Officiating Address by YB Senator Tengku Datuk Seri Utama Zafrul Aziz Minister Of Finance Malaysia, at the Launch of Labuan IBFC’s Strategic Roadmap 2022-2026
LAUNCH OF LABUAN IBFC’S STRATEGIC ROADMAP 2022-2026
16th June 2022
Officiating Address By
YB Senator Tengku Datuk Seri Utama Zafrul Aziz
Minister Of Finance Malaysia
Bismillahhirahmannirrahim
Yang Berbahagia Datuk Seri Asri Hamidon,
Secretary General of the Treasury
Yang Berbahagia Datuk Siti Zainab Omar,
Chairman, Labuan Financial Services Authority
Yang Berbahagia Datuk Seri Dr. Awang Adek Hussin,
Chairman, Securities Commision Malaysia
Yang Berusaha Encik Nik Mohamed Din Nik Musa,
Director General, Labuan Financial Services Authority
Your Excellency Ambassadors and High Commissioners
Members of the Media
Ladies and Gentlemen
Assalammualaikum Warahmatullahi Wabarakatuh and a very good afternoon.
Yang Berbahagia Datuk Seri Asri Hamidon,
Secretary General of the Treasury
Yang Berbahagia Datuk Siti Zainab Omar,
Chairman, Labuan Financial Services Authority
Yang Berbahagia Datuk Seri Dr. Awang Adek Hussin,
Chairman, Securities Commision Malaysia
Yang Berusaha Encik Nik Mohamed Din Nik Musa,
Director General, Labuan Financial Services Authority
Your Excellency Ambassadors and High Commissioners
Members of the Media
Ladies and Gentlemen
Assalammualaikum Warahmatullahi Wabarakatuh and a very good afternoon.
INTRODUCTION
1. First and foremost, I’d like to thank the Labuan Financial Services Authority (or Labuan FSA) for inviting me to launch the Labuan International Business and Financial Centre’s (Labuan IBFC) Strategic Roadmap 2022-2026.
2. This Strategic Roadmap represents another milestone for Labuan FSA in charting the course for the Centre’s business expansion and regulatory upscaling over the next five years.
1. First and foremost, I’d like to thank the Labuan Financial Services Authority (or Labuan FSA) for inviting me to launch the Labuan International Business and Financial Centre’s (Labuan IBFC) Strategic Roadmap 2022-2026.
2. This Strategic Roadmap represents another milestone for Labuan FSA in charting the course for the Centre’s business expansion and regulatory upscaling over the next five years.
MALAYSIA’S ECONOMY REMAINS STEADFAST
Ladies and Gentlemen,
3. Malaysia’s GDP growth for the first quarter this year rebounded to 5 per cent compared to 3.6 per cent in the fourth quarter of last year. This growth is mainly attributed by the surge and sustained expansion in domestic demand as well as further improvement in the labour market.
4. To further support the progress we have made, we have remained persistent in our efforts to build on the momentum of our economic recovery and strengthen our resilience to face future challenges posed by the changing landscape of the global economy.
5. I wish to highlight that Malaysia’s commitment to inclusive and sustainable socio-economic development has been charted carefully via national plans and policies which include, among others, the Twelfth Malaysia Plan, the National Investment Aspirations, and MyDIGITAL. Of course, it is the annual budget that gives life to all these aspirations.
Ladies and Gentlemen,
3. Malaysia’s GDP growth for the first quarter this year rebounded to 5 per cent compared to 3.6 per cent in the fourth quarter of last year. This growth is mainly attributed by the surge and sustained expansion in domestic demand as well as further improvement in the labour market.
4. To further support the progress we have made, we have remained persistent in our efforts to build on the momentum of our economic recovery and strengthen our resilience to face future challenges posed by the changing landscape of the global economy.
5. I wish to highlight that Malaysia’s commitment to inclusive and sustainable socio-economic development has been charted carefully via national plans and policies which include, among others, the Twelfth Malaysia Plan, the National Investment Aspirations, and MyDIGITAL. Of course, it is the annual budget that gives life to all these aspirations.
ASPIRATIONS FOR LABUAN IBFC
Ladies and Gentlemen,
6. The Government has always hoped that Labuan IBFC to become the nation’s international financial and business centre, facilitating Asia’s business and investment flows.
