Ladies and Gentlemen,

It is indeed a pleasure for me to speak to you today to launch my Ministry’s Strategic Plan.   This is a fitting and appropriate forum to unveil our 10-year Strategy to revamp and re-invigorate the Bahamian business services industry.

[slide 2] I want to begin with a story, a story of how forward looking vision can change the lives of many people and the economy of a country.   My story begins in the city of Montevideo, Uruguay.  

In the late 1980’s legislation was passed in Uruguay to establish free zones.   The Government of Uruguay, together with the private sector envisioned a service based economy which could attract high quality Foreign Direct Investment to drive development within its free zones with a focused and disciplined objective.  

One zone in Montevideo, ZonAmerica was dedicated to high value added services including technology services and financial services.   The Government of Uruguay invested heavily in the technological infrastructure of that park and created an attractive environment for business.  

Outside of these parks, the government of Uruguay also pursued complementary policies.   Within 10-years after the creation of ZonAmerica, every primary school child and teacher in Uruguay was equipped with an inexpensive laptop computer with internet connectivity through the “Plan Ceibal”. [1]  A policy the couples investment and development of their people in conjunction with the development of the industrial model.

Today, ZonAmerica has attracted well over 180 service firms, including major financial services firms and small family offices and employs over 5,000 persons.   Montevideo is quickly becoming a world leader in technology and professional services.  

A few words describe this:  Forward Looking Vision!

[slide 3]  I want to tell you another story, a much older story, but one that still demonstrates progressive, forward-looking vision.   It’s a story that we in The Bahamas have lived, but perhaps do not appreciate as much as we should.  It is our story.

It is the story of the transformation of an economy characterized by “booms and busts” [2] as economic historians on The Bahamas have put it, to a vibrant financial center.   The Bahamas has come a long way since the establishment of the first trust company, The Bahamas General Trust Company, in 1936. [3] Indeed, the industry saw tremendous growth with the creation of the Eurodollar market in the 1960s and 1970s.   In 1998, Governor Wendy Craig and others wrote,

“The Bahamas presented itself as an attractive centre:   it had ……..[the] absence of exchange controls on transactions between non-residents; developed infrastructure facilities; skilled professional support; convenient direct [transport] links and strategic location in the same time zone as New York.” [4]

Those traditional comparative advantages, together with the common law tradition, an attractive tax and cost structure and an investor friendly business climate, catapulted The Bahamas to a household name in terms of “offshore banking”.   The Bahamas’ banking list at its height contained almost 400 operations, including almost all of the top international financial firms.

[slide 4] The benefit for the real economy, in terms of GDP per capita from this strategy were evident. We saw Bahamian incomes breaking away from our peers towards the late 1970’s.  By 1978, Bahamian GDP per capita was higher than Singapore, Hong Kong and Ireland – to name a few.   However, by the 1990’s, while GDP per capita was still increasing, we saw those three countries in particular experiencing exponential growth – that is major upward changes to their growth trajectory while The Bahamas continued on a smooth and predictable growth path.

This analysis of GDP per capita growth is intriguing to me and suggests that there was and still remains a real need for a Forward-Looking Vision, one that includes change.  Progressive vision is needed to keep pace, in fact to get ahead of our peers.

The financial services sector, of course does not explain the entire picture here – I understand that there are a number of factors that have contributed to the phenomenon shown on this slide, but I am a firm believer that countries do not change their growth trajectories on their own.   It takes vision, it takes action, it takes cooperation between the private sector and the Government and it takes LEADERSHIP.  

[slide 5] Ladies and Gentleman, as a Believer in The Bahamas, I know that we did it once, and we can do it again.

It is indeed my pleasure to share with this Summit, my Ministry’s vision for the redevelopment of The Bahamas’ financial services industry focusing on the following:

  • The recreation of the Ministry of Financial Services;
  • The Rebranding of The Bahamas as a full business services centre;
  • A comprehensive approach to increasing the competitiveness of The Bahamas as a business centre;
  • A comprehensive approach to business friendly immigration policy;
  • A comprehensive approach to innovation management;
  • A focus on new geographic markets and new sectors;
  • Leveraging The Bahamas’ sovereignty as an asset.

A.    Recreation of the Ministry of Financial Services

[slide 6] Cabinet Level Oversight.   As the second industry of The Bahamas, behind tourism [and one day we hope will rival and surpass tourism], the Prime Minister recognized the important need to have a specific, separate entity with cabinet level leadership overseeing the development of this sector.  

