PRESS
RELEASE
The
2003 Labuan Offshore Financial Services Authority Annual Report
LABUAN,
29 April 2004 –
The Labuan Offshore Financial Services Authority (LOFSA) released
its 2003 Annual Report today.
(Further information about LOFSA is available at www.lofsa.gov.my)
The
LOFSA 2003 Annual Report provides a review of the progress and
development of the Labuan International Offshore Financial Centre
(IOFC) and the financial performance of LOFSA.
Overview
In 2003, Labuan IOFC recorded
positive results in every sector of offshore business. This
reflected the improved global and regional environment and the
outcome of the measures undertaken by LOFSA to further spur the
development of Labuan IOFC. These
measures include enhancing the legal and regulatory framework,
providing further business incentives and other promotional and
business development initiatives. LOFSA will continue to focus on
enhancing the business environment of the IOFC through the
implementation of the action plans outlined in the Financial
Sector Master Plan.
Offshore
Companies
The number of new offshore companies
incorporated in Labuan IOFC increased from 486 in 2002 to 494 in
2003. This brings the
total number of offshore companies in Labuan IOFC to 4,065 as at
end-2003 (2002 : 3,571). The
offshore companies originated from more than 70 countries in the
world, reflecting the international stature of Labuan IOFC since
its inception in 1990.
Trust
Companies
During
the year, the number of trust companies increased by two, bringing
the total to 20. The
sector recorded an aggregate operating income of RM21.0 million,
an increase of 12.3%, from RM18.7 million achieved in 2002.
Total profit before tax also increased by 6.2%, from RM8.1
million in 2002 to RM8.6 million in 2003.
This
performance reflected the combination of a higher number of
offshore companies incorporated in Labuan IOFC as well as greater
diversification in the types of services offered by the trust
companies.
Offshore
Banking
The offshore banking industry recorded a 48.8% increase in pre-tax
profit, amounting to USD166.8 million in 2003, from USD112.2
million in 2002. This
reflected in part the improvement in the loan portfolios, with the
decline in the non-performing loans (NPLs) ratio from 10.7% in
2002 to 6.2% in 2003.
Three new banking licences, all of which were for the conduct of
offshore investment banking, were approved in 2003. The activities of these new banks
contributed to a
significant increase in the total assets of
the offshore investment banking industry, from USD6.6 million in
2002 to USD66.8 million in 2003.
There
was also a turnaround in the investment banking industry, from a
loss of USD14,000 in 2002 to a total pretax profit of USD1.3
million in 2003. During
the year, NPLs
in the offshore banking industry declined by 45.5% from USD1.1
billion in 2002 to USD0.6 billion as at end of 2003.
In
line with the increase in the number of offshore banks, there was
an increase in the number of employees, from 459 in 2002 to 468 in
2003. Malaysians
comprised 90.8% of the total number of employees and the number of
Malaysians at senior and middle management levels was 40 and 99
respectively.
Offshore
Insurance
The offshore
insurance industry continued to attract more institutions to
Labuan, as reflected in the 13 new licences approved during the
year, of which five were reinsurers, four captives, one
underwriting manager and three insurance brokers.
Growth in total industry assets was at a significant 30.4%
in 2003 amounting to USD914.0 million, from USD701.0 million in
2002.
In
the offshore general insurance and reinsurance industry, gross
premium grew by 19.5%, from RM341.6 million in 2002 to RM408.2
million in 2003. The
industry is expected to experience
greater
diversity in its insurance activities in 2004, with the inclusion
of an additional international insurance company to conduct life
reinsurance business in Labuan.
In
2003, four new captives were established in Labuan IOFC, while two
discontinued their business.
The total number of captives increased from 21 to 23, with
companies mainly originating from Malaysia, Australia, Hong Kong,
Indonesia, Japan and Thailand.
Gross premium received from captive business amounted to
USD17.4 million, an increase of 26.1% (2002 : 61.5%) from USD13.8
million in 2002.
Offshore
Fund Management
The total approved
fund size of private funds increased from USD1.7 billion in 2002
to USD1.9 billion in 2003. The
number of fund managers increased from 12 in 2002 to 14 in 2003.
In terms of country of origin, eight of these fund managers
were from Malaysia, two from British Virgin Islands and one each
from Canada, Hong Kong, Singapore and Switzerland.
During
the year, LOFSA was admitted as an associate member of the
International Organisation of Securities Commissions (IOSCO).
Offshore
Leasing
The leasing industry in Labuan IOFC
grew by 33.3% in 2003, with the approval of 16 new leasing
companies (2002:12). Twelve
of the 16 new leasing companies were established to cater for the
oil and gas industry, while the remaining companies were involved
in the lease of aircraft, specialised survey and heavy-duty
engineering equipment. The
cumulative amount of lease financing increased by 116.3% (2002 :
52.2%) to USD6.3 billion (2002 : USD2.9 billion), while the amount
of new lease financed grew by 243.1% to USD3.4 billion (2002 :
USD991.0 million).
Legislative
and Regulatory Developments
The
legal and regulatory framework continued to be reviewed in 2003 to
further enhance the offshore legislation to ensure the soundness
of the offshore center as well as to facilitate business growth.
Amendments to
the
Labuan Offshore Security Industries (Amendment) Act 2003 (LOSIA),
which came into effect in May 2003, included several updated
provisions relating to private funds and allowed fund managers to
manage and administer foreign funds in Labuan.
During the year under review, emphasis was also given to
the international initiative against money laundering, with the
invocation of the Anti-Money Laundering (Invocation of Part IV
(No.2)) Order 2003 on 15 April 2003.
