Welcome to Singapore - The Switzerland of Southeast Asia!

Wednesday, February 7, 2007
Vol. 9 No. 33

In Today's Letter:
Comment: Welcome to Singapore - The Switzerland of Southeast Asia!
Offshore: Now's the time to go Offshore - While You Still Can!
Privacy: Avoid Becoming a Statistic of Identity Theft - Here's How ...

Welcome to Singapore -
The Switzerland of Southeast Asia!

Today's comment is by Eric Roseman, our Investment Director and Editor of Global Mutual Fund Investor.

Dear A-Letter Reader,

Over the last two days, I've met with numerous private banks, lawyers, accountants and real estate consultants in Singapore. It's been a nonstop blitz of meetings and as I'm making my way to Vietnam this morning, I've got a few conclusions about Singapore.

Let me say, I'm totally impressed with this city-state. I'm convinced Singapore will continue to grow exponentially over the next decade and beyond and increasingly draw huge sums of global capital inflows. The country is incredibly efficient, highly literate and the entire population speaks English fluently. This is just a great place to do business.

It's also a great place to invest. The Singapore Strait Times Index continues to hit fresh all-time highs this year as the economy thrives on the heels of booming regional trade.

Singapore also looks like a smaller version of Switzerland - only with lush palm trees and a warm climate year-round. This city is extremely clean and well-organized. And compared to smog-laden Hong Kong, Singapore still enjoys fresh air. That's one of the main reasons why many Hong Kong executives have moved to this bustling financial center since 2000.

An Entire Armada of Vessels to "Welcome" You to Singapore

Singapore's economy thrives on international shipping, financial services and technology manufacturing. The city-state is strategically located in Southeast Asia. This central hub acts as a bridge between regional trading partners in nearby Malaysia, Vietnam, China, Thailand and Indonesia. Shipping is definitely a major source of revenue for Singapore, and once you visit here, you will easily see the signs of a major shipping hub. In fact, the first thing you notice on your final approach to Singapore's Changi International Airport is the huge armada of cargo vessels awaiting port entry.

Driving the influx of foreign capital and international investors to Singapore is the city-state's low corporate and individual tax rates, same as in Switzerland. This island-state has been steadily slashing its top income-tax rate, from 55% at independence in 1965 to 28% in 2000 and 20% in 2007. Singapore's corporate tax rates are heading lower by at least one percentage point in 2007, according to government finance officials. Currently, Singapore's corporate tax rate is 20%, and the city-state, also imposes a national sales tax, currently at 5%. Singapore may raise it to 7% this year to cover government spending plans instead of raising individual and corporate tax rates.

Singapore's People's Action Party (PAP), founded by Lee Kuan Yew, has controlled the island since gaining independence from the United Kingdom in 1965. The country's mixed population of Chinese, Malays and Indians has accepted decades of the PAP's often authoritarian rule in exchange for phenomenal economic growth that has transformed this former British trading outpost into one of the world's most prosperous states.

In 2006, Singapore's economy grew 7.7%, making this city-state one of the fastest-growing regional markets after China and Vietnam. Singapore, unlike most advanced economies in the OECD (Organization for Economic Co-operation and Development) continues to serve as a model economy harboring a positive budget and trade surplus. The local currency, the Singapore dollar, remains Asia's strongest unit versus the U.S. dollar this decade.

Watch Out Switzerland! Singapore's Banks Are Moving In

But what impresses me most as a global investor is how Singapore is quickly emerging as THE private banking haven in Asia.

Over the last decade, the city-state has built up an impressively financial services industry that challenges their rival, Hong Kong and is attracting lots of mutual fund and hedge fund business, including prime brokers and big international banks. Singapore is now Asia's third-largest financial center, after Japan and Hong Kong, and it's quickly gaining market share.

Private banking has emerged as a leading source of revenue for Singapore. In fact, over the last five years, Singapore has matured as a leading private banking destination for international investors, drawing deposits away from kingpin Switzerland.

Unlike Switzerland, where an estimated one-third of all private banking deposits are held, Singapore is not under constant political pressure from the European Union's (EU) Financial Action Task Force, which is constantly attempting to strip away Switzerland's tax advantages and privacy. And that's what's luring many European and international investors to Singapore.

Singapore Already Made Sovereign Society Members 58% Since August

With compelling economic statistics most countries would love to brag about, it's no wonder my best-performing recommendation over the last year in the Sovereign Individual Portfolio has been Singapore's largest real estate investment trust, up over 58% since last August. And, I'll be making more recommendations in Singapore as the year progresses.

This October, The Sovereign Society will host its Asian Financial Investment Tour in Singapore. I'll be part of this exciting tour and look forward to taking our members to the Singapore Stock Exchange, among several other interesting financial stops in what's quickly becoming Asia's most dynamic and prosperous financial center. See you in October!

