Malaysian central bank unveils Labuan plans

Malaysian central bank unveils Labuan plans

KUALA LUMPUR (AFP): Malaysia's top banking official has
invited the world's best banks to make home on the eastern Labuan
island to turn the tiny offshore financial center into the
biggest in the region, a report published yesterday said.

Labuan is a tax-free haven in the hub of dynamic Asia-Pacific
economies and offers among the best transaction opportunities and
fiscal incentives in the world, Ahmad Mohd Don, governor of the
central Bank Negara was reported saying.

"Specifically, Labuan is almost equidistant from Kuala Lumpur,
Bangkok, Hong Kong, Jakarta, Manila and Singapore," Ahmad said in
the interview with the Malaysian Industrial Development Authority
published by The Star newspaper.

However, only banks with huge capital adequacy, unblemished
records and ability to withstand stringent operating rules would
be allowed on the four-year-old financial market, Ahmad said.

"At present, we would only consider an application from a bank
which is among the largest banks in an Asian or ASEAN country,"
Ahmad said.

ASEAN, or the Association of Southeast Asian Nations, groups
Brunei, Indonesia, Malaysia, the Philippines, Singapore and
Thailand.

Ahmad said Labuan was in an ideal time zone for conducting
business around the clock and the legal framework for business
was simple, with administrative procedures kept to a minimum.

"Corporate tax is only three percent while dividends paid by
an offshore company, interest earned on deposits with an offshore
bank and interest earned on loans to Malaysians are not subject
to withholding tax," Ahmad said.

He added that there were no stamps, inheritance, death or
estate duties.

Wages, office, housing and living costs were also lower than
Singapore, Hong Kong or Tokyo, Ahmad said.

He said offshore banks were completely free of exchange
control restrictions when dealing with foreigners and had young,
trainable and English-conversant local workers at their disposal.

Officials said the tight entry laws were among reasons why
only 36 foreign financial houses and three local ones have been
permitted so far to operate on the tax-free haven neighboring
Borneo Island.

There were also some 400 offshore companies conducting other
businesses on Labuan, which has seen a total of about two billion
ringgit (US$800 million) in development over the past four years,
officials said.

The government has also proposed an internal stock market and
monetary exchange to attract financial houses to the island.

Ahmad said applicants should have a track record of sound
management, at least three years of good financial performance,
no violation of banking or other laws and should be supported and
supervised regularly by their home authorities.