23 Jan Health and safety alongside plans for economic recovery
Curtis Dickinson, Minister of Finance of Bermuda, provides a glimpse into Bermuda’s legislative overhaul to claim its potential
As we approach the end of the year, Ministers of Finance across the world are taking stock of the true impact that COVID-19 and the great lockdown have had to their economies. However, recent news about vaccines have given all the injection of hope and confidence about 2021. How optimistic are you about the speed of Bermuda’s recovery and next year’s economic performance?
Bermuda, like all other countries, has been significantly impacted by the pandemic. Fortunately for us, we put into place a number of health measures that were designed to keep the number of cases fairly low and the island safe. The lockdowns as well as the closing of the airport and our borders for a period of time have resulted in us having one of the lowest number of cases of COVID-19 in the world. Those health measures certainly had an impact on our economy. For the first fiscal quarter the impact was substantial. We have seen an improvement in the second quarter. Now we are in the middle of the third and are seeing further improvements, but our expectation is that, because of the pandemic and the loss of our tourism season, we will see a significant reduction in revenue. We have also taken on a number of expenses to ensure that we can keep people safe. We have spent significant amounts of money on testing supplies and equipment and quarantine facilities. We have also spent about USD 60 million providing unemployment benefits to those that were adversely affected in their jobs by the lockdown. We think that we have gotten to the worst of at least the first wave. We do see what is happening in Europe and the United States and this is a concern to us, as our airport is open again. We feel fairly comfortable that we have a robust testing regime in place to help us to identify cases when they arrive on the island and then take the appropriate measures. I am hopeful with the news of vaccines that we can, as a global community, start to significantly decrease the rate of spread of this virus and then get back to some semblance of what normal looks like. With regard to budgeting purposes for next year, I have advised my colleagues that we need to take a very cautious and conservative view as we are not expecting revenues to recover to normal levels so soon. Therefore, we have to adjust spending accordingly to ensure that we have the capacity to provide for health measures.
What are you immediate priorities as you begin this new term in office? What are the latest additions to the economic stimulus plan targeting unemployment and new investments, such as the recently announced USD 11 million to boost infrastructure development and construction?
Our focus continues to be health and safety. Then, not far behind, we have to focus on the recovery of our economy. We believe that unless we get the health care under control, all the work on the economy will be for nothing. There is an increased focus on the Ministry of Health. We have started to also turn our attention towards the economic recovery as well. About six months ago, I formed an economic advisory committee of leaders from around Bermuda in both the domestic and international economy, to provide the government with ideas on how we recover from the ‘punch in the gut’ that COVID-19 had in our economy. That group originally focused on identifying ‘quick wins’, meaning things that we can do requiring minimum investments that could help get the economy moving again. The Committee is currently developing medium–term strategies which can be implemented over the next year to three years in order to stabilize and grow the economy. We have opened our airport and extended our unemployment benefits. These things helped us create some sense of returning back to normal. Since then, we have made a series of announcements on things that we intend to do in order to get the economy moving again. We have mentioned in our legislative agenda that we are going to be looking at banking reform, changing some of the banking laws to allow for a more competitive market place. This should result in the delivery of better services to customers at a more affordable cost. Bermuda has no standard base rate for retail customers, as each bank has a different rate. We have talked about harmonizing the rate, trying to base it on prime, for instance. We are talking with the banks regarding what the best possible construct should be. My approach involves lots of collaboration, identifying the problem and then asking partners how we can solve these issues. We are also looking at potentially liberalizing our banking laws to allow for more kinds of banks to operate out of Bermuda.
We have also announced things around the capital development side believing that government has a role to play, in creating a good environment as well as investing in infrastructure that can lead to the creation of economic activity. We have moved some capital expenditures that we were planning to spend in the 2021/22 budget forward, as a way of getting small and medium-sized projects active in order to put people to work. We have provided the capital budget that was initially withheld before accessing the capital markets. Originally, we had cut back on capital spending, as we decided to not spend any money on any projects that had not been started already. Once we were through the first wave and we managed to secure financing, we decided to pivot a little, moving forward with a few capital projects. In addition, we are looking on legislation to bring some modernization into the old town of St. George, which is the oldest town in Bermuda developed over 100 years ago. During COVID-19, we have introduced a number of legislative amendments to private pension plans. In this case, through another round of amendments, we are looking for ways to allow young people to borrow from their pensions to provide the down payment on the purchase of a first home. We want to encourage people to save, but we also want them to get their own property. By being able to borrow from themselves, they can avail themselves of fairly inexpensive money that they can then pay back into their pension funds, applying the borrowed funds towards buying a home.
