GIV­ING LABUAN

Time to re­view is­land’s devel­op­ment and at­tract more peo­ple to en­sure sus­tain­able growth

New Straits Times - - Opinion -

ARECENT trip to the Fed­eral Ter­ri­tory of Labuan with the board mem­bers of Bank Ne­gara Malaysia ac­corded the op­por­tu­nity to re­flect on the off­shore fi­nan­cial cen­tre that was es­tab­lished in early 1990s.

The is­land has cer­tainly ad­vanced on many fronts com­pared with its po­si­tion be­fore ac­quir­ing the sta­tus of a tax haven. How­ever, the is­sue of its sus­tain­abil­ity quickly comes to mind.

Labuan has a duty-free sta­tus for re­tail goods and low-tax regime for in­dus­tries, such as bank­ing, in­sur­ance and fi­nance. Be­fit­ting its po­si­tion as an off­shore fi­nan­cial cen­tre, it is home to many branch of­fices of overseas fi­nan­cial houses.

There is also a marked pres­ence of sev­eral oil and gas in­dus­tries on the is­land like the Petronas methanol plant, which is sig­nif­i­cant in driv­ing the lo­cal econ­omy.

How­ever, with the cur­rent state of the global oil and gas in­dus­try, the low prices of oil, for one, has quite a damp­en­ing im­pact on the is­land.

But the Petronas methanol plant there is able to sup­ply the re­gion and also meet de­mand from China, which is grow­ing by leaps and bounds.

The lo­cal econ­omy is also sup­ported by the pres­ence of gov­ern­ment fa­cil­i­ties and ser­vices, es­pe­cially dur­ing the is­land’s early devel­op­ment stage.

How­ever, this now can­not be ex­pected to add to eco­nomic growth any more be­cause of the fis­cal pol­icy to re­duce pub­lic ex­pen­di­ture in the medium term, so as to re­duce pub­lic sec­tor deficit.

Labuan also at­tracts tourists from Sabah and Sarawak, as well as Brunei, in view of its prox­im­ity and rel­a­tively low prices. In­deed, Labuan is a week­end and hol­i­day re­treat des­ti­na­tion for peo­ple from those places.

All this is help­ing with the up­keep of the is­land’s econ­omy.

Con­sid­er­ing the low oil price sce­nario and progress to date, per­haps it is time to re-ex­am­ine and re­view the strate­gies crafted in the early stages of Labuan’s devel­op­ment, and to put more stim­u­lus for its fu­ture growth.

This im­pe­tus is cer­tainly es­sen­tial as Labuan may not have the crit­i­cal pop­u­la­tion base to en­able the is­land to move for­ward sus­tain­ably.

A dated study on the re­la­tion­ship be­tween peo­ple and eco­nomic ac­tiv­i­ties gave a fig­ure of about 250,000 pop­u­la­tion be­fore

FILE PIC

Labuan also at­tracts tourists from Sabah and Sarawak, as well as Brunei, in view of its prox­im­ity and low prices of goods.

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