2016/2017 BUDGET CONTRIBUTION BY THE HON. C.V. HOPE STRACHAN
MEMBER OF PARLIAMENT FOR THE SEA BREEZE CONSTITUENCY
AND MINISTER OF FINANCIAL SERVICES & LOCAL GOVERNMENT
Mr. Speaker,
It is indeed my privilege to rise once again in this Honourable House to provide my contribution to this 2016/2017 Budget Debate as the representative for the wonderful people of the great Constituency of Sea Breeze.
MINISTRY OF FINANCIAL SERVICES, HEAD 49
The responsibilities I am charged with under this Ministry include: the promotion of the Financial Services Sector, International Trade, the Industries Encouragement Act, the Bahamas Bureau of Standards and Quality and the establishment of an International Commercial Arbitration Centre in The Bahamas.
In order to achieve this mandate during the 2016/2017 fiscal year, the Ministry received an allocation of $2,597,300.
Financial Services
Mr. Speaker,
Financial Services, the second pillar of our economy, second only to tourism and accounts for more than 15% of the GDP of The Bahamas and more than 20,000 jobs directly and indirectly, representing more than 13% of total employment. The job opportunities in the financial services sector support the middle-class in The Bahamas which are among the highest paid and rewarded jobs available and which also invests heavily in intensive training of its employees, increasing their intellectual capital and indeed the human resource capital of The Bahamas.
Moreover Mr. Speaker, the financial services industry generates substantial government revenues of approximately $200 million and 19% of the tax base according to latest publicly available figures, and I would envisage that these figures will increase tremendously as we advance to automate the various government departments to increase efficiency and facilitate the ease of doing business in The Bahamas. The financial services sector contributes to the Bahamian economy as a whole, by providing access to global capital markets and facilitating investment opportunities that would not otherwise be attainable, and which encourage entrepreneurial activities that foster economic growth. Activities associated with the financial services sector also bring high-end customers and high-end investment to the tourism industry, real estate industry, as well as, the use of legal, accounting, communication and transportation services in The Bahamas. It is clear that we must invest more in aiding the growth and sustainability of this industry as a major economic contributor to our country.
Many key financial centres of the world, including London, New York, and Singapore, have conducted strategic reviews to identify initiatives aimed at remaining competitive and ahead of the game. We believe a similar effort to define a holistic strategy is critical for The Bahamas to maintain and preserve its status as one of the most important international financial centres in the region. This strategy should leverage on current strengths, take advantage of the natural opportunities facing The Bahamas and build upon the value added proposition that currently exists.
The overall strategy for The Bahamas’ financial services comprises four components: vision, current advantages and opportunities, enablers and historical value. These are the building blocks from which to further our development. In this vein, my Ministry is working with other relevant Governmental Departments, Industry Private Sector Participants, Financial Services Regulators, The Bahamas Financial Services Board and other relevant stakeholders to chart a course that will continue to promote and develop Financial Services in the Bahamas. We have begun to further define what Financial Services is to our country in order to sustain its continued development as a major economic benefactor to our citizens.
THE VISION
First, Mr. Speaker – Our message continues to be that we are a Trustworthy, Competent and Compliant jurisdiction. And, while The Bahamas’ current position and strengths are widely recognized, its position as a premier international financial centre in the future is not entirely secured. Our aim is to become the preeminent international financial center in the region.
ADVANTAGES AND OPPORTUNITIES
Mr. Speaker,
Over the past year, my Ministry has been analyzing the international competitive landscape to identify and develop initiatives to strengthen the local financial services community and to assist our efforts in establishing and creating The Bahamas brand as being a full international financial services center.
This year we have once again engaged in a partnership with the Society of Trust and Estate Practitioners otherwise known as STEP to sponsor some of the conferences, particularly STEP Caribbean (St. Lucia) which was held in May, STEP Global Congress which will be held at the end of this month in Amsterdam, STEP LatAm (Sao Paulo, Panama), STEP Asia (Hong Kong), and adding new ones to the mix, trusting that this will translate into viable business opportunities for the sector. We are also going back towhat has worked in the past with more targeted summits on Bahamas Financial Services to be held in New York, Switzerland and London. Through BFSB, we have been engaging more private sector partners.
