SPECIAL REPORT: ASIA’S RISING IFCs
Contents
THE BIG INTERVIEW - THE ADVISERS
Holborn Assets’ Riyad Adamou
INTRODUCTION
Asia’s new gateway
FRONTRUNNERS
Hansard International: New opportunity arises in Japan
JURISDICTIONS
Labuan IBFC: The best of both worlds
Labuan: The gateway to Asia Pacific
Spotlight on Malaysia and Japan
Welcome to our new-look special reports, with a cleaner layout and more user-friendly interface, as easy to read on your smartphone as on a laptop or tablet. This month we take an in-depth look at Malaysia’s Labuan free trade zone, and the increasingly important role it’s playing in Asia’s economy. As Hong Kong grapples with its increasingly uncomfortable status within China’s “one country, two systems”, many in the industry are looking to Malaysia and Singapore as viable alternatives. Labuan International Business and Financial Centre (Labuan IBFC) is already seeing its comprehensive midshore solution reap results as new businesses soared 12.5% last year, and now lists 1,059 companies from across the region. Pedro Gonçalves explains the background to this success in his feature. And in an exclusive interview, Pedro talks with Labuan IBFC’s CEO, Farah Jaafar-Crossby, who explains why “as a midshore IFC we hope to offer the best of both worlds.” In our regular Big Interview – The Advisers series, Riyad Adamou of Holborn Assets discusses the company’s pivot to Asia. And in our extended video feature Hansard’s Graham Morrall discusses the company’s recent expansion into Japan with Gary Robinson. I hope you enjoy the new issue, and our innovative new format. Christopher Copper-Ind, Publisher, International Investment.
“As Hong Kong grapples with its increasingly uncomfortable status within China’s ‘one country, two systems’, many in the industry are looking to Malaysia and Singapore as viable alternatives”
THE BIG INTERVIEW – THE ADVISERS
As one of the Dubai’s biggest players Holborn Assets is firmly commited to the Middle Eastern marketplace despite the ongoing challenges of changing regulation and a number of advisers falling by the wayside. But most recently – as it adds to its bases across the world – Asia has become an increasingly important hub for the firm. In addition to an office in Malysia, there has been acquisitions across the last couple of years in both Hong Kong and most-recently in April this year with a new outpost in Vietnam's commercial capital of Ho Chi Minh. The new operation, in the iconic Bitexco Financial Tower, the city's tallest building, which will based in the heart of the financial district, will be headed up by industry veteran Andrew Menzies as country manage. In this Q&A and video interview (above, right) International Investment’s Gary Robinson meets up with Riyad Adamou, chief commercial officer at Holborn Assets at the company’s Dubai headquarters and discusses how global regulation is shaping international financial services, why Asia is increasingly important to the company and what makes one of the industry’s best-known companies stand out in a crowded marketplace. GR: What makes the Asia marketplace important to Holborn? RA: Asia offers a very diverse mix of clientele and through that comes an array of different requirements and needs most of which are not catered for by the local banking the sector or through the domestic practices. This creates a big opportunity for companies such as Holborn to fill the void, offering a more familiar service in an unfamiliar territory which clients certainly appreciate. Removing the major Asian hubs the Asian market as a whole is still relatively under-serviced and offers a great opportunity for companies that have the will and the means to invest in operations over the longer term. GR: In the last couple of years you have recently acquired books in Hong Kong and Vietnam etc. How has this bedded in and do you see this type expansion continuing? RA: Our global expansion has been well documented over the last few year and Asia was an area we identified during the writing of our last strategic plan. We have opened four offices in Asia in the last 18 months and we are presently looking at two other territories, but our expansion has always been people driven. You can have what looks like a fantastic opportunity on the surface but you have to have the right manager in place along the right people who possess the right knowledge in order to deliver on that opportunity. In most instances we try to recruit from the region itself or the surrounding regions which greatly mitigates our risk. Each acquisition or new venture follows a set process to ensure we cover all aspects of the business and aids their seamless integration into the wider group. We continue to learn lessons from each new venture and that knowledge is then carried forward to aid the next. GR: To what extent is HK’s current domestic crisis affecting financial services in the region? RA: It’s hard to pin point exactly how deep an impact the current domestic crisis is having on the sector in isolation especially when there