The Hon. Zhivargo S. Laing, M.P.
Minister of Economic Development
Speaking at the recent 2001 Miami Conference on the Caribbean and Latin America, the Hon. Zhivargo S. Laing, M.P., Bahamas Minister of Economic Development, pointed out that a “new international morality” led to recent initiatives of various international organisations in relation to the operations of international financial centres.
Referencing the steps taken by The Bahamas in response to the new demands placed on its financial services sector, the Minister acknowledged that there have been losses in new and existing International Business Company (IBC) incorporations and continuance. He indicated, however, that this was fully anticipated, *”as we suspected a number of IBCs would not be able to meet the heightened standards within our financial services sector”.* The Minister added that there have not been any other significant losses in business, and that *”Indeed, there have been indications from international institutions that they are looking at The Bahamas with a view to establishing operations in what they regard as a jurisdiction with international standards of regulation”.*
The standard of financial services regulation within The Bahamas was touted as being equal to, and in some cases exceeding, that of most jurisdictions in the world.
See below for an extract from the Minister’s address to conference delegates:
New International Morality
The genesis of the new morality is founded in an age-old ambition, that of capital flow in pursuit of wealth. Corporate and private entities move money throughout the world with the aim of maximising wealth for their owners. Governments that provide the enabling environment for such wealth to be pursued do so at a cost, a cost that is financed primarily through taxes on the monies earned by the corporate and private entities. To the extent that private concerns can satisfactorily move their capital to earn income and governments can satisfactorily tax that income, the world is in virtual harmony. However, if this cannot happen, then such adjustments are made as are perceived will bring about that harmony. It is the latter situation that has spawned this new international morality.
Recent events of history have resulted in the convergence of a number of forces that have precipitated the new international morality in the international financial system. These include:
a. Telecommunications, information systems, microelectronics and transportation technological advancements that have provided the technological infrastructure for the global economy in which capital can be moved instantaneously across the planet.
b. Globalisation, which is a process that has compressed, in a sense, both time and space, and enables functionality in politics, economics, culture and civil society on a planetary scale on real time.
c. International capital flow trends as a result of the new global modalities that have resulted in significant tax avoidance and evasion strategies on the part of both private and corporate entities.
d. International corruption in drug trafficking and the related money laundering that has been facilitated by technological advances and the globalisation process; and that has sought to undermine peace and prosperity, both at the national and international levels.
e. An ideological shift that suggests big government is counterproductive, and that such governments should be leaner and smarter. Governments have thus sought to maximise current levels of taxation, which necessitates improving collection strategies, including preventing avoidance and evasion strategies by their nationals.
f. An enabling international cooperative environment, aided by the integrated technologies of a global system, where national borders serve as less of a hindrance to national enforcement and less of a facilitator of international criminal activity. This environment has been functioning for the last 15 years to fight against international crimes, namely money laundering.
International Financial System
These forces made it inevitable that the international financial system would come under review and that changes would be made to serve the needs of the global system, especially where the interest of the powerful was at stake.
The modus operandi of capital in pursuit of wealth governs legitimate as well as illegitimate enterprise, and modern advances are equally enabling in both environs. Increasingly open borders, falling trade barriers and information flow has made both the legitimate and the criminal more efficient at their crafts. Large sums of monies are being made by criminals smuggling drugs, people and information using the most modern of technologies available and taking advantage of a more global system. Where once criminals operated within national boundaries, transnational groupings have made it possible for crime to be conducted on a global scale. They are using the same business strategies that benefit global corporations building worldwide commercial profits.
The Future of Offshore Finance
*While we will continue to be a low tax jurisdiction with a strong commitment to confidentiality, it is our ability to provide the same in a spiritually renewing environment that will continue to appeal to international clients.*
The dramatic reforms undertaken in The Bahamas’ offshore finance centre and other offshore centres in the world have left many wondering about the future of such centres. The secrecy and tax bases for the attractiveness of such jurisdictions have been somewhat eroded. Those who postulate that a continuance of such erosion will destroy these centres tend to miss a point of historical importance as well as current realities.
The Bahamas’ offshore centre grew out of the demand by international persons spending long periods of time in The Bahamas to meet their financial services needs. As such persons tended to take up residence in The Bahamas for extended periods, they came to demand a diversity of financial services. Such visitors came to The Bahamas to enjoy a lifestyle unique to the isles of The Bahamas. That lifestyle was at first alluring, but for many became an enduring fascination. They have become permanent residents and second homeowners in The Bahamas. Their links to their homelands have provided networks of global proportions. We believe that such people will continue to find the lifestyle of The Bahamas alluring fascinating. They will find The Bahamas a full service offshore centre that complements their enjoyment of the pristine and tranquil environs of our sunny isles.
The Bahamas and other offshore jurisdictions also evolved in response to changes in the global environment, most specifically changes in developed countries. It was creativity and innovation that enabled offshore jurisdictions in the face of changes taking place to thrive and prosper. Change is a permanent reality of human existence. The changes now taking place call for creativity and innovation on the part of our jurisdictions. Taking into account the new international order prevailing, we can and we must develop products and services that meet the needs of those who seek out our territories for both lifestyle and business reasons.
The new international financial regime demands extensive scrutiny of the activities of users of the financial system. Offshore jurisdictions that value their commitment to international cooperation and goodwill will have to focus on fewer but more quality clientele, rather than more but less quality ones.
A key element of offshore financing is human resources. The industry and professionalism of the people who serve in these jurisdictions are paramount. Lawyers, accountants, bankers, administrators, public servants and general staff, all contribute to the competitiveness and attractiveness of a jurisdiction. Perhaps more so than many other clients, financial service clients value relationships with their service providers. They value loyalty, quality, and competence in a relationship. We in The Bahamas have these values entrenched in our financial services psyche — indeed, in our national culture. We also have a commitment to the further entrenchment of these values. By following through on this commitment, I have no doubt that we will continue to be relevant to the changing and discriminating needs of international clients.