The World Chamber of Commerce honored the premier of Bermuda in Atlanta with its “International Hero Award” on Nov. 15 for her leadership in formulating financial policies of global significance in the face of the current recession.
As vice chair of the Organization of Economic Development and Cooperation’s Global Forum, Premier Paula Cox is focused on transparency and exchange of information in financial transactions. The OECD, which is composed to the world’s wealthiest nations, serves as a forum to help set global policies affecting all nations.
The World Chamber was organized in 2008 to promote international business in the Southeast and across the world. Last year, it gave Alvaro Uribe, the former president of Colombia, and Atlanta Mayor Kasim Reed, its international hero awards.
Mrs. Cox has had an exceptional political career ever since she was elected to the island’s parliament in 1996, eventually becoming the head of the Progressive Labour Party and premier in October 2010.
She has held numerous cabinet posts including minister of Education and Development as well as minister of Labour, Home Affairs and Public Safety.
She also has served as attorney general and as head of the Finance Ministry succeeding her late father, C. Eugene Cox. She is a member of the Bermuda bar and serves as president of the Bermuda branch of the International Women’s Forum, which she established in Bermuda in 2011.
In responses to questions sent to her from Global Atlanta by email, she addresses a wide range of issues including the state of the world’s economy, Bermuda’s role as a magnet for insurance companies, its efforts to increase foreign direct investment and its tourism initiatives.
Global Atlanta: Please describe the factors responsible for the success of Bermuda’s economy over the years and how they have been affected by the global recession?
Premier Cox: Once almost entirely dependent on tourism for foreign exchange earnings, Bermuda has developed its position as an international business center since World War II. International business and tourism are the two sectors that make the greatest contributions to GDP and generate high levels of foreign exchange earnings.
Bermuda is regarded as a leading financial service center due to: a long-established and highly developed commercial and social infrastructure; the proximity to the United States and ease of access to Europe; recognized by the Organization for Economic Cooperation and Development (OECD), the International Monetary Fund (IMF) and other international bodies as having transparency and standards consistent with those of other major developed countries;
coherent, transparent, and predictable application of the financial services policy towards the financial services sector; shaping of international relations in the financial sphere, including bilateral relations with G7, G20 and markets that are of significant economic importance to Bermuda; well-established reputation as a domicile of choice for insurance and reinsurance; the Bermuda Stock Exchange is the world’s largest offshore, fully electronic securities market; well-educated labor force; the absence of direct taxation and exchange controls; and a stable regulatory framework.
Bermuda also has a long-established and transparent legal system as well as an extensive, well-qualified support system of auditors, attorneys and investment professionals. Equally important are Bermuda’s stable economic and political history.
The (re)insurance sector, as the key driver of the current account surplus, has remained well-capitalized in spite of a near record-level of catastrophe losses in 2011, and fundamentals appear to be still strong.
Tourism is also a vital and integral component of the Bermuda economy.
Being a small open economy, the lack of economic diversity exposes the Bermuda economy to significant risk of instability should either sector seriously decline. As is the case globally, the recent global economic and financial crisis has negatively affected the international business and tourism sectors in Bermuda, and Bermuda is still recovering from the impact of the recession. However we continue to leverage our strengths to attract interested investors while maintaining our current industry base. In other words, Bermuda continues to be open for and open to business.
Global Atlanta: Are you fearful about the state of the global economy in the coming years or do you foresee an economic rebound?
Mrs. Cox: Bermuda is generally navigating the crisis well, but clearly there are concerns—until we see tourism development and more volume in international business, we’re very much waiting to exhale. Nevertheless, there are some green shoots and tremendous opportunities on the horizon, both in terms of legislative change and interest in the jurisdiction. There is still tremendous appetite for the Bermuda brand and we’re well positioned for recovering, but we’re not there yet.
Legislative developments are going to help Bermuda differentiate itself from the competition and give us a good lift. For example work that’s being done on Morgan’s Point (a luxury resort in the process of deelopment) has been helpful, but I don’t think we’re yet at a point where we can cross our arms and say all is well.
With the global economic outlook deteriorating and financial markets experiencing regular bouts of intense volatility, we do not forsee further growth in economic activity through 2012. That said, we see some bright spots. Right now, we’re seeing a tremendous pipeline of new business on some of our international listings, particularly in the insurance-linked securities (ILS) space where we have really planted our flag.
Global Atlanta: How is Bermuda responding to the current economic climate and how is it preparing for the future?
Mrs. Cox: As one of our business partners stated in an interview, it’s about maintaining the credibility and the desire for Bermuda to continue to be such a highly regulated jurisdiction—never taking our eye off the ball, and taking on challenges such as the Organization for Economic Cooperation and Development and the European Union’s Solvency II (global financial initatives to stabilize and provide greater transparency to the global economy.)
Another big success we have achieved, which was evident at the recent captive conference, is that maintaining a practical risk-based approach to regulation and maintaining dialogue with the industry, have helped people realize that Bermuda is not simply focused on one area of the market.
Through the remit of the minister of Business Development and Tourism, a new Companies Act amendment has been passed to facilitate and provide a platform for greater foreign direct investment.
We also have legislation in the offing with regard to corporate service providers. Again, that reflects the partnership between government, the regulator and industry. It’s about finding ways to help our service providers be more empowered.
