Labuan IBFC could expand Malaysia’s Islamic fintech

The govt is ready to collaborate with relevant stakeholders to realise the goal, Tengku Zafrul says

by ANIS HAZIM / Pic by TMR GRAPHIC

THE Labuan International Business and Financial Centre (Labuan IBFC) can become a platform to expand Malaysia’s capabilities in digital Islamic finance and the government is prepared to collaborate with relevant stakeholders to realise the goal, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said.

He said the government is ready to broaden digital Islamic finance as an alternative to conventional financial technology (fintech) especially as the economy begins to recover and gain momentum in 2022.

“Taking advantage of Malaysia’s striving dual financial system, my aspiration is for Labuan IBFC to provide not only conventional offerings, but also a full suite of Shariah-compliant products and structures to meet the demands and preferences of global investors,” he said at the commemorative coin launching in conjunction with the 25th anniversary of Labuan Financial Services Authority (Labuan FSA), an integrated regulator of the Labuan IBFC under the Ministry of Finance.

According to him, Labuan IBFC’s labour force contributed more than 60% of its GDP 2020.

He also noted that Labuan IBFC has contributed close to RM5 billion to the nation, making it the largest contributor to Labuan’s total GDP.

“I am pleased to see that Asia Pacific and the Far East account for 70% of the businesses at Labuan IBFC.

“This demonstrates that it has successfully evolved into an outward-looking centre that facilitates international business and is well regarded around the world,” he stated.

Currently, Labuan IBFC is the federal state’s largest white-collar employer, accounting for 85% of total employment, employing over 6,000 people from the local community, neighbouring states and the rest of Malaysia.

For its integrated regulator, Labuan FSA saw an increase by more than 10 times from 80 entities to 850 international and regional financial players in the IBFC since it was set up in 1996.

“I encourage the Labuan FSA to continue facilitating financial innovations and attracting more fintech companies to serve the Asian market with the goal of eventually becoming Asia’s leading digital financial hub,” said Tengku Zafrul.

He also applauds Labuan FSA’s achievement that has adhered to high international standards.

“Labuan FSA has implemented all necessary controls and safeguards to ensure that only legitimate businesses could be established and that only legal transactions take place,” he added.

The government also praised Labuan’s approach which is both pragmatic and market focused, striking a good balance between risk-based supervisory surveillance and a modern legal framework with a tax-efficient regime.

“These are its strengths and unique advantages in meeting the needs of international sophisticated investors, as recognised by organisations such as the International Monetary Fund and the Organisation for Economic Cooperation and Development (OECD),” he added.

As part of the commitment to OECD compliance, minimum substance requirements are imposed on entities operating from Labuan IBFC which are expected to generate more socio-economic benefits for Labuan.

To commemorate Labuan FSA’s 25th years, Tengku Zafrul launched the Labuan FSA 25th anniversary commemorative coin as FSA establishment as the regulatory and supervisory agency of the Labuan IBFC.

Issued by Bank Negara Malaysia, the coin incorporates a unique feature that will be the first of its kind in Malaysia and will be minted in silver and nordic gold.

The coin also features a diamond-cut 3D surface that depicts the Labuan island surrounded by the blue waters of the South China Sea.

The commemorative coin will be issued in limited quantity in February 2022.