In addition to that, work has commenced on reviewing respective jurisdictions’ preferential tax regimes against the standards outlined, to combat harmful tax practices. The standar4, which forms one of the four BEPS minimum standards, will require authorities to step up on transparency and substance rules for geographically-mobile activities, such as financial services. It seeks, for one, to prohibit the shifting away of income into preferential tax regimes where businesses have little or no economic activity. Such international developments will directly influence IBFC’s business model going forward. The world that we live in, since the creation of offshore Labuan in the 1990s, has drastically changed. What was relevant then is no more relevant now. We have no choice but to change with it. It is an opportune time for us to review of the current tax framework for Labuan. The purpose of this review is not only to ensure alignment with international best practices, but to confirm the continued relevance of such incentives in catalysing new growth areas. Tax incentives for businesses which have become irrelevant should be rationalised. The allocation of any preferential tax treatment must be supported by clear value propositions that are systematically measured across the qualifying period. Businesses that enjoy tax incentives will be benchmarked against the performance indicators that quantify economics and financial benefits. This is not meant to be onerous. It is a necessary tool to ensure that the economy grows in an inclusive and sustainable way and the public policies implemented bear the intended benefits.
In addition, we must improve the inequality in Labuan as measured by the Gini Index. It has to improve to at least the national level. High inequality in income affects growth, productivity and opportunities for social mobility; and 2. Second, the average unemployment rate at 5.1% in the recent years continues to be above national average in Malaysia. While this might be cyclical because of the downturn in the global oil and gas industry, we need a diversification strategy so that over reliance over certain sectors is avoided. Further, the workforce participation rate, especially among women, is markedly lower than the national averag2. Both reflect a worrying trend where the labour market is not tailored to meet the needs of the local community. This state of affairs is disappointing and cannot persist. It reveals that an improvement in the current economic operating model is warranted. A new model must be designed that can benefit the local community in a more meaningful manner. Without doubt, it is our collective duty, as an industry whether as regulators or industry players, to advance the welfare of society through a more inclusive economic development. The success or failure to achieve this will reflect on us all as a collective. In this respect, Bank Negara Malaysia is proud to offer undergraduate scholarships to two deserving local students. This initiative to provide educational opportunities for deserving talents is very much needed and it exemplifies how one can contribute in a tangible manner to the local community.