areas of economic potential and fulfilling infrastructure needs is a difficult but not insurmountable task. we may refer to the story of our country ’ s development for inspiration. within six decades, our economy moved from being a commodity - dependent nation to one that is successfully transformed. we subsequently elevated ourselves to where we are today, an economy that is open, diversified and competitive. this is only possible because of continuous investments in infrastructure over many decades. rationalising tax incentives to be in line with international practices on the global regulatory front, as we had witnessed, the unfolding of the global financial crisis revealed the significant vulnerability of international financial markets to market dislocations. calls for greater regulatory harmonisation and the adoption of international best practices have gathered speed, blurring the distinction between onshore and offshore regulatory requirements. offshore financial centres which remain mired in the old model and thinking are set to become part of a sunset industry. there have also been significant advancements with respect to international taxation practices. authorities are now more proactive in seeking to mitigate the distortionary effects of harmful tax competition on the allocation of resources and its negative implications on national tax bases. malaysia, until early this year, has been an observer of the oecd ’ s inclusive framework on base erosion profit shifting ( beps ). since january 2017, we have agreed to become a participating member in the inclusive framework. this will allow malaysia to participate in the beps related work on equal footing with other oecd and g20 countries. we will also be able to provide direct inputs to shape the content of the beps related standards. in addition to that, work has commenced on reviewing respective jurisdictions ’ preferential tax regimes against the standards outlined, to combat harmful tax practices. the standar4, which forms one of the four beps minimum standards, will require authorities to step up on transparency and substance rules for geographically - mobile activities, such as financial services. it seeks, for one, to prohibit the shifting away of income into preferential tax regimes where businesses have little or no economic activity. such international developments will directly influence ibfc ’ s business model going forward. the world that we live in, since the creation of offshore labuan in the 1990s, has drastically changed. what was relevant then is no more relevant now. we have no choice but to change with it. it is an opportune time for us to review of the current tax framework for labuan. the purpose of this review

events. it is alarming that the number of reported weather - related natural disasters has increased threefold since the 1960s. the effects of these events have been devastating – economic activities have been disrupted ; large resources have been rechannelled ; and vulnerable segments of societies have been the most affected. the el nino phenomenon for example, affected many developing countries that are dependent upon agriculture and fishing, particularly those bordering the pacific ocean. last year, it left millions of people hungry and in need of food aid ; water shortages across southeast asia ; and higher food prices globally. closer to home, thousands have been displaced after the northern state of penang was hit by the worst flood in more than 20 years. these are indications that despite progress made in regulating global emissions of greenhouse gases over the past decades, we need to do more to mitigate the adverse effects of climate change. moving on to the second challenge – growing inequality. globally, the benefits of economic growth have been uneven. in reality, not all members of society have fully benefitted from the growth. while some have gained, many have been dislocated – feeling that they have been left behind. today, global inequality is at its highest since the 19th century. recent studies show that the richest 1 % now owns half of the world ’ s wealth combined. in stark comparison, 70 % of the 1 / 5 bis central bankers'speeches world ’ s adult population holds only 3 % of the global wealth. globally, continued widening of the inequality gap would be detrimental to economic growth and social progress in the long - run. inequality is a threat to growth if it leads to those in the low income segment suffering poor health and low productivity ; and to struggle in obtaining quality education. governments worldwide are already taking steps to address this concern – but more collective effort is needed to make any significant progress – in closing the gap between the rich and the poor. the third challenge is the retreat in globalisation. increasingly inward - looking political sentiment poses serious threat to trade liberalisation – which has formed the global economy ’ s growth engine since the 1980s. two decades ago, trade liberalisation enabled developing countries such as china and india to achieve exceptional growth, and in the process, unshackling millions from deep poverty. the calls for trade protectionism that are rife in the advanced economies today is therefore a major concern. if left unaddressed, the upsurge in protectionism and insular policies may lead to a reverse in globalisation,