Oleh/By : DATO' SERI DR. MAHATHIR BIN MOHAMAD
Tempat/Venue : THE SHANGRI-LA HOTEL
Tarikh/Date : 05/02/91
Tajuk/Title : CONFERENCE ON "LABUAN: AN
INTERNATIONAL OFFSHORE
FINANCIAL CENTRE"
It is indeed a pleasure to be here this morning and to
address this conference. This, I believe, is the inaugural
conference since the time the six key legislations aimed at
launching Labuan as an IOFC came into force in October 1st
last year.
2. When the government first announced its plans to launch
Labuan as an IOFC, the initial reaction among many in the
financial circles was one of incredulity. Some, I believe,
had to refer to their world maps to locate Labuan.
3. At first sight, it would seem to be a far-fetched idea
- the creation of a sophisticated modern financial centre in
an island which was hardly known and without any financial
infrastructure. But since that announcement this has been
remedied, albeit in a small way, with the establishment of
six banks, five legal establishments and eight accounting
firms.
4. Far-fetched ideas if worked at assiduously can become
realities. Most of todays successful business conglomerates
started as far-fetched ideas. It was the determination and
commitment of the people involved that saw the idea take
root and grow into what these conglomerates are today. In
our case, I would like to reaffirm the government's strong
commitment to develop Malaysia into an important regional
business centre through an efficient and increasingly diver-
sified manufacturing sector, as well as through greater
dynamism and sophistication in the financial, insurance and
banking services. Creating Labuan is one of the various
steps we have taken to achieve our goal.
5. Let me say that the government's policy to develop
Labuan as an IOFC was not pulled out of a magician's hat.
Deliberations on how best to develop the Federal Territory
of Labuan started a while back. We took stock of the is-
land's strengths and weaknesses and after assessing the many
alternatives, the proposal to develop Labuan as an IOFC ap-
peared to have a reasonable chance of success.
6. Labuan, located literally in the middle of the fast
growing Asia-Pacific region, has a number of attributes
which are necessary and conducive to the formation of an
IOFC. We, in Malaysia, are indeed fortunate. We are
blessed with a beautiful country which revels in sunny
weather and lush green vegetation. Our land is rich in ag-
ricultural and mineral resources. Our workforce is young,
educated and productive. Our political and economic stabil-
ity is well-known among investors. These attributes have
been identified by experts as some of the key foundations
necessary to build an IOFC, and in Labuan, these are amply
evident.
7. To ensure Labuan's development into an IOFC of interna-
tional repute, a series of development projects have been
identified. These projects, which will cater for both the
short and long-term needs of offshore investors in Labuan,
are already being implemented in some cases, and others are
in the final stages of planning prior to commencement of
work. To provide for a conducive work environment for off-
shore financial institutions, there are definite plans for
excellent office buildings, fully equipped with the latest
office technology, to be built, some by government agencies,
in an area that is going to be zoned as a Financial Park or
Banking District. To ensure that telecommunication facili-
ties meet the high standards required of an IOFC, various
projects are already being undertaken by Syarikat Telekom
Malaysia to immediately upgrade telecommunication facilities
in Labuan. Efficient modern telecommunication is a hallmark
of an IOFC, and we are certainly sparing no efforts in giv-
ing top priority to undertake and complete all projects that
will improve and enhance telecommunication service in
Labuan.
8. The Government has requested Malaysian Airlines to
schedule more direct flights between Labuan and Kuala Lumpur
and also between Labuan and Kota Kinabalu. If the demand
justifies we will have direct flights from foreign points
into Labuan. Our aim is to ensure that a visitor to Labuan
is able to travel in by the most convenient and comfortable
way, and within the shortest possible time. I know time is
precious for businessmen and I have no doubt that we shall
certainly see a more favourable scheduling of flights in the
course of the year.
9. The construction of a modern hospital in Labuan is also
being expedited. The hospital should be able to serve both
the residents and non-residents of Labuan and be fully
equipped for a comprehensive range of specialist services.
The government is certainly planning to effect a number of
other projects too, in the area of housing, office space,
and other support facilities which are suitable for an
expatriate community, such as recreation and education.
10. The numerous queries and interest shown by various par-
ties in the Labuan IOFC, indicates that Labuan can create a
niche for itself. Labuan, in close geographical proximity
to many Asian capitals, is in an ideal position to be devel-
oped into an integrated financial centre. We aim to develop
it to meet the banking and insurance needs of multinational
companies and high net worth individuals and families in the
Asia-Pacific region, who wish to protect their interna-
tionally held assets and trusts as well as minimise their
tax liabilities. Indeed, I am confident that Labuan would
be an excellent domicile for many regional insurers and re-
insurers who are far-sighted enough to take advantage of the
potentials arising from rapid growth in the region.
11. Yet, in our enthusiasm to develop Labuan, let me say
that our efforts and overtures should not be construed by
potential offshore companies as a proclamation of a 'free-
for-all policy' for Labuan. On the contrary, Labuan will be
a selective suitor and will only woo those who are reputable
and who are prepared to set up operating offices in Labuan.
I am aware that in some tax havens, an offshore company need
only maintain its presence through a name or brass plate.
