 |
 |
 |
| Caribbean Property Magazine Home / January 2009 / 'Caribbean Offshore Industry ' | SEND THIS PAGE TO A FRIEND  |
 |
 |
| REACH OVER 380,000 SUBSCRIBERS EVERY MONTH! |
|
|
|
|
|
|
 FULL - LENGTH ARTICLES FEATURING YOUR PROPERTY! Tell YOUR story and get exposure! Sell your property or business (or business opportunity) through editorials and feature articles! |
|
|
 |
 |
|
|
| VISIT OUR ARCHIVES! Click here to explore our archived articles. |
|
|
| TELL YOUR STORY! We want your articles, your stories, your experiences, your knowledge and your advice! Tell our readers what you have learned, what you love and what you think other people need to know about living, working, buying, selling, relocating and retiring in the Caribbean. |
|
|
| |
 |
| A comprehensive list of downloadable ebooks available from Caribpro. Titles include: |
 Retirement Planning For Offshore Living: Maintain and Enhance your lifestyles spending less than 25% of your monthly budget. |
|
|
|
|
| Belize: Living There How to Live, Retire, Work of Invest in Belize. |
| Nicaragua: Real Estate Property and land bargain amidst colonial splendour. |
| Plastic Surgery in The Caribbean: Inexpensive, High Quality Cosmetic Surgery. |
|
|
|
|
| |
 |
| |
JANUARY  2 0 0 9Issue 24
| ||
| THE CARIBBEAN OFFSHORE INDUSTRY by Katie Sosna The development and growth of Caribbean islands into sound, independent economies and societies has been the result of a colourful and turbulent history. The current offshore industry is a strong and viable economic contributor to many of the Caribbean islands and is presently weathering the storm of the ongoing economic crisis. The Caribbean comprises an array of diverse countries with varied historical legacies and present day governmental systems. Achieving strength through unity lies at the core in the development of Caribbean islands. With progressively advancing economies, representation as a body with one voice is a key in assuring regional success. One of the first major attempts made toward unifying the Caribbean islands under a single government was embarked upon through the establishment, in 1958, of the British West Indies Federation, which was the formation of a Federal Government encompassing ten member countries, then known as the British West Indies. The Federation, however, folded upon the sudden withdrawal of Jamaica and Trinidad and Tobago in 1962. The ensuing discussions on reviving the defunct West Indies Federation achieved success on July 4th, 1973, with the signing of the Treaty of Chaguaramas by which the Caribbean Community and Common Market (CARICOM) was created.  The establishment of CARICOM culminated as several of the islands were in the process of attaining full independence from Britain; for example, Barbados and Guyana (1966), Trinidad and Tobago (1962), the Bahamas (1973), Dominica (1978), St. Lucia, St. Vincent and the Grenadines (1979), Antigua and Barbuda (1981). Presently, the members of CARICOM are Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Montserrat, St. Kitts and Nevis, Saint Lucia, St. Vincent and the Grenadines, Suriname and Trinidad and Tobago. Membership of CARICOM is open to any other State or Territory of the Caribbean Region that is, in opinion of the members, able and willing to exercise the rights, and assume the obligations, of membership. The revised Treaty of Chaguaramas of 2001 established the Caribbean Community, including the CARICOM Single Market and Economy. Countries such as Aruba, Bermuda, Cayman Islands, Colombia, the Dominican Republic, Mexico, the Netherland Antilles, Puerto Rico and Venezuela have acquired Observer Status in different institutions and ministerial authorities within the Community and CARICOM. The economic mainstay of the islands during both the colonial and post-colonial periods, was in the production of cane sugar, coffee, bananas, spices and citrus. However, strengthened competition, due to eroded trade preferences and the entry of new suppliers into what were previously closed markets, evinced the need to diversify the economies of these small island nations. At the Barbados Investment and Development Corporation Conference on May 31, 1996, Dr. Compton Bourne, President of the Caribbean Development Bank (CDB), associated the new challenges with the advent of globalization, which he stated, “includes the deepening of international trade relations evidenced by higher ratios of trade to national incomes and by higher ratios of imports to national income. Countries have become more trade dependent. At the same time, globalization has been attended by strong movements towards regionalism which in the case of industrial Europe and North America have ensured that trade deepening and the benefits associated with it have been largely confined to the countries within those trade groups.” Dr. Bourne also noted that, “a very important concomitant of globalization is the erosion of trade preferences from which small Caribbean economies have traditionally benefitted. The affected commodities are mainly agricultural and agro-industrial (bananas, rice, sugar and rum), but manufactured commodities may also be affected. The removal of trade preferences has proceeded at a faster pace than the dismantling of protectionist barriers erected against agricultural and manufactured goods in which developing countries, largely because of labour cost differentials and natural endowments, would have