ntent on consolidating its reputation as the "Switzerland of the East," Singapore is considering measures allowing banks to offer their customers secret, numbered accounts.
According to Western diplomats and banking sources, the government is expected to announce the measures in a budget message at the end of this month or in early March. The annual budget message sets out the government's economic policy for the next fiscal year beginning April 1.
For the past several months, government planners have been studying proposals to allow numbered accounts, and foreign banking experts have been approached about how the accounts operate, the sources said. However, the government will not confirm whether the secret accounts will indeed be introduced, saying the issue has yet to be decided formally.
While such a measure might attract more money to Singapore's already well-developed and highly secretive offshore banking system, diplomats said, it risks offending this tiny city-state's neighbors, notably Indonesia. In addition, the U.S. Internal Revenue Service is known to be unhappy about the prospect of even more banking secrecy here, fearing it will attract tax evaders.
IRS agents in Singapore refused to comment publicly, but a well-informed economist noted that the service "has been after Singapore for years" to provide information on IRS suspects.
Their efforts have made little headway, however, and introduction of numbered accounts would probably doom attempts to conclude a U.S.-Singaporean tax treaty, the economist said.
"The IRS people complain about bank secrecy in general, but this the numbered accounts will drive them bonkers," he said.
However, the main reason for Singapore's reluctance to introduce numbered accounts up to now has been the attitude of its populous neighbor, Indonesia, diplomats said.
Provisions for the secret accounts were written into Singapore's Banking Act of 1970, but authorities have not implemented them. One reason for the delay, diplomats said, has been a celebrated court case over $35 million deposited in Singapore by an official of Indonesia's state-owned oil company, Pertamina.
Achmad Thahir, who earned a salary of about $9,000 a year as a close aid to the former president-director of Pertamina, Gen. Ibnu Sutowo, made a series of hefty deposits before his death in 1976. The dispute arose when his wife tried to withdraw some of the money. The Indonesian oil company then stepped in, arguing that the money was acquired through corruption and should be returned.
The case remains unresolved.
Singapore was caught in an embarrassing position, diplomats said. On one hand, it did not want to tarnish its reputation as the Switzerland of the East by allowing the seizure of Thahir's funds, and on the other it wanted to maintain good relations with Indonesia.
Indonesian authorities took the opportunity of the court case to renew a request for an extradition treaty with Singapore. But the Singaporeans said they would conclude one only if it did not cover "economic crimes," diplomats said. The authorities here made it clear they would not agree to any treaty that required them to open up Singapore's banks.
In the view of one well-informed economist, the Singaporeans wanted to let the Thahir case die down before going ahead with numbered bank accounts.
"They think the idea of numbered bank accounts will enhance the attractiveness of Singapore as a place to put money," the economist said. However, some experts feel it would have a marginal effect, since only about 15 percent of the approximately $85 million in Singapore's officially designated offshore currency units belongs to individuals. The rest is deposited by financial institutions or corporations.
Moreover, with existing bank secrecy laws, numbered accounts are not really needed, some officials believe. They say the effect is mainly psychological, to make a depositor feel safer.
The prospect that the measure would make Singapore a haven for illegally acquired money seems not to worry authorities much.
"I guess wealthy crooks don't bother them," a foreign economist said. "They don't commit street crime, and they're certainly not communists. But what the government probably hasn't thought about is the drug thing."
Some critics of the plan think numbered accounts will attract traffickers who deal in heroin from Southeast Asia's Golden Triangle, a particular irony given Singapore's tough narcotics laws.