Business BVI 2012 by Anne Reil

BANCO POPULAR

A FINANCIAL STAPLE IN THE V IR G IN ISLA NDS F O R THE PAS T 30 YEA RS

ow, the bank is reinforcing that promise and its presence with the construction of a new branch in St. Croix at Sunshine Mall, which will begin operations in December. In 1983, Popular opened its first branch in St. Thomas. In 1993, it acquired five additional branches from another financial institution, including one in the British Virgin Islands. Currently, Popular’s footprint in the USVI/BVI island chain breaks down to five branches in St. Thomas, two in St. Croix and one in Tortola. Banco Popular Virgin Islands is one of the leading financial institutions in the region and it offers a wide range of financial services in various sectors: Retail, Commercial, Mortgage, Consumer Credit, Investments, and Insurance. It has four credit centers and three mortgage centers in operation where customers are provided with the most innovative products available in the market, offering more than one option to adjust to their particular needs. “Thirty years ago we opened our first branch in St Croix and from then on, we have continued to grow and invest in the region,” says Banco Popular Senior Vice President and Regional Director Antolín Velasco. As stated in its most recent institutional promotional campaign, Banco Popular has “built something special” in the Virgin Islands through the years, with milestones such as installing the region’s first ATMs in 1986 and becoming the local government’s leading lender, providing financing for projects that have had a significant impact on the regional economy. “We work in a very competitive environment and we know that our clients have options, so our commitment is to provide our clients with the best service and the most innovative products for all their financial needs,” says Banco Popular Senior Vice President Ian Smith.

It’s been 30 years since Banco Popular opened its first branch in the Virgin Islands in Christiansted, St. Croix, with a firm commitment to investing in the region and becoming a financial ally for residents, businesses and the local governments alike.

In 2003, the bank provided nearly $100 million in combined loans to help several USVI public agencies build long-term projects. For example, the USVI Ports Authority received $10.7 million to build and improve maritime facilities in St. Thomas, St. John and St. Croix, while the Water & Power Authority secured $18.7 million to improve and upgrade the electrical and water delivery systems in the islands. “We have been very fortunate to have been able to be in the region for 30years. We are proud of our history and we have strong plans for the future,” says Popular Executive Vice President for Individual Banking Néstor Obie Rivera . In addition to the financial impact of its operations, Obie explained that Banco Popular’s impact on the community has been significant. The financial institution has participated in many community projects with non-profit organizations, most of which work with improving the education of youth in the Virgin Islands. “We support groups that effectively cultivate the potential of our communities, especially among youths. We believe that the well-being of Banco Popular is closely tied to the well-being of each of the communities we serve,” Obie Rivera explains. Banco Popular Virgin Islands’ operation is part of Popular, Inc., which was founded in 1893 and is the leading banking institution by both assets and deposits in Puerto Rico. Popular Inc. ranks 36th by assets among U.S. banks, where it has established a communitybanking franchise providing a broad range of financial services and products in New York, New Jersey, Illinois, Florida and California.

An intimate resort community where the soul of the Caribbean comes alive like never before. 284.495.5400 路 www.oilnutbay.com

Cross Roads of

at the

A Perspective on airlift in the virgin islands denniston fraser managing director BVI airports authority

From Sea Ports to Railroads; Highways

to Airports; transportation infrastructure has been the basis of business location and commercial development. Air Transport supports activities in the international exchange of commodities. It is an essential ingredient in growing the economy and is indispensable for the recruitment of international companies. An expanding aviation environment gives rise to globalization, speed, connectivity and an ever-increasing tourism industry. Certainly there is a correlation between the economic growth of the Virgin Islands and a growth in air traffic. The benefits that would be derived from the direct, indirect and catalytic effects of air transport would all contribute immensely to empowering the BVI, making this Territory â&#x20AC;&#x153;a force to be reckoned with.â&#x20AC;?

p112

Features

p24 The Future of Offshore Financial Services

p62 The

Conyers GeneratioN

dan mitchell senior fellow, the CATO institute Washington, DC brian garst director of government affairs center for freedom and prosperity Washington, DC

freeman rogers

Thinking How can Issues island

economies get

infrastructure projects off the ground? russell crumpler

p88

POSITIONING FOR THE FUTURE A

A Digital Highway Under the Caribbean Sea vance lewis

p98

Growing

wings

ESTABLISHING THE BVI AS A CENTRE FOR AIRCRAFT REGISTRATION robert briant, partner and head of the BVI office conyers dill & pearman

p32

p84 The New An Interview with the New Premier Dr. D. Orlando Smith

Governmentâ&#x20AC;&#x2122;s Economic Agenda

freeman rogers & russell harrigan

dragon

enter the

CHINA AND THE CARIBBEAN david jessop

p56

DEPARTMENTS International business 24 T he Future of Offshore Financial Services

by dan mitchell - senior fellow, the cato institute, washington, dc brian garst - director of government affairs center for freedom and prosperity, washington, dc

26 u sing bvi companies IN MYRIAD AND VARIED WAYS

by simon schilder, partner

28 modern intellectual &

BVI business & LIFESTYLES The British Virgin Islands as an 48

- ogier

INTERNATIONAL FINANCIAL CENTRE OF SUBSTANCE:

Strengths, Weaknesses, Opportunities & Threats in the Current Environment.

by michael j. burns, managing partner, appleby, british virgin islands james mcconvill, consultant, appleby, british virgin islands

Ernst & Young

TORTOLA IMPORTING COMPANY

Opens Practice in the BVI

industrial property legislation An Area of Opportunity for the BVI by laura s. arthur & lewis s. hunte, qc

Beyond a Generation

by steven melendez

30 Thinking Issues - FATCA in the bvi Are you caught?

by grant green, director, audit, kpmg (bvi) limited

32 GEstablishing rowing wings the BVI as a Centre

enter the dragon

China and the Caribbean by david jessop

Developing an Economic Strategy for the British Virgin Islands

by robert briant, partner and head of the bvi office, conyers dill & pearman head of banking, vp bank (bvi) limited peter reichenstein managing director, vp bank (bvi) limited

36 ignorance is not bliss Corporate Governance in the BVI

by elizabeth killeen, corporate lawyer jonathan bailey, trust lawyer tmf group bvi office

38 The OECD Global Forum

Peer Review Process

by neil smith, financial secretary, government of the bvi

40 Caribbean Financial Centres

are we our worst enemies?

presented by robert mathavious managing director & ceo, bvi financial services commission

44 B ERMUDA CALLING STEP Caribbean Conference 2011

by hĂŠlĂ¨ne anne lewis, chairman bvi branch of step

Key Pointers

by patlian johnson

for Aircraft Registration

34 adding value in troubled times by sjoerd koster,

The Conyers Generation

Acquisitions in Financial Services

by freeman rogers

BVI Firms Position Themselves for Future Growth by jason smith

Business BVI

OPINION

In Every Issue 16

Opening remarks

Contributors

bookshelf

Our Selection of Top Business Literature

136

moving to the bvi Need to Know Info

140

fast facts

BVI Reference Guide

patlian johnson

Size Does Not Matter. We Must Innovate & Educate!

Clarence m. faulkner & Gregory E. Hinkson Pensions: The Need to Shift the Pendulum

DEPARTMENTS BVI business & LIFESTYLES (continued)

66 Justice Bannister reflects on the Early work of the Commercial Court and Looks to the future

by freeman rogers & russell harrigan

68 F inancial Services Positioned for the Future Cross-selling & working together

TOURISM Development & REAL ESTATE A $65 MILLION 107 OPPORTUNITY FOR THE BVI moorings’ & sunsail’s MASSIVE FLEET iNVESTMENT by jason smith

by simon owen, managing director, hyperion risk solutions limited & insurance director of folio insurance management

SCRUB ISLAND RESORT TEAMS UP WITH MARRIOTT FOR GLOBAL OPPORTUNITY

110

MemBers: Lorna Smith & Martein van Wagenberg

At The Cross Roads of Expansion A Perspective on airlift in the virgin islands

112

SUP Floating to the top

114

north sound goes mega: big yachts mean big business

116

The Crewed Yacht Option FLOATING Boutique HOTELS

118

The Outlook for Real Estate 2012 A PURCHASER’S MARKET

120

76 C ongratulations to our Editorial Board

Lorna Smith awarded an OBE & Martein Van Wagenberg takes over Rosewood’s Las Ventanas al Paraiso, Cabo San Lucas, Mexico by steven melendez

79 Transforming BUSINESS: Telecommunications in the Virgin Islands

80 AE ducation: It’s Time to Hit the Reset Button Generational Perspective by kevin malone

An Interview with the New Premier Dr. D. Orlando Smith

84 by T he New Government’s Economic Agenda freeman rogers & russell harrigan 88 T hinking issues -

How can island economies get infrastructure projects off the ground?

by russell crumpler, director, advisory, kpmg (bvi) limited

92 Those Elected to Govern: 2011 ELECTION RESULTS by freeman rogers

business bvi Digital 96 by infinite goes apple kaletha henry

98 P ostitioning for the Future: a Digital Hightway Under the Caribbean Sea

by vance lewis

100 S martphones: Are Indispensable to Keeping Up With Your Clients by steve goodman

102 ste by steve ve jobs: His Impact on the Digital Age goodman

by jason smith

by denniston fraser, managing director, bvi airports authority by todd vansickle

by jason smith

by crystall kanyuck

by edward childs

GREEN OPPORTUNITIES ALTERNATIVE ENERGY 128 AND THE BVI

by steven melendez

around the region THE $3.4 BILLON 132 BAHA MAR RESORT

The Largest Single-Phase Resort Development in the Caribbean by inderia saunders

opening remarks

Preparing for

New Global Opportunity Welcome to the 6th edition of Business BVI.

After almost four years

of what has been the most difficult and gut-wrenching economic conditions experienced globally since the great depression, there is much hope that 2012 will begin to usher in a broad based return to economic growth here in the British Virgin Islands. All indications are however, that any such growth will return only in baby steps and not via any great or sudden leap forward. This expectation has been buoyed by the election of a new government in early November with a decisive majority, led by the new Premier and Minister of Finance, Dr. D. Orlando Smith. It is clear, that the overriding reason for the election of the National Democratic Party is to fix the local economy; a message which they touted convincingly throughout the long campaign and one for which there was fertile ground. At Business BVI, we believe that this government was not elected to tinker at the edges of the very significant challenges facing the territory. Rather, it must think outside of the box, or better yet, to think as if there was no box and to make bold and imaginative decisions, which are required to set the BVI on a path to progress, economic and otherwise for the next quarter century. Fixing the economy will in no way be a walk in the park. It will require; a well thought out, a multi-pronged strategy, steadfast determination, cheerleaders in government and the private sector, a strong, consistent and targeted communications plan, a determined and focused effort to cut the red tape, particularly in the various governmental approval processes, a strategic partnership with the private sector and the banking institutions and above all, patience on the part of people of the territory. If these economic seeds are to germinate and bear fruit over the next four years and beyond, it will be critical for the territory as a whole, including the business community, the public sector, the political directorate, Her Majesty’s Government (HMG) in the UK and the citizenry at all levels to begin to think in holistic and emergent terms. Nothing less will do. Anything short of this will only create false starts with the attendant dissipation of energy, resulting in the loss of a strategic opportunity. As Rahm Emanuel, the former Chief of Staff to President Obama and now Mayor of Chicago often proclaimed in the early giddy days of the administration, “never let a crisis go to waste.” It is worthy of note, that this effort to fix the economy will take place at a time when the global economy is still not out of the woods. As a matter of fact, the prognosis for the near term is bad with a good chance that it could get worse. In Europe, there is very serious concern that the postwar foundations are cracking, concerns that another global financial crisis will add to the destabilisation of the Middle East, concern as to whether or not – the slowing growth in

China will lead to internal challenges and whether or not the middle class in the Unites States will be knocked down again as the country prepares for presidential elections in November. The potential complex interplay of the above conditions will be a potent force to reckon with. In the BVI, we like to say that resilience is in our DNA. If this is so, this will be one of those times when we will be required to tap into it. The take away from the foregoing must not be that there are no pockets of opportunities in the global economy. Far from it. There are many trends and centres of growth which nimble and well-resourced (human and financial) jurisdictions are taking full advantage of to fuel their economic development. Critical among these trends for twin pillar economies such as the BVI, is the global growth in wealth creation, which is the foundation for our two leading industries. This new wealth is no longer just American or European centric but has become global with steady rates of growth in countries such as; Brazil, Argentina, Chile, Russia, China, India, Australia, Canada, Norway, Sweden, Finland and increasingly even in selected areas of Africa. This issue of Business BVI, our Sixth, was conceptualised and designed to focus on what the BVI must do to seize the moment and capitalise on the confluence of opportunities, which this economic crisis has presented. Accordingly, for the first time we have branded an Edition with our cover caption; The BVI - Preparing for New Global Opportunities. The pages of the issue are laden with articles about emergent opportunities for the local economy in tourism, financial services, alternate energy, telecommunications and real estate. Additionally, we also look at; education and the need for relevancy given the evolution of the local economy, – see Education It’s Time to Hit the reset Button p80 – the need to get to take control of how visitors get to the BVI, – see At the Crossroad of Expansion - A Perspective on Airlift in the Virgin Islands p112 – the new government’s thinking about fixing the economy, – see The New Government’s Economic Agenda - An Interview with the New Premier p84 – alternate financing options for infrastructure, – see - How Can Island Economies Get Infrastructure Projects Off the Ground? p88 – developing an economic strategy, home grown global quality talent – see The Conyers Generation p62 – the global challenges to the offshore sector, – see The Future of Offshore Financial Services p24 and China and the Caribbean. – see Enter the Dragon p56. As usual we are forever tweaking the magazine with a keen eye on relevancy. Thus we have added two new sections; Opinion and Business BVI Digital. Enjoy and please let us have your feedback and comments info@oysterglobalmarketing.com

Russell Harrigan Managing Editor

editorial board

russell harrigan ceo, oyster global marketing group lorna smith, obe ceo, lgs associates elihu rhymer ceo, bvi development consultants ayana hull-brathwaite associate lawyer, maples

& calder

simon schilder partner, ogier kenneth m. krys founder and ceo, krys global managing editor publisher project co-ordinator design photography editorial assistant businessbvi.com

russell harrigan oyster publications ltd portia harrigan anne ferrier reil todd vansickle rahel worede rahel worede

The dragon is a symbol of power. 2012 is the Year of the Dragon. In Chinese astrology the dragon is quite special and very much revered and is not seen as a threatening evil being as we do in the west - rather a symbol of power, superiority and rule. The dragon holds special significance for the Chinese people. Today, China has the become the worldâ&#x20AC;&#x2122;s second largest economy having overtaken Japan in 2011. It is projected to become the worldâ&#x20AC;&#x2122;s largest economy by as early as 2020, overtaking the economy of the United States. For the BVI, China related business plays a significant role in the success of the territoryâ&#x20AC;&#x2122;s financial services sector. China has also become a significant investor in the Caribbean as detailed in our article: Enter the Dragon on page 56. Business British Virgin Islands is an annual magazine published by Oyster Publications Inc., LTD, P.O. Box 3369, Road Town, Tortola, British Virgin Islands Tel: 284-494-8011 Fax: 284-494-3066 Email: info@oysterglobalmarketing.com. Please send comments and address changes to this address. BusinessBVI and Oyster Publications LTD are divisions of Oyster Global Marketing Group. www.businessbvi.com All information in this publication has been carefully collected and prepared, but it still remains subject to change and correction. Use these contents for general guidance only and seek extra assistance from a professional adviser with regard to any specific matters. Copyright reserved. None of the contents in this publication may be reproduced or copied in any form without permission in writing from the publisher. These articles do not constitute tax or legal advice, and no action should be taken based on the information in these documents without first consulting suitable tax or legal advisers. No liability for actions taken, or in action, based on the information in these articles, will be accepted.

CONTRIBUTORS LAURA S. ARTHUR of the British Virgin Islands High School. She obtained a Bachelor of Arts degree from DePauw University in Greencastle, Indiana in May 1994. Laura then attended Temple University School of Law in Philadelphia, Pennsylvania where she achieved the degree of Juris Doctor in May 1997 and was the recipient of the John and Frieda Golden Prize for Legal Writing. She also obtained a Certificate of Legal Education in March 2001 from the University of the West Indies, Eugene Dupuch Law School, in Nassau, Bahamas. She is admitted to practice in New Jersey, the British Virgin Islands and Barbados. Laura is a Partner at Hunte & Co. Law Chambers in Road Town, Tortola. Her primary areas of practice include Corporate and Commercial law and Conveyancing. jonathan bailey An experienced trust lawyer, Jonathan is based at TMF’s office in the British Virgin Islands (BVI). His expertise covers VISTA, Private Trust Company regulations, wills and estates. Qualified in BVI law, Jonathan joined TMF (formerly Equity Trust) in 2009 from Harney, Westwood and Riegels. Prior to this, Jonathan was an Assistant Solicitor at Dickinson Dees LLP in Newcastle, UK. Jonathan was admitted as a solicitor in England and Wales in 2003 and as solicitor in Anguilla, as well as a solicitor in BVI in 2008. He became a full member of the Society of Trust and Estate Practitioners (STEP) in 2007 and is currently the First ViceChairman on the STEP Committee in the BVI. 20

ROBERT BRIANT is Partner and Head of the British Virgin Islands office of Conyers Dill & Pearman. Robert joined Conyers in 1994. Robert advises on all aspects of corporate and commercial law and provides specialist advice to hedge funds. He also specializes in structuring British Virgin Islands joint venture companies, as well as advising on a broad range of financing transactions for off-balance sheet vehicles and finance subsidiaries. MICHAEL J. BURNS is the Managing Partner and Head of the Corporate and Commercial Department of Appleby in the BVI. Michael is also the Group Team Leader and Local Team Leader of the Segregated Accounts Team. In addition to his practice in the BVI, Michael is Group General Counsel and a member of both the Group Management Committee and Group Executive Board. Michael joined Appleby as an associate in June 1992 and became a partner in April 1998. EDWARD CHILDS is qualified as a Chartered Surveyor. He joined the British Virgin Islands office of Smiths Gore Overseas Limited in 1990 following training as a commercial surveyor with Savills in London. At Smiths Gore he has expanded the commercial sector of the firm, undertaking a range of instructions on hotel, marina and development properties throughout the Caribbean. Recently, he has been involved with development projects in the British Virgin Islands, Anguilla and Barbados. RUSSELL CRUMPLER is the Head of Advisory for KPMG (BVI) Limited. Russell joined KPMG’s London office in 2000, moving to the Cayman Islands for five years in 2004, before returning briefly to KPMG in the UK in 2009. Russell moved to the BVI in 2011 and specializes in transactions & restructuring. He is UK JIEB qualified and holds a BVI Insolvency Practitioners License. This has led to Russell being appointed to act with regards to a wide

variety of insolvent companies. He also has astrong background in contingency planning, options analysis and broader advisory roles. One of Russell’s key responsibilities is to help governments and public sector entities address infrastructure challenges, raise service delivery efficiencies and revenues, and enhance the quality of public services. CLARENCE M. FAULKNER is Founder and Managing Director of Pension Management Interactive, Inc. (PMI), a BVI based firm providing consultancy, management and administration services to pension plans. Mr. Faulkner with a BComm and MBA (Hons) has worked in the pension and investment arena for over 15 years. He was formerly the Investment Manager of the BVI Social Security Board where he was responsible for the management of the Board’s retirement portfolio of assets. He serves as the Vice-Chairman of the International Social Security Association (“ISSA”) Technical Commission on Investments. He was selected by the Heads of the CARICOM Regional Social Security Systems to chair a committee to, identify the most feasible methods of pooling resources for investment outside of the Caribbean Region for the protection of retirement assets. denniSTON fraser is a proud BVIslander, is the first appointed Managing Director of the BVI Airports Authority and has been holding this position since July 2005. He graduated from the then BVI High School in 1983 and that said year was appointed as an Air Traffic Control Trainee with the Government of Virgin Islands. Upon completion of Meteorology training in Barbados and Air Traffic Control training in Canada he was appointed to the post of Air Traffic Controller, a post he held for 6 years. He later obtained a degree in Aviation Business Administration from Embry Riddle Aeronautical University and was promoted to the post of Operations Manager at the then Beef Island Airport, upon his return to the territory. On numerous occasions he acted as the Airport Manager. Later he was appointed to the post of Director of Civil Aviation; a position which was short lived as he was invited to be the “change agent” where he was instrumental in establishing the BVI Airports Authority as a separate entity for Operations. Mr. Fraser also holds a Bachelor of Laws (Honours) from the University of the West Indies and an MBA from Wright State University. BRIAN GARST is the Director of Government Affairs at the Center for Freedom and Prosperity. He previously worked on education and health care policy at the American Legislative Exchange Council, and on foreign policy at the Cato Institute. He has an M.A. in Political Science, Security and Diplomacy from the University of West Florida. GRANT GREEN is a director with KPMG (BVI) Limited. Educated at the University of Auckland, New Zealand, Grant started his career at KPMG in New Zealand in 1997. Since that time Grant has provided audit, tax and related services to a large number of clients in a variety of industries and jurisdictions. Prior to joining KPMG (BVI) Limited in 2011, Grant spent 4 years in the Cayman Islands specializing in alternative investments, and before that in offices around the world including the United Kingdom, Australia, Belgium and the United States. Grant was on the editorial board of KPMG’s global thought leadership piece “Transformation – The Future of Alternative Investments” in 2010.