Charged with this awesome responsibility, my Ministry endeavors to strengthen The Bahamas as a modern, well-functioning, robust business and trade centre while also protecting and promoting the financial services industry for the overall development of The Bahamas and to the benefit of our citizens.  

 

Complete overview of trade in services.   My Ministry includes many aspects of the services.   This multifaceted approach dovetails nicely with our trade portfolio.   Indeed, there are natural synergies between the two as an international business center, by nature, is centered on the trade in or export of services.  Not only do we build domestically and internally, we should also leverage our knowledge base to export services, and particularly in financial services.

In fact, the demand exists.  I have had the opportunity to discuss at length economic opportunities between the Bahamas and countries like the Dominical Republic and Haiti.  In fact, the Minister of Commerce for the Dominican Republic has recently discussed their need to supplement their financial services sector with our talent, inviting us to export our financial services to their country.  I held a similar discussion with the Minister for Commerce with Haiti.  He was very specific, encouraging the integration and export of our financial service sector in providing the necessary services support to their small and medium business development.  These are great opportunities for us to link our mature financial services industry with a trade in services agenda to regional countries. 

International Initiatives.   Another important aspect of our work is that my Ministry serves as a focal point from which the Government of The Bahamas can survey international initiatives that impact and threaten our centre.   My Ministry is charged with ensuring that The Bahamas is not faced with surprises from the international arena.

My Ministry will also be coordinating The Bahamas’ response to these initiatives, in conjunction with the Ministry of Foreign Affairs, to our Embassies, High Commissions and Consulates throughout the world and the Office of the Attorney General and the Ministry of Finance as necessary.   In this regard, we will be working on several key issues:

 

United States FATCA:   Everyone in this room, would be very familiar with the ongoing work of the United States Government with respect to FATCA.   I have instructed my Director of Financial Services, to make this issue a top priority over the next few weeks with a view to ensuring that the Bahamas has a detailed strategy for ensuring that our center remains competitive in an environment with FATCA.  

FATCA’s regulations contain various options that are being carefully studied by my Ministry.   I am mindful, that my Ministry ought not to consider the implications of FATCA in a “public sector vacuum”.   Therefore, to ensure that private sector participants are included, I have installed a Minister’s Advisory Group to ensure that your views are considered.   I am pleased to report that this group has met and has commenced its work to chart the way forward with respect to FATCA.

Foremost on our Ministry’s agenda is the development of a strategy to elucidate a clear way forward for Bahamian financial institutions so as to remove any uncertainty as to our approach as quickly as possible.   My Ministry wants your businesses’ FATCA preparations to proceed as soon as possible.   We fully understand that time does translate to costs for our industry; however, we endeavor to undergo an expedient, but thorough review of our options and announce the way forward for The Bahamas within the first quarter of this year.

 

OECD/Global Forum :  My Ministry continues to work alongside the Ministry of Finance and the Attorney General’s Office with respect to the work of the Global Forum on tax transparency and the exchange of tax information matters.

The OECD and now the European Union has a consistent, fast moving approach in its actions against jurisdictions like ours.   It is evident that our only crime is having a competitive tax structure and one that differs considerably from Europe.   The Bahamas’ tax structure has evolved, not from the desire to create a “tax haven” environment, but one that is historically based on our policy makers’ consideration of the best mechanism to raise revenue for public expenditures given our open, import oriented economy.  The Bahamas has always been a trading nation with a large informal, self-employed sector.   Therefore, import taxes rather than direct income taxes provided the best approach, at the time, for raising government revenue.

Nevertheless, the world has changed.  Rules have changed.  My Ministry is closely following developments out of the OECD and the European Union to ensure that the views of the business sector are considered as we adjust our legislation.   As the OECD strives to make its groupings more inclusive based on the demands of small countries like The Bahamas, my Ministry will also be an active participant to ensure that The Bahamas’ views are always presented and included in the OECD process, and in fact on the Global stage.

In fact, just last weekend I had the opportunity to have bilateral discussions with the Director of multilateral initiatives in the UK Ministry of Foreign Affairs.  In our discussion I raised the issue of the tax avoidance initiatives that seem to be originating from the EU and the UK with the goal to re-assure the uK that the Bahamas is a sovereign and independent jurisdiction that in every instance has demonstrated its compliance with international best practices. 