7. After more than three decades of operation, Labuan IBFC has evolved and grown into an appealing, dynamic, and resilient financial centre. A centre that has stood strong in the face of various challenges and external shocks, emerging as one of Asia’s preferred investment and business hubs.
8. In the face of changing market externalities, Labuan IBFC has been agile to adapt in order to keep the Centre and its offerings relevant and attractive to international investors. This is clearly reflected in how Labuan IBFC has expanded rapidly in terms of market size and business complexity.
9. Labuan’s financial market has grown more than tenfold since its inception, from 80 regulated entities now we have 880 international and regional financial players today.
10. As a truly internationalised and prominent Centre, Labuan IBFC is now home to over 5,100 active companies from 125 countries, including some well-known financial institutions. What Labuan has to offer is unquestionably more exciting, cutting edge, and relevant for today’s global financial markets.
Ladies and Gentlemen,
6. The Government has always hoped that Labuan IBFC to become the nation’s international financial and business centre, facilitating Asia’s business and investment flows.
7. After more than three decades of operation, Labuan IBFC has evolved and grown into an appealing, dynamic, and resilient financial centre. A centre that has stood strong in the face of various challenges and external shocks, emerging as one of Asia’s preferred investment and business hubs.
8. In the face of changing market externalities, Labuan IBFC has been agile to adapt in order to keep the Centre and its offerings relevant and attractive to international investors. This is clearly reflected in how Labuan IBFC has expanded rapidly in terms of market size and business complexity.
9. Labuan’s financial market has grown more than tenfold since its inception, from 80 regulated entities now we have 880 international and regional financial players today.
10. As a truly internationalised and prominent Centre, Labuan IBFC is now home to over 5,100 active companies from 125 countries, including some well-known financial institutions. What Labuan has to offer is unquestionably more exciting, cutting edge, and relevant for today’s global financial markets.
THE STRENGTHS OF LABUAN
Ladies and Gentlemen,
11. Labuan’s rising prominence can be attributed to:
12. Of the over 880 licensed Labuan financial institutions, 296 licensed entities represent the more matured sectors. So this comprises of 67 banks and investment banks amassing a total banking asset of 55.8 billion (US) dollars, and 229 insurers and insurance intermediaries with total premiums underwritten worth approximately 2 billion (US) dollars as at end of last year.
13. To keep Labuan IBFC ahead of the curve, the Centre has nurtured and promoted the development of innovative business solutions not only as a game changer to move away from traditional business offerings, but also as a means of building the Centre’s unique offerings and branding within Asia.
14. Labuan captive, too, has grown in prominence in the global insurance space. It has become the Centre’s second largest insurance segment, with gross premiums of 569 million (US) dollars, more than 60 per cent of which came from international markets.
15. The Centre now has a diverse set of Fintech-related offerings as well, ranging from simple digital trading platforms for fiat and virtual currencies to more complex digital banking and digital tokenisation activities.
16. Leveraging on its dual financial system, Labuan IBFC’s shariah-compliant sector has also proven its ability to expand and innovate. Labuan IBFC grew two more Islamic banks in 2000 to 18 as at end 2021, with total Islamic banking assets of 1.9 billion (US) dollars. Similar trends can be seen in the takaful sector, which contributed 117.4 million (US) dollars.
17. These developments have been made possible by our commitment to establishing a strong legislative and regulatory framework that adheres to international standards.
18. The recent enhancements made at the March Parliament sitting by the Ministry of Finance to three Labuan IBFC laws - namely, Labuan Companies Act 1990, Labuan Financial Services and Securities Act 2010, and Labuan Islamic Financial Services and Securities Act 2010 - bode well for the Centre’s reputation in upholding international regulatory and tax standards, and maintaining its positive assessments, InsyaAllah.
11. Labuan’s rising prominence can be attributed to:
- its strategic location, which allows it to serve the economies of both South East Asia and Far East Asia;
- a modern and transparent legal framework supplemented by business-facilitative regulations; as well as
- continuous Government support.