KALETHA HENRY is an internationally recognized journalist with over 15 years of experience as a writer and reporter covering an array of topics in the realm of news, entertainment, culture, human interest and business. She has written feature articles, public outreach materials and copy for newspapers, magazines and corporate collateral. Kaletha obtained her Bachelor’s degree in Advertising and her Master’s degree in Communications from New York Institute of Technology and studied photography through the Maryland Institute College of Art. GREGORY E. HINKSON is a Director of PMI and has been involved in the financial services industry for over twenty years. Mr. Hinkson is a graduate of the University of the West Indies, a Fellow of the Certified General Accountants’ (CGA) Association of Canada and a Certified Management Consultant (CMC). He is a Member of the CFA Institute and the Caribbean Institute of Certified Management Consultants (CICMC). Mr. Hinkson was Vice President, Investments with Sagicor Life Inc. where he was responsible for the management of the investment portfolios for the life insurance companies and the segregated pension funds encompassing the territories of Barbados, the Eastern Caribbean, Netherlands Antilles and Belize. He also served as Manager, Investments with the National Insurance Department in Barbados, and General Manager for the offshore banking subsidiary of CIBC. LEWIS S. HUNTE, QC was called to the Bar in England on 23 November 1965. He has held a number of posts in the legal services of Barbados and Jamaica and completed a one-year stint at the Federal Department of Justice, Ottawa, Canada. He held the post of Attorney General of the British Virgin Islands from 1982 to 1985 and has acted from time to time as a judge of the High Court of the Eastern Caribbean. Mr. Hunte was the draftsman of the International Business Companies Act of the Virgin Islands, the first piece of legislation of its kind, which has been adapted in many offshore jurisdictions and was the forerunner of the new BVI Business Companies Act, 2004. His primary areas of practice are Intellectual Property, Labour/ Employment Law, Civil Litigation, Local Business and Shipping. PATLIAN JOHNSON is a Policy Analyst in the Macro-Fiscal Unit in the Ministry of Finance, Government of the British Virgin Islands where she advises on fiscal and economic policy issues. Prior to that she was the Deputy Director of the Development Planning Unit. In addition Ms. Johnson has worked as a researcher for the Financial Services Commission in the Policy Research and Statistics Division and the Leverhulme Centre for Market and Public Organisation at the University of Bristol. She has also lectured full-time and part-time at the H. Lavity Stoutt Community College. Ms. Johnson holds a Masters of Science Degree in Economics and Finance from the University of Bristol in the United Kingdom and a Bachelors of Science degree in Economics and Accounting (1st Class Honours) from the University of the West Indies. In her spare time Ms. Johnson enjoys cycling, travelling and swimming. DAVID JESSOP is the Executive Director of the Caribbean Council. He has worked on Caribbean issues for over thirty-five years. He advises and supports governments, major industries, associations and companies on Caribbean investment, trade policy and political

issues. He has worked with successive governments of the British Virgin Islands since the mid 1980s. In recent months he has been closely involved in co-ordinating in the UK the Caribbean lobby against aspects of Britain’s Air Passenger Duty. Mr Jessop is a member of the Board of Trustees of Caribbean Latin American Action in Washington and the Caribbean Hotel Assoc and the Caribbean Association of Industry and Commerce. He is the Director of the Cuba Initiative, the bi-lateral and bi-partisan UK-Cuba body and the advisor to the Caribbean Britain Business Council. In 1998 he was awarded the OBE by Queen Elizabeth II for services to Anglo-Caribbean relations and in 2009 the Order of Distinction (Commander Class) by the Government of Jamaica. CHRYSTALL KANYUCK is a journalist at the BVI Beacon whose work has appeared in United States newspapers such as USA Today and the Arizona Republic. She was born and raised in Long Beach, California, and has lived in the BVI since 2010. Elizabeth Killeen In-house corporate and funds lawyer, Elizabeth, is based at TMF’s office in the British Virgin Islands (BVI). Elizabeth specialises in all corporate and commercial matters, including company incorporations, liquidations, mergers, acquisitions, corporate restructuring, dispositions, strategic joint ventures, takeovers, international stock exchange listings and general day to day company procedures and maintenance. In addition, Elizabeth advises on the formation, operation and restructuring of BVI investment funds, as well as the impact of relevant financial services and securities laws. Elizabeth trained as a solicitor at Denton Wilde Sapte (now SNR Denton) in London, during which time she undertook a six-month secondment at Garrigues in Madrid. On qualifying as a solicitor, she joined SJ Berwin LLP, before relocating to the BVI to work for Maples and Calder in 2008 and later for TMF Group (formerly Equity Trust) in 2011. Elizabeth was admitted as a solicitor in England and Wales in 2006 and as a solicitor of the Eastern Caribbean Supreme Court (BVI) in 2008. She is an active committee member of the BVI Association of Registered Agents. SJOERD KOSTER has worked in the financial services industry since 1999. He was previously employed by ABN AMRO Bank in the Netherlands and in 2006, Sjoerd moved to the British Virgin Islands to join Equity Trust as their Business Development Manager for their fiduciary and trust services. He joined VP Bank in 2010 as Head of Banking. He holds a BA degree in International Business Studies from the Hanze University and an MSc degree in Business Technology from Middlesex University. He is also a member of the Society of Trust & Estate practitioners (STEP) and Deputy Head of the BVI Association of Registered Agents (ARA). Hélène ANNE LEWIS Hélène Anne Lewis is a national of Trinidad and Tobago and an English qualified lawyer of more than twenty-five years who has been practising in the BVI for almost twenty years. She also served as the Senior Crown Counsel and at times Acting Attorney General of the Turks and Caicos Islands. After admission to the Bar at Gray’s Inn the former Hélène returned to Trinidad where she was at various times, State Counsel in the Attorney General’s Chambers, Legal Advisor to the Ombudsman and to the Leader of the Opposition. She is recent past chair of Chairman of the BVI Branch of STEP (Society of Trust and Estate Practitioners). She has served as President of the and is now a member of the STEP World Wide governing council. She has served as President of the BVI Bar Association and has also served as Vice President

and Treasurer of the OECS Bar Association. She established her own practice (SimonetteLewis) in the BVI in February 2007 and in November 2009 launched Magnolia Trustees Limited. VANCE LEWIS retired from Cable and Wireless now LIME, after a career spanning over 35 years in telecommunications, with more than 20 years in Senior Management including the last 7 years as Chief Executive of LIME BVI. He is now Managing Director of VM Professional Services, a Business Management Consultancy company, and also enjoys the status of Fellow of the Chartered Management Institute of the UK. Besides his business involvement, he is deeply committed to community service and has channeled his community involvement through Rotary, where he has been elected to serve as District Governor 2012 – 2013 for the North Caribbean District 7020 encompassing 10 Caribbean islands. His interests are reading, socializing and sports. KEVIN MALONE serves as a Relationship Manager at InsiderScore, an investment research and analytics firm located in Princeton, New Jersey. In this capacity, Kevin is responsible for managing client relationships and providing investment ideas and analysis to institutional investors across the world. Prior to joining InsiderScore, held similar positions at global research companies, such as Dow Jones and The Financial Times, where his responsibilities included sales, strategy development and relationship management. ROBERT MATHAVIOUS is the first Managing Director and Chief Executive Officer of the British Virgin Islands Financial Services Commission (FSC) which was established in January 2002. The FSC is an autonomous agency charged with regulatory and supervisory oversight of the BVI financial services industry. JAMES MCCONVILL joined Appleby in January 2008 as an associate in the Corporate and Commercial Practice Group of the British Virgin Islands, and in April 2010 became a Consultant to Appleby BVI. James specialises in international banking and finance law, corporate governance and compliance, mergers and acquisitions, and insurance. During his time at Appleby, he has advised a host of major financial institutions, multi-national corporations and investment advisers. He has worked on some of the biggest corporate deals handled by Appleby’s BVI office. STEVEN MELENDEZ A reporter at the BVI Beacon, Steven can often be found in the territory’s courts and, occasionally, at Her Majesty’s Prison. When not occupied with criminal matters, he enjoys long walks along the ghut and hitchhiking to East End for delicious burritos. DAN MITCHELL is a top expert on tax reform and supply-side tax policy. Mitchell is a strong advocate of a flat tax and international tax competition. Prior to joining Cato, Mitchell was a senior fellow with The Heritage Foundation, and an economist for Senator Bob Packwood and the Senate Finance Committee. He also served on the 1988 Bush/Quayle transition team and was Director of Tax and Budget Policy for Citizens for a Sound Economy. His articles can be found in such publications as the Wall Street Journal, New York Times, Investor’s Business Daily, and Washington Times. He is a frequent guest on radio and television and a popular speaker on the lecture circuit. Mitchell holds bachelor’s and master’s degrees in economics from the University of Georgia and a Ph.D. in economics from George Mason University. SIMON OWEN is the Managing Director of Hyperion Risk Solutions Limited and the Insurance Director of Folio Insurance Management Limited.

He is a past Chairman of the BVI Association of Insurance Managers and has served as a member of the BVI Marketing Advisory Committee, the Financial Services Institute Advisory Committee and the Joint Anti-Money Laundering and Terrorism Financing Advisory Committee PETER Reichtenstein holds a Doctorate in Economics from the University of St. Gall, Switzerland. Peter has held various management positions with major Swiss banking institutions before joining VP Bank and ATU Group in 2000 as Head of its Caribbean joint venture. As General Manager he has overall responsibility for VP Bank (BVI) Limited, a fully licensed bank. He is fluent in German, English, French and Spanish. FREEMAN ROGERS is the editor of The BVI Beacon. A South Carolina native, he has lived in the territory for five years. In his spare time, he enjoys surfing, reading and learning about the BVI. INDERIA SAUNDERS is an award-winning journalist, based in Nassau, Bahamas. She has a BA in Mass Communications from Towson University and has work experience at the ABC news affiliate in Baltimore, MD and “tween” publication Girls Life Magazine, before she returned home to The Bahamas to contribute to and further develop journalism in the country. Working for the national newspaper there, she has covered everything from politics to crime, traveled to China and within the Caribbean region reporting on various issues. She has been a guest on the Larry King Live show, Entertainment Tonight show and a host of other news and entertainment productions for breaking the news of the death of 21 Playboy playmate Anna Nicole’s 20-year-old son Daniel Smith and the chain of events that followed thereafter. She is also a People Magazine correspondent. Inderia is currently in charge of Communications for Oyster Publications SIMON SCHILDER Partner Ogier, Simon is a partner and Head of the Investment Funds practice at the BVI office whose practice covers cross border and multi jurisdictional mergers & acquisitions, corporate finance and investment funds. Prior to joining Ogier, Simon practiced at Lovells in London. attended the University of Southampton and graduated with a BSc in Economics and Politics in 1994. Simon then went on to take the CPE in 1995 and LPC in 1996 at the College of Law, London. Simon is a member of the Securities, Investment Business and Mutual Funds Advisory Committee, established by the Financial Services Commission to advise it on the maintenance and development of the BVI’s securities, investment business and funds industry. JASON SMITH is a journalist from Burlington, Vermont who has lived and worked in the British Virgin Islands for nearly a year. He edits the business section for the BVI Beacon and writes frequently on topics including crime, development and government. He has previously worked at newspapers in California and Mexico. When not writing, he enjoys hiking, reading and traveling. NEIL SMITH is presently the Financial Secretary in the British Virgin Islands Government. He holds a Bachelor of Engineering Degree from the University of Dayton and an MBA from Wright State University with a concentration in finance. TODD Van sickle is a journalist with more than 13 years of experience. When he is not working he enjoys helicopter rides and long strolls in a park. If he could be anything else in the world he would be a bird.

International Business

INTERNATIONAL BUSINESS

dramatic transformation has swept the globe over the last three decades. Despite the best

efforts of politicians to follow their worst intentions, worldwide tax rates have dropped and fiscal policy has grown considerably more pro-growth. Responsible for this remarkable phenomenon is a process known as tax competition, whereby nations compete to attract labor and capital.

The Benefits of Tax Competition

The importance of good tax policy on prosperity and living standards is increasingly clear. Low marginal rates reward productive behavior, encouraging people to work more, save more, and invest more. Taxes on capital – such as taxes capital gains, dividends, interest and inheritances – are particularly destructive because they inhibit a process – capital formation – that all economic theories agree is necessary for economic growth. Economic growth is truly the key to human prosperity. Even slight differences in growth rates can have a significant impact over time thanks to compounding. A seven percent growth rate can double economic output every 10 years, but a one percent growth rate can only do so every 70 years. Even smaller differences can be profound. Even a modest three percent growth rate can double economic output in less than 24 years, or every generation or so. Unfortunately, politicians don’t necessarily care about promoting growth. They care about raising tax revenues, which can then be spent in the quest to acquire votes and enhance the power of the political class. Tax competition is the mechanism by which the interests of politicians are forced – at least to some degree dan mitchell – into alignment with those of senior fellow, the CATO institute taxpayers and the economy. As Washington, DC a result, despite the fact that the political system encourages bad brian garst policy, tax law has moved in director of government affairs the right direction. Beginning center for freedom and prosperity with the Reagan and Thatcher Washington, DC cuts of the 1980s, the number of flat tax nations has increased from 3 to 30, corporate tax rates have dropped by more than 20 31 October 2011 - Angel Gurría, Secretary-General of the percentage points, top income rates have dropped 26 percentage points, OECD at the Press conference of the OECD Interim Economic and the destructive practice of double taxing dividends and capital gains Outlook Pre-G20 Cannes. OECD Conference Center, Paris, France. © OECD Organisation for Economic Co-operation and has been reduced. Development. Used under Creative Commons License.

The Future of Offshore Financial Services

The Political Class Reacts

The bad news is that politicians have figured out that tax competition is a threat to excessive taxing and spending. In response, politicians have drawn on a theory known as capital export neutrality (CEN), and sought to create a global tax cartel – essentially an “OPEC for politicians”. The CEN theory is based on the notion that all differences in tax rates should be eliminated, leaving taxpayers no ability to protect themselves by shifting economic activity to jurisdictions with better tax law. Tax and spend politicians love CEN because when there are no jurisdictions with better tax law, they cannot be punished for their bad policies. The campaign against low-tax jurisdictions began in the mid-1990s, entering the public realm with the release of a 1998 OECD report entitled, “Harmful Tax Competition: An Emerging Global Issue.” The Organization for Economic Cooperation and Development (OECD) had by that time become the preferred vehicle for anti-tax competition campaigners to advance their scheme. Their adherence to CEN theory has been notably revealed on several occasions. One such instance occurred at the September 1-2, 2009 Mexico City meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes, where the OECD attempted a power grab by unilaterally asserting that it had the ability to impose rules to restrict tax avoidance and other forms of legal tax planning. To the uninitiated this sounds absurd, but it comes straight from the CEN theory. According to this ideological view, tax avoidance is just as bad as tax evasion. What was particularly noteworthy in Mexico City was how they attempted to spring the effort unannounced on attendees. During the first day of the two-day conference, there was no mention of any campaign against tax avoidance and legal tax planning. The OECD even circulated a draft “summary of outcomes” after the dinner that evening, and the document began, “The main objectives of the meeting are…” Yet by the next morning, the version that was used as the working document included a dramatic change. Delegates from low-tax jurisdictions were shocked the next day to see a significant new clause, and the summary now read, “In the context of the broader effort to fight tax evasion and avoidance and to remove harmful tax practices that facilitate such activities, the main objectives of the meeting are…” Many of the low-tax jurisdictions understandably objected to the underhanded addition. Despite the efforts of high-tax jurisdictions to stall or move on to other topics, opponents kept up the fight long enough to force removal of the new language. Most remarkable, the nation that was instrumental in stopping the OECD was China. As hard as it is to believe, a nation governed by a nominal communist party played a key role in blocking a statist tax scheme pushed by supposedly capitalist nations. While this particular power grab failed, the OECD’s anti-tax competition campaign has had successes over the years. Low-tax jurisdictions have been pressured, harangued and cajoled into abandoning financial privacy protections, and into signing one-sided information sharing agreements designed to conscript low-tax jurisdictions as deputy tax collectors for high-tax welfare states. With each concession, low-tax jurisdictions have hoped that they may have finally satisfied the OECD. But feeding a tiger a bunch of steaks won’t turn it into a vegetarian. Every concession has simply become the new starting point, as the bureaucrats at the Paris-based OECD concoct new hoops for low-tax jurisdictions to jump through.

capital income, corporate income, and labor income. Should it be utilized by other nations, the impact of a worldwide tax system would be exactly what CEN adherents want – no ability to benefit from better policy in other jurisdictions. Another deeply troubling development comes from a TIEA-onsteroids unveiled by the OECD at the 2011 Global Forum in Bermuda. The Multilateral Convention of Administrative Assistance in Tax Matters presented at the meeting isn’t actually new, but was radically altered in 2010 and recently unveiled again. The Convention would obligate signatories to become deputy tax collectors for every other nation that joins. Even worse, it puts the OECD in charge of the “co-coordinating body,” granting it enormous powers to interpret the agreement and resolve disputes. They are essentially granting themselves the ability to serve as judge, jury and executioner. Under the guidance of OECD bureaucrats, the scheme would result in the creation of something akin to a World Tax Organization. As a new potential blow to tax competition, the Multilateral Convention would likely lead to higher tax burdens. It would also increase the risk to human rights by undermining the financial privacy laws that protect individuals living under repressive regimes or in countries with high levels of crime and corruption. Already, the thuggish dictatorship of Azerbaijan has signed up, as well as the unstable nation of Moldova and the corrupt government of Mexico. And just like the Mexico City Surprise, the Multilateral Convention contains another attempt at “combating tax avoidance.” This shouldn’t come as much surprise given the tenets of CEN theory. Currently it’s only possible to speculate on how the multilateral convention will evolve, but there are three reasons to be concerned. First, the high-tax nations that control the OECD want an aggressive, multilateral approach, and the Convention creates a tool that presumably can be used to bully low-tax jurisdictions into acting as deputy tax collectors. Second, the OECD is doubtlessly excited by the Convention since it expands the power and budget of the Paris-based bureaucracy. As noted above, the OECD will staff this new entity, giving the 25 bureaucracy new authority and prestige. Finally, it satisfies the long held desire by ideological advocates of bigger government for some sort of international tax organizations, which the left-wing law professors and statist NGOs doubtlessly will use the Convention as a starting point for even further demands. The one unknown in the process is the degree to which other nations will sign on to the pact. The Convention currently has two-dozen signatories, mostly OECD countries. No “tax haven” is on the list. But given the OECD’s pressure for TIEAs, the Convention may be a tempting option. For all intents and purposes, signing the Convention could be seen as a one-stop way of dealing with demands and getting on the OECD’s so-called white list of compliant jurisdictions. But as history has demonstrated, this is a foolish notion.

