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LOOK out Bermuda and the Channel Islands. Asia's first international offshore financial centre on a tropical Malaysian island is gaining ground and luring the world's top financial institutions.

  Just five years since its inception, development of Labuan International Offshore Financial Centre, neighbouring Brunei off the Borneo coast, has far outstripped the most optimistic forecasts of its viability as a major offshore player.

  Buoyed by investor confidence and institutional response, infrastructure development is powering ahead. A new 4.4-hectare Financial Park, which is planned to house all banks, trust and financial companies, will be ready for occupancy by the end of this year.

   The US$360-million project, spearheaded by Bank Negara, will include luxury condominiums, shops, restaurants, offices, a convention centre and recreational facilities.

   Labuan's existing airport is being expanded. Construction of a new M$120-million (HK$372-million) terminal starts next year.

  Meanwhile, Telekom Malaysia is next month due to complete the installation of a 451-metre optic-fibre submarine cable which, combined with a M$32-million satellite-earth station, will bring state-of-the-art telecommunications to Labuan.

  Labuan will be connected 'by voice, text, video and data to all major global communications networks, providing access to a wide range of leading-edge services', said Daim Zainuddin, chairman of the Labuan Development Authority (LDA).

  Among those links will be desktop video conferencing, video tele-conversations, high-speed faxing and multi-media applications.

  Catering for the growing number of expatriates, an international school is to be built along with a small township.

  The LDA will build 2,500 apartments, bungalows and houses. The largest development will include a golf course.

  A new 109-bed hospital will also open and the sewage system is being upgraded.

  Malaysia's Deputy Prime Minister and Finance Minister Anwar Ibrahim said: 'The die is cast; there's no turning back.'    Mr Anwar said infrastructural developments being completed by the end of this year were 'an important milestone creating a conducive environment for the offshore financial centre'.

   He said the legal framework for foreign companies was being improved, while tax incentives for offshore companies and their expatriate executives had been introduced.

   Offshore trading is taxed at three per cent. Office rents are just M$5 per square foot. Shops are duty-free.

  The aim, according to Mr Anwar, was to develop Labuan as a competitive and reputable offshore centre.

   'No effort has been spared to make it conducive to business,' he said.

  Reputable is the operative word on Labuan.

   'The emphasis on 'good names' remains,' Mr Anwar said. Only the world's top 100 banks can qualify for an offshore banking licence in Labuan. Seventeen of the top 25 are already present, placing Labuan firmly on the offshore financial centre map alongside the British Virgin Islands, the Bahamas, Cook Islands, Cayman Islands, Bermuda, Guernsey and Jersey.

  Among the top institutions which helped to enhance investor confidence by opening in Labuan have been ABN Bank, Industrial Bank of Japan, Dresdner Bank, Banque National de Paris and Universe Bank of Switzerland.

  Citibank, with offshore offices in the Caribbean, has since opened in Labuan, along with Hongkong Bank, Standard Chartered, Bank of America, Banque Indosuez, Dao Heng, National Westminster, Rabobank and Bank of Tokyo.

    So far, 435 offshore companies are registered, including 42 banks, six insurance and re-insurance companies (two from Hong Kong) and one fund-management company.

   Six Acts of Parliament have been enacted to simplify offshore operations and more are in the pipeline.

   Next month, immigration legislation is being overhauled to ease entry for expatriates.

  Prime Minister Dr Mahathir Bin Mohamad is also throwing his weight behind the island which was named after the Malay word for harbour.

   The government has committed US$1 billion to infrastructure development alone.

   Dr Mahathir has said Labuan 'is at the very heart of the government's commitment towards promoting economic growth as Malaysia moves towards the 21st century. I am confident it will continue to meet the needs of today's dynamic international business community, providing a climate for profitable operation in the years to come'.



Facilities upgraded as Labuan flourishes