competitive advantage.” With the hope of offsetting some of the damage done by the decreasing export of goods, many of the islands looked towards tourism as a means of diversification. It was felt that the tourism industry would bring a host of associated benefits such as infrastructural development through the construction of international airports, hotels, a service industry and upgraded road networks, which would act as primary catalysts for economic and social change. However, whilst tourism did succeed in boosting the economies of many Caribbean nations, the region was learning fast not to put all its “eggs into one basket.” Thus serious steps were taken to evolve a financial industry that could contribute to each island’s economy and make use of the emerging technological capacity that allowed for business to be done on a transnational level.  Many Caribbean governments had long seen the importance of adapting rapidly to an increasingly fiercely competitive global environment and the danger that small developing economies could face in the absence of a policy framework for financial interrelations with the global economy. From the early eighties, islands such as the British Virgin Islands (1984), Bermuda (1981), Barbados (1982), Antigua and Barbuda (1982) and the Bahamas (1989) enacted International Business (IBC) Acts alongside the development of their tourism industries in an attempt to identify economic activities that would reassure a continuous and substantial flow of revenue. Other islands, namely, Belize, Anguilla, Dominica and St. Lucia followed suit by enacting similar IBC Acts in 1990, 1994, 1996 and 1999 respectively. ONE MOTIVATING FACTOR THAT LED GOVERNMENTS TO CONSIDER THE FINANCIAL SERVICES INDUSTRY WAS THE WEALTHY ECONOMIC STATUS THAT SWITZERLAND MAINTAINED One of the motivating factors that led these governments to consider the financial services industry as an alternative was the wealthy economic status that Switzerland had managed to maintain as a result of its steadfast political, banking and financial principles. The offshore industry originated in Switzerland, a country which always remained neutral during war and as a result has been able to maintain its wealth and protect its financial interests. This made Switzerland very attractive as a tax haven since both individuals and corporations internationally explored the possibility of protecting their assets by opening bank accounts, known today as Swiss offshore bank accounts. Additionally, the spread of similar Offshore Financial Centers (OFCs) throughout the world was due to a series of tax and financial restrictions that were imposed by governments in many developed countries during the 1960s and 1970s. High taxes and fiscal restrictions created an outflow of capital and deposits to less regulated and tax exempt institutions, such as Eurocurrency and offshore centers. The Swiss strategy was being closely observed by many governments in search of ways to broaden the economic bases of their countries. Parallel to this, the British Dependencies of Jersey, Guernsey and Isle of Man were successfully progressing economically as their offshore and financial services centers grew to accommodate the masses of British and European citizens that sought offshore financial services to avoid the exorbitant taxes that were being levied both in Britain and throughout Europe. Four main factors highlighted as the major catalysts in the emergence of OFC’s are: 1. The removal of impediments to foreign exchange on the conversion by nonresidents of current earning in Western Europe. Moreover, globalization increased the ability of multinational corporations and financial establishments to move from one place to another. Capital and labor mobility, strengthened by market liberalization, the removal of barriers to trade and technological advancements in the area of software and hardware with which information is transmitted at the speed of light, propelled global offshore activity and investments. According to Ahmed Zoromé (2007), the Eurocurrency market grew at a remarkable pace during the 1960s and 1970s, with the shift of financial activities to Eurocurrencies gaining considerable momentum after 1966, when US money market rates rose above the interest rate ceilings on dollar deposits allowed by Regulation Q (a regulation imposed by the US government which limited the interest rates that banks could pay, as well as a rate of zero on demand deposits - checking accounts). This resulted in a credit crunch that, in turn, forced US banks to seek funds in the Eurodollar market. During the years 1966-1977, the gross size of the Euro-market, that is the sum of all Euro currency liabilities including interbank deposits, grew 17-fold, from US$18 billion at the end of 1966 to US$310 billion at the end of 1977. CAYMAN ISLANDS CAPITAL MARKET BECAME THE 5TH LARGEST IN THE WORLD, WHILE FOREIGN INVESTMENTS IN LOW TAX JURISDICTIONS WITHIN THE CARIBBEAN AND SOUTH PACIFIC ISLANDS GREW TENFOLD TO OVER $200 BILLION In the Caribbean sphere, the offshore sector flourished. Behind New York, London, Tokyo and Hong Kong, the Cayman Islands capital market became the 5th largest in the world, while foreign investments in low tax jurisdictions within the Caribbean and South Pacific islands grew tenfold to over $200 billion from the period 1985 to 1994. By 1995, the British Virgin Islands had an estimated total of 60,000 registered IBC’s accounting for 41% of all international business companies in the world. | ||
