ability to influence the political system ... political efficacy refer[s] to the feeling that political actions taken by individuals' can have an impact on the political process. Contemporary views ... conceptualize political efficacy as having two dimensions: internal efficacy, which reflects a personal sense of political competence, and external efficacy, the belief that the political system is democratic."

A simple search of articles on subjects dear to the Singapore citizenry such as HDB prices, Temasek Holdings, and immigration brings several points to the fore.

1. Singaporeans are far more confident and vocal in their opinions, including criticisms, compared to a few years ago;
2. Singaporeans wish to have a greater voice in the future of their society and are lacking in legitimate non-government / non-state associated avenues to channel their opinions;
3. Thus, people are pushed into the only avenues available, the New Media. The nature of the New Media increases the tendency of people to make extreme and unrealistic judgements. This naturally diminishes the quality of the dialogue;
4. There is a communication gap between segments of the population and the state;
5. Many equate the state with the government and the People's Action Party (PAP). A notion buttressed by the feeling that the state's judicial and law enforcement system has traditionally supported the incumbents in maintaining control of the levers of state;
6. The governments 'out of bound markers' have shifted – either by choice or force of circumstance. The recent acquittal of five opposition politicians for leading a procession in 2007 reflects that even officialdom is getting bolder in asserting freedoms and civil rights.

All of the above characteristics are positive. They exhibit a vested interest and a stake in the system, albeit with a desire for change.  In some respects, the traits are a natural corollary of a more affluent and educated population.

The question before policy makers is how to marry the idealism and energy of Singapore's younger generation with the practicality of the real world. One response may be the phased deregulation of Singapore's media sector.

A regulated and liberalized media sector is an important social safety valve. It will absorb some of the pent up pressure that is currently clogging up the 'underground' system.