KUALA LUMPUR (July 17): New company incorporation in Labuan achieved a 19.1% growth or 941 new companies in 2017, compared with 790 companies in 2016, said Labuan Financial Services Authority (LFSA).
"This reflects the increased interest for investments and business setups in Labuan International Business and Financial Centre (IBFC), mainly from the Asia Pacific region," said LFSA in a statement, adding that other regions showed marked growth, depicting increase in the geographical spread of market interest for Labuan IBFC.
"The strengthening of the global economic recovery and increased market confidence in 2017 has fuelled the growth momentum of Labuan IBFC in the regional landscape," said LFSA.
It added that the centre's growth trajectory remained positive despite the slight business moderation in the banking and insurance segments.
The number of banks increased to 54 in 2017, a 5.9% year-on-year (y-o-y) growth.
"Non-resident financing, particularly from the Asean countries, contributed almost 70% of the industry total loans comprising both conventional and Islamic lending," said LFSA.
While loans and advances contracted marginally by 0.5% to U$50.7 billion in 2017, Islamic financing grew by 61.6% due to increased demands for shariah compliant financing, LFSA added.
The industry remained resilient and well capitalised, despite seeing moderated profitability in Labuan banking in 2017.
The shareholders' fund increased from US$2.8 billion to US$3.3 billion in 2017, which resulted in higher risk weighted capital ratio of the industry of 37.9%, versus 35.7% in 2016, said LFSA.
Turning to the insurance segment, LFSA said there were 14 insurance and insurance related new setups in Labuan IBFC.
Gross written premiums rose 2.2% to US$1.4 billion; 63.2% of these businesses were retained in Labuan, said Labuan IBFC, attributing it to general reinsurance and captive premiums amounting to US$943 million and US$361 million, respectively.
LFSA noted that contribution from foreign business increased to 60.9%, while fire risks maintained its dominance with 36.7% of the total premiums.
Notwithstanding, the underwriting margin contracted to US$91.9 million due to higher catastrophic-related claims during the year, thus resulting in the overall claims experience to grow to 63.5% from 35.2%.
Consequently, the overall insurance industry profitability moderated to US$170 million in 2017, compared with US$387.3 million in 2016, said LFSA.
"Riding on the positive momentum of the regional economy, other Labuan niche businesses, such as in wealth management, commodity trading and money broking activities recorded growth," it said.
Under the wealth management sector, LFSA said the Labuan private foundations continued to draw interest from the Asia Pacific region, with 151 active foundations in Labuan in 2017.
In 2017, the Labuan international commodity trading sector recorded 12 new Labuan International Commodity Trading Companies (LITCs).
The accumulated income generated by the LITCs increased by 39.2% to US$23.8 billion as compared to US$17.1 billion in the preceding year, with a majority of the income stream derived from trading in petroleum and petroleum-related products.
In line with the increase in revenue, the profit before tax of LITCs more than doubled to US$755.4 million, from US$238.3 million in 2016.
Additionally, gaining traction in the recent years, money broking recorded more than 300% growth since 2013; the majority of the money brokers in Labuan provides electronic platform for the trading of currencies.
On the other hand, the Labuan leasing business performance saw a slowdown mainly due to the sluggish global oil and gas activities, which results in the decline of the total accumulative assets leased to US$48.8 billion.
In contrast, aviation leasing showed encouraging growth with 19 new asset leasing structures set up.
"Moving forward, Labuan IBFC intends to expand the growth in this sub-sector by capitalising on its past experience in aviation leasing and the Asia markets' expected growth in aviation market," said LFSA.