Bermuda Sees Strong Growth In Economy

Lisa Ugur, Tax-news.com, London

19 July 2000

Bermuda was one of the six offshore jurisdictions to write to the OECD in order to escape inclusion on the now famous list of harmful tax havens and whilst a number of offshore financial centres are struggling to absorb the OECD's and other recent attacks on them, Bermuda seems to be going from strength to strength. Aside from gaining confidence on the back of the OECD's exclusion of Bermuda from its blacklist, the island is seeing a surge in its fortunes. The Bermuda Stock Exchange has just witnessed one of its best weeks ever and, despite weakness in the tourism sector and some concern over new workplace and immigration rules, things are looking good for Bermuda's economy as a whole.

Tourism is of course one of the mainstays of the Bermuda economy, yet it is currently suffering a mini-crisis as both spending and visitors are down and the dollars are not flowing in as rapidly as in the past. However, Bermuda has at least been able to fall back on its other growing industries - financial services and the burgeoning e-commerce industry.

In an interview with the Bermuda Royal Gazette, Finance Minister Eugene Cox said 'I am very pleased with the way the economy is going. People out there are saying it impacts them in different ways, but the reaction seems to be positive.'

Bermuda's balance of payments has a healthy surplus, and according to Mr Cox, the estimates for 1999 have been one of the indicators that the economy is strong: 'There has been a healthy surplus, and we have been able to buy currency easily. There has been no shortage of dollars. No-one has been denied the possibility of selling foreign exchange to go abroad. The level of surplus is certainly healthy and there is a net earnings of foreign exchange which gives the people of Bermuda the opportunity to make purchases from overseas without any difficulty. That is key. If we had a deficit then there would be problems. It is really very, very healthy. People have money to spend and that is what is driving it.'

As far as inflation is concerned, which now stands at 2.9 per cent, Mr Cox is not unduly concerned. He said the rise had been driven by an increase in fuel prices and now that they were on their way back down, inflation would follow suit: 'Fuel costs are impacting on us. We will not see the reduction in the prices of oil until the figures that come out at the end of July or even August. It is good that we can see inflation going down already and the effects of oil prices coming down will be reflected in due course.'

One of the most telling indications that Bermuda is prospering is the rise in the number of businesses being incorporated on the island. In 1999, 11,494 international businesses maintained registration in Bermuda, and 2,528 locally. In the first quarter of 200 there were 51 new registrations for local companies, and 408 for exempted companies - up 74 per cent on the same period last year.

Mr Cox said 'People have talked about international business as being one of the two main pillars of the economy, but the spectrum is broader than that. While we still want to see tourism grow to a certain extent and we are still targeting it with trying to get an increase in the number of flights and cheaper airfares, it is good to see international business thriving....this year we also landed a terrific coup. We got the Concert people - the new joint venture between AT&T and British Telecom. They employ 60 people so far, and at the moment 20 of them are Bermudian. From ventures like this we gain in income, have a company located here, more jobs, more training on the cutting edge of the industry and it gives us diversification of jobs on the Island.'

The Bermuda Stock Exchange has this past week demonstrated the high level of investor confidence in Bermuda's companies and, according to Mr Cox, it is a further indication of how well the economy is faring: 'Certainly when we see the value of shares go up, it is an optimistic thing for Bermuda. People purchasing these shares shows an interest in commodities we have to offer. It certainly seems to be healthy when shares go up and the index is up.'

With so many offshore financial centres still smarting from recent blows by the OECD, FATF and, just last week, the US advisories, Bermuda has undoubtedly siezed the opportunity to blow its own trumpet. Whilst tourism may be in the doldrums, Bermuda has, quite rightly, invested enough time and effort into other sectors in order to be able to fall back on them in times of difficulty. E-commerce is one area which springs to mind, and no-one could accuse Bermuda of being lax when it comes to developing the island's e-commerce prowess. Combined with its expanding offshore sector as a whole, Bermuda certainly seems to be leaving some other jurisdictions still on the starting blocks.

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