Dark Clouds on the Horizon

Despite their successes to date, the real danger from the international tax bureaucrats likely lies ahead. The ultimate goal of CEN remains complete tax harmonization. One back door method of achieving this goal is worldwide taxation. Under worldwide taxation, an individual or company is taxed by its home nation on all income regardless of where it is earned. The U.S. is currently one of the few nations with a comprehensive worldwide tax system applying to

General strike against new $40.36 billion austerity program of tax hikes and sell-offs of state property on June 15, 2011 in Athens, Greece. Greek riot police block access to central square. ©tovovan / Shutterstock.com

INTERNATIONAL BUSINESS

MYRIAD AND VARIED WAYS using b vi companies IN

simon schilder, partner - ogier

But what are all of these companies being used for and why?

The extent and diversity of assets owned by BVI companies is often a surprise to many observers. BVI companies can be found in all geographic markets and sectors and, as a consequence, are found to be holding a plethora of different types of assets around the world. Whilst many BVI companies are used to hold relatively modest assets, at the top end, BVI companies frequently hold extremely significant and high profile assets, from office blocks in Central London; to hotel portfolios such as Marriott’s four star hotel portfolio in the United Kingdom; to film rights in Hollywood; to mining rights for gold, silver and diamonds in Russia, the CIS and Africa; to oil exploration rights in the Middle East; to chains of hypermarkets in Russia; to luxury resorts in Asia; to global 26 clothing brands such as Tommy Hilfiger on the high street; to the Lear jets and mega yachts for the rich and famous; and even for image rights for professional sportsman. As with so many things in the financial markets, a natural herd instinct encourages the use of BVI companies as one of the default options where a company vehicle mutually acceptable to all stakeholders is required. However, particularly at the top end, with so many competing jurisdictions to consider, the reason for the choice of companies domiciled in the BVI over companies domiciled elsewhere is worth exploring in greater detail. BVI companies undoubtedly represent a mutually acceptable vehicle for the structuring of investment vehicles, being popular to each of investors, financial institutions and their advisors from traditional economies such as the United States and United Kingdom. As well as to investors, financial institutions and their advisors from emerging market economies, particularly (although by no means exclusively) the BRIC economies of Brazil, Russia, India and China. As a consequence, the use of BVI vehicles represents the median through which global investors can come together to facilitate investment. With international transactions continuing to look to the East and to Asia in particular, the prospects for BVI to continue to retain this popularity remain strong. One area where the use of BVI companies is particularly prevalent is in the structuring of international joint ventures. In such instances, a BVI company is able to provide all parties with a tax-neutral platform, enabling investors from different jurisdictions to invest on an equal tax footing (since BVI companies are not subject to tax in the BVI) and, at the same time, the flexibility afforded under the BVI’s company law statute, the BVI Business Companies Act, 2004, enables the parties to structure and operate their joint venture vehicle in the manner which reflects the commercial intentions of all parties concerned. Whilst there are many examples, perhaps the most high profile current example of an international joint venture utilising a BVI company as the joint venture vehicle, is BP and TNK’s joint venture, TNK-BP. TNK-BP is Russia’s third largest oil producer and among the ten largest private oil companies in the world.

Despite being a relatively small country in terms of geographic size and population, the British Virgin Islands (BVI) is a giant in the world of company domiciles. According to the most recently available statistics, currently there are 456,146 companies active and registered with the Registry of Corporate Affairs in the BVI as at 31 March 2011. This is an incredible statistic and testament to the popularity of the use of BVI companies throughout the world.

Another area where BVI companies are frequently popular is for listing vehicles for companies seeking to raise investor capital by accessing the international capital markets. Amongst recent noteworthy IPOs of BVI companies include Justice Holdings Limited, a special purpose acquisition company, which raised $1.4bn on its IPO on the London Stock Exchange in February 2011 (one of the largest UK IPOs in recent years and the largest ever by an investment vehicle of its kind) and Winsway Coking Coal Holdings Ltd, which raised HK$3.7bn on its IPO on the Hong Kong Stock Exchange in October 2010 (this listing being the first BVI company to list its shares in Hong Kong following the Hong Kong Stock Exchange’s approval of the BVI as an “Acceptable Overseas Jurisdiction”).

What is the appeal of the BVI for structuring?

As noted above, as one of the world’s largest corporate domiciles, there is obviously an advantage to be had by the sheer weight of numbers of BVI companies active throughout the world. However, numbers alone cannot by itself be the only justification. Equally important are other factors, such as the legislative platform in the BVI. As noted above, the flexibility afforded under the BVI Business Companies Act, 2004 makes it a universally popular statute. Given that its origins are in a mix of English company law and Delaware company law, it also benefits from being conceptually understood by advisors throughout the world. In addition, the BVI Business Companies Act, 2004, when taken with the BVI’s insolvency law statute (Insolvency Act, 2003) and financial services statute (Securities and Investment Business Act, 2010), enables the BVI to to offer a modern and user friendly suit of statutes, which provides a platform to encourage international operations to utilise the BVI for their business. Significant also in this context for the BVI’s appeal is the existence of a dedicated commercial court, the Commercial Division of the Eastern Caribbean Supreme Court, with Justice Edward Bannister, QC, a well-respected English Chancery Barrister sitting as its resident judge. With the BVI’s Commercial Court, the BVI is able to boast a Court that is equipped to hear some of the world’s most complicated legal cases. Amongst some of the more high-profile litigation coming before the BVI’s Commercial Court recently have been applications on a number of matters arising out of the Madoff fraud, of which the most high-profile has involved applications by the liquidators of the Fairfield funds, which were the largest single investor into Bernard L Madoff Investment Securities LLC. Together with the twin platforms of a respected legislative framework and legal system, another important ingredient to the BVI’s appeal is the sophistication of its service providers, with all major accountancy and offshore law firms present in the jurisdiction. There has been a steadily increasing pool of highly skilled professional services providers located in the BVI, which shows no sign of changing. All of this taken together means that in addition to being able to provide the corporate domicile, the BVI is also able to provide the services to provide ongoing support and advice to such entities as they undertake their operations.

Will the current political and regulatory environment dampen the future use of the BVI for structuring?

Whilst following the recent financial crisis, the role of financial centres such as the BVI has been subject to increased levels of scrutiny from various governments concerned about tax leakage from their own domestic economies, the BVI has continued to demonstrate its commitment to being at the forefront of international co-operation with international initiatives for the provision of tax transparency and information sharing. The benchmark for measuring this is the Organisation for Economic Co-Operation and Development’s (“OECD”) tax information exchange agreement program (“TIEAs”). With 21 TIEAs already in place, including TIEAs with the United States, China and a number of EU Member States (amongst European TIEAs significantly being the United Kingdom, France and Germany), the BVI enjoys “white list” status as having substantially implemented the OECD’s internationally agreed tax standards. Given the above, the prospects for the continued use of BVI companies in the years to come remain strong. Indeed, at the time of going to press, with the numbers of new incorporations year to date in 2011 demonstrating double digit growth from the prior year, it would seem as if the BVI’s stature in the world of company domiciles is continuing to grow.

INTERNATIONAL BUSINESS

intellectual & industrial property legislation m odern

A n area of opport unity for the bvi

laura s. arthur & lewis s. hunte, QC

The BVI Advantage

The British Virgin Islands has long positioned itself as an industry leader with its arsenal of innovative financial services products designed to meet the needs of the global economy. Indeed, the British Virgin Islands has secured a vital role in facilitating global trade and investment with more than 60,000 new company incorporations each year. Given the Territory’s progressive posture in the area of financial services, it may come as a surprise to many that the intellectual property laws now in force in the British Virgin Islands date back to the early 1900s, a time before the Internet and television. It is therefore little wonder that the Financial Services Commission of the British Virgin Islands, the body responsible for the administration of intellectual property laws, announced in January 2010 that it would be establishing a Focus Group to review and revise existing Intellectual Property Laws. In so doing, the Financial Services Commission recognized that intellectual property is an increasingly important tool for stimulating commercial and industrial activity and, consequently, economic growth.

Intellectual Property – An Awareness Intellectual property, as the term implies, is property, both artistic and commercial, produced from the creation of a person’s mind or intellect. The most common categories of intellectual property defined in law are copyright, trademarks, and patents and, in some countries, trade secrets. Whether the work in question is literary or musical, an industrial invention or a commercial mark, it constitutes valuable property and, as such, it may be sold, transferred by will or even stolen. Gone are the days when an inventor literally slept with his invention to prevent it being stolen by others. Protection against theft of intellectual property, known as piracy, is well entrenched in law. Several countries have legislated against it because they have come to realise that when intellectual property is stolen it is not only the individual who is adversely affected but also the State, itself, is impoverished. Knowledge and ideas have always been critical elements of economic development. Without intellectual and practical innovation, natural resources such as land, energy sources, minerals and animal life cannot be used productively. Indeed, it has taken generations of progressive ideas to develop natural elements into technologies that can change a nation’s economic prospects. The power of ideas to propel economic development and growth is evident throughout the world. The value of the intellectual property which embodies those ideas and innovations – encompassing computer software, musical recordings, patented pharmaceuticals and information technologies -- is significant. It is then easy to imagine that the underlying ideas are often stolen. Around the world, between 35 and 40 percent of all commercial, packaged software and musical recordings sold every year is thought to be counterfeit. In some nations, the vast majority of the software and musical recordings sold are counterfeit versions. In addition, experts in pharmaceutical piracy have found that counterfeits account for up to 50 percent of certain drugs sold in China and Pakistan, and more than 10 percent of the entire markets in other Asian countries and Russia.

The Importance of Intellectual Property to Economic Growth The importance of modern intellectual property laws is therefore hard to overestimate. Both the development and the use of new technologies and innovations rely on legal and regulatory frameworks that protect the intellectual property rights of those who develop and share them. It is easy to see how new technologies and new ways of doing business benefit the advanced economies in which they are usually developed. Of equal importance however, is the benefit derived by the world’s most successful developing nations, such as China, where innovations that drive growth and higher living standards have been a key factor in rapid modernization. Over the last generation, research has established a direct link between strong intellectual property protection and foreign investment. Strong intellectual property protection in developing societies, especially countries with low per capita incomes, directly encourage technology transfers from more advanced economies through direct imports as well as foreign direct investment. In contrast, researchers have found that countries with weak intellectual property protection receive less direct foreign investment. rangizzz / Shutterstock.com

This is further illustrated by the steady increase in the level of foreign direct investment in India ever since patent and trademark reform was introduced in the early 1990s. An even more dramatic development took place in Brazil with impressive growth in foreign direct investment following the introduction of a new industrial property law in Intellectual Property 1996 (US$4.4 billion in 1995 to (IP) refers to US$32.8 billion in 2000). creations of the mind: The British Virgin Islands has already acknowledged inventions, literary the need to strengthen its & artistic works, intellectual property regime. & symbols, names, This is of particular significance in a time where similarly images, & designs placed offshore jurisdictions used in commerce. searching for alternative streams source: wipo.int of income have also recognized the value in modernizing their intellectual property regime. For example, in December 2007, the States of Jersey commenced a public consultation on proposed new Intellectual Property laws. As a result of that process, the draft Intellectual Property (Unregistered Rights) (Jersey) Law 201 was produced and lodged for consideration by the States during 2011. Ultimately, Jersey’s new Intellectual Property laws should enable Jersey to become compliant with, and party to, a number of international treaties and conventions, including the Agreement on Trade Related Aspects of Intellectual Property Rights, Berne Convention, Universal Copyright Convention and secure membership to the World Trade Organisation.

Guernsey is another offshore jurisdiction historically known for its financial services. Most likely as a result of recent world events, Guernsey has also sought to diversify its economic portfolios. In 2002 Guernsey’s legislature reviewed and approved a “cutting-edge suite of intellectual property legislation” aimed at positioning Guernsey as a centre of excellence for the development and management of intellectual property rights. The introduction of the new regime established Guernsey as one of the most modern intellectual property environments in the world. The challenge now is for the British Virgin Islands to capitalize on its current legislative advantage and implement a modern intellectual property regime that is harmonized to international standards. The modernization of the intellectual property regime is clearly a fundamental tool in the Territory’s efforts to promote innovation, attract inward investment and to diversify its own economic portfolios. By demonstrating its commitment to protect the ideas and innovations that are vital to future growth and development, the British Virgin Islands will further establish itself as the jurisdiction of choice for international business.

References Millien, Raymond, “The US$173.4B Global Intellectual Property Marketplace?”, 16 December 2010, http://dcipattoryney.com/2010/12/the-us173-4b-global-intellectual-property-marketplace/. Kelty, Christopher, “A Primer in Modern Intellectual Property Law”, http://cnx.org/content/m11795/latest/. Sathishkumar, “Understanding How Intellectual Property Protection Laws Apply To You”, 27 August 2011, http://www.tech2date.com. BVI Lawyer, “British Virgin Island Intellectual Property Law Explained”, 10 December 2010, http://www.bvilawyer.com. Shapiro, Robert J. and Hassett, Kevin A., “The Economic Value of Intellectual Property”, October 2005, http://www.sonecon.com/docs/studies/IntellectualPropertyReport-October2005.pdf. Doffing, Brandon, “Jersey: Jersey’s New IP Laws”, 4 August 2011, http://www.mondaq.com/x/141128/Jerseys+New+IP+Laws. Gray, Elaine, “Guernsey: The Offshore Jurisdiction Of Choice For Intellectual Property Rights”, 17 November 2009, http://www.mondaq.com/article.asp?articleid=89366. Guernsey Law, “Intellectual Property”, October 2010, http://www.netlaw.co.uk/intellectual-property.

INTERNATIONAL BUSINESS

Background

Thinking Issues

FATCA in thebvi are yo u c aught?

he US Foreign Account Tax Compliance Act (“FATCA”) is an initiative to tighten sanctions against offshore abuse, such as US taxpayers avoiding taxation by shielding their identity using foreign accounts; and foreign citizens benefiting from withholding rates that they are not entitled to use. FATCA is currently intended to come into force on January 1, 2013. It may appear that this leaves ample time for preparation, but CFOs and tax directors should be aware that most US financial institutions and Foreign Financial Institutions (“FFIs”) have concluded that implementation will take up to 24 months. The FATCA legislation is lengthy and complex and introduces an entirely new set of concepts in relation to US withholding and information reporting. The US Congress has provided the US Treasury Secretary with extensive powers to relax or waive the FATCA requirements in certain instances. The detailed regulations that are expected to define how widely those powers will in fact be exercised have not yet been published; however, the IRS has released priority guidance setting forth the general framework to follow when implementing a FATCA-compliant business.

Issues

FATCA broadens the definition of a FFI far beyond a traditional view, to include insurance companies that issue cash value products, hedge funds, private equity funds, and other collective investment vehicles. The core principle of FATCA is that Participating Foreign Financial Institutions (“PFFIs”) will need to identify the direct and indirect owners of their accounts to determine whether they are “US accounts.” To the extent they are, the PFFI must disclose them to the IRS annually. FFIs that do not agree to do this will suffer a 30 per cent withholding tax on all US withhold-able payments. The US withholding agent will implement the FATCA withholding requirements and ultimately the reporting of US-source income sent offshore.

These requirements create two significant issues:

1. Investment funds and other FFIs will have to identify US persons that hold affected accounts or financial instruments on a direct and indirect basis. Identifying and providing the relevant information to the IRS will pose a major challenge. The challenge is greatest for the “non-traditional” entities brought within the FATCA framework such as investment funds. Many of these have sub-contracted to service providers such as paying agents, transfer agents or distributors the operations necessary to obtain documentation under their local knowyour-customer or anti-money-laundering rules. In addition, it may be difficult to obtain information about indirect interests in an industry that regularly uses financial intermediaries such as nominee accounts. 2. N on-participation with the FATCA regime will be expensive and customer relationships will be at risk if clients are unnecessarily subject to withholding or have confidential account information provided to the IRS. The withholding is calculated on all US withhold-able payments, and can include the gross proceeds from the sale of investments, not just the profit generated on sale. This significant financial burden should be sufficient to deter those that would otherwise refuse to comply with the legislation.

To avoid the withholding requirement, the FFI will have to enter into an agreement with the IRS to identify all US accounts held by it or its affiliates and report annually on each such account. Furthermore, the PFFI will have to comply with any request for additional information regarding identified US accounts, and must attempt to obtain from each account holder a waiver of any bank secrecy law that would otherwise prevent such a report. If this proves impossible, FATCA provides that the PFFI must close the account. The IRS is likely to utilize the information collected under FATCA to identify potential instances of underreporting and even fraud by US persons.

Major challenges

Given the nature of non-bank FFIs, the impact of FATCA is far-reaching and will entail a thorough review of an FFI’s business, and is not confined to tax reporting. The following outlines some of the key issues identified by respondents to a recent worldwide study by KPMG: Understanding the requirements • Lack of final regulations; • Understanding the US documentation; and • Understanding how FATCA will subsume the current set up under US rules. Information and data • Obtaining detailed information about final investors in a distribution system that is based on intermediaries; • Identification of US taxable persons; • Obtaining consent of US person for disclosure; • Identification of all shareholders; • Identification of beneficial owner; • Verification of data; • Ascertaining whether a person is non-US person; and • Intermediary transparency Organizational impacts • Compliance processes and systems integration; • Increased business risks (uncertain qualification as FFI); • Modification of sales prospectuses; • Amendment of distribution agreements; • Implementation costs; and • Ensuring that distributors conform. Corporate strategy • Product and market strategy; • Distribution strategy; • Business models; • Pricing, margin and risk; and • Legal entity structure.

