On August 16, 2017, the "2017 Asian Captive Conference" was held in Kuala Lumpur, Malaysia, where Mr. Danial Mah Abdullah, CEO of the Labuan International Business and Financial Centre, gave an exclusive interview to China Captive Network.
Danial Mah Abdullah first introduced the development of Labuan's captive market. As of the first half of 2017, a total of 43 captive insurers had been established in the Labuan International Business and Financial Centre (IBFC), mainly from Malaysia (23) and Japan (8). In 2016, Labuan IBFC's total gross premium income was USD 252 million. The construction sector contributed the highest premiums at USD 131 million. Most captive insurers' premiums originate from outside Malaysia.
He said that, as a mid-shore jurisdiction complying with international standards and best practices in the financial services industry and subject to rigorous regulation, having signed numerous international agreements including on anti-money laundering and information exchange, and observing the regulatory requirements set by the Organisation for Economic Co-operation and Development (OECD), Labuan IBFC, Malaysia demonstrates an even stronger commitment to a safe and reliable business environment. It has the following development advantages:
- Companies registered locally (including captive insurers) can be recognized by the OECD as having substantive business operations and meet the requirements of the Base Erosion and Profit Shifting (BEPS) project.
- An internationally recognized regulatory framework with a convenient and business-friendly regulatory environment for investors, low daily operating costs, and flexible choices of operating location between Labuan and Kuala Lumpur.
- A variety of risk management mechanism options for investors
- Labuan-registered captive insurers are competitively positioned in Asia in terms of capital and surplus requirements; they can be supported by any reinsurer, and gain access to the direct insurance markets of the Asian region and Malaysia; with approval from the Labuan Financial Services Authority, they may underwrite third-party business
- Islamic-compliant insurance options are available
- The same time zone as China
Not long ago, Labuan IBFC issued a report supporting China's "Belt and Road" strategy, estimating that the funding required for "Belt and Road" infrastructure construction exceeds USD 6 trillion. Danial said the Centre has strong intellectual resources and intermediary service support, and that Labuan, as a mid-shore market, can provide support for the financing of China's "Belt and Road" projects. He hopes Labuan can become an important complement to Hong Kong and develop into a financing center for "Belt and Road" infrastructure construction projects.
Mr. Danial said Labuan IBFC focuses on the Asian market, playing an important coordinating role in regional trade and serving as an important intermediary for regional investors. For example, Chinese investors and business shareholders are encouraged to use Labuan IBFC as a gateway to the larger ASEAN market and to gain opportunities to create emerging markets.
As a mid-shore sovereign territory, Labuan is a place with complete infrastructure, allowing fund financing in multiple foreign currencies and providing regional investors with various types of capital resources. Labuan IBFC offers multinational enterprises, including those from China, a business-friendly, well-regulated operating environment and financing structures.
Labuan IBFC has also been listed by the Asian Development Bank as the domicile of the ASEAN Infrastructure Fund. Established in 2012, the ASEAN Infrastructure Fund is the largest infrastructure construction fund established by the Asian Development Bank and ASEAN members.
Danial expects China's captive market to have enormous development potential, and welcomes Chinese enterprises—especially companies involved in "Belt and Road" construction—to use Labuan captive insurers to help manage risk in overseas markets.
Mr. Danial concluded by saying that Malaysia was the first Southeast Asian country to establish diplomatic relations with China and is China's largest trading partner among Southeast Asian countries. Captive insurance is still relatively underdeveloped in Asia, and Labuan IBFC is willing to use its own development experience to cooperate with China in jointly promoting the development of the Asian captive market.
Background information:
Malaysia is a major developing country in Southeast Asia with a population of over 30 million and a superior geographic location, bordered by Indonesia, the Philippines and Brunei to the east, Thailand to the north, and the global financial center of Singapore to the south. Malaysia was ranked 44th among the world's most popular countries.
Labuan means "good harbor" in Malay. Located on an island northeast of Sabah in the South China Sea, it is a free port and tourist destination. Labuan was formally established as the Federal Territory of Labuan (Wilayah Persekutuan Labuan, or Labuan for short) on April 16, 1984, and its financial center was formally established on October 1, 1990, beginning to stimulate and drive regional economic development—a pioneer in building an international financial center in Asia. In 1996 Labuan had only 937 registered companies. As of September 2015, the number of registered companies had increased to 12,281, covering banking, insurance, leasing, trusts and funds, with 70% of companies from Asia. Currently, the number of captive insurers registered in Labuan ranks second in Asia, behind only Singapore.
Located in a strategic position at the heart of the Asia-Pacific region, Labuan IBFC, Malaysia occupies the advantageous position of one of the world's fastest-growing regions, offering perfect opportunities to companies wishing to strengthen ties with Asian economies. It has a wide variety of business and investment structures that help facilitate cross-border transactions, business dealings and wealth management needs. These unique advantages allow regional businesses to expand globally or to penetrate the rapidly growing Asian market effectively.
Labuan is positioned as a mid-shore jurisdiction, offering a full range of mid-shore solutions and striking an ideal balance between client information confidentiality and international best standards and practices. Through a simple and attractive tax system, and a dynamic, modern and internationally recognized legal framework enforced by the regulator, the Labuan Financial Services Authority (Labuan FSA), it creates a favorable business environment.
Company registration in Labuan derives from the provisions of Malaysia's Offshore Companies Act 1990. Labuan companies not only enjoy tax benefits, but also the relevant preferential terms of double taxation avoidance agreements signed between Malaysia and other countries. Its tax regime is similar to that of Singapore offshore companies, but is simpler than Singapore's in terms of tax administration. For example, Labuan caps the maximum tax payable at 20,000 ringgit, while Singapore has no similarly clear provision. As a duty-free island, Labuan enjoys many privileges and facilities and offers abundant business and investment opportunities. For example, raw materials used in manufacturing can be freely imported and exported without customs duties. It is also Malaysia's only deep-water anchorage port.
Source: China Captive Network