is so much happening on a global scale, but as the General Chamber of Commerce mentioned in a statement earlier this week its clear the demonstrations are doing little to improve Hong Kong’s reputation as an international financial centre. Unfortunately with any form of uncertainty comes greater caution so a negative impact on business is inevitable. With reference to our operations in Hong Kong we have actually been relatively unaffected. Our clients are primarily made up of HNW expatriates whose targets and ambitions have not changed and they remain very much in need of our services. Of course the local issues are something we are vigilant of but we are medium to long-term strategists and when you take that approach you have to accept there will be bumps in the road. GR: What makes Holborn stand out in Asia? RA: We are a company that has a deep pool of experience and a diverse workforce which we are able to consistently draw on. All of our managers in Asia have been living in their jurisdictions for over a decade which means we immediately have a clear understanding of the local market and this puts Holborn at a clear advantage from the first moment we open the doors. Experience is not something that can be bought and we are glad to have four great managers in place that bring stability and consistency to our operations. It is that local knowledge and experience coupled with Holborns infrastructure and the strength of our overall proposition that makes us stand out amongst our peers. GR: What sets Holborn apart from other companies. What makes you special? RA: We are transparent in everything we do – there are no hidden agendas and any new advisers soon learn that there is transparency here than you wouldn’t find at any other company – from our basic management information right through to our strategic plans. We operate a corporate structure but that is underpinned with family values. And as with all good families we stick together and our advisers all pull in the same direction which is fairly unique in what is a very competitive market. GR: How important is the Middle East market to your business model? And what challenges does that market face? RA: Hugely important, this where the company started, this is the companies HQ and the nerve centre of Holborn. It is a market we know and a market we understand but it also a market that can change quickly, it is a market that is perhaps more susceptible to change for various reasons than other more established, equivalent territories such as Singapore or HK so we are constantly having to adapt. It is a market that ebbs and flows but the transient nature of expats means there is constantly new people arriving who have financial planning requirements and the same goes for people leaving, so there is still a huge opportunity here, uncertainty remains one of it’s biggest challenges but at the same time it is also creates opportunity. GR: How will regulatory change affect your business? And how do you plan for such eventualities? RA: Over the long term positively, but as with any change there is a transitional period, perhaps even a period of pain as you change and grow. The changes have been coming thick and fast over the last few years. Circular 12 here in the UAE, COBS in the IOM, changes to the pensions market, recent changes out Malta to name but a few. But thankfully we have been planning for this change for quite some time, focusing on our own proposition and vertically integrating where we can, improving our employee and client facing proposition to ensure Holborn’s overall proposition remains the strongest in the market, and, we believe it is. Holborn will be one of the few companies that will benefit from greater regulation, so we welcome it. GR: How do you see the advisory world, in the Middle East changing across the next few years? RA: At some point more regulation will come through and you would expect that it would be within the next few years. When that does occur I think we can expect more consolidation, and we can expect a reduction in adviser numbers leaving a smaller head count of higher quality career advisers. In short it will become a more mature market. GR: Why would an adviser choose Holborn? RA: There is a number of different reasons, we can talk about our employee proposition, the strength of our client proposition, the investment we make into our workforce but at the core I think our Ethos and our transparency is really key here. It’s a completely different working environment and for many its a refreshing change. GR: What are the challenges around good quality staff retention? How does Holborn achieve this? RA: Aside from the usual of course, which is to provide a competitive employee and client facing proposition, you have to provide a platform for personal growth, financial incentives alone are not enough. We spend considerable sums on the education of our advisers each year but more importantly we try as much as possible to seek out the feedback of our employees, from the seasoned adviser to