Labuan: Country and Foreign Investment
Economy and Currency
Recognizing Labuan's strategic location and proximity to major shipping routes and offshore oil and gas fields, the Federal Government launched a long-term development program to jump-start Labuan's stagnating economy and to encourage the influx of both domestic and foreign investments.
As Malaysia's only deepwater anchorage, Labuan is a free port, a Federal Territory, and an International Offshore Financial Centre (IOFC). The currency is the Malaysian Ringgit (RM); however the business of Labuan offshore companies requires a foreign currency (the standard currency is US dollars).
Labuan's GDP was estimated at RM145 million in 1991 and RM2.2bn in 2010, giving a per capita GDP of RM29,000 (2010). The mining sector, largely represented by oil and gas production and its related industries, is the biggest contributor to Labuan's economy, followed by the manufacturing sector, wholesale, retail, hotel and restaurants sector.
Although still not a major economic contributor, the finance sector is gaining significantly with its GDP contribution increasing from 5.7% in 1991 to nearly 10% in 2000. In the future, the manufacturing and mining sectors are expected to play a less significant role.
The Government hopes that Labuan will register an average GDP growth of 10.1 per cent per annum during the planning period to 2015. GDP growth in 2010 was 6%.
Malaysia's ambitions for Labuan to become a financial centre to challenge Singapore and Hong Kong remain unfulfilled, but the island has become a major conduit for FDI into the surrounding economies, especially Korea. It is thought that somewhere between one-third and one-half of the companies registered on the island are somehow linked to Korea. Many Korean companies themselves have invested back into Korea through Labuan.