Zeti Akhtar Aziz: The transformation of Labuan as an International
Business and Financial Centre
Speech by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the launch of
Labuan International Business and Financial Centre, Kuala Lumpur, 28 January 2008.
* * *
Distinguished Guests,
Ladies and Gentlemen,
It is with great pleasure that I welcome you to the launch of Labuan International Business
and Financial Centre. This decade has seen the Labuan Offshore Financial Centre
demonstrate its ability to adjust and reinvent itself in a rapidly changing international and
regional environment. This decade has also witnessed the robustness and resilience of the
Labuan Offshore Financial Centre as evidenced by its ability to continue to expand and
mature even during the most challenging of periods.
The global and regional market place however, continues to transform, bringing with it new
opportunities and challenges. To have the flexibility to benefit from the new opportunities and
to have the capacity to rise to the new emerging demands and challenges, continued
reassessments need to take place to rediscover new directions, build new strengths, new
comparative advantages and to define our new role in this ever changing and more
competitive market place. Today we are defining a new beginning for the Labuan Offshore
Financial Centre as it positions itself for a much larger role. Your presence here today to
share in this auspicious occasion is indeed appreciated.
In providing the full range of financial services, Labuan offers a total financial solution both in
both conventional and Islamic finance. Labuan also has the top-ranked financial institutions
that originate from more than 80 countries, including Islamic financial institutions that also
originate from different parts of the world. The Labuan Offshore Financial Centre has seen
steady expansion both in terms of the number of players, the diverse financial product
offering and the volume of activity.
Labuan today has also become a thriving regional business centre. It is making its mark as a
regional base for the oil and gas industry and as an entreport for the regional triangle of
Brunei-Sabah-Philippines. Its convenient location and excellent deep harbour are natural
advantages. Its modern airport which has been enhanced has also promoted increased
tourism. Being a duty free zone and a free port status has supported these activities. Growth
in these peripheral commercial and economic activity in Labuan has provided the potential
for Labuan to succeed as an international business and financial centre.
Labuan benefits from being centrally located in the Asia Pacific region, a region that has
been one of the fastest growing regions in the world. The Asian region is also among the
most open in the world in terms of international trade and investment. A more recent
phenomenon is the increased intra-regional trade and investment resulting in greater
regional economic integration. This has been reinforced further by increased investment
flows from the Middle East to Asia. In 2006, the Asia Pacific surpassed Europe as the
second largest region for investment from the Gulf Cooperative Council (GCC) with USD460
billion investment.
Despite the current financial upheavals that are occurring in the international financial
system, the underlying trends in the region including the cumulative regional demand,
greater regional integration and the increased appeal of the region as an investment
destination have continued to present immense opportunities for Labuan as a business and
financial centre.
Labuan is well positioned to tap these business opportunities. Key to the success of a
business and financial centre is its competitiveness, the convenience and cost effectiveness
of doing its business, its connectivity and the confidence in the centre. The Government of
Malaysia has been highly committed to ensuring that Labuan has all these elements.
Massive investment has been made to provide for the physical infrastructure and amenities
in Labuan. This includes the modern communication links, and the business and education
amenities to support Labuan's designated role as an international business and financial
centre. Recently, the Labuan International airport was enhanced further and open sky policy
has been adopted to facilitate enhanced access to the island. Also, improvements have been
made to the deep harbour facilities.
Increased access is however, not only limited to the physical access but also the easy
access to other financial markets. This requires the infrastructure that allows for the efficient
conduct of international financial transactions. Intermediaries need to be able to have easy
access to participate in other jurisdictions. To facilitate this and to promote the cost
competitiveness in Labuan, it is supported by a balanced regulatory regime that effectively
regulates the market while facilitating market development. LOFSA, the Labuan Offshore
Financial Services Authority was established ten years ago not only to put in place an
effective regulatory regime and to provide the supervisory oversight, but also to focus on
market development and facilitation. To further ensure a conducive business environment, it
is also supported by a robust legal framework including trust laws. While Labuan has in place
a business friendly tax regime it also has never been positioned as a low tax finance
repository. On the contrary it has leveraged on its strengths and unique advantages to meet
the market's need.
In going forward, a number of programs will be initiated. The Labuan International Business
and Financial Centre (IBFC) aspires to achieve the status of being the "gold standard for
holding company jurisdiction". This market has been identified as a further business driver for
Labuan IBFC. Malaysia's extensive tax treaty network with over 63 countries in addition to
the introduction of a more flexible tax framework supports this initiative. It was announced in
the 2008 Budget that Registered Labuan offshore companies now have the option to be
taxed under the Malaysian Income Tax Act 1967 or the Labuan Offshore Business Activity
Tax Act (LOBATA) 1990, thus enabling businesses to structure their transactions more
efficiently. The Labuan IBFC's competitiveness will be further enhanced through a revision of
the pricing structure pertaining to incorporation and maintenance fee charges. There will be
an annual reviews and prices will be revised in response to competitive market
developments.
The Labuan IBFC will also leverage on the national strategy of the Malaysian Islamic
Financial Centre by promoting Syariah-compliant trusts and foundation. These products will
complement Islamic financial products and services already available in Kuala Lumpur.
Efforts will also be taken to further develop Labuan's captive insurance business which has
enjoyed commendable growth over the years.
Conclusion
Ladies and Gentlemen,
The establishment of Labuan as an international offshore financial centre in 1990 was indeed
a bold step in its time. We are now seeing the payoffs from this initiative. With the
transformation of Labuan as an International Business and Financial Centre, our ambition will
be taken further. The new name signals that Labuan is ready to take on the much broader
and larger role. The new name also represents a commitment. A commitment for the future.
To demonstrate this commitment, the Government and the regulators have put in place the
supportive and enabling environment to promote a more connected and more cost effective
environment. Continued initiatives will also be taken to remove any impediments and
obstacles to a more efficient delivery system and to advance forward the Labuan IBFC.
The responsibility for ensuring the ambitions of the Labuan IBFC to be realised, is however,
a shared responsibility. The future will be for the competitive. The future will be for the cost
efficient. The future will be for the creative and innovative. The future will be for those that
are able to give good value propositions to their customers. Achieving this will therefore
involve the industry, the market professionals and participants. With these cumulative efforts,
we are confident Labuan IBFC will be another chapter of success, Insya Allah.
On that note, I thank you again for being here to witness the launching of the Labuan
International Business And Financial Centre.
Thank you.