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30 Years of Intermediating Asia by Farah Jaafar-Crossby
by Farah Jaafar-Crossby
It is no mere coincidence that Labuan derives its name from the word “labuhan” or a port. Its naturally deep, well-sheltered harbour established Labuan’s early position as a strategic maritime port from the 1800s. Some have even opined that Admiral Cheng Ho, the early Chinese mariner, explorer and diplomat, would have had to stop by Labuan in his epic journey from China to the West. With his armada of 400 ships, that would have been a sight to behold!
Since then, Labuan IBFC’s role as a wholesale financial intermediation centre continues to attract visitors and users with our pragmatic midshore proposition – offering the ease of doing business combined with high international standards of regulation and supervision found onshore. In this age of transparency, Asia-based businesses welcome a well-regulated, transparent and substance-enabling environment with diversified products and solutions.
As we mark 30 years since Labuan’s inception as a business and financial hub, we have welcomed more than 15,000 registered companies, more than 800 licensed entities and have grown beyond merely serving Malaysia-based entities to other international-minded organisations in banking, leasing, capital markets, insurance, reinsurance, risk management and wealth management. Labuan has also gained solid traction as the centre of choice for players in niche financial services such as Islamic finance, digital solutions and self-insurance.
Since then, Labuan IBFC’s role as a wholesale financial intermediation centre continues to attract visitors and users with our pragmatic midshore proposition – offering the ease of doing business combined with high international standards of regulation and supervision found onshore. In this age of transparency, Asia-based businesses welcome a well-regulated, transparent and substance-enabling environment with diversified products and solutions.
As we mark 30 years since Labuan’s inception as a business and financial hub, we have welcomed more than 15,000 registered companies, more than 800 licensed entities and have grown beyond merely serving Malaysia-based entities to other international-minded organisations in banking, leasing, capital markets, insurance, reinsurance, risk management and wealth management. Labuan has also gained solid traction as the centre of choice for players in niche financial services such as Islamic finance, digital solutions and self-insurance.
Staying ahead in the digital age
As an innovative and forward-looking intermediation centre, Labuan has kept pace with the rapid changes wrought by digital innovation.
Unlike other jurisdictions, Labuan IBFC does not discriminate against digital. The ethos we adopt is that digital is an enabler of business in the first instance – it is a business process.
This open approach means that possible license holders need to comply with existing requirements but with an added layer of explanation to the regulators as to how the digital element plays a part in the entity’s operations.
Based on this approach, existing Labuan-licensed entities that wish to incorporate any innovative financial services (IFS) activities into their current business operations are simply required to apply to Labuan FSA noting their change in business plan.
It helps that Labuan already offers one of the widest range of structures and solutions available in Asia. These existing structures from licenses in money broking, credit token, private fund management and protected cell companies means that companies only need to build a strong business case for a digital ‘wrapper’ to an existing business.
This has eased the set-up of innovative financial service providers from digital banking licences to insurtech, robo-advisory, digital exchanges, crypto trading platforms, e-payment systems and blockchain tokens. In 2019 alone, more than 30 digital related licences were approved to operate in Labuan. These businesses were drawn by Labuan’s stable regulatory and legal framework, combined with a pro-business environment.
The key to this approach is that Labuan Financial Services Authority is a facilitative one-stop regulator and is able to process each application on its merit individually. That the jurisdiction only operates in the wholesale financial markets is a huge advantage.
Unlike other jurisdictions, Labuan IBFC does not discriminate against digital. The ethos we adopt is that digital is an enabler of business in the first instance – it is a business process.
This open approach means that possible license holders need to comply with existing requirements but with an added layer of explanation to the regulators as to how the digital element plays a part in the entity’s operations.
Based on this approach, existing Labuan-licensed entities that wish to incorporate any innovative financial services (IFS) activities into their current business operations are simply required to apply to Labuan FSA noting their change in business plan.
It helps that Labuan already offers one of the widest range of structures and solutions available in Asia. These existing structures from licenses in money broking, credit token, private fund management and protected cell companies means that companies only need to build a strong business case for a digital ‘wrapper’ to an existing business.
This has eased the set-up of innovative financial service providers from digital banking licences to insurtech, robo-advisory, digital exchanges, crypto trading platforms, e-payment systems and blockchain tokens. In 2019 alone, more than 30 digital related licences were approved to operate in Labuan. These businesses were drawn by Labuan’s stable regulatory and legal framework, combined with a pro-business environment.
