SINGAPORE (Reuters) - Along a sun-splashed cobblestone street in central Singapore, coatless bankers with loosened ties quaff imported beers in a neighborhood of gaily painted shophouses called Duxton Hill.

A view of the main gambling floor of the Marina Bay Sands casino in Singapore in this April 27, 2010 file photo. The squeaky clean city of 5.1 million, nicknamed the "nanny state" for its propensity for micromanagement, is fast emerging as one of the world's hottest destinations for wealth - and the wealthy, who now have casinos and theme parks for play, and seaside mansions and penthouses to stay. The Monetary Authority of Singapore (MAS), the central bank, estimated overall assets under management in the city totalled a record S$1.2 trillion ($900 billion) at end-2009 - the most in Asia. Picture taken on April 27. To match Special Report WEALTH-SINGAPORE/ REUTERS/Pablo Sanchez/Files

The scene is almost European. And for long-time residents of this Southeast Asian city-state at the crossroads of some of the world’s busiest shipping lanes, a bit bemusing. Just a couple of years ago late-night revelers used to tumble out of ill-lit pubs and grimy, illicit brothels on Duxton Hill.

The transformation is a microcosm of the reinventions Singapore has undergone to keep an island with almost no resources and roughly the size of New York City competitive in a neighborhood of fast-growing emerging markets.

Boutique funds, advisory firms and brokerages are putting down roots in a revamped Duxton Hill, where opium and gambling dens run by Chinese triad gangs flourished last century.

Singapore has attracted hundreds of such firms in the past decade, lured by its light-touch registration requirements and relatively benign regulatory climate, even as Switzerland, the world’s leading wealth manager, gets tougher on bank secrecy.

“Our vision of this place is the Singapore version of London’s West End,” said Ed Peter, 47, a Swiss-born fund manager who has been buying up shophouses in Duxton Hill.

The neighborhood, in truth, bears little resemblance to London’s theater district, but it’s also a far cry from its shady past.

“It’s going upmarket. It’s cool. It’s funky,” said Peter, speaking effusively at his office in a three-storey building which housed an Elvis impersonator bar just two years ago. “You’ve got half the financial community here.”

Next door, the raunchy Aristocats pub closed shop a few months ago, providing space for Daun Consulting, a private equity adviser, to expand from its upper-level offices.

Peter, Deutsche Bank's DBKGn.DE head of asset management for Asia Pacific, Middle East and Africa before setting up his own firm in Singapore, manages about $650 million.

The squeaky clean city of 5.1 million, nicknamed the “nanny state” for its propensity for micromanagement, is fast emerging as one of the world’s hottest destinations for wealth -- and the wealthy, who now have casinos and theme parks for play, and seaside mansions and penthouses to stay.

The Monetary Authority of Singapore (MAS), the central bank, estimated overall assets under management in the city totaled a record S$1.2 trillion ($900 billion) at end-2009 -- the most in Asia and up about 40 percent from a year ago.

The Boston Consulting Group estimates private banks alone in Singapore manage about $500 billion in assets. The numbers are dwarfed by the estimated $2 trillion in private wealth managed in Switzerland, but the growth in Singapore is startling, wealth managers say.

“In the last 10-12 years I’ve seen Singapore really take a leadership role in changing the landscape of the wealth management industry,” says Deepak Sharma, chairman of Citi Private Bank.

“The regulatory environment in Singapore is one of the finest. It has one of the best standards in the world, but at the same time, it is consultative. It engages the industry.”

GO EAST YOUNG MAN

The big players, including Swiss giants UBS AG UBSN.VXUBS.N and Credit Suisse CSGN.VX who have a global stranglehold on private wealth management, are among those looking East. UBS, usually chary about its plans, says it will hire 400 new staffers in the Asia-Pacific region in the next few years.

Credit Suisse said net new assets from clients in Asia climbed to 11.5 billion Swiss francs ($11.78 billion) in 2009 from 8.4 billion in 2008. In the first six months of this year, net new assets came in at 7.1 billion Swiss francs.

Morgan Stanley MS.N plans to double its Asia headcount in wealth management over the next three years, largely focusing on the top end of the market.

JPMorgan Chase & Co JPM.N plans to triple its private banking assets in Asia over the next five years and plans to increase its headcount in the region by 40 percent over the current 400, a company spokesman in New York said this week.

“I believe Singapore will be the true private banking hub,” said Massimo Hilber, managing partner at private Swiss bank Marcuard who, like Peter, has an office on Duxton Hill. “All the big players are here, and the smaller players like us. You have to be here.”

Why Singapore?

