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14 August, 2011

Singapore may be a small island in the South China Sea, but its economy is one of the fastest growing in the world, even outpacing the giant population of China. MICHAEL PREISS

Singapore is booming. Economic growth in the first quarter of this year rose a breathtaking 45 per cent. The economy is on track to be the world's fastest growing this year after record first half growth numbers.

On an annualised basis, gross domestic product will rise between 13 per cent and 15 per cent in 2010 making it the highest in the world. Even if the economy shrinks in the second half, full year growth could still be Singapore's highest ever and surpass even that of China and India.

Both the currency market and the stock market seem to like the'singapore Story' and they are voting with their money. While the US stock market is flat year-to-date, and Japan is dowm seven per cent, China is down 26 per cent and Hong Kong six per cent while Singapore is up four per cent.

According to Standard Chartered Bank research, the Singapore dollar is expected to surge by 12 per cent against the US dollar by midyear 2011, while the Euro and British pound are expected to stay weak and under the burden of very heavy and record high public deficits for years to come.

Singapore is now the fourth wealthiest country in the world in terms of GDP (PPP) per capita, and the 20th wealthiest in terms of GDP (nominal) per capita.  Despite Singapore's small size, it has the world's ninth largest foreign reserves and hardly any sovereign debt. Sovereign wealth fund, Temasek is said to manage a global portfolio of $186 billion including a stake of about 18 per cent in Standard Chartered Bank.

The Economist Intelligence Unit, in its 'Ouality-Of-Life Index', ranksSingapore as having the best quality of life in Asia and 11th overall in the world.

Singapore sees hundreds of thousands of foreign expatriates working in multi-national corporations or running their own companies.

Immigration policy is one the reasons for Singapore's economic success.

In Hong Kong it takes seven years to become a permanent resident, in Singapore you can become permanent resident after two years. Yet in Dubai you can have $100 million in the bank and still have no peflnanent residence.

Wlhen I lived in Hong Kong during the 1990's we used to joke that in Singapore you are "singa-bored". Nightclubs used to close at 2am and it was more of a sleepy town. Now

in 2010, Singapore is more happening than many other Asia cities put together. Hong Kong in its relevant importance in declining and Singapore is rising. Hong Kong suffers from some of the world's worst pollution, but Singapore has clean air and much more space.

   In the late 90s, then Prime Minister KuanYew Lee apparently commissioned consulting firm McKinsey to find out what is wrong with Singapore and why Singapore lagged behind Hong Kong.

The city was already an important passenger hub, the airport with the IATA code of SIN was one of the busiest cargo airports in the world, handling over 1.66 million tonnes of cargo, but business people somehow thought the place was dull.

McKinsey apparently instructed Prime Minister Lee that Singapore was missing the SIN in SIN.

The Singapore government dutifully took note and deregulated nightlife, freedom of the press, and even signed a degree to allow casinos, or what the locally call "IR: Integrated Resorts". In true Singapore spirit, however, the locals have to pay S$100 per visit while foreigners get in for free.

According to the Singapore Tourism Board, tourist arrivals are likely to increase to 12.5 million a year, with year-on-year growth of 30 per cent. Tourism receipts are estimated to surge 50 per cent to reach $18.5 billion.

In the old days, Switzerland was considered to be the private banking capital of the world. Now in 2O10 and beyond, increasingly it is the Island State of Singapore that is becoming the centre for wealth management globally.

UBS and even Credit Suisse today employ more staff in wealth management in Singapore than they do in Switzerland. UK taxing bonuses and high income tax mean more and more investment bankers, private equity firms and hedge funds are moving from London to Singapore.

With regards to portfolios and fixed deposits, however, it is surprising how few investors in the Middle East have savings in Singapore Dollars.

Exposure to Singapore equities is also comparatively low in Arabian and Middle Eastern client portfolios, but with Singapore having the highest growth in the world, more and more investors seem to take notice.

Michael heiss is an investment advisor and finance professor and can be reached at:

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