This reflects one of Bermuda’s core strengths, its can-do approach—we find a way and we are innovative. As regards service providers, some can less readily afford the additional overlay of compliance and governance, but are still able to have a fallback position of using the existing systems that are in play through the Bermuda Monetary Authority.
In terms of practical steps, the Waterfront steering committee is an excellent example of a concrete partnership between the public and private sectors, in this case between the Corporation of Hamilton, Bermuda First and the government.
I have suggested to those involved that it would be wise for the lead to be the private sector. That’s part of our job as government—to be aware of the nuances, and to provide guidance in situations where we believe leadership has various approaches. We’ve had a number of meetings, work is being done and results will be available publicly.
One of the things that makes Bermuda different is that we’re focused on this approach in all aspects of infrastructure—the regulator has a responsibility with the regulatory regime, the capital markets have a stock exchange that dovetails with the regulator, while also supporting the needs of the domestic and international capital markets. From that perspective, we operate a financial services environment that is a microcosm of New York or London.
Global Atlanta: Bermuda has been considered a tax haven for a long time and currently is working with the OECD to ensure that companies and individuals don’t abuse this activity. Would you outline some of the initiatives that you have taken in this regard?
Mrs. Cox: Prior to 2000, The OECD stated in its early definition of harmful tax jurisdictions that any low/no tax jurisdiction that had (1) transparency in its laws as well as (2) a tax information exchange agreement is not a harmful tax jurisdiction. The OECD Global forum is constantly assessing jurisdictions based on those two criteria identified so many years ago.
Today you see that Bermuda is in a leadership role as one of the vice chairs of the OECD Global Forum. Bermuda continues to lead…we were first to ascend to the OECD white list post its April 2nd 2009 creation. We have had a good phase-one OECD assessment. Also our 38 Tax treaty network is second to none and includes all of the G7 and 18 of the G20 no low tax jurisdictions.
Global Atlanta: It seems that you are actively seeking out new business partners. You recently met with representatives of the Qatar Financial Centre Authority regarding investments in Bermuda’s infrastructure and you have signed tax information exchange agreements with Brazil and Singapore. Are you promoting Bermuda more aggressively than in the past?
Mrs. Cox: We have been promoting Bermuda more aggressively for some time and not just in response to the global fiscal crisis. As we have reached out to other jurisdictions to negotiate tax treaties, such as South Africa, the Gulf Cooperation Council, Europe, Asia, Canada, Mexico and the two South American G20 countries, we have used that opportunity to promote the benefits of doing business in Bermuda. In addition, our regulator, the Bermuda Monetary Authority and our stock exchange, the Bermuda Stock Exchange have also been forging cooperative agreements and relationships.
You don’t want the economy to be one-legged. It’s improving, but we haven’t yet had the game-changer on the tourism side. In terms of other pillars of the economy to look at, we have technology and the green space. The government is trying to stimulate entrepreneurship by putting out requests for proposals from those who wish to develop green technologies. I think that helps reduce dependence on government spending on infrastructure and will encourage greater private sector involvement in that space.
There are also opportunities in space technology—with work being done by the Ministry of Economy and Infrastructure Strategy—because there is some interest in using our orbital slots. And obviously the hedge fund, tourism and financial services sector are driving demonstrable progress and increases in our GDP.
The head of the Boston Scientific Corp. once stated that the global capital markets provide real potential for this country that hasn’t been looked at. The fact that we have a totally unique position as a country with an independent regulator that’s not aligned with the EU or U.S., that’s nestled between two of the deepest capital markets in the world, while meeting international standards, is an enormous opportunity.
It’ll be small steps, but it’s exciting to see how Bermuda can get involved in supporting global capital market transactions and how we can accelerate true convergence between insurance and the capital markets. In time, this could also help create a third pillar.
Global Atlanta: What do you think the growing influence of BRIC countries will be on the world economy?
Mrs. Cox: Global economic indicators speak for themselves and we recognise the growing influence of the BRIC countries on the world stage, The BRIC countries represent great potential for business for Bermuda, that is, international financial services and tourism.
Global Atlanta: Are you concerned about the turmoil that has occurred in the Middle East, North Africa regions or do you think that there will be new and positive opportunities for Bermuda in strengthening its ties with their financial institutions?
Mrs. Cox: Today the world is a small place where mutual respect goes a long way. The Middle East has had their problems. But so have countries in Europe and Asia. We are positioned to give a hand up to any market by providing a hub to the global trade markets for any country in any region based on international regulatory standards and respect for cultural differences. The roll-out of our tax treaty relationships also reflect this philosophy.
Global Atlanta: Do you think that it is important for the U.S. to strengthen its ties to the Arab world and, if so, what do you feel is the most important step for the U.S. in that process?
Mrs. Cox: The United States has traditionally been a close friend and ally of Bermuda, and we would not pretend to speak for it.
Global Atlanta: The majority of Bermuda’s population seems to approve of its current relationship with the United Kingdom and initiatives to change it failed in 1994 and 2005. Do you foresee any changes in years to come?
Mrs. Cox: Nothing is ever set in stone. But Bermuda has far more urgent and important challenges to address at this time. As such, we will continue to respect and nurture our mutually beneficial relationship with the United Kingdom.
In fact, there is the annual meeting between the Overseas Territories and the United Kingdom in a matter of weeks at which time it is likely that a major source of discussion will surround the recently issued white paper on the U.K.relationship with its OTs.
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