First, assets held by Asia-Pacific’s high net worth individuals -- people owning more than $1 million excluding home, collectibles and durables -- surged 31 percent in 2009 to $9.7 trillion, overtaking Europe, according to CapGemini/Merrill Lynch.

Second, high net-worth individuals seeking high-return investments are turning to emerging markets. Accordingly, portfolios of such individuals included 22 percent in Asia-Pacific investments in 2009, up from 19 percent in 2008, and will soon overtake Europe, the CapGemini study says.

Many of these changes are focused on Singapore, which is at the crossroads of new wealth being created in China, India and Indonesia, some of the fastest growing economies in the world.

Singapore, which has the world's highest concentration of millionaires, is poised to grow its own economy 13-15 percent this year, possibly the fastest rate in the world. (Click link.reuters.com/kew25p for a graphic on millionaires)

Hong Kong is Asia’s other big financial center, but tends to focus on investment banking and deal-making in China rather than in the management of private wealth, bankers say.

“Hong Kong probably makes great business sense from an investment banker perspective, but I don’t think it has invested as much in itself in creating a place for families to live,” says Nick Pollard, Asia chief executive of private banker RBS Coutts.

“What Singapore has done very well is that it has almost created a whole infrastructure, not just a place to work, but also a place to live, a place to educate your children, a place to have great fun.”

FINE CITY

Stuffy. Staid. A “fine city” where every minor transgression attracts a fine. Where the sale of chewing gum is banned, and caning is prescribed for offences such as vandalism.

That was, and in some cases still is, Singapore.

But about five years ago, the government launched a concerted effort to change the image. Two casinos sprang up this year at a cost of about $11 billion in a city where gambling had been banned. It’s the only country in the world where the Formula One Grand Prix is held at night.

Singapore impeccably conducted its third F1 race on September 26, with Fernando Alonso winning on a balmy tropical night, driving his Ferrari through 61 laps around the city’s business district.

Top music acts including Mariah Carey, Sean Kingston, Chris Daughtry and Adam Lambert performed at different areas around the circuit. Some of the jet-setting crowd partied after the race at a newly opened rooftop bar at the $5.3 billion Marina Bay Sands casino resort, built by Las Vegas Sands LVS.N on reclaimed land around the mouth of the Singapore River.

Sentosa island, just offshore Singapore, is being redeveloped as a home for the seriously wealthy, with golf clubs, a sailing marina and sea-facing bungalows priced at $20 million and more. Genting Singapore's GEN.SI Resorts World casino and Universal Studios theme park opened in February, raking in S$503.5 million ($369.9 million) in the first three months.

“Rebranding Singapore as a global city and tourism hub fits in very well with its natural advantage, which is its strategic location in the center of Southeast Asia and good transportation links,” said Kit Wei Zheng, a Citigroup economist.

The aim is simple. Make the city more attractive for high-end foreign talent and wealth. Turn tourism into a money spinner. Focus on services as manufacturing shifts to lower-cost countries in the region. And make it easy for foreigners to work.

It is the latest incarnation of a city that emerged from British colonial rule in the 1960s as a gritty port town. Founding father Lee Kuan Yew and his People’s Action Party -- dressed in trademark white shirts and pants -- set out to scrub the city clean of corruption in all its manifestations.

By the 1970s, the port had become one of the world’s busiest and was soon complemented by the opening of top-ranked Changi international airport.

By the 1980s, Singapore was a regional manufacturing hub, particularly for electronics. Then it reinvented itself as a financial hub, and by the 1990s was one of the world’s leading centers for foreign exchange trading. A decade ago, the PAP patriarchs began building an education and bio-tech hub.

NUMBER 10

The common denominator for each Singapore incarnation has been to make it easy to do business. Be the fastest shipper, the most proficient manufacturer, the state with the least red tape.

For the Singapore financial industry, that comes from what they call “Number 10”. That’s 10 Shenton Way, not Downing Street but the address represents an institution similarly powerful -- the headquarters of MAS, the central bank.

“The regulatory environment is fair as opposed to arbitrary, random and difficult,” says Peter, the fund manager. “The rule of law is incredibly important. This is probably the best-managed country on the planet. It’s managed in a pro-active business-friendly way.”

Funds with less than 30 institutional investors can set up shop without a license from MAS. While MAS is set to introduce tighter rules next year, Singapore remains one of the easiest jurisdictions for funds to begin operations.

But as regulation is tightened in Europe and the United States following the 2008 financial crisis, and Switzerland responds to concerns about its bank secrecy laws, Singapore, too, has come under the spotlight.

In November, Singapore was taken off the OECD “grey list” of nations not implementing international disclosure standards, but has yet to sign a tax treaty with the United States.

