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Will Pulau 1 (Forest City, Johor) be the New Labuan?

Five bills have been passed to turn Pulau 1 into a duty-free island like Labuan. One should not stop at duty-free booze: the island next door to Singapore has the makings of an international business & financial centre.

Map of the Johor Strait: Pulau 1 beside Forest City, Johor, with its 600-metre bridge to the mainland and Singapore right next door, alongside the nine ingredients of an international business and financial centre

Pulau Satu or Pulau 1 is an island (770 acres, one is told) connected by a 600-metre-long bridge to Forest City, Johor, Malaysia.

Five bills have been passed by the Dewan Rakyat to turn Pulau 1 into a duty-free island like Labuan, Langkawi, Tioman and Pangkor.

One should not stop at duty-free booze.

The creation of an international business & financial centre (IBFC) depends, inter alia, on:

  1. Proximity to a major international financial centre. Right next door is Singapore, which ranks 3rd on the Global Financial Centres Index 35, after New York & London.

  2. Free movement of capital. No Exchange Control.

  3. English Common Law v. Civil Law. Trust v. Stiftung (or Foundation).

    a) There are over 60 trust jurisdictions to redomicile to; only about 20 for foundations.

    b) Trust law has been around since the 12th Century (about 800 years of case law); the Stiftung has been around for about 100 years.

    c) Cuban Missile Crisis Clause: in the event of a geopolitical crisis; trustees can, at the stroke of a pen, flee from one trust jurisdiction to another of about 60 jurisdictions. A foundation requires the consent of the registrar of the jurisdiction one is fleeing from; and the consent of the registrar of the jurisdiction one is fleeing to: that takes weeks if not months. In a crisis one does not have the luxury of delays.

That is part of the reason why Family Offices are attracted to Singapore & Hong Kong. Pulau 1 will be more attractive than Bali: because Malaysia is historically an English common law jurisdiction, like Singapore & Hong Kong; unlike Bali, Indonesia (which is a civil law jurisdiction). There have been proposals to turn Bali into a Family Office hub.

  1. Little or no tax.

  2. There are plenty of trust & tax lawyers & accountants in Singapore.

  3. Low cost.

  4. Ease of administration.

  5. Good communications & ease of travel.

  6. Language. Many Malaysians speak English; Cantonese; Hokkien; Mandarin; Bahasa Malaysia or Indonesia & Hindi.

Last year Prime Minister Datuk Seri Anwar Ibrahim said the government had earmarked the USD 100 billion Forest City project as a special financial zone to spur the economy in Iskandar Malaysia.

He said new incentives would allow multiple entry visas, fast-track entry for those working from Singapore, and a flat income tax rate of 15% for knowledge workers.

It will now be a small step to turn Pulau 1 into an IBFC; but a big step for Malaysia.

Originally published on LinkedIn, 19 July 2024.

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