Labuan Fund

The Role of Labuan in China’s One Belt One Road (OBOR) Initiative

Catherine Tan, Business Advisor of Indah Trust Limited

26 September 2017

The China OBOR was initated by the China’s President Xi JinPing in 2013 aiming to boost the trade connectivity between China and Asia, European, Africa continents through various infrastructures, trade and investment projects with an implication for huge cross-border business activities spanning over 60 countries involving USD21 trillion of gross domestic production (GDP).

Funding Needs and Filling Up the Investment Gap

Many countries aligned along the OBOR initiative are those – underdeveloped and developing nations – in need for foreign investments’ funding on the potential infrastructure projects. International financial centres along the OBOR route can play a vital role to mobilize funds from global institutional investors for infrastructure projects in the region.

Labuan as one of the international financial centres is able to play an effective role to act as a funding hub under the OBOR initiatives; being a substance-enabling international financial jurisdiction, it can offer a business-friendly funding structures under a well-regulated environment to businessman and investors around the world. Additionally, Labuan is an alternative source of capital as it allows funds to be raised in several currencies and free from foreign exchange control. Hence, it could be used as a complement structure to Hong Kong, the fund-raising hub used by most of the OBOR infrastructure projects.

A typical investment fund structure using a Labuan entity is shown in the diagram below:

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