The key to this approach is that Labuan Financial Services Authority is a facilitative one-stop regulator and is able to process each application on its merit individually. That the jurisdiction only operates in the wholesale financial markets is a huge advantage.
In Asia for Asia by Asians
Labuan’s strategic location means that it is an excellent conduit for conducting business in Asia. But we would be amiss if we did not address the elephant in the room when talking about the region – financial inclusion. One can’t ignore the evident disparity between the have and have-nots when driving down the busiest roads of Asia’s capital cities.
Across Asia, more than 1 billion people do not have access to formal financial services, making it difficult for them to climb up the economic ladder. Ensuring that financial services is accessible to the region across geographical locations and income levels starts with providing the right regulatory infrastructure for new ideas and innovations to grow and serve the vast unbanked. Here is where we believe Labuan IBFC via its license holders must play an active role in ensuring that the “rising tide of Asia, lifts all boats”.
The rise of socially or ethically-conscious investors has also driven demand for Shariah-compliant structures. Labuan is the only jurisdiction that offers an omnibus legislation that govern all Shariah-compliant businesses.
In effect, all the licenses, structures and solutions available in Labuan may operate Islamically. Indeed, Asia’s first robo-advisory service for Shariah-compliant investments is offered via a Labuan-licensed entity. Labuan is also the world’s only jurisdiction that offers innovative Takaful captives, an in-house reinsurance solution.
Again, the facilitative role of our approach towards digital and Islamic wrappers may hold the key for the underbanked and underserved. I strongly urge all existing license holders and potential Labuan license holders to consider how they can play a part.
Across Asia, more than 1 billion people do not have access to formal financial services, making it difficult for them to climb up the economic ladder. Ensuring that financial services is accessible to the region across geographical locations and income levels starts with providing the right regulatory infrastructure for new ideas and innovations to grow and serve the vast unbanked. Here is where we believe Labuan IBFC via its license holders must play an active role in ensuring that the “rising tide of Asia, lifts all boats”.
The rise of socially or ethically-conscious investors has also driven demand for Shariah-compliant structures. Labuan is the only jurisdiction that offers an omnibus legislation that govern all Shariah-compliant businesses.
In effect, all the licenses, structures and solutions available in Labuan may operate Islamically. Indeed, Asia’s first robo-advisory service for Shariah-compliant investments is offered via a Labuan-licensed entity. Labuan is also the world’s only jurisdiction that offers innovative Takaful captives, an in-house reinsurance solution.
Again, the facilitative role of our approach towards digital and Islamic wrappers may hold the key for the underbanked and underserved. I strongly urge all existing license holders and potential Labuan license holders to consider how they can play a part.
The butterfly effect of globalisation
Our increasingly interconnected economies mean that the flap of a butterfly wings in Brazil may set of a tornado in Texas, to paraphrase the question Edward Lorenz, a meteorology professor from Massachusetts Institute of Technology, first asked in the 39th meeting of the American Association for the Advancement of Science.
For Labuan, increased globalisation is a pragmatic opportunity for us to continue opening our doors to international businesses and investors looking to enjoy jurisdictional neutrality while operating in a sound and stable regulatory environment.
It is with our midshore approach Labuan IBFC will continuously strive for the right equilibrium to balance its market stability agenda vis-à-vis global business growth. After all, wouldn’t you agree with me that, in life, true north somehow always lands in the middle?
There have been ups and downs in our journey of 30 years. But our current success would not have been possible without your support. For that, we thank you and we will strive to always be on the vanguard of change and innovation as global businesses seek a safe harbour (or “labuhan”) to call home in Asia.
So please join us in celebrating our 30th anniversary this year; follow us on Twitter or Facebook for the latest developments. Alternatively, visit www.labuanibfc.com
For Labuan, increased globalisation is a pragmatic opportunity for us to continue opening our doors to international businesses and investors looking to enjoy jurisdictional neutrality while operating in a sound and stable regulatory environment.
It is with our midshore approach Labuan IBFC will continuously strive for the right equilibrium to balance its market stability agenda vis-à-vis global business growth. After all, wouldn’t you agree with me that, in life, true north somehow always lands in the middle?
There have been ups and downs in our journey of 30 years. But our current success would not have been possible without your support. For that, we thank you and we will strive to always be on the vanguard of change and innovation as global businesses seek a safe harbour (or “labuhan”) to call home in Asia.
So please join us in celebrating our 30th anniversary this year; follow us on Twitter or Facebook for the latest developments. Alternatively, visit www.labuanibfc.com
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