| ||
| ||
| ||
Meanwhile, in St. Vincent and the Grenadines, the IMF estimated that the offshore financial sector contributed EC$30 million to the economy, that is, 3.5 % of GDP, in fees, job creation, rentals and use of utilities. The St. Vincent and the Grenadines offshore sector was also reported to have grown rapidly and had a total number of 11,400 registered entities, of which 28 were banks, 608 were trusts and the rest included international business companies.  The Caribbean islands were unprepared to confront the magnitude of the OECD initiative and the ensuing negative economic impact. Barbados, an economically stable CARICOM country, stood to lose two-thousand jobs which were created by the financial services industry and one-third of the government’s revenue. Barbados’ Prime Minister Owen Arthur was concerned about the island’s inclusion on the OECD’s List of Tax Havens since a collapse of the offshore finance and information services sectors would also signify the loss of a significant earner of foreign exchange and would have a negative direct impact on other related industries and social stability. Dominica, St. Vincent and the twin-island nation Antigua and Barbuda were also hard hit by the OECD’s initiative. In all three islands, the loss of fees, exodus of offshore banks and loss of employment destabilized these economies, bringing them to near collapse. In April 1999, even before the OECD included the islands on its List of Tax Havens, the United States and Britain issued an “advisory to their financial institutions, recommending enhanced scrutiny’ ”for transactions in these islands. In an effort to have the advisories lifted, Caribbean governments implemented several measures to bring their offshore financial sectors in line with the requirements of the Americans and the OECD. Some of the measures implemented by Caribbean governments included the revision and enactment of several offshore laws. Many of these legislations involved Anti-Money Laundering (AML) measures, which sought to combat illegal financial activities and erase loopholes from existing offshore laws. For instance, Antigua and Barbuda effected many amendments to the Money Laundering (Prevention) Act and the International Business Corporations Act, Dominica passed the Money laundering (Prevention) Act and the Exchange of Information Act; in St. Kitts and Nevis, acts passed include the Financial Intelligence Unit Act, No. 15 of 2000, the Proceeds of Crime Act, No. 16 of 2000, the Financial Services Commission Act, No. 17 of 2000, The Nevis Offshore Banking (Amendment) Ordinance, No. 3 of 2000; and in St. Vincent and the Grenadines – the International Banks (Amendment) Act, 2000 and the Confidential Relationships (International Finance) (Amendment) Act. Furthermore, more than three quarters of the offshore banks that were functioning on the islands were asked to move, while others that were discomforted with the state of affairs simply packed up and left. In Antigua, for example, several International Business Companies were made inactive and later struck from the country’s Companies Registry. CARICOM governments also held consultations with the OECD in an attempt to discuss ways in which both economic and legislative reforms could be implemented so that their respective countries could be removed from the organization’s blacklist and without draining too much of the islands’ economic resources in light of the damaging financial and political effects that were already occurring. Coupled with this, a Caribbean leg of the Financial Action Task Force (FATF), the Caribbean Financial Action Task Force (CFATF), was established. Offshore services are perfectly legal, supported by legislations that regulate the operation and functions of offshore entities and the provision of offshore service by agents. Offshore services are perfectly legal, supported by legislations that regulate the operation and functions of offshore entities and the provision of offshore service by agents. The legislative and financial reforms undertaken by the CARICOM governments continue to provide an ever progressive framework for the construction of stable and safe offshore financial centers within the region. As technological advancements increasingly erase geographical boundaries, the task of keeping abreast with global changes will be an ongoing one for CARICOM governments. Today, advanced telecommunications facilities enable offshore service providers operating within these jurisdictions to render quality and efficient offshore and financial services. State of the art company registries throughout the region ensure quick offshore company incorporation, normally within 24 to 48 hours, and secure formation document filing. Millions of people throughout the world are provided with offshore corporations such as Trusts, Insurances and IBCs which aid in relieving tax burdens and the constant threat of loss of assets and belongings to litigation claims. DOMINICA, ST. KITTS AND NEVIS ONGOING ECONOMIC CITIZENSHIP PROGRAMS ARE EXTREMELY WELL REGULATED In addition to the offshore sector, Economic Citizenship also emerged as an opportunity for small islands to increase opportunities to garner valuable foreign investment. Although not available on a large scale as before, due to the cancellation of most programs throughout the world, Economic Citizenship has been viewed a major offshore product by a small selection of nations. Currently only offered by the two Caribbean islands of Dominica, St. Kitts and Nevis, these ongoing Economic Citizenship Programs are extremely well regulated, and are administered with stiff international due diligence checks and thorough application processes.  