Singapore aims to be Asia's gold trading
hub
Thursday, Mar 15, 2012
The Business Times
By Kenneth Lim
SINGAPORE - Trade agency International Enterprise (IE)
Singapore hopes to expand the country's share of the global
precious metals market at least five-fold within 10 years and
create an Asia-Pacific industry hub, its senior executives said
yesterday.
'In Asia there really isn't a hub for the physical
trading of gold. . . Our aspiration is really to be like London and
Zurich, to serve not just Asia but the rest of the world as well,'
said IE Singapore assistant chief executive Kathy Lai at a press
briefing.
Singapore has about 2 per cent share of the global gold trading
market in terms of tonnage, according to IE Singapore.
The agency wants to grow that share to 10 to 15 per cent in the
next five to 10 years, IE Singapore director of trade services and
policy Gina Lim said.
It aims to capitalise on growing demand for precious metals as
global economic uncertainties spur interest in an alternative asset
class and the desire to keep those assets close to home. Along the
way, Singapore could benefit from 'good-quality jobs' in related
industries and boosts to economic segments such as financial
services and logistics, Ms Lai said.
Industry group World Gold Council said global demand for gold
rose 0.4 per cent to 4,067.1 tonnes, worth about US$205.5 billion,
in 2011, with investment demand, particularly from Asia, driving
the growth.
Ms Lai's comments came as Singapore said it would exempt
investment-grade precious metals from the 7 per cent Goods and
Services Tax (GST) beginning in October 2012.
That move would bring tax treatment of investment-grade precious
metals in line with other major markets, such as London, Zurich and
Hong Kong. Investors, including retail traders, gold
exchange-traded funds and private banking clients, will then be
able to trade and store their assets in Singapore without having to
incur additional tax.
Transactions now are typically done offshore, such as in Europe
or within the confines of the Singapore Freeport free-trade zone,
to avoid the GST charge.
'IE proposed that we should correct this anomaly,' Ms Lai
said.
She said the GST exemption will 'open our door for the party',
and getting people to come to the party will be the next step.
This won't be without its challenges.
Singapore's competitors, Dubai and Hong Kong, are already
established centres for key Asian markets.
India, which accounts for just over half of the demand in Asia,
does a large part of its trading through Dubai.
But 'few people see Dubai as a financial centre of the same
stature as, say, Singapore and Hong Kong, and I think given its
political context also it's not seen as a business environment that
is completely secure for the long term,' Ms Lai said.
Hong Kong gets the bulk of China's trades, but its close ties
with the mainland are also a source of concern.
'Many investors do view Hong Kong as part of China,' Ms Lai
said. 'Policy changes are a little bit outside the kind of
predictability that we have in Singapore, so it's not as 'neutral',
so to speak, as Singapore.'
Industry players have generally welcomed Singapore's decision to
scrap the GST levy.
Ng Cheng Thye, head of precious metals Asia for Standard Bank,
said many clients have been trying to bring some of their gold
assets back to Asia from Europe after the 2008 global financial
crisis.
'Singapore is actually an ideal location' in the region because
of its infrastructure and proximity, and the GST exemption clears a
major hurdle for investors, he said.
He said that not having GST will also encourage refineries to
set up shop in Singapore, which is key to the development of a
viable hub.
'It's a very important piece of the puzzle,' he said.
However, Singapore does not have a gold refiner at the moment,
and Ms Lai said there is no new refinery in the pipeline for
Singapore to the best of her knowledge.
A key executive for a leading refinery company with plants in
the region said his company was studying the viability of setting
up in Singapore, but the business case was not obvious.
Refineries that already operate in the region may not have need
for another plant in such close proximity, and Singapore's level of
demand is still small at the moment, he said.
'In Singapore itself, we don't manufacture jewellery, we don't
have goldmines and so on, so that's something we have to study,'
the executive said.
This article was first published in The Business Times.
http://business.asiaone.com/Business/News/My%2BMoney/Story/A1Story20120315-333671.html