Established in 1990, the Labuan International Business and Financial Centre (IBFC) is based on the island of Labuan off the Borneo coast.
Located between China and India, its proximity to regional capitals and the financial centres of Hong Kong and Singapore, along with the regional growth story, has recently seen it being promoted as an international business and financial centre. Businesses based in Labuan IBFC focus on three core sectors — banking, reinsurance, wealth management and financial services.
The Labuan banking sector saw an asset growth of 7.6 per cent to $51 billion in 2016, with total loans outstanding at $31.8 billion and non-residents accounting for 62.4 per cent of total loans. Borrowers from ASEAN countries made up the largest share, with total outstanding loans of $22.8 billion.
Transportation, storage and communications were the major business lines funded by Labuan banks, contributing about 18 per cent of total loans. While the sector’s profit before tax moderated to $551.5 million, balance sheets remained healthy with further improvements in asset quality and adequate capital buffers. In the area of wealth management, 2016 saw a 13.2 per cent increase in the establishment of Labuan foundations to 188, with 78.2 per cent of them being of Asia-Pacific origin.
These foundations were established for philanthropic purposes, private wealth preservation and estate planning. Labuan’s growth In an interaction with DEALSTREETASIA, Abdullah notes that Labuan IBFC has 51 banks, most of them international; around 200 insurance companies and a number of reinsurers; as well as various financial service vendors, intermediaries and brokers catering to their business needs.
With its financial infrastructure geared towards wholesale financial business activities rather than retail business, Labuan concentrates on catering to institutional clients. Abdullah explains: “Lately we are seeing a lot of offers. We are big at leasing; we have over 300 leasing companies, and the total value of assets that are leased through these companies is $52.5 billion. These leasing companies cater to aviation and marine sectors, generally because of the downturn in the oil sector.” He adds, “The number of leasing transactions relating to oil and gas has fluctuated for a while. But generally, it is a big business for us in Labuan.“ The number of Labuan leasing companies stood at 383 in 2016. However, this sector was affected by the global trend of low oil prices, which saw a 20 per cent decline in new leasing companies compared to 2015, with the total value of assets leased declining by 2.3 per cent to $50.6 billion.
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Malaysia’s Labuan special economic zone will grow in importance as an Asia Pacific mid-shore financial centre helped by the growth wave sweeping Southeast Asia, according to Labuan Financial Services Authority deputy director Danial Mah Abdullah