Malaysia: Labuan IBFC To Focus On Niche Areas In 2017; Expects To Benefit From The Global Movement Towards Transparency
Last Updated: 16 March 2017

The midshore centre will focus on growing the niches to drive sustainable growth

Kuala Lumpur, 1 March 2017 – Labuan International Business and Financial Centre (Labuan IBFC) is expected to intensify its efforts on developing niche sectors such as leasing, captive insurance, commodity trading and wealth management in 2017 as part of its strategic plan to develop the jurisdiction.

Labuan IBFC Inc CEO, Danial Mah Abdullah said: "We believe the changes in the way cross-border investment and trade are conducted due to demands for greater transparency is a business enabler for Labuan IBFC."

He added that as a substance enabling jurisdiction that adheres to the international protocols on transparency and exchange of information, as well as the fact that Labuan IBFC is part of the larger global Malaysian offering, allows it to tap into these strengths to power the next stage of its evolution.

"We will be focusing on developing the niches with high growth potential and these sectors have been showing a positive upward trend in driving the midshore centre's development in the recent years.

"These sectors are leasing, captive insurance, commodity trading and wealth management. For instance, our Q3 2016 numbers showed that there was an increase of 14% in commodity trading companies operating in Labuan IBFC and about 13.8% increase in the establishment of private and charitable foundations," said the CEO.

Danial added that Labuan IBFC continues to show sustainable growth with more than 13,000 companies incorporated last year. This reflects the continued growth of the midshore centre despite the uncertainties in the global economy.

"We hope this growth trajectory will continue with the inflow of investors, global corporations and reputable service providers to the centre, especially from markets such as China," said Danial.

He added: "Businesses operating in Asia or out of the region can still find opportunities, if they take advantage of integration initiatives such as the ASEAN Economic Community. Labuan IBFC could be the ideal entry point for these businesses into the burgeoning market of ASEAN for substance creation".

Business Overview (as at Q3 2016):

Company Incorporation

A total of 13,077 companies (6.4% increase y-o-y) were incorporated in Labuan IBFC.

Wealth management

Labuan IBFC's comprehensive range of wealth management solutions continued to draw interest from regional high-net-worth individuals (HNWIs) with a total of 181 foundations established in the midshore centre.

As reported by Capgemini's World Wealth Report, Asia Pacific continues to be a driving force for global wealth. Riding on this wave, Labuan IBFC believes that this sector will continue to experience a double-digit growth.

Leasing

The demand for leasing business has grown steadily, with the total number of leasing companies increasing to 386 and the total assets leased amounting to USD52.5 billion. This signifies the continued need for large and heavy equipment such as container ships, aircraft and oil rigs in the Asian region.

Captive Insurance

The increasing interest among Asian corporates to establish captives as a risk management strategy also presents immense opportunities in offering risk solutions that complement onshore activities. A total of 39 captives were established in Labuan IBFC as at October 2016.

Commodity Trading

A key target business area is commodity trading in the form of Labuan International Trading Companies (LITC). The numbers of LITC grew by 16.3% to a total of 50 companies.

More information on the growth and performance of the various industries in Labuan IBFC can be obtained from Labuan Financial Services Authority's 2016 Annual Report which will be released in May and will provide a holistic overview of the jurisdiction's performance.

Commitment to transparency and substance

For Labuan IBFC, the need to conform to the international regulatory requirements has always been key to our principles and aims of ensuring the sanctity of the jurisdiction itself. The unrelenting demand for transparency provides an edge for Labuan as we have always and will continue to maintain a high regulatory and supervisory standard alongside our commitment to transparency.

Adoption of CRS

In December 2016, the Parliament of Malaysia gazetted two Income Tax Orders: the Automatic Exchange of Financial Account Information and the Convention on Mutual Administrative Assistance in Tax Matters. These Gazette Orders apply to Malaysia as a whole including Labuan IBFC, and effectively implements the Automatic Exchange of Information (AEOI) and the Common Reporting Standard (CRS) in Labuan IBFC.

Finance Bill 2016 (post budget)

The requirement for transparency and the need to conform to initiatives such as CRS and Base Erosion Shifting (BEPS) will soon be the new normal for all future financial activities.

In October 2016, the Malaysian Parliament passed the Finance Bill 2016 which adopts OECD's BEPS 13 recommendations on transfer pricing documentation that are prepared by multinational companies. Rules and guidelines on the preparation and submission of country-by-country reporting will soon be introduced by Malaysia.

It is expected that more action points will be adopted in due course, as part of Malaysia's overall commitment to these standards

Anti-Money Laundering Act 2001 (AMLA 2001)

It is worth noting that as a federal territory of Malaysia, the AMLA requirements are also imposed in Labuan IBFC pursuant to provisions of the AMLA 2001 as well, ensuring the highest level of compliance to the anti-money laundering and terrorism financing requirements.

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