the paraplanners to those that work in the cafeteria. We implore our employees to speak up as much as possible and encourage them to come to us with any suggestions for how we and where we can improve. Everyone’s opinion is valid and when people feel they can contribute they feel valued. GR: With many IFAs in ME, Asia and elsewhere converging or books being sold, how important are acquisitions to Holborn? RA: I think its fairly well know that Holborn has been on a rapid period of expansion over the last two years hiring over 200 people, opening 10 new offices across various new departments and divisions. But acquisitions are only as good as the people you bring in. It’s not the amount of clients, the amount of advisers or the size of the book of business it’s very much the people. If the people are not a good fit for Holborn then regardless of how good the deal looks on the surface we would not be interested. So Holborn’s growth, whilst being part of our strategic plan, has actually been fairly organic because we have known many of the people we have brought on board, and we have known them for a number of years. But, each acquisition is treated on its own merits and has to adhere to strict criteria before we would even consider it. All is can say is we turn down far more people than we recruit and we have recruited a lot as you know. GR: What are your key product areas for 2019 and beyond? RA: Not to objectify people but our key product is and always will be our advisers and our workforce in general, so we will continue to focus on them as we always have. But when it comes to our client facing proposition, which I assume is what you are referring to, we have expanded into other areas, for instance we have recently launched a new end to end property division as a further value add. But our main focus is on refining our existing proposition as much as possible. We want to create an attractive, clear and efficient proposition that allows us to easily scale. And, of course, with efficiency comes cost savings, and that’s cost savings that can be handed down to our clients and future clients as well. GR: How does Holborn help new recruits settle into new roles, particularly those moving from one country to another? RA: This may come as a surprise but we are not a company that recruits a great deal of new advisers to the industry. We are a company that promotes from within, but we mainly attract existing, seasoned advisers that are already in the region. If our competitors recruit 10 new people we would prefer to recruit 1 experienced adviser, but we would still allocate the same amount of time and resource to ensure the success of that individual. It’s a different model but most of the work is actually done during our recruitment process so an adviser joining Holborn knows exactly what to expect the moment she or he comes through the door. Then it is more a case of getting to know systems and processes and we have a very some really fantastic staff on board who assist with that.
“With reference to our operations in Hong Kong we have actually been relatively unaffected. Our clients are primarily made up of HNW expatriates whose targets and ambitions have not changed and they remain very much in need of our services”
This interview is the second from our new 'The Big Interview - The Advisers' section (sponsored by Hansard Worldwide) which can be found on www.internationalinvestment.net.
Riyad Adamou, Holborn Assets
New opportunity arises in Japan
On 21 June 2019, Isle of Man based Hansard International Limited announced that it had secured an Investment Manager licence in the world’s third largest economy, Japan. The acquisition of this licence is the first of its kind for an offshore insurance company, and is a further significant strategic step in bringing a new chapter in the company’s thirty-year history to life. Many in the industry have keenly followed Hansard’s pursuit of this licence for a long time, and being listed on the London Stock Exchange, the company has observed its obligation to keep interested onlookers informed of its progression over the years. So, whilst this is most definitely great news, it is not ‘by definition’ new, or unexpected news. Hansard has been focused on securing licenced opportunities around the world over recent years, with the latest announcement being the third; following a strategic alliance with Union Insurance Company in the UAE in 2017 and the establishment of Hansard Worldwide Limited, operating out of the Bahamas, in 2018. Ever-confident of a positive outcome, Hansard has been busily working behind the scenes to have everything in place for the green-light from the Japanese regulators, not least the appointment of a team of highly-experienced, bilingual Japanese nationals who will play a fundamental role in the implementation of the next steps; including the realisation of its business plan, the registration of a next generation product, the appointment of a general manager, and kick-starting conversations with distributors in