PRESS
RELEASE
The 2004 Labuan Offshore Financial
Services Authority Annual Report
KUALA
LUMPUR, 28 April 2005 – The
Labuan Offshore Financial Services Authority (LOFSA) released its
2004 Annual Report today. (Further information about LOFSA
is available at www.lofsa.gov.my)
The
LOFSA 2004 Annual Report provides information on the status and
development of Malaysian Integrated Offshore Financial Centre (IOFC)
in the island of Labuan, and the financial performance of LOFSA.
Overview
The
Malaysian IOFC registered a strong and positive performance in
2004, building upon the progress achieved in 2003. Following
the various measures implemented by LOFSA to promote and develop
Labuan as a regional offshore financial centre, efforts also
continued to be focused on ensuring that the regulatory framework
in LOFSA remained sound and progressive.
Offshore
Companies
The
number of new offshore companies incorporated in the Malaysian
IOFC increased from 494 in 2003 to 555 in 2004, representing a
growth of 12.3%. This brought the total number of offshore
companies operating in the IOFC to 2,701 as at end-2004 (2003:
2,486). This growth is testament to the growing strength of
Labuan as an IOFC that has successfully attracted offshore
companies from more than 70 countries. The positive growth
is expected to continue in 2005, in view of the growing awareness
and recognition of Labuan’s stature as an IOFC in the region.
Trust
Companies
The continued growth in the number of offshore companies
contributed to the increase in total profit before tax of the
offshore trust companies by 17.4% to USD2.7 million, compared with
USD2.3 million in 2003. As at 31 December 2004, all trust
companies in Labuan had completed the exercise to convert their
status to offshore entities in accordance with the amended Labuan
Trust Companies Act 1990. The conversion facilitated
strategic affiliations of offshore trust companies with
international institutions, making Labuan more accessible as an
IOFC to potential offshore companies and investors
Offshore
Banks
The
offshore banking industry recorded a significant increase in
unaudited pre-tax profit amounting to USD272.9 million in 2004
from USD166.8 million in 2003. The higher profit was due to
lower loan provisioning (specific provision and general provision)
by 34.3% to USD317.4 million in 2004 (2003: USD483.2 million),
attributed mainly to high recoveries. This was partly the
result of better management of loan portfolios, which saw the
industry’s non-performing loans ratio improving from 6.2% in
2003 to 3.9% in 2004. The total number of offshore banks,
including investment banks, was 57 compared with 56 in 2003.
The
number of offshore investment banks in the IOFC increased to 11
(2003: nine) with the issuance of two new licences in 2004.
Offshore investment banks recorded a significant increase in
pre-tax profit from USD1.3 million in 2003 to USD9.5 million in
2004. Total assets grew from USD66.8 million in 2003
to USD145.0 million in 2004, with the growth attributable to an
increase in long-term investments and loans and advances.
Investments formed a major portion of total assets, amounting to
44.6% or USD64.7 million (2003: 41.5% or USD27.7 million) for the
investment banks in Malaysian IOFC.
Islamic
Financial Services
Total Islamic assets (including those of conventional offshore
banks that offer Islamic financial windows) increased by 13.8% to
USD678.7 million (2003: USD596.2 million). Total deposits
continued to record an upward trend, increasing by 54.4% or
USD107.2 million to USD304.1 million in 2004. Total
financing facilities outstanding increased from USD338.4 million
in 2003 to USD409.4 million in 2004, of which 71.4% was extended
to non-residents.
Offshore
Leasing
Eleven
new leasing companies were established in Malaysian IOFC with the
new lease financing amounting to USD880.3 million, mainly for the
leasing of aircrafts and the oil and gas industry. This has
resulted in the growth of lease financing by 13.8% from USD6.3
billion in 2003 to USD7.1 billion in 2004. Leasing
facilities based on both conventional and Islamic principles are
offered in the IOFC.
Offshore
Insurance
The
offshore insurance industry continued to attract more institutions
to Malaysian IOFC as reflected in the seven new licences approved
during the year. There was a net increase in the total
number of licences from 103 in 2003 to 106 in 2004. The
industry recorded a growth in total assets by 10.2% from USD914.0
million in 2003 to USD1.0 billion in 2004. As more than
two-third of the insurance and insurance-related companies
licensed during the year were foreign-owned, the proportion of
foreign shareholding increased to 34.8% (2003: 29.6%). This
is a positive development in line with the IOFC’s objective to
attract more international insurers.
In
offshore general insurance business, gross premium grew by 6.9% in
2004 (2003: 19.5%) to USD436.2 million while the net
retention ratio improved from 75.7% in 2003 to 87.2% in 2004.
The ratio of net claims incurred to earned premium income improved
from 57.1% in 2003 to 55.7% in 2004. The underwriting profit
of the industry continued to improve from USD34.8 million in 2003
to USD50.5 million in 2004 with an underwriting margin of 13.8%.
The total paid-up capital of the industry increased by 14.5% to
USD304.2 million in 2004, after experiencing negative growth of
0.4% in 2003.
Offshore
Fund Management
Three new private funds were registered in 2004 with the total
number of registered private funds unchanged at 16 due to the
closure of three private funds. The number of
fund managers increased from 14 in 2003 to 15 in 2004. The
number of public funds increased to three with the registration of
one new fund in 2004, increasing the approved fund size from
USD130 million in 2003 to USD132 million in 2004.