On another note, we are going to be introducing legislation to reconstitute a new tax reform commission. The government had a tax reform commission that did some work during 2018. When I assumed office, I made a point that I thought that this work was great. My only disappointment was that it did not go far enough to provide a wholesale look at our tax system, as I wanted to find holistic ways to raise revenue for the Government of Bermuda. That commission will be reconstituted with the specific mandate to look at designing potentially what the new tax system would look like for our jurisdiction. My plan is to certainly involve key stakeholders as part of that commission, as we try to find a way forward to deal with tax, in light of ongoing threats from the EU and the OECD, with respect to global tax, for which we might need to modify our system to comply with any directive that comes out of those groups. In general, we are trying to ensure that we do as much as possible to get the economy moving again. However, we want to provide the necessary support to those things and get the economy back to normal for the better of the people of Bermuda.
Perhaps the most visible example of success in diversification can be seen in Bermuda’s financial services industry. Traditionally it is its biggest contributor that has allowed the country to build a strong global reputation. From becoming the risk capital of the world, Bermuda is now also known as the Silicon Valley of the Atlantic. Could you tell us a bit more about this journey? What strong and attractive legislative framework has paved the road for a vibrant ecosystem, where Fintech and Blockchain companies can thrive?
We are not quite Silicon Valley yet, although that is our aspiration. We started three years ago on this journey towards setting up the framework where Fintech and digital technology can thrive. Given our size of 21 square miles as well as our regulatory environment and political stability, we are best placed to be an incubator for innovation. I have seen this opportunity of promoting Bermuda as being an environment that is welcoming for people in the Fintech space, who are interested in innovating in the financial services industry. That certainly has grown from beyond Fintech, now to include Insure-tech and Reg-tech. The application of block chain technology is to make the operations of these businesses and industries more efficient and easily-accessible by customers. I think that we have had great growth in this space and that there is still a lot to come. We continue to work with our regulator to refine the regulatory regime, to ensure that we are keeping pace with the developments that are going on in the world. We need to stay focused in order to make sure that Bermuda is top of mind for entrepreneurs looking to tap onto those opportunities in the financial services world.
Addressing the issues of transparency and compliance, as this is an area that your jurisdiction has taken very seriously. Being put on the EU’s white list is a testament of how much ground has been covered and accomplished over the years. Could you share with our readers the broad specs of Bermuda’s regulatory environment today, new laws in the making and where you want to take it in the future?
We decided as a jurisdiction very early on we were going to take a whole country approach to anti-Money laundering and combating the financing Terrorism. We have done quite a bit of work over the course of the last eight years, to ensure that we are a leading jurisdiction, when it comes to compliance and transparency. There is a mistaken notion that, because we have a different tax system, that, somehow, we are permissive. The truth is very different than that. We are a jurisdiction that has built our reputation for being a place that does good business with good people. For those who are interested in doing something inappropriate, the organizations and the right people are here in place to effectively address financial crime, from the government to the police force. Our laws and regulatory framework are designed to create a very difficult environment for illicit activities to be detected and appropriately dealt with.
In terms of the EU, we did a lot of work to first get ourselves off the blacklist, and then whitelisted at the end of the year. I think that this speaks to a number of things. First of all, we have had a long-lasting relationship with the commitment to transparency and international cooperation. Regulators in the United States, the United Kingdom and the European Union are working together with us to ensure that our jurisdiction is among the leaders in the world with respect to being transparent and operating an overall good compliance regime. In January of this year, a report was published, which detailed the results of an assessment undertaken by a team of independent experts, of Bermuda’s compliance with the international standards to combat money laundering and the financing of terrorism and proliferation. This review confirmed that Bermuda’s AML/ATF legislative framework and institutional arrangements are among the best in the world and has a strong level of effectiveness.
We understand the importance of our financial services to the world, as well as the need to be an active member of the global community. We value our relationships with the EU, the OECD and the US. Hence, we took the decision several years ago to ensure that our insurance regulatory regime was fully equivalent with that of Europe. Our independent regulator, the Bermuda Monetary Authority, has done quite a bit of work to be in good standing with international regulators. Our view is that doing good business is good for Bermuda. Ensuring that we maintain the appropriate relationships with international bodies that have responsibility places us in a good stead.
