Labuan, officially the Federal Territory of Labuan is a federal territory of Malaysia. It is made up of the Labuan Island and six smaller islands and is located off the coast of the state of Sabah in East Malaysia.
The economy of Labuan thrives on its vast oil and gas resources and international investment and banking services. Labuan is a very much an import-export oriented economy. Virtually all of its commodities including crude oil, methanol, HBI, gas, flour, animal feed, sea products, and ceramic tiles are exported either to Peninsular Malaysia or overseas. Raw materials, parts, and equipment for industrial uses well as consumer products are imported. Among its major trade partners are India, Peninsular Malaysia, Sarawak, and South Korea. 65% of its exports are petroleum and gas-based products. The main economic sectors in Labuan are service and manufacturing which contributed 94.6 percent to the island GDP. The service sector consisted mainly of Finance and Insurance and Real Estate and Business Services. Meanwhile, the manufacturing sector consists mainly of oil and gas industry and support.
The Labuan International Business and Financial Centre (Labuan IBFC) was created as Malaysia's only offshore financial hub in October 1990 and was operating under the name of Labuan International Offshore Financial Centre (IOFC). At the time it was established to strengthen the contribution of financial services to the Gross National Product (GNP) of Malaysia as well as to develop the island and its surrounding vicinity. The jurisdiction, supervised by the Labuan Offshore Financial Services Authority or LOFSA offers benefits such as 3% tax on net audited results or a flat rate of Malaysian Ringgit (MYR) 20,000 to trading companies; low operational costs; liberal exchange controls; and a host of other advantages including readily available, experienced and professional service providers. In 2010 the notion "offshore" was excluded from all the statutes of Labuan due to world pressure on the tax havens and offshores.
Since its inception, the jurisdiction has expanded to become a base for more than 6,500 offshore companies and more than 300 licensed financial institutions including world-leading banks. Labuan IBFC is embarking on an aggressive growth strategy to become the premier international business and financial center in the Asia Pacific region.
Labuan's business focus is on five core areas: offshore holding companies, captive insurance, Shariah-compliant Islamic Finance structures, public and private funds, and wealth management. Labuan IBFC’s position is further enhanced by the launch of the Malaysian International Islamic Finance Centre initiative in August 2006.