The Bahamas is a leading offshore financial center. Compelling reasons for businesses to invest in The Bahamas.
WHAT-TO-DO - NASSAU, CABLE BEACH & PARADISE ISLAND - JULY 2003 EDITION
There are compelling reasons for business to move offshore, says Brian Moree, senior partner at McKinney, Bancroft and Hughes and chairman of the 33-member Financial Services Consultative Forum (FSCF), which advises government on matters affecting the finance sector.
At the top of the list is The Bahamas' tax-neutral platform, including no tax on personal income, corporate earnings, capital gains, sales, inheritance or dividends.
"Tax deferral is still a major issue, where you can legitimately and quite properly defer taxes by using fully compliant structures," says Moree.
Beyond a wide range of innovative investment products, The Bahamas boasts a depth of professional services not found in every financial centre.
The numbers are impressive: 317 banks and trust companies with assets of $258 billion; 600 lawyers trained in English common law; 300 accountants representing the biggest firms in the world; a financial services workforce of 4,000 Bahamians; 724 mutual funds with assets of $89 billion; and 83 insurance companies with $687 million in assets.
"Investors, when they go into a jurisdiction, are looking for a high level of professionalism and competence and integrity in their professional advisers. I think that because we have been in this business for so long, we certainly qualify on that front," says Moree.
The Bahamas is also ranked highly by outside economic analysts. In a fall 2002 report on the country's sovereign debt and creditworthiness, Moody's Investors Service gave The Bahamas an A3 rating and a positive outlook. And in January 2003, Institutional Investor announced that The Bahamas was a top performer in its country credit ratings, finishing 2002 among the Top 10 countries in the world for most improved sovereign creditworthiness.
Strong legislation
On Dec 29, 2000, The Bahamas passed a host of new banking laws, most dealing with the financial community's Know Your Customer (KYC) regime - the rules and operational procedures banks and other financial institutions use to identify clients.
"We now have a Financial Intelligence Unit (FIU) that is a member of the Egmont Group (a world body of FIUs) and we certainly are recognized as being a player on the global front against crime and the financing of terrorism," says Wendy Warren, CEO and executive director of the Bahamas Financial Services Board (BFSB), a professional organization that represents and promotes the financial services sector in tandem with government.
In fact, with its new legislation The Bahamas is a "major contributor to the world's agenda of cracking down on money laundering and beginning to tackle the concerns about terrorism," says Warren, referring in part to a terrorism bill due to be passed into law in 2003, as required by the IMF. "It's never been done before. It's something that everyone is struggling with."
Privacy still exists
Despite the new regulatory environment, confidentiality and privacy still exist for the offshore investor, says Warren, starting with a strong due diligence process that ensures The Bahamas accepts only upstanding clients.
"The Bahamas certainly is in a position to provide a continued commitment to the privacy of its clients. Once those clients do not fall afoul of laws, either in The Bahamas or elsewhere, they will have that sense of security and safety in The Bahamas. For many reasons, wealthy individuals prize privacy, and The Bahamas is certainly going to continue to offer that to them," says Warren.
However, confidentiality is not going to remain a major motivation for offshore business, says Moree.
"Under the new law, while a degree of privacy has been retained, I don't think it will be a major draw for business. You're going to have to have other reasons to go offshore," says Moree, a strong proponent of the need to develop new investment products, or enhance old ones, to take advantage of The Bahamas' tax-neutral platform.
When Perry Christie became Prime Minister of The Bahamas following his Progressive Liberal Party's (PLP) landslide election victory in May 2002, he did two things to address these issues and boost the financial sector.
He created a Ministry of Financial Services and Investments, headed by MP Allyson Maynard Gibson, an attorney specializing in tax and estate planning, and he appointed Ambassador of Trade James Smith as his Minister of State for Finance.
The moves recognized the importance of the financial services sector as the second pillar of the Bahamian economy and helped to reassure the industry.
"In the long term we needed to provide an environment where we can be proactive and we can give greater attention to the development needs of the industry," says Warren. "So we now have a Ministry of Financial Services in place, which we are very pleased about as an industry."
Blue chip financial centre
For her part, Maynard Gibson wants to see The Bahamas become a premier investment destination within the next 10 years, one that rivals London, New York and Singapore.
Her plan is a five-year joint initiative that relies heavily on input from industry professionals.
"The thrust of all of this really is to make The Bahamas, in the same way that we are a complete tourist destination, a complete financial services destination and ultimately a complete destination. When you think of London, New York or Singapore, and Zurich as well... you know that when you go there you will find certain things and certain standards and services, whether it's in tourism or anything else," says Maynard Gibson.
According to government statistics, those four centres, and others in Switzerland, currently service 80 per cent of the world's offshore business. The Bahamas is among the top five centres with the remaining 20 per cent of the business - a statistic Maynard Gibson is determined to see change.
"One of the first things that I did in May (2002) when I had the privilege of being appointed to the ministry, was to immediately get involved with the sector and talk about where we wanted to be over the next five years and also in the longer term," says Maynard Gibson. "I wanted to strike a very, very close private-public sector partnership."
In late 2002, government announced the creation of the Financial Services Consultative Forum (FSCF), a 33-member body that will provide input on future legislation, issues and initiatives that affect the industry.
The way forward
At the start of 2003, government and the FSCF were reviewing legislation governing a host of investment products, including foundations, protected cell companies, mutual funds, International Business Companies (IBCs), domestic and external insurance, special purpose trusts, and e-commerce.
It is all part of the evolution of the industry, says Moree, and the hallmark of a dynamic sector.
"The development of products is always a work in progress. It should be a constant activity that is going on, which is listening to the markets and looking at our competitors and product development. That should be a constant emphasis for us, as it is in other jurisdictions."
He is confident that with the new legislation, The Bahamas will be able to offer "a turnkey operation to both corporates and high-net worth individuals alike, which will comprise a full range of products, that is comparable to what they can get in New York or Paris or London or Switzerland or anywhere else in the world."
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