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News

Offshore Services- Bahamas

 

Introduction

Participants and stakeholders in the Bahamian financial services industry always follow the local general elections closely. Although the Free National Movement is mostly right-of-centre in its politics and the Progressive Liberal Party has a historic association with the centre-left, both regard financial services as critical to the success of the nation. It is second in importance only to tourism, and a recent survey conducted by UK consultancy Oxford Economics upon the instruction of the Bahamian government revealed that financial services make up 27% of the gross domestic product. Traditionally, it had been thought that this figure stood at approximately 15%. Therefore, national attention is now focused on the industry more than ever.

 

Despite these impressive economic indicators, the Free National Movement beat the incumbent Progressive Liberal Party in the May 2 2007 general election by the second narrowest victory in the country's history. Former Prime Minister Perry Christie of the Progressive Liberal Party ceded defeat to the Free National Movement's leader of the opposition, his former law partner Hubert Ingraham, at 10:30pm on election day. Ingraham, who served as prime minister from 1992 to 2002, was sworn in for a third term as prime minister on Friday May 4 2007.

 

Achievements of Outgoing Administration

The outgoing administration has pointed to a number of achievements in its five-year term in office which it believes have advanced the financial sector. It established the Ministry of Financial Services and Investments and introduced new legislation intended to stabilize and encourage growth, including:

  • the Investment Funds Act;
  • the Foundations Act;
  • the Segregated Accounts Act; and
  • the Domestic Insurance Act.

 

Other existing legislation was amended during the outgoing administration's term of office, including:

  • the International Business Companies Act;
  • the Trustee Act;
  • the Financial Reporting Act and regulations; and
  • three pieces of e-commerce legislation.

A financial services consultative forum was set up with a view to strengthening public-private partnerships. The outgoing administration also claims that it is thanks to its efforts that The Bahamas is no longer being monitored by the supranational Financial Action Task Force.

 

Pledges of New Government

Ingraham has named himself the new minister of finance and has appointed Zhivago Laing, a young but seasoned party stalwart with impressive credentials, as the junior minister of finance. Ingraham articulated his action plan for the sector on numerous occasions during his campaign, and promises to:

  • maintain The Bahamas as a low-tax jurisdiction;
  • continue to advocate a level playing field for standards to be observed by providers of financial services internationally;
  • ensure the timely amendment or enactment of relevant legislation;
  • rationalize the regulatory regimes in order to reduce overlap and duplication;
  • create a statutory financial services board;
  • increase the government's contribution to the annual marketing budget of private sector-driven marketing initiatives so that it pays a 50% share;
  • address the capacity building needs within regulatory bodies;
  • facilitate the engagement of an adequate number of professional and administrative professionals in the legal and judicial services;
  • ensure that Bahamian overseas missions, particularly in the United Kingdom and the United States, have economic officers with financial services experience and expertise;
  • encourage the development of a school of business (equivalent to the Swiss Banking School) at the University of The Bahamas;
  • ensure the availability of internationally competitive telecommunications and electricity services;
  • replace the Office of the Registrar of Insurance;
  • create a new organization with a supervisory oversight role in the insurance sector, similar to the Central Bank of The Bahamas in the banking sector; and
  • pursue the re-establishment of a captive insurance industry.

 

The sector has been further encouraged by the new prime minister's electoral pledge to "provide for the timely processing of applications for expatriate skilled labour or technical expertise required in the economy but not available in the country". The general consensus is that this promise, combined with those listed above, will serve to galvanize the sector, which has seen steady growth in recent years, even further. Morale is reported to be at an all-time high.

 

The new prime minister, echoed by the junior minister of finance, has stated that the new policies are aimed at ensuring "that the financial services sector remains attractive, internationally competitive and adequately regulated". The Bahamas is a leader in private wealth management. Observers are curious whether the new government can expand the jurisdiction’s tradition and success in private wealth management to other areas of the financial sector. The prime minister's relationship with failure has been trifling, even in the worst of times; but with Ingraham now emboldened and jubilant after an unlikely election to a third term, even the most restrained political pundits have been quick to voice their expectations of success.

 

ILO