Conclusion

If you are a FFI that has withhold-able payments from the US there is no escaping the FATCA regime, even if you have no US account holders. Failure to register with the IRS as a PFFI will result in a significant punitive withholding tax cost that could cripple a business; so ignoring the requirements is not an option.

The information contained herein is of a general nature and is not intended 31 to address the specific circumstances of any particular individual or entity. For further details, please contact: Grant Green, Director, Audit, KPMG (BVI) Limited Tel: +1 284 852 4805 | e-Mail: grantgreen@kpmg.vg | Web site: kpmg.vg About KPMG (BVI) Limited KPMG’s expanding team moved to new premises within the Banco Popular Building in April 2011 We have the local expertise and island insight to add value to our local and international clients. Our high performing people are our greatest asset. We use our experience to cut through complexity, delivering informed perspectives and clear solutions for the benefit of our clients and stakeholders. About KPMG International KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 146 countries and have 140,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such. © 2012 KPMG (BVI) Limited, a British Virgin Islands limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a. Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity.

INTERNATIONAL BUSINESS

Growing

wings

E S TA BL I SHI NG T HE B V I AS A C ENTRE FO R A I RCR AFT R EGI STR ATI ON robert briant, partner and head of the BVI office conyers dill & pearman

Introduction

Aircraft registration in the BVI. What is it? Why is it needed? This article explores the issue of aircraft registration in the BVI as well as the larger question of aviation regulation. The article argues that a fully developed Department of Civil Aviation (DCA) along with supporting regulation and infrastructure should be established in the BVI, as part of developing an active aircraft register.

What is it? 32

Every aircraft in the world needs to be registered on an aircraft register. Aircraft registers are maintained by a country’s aviation authority. In order to register an aircraft on an aircraft register, it is usually necessary to demonstrate the existence and nature of the aircraft, its ownership and the use to which the aircraft will be put. The aviation authority will provide a tail number, which is displayed on the side of the aircraft. The tail number of BVI registered aircraft is VP-L**, with the ** being a unique combination of letters to identify the aircraft. It is important to note that in order for an aircraft to fly, it is necessary to do more than merely register the aircraft. The aircraft must also have a certificate of airworthiness. This certificate is issued by the same aviation authority that registers the aircraft and indicates that the airplane is airworthy. As well, there are other aspects to aviation regulation associated with aircraft registration, including, for example, the licencing of pilots. As such, aircraft registration means more than just setting up a register of aircraft. In fact, it means developing a fully functioning DCA, along with supporting regulation and infrastructure. A tall order perhaps, but one that is achievable and beneficial to the BVI.

Why Needed?

Currently the functions of the DCA in the BVI, including aircraft registration, are carried out by Air Safety Support International (ASSI), a wholly owned subsidiary of the UK Civil Aviation Authority. There are currently three aircraft on BVI’s aircraft register. ASSI’s primary objective is to provide a cohesive system of civil aviation safety regulation in the Overseas Territories. ASSI is concerned with safety; it is not necessarily concerned with developing or growing the civil aviation industry in the BVI. A fully functioning DCA in the BVI would of course be concerned first and foremost with safety, but in the context of developing a sustainable aviation industry in the BVI. A BVI DCA would give the BVI greater control over its civil aviation industry.

The following is just one example of where a fully developed DCA with supporting regulation and infrastructure is required. The BVI does not have a functioning aircraft and aircraft engine mortgage register. Without such a register, it is virtually impossible to obtain financing to acquire an aircraft on the BVI aircraft register. The short-term solution has been to register the aircraft in the United States where a person providing financing can file his security interest over the aircraft. However, for a commercial aircraft, this is not necessarily a solution. Air routes between countries are negotiated by treaty. For example, a commercial carrier from the BVI does not have the automatic right to fly passengers from BVI to St. Martin. Rather an air services agreement establishing this commercial air route will have been negotiated between the two countries. Typically these agreements only apply to aircraft registered in their respective countries. Without an active aircraft and aircraft engine mortgage register, BVI commercial operators have registered in the United States, but they may not be able to fly on these routes. To date, the commercial operators have managed to find work arounds, but this is more good fortune rather than good planning. There are other reasons to create a fully developed DCA, with an active aircraft register. Most Offshore Financial Centres offer aircraft registration as one of their product areas. Aircraft registration is seen as an integral part of the offshore product. The Isle of Man, Cayman and Bermuda each offer aircraft registration, and in fact it is a thriving product area in these jurisdictions. Their registers have hundreds of aircraft, most of which are located outside of their home territory, but are otherwise paying annual fees. Aircraft registration is also tied to the shipping registry. High net worth individuals who want to register a ship in the BVI often want to register an aircraft in the BVI as well. I have been told anecdotally that several ship registrations have been lost as a result of the inability to register an aircraft in the BVI. Finally, in order to register an aircraft in the BVI, it needs to either be owned by an individual resident in the BVI or by a company incorporated in the BVI. As a result, aircraft registration complements our incorporation business. It is part of the total package.

What Needs to be Done?

Other Benefits

a) When maintaining an aircraft register, it is necessary to be able to issue a certificate of airworthiness. In order to issue a certificate of airworthiness, it is necessary to inspect the aircraft to ensure it can fly safely, and to approve and monitor the maintenance of the aircraft. These actions are carried out by the DCA. It is not necessary for the aircraft to fly to the BVI for this inspection. Rather inspectors from the DCA can fly to where the aircraft is located. The DCA in the Cayman Islands maintains inspectors in both the Cayman Islands as well as London for this purpose. Alternatively, it is possible to establish a network of agents who will inspect the aircraft for the DCA. However, in order to establish the network, the BVI DCA must itself have people on staff with sufficient expertise to inspect the network to ensure its capability and competence and to ensure the agents are carrying out their job properly.

I have discussed why aircraft registration and a fully functional DCA are required in the BVI. They are required to allow BVI to develop its aviation industry as well as to support our international financial services product. However, in addition there are softer benefits as well. While it is not necessary for an aircraft to fly to the BVI to be registered, it will be necessary to create a DCA that is capable of inspecting aircraft and attending to the other functions of a DCA. This creates jobs and, in particular, jobs in the aviation industry for those persons who may have an interest in aviation. There are persons in the BVI who like aviation. An air show was held in the BVI in 2008. A fully functioning DCA will provide these persons with greater opportunities to pursue their interest. Further, with BVI’s demonstrated skill in company formation, there is no reason to think that the BVI could not become a leader in aircraft registration. A fully functioning DCA, with an active aircraft register, may also be a source of revenue. It is an alternative source of revenue from company formation fees, causing greater diversification of the BVI’s financial product. In this regard, while currently the costs of ASSI are borne by the UK Government, I understand this is going to change. I understand that the UK Government will be passing on the costs of ASSI to the Overseas Territories. A fully functioning DCA will allow revenue to be generated to meet these costs and more.

b) The functions of the DCA, including aircraft registration, are currently carried out by ASSI. However, ASSI’s primary job is to oversee the Overseas Territories’ DCAs. As such, they are unlikely to allow a delegation of only aircraft registration to the DCA without a road map to establish a fully functioning DCA capable of carrying out the other activities, whether issuing pilots licences or overseeing the BVI Airports Authority.

As indicated above, our competitors have active aircraft registers. This shows that there is a business here for the BVI. The BVI business company is ubiquitous around the world. As a result, we often receive queries about registering an aircraft in the BVI. Users of BVI companies assume that the BVI has an active aircraft register. As such, there will be a natural affinity for people to register their aircraft in the BVI. We need 33 to set up the infrastructure to allow them to do so.

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As such, a fully functioning DCA is required to establish an aircraft register in the BVI. In order to develop a fully functioning DCA, a business plan is required. This business plan, as well as direction and support, must come from the BVI Government and in particular the Minister for Communications and Works. ASSI and the current head of the DCA are there to help, but it takes direction and support from Government. It will also take funding. A BVI DCA, including aircraft registration, is an investment in the future. It will take a fair bit of infrastructure, which will cost money. In time, the DCA may be self-funding and possibly even a revenue generator (such as is the case with some of the other Overseas Territories), but there needs to be a commitment to invest this money today for revenue in the future.

Competitors

Conclusion

Aircraft registration could be good business for the BVI. However, it requires some infrastructure before the business can be developed. It needs a functioning aircraft register along with a functioning DCA. This requires a business plan from the BVI Government as well as funding. This plan and funding commitment needs to come from the Minister for Communications and Works. With the election around the corner, we look forward to the Minister, whomever he or she may be, taking up this cause and contributing to the development of the aviation industry in the BVI.

PLRANG / Shutterstock.com

Okay, it sounds like a great idea, but what needs to be done. As indicated above, it is not as easy as merely creating a register. This in itself is fairly simple. The BVI is well experienced with creating registers, whether the register of companies or the shipping register. However, in order to make the register effective, it will be necessary to establish a fully functioning DCA. The reasons for requiring a fully functioning DCA are as follows:

INTERNATIONAL BUSINESS

adding value in troubled times sjoerd koster, head of banking VP Bank ( BVI) Limited peter reichenstein managing director, VP Bank ( BVI) Limited

Introduction

The British Virgin Islands (BVI) has an important

role in the international financial system both as an international financial centre (IFC) and as the leading incorporator of offshore business companies. 34

Two roles that have grown very rapidly since the mid 1980’s. The main reasons for growth have been the highly developed offshore infrastructure, political stability supported by a comprehensive legal and regulatory framework, a competitive tax environment and the availability of world-class service providers.

Global Financial Crisis

The global financial crisis in 2008 and the apparent flaws in the financial system have however triggered unprecedented economic changes in the world economy. As a consequence, the BVI, as all offshore jurisdictions, have also started to see significant changes in both their own local economies as well as how they are perceived by the outside world. In general, financial services contribute to the local economies of IFCs in the range of 10-15 percent of their Gross Domestic Product (GDP). In the case of the BVI, the finance sector is the government’s primary source of revenue and accounts for more than 50 percent of the GDP. Any change to the stability and profitability of the finance sector would therefore have a profound impact on government revenues and the local economy as a whole. The offshore IFCs have attracted increasing attention on the international stage as a result of both the economic changes and the worldwide slowdown of economic development. All the major economies have been faced with the economic crisis and - as a consequence - deficits in their public finances have been soaring. This has resulted in growing political pressure on the offshore IFCs, as they are incorrectly associated with tax evasion. As a result of these international efforts to close domestic budgetary gaps IFCs have, been pressured to implement new standards on transparency and information exchange. In reality it is tax competition

rather than tax evasion, which is the issue. An issue that is not caused solely by IFCs, but also by the many countries with these large budget deficits. In addition there has been an erroneous suspicion that offshore IFCs may have contributed to the current financial crisis. Apart from lacking any objective base one might ask if this argument has not been created in order to distract from regulatory failures in the major onshore financial markets.

New Standards on Transparency and Regulation

To implement the new international standards on transparency, a number of international bodies such as the Financial Action Task Force (FATF) and the Organization for Economic Cooperation and Development (OECD) have launched various initiatives to address tax and financial regulatory policies on a global scale, but with specific focus on IFCs. One of the key initiatives used by the Global Forum/OECD in 2009 to confirm compliance with international standards is the classification of countries according to tax information exchange agreements (TIEAs) with other countries and jurisdictions. Initially these standards required offshore IFCs to sign a minimum of 12 bilateral tax agreements. In order to be removed from the so-called “Grey List” the OECD has been maintaining, IFC jurisdictions are required to conclude such agreements and align their regulations and laws with international standards in order to maintain their positive reputation. Compliance with increasingly higher standards will however be labour and cost intensive and it remains to be seen if the political and economic benefits to the IFCs will be able to compensate for these costs, and if indeed it will make a difference to the world economic recovery.

Competition Between IFCs

In addition to the changes in the economic climate and international pressure to implement the new architecture for financial markets, the IFCs are also under increasing pressure of direct competition for their products and services. This is the result of a rapidly globalizing trust, funds and corporate domicile industry. New IFCs are driven by economic developments in emerging markets such as the group of the so-called ‘BRIC’ countries (Brazil, Russia, India & China). The success of financial centers such as Hong Kong, Singapore and for example the newer Labuan Offshore Financial Centre in Malaysia are evidence of increased competition for the traditional offshore IFCs.

The BVI IFC at a Crossroad

The question the BVI has to address is how to prepare and react given the global economic turmoil and the downturn in the economy? How should the Territory prepare itself for today’s challenges and those ahead? Equally important is the question how the BVI can benefit and seize opportunities created by these changes and the newly emerging markets. An objective and sober self-assessment is the starting point. The next logical step from there is then an exercise to identify and specify the opportunities for which the industry may create new or modified products and services which add value to assure the BVI’s position. These steps, will determine the next decades of the financial services industry in the Territory. In addition to these strategic decisions and measures it is vital to realize that on the leveled legal and regulatory global playing field success is increasingly determined by the quality of

the regulatory infrastructure and practice. Although the building up of a regulatory framework and reputation of an offshore IFC takes time, the industry can be threatened very easily and the outcome of not addressing these threats can result in a rapid decline or complete loss of the business upon which it was built.

Regulatory Strength and Competition

Successful smaller offshore IFCs such as the BVI have had the ability to leverage the assets available to them to plan strategically for the future. One of the main assets is the regulatory framework and its regulators. An international reaction to the financial crisis has been the perception that regulation must be increased and tightened. The smaller IFCs, like the BVI, have the ability - due to their relative size and nimbleness - to analyze the private sector and market needs and act upon these. This would require a greater focus on risk-based regulatory system as apposed to a rule-based regulatory system. A rule-based system will further impede the development of the industry. The strategic focus should therefore be on the responsiveness and agility of the regulatory system and its regulators to prudently review the required international standards on regulatory transparency and information exchange and implement these rules taking into consideration the market needs.

Attracting and Developing the Right Resources

As a consequence of the increased competition for global financial services, the BVI will have to attract the right resources and skills. They will also have to continue to develop their existing domestic resources to safeguard the industry. Highly skilled talent will bring the sector industry experience and knowledge, which will allow the BVI to continue to innovate and develop new products and services. The primary focus will have to be on the ability to not only set-up the financial and corporate structures, but also to manage, maintain and , , advise on them in order to create a value-added product. To compete on price for services offered in Financial & Corporate the financial services industry - as Structures...creating a opposed to competing on value is unfortunately in most cases a race product. to the bottom. In order to attract the right kind of talent more flexible immigration policies would be required, keeping in mind that the BVI is already in direct competition with immigration policies of competing financial jurisdictions. A good example is the immigration policy in Singapore, where the ‘foreign talent’ refers to foreigners with professional qualifications or degrees, working at the higher end of Singapore’s economy, allowing the local economy to directly benefit from the skills that these workers contribute. There are no significant barriers for these resources to enter the job market or the ability to settle down to allow for longer term commitments to the financial industry and therefore to the future performance and stability of the local economy. Besides attracting new skills to the industry to innovate and expand, there also needs to be focus on the development of domestic talent to not only drive economic growth but also to create quality jobs for the domestic market in areas such as accounting, finance, legal, and IT jobs. This will require significant investments in education supported by, both, the private as well as the public sector. These investments in education are essential to be able compete on a global level and allow for an increasing number of young people to reach the required levels of competency through the availability of business degree courses and finance industry specific programs.

set-up manage maintain & advise

value-added

Domestic and Infrastructure Support

The development of resources for the finance industry is however not only limited to attracting outside skills and developing domestic resources. The jurisdiction also requires, from both the private sector as well as the Government, the continued support for the overall business environment as the finance industry does not function in a vacuum. It is directly influenced by the jurisdiction’s physical infrastructure, the community in which it operates and the Government from which it receives its political support. It therefore requires investments in order to create a high quality business infrastructure to continue to grow and thrive and to support its participants. Components of such a constructive business environment are a good health care system, a solid education system, well-maintained roads, sewerage and energy infrastructure, and a favorable cost of living. In the overall long-term strategy, attention must also be paid to possible domestic issues. In the various challenges facing the industry, it is important that the local community supports its financial services industry. A pre-condition for this will be that the community understands the industry and secondly also benefits from it.

Conclusion

In order to compete in the next decade the BVI will have to have a pro-active approach to deal with the challenges ahead, as it is no longer business as usual in the current economic climate. There will have to be a greater focus on efficient and risk based regulatory and supervisory approach that can compete with new and existing global IFCs. Those that can pride themselves of a highly effective and efficient regulatory regime, minimizing bureaucracy, maintaining open dialogue with the industry and being internationally recognized for their best practices, will stand out from the rest. These strategic changes will have to be supported by an adaptive approach to corporate legislation and regulation to support the product and services offered to the existing and new markets without significantly increasing the costs of doing business. The BVI will have to continue to 35 attract the talent and expertise necessary to compete as an offshore IFC. At the same time the industry requires investments in education to allow for a well-educated and productive domestic work force to support sustained growth. Although governments worldwide are faced with budget deficits and strains on their own finances, they will have to continue to invest in the territories infrastructure to support the development of their finance industry in order to seize the available opportunities. The most optimized and well-organized financial centers offering value-added services will be able to stay ahead of the increased international competition. The benefits are clear; sustained long term economic stability, creation of wealth, an increase in volume and quality of jobs are the building blocks for the continued success of the BVI as a leading global IFC.

INTERNATIONAL BUSINESS

ignorance is not

Corporate governance in the BVI elizabeth killeen, corporate lawyer jonathan bailey, trust lawyer tmf group bvi office

he recent fall of the News of the World in the UK, and its effect on News Corporation and Rupert Murdoch (and his family), have made headlines all over the world. News Corporation’s board of directors faced shareholder rebellion due to alleged poor corporate governance and a lack of independent (i.e. non-Murdoch) directors on the board. Rupert and James Murdoch were also called before the House of Commons’ Culture, Media and Sport Committee in the UK to give evidence in connection with the News of the World’s telephone hacking scandal.

Businesses all over the world, regardless of size, must ensure that they have appropriate corporate governance in place. The consequences of not doing so were demonstrated with startling effect by the News of the World scandal. News International (the UK subsidiary of News Corporation that

owned the News of the World) saw an initial drop of US$7 billion from its valuation, while the News of the World, which was the biggest selling English language newspaper in the world, was forced to shut down. Corporate governance is described by the Financial Times Lexicon as: “how a company is managed, in terms of the institutional systems and protocols meant to ensure accountability and sound ethics. The concept encompasses a variety of issues, including disclosure of information to shareholders and board members, remuneration of senior executives, potential conflicts of interest among managers and directors, supervisory structures, etc.” An important theme of corporate governance is the nature and extent of accountability that particular individuals in an organisation have, and the mechanisms that are in place to reduce or eliminate the principal-agent problem (i.e. the difficulties that arise in ensuring that employees carry out their employer’s wishes). Good corporate governance touches all of us and recent events have shown that, regardless of the size or nature of a company, failing to adhere to good corporate governance practices can have disastrous consequences.

What Lessons Should Business Owners Take From This?

