KUALA LUMPUR (April 28): The Labuan International Business and Financial Centre (Labuan IBFC) foresees growth in new business incorporations in its hub this year further moderating, as tensions in the Middle East begins to weigh on its outlook.
New company incorporations and business registration in Malaysia's offshore financial hub is projected to expand by around 3-5% in 2026, easing from the 5.1% growth recorded in 2025, according to Labuan Financial Services Authority (Labuan FSA) director general Affendi Rashdi.
Overall, in 2025, 41 new business licences were issued, bringing the total to 808 licensed entities and 4,971 operating companies.
“[So far,] the first quarter performance looks very good in terms of licensing activity,” Affendi told The Edge after launching the regulator’s 2025 market report.
“But we are vigilant about what is happening in the Middle East, and the second quarter will be key in determining whether we revise our projections.”
As it stands, direct exposure to the Middle East remains relatively contained across key sectors, Affendi noted.
Sectors such as leasing — where 64% of activities are tied to aviation and oil and gas sectors — have yet to feel an immediate impact, as most contracts are long-term and pre-committed, he added.
“Currently, there is no significant impact because contracts are already locked in. But there is usually a time lag, so we will monitor closely, especially in the second quarter,” Affendi said.
Labuan IBFC, located on the island of Labuan, mainly serves as a platform for cross-border financial and business activities. It caters primarily to international investors, multi-national corporations and high-net-worth clients seeking a neutral jurisdiction for regional and global operations.
The centre is regulated by the Labuan FSA, the statutory body responsible for licensing, supervision and development of the jurisdiction.
Overall, Labuan IBFC is still maintaining its baseline scenario for now, but has prepared pessimistic projections depending on how global conditions evolve, according to Affendi.
“If the impact is prolonged or severe, we may need to introduce measures to support the industry and ensure business continuity,” he added.
In 2025, major sectors in Labuan IBFC saw total assets grow by 13% to US$94.08 billion, with total market capitalisation expanding by 32.3% to US$22.48 billion.
The banking sector stood out, with profits rising 55% to US$665.7 million, driven partly by higher non-interest income. Its total banking institutions now stand at 73, counting an additional three new banks from Hong Kong and the Netherlands.
Meanwhile, its Islamic banking sector has also performed well, expanding 35.2% to US$2.2 billion, supported by a growth in window operations.