Trafigura move tests Singapore’s fat-cat fatigue
By Wayne Arnold
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Trafigura’s move to Singapore could test Singapore’s fat-cat fatigue. The commodities trader is moving its HQ from Geneva to Singapore, where its CFO Pierre Lorinet will join Facebook founder Eduardo Saverin and a stream of bankers drawn by its low taxes and proximity to growing Asian markets. But a warm welcome may depend on new arrivals’ ability to create local jobs.
Hanging a shingle in Singapore has some obvious advantages, starting with its low corporate tax rate of 17 percent. Trafigura should be able to take advantage of tax incentives that cut its rate to 5 percent or lower. Like Switzerland, Singapore has no capital gains tax and allows companies to exempt income earned offshore. That could be particularly useful to a company like Trafigura whose $122 billion in business passes through 81 offices in 54 countries.
Personally, Lorinet and the 30-odd executives moving with him can look forward to their income tax rate going down from a maximum 51 percent in Geneva to below 20 percent.
Given Singapore’s growing role in global commodities trade, the only wonder is what took Trafigura so long. Situated along one of the world’s busiest shipping lanes, Singapore connects China with the Gulf, Africa and Indonesia. It is the world’s second-busiest port after Shanghai and Asia’s largest oil hub. Singapore’s international trade in commodities rose 46 percent last year to over $1 trillion, which explains why other traders including Anglo-American, BHP and Cargill have moved staff to Singapore.
The more companies move to Singapore, the more it will ask for something in return. Singapore’s attempts to lure well-heeled entrepreneurs, scientists and private bankers have helped push the population up by 65% in just 20 years. A third of its workforce is foreign. Angry with rising prices and income gaps, voters in last year’s elections handed the ruling People’s Action Party its lowest returns since independence in 1965. It has responded by raising the bar for foreigners setting up companies, and promised to lower limits on how many foreigners companies can employ.
Trafigura boasts that 90 percent of its employees are locals. That’s a statistic it should trumpet loudly as it takes up its new residence.