Responsibility for corporate governance and risk management of a company (or indeed a group structure) lies, in the first instance, with the directors and senior management – and not where the problem may have occurred. The directors owe a duty to their shareholders and in discharging this duty they are expected to provide strong independent executive management throughout the company or the group of companies. Having no direct control of events is no defence. Business owners should therefore: • Establish clear and complete corporate governance protocols that provide an effective check against poor decision-making. • Consider future corporate governance protocols to ensure the business continues to be run in accordance with the owner’s values. • Ensure that appropriate and competent employees are appointed throughout the business. • Ensure that any protocols and all associated processes are kept under review (especially in view of new technological developments).

dutourdumonde / Shutterstock.com

Well-drafted and robust ODRs under a VISTA trust structure are certainly an excellent starting point for any business owner wishing to formalise corporate governance protocols and entrench broader risk management, business and ethical conventions, for the years ahead.

How Can the BVI Help a Business Owner Provide Adequate Corporate Governance? Virgin Islands Special Trusts Act

The BVI is a well established trust jurisdiction and the Virgin Islands Special Trusts Act (VISTA) provides a perfect tool (a VISTA trust) to establish and maintain effective corporate governance protocols for all businesses owned by a VISTA trust. A VISTA trust allows the business owner to place the shares in his company into a trust. The trustee of the VISTA trust (a licensed trustee) is not permitted to intervene in the running of the company (other than in pre-agreed and identified circumstances) and they cannot sell any shares in the company without director consent. The business owner can use VISTA’s Office of Director Rules (ODRs) to lay out detailed business plans covering how the organisation should be run by its board. These can vary from simple rules covering the appointment and removal of directors and their remuneration, to detailed protocols regarding the management and ethical behaviour of the company. In short, the ODRs can set out all the corporate governance, internal control and risk management conventions that the business owner wishes to see in place in the company/group that is held by the VISTA trust. This can be very comforting to business owners approaching some sort of transition – be it a public offering or, more commonly, generational succession, where the business owner wishes to ensure that the enterprise continues to embrace certain values and control practices. ODRs apply to the BVI holding company owned by the VISTA trust. However, the effect of the ODRs can be applied at the subsidiary level, as the holding company has the power to appoint and remove directors of the subsidiaries. The holding company can be obliged to enforce the right to appoint or remove directors if a subsidiary (or any of its directors) does not comply with the business owner’s chosen corporate governance practices as set out in the ODRs. The ODRs can outline a clear business protocol, which can determine how the company and its subsidiaries should be run. This can reflect moral and business ethics. If a director is responsible for a certain area within the business and is found not: (i) to be adhering to the established ODRs, or (ii) ensuring that those he/she is responsible for adhere to the ODRs, then these rules can be used to remove and replace him/her as a director. Equally, the rules can embed incentivisation and reward schemes for directors and staff who are furthering the values of the business owner. This provides a structure that allows the business owner’s ethos to run throughout the company and its subsidiaries. The ODRs will be in effect for the duration of the VISTA trust, which can run for up to 100 years. Therefore the business owner can not only set out his current corporate governance protocols, but also ensure that the companies under it will have a suitable corporate governance plan in effect for the future. Obviously, when you have an organisation as large as News International it is hard to monitor all employees and ensure that they comply with agreed procedures or guidelines, particularly where there may be uncertainty or inconsistency in their interpretation. It is, therefore, necessary to ensure that a VISTA trust’s ODRs are carefully drafted to include appropriate oversight and policing provisions that reflect the size and nature of the business. Given the importance of corporate governance protocols, it is vital that the business owner puts sensible and appropriate safeguards in place from both a risk management and a financial security prospective.

Private Trust Company Legislation

As an alternative to using VISTA to hold the shares in the trading companies, the business owner can use Private Trust Company (PTC) legislation in the BVI. The owner can incorporate a PTC to act as trustee of a standard discretionary trust, which will hold the shares in the trading companies. The business owner can be appointed a director of the PTC and, through this appointment, he/she can ensure that he/she maintains direct control of the company (and its group) – including its corporate governance. To ensure that the business owner’s corporate governance policies and direction over the business are maintained in the long term, the shares in the PTC can be transferred into a VISTA trust. The owner, or whomsoever he/she may nominate, would be a director of the PTC as long as he/she is able and would use the ODRs under the VISTA trust to determine who should succeed him/her as director. This VISTA trust would follow the same principles as detailed above and could be used to ensure the business owner’s standards of corporate governance are maintained in the company (and its group) through ODRs, even after he/she is unable to run the company. A PTC arrangement such as this dovetails very neatly with a family office style arrangement, responsible for family members and the family business, with the family office often represented on the board of the PTC. BVI trust legislation provides several effective and flexible solutions to the problem of controlling and maintaining suitable corporate governance protocols in a trading company or group of companies. This is particularly pertinent in cases where the business owner is unable or unwilling to manage the corporate governance process adequately, and it can be a 37 fundamentally important ingredient in planning for transition or generational succession. Editor’s notes:

TMF Group helps businesses expand seamlessly across borders. With dedicated accounting, legal and HR and payroll staff in more than 100 offices in over 75 countries, we can take care of the details, leaving you free to focus on your global ambitions. For more information, please contact: Nicholas Lane

rust Director, TMF Group – BVI T T. +1 284 852 5042 | E. nicholas.lane@tmf-group.com Elizabeth Killeen Corporate Lawyer, TMF Group – BVI T. +1 284 852 5048 | E. elizabeth.killeen@tmf-group.com Jonathan Bailey Trust Lawyer, TMF Group – BVI T. +1 284 852 5043 | E. jonathan.bailey@tmf-group.com Whilst we have taken reasonable steps to provide accurate and up to date information in this publication, we do not give any warranties or representations, whether express or implied, in this respect. The information is subject to change without notice. None of the information contained in this publication constitutes an offer or solicitation for business, a recommendation with respect to our services, a recommendation to engage in any transaction or legal, tax, financial, investment or accounting advice. No action should be taken on the basis of this information without first seeking independent professional advice. We shall not be liable for any loss or damage whatsoever arising as a result of your use of or reliance on the information contained herein. This is a publication of TMF Group B.V., P.O. Box 75215, 1070 AE Amsterdam, the Netherlands (contact@tmf-group.com). TMF Group B.V. is part of the TMF Group, consisting of a number of companies worldwide. A full list of the names, addresses and details of the regulatory status of the companies are available on our website: www.tmf-group.com. © 2011 TMF Group B.V.

The OECD Global Forum

Peer Review Process

INTERNATIONAL BUSINESS

neil smith, finanacial secretary government of the BVI

s one of the largest and most sophisticated corporate registries in the world the Virgin Islands must be poised at all times in true form to its coat of arms “Vigilate”, to be vigilant and nimble in its response to an ever changing landscape. Indeed the BVI’s ability to be successful in this niche of the financial services industry is a result of constant scanning by the regulatory authority, the Financial Services Commission, technocrats within central government and friends outside and within the Virgin Islands themselves. Over the years the BVI has had to respond to various initiatives launched by the Organization of Economic Co-operation and Development (OECD) and various other allies of this powerful institution. Traditionally, the Virgin Islands has always reacted in a way that first tries to understand the rationale behind these initiatives and then to respond to them in a manner that allows it to meet the standards set, while still facilitating the industry that utilize our regulatory framework. An interesting battle that is constantly being fought however, is that of the level playing field. The powerful industrialized countries of the western world in their quest to repatriate tax revenue back within their borders complain that they are losing revenue as a result of unfair tax competition by the likes of International Financial Centers such as the Virgin Islands. At the same time these IFCs point out that these nations, in this quest should refrain from utilizing their superior economic and political power to tilt the odds against IFC’s. The existence of IFC’s is simply a response to opportunities presented by the high level of taxes experienced by the citizens of the

large industrialized countries. One can even go further and even propose that it is not necessarily the high tax burden, but perhaps the choices that are made by governments of these countries that incentivize their citizens to move their assets elsewhere. In defense of the governments themselves however, part of the cost price of living in a society that has an extensive welfare system to maintain the quality of life of its citizens, is a high tax burden. The saga goes on however and from year to year different initiatives in various forms are launched, with the sole aim apparently of promoting the OECDE’s mandate of promoting a fair and open global society. IFC’s bear the brunt of some of these initiatives since they appear to be havens for individuals that are attempting to avoid tax. The reality however is that the regulatory framework in the premier IFC’s such as the Virgin Islands make it very difficult for individuals to use ethically weak methods to avoid taxation, but instead provide a place with a strong track record for jurisprudence and efficient company management as a domicile for their companies.

One of the initiatives that have had an illustrious history for the Virgin Islands are their involvement in the Global Forum on Transparency and Exchange of Information for tax Purposes. This forum saw its birth in a concern by G20 leaders on the matter of tax evasion, which as they identified as undermining their tax base and stressing their financial systems. It is a multilateral framework that is based on tax transparency and the exchange of information. It is charged by the OECD to monitor and review the standards transparency and exchange of information for tax purposes in various jurisdictions across the globe. The standards used are identified in Article 26 of the OECD Model tax Convention on Income and Capital, the commentary that accompanies this convention, the OECD Model Tax Agreement on Exchange of Information on tax matters, as well as the UN Model tax Convention, which for all intents and purposes, copies the OECD model.

The Virgin Islands was reviewed in the first quarter of 2011 and will be reviewed again in 2012. Assessments are done by examining three basic components.

A. Availability of Information a. (A1) Jurisdictions should ensure that the ownership and identity information for all relevant parties and arrangements is available to their competent authorities b. (A2) Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements c. (A3) Banking information should be available for all account holders

B. Appropriate accesses to information a. ( B1) Competent authorities should have the power to obtain and provide information that is the subject of a request under an exchange of information arrangement from any person within their territorial jurisdiction who is in possession or control of such information (irrespective of any legal obligation on such person to maintain the secrecy of the information) b. (B2) The rights and safeguard that apply to persons in the requested jurisdiction should be compatible with effective exchange of information

C. Existence of exchange mechanisms a. (C1) Exchange of Information mechanisms should provide for effective exchange of information b. (C2) The jurisdictions’ network of information exchange mechanisms should cover all relevant partners c. (C3) The jurisdictions’ mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information needed d. (C4) The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties e. ( C5) the jurisdiction should provide information under its network of agreements in a timely manner.

Currently the Global forum is made up of close to 100 members, and the standards, which they all must agree to adopt on joining, provide for the international exchange of information on request for the administration and enforcement of the domestic tax laws of the requesting jurisdiction. One of the safeguards is the prohibition of fishing expeditions. Another is that the concept of dual criminality cannot be applied to the decision on whether or not to exchange information. The members of the Global forum are all subjected to peer reviews, much the same as is used by the Financial Action Task Force (FATF). In the Global forum these reviews are divided in two phases. Phase one examines and assesses the legal and regulatory framework that is in place in the reviewed jurisdiction that allows it to exchange information. Phase 2 assesses the jurisdiction’s practical application of these frameworks for exchanging information. It is therefore not merely enough to have the relevant frameworks in place, but in addition they must be applied and used for the exchange of information. In doing these assessments, specific assigned members of the Global Forum must examine the reviewed jurisdiction, evaluate and submit a report to the Peer Review Group of the Global forum, who will then examine the report and make recommendations to the general body of the Global Forum. The Peer Review Group is a working group that is made up of some members of the Global Forum and whose task it is to make recommendations to the Global Forum on the adherence of the jurisdictions being reviewed to the OECD standard. Once adopted by the Global Forum these reports are published. The various assessment are done by assessors, who are all members of the Global forum, have been advised on the methodology of the reviews and present to their reports to the Peer Review Group. These meetings can be very interesting and thus assessors are most prepared to defend their assessments vigorously. It is felt that the peer review process will minimize inconsistencies and prejudicial reports being submitted to the Global Forum, and hence all assessments (it is felt) will be fair. Obviously this is not always the case, but generally speaking matters work themselves out to give an accurate description of the reviewed jurisdiction’s status quo.

In the review done it was determined that the framework of the Virgin Islands was not robust enough to fully satisfy the requirements in all of the elements. This resulted in an initial determination that the Virgin Islands would not move on to Phase 2 of the reviews until required changes were made. This was despite the fact that the interpretation of the legal framework by the Virgin Islands was one that was consistent with the OECD standard, and it had been exchanging information without any impediments for some year’s prior. The VI did make amendments to its legislation to carry this interpretation beyond any doubt unfortunately; these changes were done after the review period, and were subsequently considered in a supplementary review of the Virgin Islands in September. The outcome of the supplementary review was somewhat different than the initial one with two of the three essential elements being fully in place and the element in respect to availability of information needing further improvement. The two elements that were fully in place were Appropriate Access to Information (B), and Existence of Exchange Mechanisms (C). The next step is now to make the requisite amendments to the legislation relevant to the Availability of Information so that this element is fully in place by the time of the next review in 2012. This commitment was made by the Virgin Islands publicly during the peer review meeting in September, and by the Premier since then. After consultation with the industry in the Virgin Islands it is expected that this exercise will be completed. As the Virgin Islands moves on in its journey of existence it must hold and even improve its position as a leader in the financial services community, not only in the region, but also globally. From all indications from its leaders and those that support them, it can be expected that this will be the case, as it was yesterday, today and for the foreseeable future.

INTERNATIONAL BUSINESS

Caribbean financial centres STEP 2011 Caribbean Conference, May 16 – 18, 2011, The Fairmont, Southampton, Bermuda

are we our worst

enemies? presented by robert mathavious managing director/ceo, bvi financial services commission

Ladies and gentlemen,

Good morning. I am delighted to be here today. I am grateful to STEP for this opportunity to step outside of my usual regulatory groove of concentrating on prudential regulatory standards regulatory core principles, AML/CFT, compliance, etc and to think more widely about the challenging question posed by the conference organisers. To those who do not know our region, the suggestion that Caribbean jurisdictions could be their own worst enemies might come as a surprise. Given the difficult history we all share and given the common problems we confront today, how could we be anything other than our own and each other’s best friends?

And yet life is rarely that simple.

Yes, many Caribbean IFCs strive to meet the highest international standards and have a good story to tell. But too many others, it seems to me, prefer words to action. And by so doing, they shoot themselves in the foot. Moreover, even the best IFCs – those that put in place sound legal, regulatory and administrative structures to ensure compliance with the new rules – even these too often try and go it alone rather than work with their neighbours to forge common regulatory, political and media strategies which would help everyone. They forget that in unity is strength and they foolishly denigrate others in a misguided attempt to be the last man standing. This does no one any favours, least of all themselves. Ladies and gentlemen, you may say I am being unfair. I would certainly agree that I am being a little provocative. Let me explain.

First, what do I mean about preferring words to action?

It often seems to me that one of the defining characteristics of the Caribbean is our love of language. We appreciate its strength and its beauty. We play around with words. We seek the oratorical flourish. Indeed, we have expended plenty of oratory on the challenges besetting our financial services industry. But there has to come a time when we stop just talking the talk and begin to walk the talk, too.

Unless jurisdictions implement the commitments they have made, where is their integrity?

I realize that some Caribbean IFCs may be relatively new to the industry or their financial services sector may be relatively small. But in the global world of financial service regulation, this makes no difference. All are weighed in the balance in the same way in the areas of banking, insurance, investment business, money services, fiduciary business and so on. There is no leniency or halfway house – you are either fully in or you are fully out. Despite this, some Caribbean IFCs still try special pleading. For example, with regard to their commitments to the OECD, some foolishly thought they could use the bumps in the level playing field as an excuse for not keeping their word. The global crisis put a stop to this. Those jurisdictions that tried to soft-pedal on their agreement to enter into Tax Information Exchange Agreements were found wanting and confronted with a stark choice – sign TIEAs or lose business by being blacklisted. I note that one of the questions under the title of this talk in the conference programme is whether we deserve a better reputation than the negative one pinned on us. You tell me. Yes, all the Caribbean IFCs have now signed enough TIEAs to avoid formal blacklisting. But what does it really do for our reputations when we are seen to follow the right path only under coercion and duress? Ladies and gentlemen, if we insist on – and win – greater fairness in setting standards, how can we then justify not introducing those standards?

I ask you not to yield to the siren voices that try to convince you otherwise. Do not cede the moral high ground to others. Do not be your own worst enemy.

Doing the right thing is, of course, the shared responsibility of regulators, practitioners and politicians alike. It may amaze some of you to think that any of our leaders might make speeches about the importance of the Caribbean region meeting high money laundering standards only for their country not to meet those standards because the same leaders have failed to act. It may equally surprise you that any country criticised for specific regulatory weaknesses might prefer to accuse its accusers rather than address the weaknesses, and that far too many of our practitioners boast when marketing our jurisdiction of how well regulated we are yet only pay lip service to competitive issues. Or that any regulator might permit their jurisdiction’s corporate vehicles to be used without concern for who is in the driving or passenger seat or what the destination is or what victims are struck down along the route. Yet these things happen. Sadly, they happen far too often. And when they do and when the ethically challenged are able to abuse our structures for nefarious activities, the unfortunate impression can again be left that we are more concerned about talk than to action. When we persistently fail to meet universally agreed standards of regulation, when our international cooperation modalities do not meet international requirements for exchange of information for criminal, law enforcement, regulatory or tax purposes, when we fail to develop the relevant legislation or fail to devote sufficient regulatory resources to safeguarding our financial systems and when we fail to honour United Nations and other international sanctions against countries or individuals and end up being called sanctions-busting pariahs. How then can any of us not answer “guilty” to the charge of being our own worst enemies? Another of the questions asked in the conference programme is whether our business practices in the Caribbean empower our detractors. If we are not careful, then they can too easily do so. Along with every finance centre anywhere in the world, we have to recognise that the same things, which make our structures attractive to legitimate businesses, also make them appealing to conmen and fraudsters. Making lemonade out of lemons is in the regions DNA and now more than ever we are called to turn today’s challenges into opportunities to provide services to a discriminating global clientele. If the amount of lip service paid to regulation by certain practitioners, or the number of their complaints that international bodies are behaving unfairly, or the frequency with which they tell local politicians and regulators that proposed regulations and legislation will be too onerous and drive away business. If all of this verbiage could simply give way to making greater efforts to introduce effective compliance systems, if all of this fantastic energy could be applied to developing innovative strategies to identify and exploit the competitive opportunities that are being created by the new rules, think how much richer our societies could be! Ladies and gentlemen, whether through indifference, inertia or incomprehension, when we drop our guard, when we turn a blind eye to fraud, when we allow our structures to be used by politically exposed persons who mishandle their countries’ wealth, when we fail to demonstrate zero tolerance for anything that would tarnish our reputation, in short, when we do business with shysters, we do ourselves no favours at all. Instead, we find our business practices and our IFC understandably in the dock of world opinion.

Every time this happens – every time a Caribbean practitioner is indicted for negligence, willful blindness or worse– it damages the reputation of their jurisdiction. And every time a jurisdiction hits the headlines due to abuse of its systems, it damages our region. Indeed, although I am one of STEP’s greatest fans, it may be that not including a session on compliance in the new world order at this conference was a missed opportunity. For compliance is the linchpin of our reputation. It should lie at the heart of every financial services business. What is more, every business and every country should demand compliance by its neighbours. For business profits and government revenues can be too easily put at risk by someone else’s inadequate systems, controls and, yes, attitudes. As Alexander the Great said, “Upon the conduct of each depends the fate of all”. Now more than ever this is true for this region. So let us stop preferring words to action. Let us stop shooting ourselves in the foot. The other self-destructive tendency I identified was the reluctance of Caribbean jurisdictions to act collectively to defend their financial services industries. The conference programme further wonders whether we promote our regulatory achievements sufficiently to win the respect of the international community.

