Once again Singapore is trying to prove that the arm of government is stronger than the invisible hand of the economy. This time it is the wealth management and financial services sector which is being singled out for potential nurturing. Is it time for Hong Kong's critics - led by my daily colleague, Jake van der Kamp - to start smirking over the Lion City's perennial belief in state direction of industry? Or is this a signal that it is time for some of that proactive market enablement which Financial Secretary Antony Leung Kam-chung unveiled in his budget earlier this year? Hong Kong has rarely before shown enthusiasm for the sort of second guessing of the future which fascinates the ruling technocrat of the People's Action Party in Singapore, led by Prime Minister Goh Chok Tong. Chasing wafer-fabrication plants or biotechnology labs on the strength of Alvin Toffler's books was not our way. As Hong Kong was already moving out of the manufacturing industry and into the service sector, the moves down south were of little interest, and the market forces continued to choose Hong Kong's path. Along that path was the financial services industry. Japan may be bigger, but there is no centre in Asia to touch Hong Kong for the depth of its financial services, in particular its fund management industry. For years Singapore looked with envy at Hong Kong's wealth of leading names, but had to be content with its (highly successful) development of the Asian currency units of major banks which trade foreign exchange in a big way. Then, softly at first, but steadily more blatantly, the Singapore government began to woo fund managers, holding out carrots of big money to be managed from the coffers of state-linked industries, and the well-established Central Provident Fund. It seemed a fair enough tactic. Fund managers wanted to manage money and Singapore had lots of it. It worked to some extent and a lot more chief investment officers of big funds are now based in Singapore's central business district than was once the case. It wants more, and needs more, as the once successful microchip manufacturing business becomes a cost-based commodity which will eventually depart to cheaper centres. To find ways to fill the gap, and frightened by a sudden decline in its gross domestic product, the Singapore government set up an Economic Review Committee (ERC) - just as it did in the mid-1980s when it suffered an earlier recession. The task was to identify industries of the future, and last week the crystal-ball gazers put financial services and wealth management formally on the list. From the ERC came the FSWG (acronyms are a must in Singapore), the Financial Services Working Group. This body was led and populated by working professionals, not civil servants, and they concluded that Singapore should thrust into wealth management and financial processing and establish the city as a risk management centre. As members included fund managers, it came as no surprise to learn that they decided that more money should be put into the hands of their industry by the government. More surprisingly, they recommended that start-up fund management groups should enjoy some government money as seed capital. Also on the wish list were tax exemptions for foreign-sourced income remitted to Singapore, and on management-fee income earned by local fund managers from funds managed overseas. It's at this point that Hong Kong critics of Singapore should stop chortling, for this recommendation is going to strike a very strong chord among the SAR's own money men. Far from having a government-sponsored body supporting the idea of formal tax exemption on offshore funds, the prospect of offshore fund mangers being taxed in Hong Kong is still being held over their heads by the Inland Revenue. Local managers have been scared out of their wits by inquiries last year by the revenue men about their income; inquiries which many feared were the first stage in the demand for tax. As no other financial centres levy such a tax, Hong Kong's managers would immediately see their clients heading for the door, because the tax would inevitably come out of their returns. Stung by threats of mass emigration, Mr Leung in May told a gathering of financial managers they should not worry, and that no such taxes would be levied. Sighs of relief all round at the time, but since then - silence. What Hong Kong-based fund managers are looking for now is a clear-cut policy, set in stone, which will exempt them from such taxes. We even had a body that could recommend it, for it is not only Singapore that sets up committees to seek new developments. The Working Group on Fund Management which was set up by the Financial Market Development Task Force to find ways of easing the regulatory and bureaucratic burden on the industry, should press for action. Laugh as we might at Singapore's quaint belief that the government can identify successful economic strategies, rather than just laying down the infrastructure and letting business do the rest, the fund management industry is much more mobile than wafer-fabrication plants. Fund managers can manage money from anywhere that has a recognised set of rules. Shifting financial assets can be done at the push of a button. In the 1990s many were set to do just that if 1997 had proved a disaster. Back-up systems were in place in Singapore that would have hummed into life in a nano-second in the unlikely event of a red tide engulfing the financial sector. The tax-driven exodus would not stop at the money and the managers. It would drag along with it a whole infrastructure of administration, broking and legal services which would also depart. These are a key part of the fund management industry, so guess what other areas of the financial services sector Singapore has identified as engines of growth?