the local market. As Chief Executive Officer Gordon Marr explained “The licence presents us with a very significant and material opportunity to achieve a step change in Hansard’s future growth potential, but there is much work to do before we are operational” Historically well-known for being relatively risk averse in its saving habits, the 128 million-strong population of Japan has shown recent signs of becoming more willing to look further than the ever-popular local postal saving schemes, available from over 25,000 branches across the country. As Hansard’s Global Sales & Marketing Director, Graham Morrall explains “It is estimated that $14trn will be saved in Japan in 2019, of which, $9trn will be committed to low interest, deposit type arrangements”. As a provider of savings and investment products for over 30 years, this backdrop represents an obvious opportunity to Hansard, albeit one that is not under-estimated in requiring significant commitment, investment and focus in delivering a proposition that will prove popular with clients and distributors alike. Synonymous with being at the forefront of online developments within the industry, and having scooped numerous awards over the years for its advisor & client platforms, it is no surprise to hear that technology will be central to the delivery of Hansard’s ‘next generation’ proposition in Japan, utilising a platform that will provide a truly paperless ‘end-to-end’ transaction for clients, in local language. As you would expect of a developed economy, highly regarded for its advances in technology, Japan is home to some of the largest financial service providers in the world, with lots of established players providing healthy competition to Hansard, so the size of the task in hand is not under-estimated. It is fair to say, though, that Hansard is a company that has long ‘punched above its weight’ in an industry that is home to a number of large, multi-national household names, and is therefore extremely well-placed and ready for the challenge that this new chapter in its extensive history presents.
NEXT STEPS
THE OPPORTUNITY
“It is estimated that $14trn will be saved in Japan in 2019, of which, $9trn will be committed to low interest, deposit type arrangements”
Graham Morrall, Hansard International
Gary Robinson speaks with Hansard's Global Sales and Marketing Director Graham Morrall who discusses the company's plans in Asia, including its landmark Japanese license
LABUAN
The gateway to Asia-Pacific
With 1059 new companies mostly from Japan, China and South Korea, Labuan IBFC is also making the most of its location, strategically located in the heart of Asia. Anchored by a simple and attractive tax system, it offers a wide variety of business and investment structures to boast and promote cross border transactions and wealth management. In a press release statement, Labuan Financial Services Authority said Labuan IBFC’s trust and corporate service providers increased by 11.5% year-on year amounting to 58 trust companies including granting six new licences in 2018. It added that Labuan’s insurance sector also saw a growth of 19.1% to $1.7bn in insurance premiums written, of which 64.7% were foreign insurance businesses. Being located off the coast of East Malaysia – also know as Borneo coast – on an island named Labuan, in the heart of Asia-Pacific, has allowed it to become a connectivity hub for Asian businesses to continue tapping into opportunities in the region. Its location shares the same time zone as many large Asian cities and financial hubs such as Singapore, Hong Kong, Beijing and Shanghai. “The overarching growth last year underscored Labuan IBFC’s growing prominence as a regional financial hub, facilitating intra-Asian trade, investments and asset intermediation,” the report said. Labuan FSA director general Danial Mah Abdullah said the centre continued to be an attractive destination among non-resident businesses fuelled by its robust business policies and the expansion and deepening of Labuan IBFC’s intermediation role. “Yes, we are confident of recording another double-digit growth [in new company incorporation] this year, if not at a normal rate at eight to 10% growth recorded in the past 10 years. “Labuan IBFC remains a preferred jurisdiction for investors seeking business expansion in the region, in tandem with the growing pace and potential of Asia’s economies,” he said during a meeting with the press. Labuan banking sector’s total assets increased by 8.4% to $55bn, while total loans rose by 19.1% to $33. 