I explained that our OECD Phase 1 Peer Review was very positive, and any identified deficiency has been properly addressed.  I explained how all indications from our recent FSAP review were positive.  I also made it a point to discuss how the Bahamas is the only sovereign nation in the region that has achieved IOSCO A status, indicating that we are compliant with all recognized international best practice standards in securities regulation.  Any discussion of no-cooperative jurisdictions naturally should not, and I would hope not include the Bahamas.  We must continue this message in the international diplomatic community. 

Regulatory Initiatives (Financial Stability Board, IMF, FATF):   A modern regulatory environment is an important selling point for any jurisdiction.  My Ministry is working closely with the Regulators to ensure that regulatory initiatives including those which cut across the entire financial sector are properly and promptly addressed in a manner consistent with the risks present in our jurisdiction. 

We are, of course, mindful of the necessary independence of the regulator – a tenet that we fully respect; however, I am adamant that the regulators have a clear understanding of the Ministry’s policy perspective as soon as possible when any initiative arises.   It is also important the Ministry has a good understanding of the regulators’ perspectives as we discuss with the industry in this quickly evolving marketplace.  

With respect to these international initiatives, it is my Ministry’s view that The Bahamas must take a leadership role amongst our CARICOM and CARIFORUM peers on these issues.   A regional approach is important to support our national approach.  We as the Bahamas must be leaders in this regard.  The Bahamas has a strong reputation of proper regulation and a strong legislative and policy framework, my strategy incorporates this aspect of leadership.  

My strategy also involves The Bahamas systematically identifying those jurisdictions outside of the region with positions that are compatible with The Bahamas so that discussions may be advanced with a view to developing common strategies for addressing these initiatives.   The Bahamas has many friends in the world and are prepared to call upon like-minded nations to have a truly global discussion on the future of international business and finance.

 

Managing Industry Relations

[slide 7] Together with the Bahamas Financial Services Board (BFSB) my Ministry creates a platform for industry participation in the development of the financial services sector.  

Our Government has a renewed commitment to consultation on matters that affect your business.   In particular, we seek to balance the need and approach of the regulators with that of the business reality in which we lie.  

We must emphasize that there is a strong and distinct difference in the roles of the BFSB and our Ministry.   We emphasize that for the Ministry to function effectively, we   need to have a strong, vibrant, full time industry lobby in the form of BFSB to continually do your bidding to the Government.   We therefore, encourage those who are not yet members to join both your particular industry groups and BFSB so that your views are included in the industry representations to the Ministry of Financial Services.   While our Ministry does have a valued, close relationship with the industry on a one-on-one basis, there are benefits to representation to our Ministry through BSFB – who I must add is a strong and persistent advocate for its members.

 

B.    Rebranding as a Full Business Centre to the World

[slide 8] The second aspect of our strategy is the rebranding of our business centre.   Financial services is one, albeit a very large component, of the services offered in The Bahamas.   The Ministry of Financial Services views our ability to link current and new service sectors, as key to the future growth and development of the Bahamas. As part of our strategy, my Ministry has begun and will continue to identify the financial sector linkages in each of our services subsectors.  

As an example, a few weeks ago my Ministry met with BISX to identify the opportunities for co-ordination with the ultimate aim of increasing the use of our Bahamian exchange. As a result of those discussions, the specific needs of BISX will be on the table during my discussions with foreign governments and CEOs of our financial sector firms.   Those discussions have also identified specific projects that can be taken on board by the Ministry as part of its 2013 work plan.   

An example is how we can integrate BISX with the exchange in other countries, such as Panama.  I had an opportunity while in Panama to have discussions with the securities regulator in panama and the stock exchange in Panama.  We have developed a plan, that will be assisted with obtaining IOSCO A to have BISX recognized in Panama, allowing the exchanges to work together and us to be able to provide for products of the Bahamas to be better marketed to Latin America markets creating an avenue of trading and liquidity.  We must incorporate all of our tools into a focused strategy.

The Bahamas’ arbitration services rounds out the services that are offered in The Bahamas.  As many of you may know, we passed in 2009 international arbitration legislation benchmarked against the highest regarded international legislation.  We have not proceeded much further.  My Ministry has portfolio responsibility for creating the Bahamas as an international arbitration center.  We are looking to focus on niche markets, such as maritime and financial services, as well as trade disputes, and also focus on being the gateway to Latin America for such disputes.  We are constituting an arbitration council of public and private sector persons to plot the strategy forward, which should meet in the coming weeks.  We look to advance the arbitration agenda of the Bahamas in a way to continue providing opportunities for local practitioners, further diversifying the financial and professional services of the Bahamas. 

