Labuan,is the second federal territory of Malaysia. Located 8 km off Sabah coast in East Malaysia, Labuan was designated as an international offshore financial centre and duty free port. The harbour is large and deep, hence the name Labuan was given to the island, stemming from the Malay word "Labohan" which translates into anchorage. Labuan is 2 1/2 hours from Kuala Lumpur by flight.