Mr. Speaker, attendance at these international conferences, meetings and summits serve a dual purpose for us. Not only does it provide tremendous opportunities to network with a large number of industry participants, but it also provides opportunities for my Ministry to explore and better understand new markets and seek new ways to become more innovative in order to stay ahead of the curve. This is a key component in our strategy to arrest the decline in our financial services sector. New and emerging markets in Latin America and Asia have been identified as our best chance for growth in the sector as business opportunities from the traditional European markets decrease. Coupled with our marketing initiatives the Ministry of Financial Services has identified new ways to promote the sector through the placement of financial and trade officers in various key locations including Shanghai, London and New York.
When compared to our Tourism or Maritime product for The Bahamas, it is worth noting that offices to support these sectors are located around the world, however, the second pillar of our economy – Financial Services, has no such presence. Our competitors understand this and have had such presence for years enhancing the dissemination of information, forging relations and networks that result in economic benefit, as well as creating opportunities for Bahamians abroad and allowing greater participation in events in these countries to maximize the Bahamas brand.
We must stay ahead of the game if we are to lead Mr. Speaker. We must make prudent investments in our future sustainability in building a Better Bahamas for generation s to come. We must show our worth and deliver on our potential if we are serious about this industry. Times have changed, the face of financial services is not that of long ago, we too must change and adapt if we are to survive as viable International Financial Centre.
Mr. Speaker,
As I have stated time and time again, the natural strengths of The Bahamas cannot be imitated or duplicated. There is a need to increase our visibility in this regard. God has truly blessed the islands of The Bahamas with unrivaled beauty and an enviable geographical location which must be highlighted at all times, and in everything we do. Our regional neighbours can boast of beautiful islands, but not 700 of them, nor can they reach mainland USA in 30 minutes non-stop. They cannot boast of nearly 100 years of financial services excellence and professional human capital resources second to none. Mr. Speaker, The Bahamas is simply the best, better than all the rest – but we must not rest on our laurels, we must act swiftly to stay ahead of the curve and take on challenges head on to create opportunity in adversity.
These attractive advantages coupled with political stability (even the United States is unsure of this right now), an attractive tax regime and cost structure, our common law traditions, skilled workforce and a warm and welcoming climate for investor friendly business, has held The Bahamas as one of the leading international financial and business centers in the Region and indeed the world.
Mr. Speaker, building on our natural attributes, we must also intensify our efforts that focus on lifestyle standards, inclusive of beautification and cleanliness, maintenance, service efficiency, safety and security, utilities, recreational facilities, the arts, schools and quality resorts. These add value for intermediaries, investors, second home buyers, HNWI and UNNWIs as well as Bahamians – we deserve the best quality, infrastructure and environment. One Bahamas, working together and making it Better all the time. This is also evident in the National Development Plan coming together for a brighter future.
As my Ministry continues to promote the Bahamas, this is the message we are spreading, there are no made up stories here, only facts! The truth that it is truly “Better in The Bahamas” and always has been. My Ministry has developed new marketing material inclusive of a new website, and a comprehensive brochure that will help us to deliver this message all over the world and ensure that the message always remains the same.
We plan to launch both of these next month. These will be great enhancements to the already established Bahamas Investor Magazine published by Dupuch publications. This is a testament to the importance of the participation of the government in the promotion and development of the financial services industry, as well as Gateway publication, which is published by BFSB. Together these sources continue to provide an invaluable source of information for the sector and The Bahamas as a whole.
Mr. Speaker,
In our travels we are often provided with speaking opportunities which allow us to raise the profile of The Bahamas tremendously in countries such as the Brazil, China, United Kingdom, Mexico, Greece, the United States and throughout the Caribbean region. And we have come to the conclusion that there is unabated value that the Bahamas government brings to the international arena by being present and displaying its commitment to the sector. Potential investors and other prospective business clients have stated that it makes them consider the Bahamas a little more seriously than other jurisdictions because of the open display of the government’s commitment. It shows the world that we are serious about the financial services industry and that they can have confidence in doing business with us.
RMB Hub
Mr. Speaker, in recent times, The Government of The Bahamas has taken advantage of several opportunities for project financing from The Chinese Government and from Chinese corporations. As a result, the Establishment of a hub for trade in Chinese currency is an attractive prospect that the government of The Bahamas has approved and my ministry is diligently pursuing this initiative as a viable project. The success of this project would translate into an entirely new frontier of financial services and trade business fir The Bahamas and would be a monumental achievement in making The Bahamas the RMB Trading Hub for the entire region.