ERIC ROSEMAN, Investment Director

P.S. We're already taking reservations for our Asian Advantage Tour: October 12-26th! If you plan to join us, please register today by calling Value Holidays at 1-800-558-6850. Of course, you'll receive your early bird discounted price of US$6,850 for registering now. Sovereign Society members receive additional discounts. For more information about this exciting and informative tour, please click here .

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Offshore

Now's the Time to Go Offshore -- Before the Taxocrats Have Their Way

However abysmal you may think the Bush administration has been in many of its policies, the Bush administration has supported free trade and the unrestricted offshore movement of capital.

But the political winds have shifted in Washington, with Democrats now in charge in both the Senate and House. As I have warned recently, this means that offshore financial activities are a major target for regulation by Democrat-inspired legislation.

Now these congressional Democrats, hoping to finance an ambitious agenda without raising taxes, are on a collision course with the Bush administration about pursuing the supposedly vast amount of money that people allegedly hide from the Internal Revenue Service. Democrats claim the government could collect as much as US$100 billion more a year by reducing the so-called "tax gap" - the unpaid taxes, mostly on unreported earnings that the IRS has estimated at about US$300 billion a year. But most of that figure is based on conjecture. Not to mention, it would require a tax Gestapo to enforce Draconian rules to collect even a fraction of the cash, since most of it involves small businesses and individual taxpayers.

But now a Democrat sponsored bill has passed the Senate that would impose enormous taxes on American citizens who choose to end their citizenship (as they have a legal right to do) and on resident aliens who end their status. My colleague Mark Nestmann will have more to say about this in next week's A-Letter. But in essence the new restrictions assume anyone who ends U.S. citizenship or residence status, based on the individual's past income taxes paid and net worth, is a tax evader.

The tax penalties are severe and immediate. To be frank, if this becomes law, it is unlikely to impact many wealthy people. Very few Americans end their citizenship each year (and in most cases it has nothing to do with taxes), but with careful professional advice, such curbs can legally be avoided.

My point: you need to understand what the Congress has in store for people of even modest wealth. You should consider now the possibility of expanding your offshore activities of all kinds (investments, banking, residence, second citizenship) -- while you still can.

BOB BAUMAN, Legal Counsel

Privacy&Rights

Identity Theft Losses Fall-Should We All Relax?

Identity theft losses in the United States fell in 2006 to "only" US$49.3 billion, according to a study from Javelin Strategy & Research. That's down from US$55.7 billion in identity theft related losses last year. Pardon me if I don't pop the Champagne cork!

That's because the numbers remain staggering: in 2006, 8.4 million Americans were unwitting victims of criminal fraud with personal data such as credit card or Social Security numbers compromised. That's down from 8.9 million in 2005 and 10.1 million in 2003 - but that's little consolation if you're one of the victims.

The individual stories are as heartbreaking as ever. Just a few days ago, I learned about a Pennsylvania man who had his identity stolen by someone who was eventually convicted of murder using the stolen identity. The man who impersonated John T. Healy stole US$3,500 from his bank accounts, purchased a Cadillac, and bailed out one of his criminal accomplices, all using Healy's identity.

Last week, the criminal, who was indicted under the name "John T. Healy," was convicted of murder. Now, the real Healy faces a very real risk of forever having his name linked with a convicted killer. And short of changing his own name , there's not much he can do about it.

Here are the most important precautions to follow to avoid becoming a statistic of identity theft:

1. Keep your Social Security number top-secret. You must disclose it when you're applying for credit or obtaining a driver's license. And you'll find it nearly impossible to open a bank account without it. But by law disclosing your SSN is strictly optional just about anywhere else, although a private company isn't legally obligated to provide you services should you refuse. And when opening any new accounts with any financial institution, ask for an account or customer number that doesn't contain your SSN.

2. Check your credit records at least annually. Federal law now requires credit bureaus to give consumers one free copy of their credit report annually. See http://www.annualcreditreport.com , call toll-free 1 (877) 322-8228 or download the written request form at https://www.annualcreditreport.com/cra/requestformfinal.pdf .

3. Be cautious about what you throw in the trash. "Dumpster diving" is a popular pastime for identity thieves. Purchase a crosscut shredder (about US$200) and shred any document before disposal that contains personally identifying information such as credit card numbers, bank account or brokerage information, or your SSN.

For additional suggestions on preventing or dealing with identity theft, see the following websites: http://www.privacyrights.org/identity.htm ; http://www.consumer.gov/idtheft ; and http://www.identitytheft.org .

MARK NESTMANN, Privacy Expert & President of The Nestmann Group
www.nestmann.com

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