Do business practices in the Caribbean empower our detractors?

Well, let me ask you this.

When we fail to analyse collectively the global environment within which we are now operating, when we fail to develop and resource our risk mitigation and risk management systems, when we choose not to develop common positions in the fora where matters affecting us are decided, when regional governments and public officials choose only to attend As Alexander the Great said, those fora when they are in far away “ exotic locations or only when someone else covers the cost of attendance, or when they attend without having read the relevant papers and are thus not in a position ”. to comment critically on Now more than ever issues being discussed this is true for this region. and, yes, when we fail to develop a proactive, joint media strategy and are constantly on the defence as to the legitimacy of our programmes, our policies and our modalities and when we fail to constructively engage those driving the international initiatives targeting IFCs for example the Tax Justice Network, then who else are we harming but ourselves? I hugely welcome the support the Caribbean receives from STEP. This helps to strengthen our private sector’s positions and to build cooperation between our governments and, to an extent, regulators. I also welcome the new International Financial Centres Forum, which seeks to address common misconceptions about IFCs.

Upon the

conduct

of each depends the fate of all

INTERNATIONAL BUSINESS

But these important bodies do not lessen the need for Caribbean countries themselves to collaborate better, more effectively and strategically. Our history is one of suffering from divide and rule. Yet instead of rejecting this and seeking ways of acting in concert, we too often let the old mentality drive us. The world’s developed countries consistently devote major resources to institutions such as the OECD, FATF and European Union, which they use to promote their interests. The Caribbean IFCs, however, spend as little money as possible for as short a time as possible on the few organisations they create, taking meaningful collective action for only as long as their backs are well and truly against the wall. As soon as we perceive the threat is over we revert to business as usual. Look at the example of the International Trade and Investment Organisation (ITIO), established in 2001, mainly by Caribbean jurisdictions, in response to the OECD. The ITIO was a great success. It helped members negotiate both individually and collectively and it undermined the OECD’s attempts at divide and rule. Jurisdictions spoke with one voice in international meetings. It won a positive hearing in the media. And crucially, with the support of the Commonwealth Secretariat and STEP, the ITIO got the OECD to concede the level playing field I mentioned earlier. And then what happened? Through a combination of penny-pinching and miscalculation we deprived the ITIO of resources and allowed it to wither on the vine. We disbanded our army after winning the battle, even while the war still continued. We were truly our own worst enemies. And we have been in danger of letting the same thing happen to the Caribbean Financial Action Task Force. When we see suggestions in 42 the media that some countries join the CFATF only to pay lip service to combating money laundering and that they are happy to keep it ineffective, we should be appalled. Fortunately, steps are now being taken to strengthen the CFATF’s funding, efficacy and credibility. It may even be that in future only those members judged compliant with AML standards will be permitted to hold key CFATF positions. This would help place the CFATF firmly back on the moral high ground. It is too soon to judge the success of this enterprise, but for once the signs are hopeful. Caribbean OFCs need a vibrant CFATF. Ladies and gentlemen, I began by saying that there was no one answer to the question of whether Caribbean financial centres are their own worst enemies. I fear, however, that in too many ways the answer is yes. This is not to discount the numerous external enemies we have ranged against us. I have been in this game too long ever to do that! But it is to recognise honestly and openly that the Caribbean’s tendency to substitute words for action and our failure to cooperate consistently and with an open heart only serve to strengthen our enemy’s hand. When we fail to work collaboratively with other stakeholders and develop strategic alliances, when we weaken the link between IFCs by trying to win special concessions for our own jurisdiction, when we make the mistake of thinking that cooperation and competition are mutually exclusive, when we treat competition with other Caribbean IFCs as a zero sum game in which the success of one depends on the failure of another, rather than seeking to grow a bigger market whose fruits all can enjoy, then truly we are creating a rod for our own backs.

It should be remembered that when the OECD Harmful Tax Cooperation Initiative, and the FATF NCCT initiatives were launched in 1998 it was conventional wisdom then that only a few IFCs, between 8 to 10 would be able to survive. Caribbean IFCs are still here. However, if Caribbean IFCs are to have a long-term future, we have to act in concert and reject divide and rule with our deeds as much as with our words. We have to recognise that you need an alliance to make a difference. That in large organisations like IOSCO and the IAIS, no single jurisdiction acting in isolation can influence how a particular standard is shaped. And we must accept that we are all truly our brother’s keeper, if only because every one of that falls leaves the rest of us more exposed.

As the German Pastor Martin Niemoeller famously said in the aftermath of the Second World War: First they came for the Socialists, and I did not speak out Because I was not a Socialist. Then they came for the Trade Unionists, and I did not speak out Because I was not a Trade Unionist. Then they came for the Jews, and I did not speak out Because I was not a Jew. Then they came for me and there was no one left to speak for me. There is no doubt that by the strength of our common endeavour, the Caribbean IFCs can achieve more than we can achieve alone. So let us renew our determination to work with a common purpose and speak with a common voice. Let us ensure that our only enemies lie outside, rather than within, ourselves. Thank you.

INTERNATIONAL BUSINESS

BERMUDA CALLING

STEP Caribbean Conference 2011

hélène anne lewis, chairman BVI branch of STEP

The STEP Caribbean Conference was held between May 16th and 18th 2011 at 44

the Fairmont South Hampton in Bermuda. The conference was a gathering of the trust industry’s premier speakers and delegates from around the world and it is coordinated each year by a committee compromised of

representatives

the

Caribbean branches of the Society of Trust and Estate Practitioners (STEP).

The STEP Caribbean Conference was held between May 16th and 18th 2011 at the Fairmont South Hampton in Bermuda. The conference was a gathering of the trust industry’s premier speakers and delegates from around the world and it is coordinated each year by a committee compromised of representatives of the Caribbean branches of the Society of Trust and Estate Practitioners (STEP). As chairman of the BVI Branch of STEP, I am the designated representative of the territory on the STEP Caribbean Conference Steering Committee. Member branches of the Caribbean region, bid to host the conference by presenting proposals in November of each year. Bermuda’s winning bid provided an opportunity for the jurisdiction and for our delegates to network with prominent trust practitioners in an unusually collaborative and enthusiastic environment. The conference ran for two and a half days and was generously interspersed with networking opportunities and opportunities to enjoy the hospitality of the jurisdiction. Bermuda’s unique environment offered many opportunities for delegates to enjoy the sites of Bermuda but not before serious deliberations on the challenges and opportunities facing the international financial community in particular, the survival of international financial centres in the Caribbean. The discussions were led by such eminent speakers such as Professor Gilbert Morris and Richard Horrowitz who made presentations to the delegates supporting the argument that international finance centres in fact provide a critical element for global economic growth and stability particularly because many of these centres are much better regulated than the onshore centres. Welcoming the delegates, Chairman of STEP Worldwide Mr. Michael Young pointed out that the Caribbean and Latin American branches “represent one of the strongest examples of collaborations around the STEP world”. Mr. Young commended the organisers and the delegates for the “confidence in the long term outlook around the industry” as evidenced by the attendance by more than two hundred and fifty delegates at the conference. The conference was also a learning opportunity for mid-level managers in the trust industry and several workshops that proved invaluable. Interactive sessions were led by Mr. Christopher McKenzie of Walkers, among others of the region’s practitioners including, Heather Johnson of Hicks and Johnson in the Bahamas. Always a very welcome speaker at conferences around the world, STEP Caribbean conference was privileged to have Mr. Robert Mathavious, Managing Director and CEO of the British Virgin Islands Financial Services Commission address the conference on the topic, “Caribbean Financial Centres- Are We Our Worst Enemies?” In his remarks, Mr. Mathavious reminded the Caribbean Financial Centres, “Even the best IFCS - those that institute sound legal, regulatory and administrative structures to ensure compliance with new “rules” - often make mistakes.

He challenged attendees to avoid complacency as they continue to meet the challenges thrown down by such international bodies as the OECD and FATF. These organisations he said seek to impose global standards on the regulation of the provision of financial services around the world. He reminded the conference that the developed countries “consistently devote significant resources to these institutions” while in contrast the Caribbean international finance centres “spend as little money as possible for as short a time as possible on the few organisations they create.” This short sightedness was inimical to the survivability of international financial centres, which must in the end rely on public private collaboration in order to ensure that institutions are strengthened and that financial centres are underpinned by robust legislation and effective regulatory measures. Another timely, interesting and spirited session for delegates was a round table discussion introduced by Mr. Christopher McKenzie of Walkers and moderated by James Corbett QC on the topic “We Will Survive.” One of the lead panellists for this discussion was another local speaker, Mrs. Lorna Smith of LGS & Associates. She ardently supported the proposition that IFCs, particularly those in the Caribbean are well positioned to survive not only the global economic down turn but be consistent efforts of international organisations to “downgrade” Caribbean financial centres. Her confidence stemmed in part from the fact that the regional IFCs continue to attract top quality professionals and to offer them a consistently superior lifestyle to that enjoyed onshore. On the social side of the conference, one of the most interesting events was a visit to Bermuda’s national museum, which is one of the finest examples anywhere of the value to be had from preserving artefacts. The Commissioner’s House is one of Bermuda’s important landmarks and the world’s first cast iron building. The three-story 30,000 square foot museum exhibits artefacts of life in Bermuda dating back to the 17th century. Delegates were awed by the grandeur of the surroundings and the importance of the various artefacts on display. The British Virgin Islands delegation comprised more than thirty practitioners from the local financial services sector. The 2012 conference will be held in the Cayman Islands and STEP British Virgin Islands looks forward to being well represented once again by a strong team of delegates.

BVI Business & Lifestyles

BVI BUSINESS & LIFESTYLES

the british virgin islands as an

INTERNATIONAL FINANCIAL CENTRE OF SUBSTANCE: strengths , weak nesses , opportu nities & threats in the c urrent environ ment

michael j. burns, managing partner, appleby, british virgin islands james mcconvill, consultant, appleby, british virgin islands

Introduction

The scrutiny that offshore financial centres (“OFCs”) have been subjected to since the global financial crisis set is no idle threat, and the environment we now operate in will not get any easier. We believe, however, that OFCs and the BVI in particular, are indispensable to the proper functioning and wellbeing of a modern, sophisticated, global economy. The BVI is athriving offshore financial centre which is the envy of many “competitor” financial centres. In light of the challenges facing the BVI and other offshore financial centres, we felt that it would be useful to explore what we see are some of the strengths, weaknesses, opportunities and threats confronting the BVI as one of the leading offshore financial centres.

We start with it’s strenghts.

Pictured Above: Financial Districts of New York, London, Kuala Lumpor, Dubai, Toyko, Hong Kong, Shanghai Pudong Image created for BBVI2012 utilising: r0ma4, QQ7, far8, hainaultphoto, gyuchan, leungchopan, testing / shutterstock.com

Strengths

he BVI continues to hold the position as the number one domicile for international business companies. As Michael Foot noted in his October 2009 “Final Report of the Independent Review of British Offshore Financial Centres”, much of this business comes from Hong Kong and Mainland China. According to the Foot Report, the BVI’s offshore financial services sector accounts for roughly half of the BVI economy’s revenue (close to US$290 million in 2010). According to the BVI Financial Services Commission, at the end of the first quarter of 2011, there were 456,146 active international business companies incorporated in the BVI. Recent statistics do not support the suggestion made by some that the BVI incorporation market has matured. There was a natural drop in incorporations when the global financial crisis hit in late 2008, but numbers have returned to levels similar to pre-Lehman days. For example, in 2010, there were 14,267 incorporations in the fourth quarter of 2010, 15,946 in the third quarter, 12,815 in the second quarter and 16,596 in the first quarter. This compares to 9,000 incorporations in the fourth quarter of 2008, 16,133 in the third quarter, 15,831 in the second quarter and 20,752 in the first quarter.

61,716

59,624 2010

16,596

15,946

2008

12,815

20,752

14,267

16,133

15,831

9,000

The BVI is also a significant offshore domicile for mutual funds—being second only to the Cayman Islands. At the end of the first quarter of 2011, there were 2,637 funds domiciled in the BVI. There has been some concern recently about the future of the funds industry in the BVI, particularly with the implementation of the regulatory imposition of the Securities and Investment Business Act 2010 (or “SIBA”) from May 2010 (by which those conducting “investment business” (defined widely) in or from within the BVI need to be licensed), and the Regulatory Code 2009 from February 2010. SIBA and the Regulatory Code introduced new compliance requirements for BVI-registered fund managers and administrators on the basis that they conduct investment business. The statistics, however, do not evidence a declining sector. In terms of professional funds recognised in the BVI (funds targeting the “high end” investors who invest more than $100,000 and/or have a net worth of than $1m), the numbers have been steady over the last few years. Professional funds are the most popular type of BVI mutual fund, accounting for about 65% of total funds. It is, however, early days in the life of SIBA and the Regulatory Code (the Code applies to investment businesses from 31 March 2011), and therefore we mention later on that this changing regulatory landscape in the BVI also poses a “threat” that we cannot ignore. As a demonstration of the BVI’s status as the leading financial centre in the Eastern Caribbean region, in 2009 a specialist Eastern Caribbean Commercial Court (being a division of the Eastern Caribbean Supreme Court) was established in the BVI to hear commercial disputes from the nine Eastern Caribbean jurisdictions (Anguilla, Antigua & Barbuda, Dominica, Grenada, Montserrat, St Kitts & Nevis, St Vincent, St Lucia and the BVI). The BVI was chosen as the location for this court due to not only the volume, but also the quality, of international commercial disputes coming into the Territory for resolution. From all accounts, the Commercial Court

STRENGTH

has been a tremendous success and has added a further string to the The BVI is also to be BVI’s bow as a worldpraised in undertaking class financial centre. significant efforts to The BVI is also to be join the OECD’s praised in undertaking significant efforts to “White List” join the OECD’s “White of jurisdictions List” of jurisdictions considered to adhere considered to adhere to to international international standards on tax transparency. standards on The BVI is now a party to tax transparency. over 20 Tax Information Exchange Agreements, or “TIEAs”— including TIEAs with the US, Cyprus rather than BVI Australia, Finland, entities are often now Greenland, Norway, New used for investing into Zealand, Netherlands Russia due to the double Antilles, China, France, Portugal, UK, Denmark, tax treaty between Faroes, Iceland, Sweden, Cyprus and Russia. Netherlands, Aruba, The BVI has not been active Ireland, Germany, India to date in entering into and the Czech Republic. In October 2010 double tax treaties. the IMF also released a favourable report on the BVI. The report, titled “British Virgin Islands: Financial Sector Assessment Program Update- Financial System Stability Assessment”, importantly states that: “The BVI’s continued ability to attract company registration business relies 49 on its being viewed internationally as a well-regulated and policed jurisdiction with a strong legal framework and efficient corporate services. The jurisdiction has been quick to adopt international standards as they evolve”.

WEAKNESS

Weaknesses

Despite all the success that the BVI has had as an offshore financial centre, there is still room for improvement. For example, there appears to be a need to dedicate additional resources to the BVI Financial Services Commission to regulate the insurance sector, where further depth and expertise has been noted as being necessary. In addition, many investors (particularly those investing into India or Europe) are now preferring to use offshore financial centres with favourable double tax treaties with the countries they are

The BVI is a thriving offshore financial centre, which is the envy of many “competitor” financial centres.

BVI BUSINESS & LIFESTYLES

investing into, with Cyprus, Mauritius and the Seychelles having grown significantly in recent years on the back of this trend. The rise of these “tax treaty jurisdictions” has inevitably captured some of the BVI’s market share for international business companies. Cyprus rather than BVI entities are often now used for investing into Russia due to the double tax treaty between Cyprus and Russia. The BVI has not been active to date in entering into double tax treaties.

Opportunities

One opportunity that we are excited about is the utilisation of segregated portfolio companies in the BVI. Under BVI law (Part VII of the BVI Business Companies Act 2004) at the present time, only funds and insurance companies can structure themselves as segregated portfolio companies — although this can be changed by regulation. Segregated portfolio companies can form separate “portfolios” and the assets and liabilities of each portfolio are segregated from any other portfolio within the company and the company itself. At the end of the first quarter of 2011, there were 124 funds registered as SPCs in the BVI, so approximately 5% of all BVI funds. This compares to 88 if we go back to the end of 2008. Another opportunity for the BVI to further reinforce its position as a leading offshore financial centre is through law reform. One idea for law reform in the BVI that we have is to expand the BVI’s SPC regime by allowing the incorporation of each portfolio or “cell” within the company. Thus, each portfolio within the company would have distinct, segregated assets and liabilities, but would also be considered a separate legal entity which provides for further protection and addresses the concern that the SPC structure would not be recognised by courts in jurisdictions without segregated portfolio legislation in place. A number of jurisdictions, including the Isle of Man, Guernsey and Jersey, already have incorporated segregated accounts legislation. In the funds arena, we see the European Union’s Alternative Investment Fund Managers Directive (“AIFM Directive”) as a favourable opportunity for BVI fund managers to continue to have access to the European market. The AIFM Directive introduces both a “private placement” regime (to apply to non-EU fund managers from 2013 and expected to serve as a transitional regime until 2018) and a “passport” regime (which will potentially apply to non-EU fund managers from 2015 if the EU consents after a review is undertaken). The “private placement” regime enables non-EU fund managers to market fund products in an EU jurisdiction, much like they can now. The “passport” regime will potentially enable non-EU fund managers to market their fund throughout the EU once registered in one EU jurisdiction. Without getting into the detail of the AIFM Directive, it does emphasise the desirability and importance of the BVI’s recent efforts to strengthen the regulation of fund managers (through SIBA and the Regulatory Code), and join the OECD’s “White List” of jurisdictions, and to increase the number of TIEAs entered into between the BVI and EU member states as these boxes need to be ticked in relation to a non-EU jurisdiction under the AIFM Directive, before a fund manager domiciled in that non-EU jurisdiction can market funds to investors in Europe.

OPPORTUNITIY

the AIFM Directive: “Private-placement” & “Passports” under the EU’s Alternative Investment Fund Managers Directive

THREAT

BVI as “investment businesses” under SIBA could very well result in fund managers moving to other offshore jurisdictions with more flexible regulations, and taking their funds with them.

Threats

While the OECD, G-20, and UK and US governments have not been as noisy about OFCs as they were in the middle of the global financial crisis, the BVI must not be complacent and feel safe that joining the OECD’s “White List” is the end of the story. The threat remains that the OECD may be pressured into shifting the goal posts again, making it harder or impossible for offshore financial centres to be on its “White List”. Jurisdictions considered to be offshore financial centres could, perhaps, even be automatically excluded from the White List. Alternatively, offshore financial centres may be required to automatically exchange information with onshore jurisdictions to remain Conclusion on the “White List”, which would certainly be a concern for many who There are a number of important strengths legitimately use offshore centres but want their privacy to be respected. Further, while the current statistics do not show any recent decline in the attaching to the BVI as a financial centre of BVI funds industry, this does not rule out a possible future decline. The which we all can be proud. There is, however, licensing and regulatory requirements for fund managers, administrators more that can be done. There are also threats and other functionaries operating in or from within the BVI as “investment that the BVI must continue to recognise and businesses” under SIBA could very well result in fund managers moving manage, and at the same time opportunities to to other offshore jurisdictions with more flexible regulations, and taking their funds with them. be explored and embraced. This necessitates

Disclaimer: This article is general in scope and is not intended to be comprehensive. It is not a substitute for legal advice.

a delicate balancing act, aided by experience, rigour, and strong support. In other words, what is needed is what the BVI has in droves. And this is the BVI’s ultimate strength.

