HONG KONG CARRIER GETS TAX BREAKS, WILL MOVE TO SINGAPORE

HONG KONG CARRIER GETS TAX BREAKS, WILL MOVE TO SINGAPORE

International Maritime Carriers, a local bulk operator, is making Singapore its operational base thanks to a new tax incentive granted by the government there.

It is the first foreign line to be granted approved international shipping status by Singapore.The status permits taxes to be waived on vessels managed from Singapore regardless of their flag of registry. There is no tax on Singapore-flagged ships.

"Previously we were liable to tax on non-Singapore-flagged ships because their management was deemed to be done from Singapore," J.K. Seth, an IMC director, said Monday. "With this new approved status, those ships are also now free of tax."

The exemptions cover revenues from ship operations outside Singapore, dividends from approved subsidiaries and affiliates and withholding mortgage interest on ship purchases.

The line, a unit of IMC Holdings Ltd., has gradually shifted approximately 40 personnel from Hong Kong to Singapore in anticipation of the tax breaks.

"All our operational staff are there, while other headquarters functions remain in Hong Kong," Mr. Seth said.

The line's parent company was re-registered as a Bermuda entity in 1989 as a hedge against 1997, when China regains sovereign over Hong Kong. It also was listed on the Singapore stock exchange.

Frank Tsao, founder and chairman of IMC, said the tax breaks will allow the company to make Singapore a "nucleus" for shipping operations in Southeast Asia, Australia and New Zealand.

"We have long been interested in Singapore as an operational headquarters due to its proximity to our primary markets, ship-repair facilities and well- developed infrastructure." But until the tax law was changed, there was a

financial disincentive, he said.

IMC operates 17 bulk carriers under its own name and others under various private companies for a total of about 40. It's thought that at least 30 will be managed from Singapore.

As reported previously, the shipping line has ordered four bulk carriers

from Sumitomo Corp. of Japan.

For Singapore, the new tax incentives should mean "substantial" economic benefits, said Yeo Seng Teck, chief executive of the government's Trade Development Board.

"Additional tonnage will attract more ancillary services like marine surveyance and insurance, ship financing and ship repair," he said last week at the announcement of the IMC accord. Singapore is already a significant bunker port and repair facility.

A number of other foreign and domestic Singapore lines are being evaluated for approval under the tax program, Mr. Yeo said.

He declined to identify them, but acknowledged that flag-carrier Neptune Orient Lines Ltd. is a likely contender.

IMC also has interests in Malaysia and Thailand, two of the region's fastest-growing countries, through Mr. Tsao's private companies. Mr. Tsao

himself has forsaken his Hong Kong passport for Malaysian citizenship and his son, Frederick, has adopted Thai nationality.

The company hopes to develop Malaysia into a management center to take part in its industrialization, the younger Mr. Tsao said last week.

Its latest Malaysian undertaking is Pintar Engineering, a joint venture with Japan's Hitachi-Zosen Engineering & Construction, that was formally launched last week.

The venture will focus on plant design, procurement and construction as well as maintenance.

One likely approach is cooperation with Malaysia Shipyard & Engineering Sdn. Bhd., in which IMC holds a 28.5 percent stake.

Mr. Tsao senior is also a founder and current deputy chairman of Malaysian International Shipping Corp. Bhd.