2bn. The report said loans granted to non-residents accounted for 59.7%, with most from the Asia Pacific region. Islamic banking business continued to grow in financing and customer deposits, with total assets grew 2.4% to $3.2bn, and total financing up by 8.4% from $2.7bn. With the mission of striking the perfect balance between client confidentiality and compliance with international best standards and practices, Labuan IBFC not only provides Islamic banking services but was the first financial centre to meet the unique needs in Islamic wealth management. It has available a complete suite of Islamic wealth management structures and solutions that includes a Shariah Supervisory Council that adds an extra layer of comfort to businesses and investors that seek Shariah-compliant financial services. “Wealth management, in particular, offers a unique value proposition given that it is the only international financial centre in Asia to offer private foundations and special purpose trusts, including Islamic foundations or waqf,” Muhammad bin Ibrahim, the former governor of the Central Bank of Malaysia (Bank Negara Malaysia), said about Labuan IBFC. The private client waqf foundations have attracted interest from investors in Asia Pacific, such as Singapore, as well as Jordan and Saudi Arabia. Labuan IBFC is the first jurisdiction in the world to introduce the ability to utilise the concept of waqf in wealth preservation and management using contemporary and internationally recognised foundation laws. The financial centre is also looking at the new frontier that Islamic fintech presents. Established in 1990, since 2008 the jurisdiction has undergone a rebranding and has moved beyond banking, capital markets, leasing and insurance to also include protected cell companies, partnerships, trusts, foundations and an international shipping registry. It has even become the financial hub of choice for players in niche financial services such as aircraft and oil and gas leasing services, reinsurance and captive insurance. The game changing rebranding also included repositioning it from an offshore to a midshore centre to give a distinct value proposition that distinguishes Labuan IBFC from other competitors. As a midshore centre, it offers both the ease of doing business found in offshore centres, combined with high international standards of regulation and supervision found onshore. Labuan IBFC is supported by a modern and internationally recognised legal framework enforced by its regulator, Labuan Financial Services Authority. Labuan FSA ensures that the jurisdiction follows international standards and best practices in financial services and prudential supervision, including protocols on anti-money laundering and exchange of information and regulatory requirements set by the OECD. The legal framework reflects the ongoing commitment of the centre to be a leading jurisdiction in advocating strong prudential, transparency, anti-money laundering and counter terrorism financing standards. This allows international investors to enjoy jurisdictional neutrality while operating in a sound and stable environment. Labuan IBFC also boasts a simple and straightforward tax system that make it and ideal financial hub for global companies to house their international dealings and transactions. A Labuan entity is subject to tax in respect of its Labuan business activity such as foreign currency with non-residents or other Labuan entities, or in respect of any designated Labuan business activities which then may be transacted with residents or in the Malaysian currency. Tax is chargeable only on the net profits per audited accounts in respect of Labuan trading activities. For example, banking, insurance, trading, management, licensing, shipping operations and any other activity, other than the holding of investments in securities, stocks, shares, loans, deposits or other properties. The tax rate is 3% upon the chargeable income from only the Labuan trading activities. This means the income from the Labuan non-trading activities such as the holding of investments in securities, stocks, shares, loans, deposits or other properties of a Labuan entity is not subject to tax at all. However, a Labuan entity may elect –- within three months of the start of the year of assessment – to be charged to tax of RM20,000 instead of the 3% of net profits. This means that the Labuan entity will not be required to submit a tax return for that year of assessment. As fintech seems to be changing the way financial services are delivered, Labuan IBFC is seeing an opportunity to carve its own niche in this new area. The Fintech Association of Malaysia (FAOM) is in talks with Labuan financial centre in order to facilitate businesses onshore Malaysia and abroad by using the uniqueness of Labuan’s financial regulatory framework focusing on fintech startups, SMEs, growth and scalable companies that seek to tap on foreign investments and funds. The IBFC saw many financial technology startups establish innovative financial services-related businesses in 2018, offering a ready suite of infrastructures and solutions in the fields of money broking, capital market and wealth management business. As Asia Pacific’s premier midshore international business and financial centre that combines the ease of doing business, tax and currency neutrality, cost efficiency and international standards of compliance, Labuan IBFC has positioned itself as the gateway for businesses seeking to connect with Asia’s economies and beyond.
