By Noor Soraya Mohd Jamal
The slowdown in Europe has affected numerous economies in the world, but officials say the impact on the Labuan International Business and Financial Center (Labuan IBFC) is minimal.
“We have also seen how Asian jurisdictions have benefitted from the resilient growth of regional economies. Indeed, Asian equity, bond, and foreign exchange markets in Asian financial markets including Labuan, have demonstrated resilience,” Second Finance Minister, Datuk Seri Ahmad Husni Hanadzlah told Bernama here Saturday.
The minister said another factor that reduced the sensitivity of Asian markets to European financial pressures was that Asian economies undertook structural reforms in their banking systems and capital markets.
“These reforms have given the Asian the depth and breadth to absorb external shocks. We have also learnt to cope with capital flows in and out of our systems better,” he said.
Ahmad Husni said Labuan witnessed a steady growth of 8.0 per cent in the number of company incorporations in 2011 and anticipated further growth with the increasing infrastructure development that is expected to take place in Asia, especially Asean.
A number of milestones have been achieved last year, which included the development of Global Incentive for Trading Program (GIFT) for the oil and gas (O&G) traders to advance Labuan as a regional hub for O&G trading activities in Asia Pacific.
Currently, the Labuan licensed financial institutions and the supporting service providers created about 2,000 direct employment in Labuan.
“These are talents with specific skill sets in the fields of accounting, law and taxation.
“There is also substantial indirect employment of locals arising from the spillover of economic activities to the real sectors,” Ahmad Husni said, adding that with the introduction of co-location in 2009, there are others being employed by Labuan entities in Kuala Lumpur too.
The Labuan IBFC also has received substantial amount of investment from the federal government since its establishment as an IBFC.
Infrastructure projects to complement the services of the IBFC such as the upgrading of airport, expansion of road networks, establishment of international school, modern tele-communication facilities have benefitted the locals.
As a result, Labuan has become an important center, especially for the O&G industry, with participation not only by Petronas but also international O&G companies.
Ahmad Husni said although the government has continuously introduced measures to liberalize the domestic financial services industry, it wouldn’t impact Labuan’s advantage.
The Labuan IBFC remains relevant as it is part of the Malaysian financial system and operational flexibility for Labuan financial institutions has also been provided.
“For example the policies on co-location of insurance and insurance related companies provide the flexibility for them to establish their operational and management offices onshore, which has encouraged the transfer of international practices to the domestic institutions.
“In the financial center blueprint, several recommendations have been identified for the Labuan IBFC to complement the growth of the Malaysian financial system in the area of enhancing financial inter-linkages and Islamic finance,” he said.
Moving forward, Ahmad Husni said Labuan IBFC could play an important role to facilitate businesses to invest into Malaysia as we are seeing greater financial and economic integration with our regional neighbors in Asean and Asia Pacific, especially China and India,
Moreover, the Asean Infrastructure Fund is in Labuan.
The AIF, which was set up on Malaysia’s suggestion, had the consensus from the ministerial meeting that the US2.5 million fund be registered under the laws of the Labuan IBFC, as well as the appointment of Malaysia as chairman of the AIF Board of Directors.
The Asean Finance Ministers unanimously accepted the Asian Development Bank as the fund’s administrator, which recommended that the fund is to be domiciled in the Labuan IBFC.
ADB cited Labuan’s conducive ecosystem, including its strategic location within the rapidly growing nations, advanced financing mechanism and robust regulatory framework as some of the major factors for its recommendation.