Questions: Panama sustainability, offshore incorporation, Thai banking, housing

March 26, 2010
Vancouver, BC

I’m headed to Panama shortly where I look forward to meeting up with my friends and colleagues in the Atlas 400 group. We’re going to an exclusive deep-sea fishing resort for a few days, and afterwards I plan on taking up some unfinished business in Panama.

One of the things on my agenda is to revisit the sustainable community concept that I began discussing a few months ago. This is something that I really want to do, for personal reasons… I’ve always wanted a place that doesn’t rely on ‘the system’ for food, water, power, and security.

In my travels around the world, though, I’ve not yet found a community that provides this, at least up to my own standards… it’s possible that one exists, I just haven’t seen it yet.

I have a detailed plan in mind that will start small and allow the community to grow as the market dictates; my biggest challenge is time. At the moment, I have several other business and investment obligations on my plate, and I’m hesitant to commit to another major undertaking.

As I said, though, for personal reasons I would really like to develop this community, and I’ll be making a final decision once I meet with my team of architects and engineers in Panama over the next 2-weeks. Stay tuned.

On to this week’s questions:

First of all, Tom asks– “I’m exploring Hong Kong at the moment and am wondering if there are any subscribers in HK who would be willing to talk with me about the residency process. I’ll be here until April 3, then off to Singapore where I will be conducting similar due diligence.”

If anyone is in the area and willing to meet with Tom, please drop us a line and my assistant will forward your contact information to him.

William asks– “I live in the US and so does my business partner. We have a start up internet business hosted in the Netherlands. We have been trying to find a way to incorporate and get a bank account offshore. I have had many problems while researching this. Any suggestions?”

First of all, it’s a fantastic idea to plant a flag overseas when you incorporate a business, particularly one that’s internet-based. A properly-structured foreign corporation provides a way to legally defer tax payments (similar to an IRA) plus you have substantially reduced liability.

There is no “one size fits all” solution though. The most important thing you can do is talk to a qualified tax attorney in your home country– that means someone who understands international tax law, as well as the benefits of individual offshore tax jurisdictions. (this is a rare species)

It’s absolutely critical that you do this because no one in an offshore jurisdiction really understands the tax and structural implications that affect you.

Get the right advice and it will pay huge dividends in the future. If you need a referral, drop us a line. I have tax attorney contacts in the US and the UK.

Jack asks, “Simon, do you have any suggestions for an American who would like to open a bank account in Thailand?”

Yes. Don’t open a bank account in Thailand. It’s a beautiful country, but not a place with a trustworthy financial system. Thailand is highly corrupt and immature as a banking center… and there are too many solid options in the region– Hong Kong, Singapore, and Labuan are great alternatives.

If you want to have a bank account in denominated in Thai Baht, you can easily do this at a number of other banks in Asia, such as HSBC in Hong Kong.

Finally, Mark asks, “Simon, you said the price of housing in Malaysia is $1400 per square meter– if I did my math right, this works out to $128 per sq ft. This is the low end of new housing in the States. So, from that perspective it doesn’t seem that inexpensive. Your thoughts?”

First of all, just to clear things up, when I said the price of housing in Malaysia is $1400 per square meter, I’m referring to the average cost of high quality, expat-level housing (not raw land) in tier-1 neighborhoods.

With few exceptions, this is lower than comparable costs in the US, Canada, and Europe. To be honest, Detroit is probably one of the cheapest places on earth to buy property right now… probably cheaper than Malaysia. A speculator may be able to make a fortune in Detroit– but with tremendous risk.

“Low prices” don’t always mean “great value.” And despite the low prices, there are a few things that really scare me about US real estate.

First, continued government intervention makes me want to run away like a scalded dog. The government is unable to ‘fix’ anything other than elections, and their continued intervention in the housing and mortgage markets will only lengthen the pain in the sector.

Second, state and local governments are broke, and as a source of revenue, I’m convinced they’ll be looking to increase property taxes. In the hardest hit areas, I expect tax rates to more than triple.

Third, in the medium-term, I also expect prices to keep falling… stagnate at best. If you consider the supply/demand fundamentals, there is still way too much supply on the market, and not enough households or available credit to fill the void. In my assessment, this is not the bottom.

To me, while there are some bubbles forming on the continent, parts of Asia demonstrate significant value as long-term property investments, currency diversification, and residency flags. I don’t see those benefits in the US at the moment, particularly given the risks.

That’s it for this week; have a great weekend and we’ll talk again on Monday.