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Billionaires Add to Singapore Inequality Concerns

Jeremy Grant
Monday, 8 Jul 2013 | 10:33 PM ET
Image source: Ferrari North America

At a showroom in Singapore, a small crowd of McLaren enthusiasts were gathering for the unveiling of the latest "supercar" made by the British carmaker, a petrol-electric hybrid with a top speed of 350 kilometer an hour.

Never mind that the vehicle only comes in left-hand drive, so can not legally be driven on Singapore's crowded right-hand drive roads.

Anyone interested in buying would be looking at the P1 as an investment, even if they could get their hands on one – for a cool S$1.5 million ($1.2 million). McLaren has only made 375 of the cars and has yet to allocate what few are left unsold to the Singapore market.

(Read More: By Making Cars Harder to Own, Singapore Cools Inflation)

None of this has put off Chor King Ang, senior executive at Kwang Sia, a Singapore-based fashion retailer that sells luxury labels such as Hugo Boss and DSquared2 in stores across southeast Asia. "I've long been a fan of their Formula One racing team," he said, adding that he is already an owner of an earlier McLaren model.

In the past year, the trappings of wealth have been increasingly visible in Singapore as the number of sports cars roaring down its streets has increased. Last month saw the first sale in the island-nation of a Koenigsegg "hypercar" for $5.3 million.

Nightclubs catering to high-rollers are opening every few weeks, helping cement the city-state's growing reputation as one of Asia's hottest party towns. The clientele is an eclectic mix of the twentysomething offspring of Singapore's wealthiest families and the foreign billionaires who are increasingly making Singapore their home, drawn by Singapore's relatively low tax rates.

(Read More: Singapore Faces Choppy Recovery: Central Bank)

Among them is Eduardo Saverin, the Brazilian co-founder of Facebook, who can sometimes be seen on the nightclub circuit. Last year Nathan Tinkler, the mining tycoon, moved to the island nation from Australia.

Yet Singapore faces an increasingly awkward dilemma as its image as a playground for the wealthy collides with an economic squeeze felt by its middle class.

Lee Hsien Loong, prime minister, said on Friday that if he could persuade 10 more billionaires to move to Singapore, he would, even if that worsened income inequality.

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That, he said, was "because [billionaires] bring business, they will bring new opportunities, they will open new doors, they will create new jobs".

But it is clear his government is feeling the pressure.

K. Shanmugam, Singapore's foreign minister, said the income gap was "extremely obvious", recalling how he had been cut off while out driving one evening last week first by the driver of a Ferrari, then of a Porsche.

(Read More: World's Most Expensive Car Market Just Got Pricier)

"The middle class in Singapore has found costs rising because of energy, food and so on. At the same time they don't get the [government] subsidies and support that the 20th percentile downwards gets, so they have found themselves squeezed."

Official data showed in March that while Singapore has an average per capita gross domestic product of $50,000, income inequality is widening, as shown by the "gini co-efficient", a commonly used measure.

Meanwhile the number of rich people in Singapore with more than $1 million in "investable assets" is expected to reach 133,000 by 2015, about double the level in 2010.

(Read More: Singapore's High Cost of Living May Come at a Cost)

Compounding the issue is lingering resentment among many Singaporeans over an influx of foreigners generally, including thousands of mainly Bangladeshi workers employed on construction sites and other more skilled workers seen by locals as taking jobs from Singaporeans.

The government this year tightened up on the inflow of foreign labour and implemented measures to try and boost the productivity of local businesses as it tries to restructure the economy for more sustainable, if lower, growth.

Mr Shanmugan said he believed that Singaporeans were prepared to "trade off some growth for a drop-off in foreign labor". But he and other ministers insist that some level of foreign immigration is still needed.

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