The Labuan IBFC has entered its third decade of operation this year and the 33 years’ journey has been a fulfilling period of progression and growing prominence. Interestingly, Labuan financial sector did not experience significant shrinkage during global economic turmoil and crisis, but it has been confidently growing into a well-regulated and reputable financial centre in Asia today. The number of financial institutions grew by more than 10 times since its inception, to 917 financial players. Labuan IBFC is also the top three leading international financial centres in Asia in terms of banking assets and insurance premiums underwritten. It is also one of the fastest growing captive insurance centres in Asia and MENA region.
Labuan IBFC complements the activities of the domestic Malaysian financial market and the Centre has now become fundamental to the Labuan economy and growing importance to Malaysia generally. After over 30 years, Labuan IBFC now contributes more than 53% to the island’s GDP and is the largest employer in Labuan. In 2022, Labuan IBFC contributed about RM1 billion to the nation’s fiscal revenue.
Labuan IBFC Industry Performance 2022
In the aftermath of the COVID-19 pandemic, the Labuan IBFC ended the year 2022 on a more optimistic note with the financial industry well on path to recovery. The industry had demonstrated its ability to navigate the unprecedented level of uncertainty with remarkable resilience and adaptability. Business had recorded robust growth on multiple fronts across sectors including niche business of insurance, Islamic finance and digital financial services while other sectors such as commodity trading, leasing and capital market also showed significant growth momentum.
Key Highlights of Market Report 2022:
- 17% growth new company incorporations
- 19% rebound in insurance industry’s underwriting margin
- 25% increase in Islamic banks financing
- 55% hike in international commodity trading companies’ profitability
- 243% jump in subsequent leasing transactions
- 22% expansion in new digital players
LABUAN IBFC SECTORAL BUSINESS PERFORMANCE
Double Digit Growth in New Company Incorporations - In tandem with the economic recovery, company incorporations grew 17% growth in 2022. Predominately, incorporations from Asia and Pacific region increased by 24%, mainly from Singapore and India.
Labuan Banks remained Sound and Resilient amidst challenging external headwinds to the banking industry - Escalating geopolitical uncertainties, supply chain disruption and inflationary pressures had affected the banks’ overall financial performance in 2022. Notwithstanding this, we continued to see growing interest in the banking business as reflected by three new banking institutions approved of which two were granted to undertake digital banking business. While the total industry loan portfolio contracted by 11.5% due to settlement of loans upon maturity, the Labuan Islamic banking financing grew by 25% to USD2.1 billion, of which Islamic financing constituted 10.2% of the total industry’s loan. Islamic banking asset also shown healthy growth with noticeable increase of 21% to USD2.3 billion.
Record-breaking growth in International Commodity Trading Companies (LITCs), surpassing pre-pandemic level - The international commodity trading sector recorded the largest trading amount of USD51 billion, reflecting a significant growth of 31%. Total commodities traded were mainly crude oil and LNG, which grew by 40% to USD48.3 billion, in tandem with recovery in global oil and LNG prices. This had significantly lifted the profitability of Labuan international commodity trading companies by 55% to USD5.5 billion - the highest profit recorded in five years.
New Aviation Asset Leased Grew Tenfold - Labuan leasing activities resumed in tandem with the reopening of international borders and increasing air passenger traffic. This is reflected in approvals of 18 new leasing companies and 144 new subsequent leasing transactions in 2022. Consequently, new aviation asset leased grew more than 240% to USD5.8 billion.
Another Revealing Year for Digital Financial Services (DFS) with 20% expansion in new DFS providers- The DFS remained the fastest growing sector in Labuan IBFC with 29 new approvals granted, bringing the total number of DFS to 111. The licensees undertake various forms of DFS - from simple e-trading platforms for digital currency paring to a more complex digital banking, tokenisation and digital asset exchanges. The Centre is also driving greater synergy between Islamic financial solution and DFS to promote greater financial inclusion.
Labuan IBFC’s Capital Market has potential to grow - Surging interest in using Labuan IBFC as a platform to mediate investments and fundraising exercise in Asia and beyond. In this context, for the fund management industry, seven new fund managers as well as seven new securities licensees were approved in 2022, bringing the total fund managers and securities licensees to 45 and 23, respectively. Total assets under management by fund managers showed almost a doubling in growth to USD1.1 billion and most of the assets were investments in equities and debt instruments.
Director General of Labuan FSA, Nik Mohamed Din said, “Labuan IBFC’s modus operandi is to offer a holistic financial solution in both conventional and Shariah-compliant option as well as niche solution in one convenient location, giving Labuan IBFC its unique position in Asia.” He added that “The demands for greater transparency give Labuan IBFC the edge as Labuan FSA has always maintained a high regulatory and supervisory standard alongside its commitment to greater transparency. This reaffirmed the sustained investors’ confidence in the Labuan IBFC.”
Nik Mohamed Din also said “Labuan IBFC is here to make a difference - in contributing more significantly to the economy of Labuan Island and the nation. The employment in Labuan IBFC grew at a faster pace in 2022, increased by 7.9% to 4,224 employees working in key financial institutions (2021: 3,915). This shows the commitment of the industry players in complying with the substance requirements and aimed at increasing the Centre’s economic contribution to the Labuan Island and Malaysia.”
The current position of strength will continue to drive Labuan IBFC into the next phase of growth to take advantage of a more competitive and connected environment, while continue servicing the increasingly diversified and complex demands of the international market.
For more details of the Report, please visit https://qrco.de/market_report_2022
Labuan Financial Services Authority
14th April 2023
Corporate Communication & External Relation Unit
Tel : +603-8873 2000 Fax : +603-8873 2209
E-mail: communication@labuanfsa.gov.my