12. Of the over 880 licensed Labuan financial institutions, 296 licensed entities represent the more matured sectors. So this comprises of 67 banks and investment banks amassing a total banking asset of 55.8 billion (US) dollars, and 229 insurers and insurance intermediaries with total premiums underwritten worth approximately 2 billion (US) dollars as at end of last year.
13. To keep Labuan IBFC ahead of the curve, the Centre has nurtured and promoted the development of innovative business solutions not only as a game changer to move away from traditional business offerings, but also as a means of building the Centre’s unique offerings and branding within Asia.
14. Labuan captive, too, has grown in prominence in the global insurance space. It has become the Centre’s second largest insurance segment, with gross premiums of 569 million (US) dollars, more than 60 per cent of which came from international markets.
15. The Centre now has a diverse set of Fintech-related offerings as well, ranging from simple digital trading platforms for fiat and virtual currencies to more complex digital banking and digital tokenisation activities.
16. Leveraging on its dual financial system, Labuan IBFC’s shariah-compliant sector has also proven its ability to expand and innovate. Labuan IBFC grew two more Islamic banks in 2000 to 18 as at end 2021, with total Islamic banking assets of 1.9 billion (US) dollars. Similar trends can be seen in the takaful sector, which contributed 117.4 million (US) dollars.
17. These developments have been made possible by our commitment to establishing a strong legislative and regulatory framework that adheres to international standards.
18. The recent enhancements made at the March Parliament sitting by the Ministry of Finance to three Labuan IBFC laws - namely, Labuan Companies Act 1990, Labuan Financial Services and Securities Act 2010, and Labuan Islamic Financial Services and Securities Act 2010 - bode well for the Centre’s reputation in upholding international regulatory and tax standards, and maintaining its positive assessments, InsyaAllah.
LABUAN’S SHARIAH COMPLIANT STANCE
LABUAN IBFC’s ROLE IN FINANCIAL INDUSTRY
Ladies and Gentlemen,
19. The Labuan Islamic Financial Services and Securities Act 2010 establishes a comprehensive set of laws and regulations governing Islamic financial services.
20. To improve Shariah permissibility, Labuan’s Shariah Supervisory Committee issued a pronouncement in February this year on the minimum compliance criteria for offering Labuan Islamic digital-based solutions.
21. The strategic goal is to attract more digital asset and fintech players to Labuan, as well as to carve out a niche in the digital Islamic finance space. This will be unique in the world and will provide an alternative platform to the conventional digital finance landscape.
22. Labuan aspires to be the gateway for Islamic Digital Asset Centre, or IDAC, which focuses on “out-out” business. I’ve been informed that Labuan is on track to launch its first Islamic/ESG Digital Exchange in the third quarter of this year, potentially making it one of the world’s first Islamic digital exchanges.
23. With Malaysia’s strong dual financial system, I believe Labuan can capitalise on Malaysia’s renowned position as one of the world’s largest sukuk fund management centres.
NEW VISION FOR LABUAN IBFC
Ladies and Gentlemen,
24. The MOF’s long-term goal is for Labuan IBFC to ride and adapt to changing market dynamics and financial developments around the world.
25. The Centre must build on its track record of success, and take its competitiveness to the next level through business innovations and forward-thinking strategies.
26. To that end, today I am delighted to launch the Labuan IBFC Strategic Roadmap 2022 – 2026 which will chart the next chapter of growth and achievements in the history of Labuan IBFC. The Strategic Roadmap is based on the Centre’s current strengths and the expansion of the business regime with potential growth in planning Labuan’s future.
27. Market sustainability is a key tenet adopted in the Strategic Roadmap, enabled by digital innovation and fuelled by Labuan’s comprehensive business structures to create the Centre’s unique value propositions to international investors.
28. The Strategic Roadmap will focus on:
29. The Roadmap also aims to strengthen Labuan IBFC’s role in complementing Malaysia’s financial markets, particularly in filling demand gaps within the nation’s financial ecosystem. This will be reinforced by specific strategic initiatives spearheaded by Labuan FSA and the industry.
30. To achieve this goal, an integrated 5-pronged strategic thrust has been developed to focus on emerging growth sectors as well as regulatory and supervisory upscaling, namely:
19. The Labuan Islamic Financial Services and Securities Act 2010 establishes a comprehensive set of laws and regulations governing Islamic financial services.
