Latest news with #LabuanIBFC
The Star
01-05-2025
- Business
- The Star
Labuan IBFC carving a new niche
KUALA LUMPUR: Labuan International Business and Financial Centre (Labuan IBFC) is banking on its Islamic digital asset ecosystem, captive insurance market and a planned climate credit exchange to carve out a 'niche' and remain globally competitive, even as it braces for slower leasing and trading activities in 2025 due to global uncertainties. The special economic zone, which operates under the purview of the Labuan Financial Services Authority (Labuan FSA), added 168 new companies in the first quarter of this year – representing 25.7% of its full-year target of 653 to 654 entities. This builds on the 9% growth recorded in 2024 when 627 companies were incorporated, up from 575 the previous year. 'This sets a positive tone for the months ahead,' said Labuan FSA director-general Nik Mohamed Din Nik Musa during the launch of the 'Labuan IBFC Market Report 2024' yesterday. New incorporations in 2024 were primarily from the Asia-Pacific region (60%), followed by the Far East (21%), Europe (10%), the Americas (7%) and the Middle East and Africa (2%). As at end-2024, Labuan IBFC hosted 4,785 companies – with 65% from the Asia-Pacific region. However, Nik Mohamed Din cautioned that leasing and international trading activities are expected to soften in 2025, particularly those linked to oil and gas (O&G). 'We anticipate a slight moderation in the leasing, particularly because one will be the leasing of ships carrying O&G,' he said. 'Given that the price of O&G now is not as high as before, we foresee that trading for the demand of O&G will also moderate.' He added that the Labuan International Trading Company segment, where 99% of activity involves oil and liquefied natural gas or LNG, will likely face a slowdown amid continued price volatility. Leasing activities remained flat in 2024, with total leased assets amounting to US$36.8bil compared to US$36.6bil in 2023. Aviation leasing accounted for the largest share at US$22.8bil or 62.1% of the total. Revenue from leasing jumped 69.3% year-on-year to US$1.6bil, while pre-tax profit surged 152.3% to US$654.6mil. Eight new leasing companies were licensed, bringing the total to 195. Meanwhile, the Labuan banking sector continued to show resilience, backed by net interest income gains from high interest rates, though overall profitability fell by 27.3% due to a sharp rise in loan impairments. The total loan portfolio declined 9% to US$19bil, while deposits fell 27.4% to US$4.9bil due to reduced resident deposits. The banking sector's assets contracted slightly to US$47.7bil, though investments rose 78.6% to US$9.4bil as banks shifted towards bonds and securities. Nik Mohamed Din said four new banking licences were issued in 2024, bringing the total to 72. 'Labuan banks demonstrated resilience and maintained stable net interest income,' he noted. Islamic banking remained steady with assets above US$1.6bil, even as financing dipped 8.3%. Nik Mohamed Din highlighted the Islamic Digital Asset Centre, launched in 2022, as a key driver of Labuan's competitive edge. 'We want to help Labuan create a complete ecosystem for the Islamic digital asset market,' he said. He added that Labuan is developing a risk-sharing, profit-sharing environment within the Islamic capital market to support tokenised instruments aligned with syariah principles. 'We feel it is the way to distinguish Labuan from other countries – by creating a niche with Islamic tokens.' Additionally, on the environmental, social and governance front, he said a new climate credit exchange is also in the pipeline. 'Next week, there will be the issuance of a common credit circular,' he said. Meanwhile, Nik Mohamed Din said Labuan is positioning itself as one of Asia's most important captive insurance hubs, with over 70 entities already established in the jurisdiction. He added that Labuan FSA is actively reviewing and updating regulatory frameworks to make its captive insurance offering more innovative and attractive to multinational companies seeking risk management solutions. 'So, the team is always looking at how we want to enhance the regulation, modernise it even further to make the structure more innovative, more attractive to companies around the world wanting to sell captive,' he said. Labuan's captive insurance segment continued to expand, with licensed entities rising 16.4% to 71 in 2024, supported by regulatory enhancements and demand for alternative risk solutions. Nik Mohamed Din noted that growth was driven by demand from the Asia-Pacific region, with captives offering greater cost efficiency, flexibility and control over underwriting and claims. In 2024, Labuan IBFC posted a total pre-tax profit of US$2.56bil – a 35.8% drop from US$3.99bil the previous year, which itself was 34.1% lower than in 2022. Despite the profit slump, total assets grew 7.5% to US$89.57bil from US$83.34bil in 2023. Return on assets declined to 2.9%, down from 4.8% in 2023 and 7.4% in 2022. Employment within Labuan IBFC rose for the third consecutive year to 5,006 in 2024, compared to 4,825 in 2023 and 4,224 in 2022.
