Malaysia seeks to attract Western commodity traders as new hub

Commodity houses Mercuria and Cargill have already set small desks in Kuala Lumpur, two sources said, and others are also studying the possibility.

"We have already attracted 20 or so companies in the past 12-18 months. Some are already trading, some are setting up," said Zainal Amanshah, chief executive officer for Invest KL, a government corporation that promotes the country as a regional destination for multinationals and global commodity traders.

The incentives include preferential tax treatment, under which trading companies who set up desks only pay three percent of their profit to the government.

Malaysia is also backing the construction of an oil storage facility with capacity of up to 2 million cubic metres in Pengerang, in the south of the country.

"Part of the attractiveness is also the more flexible labour law in Malaysia and the lower cost of living," a source at a trading firm already operating in the country said.

Amanshah said Cargill, which already has some food processing activities in Malaysia, has agreed to set up a hub in Kuala Lumpur for trading soft commodities, starting with cocoa and potentially expanding to others.

Malaysia is the biggest cocoa processor in southeast Asia.