KUALA LUMPUR (May 9): For Labuan to tackle its basic infrastructure struggles, the federal territory should retain at least half of its annual income, according to Securities Commission Malaysia (SC) chairman Datuk Seri Dr Awang Adek Hussin.

Compared to the RM189 million allocated to Labuan under the 12th Malaysia Plan Mid-Term Review, Labuan contributed RM1.2 billion to the federal government’s coffers, Awang Adek said.

“Labuan must be able to retain more of its income for its development needs. At the very least, Labuan should retain half of its income (RM600 million) to reinvest in itself,” he said in his keynote speech at the Labuan Rejuvenation High Level Roundtable on Thursday. 

The SC chairman said Labuan is currently suffering from ageing and poorly maintained basic infrastructure, resulting in recurring water supply disruptions and an unreliable electricity grid. 

On these challenges, Awang Adek noted that the federal government has allocated RM300 million for pipe replacement works, while Petronas is working with the Sabah Energy Commission and Sabah Electricity to establish a new power plant to ensure stable power supply and that Labuan's energy demands are met. 

“Resolving these basic infrastructure issues will help Labuan attract new businesses, potentially through innovative strategies such as tailored digital nomad strategy which could be highly beneficial,” he added.

However, he underlined that more needs to be done to breathe new life into Labuan. 

Besides Labuan retaining half of its annual income, Awang also supported calls to revive the proposed Labuan-Menumbok bridge as well as reinstating the federal territory’s duty-free status.

“More than bridging the physical gap between Labuan and mainland Sabah, [the bridge] will also serve as a catalyst for the island’s economic growth and development. Improved accessibility has the potential to bring about substantial socio-economic benefits. These include lower costs for basic goods and services, improved job opportunities and increased tourism potential,” he said. 

Meanwhile, he noted that the removal of Labuan’s duty-free status in 2022 dealt a severe blow to its attractiveness as a tourist destination.

“The duties on cigarettes and alcohol, which previously contributed around 30% of the island’s revenue, has made Labuan a less attractive tourist destination. The hotel industry in Labaun is still reeling from the aftermath of the Covid-19 pandemic,” Awang Adek said. 

“But reinstating Labuan’s tax-free status is not just a matter of economics. It is about breathing new life into Labuan’s tourism sector, creating opportunities for local businesses and the people,” he added.