CATERING TO THE UNIQUE NEEDS IN ISLAMIC WEALTH MANAGEMENT
A SIMPLE AND ATTRACTIVE TAX SYSTEM
REPOSITIONING LABUAN IBFC
FINTECHS URGED TO TAP LABUAN FOR FOREIGN FUNDING
Pedro Gonçalves is financial correspondent for International Investment.
Labuan International Business and Financial Centre (Labuan IBFC) is seeing its comprehensive midshore solution reap results as new businesses soared 12.5% last year. Pedro Gonçalves explains the background to this success
“Wealth management, in particular, offers a unique value proposition given that it is the only international financial centre in Asia to offer private foundations and special purpose trusts, including Islamic foundations or waqf”
Muhammad bin Ibrahim, former governor of the Central Bank of Malaysia
The best of both worlds
How does Labuan IBFC makes use of its strategic location in the heart of Asia to tap into what is one the fastest growing regions in the world? Being at the heart of Asia is ideal for an international business and financial centre such as Labuan IBFC, due to it being geographically close and within similar time zones with most Asian countries. It is also easily accessible through flights. The jurisdiction is further fuelled by robust business and tax policies, in a currency and tax neutral as well as proportionate regulatory environment. Such advantages have given Labuan IBFC the edge in connecting Asia’s economies though the intermediation of trade, investment and asset intermediation. Hence it is not a surprise that Labuan IBFC is growing in prominence as a regional financial intermediation centre, as witnessed by market growths in 2018. The growth experienced by the jurisdiction has been consistent and constant over the close to three decades it has been in existence, and in fact over the last couple of years we have seen a surge in interest in Labuan IBFC mainly due to the flight of quality precipitated by the changes in global tax rules and standards. In a way, the fact that Labuan IBFC has retained and maintained its global gold standard in terms of international business companies, as well as the range and breath of corporate and wealth management solutions available in the Labuan “tool box” has created a go to midshore financial centre in the centre of Asia Looking forward we are not resting on our laurels. The ethos running through the jurisdiction is clear: it is to facilitate inter/intra Asia’s financial, investment dealings. Our focus will always be on Asia. For businesses, investments and risk management entities looking for a currency and tax neutral, cost-efficient operating environment, coupled with a one stop regulator with an open mindset exercising proportionality in regulations – the answer is Labuan IBFC. We intend to grow with and facilitate the growth of Asia.
VIDEO: Introduction to Labuan IBFC
“As a midshore IFC we hope to offer the best of both worlds”
In this interview, International Investment’s Pedro Gonçalves talks with Labuan IBFC CEO Farah Jaafar-Crossby about some of the unique solutions the financial centre offers, particularly in the world Islamic finance, how it is attracting fintech startups and how it is using its privileged location to act as a conduit for entrepreneurs and investors across Asia and beyond
Labuan IBFC introduced the world’s first omnibus legislation governing all Shariah-compliant businesses in an IFC. Are your shariah-compliant offerings still spearheading in the region? Overall, Malaysia has always played an important innovative role in Islamic financial services, boasting a comprehensive regulatory framework for Islamic banking, finance, Takaful and asset management. In extension, to our knowledge, Labuan IBFC is the only jurisdiction that offers an omnibus legislation that govern all Shariah-compliant businesses in an IFC. In effect, all the licenses, structures and solutions available in Labuan are able to operate in an Islamic option. This approach benefits from the fact that we have this omnibus legislation purely focussed on this, as well as having a strong Shariah Supervisory Council which consists of international leaders in Islamic jurisprudence and theology. We have been an innovative hotbed for Islamic financial products, such as the introduction of Waqaf embedded within a private foundation, set up as a wealth management structure. We are also home to the world’s first US dollar-denominated exchangeable sukuk, contributing towards Malaysia’s position as the global leader in Sukuk issuance. We are also the world’s only jurisdiction that offers Takaful captives, an in-house reinsurance company as another example of how the jurisdiction is in the forefront of innovation in Islamic finance So clearly there is a tendency to push the