Labuan International Business and Financial Centre (LIBFC) has said it remained 'resilient' in the face of challenges in the global market through the course of 2019, as the Centre published its Market Report for the year.
Labuan IBFC reported its growth in key business sectors was "maintained" and witnessed a surge in innovative business ventures - in tandem with Labuan IBFC's shift towards more digital-based financial business. As the Centre unveiled its Market Report 2019, it also marks the Labuan IBFC entering its third decade of operation since 1990.
New company incorporations continued to grow albeit at a slower place with 981 new incorporations in 2019. Companies hailing from SE Asia continued to show positive trending over the last three years with a significant increase of 33.3% growth in 2019.
Labuan IBFC is the second largest captive market in Asia with 52 captives operating in the Centre. Increasingly Asian companies are embracing the use of captive as alternative risk management."
The positive trend in company incorporations was in tandem with the increase in Labuan trust companies, with five new licences issued in 2019, bringing the total number of trust companies to 61.
Labuan banking industry remained financially strong to support their businesses in the region. Labuan's strategic position in the Asian region sharing similar time zone with major cities and its broad based financial market players have given the Centre the edge to continue providing effective financial intermediation in Asia. This is reflected by the 80.9% of the banks' total financing being channeled to the region. Profitability of the industry grew by 26.9% to $635bn.
Labuan insurance industry showed a modest topline growth but higher profitability performance for 2019. Total gross premiums were transacted at $1.5bn with 89% of the total premiums originating from the Asian market. The industry's profitability grew by 43.7% to $190.5m mainly due to improved underwriting performance and better cost management.
Labuan IBFC is the second largest captive market in Asia with 52 captives operating in the Centre. Increasingly Asian companies are embracing the use of captive as alternative risk management. Labuan IBFC will continue to tap on this potential with suitable captive structures supported by a strong pool of intermediaries and insurers.
Labuan IBFC continued to attract digital financial services (DFS) setups with its facilitative regulation with 28 new licences being approved. A total of 34 DFS provide digital-based services including insurtech, payment services, and digital exchange in Labuan IBFC.
The Labuan wealth management business continued to trend upward with registration of new foundations increasing by 36.8%, bringing the total number of active foundations to 192. Majority of these are vehicles for private wealth management.
The 30th anniversary signifies the success of the Centre's long standing journey, and a pivotal time to embark on new direction for the next phase of development and growth.
In 2019, one of the watershed events was the rollout of the new Labuan IBFC tax framework, which had in many ways changed the Labuan IBFC's business landscape. The salient features of the new framework included removal of the RM20,000 tax option, removal of ring-fencing elements and the introduction of substance requirements. The substance requirements will further enhance the Labuan IBFC's market players contributions towards the island's economic growth via increasing their business presence.
The Labuan Financial Services Authority (Labuan FSA) said it remains optimistic that the Centre would continue to grow in strength and expand its regional prominence. This is made possible by industry players' business agility coupled with robust capabilities and capacities that allow them to realise their strategies while at the same time adapt to new business norms.
While 2019 had been a year of sustained growth for Labuan IBFC, it had been a challenging start for 2020 as global markets being impacted by the Covid-19 pandemic and distressed oil prices. Considering the uncertainties looming in the international business scene, Labuan FSA has been closely monitoring the situation and taken pre-emptive measures to maintain stability and sustainability of the industry.
A set of regulatory reliefs which provided administrative flexibilities and financial reliefs was given to Labuan entities to cushion the impact and minimize disruption to business operations arising from the covid-19 outbreak. Labuan FSA will continue monitoring the situation to ensure that the Centre's business operations and the delivery of services remain uninterrupted.
LIBFC said further reliefs will be considered as the condition evolves and based on engagements with the industry players. During these challenging times, the Labuan entities including the financial institutions which operate in multiple markets within the Asia region continue to be able to provide services and business facilitation to their clients.