New Straits Times
30-04-2025
- Business
- New Straits Times
Labuan FSA's outgoing chief reflects on challenges, reforms during tenure
KUALA LUMPUR: Today marked the end of Nik Mohamed Din Nik Musa's tenure as Labuan Financial Services Authority (Labuan FSA) director-general, leaving behind a legacy defined by resilience, regulatory transformation, and strategic recalibration during one of the most difficult chapters in Labuan's financial history. Appointed on May 1, 2021, Nik Mohamed Din assumed the leadership of Labuan FSA at the height of the COVID-19 pandemic, a time when global markets were in turmoil and international financial centres, like Labuan International Business and Financial Centre (IBFC), were grappling with severe business disruptions. Sharing his thoughts after the unveiling of the Labuan IBFC Market Report today to the media and industry players, he said the pandemic brought immediate operational and economic consequences. "Movement restrictions disrupted business activities and forced employees into remote work arrangements, while critical systems went offline, affecting the timely submission of regulatory data, compliance reports, and business operations. "Labuan IBFC saw a notable decline in trading and financial activities, and several trading enterprises were delisted, thereby losing their eligibility for the centre's attractive three per cent tax incentive," he said. Nik Mohamed Din said that despite these setbacks, Labuan FSA acted swiftly and decisively, and through direct engagement and communication with affected stakeholders, the authority clarified compliance expectations and took steps to restore confidence. "The jurisdiction successfully reinstated numerous entities back into the qualifying list, preserving the integrity and competitiveness of Labuan's tax framework. Nik Mohamed Din remarked that the crisis, while challenging, also offered valuable lessons. He reflected that every crisis brings with it something worth learning, and that mindset paves the way for deeper institutional reflection. "It was during this period that the idea of a long-term strategic roadmap took shape, and with operations scaled down and more time to deliberate, Labuan FSA's leadership and staff developed a clearer vision for the future. He said this led to the creation of the Labuan IBFC Strategic Roadmap 2022-2026, which focuses on strengthening niche financial sectors, including captive insurance, Islamic finance, digital financial services, and environmental, social, and governance (ESG)-aligned investment structures. "The roadmap was a turning point for Labuan IBFC's forward positioning in an evolving global financial ecosystem," he said. Nik Mohamed Din said another major challenge under his leadership was the mutual evaluation by the Financial Action Task Force (FATF), the global watchdog for anti-money laundering and counter-terrorism financing standards. He said the FATF has the authority to downgrade jurisdictions that fail to meet its stringent Anti-Money Laundering/Countering Financing of Terrorism (AML/CFT) standards, an outcome that could significantly harm a country's international credibility and foreign direct investment inflows. "Recognising the gravity of this risk, Labuan FSA committed substantial resources and undertook multiple assessments to align the centre's regulatory standards with international expectations," he said. Nik Mohamed Din said that the team had "burned the midnight oil" to ensure that Labuan stayed on track and did not fall short of global benchmarks. He said that in response to the FATF's evaluation framework and in a bid to future-proof Labuan's regulatory infrastructure, the Labuan FSA introduced critical legislative reforms in December 2024. Four core business laws were amended, namely the Labuan Business Activity Tax (Amendment) (No. 2) Bill 2024, the Labuan Companies (Amendment) Bill 2024, the Labuan Trusts (Amendment) Bill 2024, and the Labuan Foundation Law (Amendment) Bill 2024. These amendments were designed to enhance tax administration, improve corporate transparency, and tighten governance mechanisms within Labuan's financial services ecosystem. "Through these reforms and strategic efforts, Labuan FSA not only restored momentum within Labuan IBFC but also repositioned the jurisdiction as a forward-thinking and fully compliant international financial centre," he said. Several industry players said Nik Mohamed Din's term was marked by a philosophy of adapting to adversity and transforming crises into opportunities. They said that as he retires today, the impact of his leadership is evident in the strengthened regulatory framework, enhanced international credibility, and a clearer long-term vision for Labuan IBFC.