The rationale is that The Bahamas government, Bahamian businesses, financial institutions as well as those throughout the region would have the ability to engage in less costly and less time consuming processes related to transactions involving the direct clearing and payment of the Yuan currency in The Bahamas. It would eliminate reliance on the U.S. Dollar and the transacting of business through the United States. The creation of a platform for the Yuan to trade freely with the Bahamian Dollar will allow for international trade finance, and trade and investment to increase significantly. The potential to increase business activity in the global business segment, as foreign corporates set up shop in The Bahamas or those already in existence further leverage to tap into:
i. a comprehensive pool of RMB denominated solutions,
ii. an efficient business framework, underpinned by factors ranging from The Bahamas’ position as a well-respected international financial centre to its strategic geographic location to North American and Latin American markets, and
iii. trading without the hurdle of an additional layer of foreign exchange cost and currency risk and to have transactions settled within a favourable time zone (EST) is indeed an attractive prospect.
As I have said before, an increase in international trade finance, trade and investment would create jobs for Bahamians and strengthen the Bahamian economy. Economic slowdown in the United States magnifies the importance of the need to diversify cross-border trading with other markets around the world. Further, new financial institutions would be established in the Bahamas, including the introduction of the first Chinese bank to the country. The establishment of the RMB Trading Hub in The Bahamas would help to further diversify our financial services sector and position The Bahamas favourably from a global perspective as an even more appealing place to invest and do business.
Product Innovation
Mr. Speaker,
A priority of my Ministry is to ensure that the Financial Services sector of The Bahamas remains competitive and relevant in an ever-changing global environment. My Ministry has been working diligently to develop service diversification and new product development in the Bahamas. The Bahamas has remained innovative and creative over the years while adapting to change. They say innovation distinguishes between a leader and a follower. The competitive environment has spawned creativity for us over the years and we aspire to continue this innovative spirit.
The success of the Investment Condominium (ICON) cannot be underscored enough. The enthusiastic interest in this product increased and established it as a staple on the investment funds menu. To date 44 ICONs have been established. And, following a visit to Mexico last year and subsequent talks with the Mexican Authorities, there is every indication that we will be in a position to take this product to market in that jurisdiction before the end of this year.
The expansion of products into markets where they are culturally suitable and legally viable is critical to the work we must do to provide more to our existing financial services stakeholders and in attracting new entrants from both established and developing markets. The ICON is proof positive that we can do it in an efficient and timely manner when we collaborate efforts between the government, regulators and the private sector. It is also important that we consider how we might replace any business that has been lost or looks vulnerable to loss, but we must not be consumed by loss and allow inertia to set in, we must move in and work to innovate new business ideas. Already, our competitors from the BVI are honing in on this market with a view to creating a similar product and hosting an aggressive roadshow in Latin America last month.
Mr. Speaker,
The Bahamas is jurisdiction that boasts a comprehensive product offering with the international institutions to support industry and client demands, and we have top class industry professionals and service providers to ensure that any structure or advice can be given. However, we will continue create and innovate through the development of new financial products, which will enable us to reach a wider financial services market and ensure that our industry professionals are fully equipped and prepared to take advantage of same. We cannot remain the same and expect different results.
Mr. Speaker,
Where an opportunity presents itself, we will again move in the spirit of creativity, innovation and collaboration in developing opportunities for Bahamians to benefit and thus, leverage the sovereignty of The Bahamas as a great asset.
GLOBAL CHALLENGES AND OTHER INTERNATIONAL INITIATIVES
Mr. Speaker,
In the past decade, the financial services industry for international financial centers has experienced changes in regulatory & tax initiatives, the global economic recession and increased competition.
Key Regulatory & Tax initiatives:
International Monetary Fund (IMF)
Global regulatory initiatives such as the IMF periodic reviews of financial centres which included IFCs focus specifically on the extent to which financial centres comply with formal international regulatory standards set by international bodies such as Basel, the IAIS, IOSCO etc. These reviews have incorporated anti-money laundering measures resulting in significant overlap with the FATF reviews...
Click here to view the full Budget Communication 2016-2017.
Source: Bahamas Information Services