envelope in the Islamic financial services, and we intend to continue with this innovative approach. What sets Labuan IBFC apart from other financial centres, both in the region and globally? Labuan IBFC offers a range of sophisticated financial solutions of which some are unique in the region, such as the Waqaf foundation, Protected Cell Companies structures, private client foundations, captive insurance, as well as an extensive range of digital/fintech related licenses, which keeps us in good stead in the region and abroad. In addition, the fact that there is a one stop regulator in Labuan FSA, which is a progressive regulator which practices proportionality in regulation is also a key success factor. Of course having said that, the overarching principal of adhering to international standards of compliance, transparency and anti-money laundering is never mitigated. Collectively, this approach provides greater confidence and peace of mind to investors. What is Labuan IBFC’s role in the Malaysian economy and which links does it share with Singapore? As an island proclaimed as a Federal Territory by the Malaysian Government back in 1984, Labuan has evolved and later rebranded as Labuan International Business and Financial Centre (Labuan IBFC). It was established to complement Malaysia’s capital, Kuala Lumpur, as a financial centre, in addition to develop the island and its surrounding vicinity. Since its establishment, international financial activities have contributed to the island’s economic growth and employment opportunities. For example this year, with the Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2018 in place, job opportunities on the island will be boosted further, as the regulation requires a Labuan entity to have adequate full-time employees on the island as well as adequate amount of operating expenditure. Labuan IBFC was initially set up to assist Malaysian companies branch out to the region and has been successful in executing this mandate. There are numerous home-grown companies such as Air Asia which have benefitted from the policies of the Malaysian Government facilitated through Labuan IBFC. Over the years, regional corporations and high net worth individuals have also discovered the benefits of Labuan and it has become a regional IFC with links across the globe, represented and evidenced by the 55 international banks and close to 200 global reinsurance/insurance license holders in the jurisdiction. In addition, there are now close to 60 trust and corporate service providers with links to other jurisdictions facilitating the growth of Labuan. With regards to Singapore, we strongly believe in a win-win relationship with Singapore as an IFC. Very much like the links between the two countries, the links between the two IFCs are just as co-joined. Singapore’s continued success as an IFC, ensures that Labuan IBFC also continues to grow and we welcome their continued robustness as well as expansion. Is the midshore centre concept a game changer? Being midshore is a pragmatic approach in the face of an evolving business environment. Labuan IBFC adopted the approach in order to further combine regulatory upscaling with business dynamism to ensure suitability, stability and vibrancy. We have continuously striven to adhere to international requirements such as on substance and transparency, and are compliant to both domestic and international requirements. For example, we are a signatory of the BEPS Multilateral Agreement, compliant with FHTP tax standards and AEOI/FATCA , and independently assessed by IMF, FSAP, APG, OECD, FATF, IOSCO as compliant or largely compliant. It is with the midshore banner that Labuan IBFC will continuously strive for the right equilibrium to balance its market stability agenda vis-à-vis business growth. The hope is that, as a midshore centre, Labuan IBFC will scale greater heights to be on par with leading IFC brand names. As a midshore IFC we hope to offer the best of both worlds, i.e. the innovative dynamism of a typical offshore offering married with the prudent and compliant approach of a more traditional onshore financial centre. After all, isn’t the best and most pragmatic approach lie somewhere in the middle? As such we are hoping to continue to straddle this position for the benefit of the jurisdiction and the economic growth of Labuan island. There was a call for fintech to tap into Labuan for foreign funding. Can you give us a bit of insight into what is happening with that? As a progressive jurisdiction, we are constantly working on ensuring we are in step with the changing business landscape. Needless to say, catering to the digital aspect, which encompasses fintech, has been on our agenda in recent years, and