|The Bahamas Investor Magazine
January 21, 2010
January 21, 2010
In an exclusive interview the Minister of State in the Ministry of Finance Zhivargo Laing talks to The Bahamas Investor about the current investment climate and the future of the financial services industry in The Bahamas.
Q: How is the financial services sector in The Bahamas holding up given the economic uncertainties of the last 18 months?
A: You have to take into account both the domestic and the offshore environments. On the domestic side, performance has fared well. It is adequately capitalized, with significant liquidity. While its portfolio has obviously been impacted by the crisis, the issues are still manageable because of the level of capitalization, so the system is sound. Obviously with the real economy deteriorating to the level it has there has been an impact upon their business by either curtailing new business or because existing clients are finding it difficult to meet their obligations. That has put some strain on them but within manageable limits.
The offshore sector again has not had any crises confronting it other than the real global economic problems that have caused some of their clients to curtail their investing and planning activities. That has resulted in reducing staff and making other cutbacks, but again within reasonable limits.
The largest challenges facing the sector have been with the efforts made by The Group of Twenty (G-20) Finance Ministers and Central Bank Governors and OECD (Organisation for Economic Co-operation and Development) member countries pressing the standard toward tax information exchange agreements (TIEAs). This has meant a profound paradigm shift in the way that we conduct business here. Having decided to meet the standard, there are those who will have to look at the way they conduct their own operations here going forward. I think recent events will give rise to a new set of norms, and we have to figure out what is going on in investors’ minds.
Q: How far along the road are we toward complete compliance with the OECD directives?
A: We have committed ourselves to the standard and believe there is now a level playing field, more level than it has ever been before in this regard, and we have already signed or are pursuing TIEAs with a number of countries to meet the standard.
Q: When you addressed Bahamas Financial Services Board members last year, you mentioned that certain weaknesses within the industry had been brought to your attention. Could you elaborate?
A: Firstly, I would like to note that any organization or state has to constantly ask itself whether it is optimizing its efforts. Are we doing as well as we could be? Are we doing the right set of things? Even if we are the best in certain fields, we still have to ask those questions. Clearly the answer will sometimes be “no.” We do some things very well, but there are things we have to do even better.
So we have looked at things such as how we process our clients at the registrar general’s department in terms of efficiency and delivery of information, and we believe we can and must do this much better. So we have introduced reforms that improve that service. We have looked at how we service our clients who are seeking residency in The Bahamas and again we believe we can do better. So we are working towards a streamlined application process. We have looked at our online presence and our ability to process clients on the Internet so that our reach is truly global through that platform.
Q: What progress has been made in increasing the jurisdiction’s Internet presence and expanding e-services?
A: The Bahamas government has been in partnership with IBM to do a complete overhaul of the network, government-wide. This will allow us to develop a single portal, which will facilitate the services available online to our clients. We will revamp our web presence with a much more user-friendly model so that international investors and locals alike can get access to the information they need quickly. I believe this will go live towards the middle of this year.
Q: What other efforts are being made to place The Bahamas ahead of competing jurisdictions?
A: Our greatest competition is ourselves. You have to be satisfied that you are doing the best you can do. The goal for us is to produce a jurisdiction that wows our clientele. And that means having a holistic approach to the “wowing” experience. Everybody who has any contact with The Bahamas–from the person who approaches the immigration desk to the person trying to get a business licence or who needs an attorney or accountant or bank in this country–has to leave saying that it was the most efficient, pleasant business experience they have ever had anywhere in the world. It is a tall order, but that is what we have to seek to do. We want to be one of the top three jurisdictions, and we can do that because we are small enough and agile enough.
So the rallying call from this office to all the arms of the government is to come together in a meaningful way so that we can do that. We have a public service improvement programme running across six different agencies of the government. A College of The Bahamas survey measured public feedback and identified weaknesses. We then engaged the services of CARTAC (Caribbean Regional Technical Assistance Centre)–a regional organization that provides technical assistance and training in core areas of economic and financial management–which took the agencies through an exercise to produce goals, service improvement charters and an action plan to address those issues. Some agencies have shown significant improvement, but some still have a long way to go.
Q: When politicians talk about change, the response from the private sector is often “here we go again.” How can you avoid what you yourself have referred to as “change fatigue?”
A: People have to see actual change to know that you are serious. We can report on real progress in our efforts with the registrar general’s department and with immigration processing. We have completed the physical consolidation of the regulatory regime of the country. We are consolidating legislation and administration. We have made legislative changes that the industry has called for. You can’t just talk about change, you have to show you are doing it.
Q: Are there particular areas or products that have the potential to expand and what efforts are being made to nurture them?
A: There are many areas. International insurance is one, so we have recently passed into law the new External Insurance Act, which was a major move in encouraging growth in that sector. We are now trying to identify international talent with contacts in that field that can nurture business here.
We also believe we can be more effective in fund administration and some issues rest with our professional services. Some national players have noted that we need more internationally known names in law connected with that area who can attract and appeal to clients to bring the administrative arm of their businesses here. It’s a work in progress.
There are opportunities in arbitration–the enactment of a new Arbitration Centre Law. We can have an [improved] aviation registry and yacht registry. Both of these complement the lifestyles of our high-net-worth clientele. We need to make better use of our clients who have their businesses registered here and want to do business in the region but as yet do not do business here or in the region. We can be a centre for them to do their investing in emerging markets and additional investing in this country.
Q: Speaking of emerging markets, have there been any specific efforts on the part of the government to actively promote The Bahamas to developing economies such as the BRIC (Brazil, Russia, India and China) nations?
A: We use mostly our diplomatic channels and international meetings to engage these countries, but we have a product that still needs to be refined. Our national investment product has not been revisited since 1993, so we are now working on a new National Investment Act to refine our investment environment. We have to rationalize matters related to the investment incentives that we offer. Once we have refined the product we can go out and more aggressively promote it. To go and make a hard sell on something that is different from the experience they will have when they visit us is more damaging than doing nothing at all.
My general impression is that most countries have not moved beyond seeing The Bahamas as paradise on earth in a tourism sense. They have no idea about the depths of this country. The Bahamas has been far too modest about what it has. We need to be more audacious in telling the world about ourselves.