BVI BUSINESS & LIFESTYLES

We consider the office in the BVI to be an integral and important part of

Ernst &young

Roy Bailey Restructuring Partner / Practice Leader Ernst & Young Ltd.

OPENS PRACTICE IN THE BVI

rnst & Young Ltd. has recently established an office in the British Virgin Islands (BVI) with plans for considerable expansion in the upcoming months– and beyond. The move means a major boost to the scope of professional services offered in the British overseas territory, one of the world’s leading international financial centers. It also strengthens the position of the Ernst & Young organization both regionally and internationally. The BVI firm will be a full-service practice, offering restructuring and insolvency, assurance, tax, transaction and advisory services to local and international clients. “In our Global Restructuring and Insolvency practices, for example, we aspire to deal with the most complex and technically and commercially challenging assignments,” explains Roy Bailey, Head of Restructuring and Insolvency for the Ernst & Young member firms in the Bahamas, Bermuda, the Cayman Islands and the BVI (collectively known as the BBC). “To do that,” said Mr. Bailey, “we need to have capabilities in key global financial markets – in particular, the Americas, Europe, Middle East and Asia. Ernst & Young already has a strong presence in the BBC region, and

we consider the office in the BVI to be an integral and important part of that group. The BVI will be a key participant in our overall global strategy.” Although Ernst & Young had a presence in the BVI until 2005, the practice provided mainly company management services. In the intervening years, however, the BVI has positioned itself, through legislation, regulation, and sound business practices, as a leader in international finance. There are currently more than 450,000 active international companies registered in the jurisdiction. Rohan Small, an assurance partner with Ernst & Young Ltd., looks forward to developing a substantial audit practice out of the firm’s BVI office. “Audit requirements are becoming more important every year locally, and regulators are requiring audits to be part of any basic regulatory environment. In the future, local regulation will require greater services from auditors in the BVI, and we look forward to providing those essential services,” said Mr. Small. The BVI office officially opened its doors in January of 2011. Roy Bailey and Scott Clout, a senior manager in the BVI office, both hold insolvency licenses issued by the BVI Financial Services Commission.

that group. The BVI will be a key participant in our overall global strategy.

Dan Scott Regional Managing Partner Ernst & Young Ltd.

The Ernst & Young Way

The global Ernst & Young organisation is a leader in assurance, tax, transaction and advisory services with 152,000 professionals in firms across 140 countries. Wherever it has a presence, Ernst & Young is committed to excellence and to supporting the communities in which it’s firms operate. The core belief of Ernst & Young is reflected in its motto – “Quality in Everything We Do.” “As a focus of our organisation,” said Dan Scott, head of the BBC region for Ernst & Young, “we place the highest priority on the development of our people. In the BVI, we will recruit, train and employ promising candidates who have an interest in pursuing careers in accounting and in the many support services we require.” One way Ernst & Young accomplishes this is by supporting education in the communities in which it operates. Ernst & Young intends to carry on these opportunities in the BVI, providing local students with scholarships and internships and, ultimately, rewarding positions in the local office.

Rohan Small Assurance Partner Ernst & Young Ltd.

Said Mr. Scott: “It is an exciting time for our people at Ernst & Young, and we look forward to creating an inclusive environment in the BVI where all of our people can develop to their full potential.”

About Ernst & Young

Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com. Ernst & Young Ltd. (Bermuda), Ernst & Young and Ernst & Young Ltd. (Cayman) are client-serving member firms of Ernst & Young Global Limited operating in Bermuda, the Bahamas, the Cayman Islands and the British Virgin Islands, respectively.

BVI BUSINESS & LIFESTYLES

n 1969, John Morrell started the Tortola Importing Company (well known as TICO) then just a small Main Street beverage retailer and wholesaler that didn’t even have a phone line of its own. “We had to sort of run a couple hundred yards to answer calls, but there weren’t many Wine & Spirit Merchants Since 1969

TORTOLA IMPORTING COMPANY

Today, the firm, with its store on Wickham’s Cay II and its warehouse and Cash ’n Carry business in Pasea Estate, is one of the territory’s leading distributors of wine, spirits, beers, as well as non-alcoholic beverages including: juices, bottled water, and energy drinks. “It was very small to begin with,” Mr. Morrell said. “And sometimes I sort of kicked myself, and tried to figure out, did I do the right thing.” Gradually, the firm built its reputation, acquiring popular steven melendez nightspots as wholesale customers and picking up the rights to distribute more beverages. As the company expanded, their operations gradually moved down Main Street, then into the building now occupied by the Virgin Queen and Mellow Moods, then to the present locations. “It’s a long road – we sort of built a reputation and we got some good brands and, what can I say, here we are.” Mr. Morrell said. Now, John Morrell is largely retired from the business, though he still comes into the office for a few hours every week, the company is headed by his youngest son, Adam, along with General Manager Jon Charlton. His eldest son, Andy Morrell, is also a company director as well as the founder of his own business, the Caribbeandesigned apparel retailer HIHO. “I worked long hours when I was young,” John Morrell said. “The guys that followed me, that are running the company now, are working long hours too.” John Morrell said he never planned for the company to be a family affair, but he sees it as a “great treat” that both his sons still live on Tortola. “I never forced, or even encouraged them, to get into it,” he said. “I don’t believe in generation after generation doing the same thing; you make your choice, and I was delightfully surprised when Adam said he’d like to do it.” Adam Morrell worked and studied in the United Kingdom and United States, his father said, spending a couple of years at Sherry-Lehmann, the famed Manhattan liquor-and-wine retailer, experience that’s proved useful as wine has grown more and more popular at bars, restaurants and with retail customers within the Territory. “Adam certainly knows wines a heck of a lot better than I do,” John Morrell said. “He’s quite knowledgeable.” In wine, John Morrell said, the market is much more “diffuse” than in other alcoholic beverage categories, which are often dominated by one Illustration Depicts TICO’s Location on Main St., Road Town, Tortola or two major players, like Absolut in the vodka category or Johnny currently McKelly’s Building, circa 1976, Illustrated by Vegh Geza Walker in scotch, making an extensive knowledge of wine important. While table wine has grown in popularity, other beverages, like higher-proof fortified wine, have lost market share, he said. One perennial favourite, though, is Stone’s Ginger Wine, whose popularity the TICO founder attributes to a regional love of ginger. And other things have changed too – the company where employees once ran down the street to use the phone has moved from typewriters, to word processors, to modern information technology. “I was never brought up with computers,” John Morrell said. “My grandchildren, from the time they were two or three feet high, they’ve been on computers. A couple of generations later: life changes.”

BEYOND A

GENERATION

calls in the beginning anyway,” he said.

BVI BUSINESS & LIFESTYLES

CHINA AND THE CARIBBEAN david jessop

Former Minister of the Ministry of Foreign Affairs Mr. Li Zhaoxing Visit Antigua and Barbuda in September 2006

The cornerstone laying ceremony of the Barbuda Community Project contracted by Chinese enterprises.

China - Caribbean Economic and Trade Cooperation Forum In the logo the red “C” and the colourful “C” represent China and Caribbean nations respectively. The colourful “C” encompasses colours ofthe national flags of the various Caribbean nations. The stroke symbolizes the linkage of friendship embodying mutual cooperation, exchanges and Source: Chinese Ministry of Commerce Website common development.

Offshore drilling platform of Sinopec near the La Brea, Trinidad and Tobago

China Export-Import Bank China State Construction Engineering. Corp. Ltd. Sign with Baha Mar Group

57 The Trinidad and Tobago Social Development Building constructed by a Chinese company

China Export-Import Bank Meet with Dominica in May 2011

Grenada National Stadium with 15,500 seats aided by the People’s Republic of China

China and Barbados signing the Protocol for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income Center Images Source: Chinese Ministry of Commerce Website

BVI BUSINESS & LIFESTYLES

are taking over small stores and larger retail outlets. Trade too is growing especially with some of the regions larger nations. China has also established The Confucius Institute at The University of the West Indies (UWI) and is looking at other locations in the region. There are also the first signs of a Chinese naval presence in the region. The Chinese media noted recently that the tour of the Caribbean hospital ship, the Peace Ark, which will provide medical services, is ‘the first time a naval vessel will visit the area’. The Confucius Institute, The University of the West Indies Officially opened July 19, 2010. Courses Offered: • Chinese • Chinese Calligraphy • Tai Chi • Film Series Looking at China Source: mona.uwi.edu

Recently the view has begun to emerge that China offers a new form of thinking and an alternative economic model free of the market excesses resulting from the Washington consensus. Early in 2011, Le Keqiang, China’s Vice Premier, suggested in a newspaper article in the London Financial Times and in reference to the Chinese development model, that ‘The Book of Songs’, a two thousand year old collection of Chinese poems, provides a guide to a development model applicable to China and the wider world. He quoted the line: ‘Give relief to people who have toiled much, so they may enjoy a life of Xiaokang. Promote it (Xiaokang) throughout the Central Kingdom and peace will be secured for all the four quarters.’ What it means, he wrote, is, when people work too hard, they should be given relief so that they may lead a comfortable life. Xiaokang, he noted, is used today to refer to a society where people can receive education, get paid through work, have access to medical services and old-age support, have a shelter and more than enough food and clothing and lead a well-off life. A Xiaokang society, he wrote, is in all respects China’s development goal by 2020. It benefits the people of China and the world and can provide moderate prosperity and development. These are ideas that seem to offer an alternative market related development model that so far the Caribbean has not explored. Instead, as with much that has happened in the Caribbean in recent years most regional nations have approached China’s involvement in the Caribbean with relatively little thought about the political and philosophical underpinning of a closer relationship between Beijing and the Caribbean and Latin America. From conversations with Caribbean Ministers and Prime Ministers the picture that emerges in a Caribbean context is that most Caribbean nations see close engagement with China from four perspectives. Firstly, almost all Caribbean Governments, including those that do not formally recognise Beijing, accept the geopolitical importance of China globally and in the hemisphere. As an advanced developing nation with a high degree of respect for sovereignty and a voice in international fora, China is seen as a natural global ally. It offers, as one senior Jamaican Minister recently noted to me, the opportunity to rebalance relations with US and Europe and for Jamaica to be able to demonstrate to traditional partners a greater degree of independence. Secondly at a time of global austerity, Caribbean nations see China’s willingness to offer the region significant levels of support through loans, grants and other forms of assistance as a way of addressing growth and budgetary constraints. They are aware too that Chinese direct investment offshore is in the process of undergoing exponential growth - more than US$1,000bn around the world by 2020 some reports suggest– and that it is likely in time that the Chinese Renminbi could become a reserve currency. They welcome the lack of complex conditions attached to development support, although in some cases, particularly in the Eastern Caribbean where political parties have sought to play off recognition of Taiwan and

China for financial support, policy appears to be driven more by national or even personal mendacity than any true desire for a lasting relationship. Thirdly there is a growing awareness that China is prepared to offer much needed training and capacity building without the bureaucratic hurdles and delays experienced with Europe and other traditional donors. And fourthly there is the perception that despite its distance from the region, China may offer opportunities for trade and tourism, although so far making this real has proved elusive. In the Caribbean, China has becoming of major economic significance and is now involved in the development of every Caribbean nation that formally recognises Beijing and in some cases such as the Dominican Republic, that do not. From grant related projects it has moved on to investment in regional infrastructure including in overseas territories such as Cayman and the BVI; it is providing military aid and has a military presence under the auspices of the UN in Haiti; and is deepening its special relationship with Cuba. In August in Beijing just before the summit with Caricom nations, Jose Ramon Balaguer, a special envoy for Cuba’s President, Raul Castro, was involved in exchanges on a party to party basis on national approaches to building socialism and on deeper economic co-operation So far US reaction has been muted to China’s increased involvement in the Caribbean, although it is clear from US diplomatic cables posted by Wikileaks that for Washington it is a matter to be monitored. It is also apparent that some in Congress who have not recognised the way that the world has changed regard China as a growing threat across the hemisphere. In contrast, for the most part, Europe and other nations with an historic relationship with the Caribbean are trying to better understand China’s thinking and where there are opportunities for co-operation in the region and other parts of the developing world. In this respect European officials and diplomats regret the fact that there are few opportunities to engage with their Chinese counterparts. While the absence of conditionality in the provision of development assistance alarms some, this appears to be more than offset by senior figures in European chanceries that have a relaxed attitude and welcome Chinese and Brazilian involvement in the Caribbean. The challenge for the Caribbean is to seize the opportunity and find ways to establish a long term strategic relationship with a country that will soon be the most powerful economy in the world –economists suggest this will happen as soon as 2020 – and unlike almost any nations other than Venezuela and Taiwan, actively wants to deepen its relationship at all levels. For this to work the region has to find practical ways to benefit economically. It is one thing for Chinese companies using Chinese workers to find opportunity in the construction infrastructure or investment projects that will be Chinese owned and quite another thing for Caribbean business to find opportunities in China or provide services that will bring growth and development to the region. In practical terms this means that the Caribbean business has to develop joint ventures in manufacturing in the Caribbean for the US and Latin American markets and will need to identify higher value added goods and services for which there might be a market in China or with Chinese business into other parts of the world. This will require larger regional companies to visit to develop relationships with Chinese entrepreneurs. It will also require recognition that in the high cost economies in the Caribbean there will need to be a longer term emphasis on niche opportunities for instance for specialist one-stop legal and back office services that can explain the nature of Caribbean business and regional culture to Chinese entrepreneurs. The history of Caribbean economic development has revolved around the strategic advantage one or another external partner saw in engagement with the region. Making Chinas’ desire for a strategic relationship of long-term, lasting and mutual value to the Caribbean will depend on recognising this, and channelling Beijing’s support accordingly. It will also involve encouraging the Chinese investment and presence that is on offer to ends that benefit the Caribbean people by bigger private sector entities and financial institutions becoming significantly more proactive.

BVI BUSINESS & LIFESTYLES

General elections by their very nature engender a plethora of promises by competing parties and candidates on how they would improve the socio-economic conditions of the people and by extension the country. These promises usually come packaged in a manifesto and form an integral part of the campaign message. The BVI is no exception. The election fever which dominated late summer into early November last year saw political parties and independent candidates promising a better future if they were given the opportunity to govern the BVI for the next four years. After the loquacious campaign rallies and glossy manifestos what the new government needs is a working document setting out in intricate detail how to develop the BVI’s economy. This document should focus not only on patlian johnson short-term polices but long-term solutions to the Territory’s current economic woes.

Developing an Economic Strategy for the British Virgin Islands

Key Pointers

Although the BVI has experienced periods of increased growth following the advent of the financial services industry and the expansion of the tourism industry, a period of sluggish and declining growth is now apparent. This is in part due to the global economic crisis but also the consequence of a lack of economic planning and inefficient use of resources. Essentially the global economic crisis has exposed the cracks in the BVI’s economy. Developing an economic strategy is the first step in preventing these cracks from deepening into crevasses and positioning the BVI on the path to sustainable economic growth and long-term economic prosperity. The foundation of any economic strategy for the BVI requires promoting competitiveness internally and externally through the productive use of human resources, natural resources and capital. This economic strategy should at minimum answer the following policy questions: How does the BVI remain competitive in the two economic pillars – financial services and tourism? How does the BVI diversify and expand its current economic base? How can BVI citizens participate and benefit from economic growth?

The “How To” Guide to Developing an Economic Strategy 60

Determine the BVI’s competitive advantage; identify market opportunities and assess the challenges. Competitive Advantage • Determine what factors have contributed to the BVI’s competitive advantage in financial services and tourism – what sets the BVI apart from its competition, what makes the BVI unique and what has made the BVI successful. • Determine what sectors of the economy are productive and efficient and what lessons can be learnt and adapted. Market Opportunities • Identify areas for improving competitiveness in financial services and tourism by offering new services, products and attractions. • Identify prospects for the enhancement of existing secondary industries as well as the development of new industries and economic opportunities keeping at the forefront given available resources. • Identify domestic, regional and international markets for BVI goods and services. • Identify industries that could benefit from foreign direct investment. • Identify avenues for broadening the Government’s revenue base. Challenges – some points to ponder in assessing the challenges that the BVI currently faces. • Is the current education system adequately providing the population with the skills necessary to meet the demands of the labour market? • Is the cost of doing business in the BVI hampering investment by prohibiting businesses both local and foreign from commencing operations and prospering? • How open and competitive are our capital markets? Do entrepreneurs and Government have ready access to capital at affordable rates? • Is the physical infrastructure meeting the needs of the growing population and economy? • Is data and information readily available for Government and businesses to make decisions? Does this data provide an accurate picture of the current state of the BVI economy in terms the level of economic growth by sector, unemployment, inflation, level of competitiveness and productivity? • Is the impact on the environment taken into consideration during the developmental process?

Develop policies and programmes to address challenges and take advantage of market opportunities. • Policies, programmes and projects must be supported by evidence (data and research) and undergo rigorous cost-benefit analyses and ensure that they deliver value for money. For example a policy to address severe traffic congestion in Road Town would require information on population density and growth, trends in traffic volume at peak times and motor vehicle density per square mile as well as research into the contributing factors to congestion. This combined information can be used to determine the extent of traffic congestion, key contributing factors and assist in identifying a range of viable congestion-reduction strategies and possible strategies. • Determine how these policies and programmes will be funded for example through public-private financing initiatives and/or debt financing. Step Three: Monitor and evaluate policies and programmes, which involve measuring the impact and outcomes of the economic strategy. • Assessment is important since it determines whether the components of the economic strategy had the intended impact and met the objectives that were prescribed. For an economic strategy to become a reality, political leaders, business leaders and the civil society must collaborate. In the BVI the inaugural BVI Business Outlook Seminar – Embracing the New Normal held in January 2011 started the dialogue by engaging stakeholders in discussions about future prospects for the tourism and the financial services industries as well as the need for public private partnerships in providing capital for development projects, economic diversification and human capital development. Similar forums need to be encouraged and information from such discussions can be used as a starting point for the development of an economic strategy. Without an economic strategy the BVI will commence 2012 devoid of a clear direction towards economic development and would also be incapable and ill equipped to deal with any challenges that the future may hold.

INTERNATIONAL BUSINESS

rom about the time she entered the BVI High School, Dawn Smith knew she wanted to be

a lawyer. Her father wasn’t so sure. “Instead of going directly into law, my dad said, ‘You don’t know what you want to do; you’re too young; you should do a liberal arts degree,’ and I was like, ‘Yeah, I think I know what I want to do,’” Ms. Smith said. Still, she followed her father’s advice, majoring in sociology and anthropology at Middlebury College in Vermont. “It didn’t trouble me, because I love learning, so Middlebury was a fantastic

The Conyers GeneratioN freeman rogers

experience,” she said, chuckling as she added, “At the end of it, I learnt that I still wanted to be lawyer.”