20. To improve Shariah permissibility, Labuan’s Shariah Supervisory Committee issued a pronouncement in February this year on the minimum compliance criteria for offering Labuan Islamic digital-based solutions.
21. The strategic goal is to attract more digital asset and fintech players to Labuan, as well as to carve out a niche in the digital Islamic finance space. This will be unique in the world and will provide an alternative platform to the conventional digital finance landscape.
22. Labuan aspires to be the gateway for Islamic Digital Asset Centre, or IDAC, which focuses on “out-out” business. I’ve been informed that Labuan is on track to launch its first Islamic/ESG Digital Exchange in the third quarter of this year, potentially making it one of the world’s first Islamic digital exchanges.
23. With Malaysia’s strong dual financial system, I believe Labuan can capitalise on Malaysia’s renowned position as one of the world’s largest sukuk fund management centres.
NEW VISION FOR LABUAN IBFC
Ladies and Gentlemen,
24. The MOF’s long-term goal is for Labuan IBFC to ride and adapt to changing market dynamics and financial developments around the world.
25. The Centre must build on its track record of success, and take its competitiveness to the next level through business innovations and forward-thinking strategies.
26. To that end, today I am delighted to launch the Labuan IBFC Strategic Roadmap 2022 – 2026 which will chart the next chapter of growth and achievements in the history of Labuan IBFC. The Strategic Roadmap is based on the Centre’s current strengths and the expansion of the business regime with potential growth in planning Labuan’s future.
27. Market sustainability is a key tenet adopted in the Strategic Roadmap, enabled by digital innovation and fuelled by Labuan’s comprehensive business structures to create the Centre’s unique value propositions to international investors.
28. The Strategic Roadmap will focus on:
- Firstly, digitalisation to diversify into innovative businesses;
- Secondly, promoting unique self-insurance (captives) structures and revitalising niche sectors, including shariah-compliant businesses;
- Thirdly, promoting the island’s economic vibrancy through intra-Labuan business synergy; and
- Finally, in tandem with the changing international business landscape, modernise the regulatory and supervisory approach.
29. The Roadmap also aims to strengthen Labuan IBFC’s role in complementing Malaysia’s financial markets, particularly in filling demand gaps within the nation’s financial ecosystem. This will be reinforced by specific strategic initiatives spearheaded by Labuan FSA and the industry.
30. To achieve this goal, an integrated 5-pronged strategic thrust has been developed to focus on emerging growth sectors as well as regulatory and supervisory upscaling, namely:
- Thrust 1: Increase market innovations and vibrancy by revitalising niche and prospective business sectors through digital solutions and meeting the needs of underserved and untapped markets;
- Thrust 2: Promote market facilitation and visibility by improving the market ecosystem, promoting intra-Labuan market synergies, and strengthening strategic ties with key stakeholders to increase the visibility of Labuan IBFC;
- Thrust 3: Enhance Labuan IBFC’s complementary roles to Malaysia by providing additional financial capacity and further strengthening Malaysia’s international ties with Asia;
- Thrust 4: Implement relevant and proportionate regulations through on-going upscaling of the prudential regulatory and legal framework in accordance with international standards. This will address any emerging risks and maintain the Centre’s stability and soundness; and
- Thrust 5: Undertake pre-emptive supervision and enforcement by using digital technology to modernise supervisory approaches to timely monitor and address market concerns.
LABUAN IBFC’s ROLE IN FINANCIAL INDUSTRY
Ladies and Gentlemen,
31. Based on those roadmap and strategic thrusts, we want Labuan to play a larger role as a Shariah-compliant fund raising and investment hub in the global digital space.
32. I’ve been told that this is already happening, and is expected to become more common in the near future. Aside from the current players, I understand that there are others in the pipeline who want to be part of this exciting, emerging sub-sector.
33. Another emerging niche targeted by the Labuan IBFC is insurance and takaful captives, capitalising on Labuan’s recognition as the best international jurisdiction for captives at a prestigious European review award 2021.
34. Global corporations from Europe and West Asia looking to expand into East Asian markets must be encouraged to establish captives in Labuan.
