KUCHING: Labuan International Business and Financial Centre (Labuan IBFC), the Asia Pacific’s Midshore International Business and Financial Centre 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 chief exective officer (CEO) Danial Mah Abdullah in a statement said he believed changes in the way cross-border investment and trade are conducted due to demands for greater transparency is a business enabler for Labuan IBFC.
“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,” he said.
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, those factors allow it to tap into its strengths to power the next stage of its evolution.
“For instance, our third quarter of 2016 (3Q16) numbers showed that there was an increase of 14 per cent in commodity trading companies operating in Labuan IBFC and about 13.8 per cent increase in the establishment of private and charitable foundations,” Danial said.
Danial added Labuan IBFC continued to show sustainable growth with more than 13,000 companies incorporated last year.
He believed the sustainable growth reflected 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,” Danial opined.
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 (AEC).
Danial believed the Labuan IBFC could be the ideal entry point for those businesses tapping into the burgeoning market of the Association of Southeast Asia Nations (Asean) for substance creation.
Elaborating further, Labuan IBFC said as at 3Q16, there was a total of 13,077 companies which were incorporated in Labuan IBFC, represented an increase of 6.4 per cent year-on-year (y-o-y)
Additionally, it said 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.
Citing a report from the Capgemini’s World Wealth Report, Labuan IBFC observed that Asia Pacific continued to be a driving force for global wealth.
As such, Labuan IBFC believed that the wealth management sector will continue to experience a double-digit growth, riding on the wave.
Moreover, Labuan IBFC noted 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 US$52.5 billion.
The financial centre believed the increased number of leasing companies signified the continued need for large and heavy equipment such as container ships, aircraft and oil rigs in the Asian region.
Furthermore, Labuan IBFC said the increasing interest among Asian corporates to establish captives as a risk management strategy also presented immense opportunities in offering risk solutions that complement onshore activities.
The financial centre observed that a total of 39 captives were established in Labuan IBFC as at October 2016.
Having said that, Labuan IBFC pointed out that a key target business area is commodity trading in the form of Labuan International Trading Companies (LITC).
The financial centre noted the numbers of LITC grew by 16.3 per cent 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,” it said.
Meanwhile, Labuan IBFC stressed that the need to conform to the international regulatory requirements has always been key to its principles and aims of ensuring the sanctity of the jurisdiction itself.
The financial centre noted the unrelenting demand for transparency provides an edge for Labuan as the financial centre has always and will continue to maintain a high regulatory and supervisory standard alongside its commitment to transparency.
Labuan IBFC recalled that 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.
It explained that those Gazette Orders applied 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.
Apart from that, Labuan IBFC said;”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 the Organisation for Economic Co-operation and Development (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.
“It is worth noting that as a federal territory of Malaysia, the Anti-Money Laundering Act (AMLA) requirements are also imposed in Labuan IBFC pursuant to provisions of the Anti-Money Laundering Act 2001 (AMLA 2001) as well, ensuring the highest level of compliance to the anti-money laundering and terrorism financing requirements,” Labuan IBFC said.