In broader terms, what can you tell us about doing business in Bermuda? What are some of the country’s biggest incentives to investors and other comparative and competitive advantages vis-à-vis other island economies? Where would you say are the most interesting opportunities today for foreign investors? In addition to Fintech and blockchain, what other industries should be earmarked?
Bermuda has essentially two pillars to its economy: one is tourism and the other is international business, which is insurance, reinsurance and everything that derives from that. I am not necessarily looking forward for a third leg of the stool. The third pillar for me can be a number of things. When it comes down to why companies should come to Bermuda, I think that we, first and foremost, have a wonderful location, sitting in the middle of the Atlantic Ocean, between the United States and Europe. When it comes to doing international business, I believe that this is an ideal geographic location, in order to reach both those markets. Secondly, we have had a history of successive changes in the government that have been seamless. The political stability that exists here provides a high degree of certainty to those persons that wish to invest capital. As a former banker, I know that certainty is something that most CEO’s strive for, as it makes the decision-making process a lot easier. Our legal framework, of UK common law, is one of the oldest legal systems in the world. I think that for investors that also brings a certain amount of certainty in terms of the court system and how disputes are being settled. Our regulator, the Bermuda Monetary Authority (BMA), is the principal one for financial services and world-renowned, constantly recognized by colleagues around the world as being a regulator of good standing.
On another note, we have a significant wealth in terms of intellectual capital. We have built expertise over the course of the last several decades in the insurance world. While lots of those people are underwriters and actuaries, there is a whole ecosystem existing outside of the insurance industry, including accountants, lawyers and corporate service providers. For those who are looking to start a business here, whether it is in insurance or other industry, they can hit the ground running fairly easily here. The government, the regulator and industry have a fantastic and long-standing relationship of appropriately working together. You can reach each of those parts of this triangle within one mile of each other. The ability to get people together fairly easily, makes things a lot easier to reach degrees of interactions between people that want to get things done. We are a great place to live and work in. I have had the good fortune of being born and educated here, to go overseas and continue my studying, working in both the US and the UK. While I loved my time there, I am very fond of being back home, as I believe that there is great opportunity here. For me, there is no better place in the world to have a successful career and raise a family.
Bermuda’s geographic location is key. It is a British overseas territory but just a two-hour flight away from New York. You have forged very close economic ties with the US, from a ministerial perspective. What are some of the strategic points that you plan to address with your counterpart in the US, starting in the next year?
Bermuda has always enjoyed good relations with the United States, notwithstanding, whether the Republicans of Democrats were in charge. Our relationship goes back a really long time. The US continues to be our largest trading partner. They are also the source of the majority of our tourism, as over 70 percent of our tourists come from the United States. 68 percent of our imports come from ships that arrive here weekly from the United States. Our currency, the Bermuda dollar, is pegged to the US dollar. I would say that the relationship has been long-standing and remains very good. We enjoy very good bilateral relations with the US. The international insurance and reinsurance markets provide significant amounts of insurance coverage to the US-based businesses and persons. The Bermudian insurance and reinsurance industries have been significant providers of claim payments when the US experienced hurricanes and other disasters. The relationship has survived changes in both sides’ of governments. We consider the US to be an important partner of ours and we make this relationship a key priority. We are looking forward to the new administration and we will work with them as hard as we did with prior administrations.
What would be your final message of trust and responsibility about Bermuda today for our readers of Newsweek?
I mentioned some of the legislation that we are looking to introduce to make us more competitive. We have also introduced the Remote Worker programme, where we are seeking to market Bermuda as a safe place to work from. We have seen people from the US, Canada or even the UK and Europe who have packed up and brought themselves here, along with their families, e to wait the pandemic out. Our view is that this is an opportunity for people to see what we can offer. For those who have not heard about Bermuda before, this is a great chance to see what we are all about. We are hoping to leverage the safeness of our jurisdiction as an opportunity to get people to see what we are all about and give consideration to placing their business here. We are working on legislation around family offices. We will be progressing with this legislation, if not this term, over the next one, kicking up a marketing campaign around it, which will allow wealthy families to place their family offices here and potentially get an opportunity to reside here for a longer term with their families. There is a strategy around Asia and Hong Kong, where we are similarly looking to attract companies that may want to be domiciled here. We are doing some work also on subsea cables, as people are finding that remote working requires some robust network infrastructure projects. Our communications infrastructure is consistently resilient, allowing people to work remotely. In general, we have certainly adapted to the circumstances at hand. Going from exporting fish, as we were traditionally fishermen, to exporting services, we are trying to leverage off our ability to innovate and provide good service to customers.