35. A special feature for insurance and takaful underwriting is Labuan’s Protective Cell Company (or PCC), which legally allows the creation of separate business cells within one legal entity. This feature ensures fund separation and transparency, which is a governance aspect in high demand.
36. It is not solely the responsibility of the Labuan FSA or the MOF to ensure the implementation of the Labuan IBFC Strategic Roadmap 2022-2026. In fact, it is a joint responsibility of the Government, related agencies, industry, and all other stakeholders.
37. In Labuan IBFC’s next phase of development, its growth prospects must be pursued more vigorously, and the industry must play a bigger role in driving these strategies with Labuan FSA. As a regulator, Labuan FSA should continue implementing and tracking the Strategic Roadmap’s initiatives to maintain and boost investor confidence.
38. As Labuan IBFC is linked to Malaysia’s financial system, the Strategic Roadmap will strengthen the Centre’s linkages and complement other strategic plans like the Financial Sector Blueprint 2022-2026.
CLOSING REMARKS
Ladies and Gentlemen,
39. Before I end, I want to emphasise that Labuan FSA is an important part of Malaysia’s financial regulatory ecosystem. With the Strategic Roadmap’s implementation, the Centre must remain sustainable, relevant, and visible as a facilitator of global and intra-Asia business and investment flows. With everyone’s participation, I am confident that Labuan IBFC will sail through its next chapter of success, InsyaAllah.
40. With that, I’d like to congratulate Labuan IBFC on today’s launch, which demonstrates its commitment to serving as the nation’s international financial centre.
41. Dengan lafaz Bismillahirrahmanirrahim, I hereby launch the Labuan IBFC’s Strategic Roadmap 2022-2026.
Wabillahi taufiq wal hidayah Wassalamualaikum warahmatullahi wabarakatuh.
Thank you.
32. I’ve been told that this is already happening, and is expected to become more common in the near future. Aside from the current players, I understand that there are others in the pipeline who want to be part of this exciting, emerging sub-sector.
33. Another emerging niche targeted by the Labuan IBFC is insurance and takaful captives, capitalising on Labuan’s recognition as the best international jurisdiction for captives at a prestigious European review award 2021.
34. Global corporations from Europe and West Asia looking to expand into East Asian markets must be encouraged to establish captives in Labuan.
35. A special feature for insurance and takaful underwriting is Labuan’s Protective Cell Company (or PCC), which legally allows the creation of separate business cells within one legal entity. This feature ensures fund separation and transparency, which is a governance aspect in high demand.
36. It is not solely the responsibility of the Labuan FSA or the MOF to ensure the implementation of the Labuan IBFC Strategic Roadmap 2022-2026. In fact, it is a joint responsibility of the Government, related agencies, industry, and all other stakeholders.
37. In Labuan IBFC’s next phase of development, its growth prospects must be pursued more vigorously, and the industry must play a bigger role in driving these strategies with Labuan FSA. As a regulator, Labuan FSA should continue implementing and tracking the Strategic Roadmap’s initiatives to maintain and boost investor confidence.
38. As Labuan IBFC is linked to Malaysia’s financial system, the Strategic Roadmap will strengthen the Centre’s linkages and complement other strategic plans like the Financial Sector Blueprint 2022-2026.
CLOSING REMARKS
Ladies and Gentlemen,
39. Before I end, I want to emphasise that Labuan FSA is an important part of Malaysia’s financial regulatory ecosystem. With the Strategic Roadmap’s implementation, the Centre must remain sustainable, relevant, and visible as a facilitator of global and intra-Asia business and investment flows. With everyone’s participation, I am confident that Labuan IBFC will sail through its next chapter of success, InsyaAllah.
40. With that, I’d like to congratulate Labuan IBFC on today’s launch, which demonstrates its commitment to serving as the nation’s international financial centre.
41. Dengan lafaz Bismillahirrahmanirrahim, I hereby launch the Labuan IBFC’s Strategic Roadmap 2022-2026.
Wabillahi taufiq wal hidayah Wassalamualaikum warahmatullahi wabarakatuh.
Thank you.
YB Senator Tengku Datuk Seri Utama Zafrul Aziz
Minister Of Finance Malaysia
