Singapore needs global perspective to be a philanthropy hub

CHRISTMAS, soon to be upon us, is a season of giving. It is also a good time to reflect on how Singapore can update its charity framework to better reflect the changing philanthropic landscape. If the country is to be a regional centre for philanthropy, its rules must be updated for the effective supporting of cross-border causes.

Deputy Prime Minister Lawrence Wong said at a philanthropy forum in September that the government is reviewing its tax incentive schemes to encourage family offices, businesses and individuals to set up base here and contribute to impactful solutions for social causes.

Singapore is already in a prime position to act as a base, given its position of relative stability in an uncertain world.

Geopolitical tensions between China and the United States continue to simmer. The recent G20 Summit in Bali may have seen the leaders of the world’s superpowers shaking hands, but there is a long way to go before anything like amity between the nations is established, let alone trust.

The Russian-Ukraine conflict continues to inflict pain in the form of rising oil prices, food shortages and disrupted global supply chains. Inflation has increased, raising interest rates and threatening economic calamity worldwide.

China’s zero-Covid policy, meanwhile, is pushing Chinese businesses and private wealth to look for bases outside the country.

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Singapore has weathered the Covid storm relatively well, and international confidence in our handling of the pandemic has been a boon to our economy. Our hotels now heave with international tourists, and our main retail street Orchard Road is so full of shoppers that the police are talking about implementing crowd-control measures.

It seems natural, therefore, that capital flows from North Asia are flooding into Singapore. The number of family offices here almost doubled from 400 in 2020 to 700 a year later.

Assessing the philanthropy landscape

A thriving philanthropic landscape is an important pillar in the successful positioning of our nation as one of the key hubs in a changing world.

Globally, 71 per cent of family offices are engaged in charitable giving. That figure is 90 per cent among family offices in the Asia-Pacific, according to UBS and Campden Wealth.

As part of wanting to “do good well”, a large proportion of these family offices are prioritising sustainable investments for their portfolios. Corporates now espouse environmental, social and corporate governance (ESG) missions, with engagement in the philanthropy sector a good way to achieve both the environmental and social objectives.

The Economic Development Board (EDB) reports that 35 per cent of wealth is expected to be in the hands of millennials in the next five to seven years – a demographic that, according to a July Forbes article, is more engaged in social causes than prior generations.

As more foreigners make Singapore their home, or at least a second base, integrating them well into the local community is important for the preservation of Singapore’s social fabric. By participating in charitable causes, they will get to know the country better and make a positive contribution.

Singapore’s charity framework

To become a regional philanthropy hub, however, Singapore must engage in the most important issues, and some of the biggest harms do not respect borders. Child sex trafficking, global warming and Internet-based offences, for instance, must be tackled across territorial boundaries. Environmental problems cannot be solved by any country acting alone.

Indeed, the EDB’s Philanthropy Handbook published this year on Singapore’s strategic position in philanthropy acknowledges that many of today’s biggest challenges are cross-territorial.

Singapore must, therefore, provide a framework that allows capital to flow where the needs are.

Under Singapore law, charitable organisations wanting to be established here must be registered and must serve the needs of the community in Singapore – if not wholly, then at least substantially.

The requirements are even more stringent for Institutions of a Public Character (IPC), a status accorded to established charities to which donations are tax deductible. IPCs must focus on local needs only. Donors writing cheques for substantial donations, tax exemption aside, will want to ensure that the institution is subject to stringent reporting and oversight requirements. Giving to an IPC becomes a default choice.

A Filipino family office may want to establish a Singapore charity to empower young women in the region through education, having seen the damage from child sex trafficking in their home country. Or a US-based multinational corporation, as part of its overall ESG efforts, may wish to register an IPC to fight cruelty to animals. The current rules require its Singapore-registered charity to focus largely, or wholly, on local issues, where such needs are not of paramount concern.

Similar restrictions hamper the efforts of philanthropists intent on funding regional causes. The Community Foundation of Singapore is an IPC that promotes philanthropy through facilitating the establishment of charitable funds. Its chairperson is appointed by the minister for culture, community and youth. But the bulk of funds placed in these foundations must be channelled to Singapore charities. A tech billionaire making Singapore his home and wishing to set up a global foundation to support causes may well look elsewhere, based on the present framework.

Singapore, due to its strong governance and well-developed legal system, is a great place to base a non-profit organisation. In an increasingly inter-connected world, however, stakeholders and beneficiaries are in multiple jurisdictions. Our registered charities must be encouraged, and empowered, to embrace broader needs.

There will be challenges – not the least of which are proper oversight of public donations and prevention of money laundering. But we did not become an international financial centre without having rigorous structures in place for our corporates. So, why not our charities?

More importantly, Singapore is at the point of re-inventing itself as an international business centre, a new multi-cultural community and a hub for good. We will only be able to achieve this if our charity framework is updated. As former Senior Minister Goh Chok Tong said at a philanthropy forum in 2011: “Philanthropy makes the world a better place … it is crucial that we continue to give generously, to local and foreign deserving causes.”

That was 11 years ago. It is a call to action that we should take to heart today.

The writer is joint managing partner, TSMP Law Corp.