Such IOFCs are treated as post offices by the offshore com-
panies and are at best 'ghost towns' for names without real
'bodies'. The Government's vision for Labuan is certainly
not of this vintage, but that of a bustling functional town-
ship. It may take time and experts have warned us that even
the Cayman Islands took about 10 years to be fully estab-
lished. But we are confident that our vision will be
achieved sooner, rather than later.
12. However, let me dispel any idea, and forestall any
criticism, that the Government has created an entrepot for
legalising illegal drug money and other laundering activ-
ities in the region. Our stand on such matters is well-
known and we will have nothing to do with facilitating any
illegal activity, least of all transacting in the ill-gotten
gains of crimes that are so abhorrent to us. In this con-
nection, I should stress once again that it is the Govern-
ment's intention to admit only offshore players of integrity
and high international standing into Labuan. This selective
process is not limited only to the offshore banks, offshore
insurance companies and offshore investment companies, but
will also be the standards set for professionals who provide
the support services, such as legal, accounting and trust
services.
13. Today's developments in the world economy give us added
reasons for developing Labuan as an IOFC. The turn of
events over the last couple of months underscores the frag-
ile state of the world economy. Latest indicators suggest
that the longest-running post-war economic expansion is
grinding to a halt. The United States and the United
Kingdom are already in recession. These developments, cou-
pled with the breakdown in GATT negotiations and the out-
break of war in the Gulf region, have cast a dark cloud of
uncertainty over the global growth prospects in the decade
of the 1990s. Amidst this gloomy scenario, the silver lin-
ing is that economies in the Asia-Pacific region continue to
expand in the 1990s. The high rates of saving and investment
in this region, coupled with pragmatic domestic macroeco-
nomic management, a willingness to undertake necessary
structural reforms, an educated work force, and political
stability, all augur well for the continuing bright pros-
pects of the economies in the Asia-Pacific region. The
sheer size of the region, which presently accounts for 40%
of world output and 45% of world trade, indicates its enor-
mous potential for further expansion. Its total population
of nearly 2 billion people or 37% of the world's population
represents a vast potential market which has yet to be fully
exploited.
14. Malaysia is an integral part of the Asia-Pacific re-
gion. Much of the upsurge in foreign investment inflows in
recent years emanated from Japan and the rapidly growing
economies of Taiwan, South Korea, Hong Kong and Singapore.
Indeed, Taiwan has emerged as the single largest source of
new foreign investments, surpassing the traditional leaders
such as the United States of America and Europe. It is with
this sense of wanting to forge closer relationships between
nations in the region that Malaysia has recently proposed
the formation of an East Asian Economic Grouping. We are
pleased to note that many nations have expressed their sup-
port for this idea which, we believe, once implemented, will
inject even greater dynamism into the region and ensure bal-
anced and free trade.
15. The Malaysian Government, on its part, will continue
with the current policies which have proved successful in
promoting Malaysia as an investment centre. Where neces-
sary, new measures, including fiscal incentives, will be in-
troduced to ensure that private investment spending remains
sufficiently high to support economic growth and develop-
ment. At the same time, efforts will be intensified to
maintain a conducive investment environment for the private
sector to flourish and lead the economic growth process.
This includes increased allocations in the Sixth Malaysia
Plan for the upgrading of infrastructural and other support
facilities in line with the needs of a rapidly expanding
economy. The Sixth Plan, 1991-95, will spell out the Gov-
ernment's commitment to providing the necessary support to
ensure that the administrative, industrial and human re-
source infrastructure is in place to support private sector
investment and growth.
16. Indeed, for us in Malaysia, growth with equitable dis-
tribution will continue to be the major policy thrust in the
1990s. While I cannot provide the details of the Sixth
Malaysia Plan before it is tabled in Parliament at the end
of June this year, I can certainly assure the private sector
that the favourable business climate that we are witnessing
today will continue to be promoted. The government aims at
greater liberalisation. Our track record speaks for itself.
As an initial step, the investment guidelines on 100% for-
eign equity ownership for manufacturing projects, which ex-
pired in 1990, have been extended for another year. Further
measures will be announced later, together with the release
of the Second Outline Perspective Plan in June this year.
17. In the years ahead, priority will be given to the fur-
ther development of the financial services industry. A more
efficient, innovative and competitive financial sector is
vital to the growth process and overall development of the
nation, particularly as the economy becomes increasingly
more modern and industrialised. The launching of Labuan as
an IOFC represents an important part of the strategy to de-
velop financial services to support the nation's development
thrust. It is envisaged that Labuan will become a window to
Malaysia in attracting new sources of foreign capital to fi-
nance Malaysia's rapid industrialisation process. Labuan is
expected to play a key role in the effort to develop
Malaysia into a truly viable regional financial centre.
18. This Conference on Labuan is certainly timely and I
hope that it will generate useful ideas and constructive
feedback for the Government, so that necessary measures,
whether remedial or otherwise, could be taken to further en-
hance and advance Labuan as an IOFC.
19. On this note, I now have much pleasure in declaring
open this Conference on Labuan : An International Offshore
Financial Center.
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