Sowing the seeds of growth

Globally, the number of family offices is on an upward trend, especially in the Asia-Pacific. The estimated number of single-family offices in the world is expected to grow by 75 per cent from 8,030 to more than 10,720, with their total assets under management (AUM) rising from US$3.1 trillion to US$5.4 trillion, by 2030.

In established, premier destinations such as Singapore and Hong Kong, this number has quadrupled to about 4,000 since 2020, presenting significant investment opportunities for nearby emerging hubs like the SFZ as well.

“Forest City’s designation as an SFZ offers an alternative to established financial hubs such as Singapore, Hong Kong and Dubai, and is expected to attract capital inflows that will benefit regional financial institutions through wealth management and advisory services for family offices,” said Alvin Lee, Country CEO of Maybank Singapore.

In fact, Forest City SFZ’s tax incentives are comparable, if not more competitive, than its neighbours too, offering lower barriers of entry and a more affordable option for family offices looking to establish their presence in Malaysia.

For instance, to qualify for tax exemptions in the SFZ, family offices are required to have a minimum of RM30 million (US$7.14 million) AUM, compared to Singapore’s Onshore Fund Incentive Scheme 13O which requires at least S$20 million (US$14.7 million).

Late-bloomer potential

While attractive, tax breaks alone are not enough. If the SFZ wants to position itself as a competitive financial hub, it will also need to put in the work to create a well-developed and reliable ecosystem. This includes building essential infrastructure – be it financial, digital or transport – and strong regulatory frameworks to ensure stability and confidence in the market.

For example, what makes Singapore a top choice for investors extends beyond its favourable business environment. The country also boasts a robust regulatory system, solid rule of law, a reputation for safety, and access to high-quality healthcare and education, among other advantages.

Currently, Singapore and Hong Kong host 15 per cent of the world’s single-family offices, and it may take more than the latest incentives to lure them.

Nevertheless, even if Malaysia has yet to cement its reputation as a go-to financial hub, early investors could still potentially benefit from first-mover advantages and capitalise on new opportunities ahead of others.

EY Asean tax leader and partner Amarjeet Singh similarly believes that the absence of a fully developed ecosystem will not impede Forest City’s goals as family office structures are relatively straightforward, further noting that “the establishment of family offices in Malaysia will provide more employment and upskilling opportunities in the services and financial sectors”.

Indeed, things are looking good for investors, if the recent developments announced as part of Malaysia’s Budget 2025 on October 18 are anything to go by. Not only has the Malaysian government passed new bills to designate Forest City as a duty-free island to spur economic growth in the area, it also launched the Single Family Office Scheme to promote and support the success of family office operations. Under this scheme, the Securities Commission Malaysia will serve as the authority responsible for issuing Resident Passes and Employment Passes to founding family investors and related investment professionals.

Cultivating connections

Besides, it does not always have to be a zero-sum game. Malaysia can also leverage its proximity to Singapore.

For one thing, family offices based there can still benefit from Singapore’s vibrant ecosystem and tap its resources that may not be as readily available in Johor, such as its talent pool or advanced financial infrastructure. Alternatively, they can even consider locating their businesses in Johor but live in Singapore to enjoy the best of both worlds.

Conversely, Singapore companies looking to expand can also set up base in Forest City, where they can contribute to its development by fostering opportunities for collaboration and innovation. The new Johor-Singapore Special Economic Zone (SEZ), which was unveiled in October 2023, is expected to facilitate such cross-border collaboration by enhancing economic connectivity between the two states through a series of pro-business initiatives.

In this way, it might be more useful to see the relationship between the two countries as more complementary than competitive. On a broader scale, the development of both economies also enhances the region’s overall appeal to investors, creating new growth opportunities and benefits across the entire ASEAN bloc.