C.    Comprehensive Approach to Increasing Competitiveness

[slide 9] The third component of my strategy deals with Competitiveness.  “Competitiveness” is the all-encompassing buzz word of the day, but our Ministry has embraced the concept to include the (a) focusing on human development and mechanisms to improve productivity in The Bahamas’ business services sector, (b) making it easier for firms to do business in and from within The Bahamas by rationalizing government processes and (c) encouraging and enabling product innovation.  

For the Ministry of Financial Services, a “competitive” Bahamas is a thriving Bahamas – One where entrepreneurs can flourish and create wealth.

Human Development and Productivity

[slide 10]  Now to the first aspect of our competitiveness strategy: A first class International Business Center requires first class Bahamian talent at all levels.   My Ministry cannot stress this enough.

My strategy includes a focus on education for all levels. 

  • The Ministry will continue to facilitate and encourage continuing education and professional programmes and certifications for high-level executives throughout the sector.  We have initiated quarterly continuing education symposium for financial services professionals to further the knowledge base of our professionals.  This initiative is done in partnership with private sector organizations and we will continue the initiative to ensure excellence. 

  • I am proposing for my Ministry to work along with the Ministry of Education and the College of The Bahamas to expand and innovate on its foreign language training and cultural sensitization training with a specific focus on international business.   Our target areas include Spanish, Portuguese, French, German, Arabic and Mandarin. 

  • My Ministry will be exploring the needs of the business and financial services programmes offered at the College of The Bahamas and The Bahamas Institute of Financial Services so that we might establish centres of excellence in certain key fields. 

  •  A new project which my Ministry will embark on in mid to late 2013 is the “Day 1 Business Skills Programme”.   Through this programme Bahamians entering the business sector will be equipped with practical business skills.  We will ensure adequate training is put in place to utilize the tools of the trade such as Bloomberg terminals and other necessary instruments. 
  • Our Ministry wishes to encourage and facilitate the development of an endowment fund for business education at the College of The Bahamas.
  • [slide 11] Finally, my Ministry will aggressively pursue internship opportunities for Bahamian students and international exchanges for Bahamian professionals.   We are identifying a number of international partners to assist with this initiative

 

In this context I am also please to announce that the Ministry of Education and the Ministry of Financial Services have agreed to partner in a comprehensive skills gap analysis of Bahamians in the financial services industry.  The intent is to identify the areas in the industry where there is a gap in local talent, and then in partnership with the Ministry of Education and educational institutions ensure that proper training and educational opportunities exist to cause Bahamians to have the skills to fill these positions. Promoting the  advancement of Bahamians through the financial services sector will ensure a sustainable talent pool for continued growth.

Focus on Improving the Ease of Doing Business

[slide 12, 13, 14] The Bahamas has an overall ranking of 77th in the most recent Ease of Doing Business Index.   The Bahamas places behind some of our CARICOM peers and most of our international financial centre peers.   With the exception of paying taxes and enforcing contracts, the trend is disturbing.  My Ministry has already begun to work with the Ministry of Finance, the Attorney General’s Office and the Registrar General’s Department with respect to the ease of starting a business, obtaining a business licence, registering property and enforcing contracts. Our goals is to see positive changes over the next few years in this index to where we are a leader among our competitors.

Innovation in Financial Services

[slide 15] The final aspect of our competitiveness strategy involves encouraging innovation and entrepreneurial activity in financial services.   Through our educational initiatives, such as the mentioned skills gap analysis, we are ensuring that our citizens have the skills to take advantage of opportunities that exist.   Through our work on the ease of doing business – we are ensuring that unnecessary barriers are removed from entrepreneurial activity in our centre.   Now, on this third pillar, we are encouraging entrepreneurs to create new products, processes and opportunities for business services.

The Ministry of Financial Services has the political will to make the necessary changes that can benefit The Bahamas’ financial services sector.   Furthermore, we understand that innovation comes from both large and small firms.   We are also committed to ensuring that our agencies gather and disseminate data that is useful to our industry for decision-making and innovation.   Given our strong commitment to innovation, my Ministry will be undertaking two initiatives in this regard.

