Labuan is conducive for China firms: ICBC
Published on: Friday, August 12, 2016
Kota Kinabalu: Industrial and Commercial Bank of China (Malaysia) Berhad (ICBC) is keen to woo companies in China to set up operations in Labuan due to the island's relatively low corporate tax.The conducive tax environment in the International Banking Financial Centre (IBFC) lowers the cost of operations for offshore companies in Labuan incorporated or registered under the Labuan Companies Act 1990.For that purpose, ICBC Labuan IBFC was established last November, said its Assistant Chief Executive Officer Lim Kok Fuat.
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He was speaking at a business talk on "RMB as an Alternative Trading Currency with China", held in collaboration with Malaysia External Trade Development Corporation (Matrade) and Kota Kinabalu Chinese Chamber of Commerce and Industry (KKCCCI), at the chamber's auditorium. About 80 people attended the talk."Labuan has not benefited much in the past due to Malaysia's insistence that banks like ICBC and other firms when doing business in the country must be locally incorporated with capital invested in Malaysia."By comparison, Singapore freely allows only branches of firms from other countries to operate in Singapore's market or for the international market from Singapore," Lim said.He said admittedly that the infrastructure in Singapore and the business environment with many international firms established is a draw for China companies to be in with that crowd of business dynamism.
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Nevertheless, Malaysia is attracting specific firms through the Labuan Financial Services Authority (Labuan FSA), which manages and supervises the Global Incentives for Trading (Gift) Programme.Labuan also needs to develop other complementary industries such as tourism, manufacturing industries and education.
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Lim said China companies can use Labuan as a base under the Gift programme.Unbeknown to many people, Gift is a programme with incentives designed to attract world-class trading companies to base their operations in Malaysia. Gift is a strategic collaboration between Labuan FSA and Malaysia Petroleum Resources Corporation.The programme is an extremely important component of the Economic Transformation Programme. It will not only create a new service sector for the country but will ultimately lead to skills transfer and job-creation for Malaysians leading to capital investments in trading infrastructure which will generate new revenue streams for Malaysia.Companies that participate in the Gift programme can register their companies under the Labuan International Commodity Trading Company (LITC). LITC-status companies can trade in petroleum, petroleum-related products, selected commodities, including minerals and carbon credits. LITC companies that are allowed to engage in trade with Malaysian companies are limited to the trade of following commodities in non-ringgit Malaysia: petroleum and petroleum-related products including LNG; and coals.With Gift, Labuan will further enhance its role as an international financial hub. Companies will be registered in Labuan but due to the nature of their business environment, these traders will be allowed to operate anywhere in Malaysia. LITC is also encouraged to leverage on the existing financial and business facilities in Labuan IBFC to support their operations in Malaysia.As Singapore is the main beneficiary of China's firms setting up in Southeast Asia's Asean countries, Labuan can poise to attract some of these companies due to its allowance for firms to operate anywhere in Malaysia, although incorporated in Labuan.The LITC is allowed to establish its operational office(s) and operate anywhere in Malaysia but must maintain its registered office in Labuan, which is the office of the Labuan trust company.Labuan offers petroleum-storage and petroleum-trading companies a competitive advantage in terms of vast land areas, access to infrastructural facilities, a cost efficient place for doing business, banking and financial services, a skilled multi-cultural and multi-lingual professional and technical workforce and a pro-business government and agencies. Labuan was declared as an International Offshore Financial Centre (IOFC) in October 1990 to complement the activities of the domestic financial market in Kuala Lumpur, strengthen the contribution of financial services to Gross National Products of Malaysia as well as develop the island and areas within its vicinity.Specifically designed legislation and regulations, primarily based on experiences of other IOFCs around the world, provide the framework for business in the IOFC.Combined with a flexible and favourable tax treatment and low cost of setting up and operating in the IOFC, this framework has succeeded in attracting substantial numbers of international businesses to domicile in Labuan, including 60 world leading banks, 78 insurance and insurance-related companies and 20 trust companies.The ability of the IOFC or IBFC to remain competitive depends heavily on its innovative capability, efficiency and market orientation and influential parties like ICBC with physical presence in 42 countries worldwide to help out.Stay up-to-date by following Daily Express’s Telegram channel.
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