“The business model for private bankers is going to change -- they can no longer tell customers just to put their money in Singapore and they will make sure no one ever knows about it,” said Edmund Leow, principal at law firm Baker & McKenzie, Wong & Leow.

“Instead, bankers are already marketing themselves as providing the best advice on how to legitimately minimize the amount of money their customers have to pay in tax.

“This is a global trend. I think Singapore is doing what most other countries are doing and shouldn’t be disadvantaged compared with other wealth management centers.”

RISKS OF REINVENTIONS

Singapore’s seismic reinventions were possible because the government nipped any political opposition in the bud and voters who have seen their per capita incomes grow seven-fold over the years were not inclined to grumble much.

But as Singapore undergoes its latest manifestation as a “global city”, with an ever-mounting proportion of foreign residents crowding the roads and competing for space and jobs, the government is having to soothe escalating criticism from the “heartland”, the sprawl of government housing blocks in the interior of the island where much of the citizenry lives.

Take, for example, Pipit Road, where a public housing compound is set amid factories and warehouses. People there live in tiny one-room apartments and are among the least well-off in Singapore.

Elderly residents shuffle along through corridors to the open area at the ground level, many with vacant stares.

“Look at my life. Do you think I have the time?”, said Seet Siew Buay, a 49-year-old woman when asked if she had seen the casino resorts or heard of the F1 race. “I have to look after them,” she said pointing to a 26-year-old son with learning and speech disabilities and an unemployed common-law husband.

They subsist on the S$300 given to the son each month in welfare, and Wong’s savings from his days as a carpenter. Singapore households earn an average income of S$7,440 a month, according to government statistics, but the bottom 20 percent earn only S$1,274.

There is some anger in the Pipit Road housing block at what is seen as the headlong rush to attract foreign investment and w wealth.

“The bloody government will get the money,” said a middle-aged man, who called himself Jack. “We will get nothing. But somehow we still vote for them.”

Having a super-rich pool of foreigners in the city poses the risk of accentuating social tensions. Already, housing prices are rising faster than in the rest of the region. Porsches, Jaguars and Ferraris flash by in the streets. The number of international schools in the city catering mostly to foreigners has risen five-fold in the last decade or so.

The number of overseas workers -- mostly for menial and blue collar jobs -- has also risen rapidly to around 1.8 million, a figure that also includes foreigners who have become permanent residents. That means one in three people in Singapore is a foreigner, one of the highest such proportions in the world outside the Middle East.

Prime Minister Lee Hsien Loong addressed those rising concerns in his August 9 National Day speech saying that without an inflow of workers to make up for “the shortage of workers and the “shortfall of babies in our population”, the economy and society would stagnate.

“I understand Singaporeans’ concerns about taking in so many foreign workers and immigrants. Some of us wonder: Will it change the ethos of our society? Will it mean more competition for us at work, or for our children in schools? Will the new arrivals strike roots here? Can they adjust to us, and we to them? These are valid concerns which we must address.”

One way to ensure some trickle-down effect from Singapore’s rapid growth is on public spending.

The government plans to spend $44 billion alone in the next decade on extending the commuter rail network to cope with a population projected to grow another 25 percent in the next few years following a 25 percent increase the past decade.

“There is a certain degree of discontent, but it is not brewing over and spilling out into unrest,” said Gerald Giam, an executive councilor of the opposition Workers Party. “It is something we need to keep a watch on.”

ST. JACK

Over at Duxton Hill, it’s getting to evening and executives are winding their way home, some hailing a cab, one or two clambering onto bicycles.

It’s still a ribald place around the edges. Some of the old bars still operate. In a few corners, one can almost imagine Jack Flowers, the protagonist of Paul Theroux’s novel “St. Jack” about Singapore in the 1960s, rifling his deck of porno cards in a seedy shophouse doorway and asking a tourist: “Can I get you anything? Anything at all you need?”

For Peter, the fund manager, Singapore has what he needs.

“This place works,” he says, strolling down the cobbled street on Duxton Hill. “Take a look at the airport. In how many countries in the world do you find your luggage on the carousel when you come out? In Geneva, you wait 25 minutes. In the US of A, you worry, will your bags show up?”

Peter, who worked in private banking in Europe and Hong Kong before setting up in Singapore in 2005, is also involved in a chain of wine shops in Singapore, and vineyards in Australia.

On Singapore’s social tensions, he becomes reflective and says: “It’s a new risk that’s worth watching. Is it a big risk? No.” Then reverting to his natural ebullience, he says: “This place has the potential to be Monaco and Luxembourg, and Geneva or even London.”

($1=.9759 Swiss Franc, $1 = 1.31 Singapore dollar )