The first is based on the Dutch “Innovation Room” Model.   This approach brings together regulators and other officials to review new products and processes quickly.   This initiative will bring greater transparency to the process of introducing new or complex products to The Bahamas.

The second initiative is the launch of a Financial Sector Innovation Council which will work with industry to identify new markets and new products for The Bahamas to pursue.  Additionally, the Council will assist in ensuring that modern financial sector legislation is in place to create new market niches for Bahamian firms.   The Council will also be charged with encouraging, through appropriate incentives, financial sector research and development.

 

D.   A Comprehensive Approach to Immigration Management

[slide 16] The fourth aspect of our strategy addresses immigration.   The Ministry of Financial Services understands that a dynamic business centre requires a modern, development-focused immigration policy.   Our goal is to work with the Department of Immigration to ensure a progressive immigration policy that protects and facilitates opportunities and mobility for Bahamians, while efficiently meeting the needs of business for occasional foreign talent.  

I would like to be clear, my Ministry understands that EVERY International business center operates with foreign talent and that EVERY center has a rigorous immigration process. However, our centre demands a responsive immigration management system that considers domestic development goals.

[slide 17] Over the next few weeks, my Ministry will be meeting with the Department of Immigration, regulators and industry to propose a smoother immigration policy specifically for the financial sector.   Paramount in this proposal will be mechanisms to identify and confirm legitimate business needs for foreign talent.   For example, is the need because of specific company knowledge, language requirements, promoting head office training programmes, etc.   In this process we must keep in mind the approval process by the regulators, where applicable.  

Second, we must ensure that there is appropriate succession planning and knowledge transfer within reasonable timeframes.  Finally, we must ensure that the immigrations process reduces uncertainty through a more efficient process.   We must ensure that there are clearer, more transparent requirements; faster processing time, an applications tracking process and flexibility to fairly deal with urgent cases.

E.    Focus on New Geographic Markets

[slide 18, 19, 20, 21] The Ministry of Financial Services, in determining our markets strategy has asked: “Where are the growth centers?”   We have identified a few lines of interest that we will be exploring aggressively over the next few months.  

The first is Latin America and in particular: Brazil and Panama. We have noted that there are rising income levels in Latin America, greater economic mobility and an increasing middle class.   Indeed the number of persons in the middle class in Latin America is greater than that in China, Russia or India, according to a recent World Bank study.

[slide 22] Our second market of interest is North America.   We believe that this market is currently underserved given the demand for tax compliant, wealth preservation and asset protection products in the North American markets.   This market will also benefit from the traditional comparative advantages that can be offered in The Bahamas and should have strong linkages with our tourism sector.

[slide 23] Asia poses another opportunity for The Bahamas.   Indeed as business opportunities strengthen between The Bahamas and Asia there are opportunities to create and strengthen financial ties.

Finally, the Middle East may also offer new opportunities for products tailored to this niche market.

Sovereignty

[slide 24] Before I conclude I want to speak briefly about what I feel is one of our key assets, an asset that sets us apart from many of our competitors, our sovereignty, our independence.  In a constantly changing environment such as what we are in today, the ability for a country to make its own decisions, to advance the interests of the industry and its citizens is paramount.  The mitigation of political risk to those doing business in the Bahamas is key, our sovereignty does just that.  We in the Bahamas recognize this tremendous advantage, the advantage of being able to be nimble in the creation of new products, and the advancement of new policy.  Our sovereignty will be a unique and important asset of the Bahamas and the Bahamas financial services sector, it will be an important component of advancing our competitiveness and will factor in the promotion and raising the profile of the Bahamas internationally.

Conclusion

In conclusion then, there is much work to be done over the next few months.   My Ministry is tasked with this awesome responsibility and we will be successful.  However, you- the financial sector – have an important role to play also.   We expect your considered and timely opinion on matters of the utmost importance as we consult.   We also ask for your continued creativity as we look for new markets and facilitate the creation of new products that meet the needs of a current and prospective clientele.

Ten (10) years is a short time.  But I am confident that the Bahamas as a business center in the year 2023 will be vibrant, robust and will serve to complement and challenge our tourism sector.

 

Thank you!

[1] http://laptop.org/en/children/countries/uruguay.shtml

[2]

[3] The Bahamas General Trust Company, established in 1936, was later bought by Natwest.

[4] Craig W. (1998), “Financial Evolution of the Bahamas,” in The Financial Evolution of the Caribbean Community (1970-1996), Caribbean Centre for Monetary Studies.   Page 95.