Singapore seeks to turn into Asian version of Monte Carlo

“The integrated resorts are a catalyst to bigger and brighter things. We are seeing more entertainment centers 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.

Jobs, Opportunities

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 percent year-on-year pace. The services industries, in contrast, continued to create jobs despite growing at a much slower pace of 11.2 percent.

The government has warned manufacturing will slow in the second half, though growth for the full year will come in at 13-15 percent, 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 US$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 percent, 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.

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.

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