The Economic Citizenship Programs of St. Kitts and Nevis and Dominica continue to contribute towards development in key economic and social areas such as education, infrastructure development and healthcare. Acquiring Dominican and Kittitian citizenship offers the added advantage of becoming part of the Caribbean Community and Single Market, which is steadily growing and strengthening as a dynamic and unified group as it deepens and fosters ties both internationally and regionally. By acquiring a second passport through Economic Citizenship, people from around the global are afforded the opportunity of living in economically, politically and socially stable countries. People, who live in countries where basic human rights and freedom are denied, are also able to enjoy freedom of expression, travel, and free enterprise. Economic Citizenship in both Dominica and St. Kitts allow for visa free travel to over one hundred countries.  In conclusion, with nearly a decade gone by, the development of Caribbean islands as key players in the global economy has, without a doubt, been challenged by many legislative issues and world circumstances. However, the will to prosper and secure a stronghold on the right policies that will propel the Caribbean islands forward into new eras, has already been established by the memories of the islands’ hurdles over stumbling blocks throughout their history. Thus, the Caribbean offshore financial sector will continue to be a viable player in the global financial industry and offer valuable offshore services to clients from around the world.
| ||
| ||
 | ||
 | ||
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
| Related Articles | ||
| December 2008 | ||
| Investors And Funding December 2008 | ||
| The system uses a classic strategy to benefit from the rewards within the currency markets, which at the moment are high. For this the expertise is provided by one of the most profitable and experienced firms within the industry, whose clients include Barclays, Lloyds and other blue chip companies who rely on their advice and expertise. The opportunity is not available to the general public, only by invitation and through professional Accountancy and Law Firms. We were lucky enough to receive such an invitation and have been monitoring this scheme to ensure it can deliver as advised. ---> Read More | ||
| December 2008 | ||
| PURCHASING PROPERTY USING AN OFFSHORE COMPANY By Mara Etienne-Manley | ||
| So you’ve been vacationing in the Caribbean every year for the last six years and you’ve got your eyes set on this amazing ocean-front villa which is finally on the market. It’s perfect for your family. This is your dream home and it’s right at your fingertips- the only thing standing between you and this gorgeous villa is the excessive taxes and legal fees to be paid in addition to the actual cost of the property. You may well be aware that purchasing a property overseas is a taxable action, and that there is an increased liability for taxes such as capital gains, inheritance and income tax, and often there are additional costs such as stamp duty and transfer taxes. Because of this, it is well worth your while researching your purchase options from a financial and legal perspective before committing to a purchase. ---> Read More | ||
| November 2008 | ||
| Passports to Offshore Security November 2008 | ||
| Given the dreadful state of the financial environment earlier this year, in April, the International Monetary Fund predicted a one in four chance of a full-blown global recession over the next twelve months, and that there will be no early or simple resolution to the world’s largest financial shock since the Great Depression of the 1930s ---> Read More | ||
| February 2008 | ||
| Caribbean Basin Developments: Casually Chic to Luxurious Retreat | ||
| As investment and purchasing a home in the Caribbean Basin and Central America becomes more and more simple, and the investments more solid, the choice becomes greater. The CaribPro Team lives the lifestyle and knows the region and all of its key developers, who are now offering a wide range of developments to suit every need. And as every nation is diverse, you get your choice of lifestyle, language and culture along with the perfect investment for your needs. ---> Read More | ||
| February 2008 | ||
| Developing A World-Class Offshore Services Sector | ||
| Developing A World Class Offshore Services Sector to equal its world-class hospitality sector has been a primary goal in Anguilla over the past 18 years. By hosting one of the most technologically advanced on-line company registration system in the world, ACORN, this tiny gem of an island, long known for its beautiful beaches, excellent cuisine and friendly inhabitants, is now renowned for it top notch international offshore services sector. ---> Read More | ||
Click Here to download this article in PDF format.
SEARCH OUR MAGAZINE ARCHIVES contact us submit an article list your property list your boat list a cultural event advertise with us list your property rental |
| |