A prime destination mainly for bankers and businessmen, Singapore also has started drawing tourists with a slew of new attractions, the most popular being two casino-complexes built at a cost of over US$10 billion (RM 31.34 billion) that opened earlier this year.
The two casinos and their related attractions represent the new face of a city that wants to transform itself from regional trade and financial centre into a place for both work and play.
"I'm looking out of my window at the new skyline. What has developed over the last five years has been amazing," Hanspeter Brummer, CEO for Asia at Swiss private bank BSI, said from his office which overlooks the new Marina Bay financial district.
"Singapore is more than just Monte Carlo, which is a bit artificial. Singapore doesn't just have one industry but a number of industries. People really have good reasons to come here," said Brummer, a Swiss national who worked in the city-state from 1997 to 2000 and returned in 2006.
Unlike the existing central business district, Marina Bay, built on reclaimed land around the mouth of the Singapore River, comprises not just office skyscrapers but also shops, residences, theatres and the towering $5.5 billion Marina Bay Sands built by U.S. casino giant Las Vegas Sands.
Marina Bay is also home to the world's biggest ferris wheel, restaurants fronted by Michelin-starred celebrity chefs and the world's first night-time Formula One circuit.
Over at Sentosa, to the west of the central business district, Genting Singapore's Resorts World casino and its Universal Studios theme park opened in February. The $4.8 billion complex earned S$503.5 million ($369.9 million) before interest, tax and depreciation in the three months ended June 2010.
Should Resorts World continue to rake in similar amount of money in subsequent quarters, it would surpass all rivals in Las Vegas and Macau in terms of profitability, analysts say.
Las Vegas Sands has not yet reported earnings for the June quarter but CEO Sheldon Adelson has said he expects Marina Bay Sands to generate gross earnings of over $1 billion annually.
Tourists and taxis
Although both casinos have yet to complete all their attractions, which include what will be the world's largest oceanarium, they have already created new business for hoteliers and taxi drivers.
Visitors to the city-state of 5.1 million people rose by over a-fifth to around 6.5 million in the seven months to July from a year ago. Hotel occupany hit 90% in July, up 10.2 percentage points, while room rates rose 20% on average from a year earlier.
Taxi drivers say their takings are up by as much as 30%, helped by increased business in the wee hours of the morning from casino patrons.
"The integrated resorts are a catalyst to bigger and brighter things. We are seeing more entertainment centres popping up... We are in the incipient stages of what we call a change in the structural demand for such services in Singapore," said Vincent Yeo, CEO of CDL Hospitality Trusts which owns M Hotel.
"There are still many attractions that are not opened yet," he added, citing the two casinos' unfinished projects as well as government initiatives such as new landscaped gardens, a river safari and an area for motorsports.
CDL's Yeo said the 90% occupancy levels will continue for several months until new hotels open, meaning visitors may have difficulty finding rooms from time to time.
Singapore's transformation began in 2005 when the government legalised casinos as part of a plan to double visitor arrivals to 17 million by 2015. Singapore attracted 9.7 million visitors last year, and the number could rise to just under 12 million this year if the growth pace continues.
The figures do not include the thousands who cross over from Malaysia daily by land. In the past, many came to work and returned the same day but a growing number are here to gamble as seen from the large number of Malaysian-registered cars in casino carparks.
Tourism currently accounts for about 7% of Singapore's economy but could grow to around 12% by 2015 based on government projections on visitor spending, economists estimate.
The transformation has detractors though -- from Singaporeans unhappy about the large influx of foreigners who have contributed to soaring property prices and crowded roads to those who fear the casinos will bring with them crime and other vices.
The tiny city-state has long been a centre of trans-shipment and regional finance, coupled with strict government control over its people. It has near-zero crime and sparkling clean streets but also flogging, the death penalty, and a ban on chewing gum.
While Singapore appears to have successfully prevented a rise in prostitution and loan sharking, there has been an increase in problem gambling.
According to local TV station Channel NewsAsia, Singapore's National Council for Problem Gambling has seen almost as many problem gambling cases in the first half of 2010 as it did for the whole of 2009.
Economists such as Citigroup's Kit said Singapore had little choice but to develop tourism, as it needs to create relatively low-skilled hotel, restaurant and retail jobs to replace those lost at factories that move to China and other cheaper places.
"Rebranding Singapore as a global city and tourism hub fits in very well with its natural advantage, which is its strategic location in the centre of Southeast Asia and good transportation links," said Kit.
"If well managed, services can be a more sustainable source of competitive advantage than manufacturing, which is footloose and very price-sensitive," he said.
Singapore's manufacturing sector, which accounts for one quarter of the economy, shed jobs in the second quarter of 2010 despite expanding at a 44.5% year-on-year pace. The services industries, in contrast, continued to create jobs despite growing at a much slower pace of 11.2%.
The government has warned manufacturing will slow in the second half, although growth for the full year will come in at 13-15%, which will make Singapore the world's fastest-growing economy.
"Manufacturing is going to slow down, but you'll see stronger contributions from services in the second half as the integrated resorts ramp up," said Endre Pedersen, who helps manage $16 billion in fixed income assets at MFC Global, the asset management arm of Canadian insurer Manulife.
Pedersen is betting on Singapore dollar-denominated bonds as he sees the local currency rising faster than most other Asian currencies against the dollar.
DTZ, meanwhile, says Singapore commercial property are undervalued by 9-12%, given the strong demand for offices and mall space that has arisen as Singapore attracts more banks and tourists. It ranks Singapore as the third most attractive city for investments in retail and number eight for offices on a risk-adjusted basis.
As for stocks, most analysts see few opportunities, noting the share prices of Genting and hoteliers such as CDL have already rallied this year.
Nomura analyst Tony Darwell warns of potential downside arising from slowing visitor growth as the novelty factor of two casinos wear off. CDL's Yeo argued, however, that casinos are more likely to attract repeat visitations than other attractions.
To Citi's Kit, the risks facing Singapore's shift to services and tourism are more long-term.
"We've developed the hardware but we've not got the software yet. At the lower level, Singapore still needs to develop a more service-oriented culture," he said, referring to high turnover of staff at hotels and restaurants.
"To be a global city also requires a more open mindset and willingness to accept alternative views even if they are poorly formed." -- Reuters
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