Labuan
International Financial Exchange (LFX)
The LFX, which complements the IOFC by providing a web-based
financial exchange for the listing and trading of a wide range of
financial and non-financial instruments, recorded a total of 13
new listings, the highest number since its establishment.
This brought the total number of listings on LFX to 26 financial
instruments, comprising 15 conventional instruments and
exchangeable bonds, six investments funds and five Islamic
certificates (Sukuk), with a combined capitalisation of USD10.1
billion.
Development
Review and Outlook
Since its establishment in 1990 as an integrated offshore
financial centre, Labuan offers a wide range of offshore financial
products and services such as offshore companies, banking
including leasing, insurance, trust business, fund management,
investment holding, company management services, capital market
financial instruments and Islamic financial services.
Labuan’s potential as an IOFC was further developed through the
recommendations encapsulated in the Financial Sector Masterplan of
Bank Negara Malaysia, released in 2001.
As
at 31 December 2004, there were 2,701 offshore companies
originating from more than 70 countries in Labuan, of which more
than half (51.4%) were from the Asia-Pacific region. Such a
composition in the countries of origin has prompted LOFSA to give
greater emphasis to promoting business within the Asia-Pacific
region, while continuing to attract companies from around the
world to Labuan.
One
of the main agenda of LOFSA is to promote the IOFC as a centre for
Islamic financial services. Six working groups were
established to provide technical expertise and support to LOFSA in
the key growth areas: capital market; fund management; trade
finance; takaful and retakaful; cash waqf; and legislation on
Islamic financial services. To create greater awareness and
increase the visibility of the IOFC in the Islamic finance world,
LOFSA organised ‘The First International Labuan Islamic Finance
Conference’ in July 2004. The conference, entitled “The
Evolution of Islamic Capital Market”, brought together experts,
academicians, regulators, Shariah scholars and other professionals
from various countries to discuss issues on the development of the
global Islamic capital market.
In
the area of capital market, LOFSA continues to encourage
international institutions to issue financial papers through
Malaysian IOFC and list these papers on LFX. By providing
listing and trading facilities for capital market instruments such
as equities, debt instruments, government bonds, asset-backed
securities and mutual funds, LFX complements the development of
the capital market in the IOFC.
To
compete in the global offshore environment, attention has to be
given to providing useful information to potential investors.
In July 2004, LOFSA launched a web-based document submission and
processing application known as mylofsa. The application
allows trust companies to submit documents to LOFSA through the
Internet, at anytime and from anywhere in the world. LOFSA
is also upgrading its ICT infrastructure to enhance business
operations in Labuan IOFC. These include the setting up of
centralised data storage system, disaster recovery centre and
upgrading statistic and database management system.
In
line with the Government’s vision to establish a centre of
education excellence in Labuan, human resource development in
Labuan will focus on providing more qualified and skilled manpower
to support offshore industries. Studies in the fields of
Islamic financial services, shipping transportation and
information and communications technology will be offered, and
research and development will be undertaken into new business
activities, products and incentives for the IOFC.
New
Perspectives of Labuan
The development of the IOFC is a long-term national agenda.
A critical element that has ensured Labuan’s potential is the
unwavering support of the Government. The Prime Minister announced
several measures during his visit to Labuan in September 2004,
including an open sky policy for Labuan, the extension of the
airport runway and the revival of the ship-building and repairs
industry. He also reiterated that only legitimate and
credible business activities are encouraged to operate in Labuan.
LOFSA
continued to adopt a consultative approach in formulating business
policies and strategies to maintain the vibrancy of Labuan IOFC,
in line with Bank Negara Malaysia’s Financial Sector Masterplan.
An International Advisory Panel (IAP) comprising industry experts
and practitioners has been established by LOFSA. The broad
objectives of the IAP include deliberation on the strategic
direction to enhance the prospect of the IOFC relating to business
and market development and create a more active business-oriented
offshore jurisdiction.
The
IAP has made a number of proposals on the areas of focus for the
further development of the IOFC; analysing the IOFC’s strengths
and the areas of competitive advantage; and developing the human
resource and specialist capacity of Malaysian IOFC.
Regulatory
Supervision
LOFSA
is committed to ensuring that the regulatory framework in the IOFC,
while ensuring compliance with international standards and best
practices, is continually improved and updated for a conducive and
business-friendly environment. The offshore activities in
Malaysian IOFC are governed by a specific set of legislation.
Provisions of other Acts of general application currently in force
in Malaysia, including the Anti-Money Laundering Act 2001, that
are consistent with the laws relating to offshore financial
services are also applicable. LOFSA carries out
regular supervision on offshore companies and maintains good
rapport with other offshore regulators and organisations.
Financial Performance
The financial performance of LOFSA for the year ended 31
December 2004 demonstrated higher growth. LOFSA recorded a
total income of RM17.7 million, an improvement from the previous
year’s income of RM15.0 million. The surplus recorded for
the year 2004 was RM3.8 million, an increase of 91.0% from the
previous year.
LOFSA
will continue with its approach of facilitating genuine and
reputable businesses to set up their operations in the Malaysian
IOFC. Going forward, the developmental and international
promotional activities will continue to be intensified to
strengthen the position of Labuan as an international offshore
financial centre.
___________________________________________________________________________________
FOR
MORE INFORMATION, PLEASE CONTACT:
Communications
Division
Corporate Services Department
Telephone
:
087-591200
Fax
:
087-411496
Email
:
communication@lofsa.gov.my
