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SCMP Reporter

Government asked to consider law changes to meet city state's challenge to Hong Kong's role as regional leader

IF ONE WORD STILL presses a strong emotional button in Hong Kong, it's Singapore.

The perpetual beauty contest that goes on between the two cities is understandable, given their regional ambitions. Just mention Singapore's latest initiative - priming itself as regional financial centre - and that's often enough to make the government jump.

But with Singapore's recent overhaul of its trust laws to attract trust services to locate in the city state, the Hong Kong government's reaction was somewhat muted.

That worries Susan Collins, the chairman of the Society of Trust and Estate Practitioners (Step) Hong Kong, who fears that the city is being slowly pushed to the margins when it comes to the region's trust business. The government, she said, was failing to match Singapore's initiatives.

'There seems to be no real plan on how to develop the industry,' she said.

Her group met the government recently to try to encourage it to  take a more active approach  to the development of the trust industry and the needs of the business.

Trust services have grown in importance globally as part of a wide array of wealth management services offered by financial institutions, so it is not surprising that Singapore is priming itself for a large chunk of the business.

Singapore officials say the new  trust laws, passed in March, will position Singapore as a leading global trust domicile and contribute to the growth of the private banking industry.

'It will add to our reputation as a sound, well-regulated and internationally competitive financial centre,' said Tharman Shanmugaratnam, the deputy chairman of Monetary Authority of Singapore.

The government also recognised the need for new law to address the growing pressure to foster higher standards of professional conduct and discourage illicit activities. The city reviewed its Trustees Act in October last year, bringing it in line with the developments in trust laws and use of trusts in financial and business transactions.

It also enacted a Business Trust Act in October last year that included governance framework for business trusts, which are entities engaged in the management of operating businesses, such as infrastructure services.

Ms Collins said her organisation used to be mainly focused on education and networking, but was prompted by Singapore's initiative to become more vocal in promoting Hong Kong.

'They [Singapore] have really gone to great lengths in promoting themselves as an international trust jurisdiction. Hong Kong, in contrast, has just sat back and done nothing,' she said.

Ms Collins recalls that Singapore's drive to enhance its position as the premier trust jurisdiction in the region started four years ago, with government providing tax holidays and other incentives to trust services moving there.

She said that while Hong Kong had done well so far, adopting a hands-off attitude was not satisfactory in the face of growing competition.

'The government should be doing more now to move the industry,' Ms Collins said.

She said the recent abolition of estate duties was  not enough if Hong Kong was to compete, and urged the government to rework the  trustee ordinance, which largely had been left untouched  since it was enacted in 1934.

The very traditional mooring does not prevent Hong Kong from becoming a major trust jurisdiction, but Ms Collins believes the existing law  does not provide enough firepower to match Singapore's initiatives.

Her organisation was drafting  proposals for amending the ordinance, adding that the recommendations were likely to be revealed this month. It wanted amendments on perpetuity and accumulation periods.

Under Hong Kong law, a trust can only exist for 80 years and can only accumulate income for 21 years.

Other  jurisdictions have either abandoned these provisions or lengthened the period of perpetuity to as long as 150 years.

It is particularly critical for trustees to have the accumulation period extended because it will expire soon for many trusts set up in the 1980s, a period when the use of these vehicles really picked up.

Besides tax breaks and proposals for regulation of the trust industry, Singapore often subsidises the training of wealth professionals to take further studies and goes on road shows in Europe and elsewhere to promote its growing financial centre.



Trust sector warns of Singapore threat