Singapore - Singapore aims to be Asia's gold trading hub

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.

Kenneth Lim

The Business Times

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