Singapore's Low Taxes Lure Trafigura

Singapore has enticed Trafigura, one of the world's biggest commodities trading houses, to move its legal headquarters from Switzerland to the Asian city state, highlighting the attractions of its low-tax regime and proximity to China.

Trafigura's relocation is a big boost for Singapore as it challenges the supremacy of Switzerland as the world's commodities trading hub and fends off competition from other financial centres, such as Shanghai, Hong Kong, and Dubai.

After concluding negotiations with the Singaporean authorities, Trafigura will use its locally incorporated company, Trafigura Pte, as the main umbrella for its trading division.

Pierre Lorinet, chief financial officer, is to move to Singapore, joining 150 traders in the city. But the company will retain its larger team of traders in Geneva.

"Trafigura Pte would become the main trading entity for the group," Mr Lorinet said. "We have been very centralised in Europe, but the world is evolving and the centre of consumption is in Asia and we want to be closer to our customers."

Trafigura is not alone: BHP Billiton, the world's largest mining company by market capitalisation, is to close its coal and iron ore marketing hub in the Dutch city of The Hague and relocate senior traders to Singapore this year. Anglo American also plans to open a new trading hub in Singapore.

Executives at other trading houses said they were hiring staff and booking more business through Singapore, attracted by its favourable tax regime, lower costs, and the growing demand for commodities across Asia.

Singapore offers trading houses a tax rate as low as 5 per cent, compared to 10 per cent in the Swiss hubs of Geneva and Zug, and 24 per cent cent in London.

Executives and Singaporean officials said the low tax rate was not the only reason for the city's success in attracting business. Commodities executives said that the city state offered a friendly business environment, a strong rule of law compared to elsewhere in Asia, lower costs for back-office staff than in Switzerland, and a growing pool of talent.

The world's largest traders had sales in Singapore of $1tr in 2011, nearly double 2010, according to government estimates. The island-state had previously hoped to reach the key $1tr level by 2015. The number of people working directly in the commodities trading sector in Singapore climbed last year to about 12,000, up 17 per cent from 2010, and 40 per cent over the past five years.

Singapore has for years been a big hub for oil trading, but its importance is now growing in metals, minerals, and agricultural commodities.