EVALUATIONS WERE ALSO ANOTHER RECURRENT FEATURE IN 2018 FOR THE CENTRE. SIMILAR TO OTHER JURISDICTIONS INCLUDING INTERNATIONAL FINANCIAL CENTRES, LABUAN IBFC WAS ASSESSED BY THE ORGANISATION OF ECONOMIC CO-OPERATION AND DEVELOPMENT (OECD), ON ITS COMPLIANCE TO INTERNATIONAL TAX STANDARDS AND CONFORMITY TO FISCAL ACCEPTABLE PRACTICES. SIGNIFICANT EFFORTS WERE MADE BY THE AUTHORITY TO COLLABORATE CLOSELY WITH THE MINISTRY OF FINANCE, RELEVANT AGENCIES AND THE INDUSTRY TO ENSURE THE CENTRE'S RESPONSES AND FEEDBACK MEET THE ASSESSORS' EXPECTATIONS.
I am pleased to share that Labuan IBFC had performed well for the two major assessments by the OECD:
- For the Peer Review Assessment on tax transparencies and the effectiveness of exchange of information, Malaysia, including Labuan was rated 'Largely Compliant'.
- As regards the Forum on Harmful Tax Practices, after dialogues with the OECD since 2017 and rolling out the policy changes, Labuan's rating was raised to 'Not Harmful'.
These bear testaments to Labuan IBFC's continual commitment to ensure regulatory framework and practices are reflective of the international standards' requirements and best practices.
The Authority has continued with its prudential upscaling to ensure the market's ongoing stability and soundness. Of note were the harmonisation and enhancements made to the corporate governance requirements for the banking and insurance institutions. This has been followed by capital regulations proposed for the insurance industry to be in tandem with international norms; a risk-based capital for (re) insurance business and a more refined capital measurement for captives.
Strong supervision is key to ensure that new regulations achieve their intended results. For a host market such as Labuan IBFC, the Authority believes in being practical in its enforcement. Leveraging on close ties with key regulatory authorities as part of its home-host supervisory arrangement, the Authority entered into a Memorandum of Understanding (MoU) with Seychelles Financial Services Authority in October 2018, and another with China Banking and Insurance Regulatory Commission in March 2019. Both MoUs are expected to foster greater cooperation especially for cross-border supervisory monitoring.
Aside from prudential supervision, emphasis on effective antimoney laundering and combating the financing of terrorism (AML/CFT) regulations and monitoring remains as the Centre upholds its commitment, together with Malaysia, as a member of the Financial Action Task Force. The Authority will continue to be vigilant so that pre-emptive measures can be undertaken to mitigate any emerging money laundering or terrorism financing risks.
To ensure the Centre progresses to become the market of choice for the region, business and developmental initiatives continue to be implemented to attract new business and to opportunise demands of the emerging market. These include the Authority's announcement on Innovative Financial Services (IFS) to welcome FinTech waves onto the Centre's shores. Instead of a sandbox approach as preferred by other jurisdictions, IFS startups are openly permitted subject to meeting the minimum regulatory requirements. In addition to new products and services, business guides were also issued on insurance offerings, such as Labuan captive business and insurance/underwriting managers, as well as on sukuk issuances. I believe that this promotes market awareness on existing offerings, boosts demand and spurs business growth.
Despite the volatile global dynamics, I am pleased to highlight that the Centre remained resilient with expanding business. The 2018 results showed that the Centre recorded another year of strong performance with growth across key sectors. The double-digit growth in new company incorporation continue to reflect the Centre's strategic location in the middle of Asia's expanding economies. The gross premiums of the insurance sector grew to a six-year high, while the banking business maintained its growth momentum.
With the Authority's promotion of IFS, there have been an influx of players that offer FinTech propositions ranging from digital currency trading, digital tokens to exchanges in 2018.
While the IFS are encouraged, the Authority has continued to ensure that the businesses are governed by suitable regulations to ensure professional conduct, transparency and that customers' interests are never compromised.
As at December 2018, Labuan IBFC has 6,031 active companies which included more than 500 Labuan licensed financial institutions across different sectors. As the second largest GDP contributing sector for the Island, these businesses which currently employ about 6,000 people, have certainly cushioned the economic slowdown during the oil and gas sector's slump. In fact, new substantial requirements which has come into effect in 2019 will see Labuan entities contributing more to the Island's economy in terms of local employment and spending. This will certainly ensure the Island's economic development grows in tandem with Labuan IBFC's business expansion.
As the businesses of Labuan IBFC grow with increasing complexity, especially with the emerging tech-based ventures, there is a need to ensure a steady supply of professional and skilled talents with relevant business competencies. Bearing this in mind, the Authority has focused on human capital upscaling initiatives comprising technical and softskill programmes for both the market and our staff. The Authority has also successfully implemented structured talent management and development for succession planning purposes. These initiatives will continuously be driven together with the industry.
As part of the Island's key stakeholders, Labuan FSA has continued to host corporate social responsibility (CSR) programmes that involve the Labuan community and other relevant agencies. To foster closer links with the locals, the Authority organised various activities throughout the year which included donation drives; community and charitable events; educational and awards programmes as well as community-based events related to health and wellbeing awareness.
Moving forward, the growth trend of the Asia Pacific market will continue to present vast opportunities for Labuan IBFC to serve as a platform for businesses to expand in this region. Labuan FSA will ensure that the Labuan IBFC's strong reputation as a well-regulated and business-friendly hub is preserved through the adoption of international standards, strong supervisory regime and practical regulations. In addition, the Authority will also continue to adapt to changing business demands, technological advancements and business developments from the international market. It is paramount that the Centre remains viable and continues to support the economic wellbeing of the island of Labuan and Malaysia.
On behalf of the members of the Authority, I wish to take this opportunity to put on record our appreciation to the advisory groups of Labuan FSA, government departments as well as the industry for their invaluable support in the development of Labuan IBFC. Also, my gratitude and appreciation to Tan Sri Muhammad bin Ibrahim, former Chairman, and Tan Sri Ranjit Ajit Singh, Dato' Khodijah Abdullah dan Dato' Zahrah Abd Wahab Fenner, former Authority members, for their guidance during their tenure with the Authority, particularly during the transformation phase. I would like to welcome Mr. Adnan Zaylani bin Mohamad Zahid and Mr. Hazim bin Jamaluddin as new members of the Authority. To the staff of Labuan FSA, thank you for your hardwork for the year and I hope to acquire the same or even greater dedication from everyone as we move into a challenging 2019.
To see the full article click here
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.