Since independence, the government of Singapore has preferred the formulation of midterm and long-term economic plans to direct the economy toward greater prosperity to the adoption of a laissez-faire policy to boost economic growth. As a result, the government has not allowed private business entities to enjoy a disproportionately high degree of freedom to maximize their profits at the expense of social cohesion. Well-known for its extraordinary ability to navigate in wild economic waters, Singapore has repeatedly relied on this strategy to help it rebound from external shocks and return to rapid long-term growth.
Unpalatable as it is to laissez-faire economists, the Economic Development Board (EDB) of Singapore deserves great credit for formulating successful economic plans for the city-state to scale new heights for decades. It is also active in attracting foreign investment. In March 2019, the EDB made a landmark decision to enhance Singapore’s competitiveness as a global wealth management and family office hub. To attract more family offices to set up in Singapore, the government has taken steps to enhance the operating environment for family offices, deepen capabilities of family office professionals and build a stronger community of family offices in the country.
What the EDB wants, it gets. There is no doubt that Singapore is now a global family office hub. The number of Singapore-registered family offices, which manage tens of billions of dollars of private wealth, has leaped from just 50 in 2018 to 1,100 at the end of 2022, according to the Monetary Authority of Singapore. Although Singapore tightened regulations in 2022 to make it more difficult for smaller family offices to set up in the country, the bullish trend is set to continue.
With a strong determination to play catch-up, Invest Hong Kong has set up a family office division to promote Hong Kong’s status as a family office hub. At present, there are roughly 400 family offices in Hong Kong, with 30 new family offices added in 2023. Hong Kong has set a target of attracting no less than 200 family offices to establish or expand their operations in the city by the end of 2025, which is very likely to be achieved as the city shows attractiveness as a family office hub.
Partly because of the ability of the Singaporean government to deliver good governance and maintain political stability, and partly because of its highly credible legal system, Singapore is ranked second globally on property rights protection in the Property Rights Alliance’s “International Property Rights Index 2023”. Like Singapore, Hong Kong is recognized for maintaining the rule of law to protect property rights. According to Article 6 of the Basic Law, the Hong Kong Special Administrative Region shall protect the rights of private ownership of property in accordance with the law. The HKSAR government is also famous for its ability to deliver good governance and maintain political stability.
The “World Justice Project Rule of Law Index 2023” ranked Hong Kong 23rd out of 142 jurisdictions surveyed. Ranked 17th by the World Justice Project, Singapore is ahead of us. More than ever, Hong Kong’s Department of Justice and legal practitioners must make extra efforts to convince foreign investors and prospective clients of family offices that the city deserves a higher ranking in the index. They must dispel defamatory narratives that have made groundless accusations against the judicial system of Hong Kong. Critics of the National Security Law for Hong Kong allege that the law has undermined the rule of law in the city. To be fair, Singapore has also established a forceful and effective national security regime.
To sharpen our competitive edge, the HKSAR government has introduced tax incentives to provide extra wind in the sails of Hong Kong’s transition to a family-office hub. The Inland Revenue (Amendment) (Tax Concessions for Family-owned Investment Holding Vehicles) Ordinance 2023 was gazetted and took effect on May 19, 2023, providing profits tax concessions for investments managed by eligible single-family offices. It is also worth noting that these incentives for family offices have gained more publicity since the hosting of the Wealth for Good summit in March 2023.
The rising number of ultrahigh-net-worth (UHNW) clients in the region has painted Hong Kong’s status as an emerging family office in a better light. According to the Altrata “World Ultra Wealth Report 2023”, Hong Kong has more UHNW people than any city in the world. The rapid economic development in the Guangdong-Hong Kong- Macao Greater Bay Area (GBA) has also helped our family-office business stay on the fast track. First, the GBA is home to about 480,000 high-net-worth individuals. Second, the central government wants to turn the GBA into a wealth management hub, preventing more money from flowing overseas. Obviously, Hong Kong’s economic integration into the GBA makes the city more competitive.
Other measures to promote Hong Kong as a leading global family office hub include the establishment of the Hong Kong Academy for Wealth Legacy, and the efforts to attract wealthy customers from Southeast Asia and the Middle East to set up family offices in the city. As an international financial center, Hong Kong has a lot of professionals to provide quality services for family offices. Nevertheless, some argue that we still need to recruit more professionals to meet the rising demand for such services.
Unlike Singapore, Hong Kong does not have a history of strong government intervention to formulate long-term economic plans to shape economic development. The topic of government intervention had been taboo in the city. The landmark decision by the EDB to promote Singapore as a global family office hub is seen within the global financial industry as a critical source of first-mover advantage. The above lesson reminds the HKSAR government that it may need to take a more proactive approach to make long-term economic plans for the benefit of the city.
Yin Zihan is a co-leader of the Rainbow Pair mentorship program, launched and administered by the Chinese Dream Think Tank.
Kacee Ting Wong is a barrister, a part-time researcher of Shenzhen University Hong Kong and the Macao Basic Law Research Center, chairman of the Chinese Dream Think Tank, and a district councilor.
The views do not necessarily reflect those of China Daily.
