More investors to be eligible for fast-track PR scheme

Singapore

TOWKAY scions and startup founders now have a new road to living in the Republic, under changes to a scheme that dangles permanent residency for investments in Singapore.

The Global Investor Programme (GIP), managed by the Economic Development Board (EDB), will add three kinds of investors who can apply for PR status, from March 1 onwards.

January's tweaks to the GIP, which was introduced in 2004, were billed by the EDB as "refinements" unveiled this year after a review of the scheme turned up new opportunities.

Matthew Lee, director of the EDB's Contact Singapore division, told The Business Times: "Rapid shifts in the global economy over the past few years have resulted in new business opportunities and also new breeds of entrepreneurs and business owners."

Next-generation business owners, founders of fast-growing companies and family office principals will join established business owners as eligible applicants under the scheme.

Investors can also qualify for the GIP by parking S$2.5 million or more in Singapore-based single family offices with at least S$200 million in assets under management. This move, according to Mr Lee, could strengthen the banking and finance sector.

The change comes on top of earlier investment options: putting at least S$2.5 million into a new or expanding business, or into a GIP fund that invests in Singapore-based companies.

"We have observed that many business families in the region will likely hand the reins to their next generation," Mr Lee said. "We are also keen to target founders of fast-growing companies in recognition of the growing impact and influence of the tech sector on the global economy."

But the minimum threshold for the investors' wealth has gone up: established business owners' companies must now clock revenue of at least S$200 million a year, up from S$50 million before. Also, next-generation owners' family businesses must have annual turnover of S$500 million.

Meanwhile, "fast-growth companies" must be valued at S$500 million or more - that is, be "unicorns or potential unicorns", as Mr Lee put it.

And family office principals need to have at least S$200 million in net investible assets, such as bank deposits, life insurance policy premiums, and other investment products - although real estate is not counted.

Investors' companies or family offices must also employ 10 or more people, including at least five Singaporeans, and ring up a minimum of S$2 million in business costs a year.

Private-sector watchers largely welcomed the expansion of the GIP, which they told BT has raised the bar for investments. That's even as the Republic remains attractive to investors on traditional factors such as stability, location in Asia, business-friendly environment and low tax rates.

"Keeping in view the changing business dynamics and evolution of modern entrepreneurship in the backdrop of global uncertainties, there was a need to modify and expand the scope of the GIP," said Abhijit Ghosh, tax markets leader at PwC, as he pointed to the new investor categories.

And, with the higher turnover requirement for investors' companies, "there will likely be more value added in Singapore," he added. "Also, this increase is more reflective of today's economic environment after inflation."

To be sure, some observers also floated tightening the investment guidelines for would-be residents.

"One area to focus on is perhaps a requirement for the business branding and product development functions to be relocated to Singapore," said Ong Sim Ho, Drew & Napier's tax and private client services director.

Over at another law firm, Dentons Rodyk partner Sunil Rai proposed raising both the minimum investment sum of S$2.5 million and the business spending commitment of S$2 million, which he said could help to grow jobs and build up industries.

Yet Eugene Wong, founder of Sirius Venture Capital, took the opposite tack, as he called for a lower valuation threshold for startups: "With that S$500 million, we may limit ourselves. It may be good if we could be a bit more flexible," he said, noting that valuations can be subjective.

While the EDB mandates "reputable venture capital (or) private equity firms" to have stakes in these companies, he cited the collapse of co-working landlord WeWork - valued by SoftBank at US$47 billion just a year ago - as an instance of how "even reputable VCs make mistakes".

Still, Mr Rai noted that "any possible drawback is mitigated by the fact that the PR status is subject to renewal" at the five-year mark, which would give the authorities time to review issues such as the progress of the applicants' business plans and their investment commitments.

Mr Ong added: "The scheme is flexible enough to be tweaked quickly in response to the economy. The recent changes are an example."

Now, with "younger and more dynamic investors" such as unicorn founders in the EDB's sights, Mr Ong even surmised that "the unspoken objective is to infect Singapore markets with the creative entrepreneurial zeal that has been generally lacking".

And, telling BT that newcomers could help homegrown players to scale up, Sirius's Mr Wong also lauded the expansion of the GIP as a step in the right direction for innovation, as "it does fill our startup ecosystem".

The government has previously disclosed that some 1,800 applicants were granted PR status under the GIP as at mid-2017, with S$1.8 billion yielded in business spending from 2011 to 2016. The EDB was unable to give more updated figures this month.

"Residence for investment" schemes have been around in Singapore since 1960, although the criteria have changed over time. For example, the EDB in 1986 expanded PR eligibility to cover injections of at least S$1 million into services projects, rather than just manufacturing industries.