The provision relates to the reporting obligations of
institutions licensed or registered to carry on, among others,
offshore banking, insurance and trust company business.
To
safeguard the nation against any terrorist act that may occur
within or even beyond the jurisdiction of Malaysia, section 125A
has been inserted into the Penal Code, making it an offence to
harbour or attempt to harbour any person in Malaysia or any person
residing in a foreign state at war or in hostility against the
King.
The Mutual Assistance in Criminal Matters Act 2002 (MACMA),
which came into effect on 1 May 2003, was introduced to provide
for mutual assistance in criminal and related matters between
Malaysia and other countries.
The
new section of the Penal Code and MACMA provides LOFSA with
additional avenues for cooperation with other supervisory and
regulatory authorities, locally and internationally, to increase
compliance and improve security for the offshore industry.
Labuan
International Financial Exchange (LFX)
There were three
new listings on the Labuan International Financial Exchange
(LFX), during the year,
bringing the total number of listings on LFX to 13 instruments.
They comprised three primary and ten secondary listings,
including three Shariah-compliant instruments, four conventional
debt securities and six mutual funds, with a total market
capitalisation of USD2.3 billion as at end-December 2003.
LFX has introduced additional initiatives to
increase its presence in international capital markets, in
particular the Islamic capital market.
A Memorandum of Understanding was also signed with the
Bahrain Stock Exchange (BSE) to facilitate the dual listing of
instruments on both exchanges and the sharing of information on
listed products. Following this arrangement, the USD600 million
Malaysian Global Sukuk was also listed on the BSE.
Islamic
Finance
LOFSA continues to be strategically focused on the
development of Labuan IOFC as an Islamic financial centre.
The Islamic-based assets of offshore banks increased by
28.1%, from USD465.4 million in 2002 to USD596.2 million in 2003,
while total deposits of offshore Islamic banks increased
substantially by 33.6% from USD147.7 million in 2002 to USD 196.9
million in 2003.
During
the year, LOFSA was admitted as an observer member of the
Islamic Financial Services Board (IFSB), the standard-setting
entity for international prudential standards for Islamic finance.
To promote Islamic financial products and services in Labuan,
LOFSA issued the ‘Directive on Islamic Financial Business in
Labuan IOFC’ in October 2003.
This is aimed at ensuring that the products and services
offered by offshore financial institutions are Shariah-compliant.
In
the area of tax incentives, offshore companies conducting Islamic
activities will be given an income tax rebate equivalent to the
amount of zakat paid to the religious authority. The rebate will be subject to a maximum of 3% of net profit
or RM20,000 (prior to this, offshore companies paid both the
corporate tax required by law and the business zakat as part of
their religious obligations).
Amendments to the relevant legislation have been made to
enable the payment of zakat by Labuan offshore companies from the
year of assessment 2004. This
is aimed at attracting companies, particularly from Islamic
countries where zakat, and not income tax, is paid on business
income.
LOFSA
continues to adopt a consultative approach in developing the
Islamic financial market in Labuan through several development
committees. The
committees have identified products, such as trade finance, cash
waqf, takaful and Islamic capital market instruments, which can be
developed in consultation with the Shariah Advisory Council for
Labuan IOFC.
Financial
Performance
The financial performance of LOFSA
for the year ended 31 December 2003 remained favourable. LOFSA
recorded a total income of RM15.0 million, sustaining the
performance of the previous year (RM14.9 million).
A surplus of RM2.0 million was recorded in 2003.
Outlook
The regional efforts on business
development programmes will be undertaken with a strategic focus
aimed at expanding offshore financial services opportunities from
Asia-Pacific and other established IOFCs.
LOFSA’s international development programmes will aim at
enhancing the global awareness of Labuan IOFC as an attractive,
viable and cost-efficient jurisdiction for offshore business.
These programmes will feature awareness and educational
conferences to raise the profile of Labuan IOFC to the
international market.
LOFSA
will continue to develop Islamic finance activities to position
Labuan IOFC as the regional Islamic financial centre in the
Asia-Pacific region. LOFSA
will endeavour to increase the relative significance of Islamic
finance assets as part of the overall objectives as outlined in
the Financial Sector Master Plan.
As part of the effort to develop the Islamic capital
market, LOFSA is promoting Labuan as the centre for the issuance
of financial papers such as sukuks and to capitalise on the
advantages of Labuan International Financial Exchange for listing
and trading purposes. LOFSA
is also reviewing the legal framework for promulgating Islamic
financial services legislation.
In line with the significant growth in the reinsurance
market in Labuan, retakaful will be promoted as part of the
overall development of Islamic financial services.
In
line with efforts to further enhance corporate governance and
internal controls, LOFSA will review the existing regulatory and
supervisory structure to ensure transparency in the management and
operations of the offshore financial institutions.
LOFSA will continue to cooperate with international
organisations through the National Coordinating Committee (NCC) of
Malaysia to ensure that the Labuan IOFC is free of
money-laundering activities.
Conclusion
The
performance of Labuan IOFC and LOFSA in 2003 has been encouraging.
LOFSA will continue with its approach of facilitating
genuine and reputable business to set up
their
operations in Labuan IOFC and will accelerate the developmental
and international promotional activities to reinforce this trend.
______________________________________________________________________
FOR
MORE INFORMATION, PLEASE CONTACT:
Communications
Division
Strategic Planning & ICT Department
Telephone :
087-591200
Fax
: 087-453442
Email
:
communication@lofsa.gov.my