demand has been gaining traction. As of June 2019, approximately 20 licenses related to the digital market have been approved by the regulator, Labuan Financial Services Authority (Labuan FSA), in areas such as digital assets trading, digital token, e-wallets, insurtech, and robo-advisory. Labuan FSA is currently working on a more extensive digital framework and guidelines, in order to further develop this area. The approach to digital finance including all things related to DLT and fintech has been pragmatic and prudent. With the expansion of global agreements and coordination in areas such as tax harmonisation and regulatory upscaling, privileges such as tax incentives and secrecy are no longer key competitive differentiators. What’s Labuan IBFC’s value proposition under this new reality? Labuan IBFC offers a transparent regulatory framework and conducive business environment have enabled and continued to facilitate market forces to operate effectively where business innovations can flourish. Only legitimate businesses are permitted to operate in Labuan IBFC, emphasising quality over quantity and our bespoke approach to licensing allows us to take the time to best understand each and every business plan put forth as part of the licensing application. Labuan FSA has continuously stressed on international compliance, which enables the financial sector to engage in trade and services in a competitive global market. Thus the Centre has been vigilant in enforcing prudential safeguards where needed. With that said, it has to be emphasised that a complex balance has to be maintained in order to be able to attract and nurture a robust business environment. A lighter regulatory touch does not necessarily mean a more relaxed approach for example, but rather having the right regulations to maintain high standards of integrity and transparency to foster greater confidence in the market as well as prospects beyond. Labuan IBFC’s business sectors experienced a 12.5% growth. What is behind this success? This was made possible by a facilitative business regime in a well-regulated environment and supported by the Centre’s professional service providers. Efforts continue to enhance Labuan’s legislative framework to ensure regulatory and business relevancy as well as introduction of forward-looking policies that enable the jurisdiction to offer innovative financial services to meet sophisticated market needs. Overall it is the commitment that the jurisdiction has to ensure global relevance and compliance, that has seen it through its continuous progress. As mentioned, we have benefitted from the global flight to quality the whole industry is experiencing as a result of the changes to the global tax landscape and the need for substance. The turmoil surrounding Hong Kong seems to be boosting Singapore status as a safe haven. Are you experiencing something similar in Labuan? As a strategically located and progressive IFC, we welcome any legitimate businesses to be domiciled in Labuan IBFC. We believe in growing the “Asian pie” so all IFCs can enjoy growth on the back of sustained growth in Asia. While in the short term, it may be perceived there are benefits for other neighbouring IFCs, in the longer term, all three IFCs in Asia, Hong Kong, Labuan and Singapore will not benefit from continued excessive turmoil in Hong Kong. It must be stressed though that even prior to the turmoil, Labuan was already experiencing an overall upwards trajectory. As we continue our focus to be an integrated financial and economic regional hub, we look forward to continuous favourable business growth, especially with a progressive business and regulatory environment.
Farah Jaafar-Crossby is the chief executive officer of Labuan IBFC Incorporated Sdn Bhd (LIBFC Inc.), the official promotion and marketing agency for Labuan International Business and Financial Centre (Labuan IBFC) since January 2018. She assumed this role after more than three years as the director of Market Intelligence and Strategic Communications, in LIBFC Inc. She has more than 20 years of experience in capital markets and the wholesale financial services sector, putting her in good stead to promote Labuan IBFC as the preferred midshore jurisdiction in Asia Pacific. Jaafar-Crossby was formerly attached to the Asian Institute of Finance and Bursa Malaysia, where she was involved in senior market development and strategic communications roles. She also managed the Association of Stock Broking Companies Malaysia, the industry lobby group representing Malaysian stockbrokers, allowing her a unique insight and hands on experience with issues surrounding multiple stakeholder management. Jaafar-Crossby has a LLB (Hons) from Sheffield University, UK.
