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Business - Unparalleled growth in Bahamas financial sector
WELCOME BAHAMAS - NASSAU, CABLE BEACH & PARADISE ISLAND - 2007
Business - Unparalleled growth in Bahamas financial sector
Outlook bullish as financial services industry evolves, economy flourishes
At the 2007 Bahamas Business Outlook conference in January, Minister of Financial Services and Investments Vincent Peet declared that he was decidedly ?bullish? about the nation?s economic prospects for the year ahead.
Central Bank governor Wendy Craigg offered a similar prognosis via video, predicting steady growth, and Prime Minster Perry Christie painted a rosy economic outlook, noting that key economic indicators remain strong going into 2007. External debt is under control, he told delegates, and investor confidence remains high, as evidenced by the $13.6 billion currently invested in new developments across the islands; looking forward, the Prime Minister forecasts at least $8 billion in inward investment over the next several years. Meanwhile, in late 2006, the International Monetary Fund predicted that domestic growth will continue to accelerate, reaching 6.5 per cent for the fiscal year 2006-2007 and rising further to 6.7 per cent for 2007-2008.
In the midst of this heady economic growth, Christie has commissioned an economic census to be undertaken in 2007. Its aim is to enhance the quality of economic data, which the government can then use to assess the current economy and shape the country?s economic direction. ?We cannot appreciate where we are going until we know where we came from,? Christie stated in early 2007.
A history of excellence
These calls for a robust economy coincide with a period of tremendous growth and change in the domestic financial services industry?an industry that boasts a history of excellence in both the products it offers and the service it provides. Private banking and asset management have been core components of the Bahamian economy since the country gained its independence from the United Kingdom in 1973, enabling The Bahamas to forge a skilled workforce over many generations. The Bahamas boasts one of the oldest democracies in the hemisphere, dating back to 1729. Its socio-economic stability, legal system and regulatory environment governing the investment sector, coupled with its intellectual resources, have been significant attributes in the development of its financial services sector. Some 250 banks and trust companies are located in The Bahamas today and many of the world?s most prestigious financial institutions have branches or subsidiary offices here.
Supporting the industry are several organizations devoted to generating awareness of The Bahamas as a leading International Financial Centre (IFC) that provides a high level of service to international investors. Foremost among these is the Bahamas Financial Services Board (BFSB), which was launched in 1998 by the industry in partnership with the government of The Bahamas. Wendy Warren, in her capacity as BFSB?s CEO & executive director, and Leslie Isaacs, director of financial services, Ministry of Financial Services and Investments, are permanent representatives on the BFSB board of directors. This board is a multidisciplinary body comprising officials from government, banking, trust and investment advisory services, insurance and mutual fund administration providers as well as legal, accounting and management professionals.
The BFSB itself promotes all sectors of the financial services industry, including banking, private banking and trust services, mutual funds, capital markets, investment advisory services, accounting and legal services, insurance, and the shipping registry. In addition to programmes designed to increase confidence and expand knowledge of The Bahamas among businesses and investors, the BFSB also consults with government to develop new initiatives to meet the changing demands of international financial markets.
Other organizations that facilitate transactions, promote the industry and encourage advances in product development and legislation also exist. These include the Society of Trust and Estate Practitioners (STEP), the Association of International Banks and Trusts (AIBT) and the Financial Services Consultative Forum (FSCF).
Products and markets, past and future
Today, The Bahamas continues to meet the requirements of an increasingly sophisticated financial services marketplace, with an ever-broadening list of products for international investors. The relaunched Investment Funds Act of 2003 set the stage for the introduction of many new products including: the Segregated Accounts Company Act, the Purpose Trust Act, the Foundations Act, enhancements to the International Business Companies Act and amendments to the Perpetuities Act. In late 2006, The Bahamas introduced private trust legislation. Other recent advances include amendments to the Securities Industry Act, which will bring The Bahamas in line with principles set out by International Organization of Securities Commissions, the international securities regulator, and proposed amendments to Foundations legislation.
At the same time they strengthen and supplement their product line-up at home, The Bahamas? financial services sector is also setting its sights on new markets to achieve growth, including China, India, Eastern Europe and Central and South America, with the BFSB having taken or planned exploratory trips to several of these areas.
Top international financial centre
The financial services industry?s prowess was recognized on an international scale several times during 2006; in early January, The Banker, a well-respected Financial Times Group publication, selected The Bahamas as the best international financial centre in the western hemisphere. This was part of its programme to identify the IFCs around the globe ?that offer banks and financial institutions the best locations and infrastructure to carry out their business and serve their clients.?
Later that same year, top-notch financial services intermediaries received international recognition when the International Financial Law Review 1000, an industry publication that reviews and rates the world?s legal firms, ranked four Bahamian law companies as Tier 1, the highest possible rating. The firms in question??Higgs & Johnson, Lennox Paton, McKinney, Bancroft & Hughes and Graham, Thompson & Co?were praised by The Legal Media Group publication for their outstanding work with clients in the financial services field. Higgs & Johnson, for instance, was noted for its role as an advisor to the Royal Bank of Canada, J P Morgan Chase and Royal Bank of Scotland. Graham Thompson & Co was cited as a key advisor to a number of major domestic commercial banks such as Commonwealth Bank, Scotiabank and Bank of The Bahamas International, on regulatory issues, transactions and project finance. Lennox Paton, meanwhile, was recognized for its involvement in a number of high-level transactions such as the $5-billion Ginn Clubs & Resorts project in Grand Bahama, the $54- million purchase of Winn-Dixie?s majority 78 per cent stake in Bahamas Supermarkets and its representation of Starwood Hotels in the Baha Mar development on Cable Beach.
Other sources of capital
In addition to the financial services industry, a number of other industries and sectors contribute significantly to the Bahamian economy. The most notable being tourism, which accounts for just over half of the country?s gross domestic product. Currently, a sizeable portion of incoming investment capital can be attributed to the government?s ?anchor project? policy, wherein it has encouraged the construction of a development project on each major Family Island. According to Prime Minister Christie, more than 430 proposed investment projects were submitted to The Bahamas between 2003 and 2006. More than 50 of these projects, worth $13.6 billion, are now in varying stages of construction. The figure is a significant one, in that the volume of investment surpasses by a significant amount The Bahamas? gross domestic product in 2005, which stood at $5.9 billion.
Moviemaking and commercial filming have also emerged as a supplemental source of capital to the Bahamian economy, thanks to the on-site filming of a number of blockbuster films in recent years, including After the Sunset, the Pirates of the Caribbean films and the latest James Bond movie Casino Royale. The film industry has injected an estimated $70 million into The Bahamian economy over the past five years, with the filming of Pirates of the Caribbean II and III alone bringing in $38 million of that amount.
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