Labuan IBFC remains resilient amid challenging conditions


THE Labuan International Business and Financial Centre (Labuan IBFC) remains an attractive market for wholesale financial intermediation in the region with over 800 licensed financial institutions currently operating.

The Covid-19 pandemic and the introduction of economic substance regulation saw the number of non-licensed companies moderated by about 30% in 2020. Coupled with higher deregistration, the total number of active Labuan companies stood at 5,802.

The special economic zone reported encouraging growth in investment banking, reinsurance, fund management, digital financial services and leasing in 2020.

In the wholesale banking segment, global market uncertainty in 2020 had affected Labuan banks’ financing and investments as the total loan portfolio declined by 2.7% to US$25 billion (RM102.99 billion).

“This is particularly in resident loans due to the non-deductibility requirement imposed on resident borrowers under the revised Labuan tax framework.

“On a positive note, the Labuan market is seeing increasing potential in the digital banking space where four out of the eight new banking licences granted in 2020 are conducting business via a digital platform,” the Labuan Financial Services Authority (Labuan FSA) stated in a statement yesterday. Labuan FSA regulates the Labuan IBFC.

Its insurance segment remained strong with underwriting premiums increasing by 6.7% to US$1.6 billion, with Labuan Captive remaining a popular risk management tool with total gross premiums of 8.7% growth in 2020.

The triggering domino effect of economic slowdown and imposition of travel restrictions had knock-on effects on the Labuan aviation leasing business, with total leased industrial assets declining 9.9% to US$40.7 billion.

Meanwhile, the stabilisation in global oil prices coupled with increasing oil and gas activities, saw the sector of the leasing market grow 196.5% to US$1.5 billion in 2020.

In terms of digital financial services (DFS), the number of DFS establishments doubled with 30 new DFS licences being granted.

Labuan IBFC remains cautiously optimistic of its expected performance for the year, with the imminent economic recovery, both globally and within Asia.

Labuan FSA has chartered a three-year roadmap for Labuan IBFC to enhance the centre’s sustainability and relevancy moving forward.

The strategic plan comprises four key priorities of expanding and strengthening Labuan IBFC’s financial ecosystem, regulatory and supervisory modernisation, visibility enhancement and branding strategy, and enhancing organisational reputation and delivery efficiencies.

Labuan FSA is committed to intensifying business growth by realigning policies and guidelines in tandem with new market development, including enhancing business in the digital space.