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Lofsa To Unveil New Strategy For Labuan In 2007

by Mary Swire,, Hong Kong

19 December 2006

The Labuan Offshore Financial Services Authority (Lofsa) is set to unveil a new strategy in the first half of 2007 to attract more international investors and elevate its status as a global offshore and low tax jurisdiction to rival the likes of the British Virgin Islands, the Cayman Islands and Mauritius.

Speaking at the Labuan-IOFC Investment Route to Asia conference in Kuala Lumpar last week, Lofsa director-general Datuk Azizan Abdul Rahman said that the authority is looking at ways in which Labuan's tax structure can be improved, with a particular focus on the jurisdiction's double taxation avoidance treaty network.

He also indicated that Lofsa is trying to identify niche markets, such as Islamic finance, which Labuan could specialise in.

Lofsa has employed a team of international consultants to help its re-branding exercise, and the study is expected to be completed within the first half of next year.

"We will then announce what we are planning to do to help reposition the financial centre," he said.

Malaysia has high hopes for the future of Labuan, and more than RM3 billion (US$845 million) has been invested by the Malaysian government in the infrastructure of Labuan to facilitate offshore business over the last decade. Some RM120 million has also been earmarked for future investment in the offshore centre under the Ninth Malaysia Plan.

Lofsa was established in 1996, six years after the creation of Labuan's IOFC, to help streamline the administration and supervision of the offshore centre. In 1997, a year after the establishment of Lofsa, the number of offshore companies incorporated in Labuan doubled to about a thousand. To date, there are more than 5,500 companies registered in the Labuan IOFC.

Labuan now provides a full range of financial services that include offshore banking, investment banking, insurance and insurance related services, investment holding, trust, fund management, leasing and Islamic finance. The jurisdiction has 55 international offshore banks, 119 insurance and insurance-related companies, 79 leasing companies, 28 fund managers and 20 trust companies.

The setting up of the Labuan International Financial Exchange (LFX) has further boosted the offshore business activities, Rahman noted.

Since its first listing in 2001 with market capitalisation of only US$250 million, the number of listings on LFX has grown to 31 instruments, comprising of investment funds, Islamic notes and debt securities that cumulatively have a total market capitalisation of US$13.5 billion.

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