What this alludes to is that continuous reinvention of financial offerings by our market players is necessary for the IBFC to build a niche and gain international prominence. Empirical evidence suggests long-term economic resilience can only be secured by adopting a broad-based economic development strategy. In other words, Labuan needs to horizontally diversify its economic base beyond financial services and oil and gas. Financial services might be a driver, but it will not be the main one. Unquestionably, the way forward requires a refined model that also gives equal weight, if not more, to inclusive and sustainable development of the economy. Another imperative for long term development is the issue of infrastructure. As with any other island economy, Labuan’s growth prospects are very much influenced by the availability of hard and soft infrastructure which are critical enablers for better connectivity and livability. Connectivity is also an important imperative. Frequency of flights to Labuan would attract talent and visitors to 2/4  BIS central bankers' speeches  the island. Labuan can also be positioned as the ‘halfway point’ between tourism in Sabah and Sarawak. Travelling time can be potentially reduced with the Pan Borneo Highway and physical connection between the island to mainland Sabah. All in all, the effort to transform the economy through identifying new areas of economic potential and fulfilling infrastructure needs is a difficult but not insurmountable task. We may refer to the story of our country’s development for inspiration.
Transforming the economic structure to become one that is more diversified, resilient and sustainable Over the past few decades, the finance and oil and gas sectors have been the main economic contributors to the island’s economy, representing more than half (51%) of the economy. However, the decline of oil prices since 2015 have revealed the vulnerabilities of Labuan’s economy to the volatilities in the external environment. As observed, businesses across the board declined by at least 40%, with significant repercussions on the livelihood of the local community. The focus on only these two sectors has unwittingly elevated the concentration risk on the island’s economy and the associated employment. A deeper assessment on the performance of the financial sector indicates that the intended outcomes have not fully materialised. Comparing against other international financial centres, there is still a significant gap in Labuan’s achievement from its counterparts. A case in point is the Mauritius International Financial Centre, which was established around the same time as the IBFC in the 1990s. Based on available data, the contribution to GDP of the Mauritius financial sector was 10.4% with an employment and tax revenue share of 4.5% and 6.5%, respectively. Other financial centres which entered the foray much later, such as Shanghai, have moved even further ahead in terms of tax revenue generated, as well as job creation.3 The 2017 Global Financial Centres Index ranks Shanghai at 13th with Mauritius at the 73rd position, while Labuan is currently not even ranked in the Index.