Photographed: Andrew Swapp, Dawn Smith, Jerry Samuels Conyers Dill & Pearman

Three years later, in 1995, she earned a law degree from the University of the West Indies. Today, Ms. Smith is one of three British Virgin Islanders who hold senior positions at Conyers Dill & Pearman’s BVI office: She and Jerry Samuel are associates in the firm’s litigation department, and Andrew Swapp is a corporate manager at Codan Trust, a trust company affiliated with Conyers. Securing such high-level positions is not easy. Robert Briant, head of Conyers’ BVI office, said the firm hires the best available talent from here and abroad. “Offshore law is exceptionally competitive: We are competing with Cayman, Bermuda, the Channel Islands, Luxemburg, Ireland; to a lesser extent Turks and Caicos and other jurisdictions,” Mr. Briant said. In order to be successful, Conyers tries to offer “city onshore experience offshore,” he added. “You have to experience what the people are calling us about, so when they send an e-mail at three in the morning that may not be entirely clear because they’re exhausted, you need to know that they’re doing their best and know where they’re coming from and respond in a better way,” he said. Mr. Briant, who started his career in Toronto, came to the territory from Conyers’ Bermuda office in 1999. At the time, the BVI branch had about a dozen employees, he said. It has grown rapidly since then, now employing more than 40 people at its new offices in the Commerce House.

The Litigators

For Ms. Smith, Conyers’ expansion would provide a prime opportunity. But first, she joined the BVI law firm O’Neal Webster in 1997. There, she dealt with a broad range of cases, including commercial litigation, family matters, landlord-tenant disputes and debt collection, to name a few. “At that time in the BVI, and also at the time in that practice, lawyers tended to have a broader practice as opposed to a specialised practice,” she said. She was glad for the varied experience, but soon she decided she wanted to specialise. So in 2002, she joined Conyers. Because the firm didn’t have a litigation department then, she expected to focus primarily on corporate work outside the courtroom. For about six months, that’s what she did. Then a client wanted a matter litigated here. “At the time I was the only person on staff who had significant experience in the courts in BVI, and so I was tasked with assisting one of our lawyers from Bermuda … with handling that matter,” she said. “And it just grew from there — one case led to another case led to another case led to another case — until it became obvious that litigation was something that Conyers Dill & Pearman could properly and profitably be engaged in the BVI. And so a full-fledged litigation department was subsequently set up.” Since then — except for a stint at the BVI London Office from 2006 to 2009 — Ms. Smith has worked in that department. The profession is challenging, she said, but interesting and rewarding. “Sometimes you’re going to have to understand aviation; you’re going to have to understand shipping; you’re going to have to understand banking; you’re going to have to understand how joint ventures work, and so on,” she said. She added that she hopes to see more young BVIslanders benefiting from the opportunities available in the territory’s financial services industry. To that end, she said, education is a must. “Frankly, my biggest desire is that Virgin Islanders are properly educated, period: that they get a good education and that the public education system doesn’t fail them,” she said. “Because once they are properly educated, they will see the opportunities for themselves.”

Roundabout path

Jerry Samuel’s path to law was less straightforward than Ms. Smith’s. After graduating from the BVI High School in 1989, he worked for about three years as a teller at Scotiabank. During that time, he was exposed to the financial services industry, but it didn’t occur him to enter it, he said. When he left for Florida A&M University in 1992, he had high hopes of becoming a teacher and a basketball coach, and he started studying health and physical education. But his plans soon changed. “While I was there

I changed my major to business economics,” he said, adding, “I think as I matured I thought more about where I would like to be in terms of career options.” After graduating in 1995, he returned briefly to Scotiabank before moving on to Cable & Wireless, where he worked in pricing and forecasting for about a year. Then he joined government’s Development Planning Unit to work as an economist. A year there piqued his interest in further studies, and in 1998 he obtained a Commonwealth Scholarship to earn a master’s degree in political economy at Carleton University in Ottawa. “During my studies at Carleton is where I began to develop an interest in law,” he said. But first, he returned to the BVI in 2000 and took up the post of research economist at DPU for two years. Then he attended Cardiff University in Wales on a BVI government scholarship, and he earned a law degree and qualified at the English Bar in 2005. From there, it was a natural progression to the financial services industry, and he joined Walkers on his return to the BVI, he said. “I think the training at the English Bar and the types of things that I did there prepared me to do this type of litigation,” he said, adding, “Having gotten that exposure, by this time I’m a lot more aware — by contrast to back in 1989 — I’m a lot more aware of the financial services industry: what’s happening in it; how it impacts the BVI; what my role could be in it.” Today, he said, there are more educational opportunities designed to get students interested in the sector from a young age. “A young person now, I would hope, is more aware about financial services and the role it plays and the opportunities there, than when I was growing up,” he said.

The Corporate Manager

Andrew Swapp, one of two corporate managers at Codan Trust, plays a somewhat different role than his colleagues in Conyers’ litigation department. “We deal with the incorporation and administration of companies, funds — you name it — incorporated through Codan,” 63 Mr. Swapp said. “So we take them from the incorporation stage all the way through to administration, all the way through to liquidation of that company.” Mr. Swapp joined Codan last June after 14 years at Harneys. In an interview last September, he glanced often at two BlackBerrys on his desk: one of them was for personal use, one for professional use, he said. Because his Jamaican father was a Methodist minister, Mr. Swapp moved often as a child, living in various countries and territories around the region. After he earned a bachelor’s degree in economics from the University of New York at Albany, his Anegada-born mother convinced him to come to the BVI to look for work. In 1992, he found a job at Mossack Fonseca. “That was the first foray into the industry; had no clue about financial services or anything like that, and actually my first job there wasn’t even in financial services proper: It was to do some form of accounting,” Mr. Swapp said. After less than a year, however, he got more involved in the trust company side of the business. “I ended up dealing with incorporations of companies and the dispatch of those corporate documents to clients,” he said. Three years later, he joined J.S. Archibald Trust Services, where he spent a year before moving on to Harneys. His years at that firm provided invaluable experience, he said. A law degree is not necessary for a corporate manager, but it can be helpful, as can a degree in a financerelated field, according to Mr. Swapp. And as the industry evolves, he added, professional qualifications from organisations like the Society of Trust and Estate Practitioners are becoming indispensable. Mr. Swapp said his profession is varied and rewarding, but he echoed his colleagues in stressing that young people interested in the financial services industry should expect to work hard. “The workdays aren’t typical, necessarily,” he said. “The workdays are client-driven. It’s a service industry, so the workdays are determined by the requests that you have from your clients. So you’re always hitched to your Blackberry. It is a twenty-four-hour workday, effectively.”

BVI BUSINESS & LIFESTYLES

he official statistics tell a generally encouraging story for the BVI’s financial services industry. According to the Financial Services Commission, the number of companies incorporated in the territory – an important measure of the sector’s health – increased nearly 45 percent over 2009 levels. The number of companies registered in 2010 – 59,613 – is still down from the pre-financial crisis high mark of 77,022 in 2007. But as the global economy grows again, so does the demand for BVI companies, which are used for setting up joint ventures, holding property, investment funds and a myriad of other uses. Despite volatile economic conditions some firms are seizing opportunities to position themselves for future growth. The financial services firm Vistra purchased the Offshore Incorporations Group in order to further the company’s reach into fast growing Asian markets. Additionally, the European private equity firm Doughty Hanson bought Equity Trust and is merging it with TMF Group, which the firm also owns. The two mergers, company leaders hope, will leave their new firms strengthened and ready to serve clients in the BVI and beyond.

Offshore Incorporations Limited and Vistra

BVI structures have long been used as a conduit for foreign investment in China and other Asian economies. And the economic forecast for those markets looks bright. Last year China’s gross domestic product grew by 10.3 percent over the previous year according to the World Bank. The American economy, still in the midst of recovery, managed only 1.3 percent growth. Offshore Incorporations Limited, which bills itself as the “largest and longest established company formation specialist in Asia,” has been focusing on the Asian region for years. That made OIL’s parent company, the Offshore Incorporations Group, an attractive target for acquisition, according to Martin Crawford, CEO of the Vistra Group. About 60 percent of the group’s business currently comes from the region, he said. “Although Vistra could have expanded organically into Asia, the merger of Vistra with the OIL Group has really accelerated this expansion,” he said. IK Investment Partners, which owns Vistra, announced the purchase of the Offshore Incorporations Group in March 2011 declaring its intentions to combine the corporate service part of the company with

Vistra. OIL currently employs 200 people with offices in Hong Kong, Singapore, Taiwan, Beijing and Shenzen in addition to the BVI. Vistra has traditionally had a strong presence providing fund administration, trust and corporate services in European countries, Mr. Crawford said. The combined OIL Vistra group will be able to take advantage of both client networks, he added. More and more, the CEO said, the firm’s global clients are seeking to form structures in multiple jurisdictions while at the same time minimizing the number of service providers they have to do business with. The “one stop shop” model is making increasing sense because clients want to keep their affairs well managed and coordinated, Mr. Crawford said. “Already we are seeing a noticeable increase in enquiries from large corporations, funds and family office clients for a global service provision,” he said. OIL’s BVI office and the companies formed there play an important part in that service provision. BVI-registered structures – companies, funds, trusts or Limited Partnerships – form the “nucleus” of activity for many of Vistra’s clients. “Once we have a relationship with certain clients at this basic entity level,we have the opportunity to offer them additional services from the group, thereby adding more value to the client while deepening our relationship,” Mr. Crawford said. “The key in this business is to

Acquisitions in Financial Services BVI Firms position themseves for future growth

jason smith

have long-lasting client relationships, and in many cases the BVI entity becomes the ‘glue’ that makes for a successful partnership with clients.” Mr. Crawford said that in addition to OIL’s current services, he envisions the firm doing more trust-related work, fund set-up and administration work in the future from the BVI office. “OIL sets up and manages companies for its clients while Vistra provides more comprehensive solutions for clients which build on the basic foundation of an onshore or offshore entity. There is a natural synergy between the two,” the CEO said. “Vistra’s strong knowledge of cross border structuring, wealth protection, fund administration and its European network will be made available to the Asian client base, while Vistra’s clients will be able to benefit from the network and knowledge of Asian based solutions of the newly merged group.” Vistra’s origins go back to 1982 as part of the United Kingdombased professional services firm Chiltern Plc. The tax consultancy firm launched the Vistra brand in Jersey and London in 2006, following it up with acquisitions of trust companies and corporate service providers in Luxembourg, Malta, the Netherlands and Curacao. The group opened its first office in Hong Kong in 2009 and expanded directly into Mainland China in 2010 with the acquisition of a trust and corporate services business in Guangzhou. “We will continue to expand in Asia and, where it makes sense, in other regions where we can deliver great service to clients,” Mr. Crawford said. “If the company stays nimble and is full of motivated people doing what they love to do – solving cross-border problems for clients – I am sure we will continue to grow to the benefit of our people and our shareholders.” Vistra currently has 19 offices in 17 jurisdictions but could add more soon, he said. “We have some deals in progress which would expand our offering in fund administration, outsourcing capability in China,

as well as boosting our presence in certain European jurisdictions,” Mr. Crawford said. “These are all consistent with our strategy of combining strong organic growth with “strategic” in-fill acquisitions where they make sense.”

Equity Trust and TMF

Supermarket shoppers aren’t the only ones who like to do business at just one location. The “one stop shop” model is very much in demand by corporate and private clients that require offshore solutions. To capitalize on that trend Doughty Hanson, a European private equity firm, purchased Equity Trust, merging it in June 2011 with the operations of the TMF Group, an accounting and corporate secretarial services provider the firm already owns. Both companies maintain offices in the BVI and the combined company aims to be “the world’s leading independent provider of trust and fiduciary services,” according to Linda Romney-Leue, managing director of the TMF Group in the BVI. A global merger better positions the company towards that goal, she said. “It was a natural move to bring them together,” Ms. Romney-Leue

said. “The merger vastly increased both parties’ size and capabilities, fast-tracking both companies’ progress and significantly boosting their global presence and proposition to clients.” A broader geographic reach and a larger pool of human resources, prepares the new company for growth in a more inter-connected world, she said. (The company) is now able to help businesses operate and expand seamlessly across borders, and provide a single point of contact to ensure excellent communication and management from anywhere in the world,” the managing director said. Equity Trust originated in the Netherlands in 1970 where the company “pioneered the role of the modern trust company,” Ms. Romney-Leue said. The firm then expanded opening offices in Asia, Europe and the Caribbean. Before the merger, Equity offered corporate services, private client services, international Incorporations, fund services and structured finance. Globally the combined firm can now offer a broader suite of financial and legal administrative services as well as HR administrative and payroll services, the managing director said. Specifically in the BVI, the firm can incorporate and maintain hybrid and special purpose companies, assist with testamentary and estate-planning 65 arrangements, offer trustee services, and establish and maintain partnerships, Ms. RomneyLeue said. The 86 employees in the BVI office also can establish and service mutual funds, register yachts and provide escrow agent and related services, she added. “Companies are now seeking providers that can help them accelerate their corporate goals and assist them to understand, as well as manage, increasingly complex compliance and regulatory burdens,” she said. “As a result, global coordinated outsourcing services are in demand.” In the next decade, the firm hopes to “substantially increase” its size globally, Ms. Romney-Leue said. “In the meantime, are keen to float our business on a major stock exchange – something we not only believe is important for an independent world leader, but will be of interest to our staff, clients and investors.”

A global merger better

positions

companies

towards their goals

BVI BUSINESS & LIFESTYLES

hen Edward Bannister arrived in April 2009 to become the territory’s first Commercial Court judge, the courthouse wasn’t ready. So for about seven months, Justice Bannister presided over a makeshift courtroom at Prospect Reef as tourists swam with dolphins nearby. But a state-of-theart new facility officially opened in Road Town in November 2009. The rest is history. During his time here, Justice Bannister has presided over high profile matters involving names like Bernie Madoff. At times, the stakes in such cases have topped a billion dollars. He has also handled local matters, such as the ongoing legal battle between government and Ocean ConversionBVI. As he approaches his third anniversary in the territory, Justice Bannister sat with Business BVI to reflect on the past and to look ahead to the future. How would you describe your tenure thus far at the Commercial Court? Justice Bannister: Well, it’s been very, very busy. I’ve got a very good staff, and we have very few, if any, muddles or administrative mistakes. The new court works very well indeed. And we get a lot of very high quality work, which comes into the jurisdiction, which is very gratifying. 66

Let’s look forward a little bit. When the historians look back at your first term as the territory’s first commercial court judge, what single accomplishment would you like them to reflect upon? Justice Bannister: What I would like them to think is that we are accommodating to the professionals and try and provide them with the service they need, which I think we do; and that I give decisions as soon as I possibly can so that people aren’t kept waiting. I’ve never kept anybody waiting for longer than three weeks for a judgment so far. That’s one of the things we’ve heard about the Commercial Court: That it processes cases very quickly. Justice Bannister: That’s what we try and offer. I don’t attempt to long great, learned judgments. I’m not interested in that. I just try to provide the facts: You’ve got a decision and there you are; you can take it or leave it. So at least it gets it moving, because a lot of these cases are so high value they’re going to go to appeal anyway. So what they really need is a speedy service — and, I hope, reasonably efficient. Do you have any idea what percentage of your cases are appealed? Justice Bannister: No, but quite a lot of mine are. I think it’s because they’re very high value. There’s no point in not appealing. It’s relatively cheap to mount an appeal here. Having said that, I do get reversed. When you spoke to us for our 2010 issue, you mentioned the importance of standards. Why are high standards so important to the Commercial Court? Justice Bannister: You cannot operate a speedy and efficient service dealing with very high value subject matter unless both the judge and his staff and litigants are in a state of high preparedness so that time isn’t wasted; you don’t get adjournments because people aren’t ready; and you don’t get adjournments because

Justice Bannister reflects on the

Early work of the Commercial Court and Looks to the future freeman rogers & russell harrigan

counsel are double booked; and all those sort of things which can just put grit in the machine. And, of course, high standards of advocacy are important because that enables business to be done swiftly and efficiently. I don’t get people who come in and aren’t ready. I see an enormous number of Queen’s Counsel from England, and they are invariably very well prepared. What does a healthy commercial court mean to the reputation of the jurisdiction? Justice Bannister: Leaving myself out of the picture, I think it’s absolutely critical, because so many disputes are generated here simply because of the number of registrations. And people who use these companies have got to know when they choose to litigate that they’ve got access to a court which will hear them quickly and decide their matters quickly and, hopefully, deliver a high standard. The number of cases we’re seeing seems to indicate to me that that’s probably the case. Has the court’s caseload been growing, then? Justice Bannister: At the moment it is. In the very early months of this year, we had an empty period with something going on, but not a huge amount. But that’s the only sort of quietish period we’ve had. Obviously, when we started it was slowish, but now it’s wall to wall. I’m not in court this week, because I never am put in court during Court of Appeal week. Despite that, I had to sit on Monday on an urgent matter; I had a semiurgent matter on Tuesday; and I’ve just been asked to sit again tomorrow to hear some other urgent matter. So in spite of the fact that it was meant to be a week with nothing in it, it isn’t. What has been your most frustrating day on the job so far, and what caused that? Justice Bannister: I think probably the most frustrating days were during the bad weather last October. That was natural interference, which I find extremely irritating. Things do go wrong: but it’s very rare. And that can cause delay, but, basically, it’s been very, very good. Smooth. Have you made any court decisions here that have had implications for other commercial courts? Justice Bannister: I decided a case here called Black Swan, and that’s been followed in Cayman, for example. It had germs elsewhere — the Jersey court had made a similar sort of order, which in fact I referred to — but that is one that’s, I think, read elsewhere, and there has been another one recently. But we often work in tandem with courts in other jurisdictions — Bermuda, Hong Kong, to some extent Cayman — because there are things going on at both ends of the line. So yes, I think some of the decisions are read elsewhere in other jurisdictions. You hear many international cases, of course. Do many local cases come before you as well? Justice Bannister: There are, but I have a minimum value of $500,000, and quite a lot of the local cases are often below that, and it’s for that reason that I don’t see so many of those. Is the $500,000 threshold the main reason a local case come to you? Justice Bannister: Nobody has to come to the Commercial Court. They can go where they like, but they have to pay Commercial Court fees if it’s a matter which could have come to the Commercial Court. So they may prefer to go to the High Court, but if it’s one, which falls within those limits, they have to pay the same fees. But apart from that, it’s pure choice. In your 2010 interview, you also mentioned that one of the things you hope to see as a result of the establishment of the court is the further development of the local bar. Has that come about? Justice Bannister: I am still really seeing the same people that I’ve always seen; just occasionally I see someone I’ve never seen before, but that’s not usual. So the local customer base is very similar, but if you’re talking about professional development, I think that there is constant improvement. I really do. As I say, the base isn’t broadening, but I think the standards are going up all the time.

Where do you see the court in five years? Justice Bannister:The first thing I suppose one could guess at is that it may start taking cases on a regular basis from elsewhere in the jurisdiction. The first three years, because the government here paid for it all — they pay for me and all the rest of it — I think it was felt that it was for the BVI, except with exceptions. And I may be speaking out of turn, but I think that the idea was some sort of cost-sharing arrangement would be entered into. And I simply don’t know, and I wouldn’t know, whether that’s going to happen, but that is a possibility. If that happens, they’re going to need two judges, I think. Because while I can cope with what I’ve got from here, I think if people started coming in from Anguilla or elsewhere it would get too much for one person to deal with. That leads into our next question: Will there be simultaneous sittings of the court in the future? Justice Bannister:Well, I think that is a distinct possibility. I do. There’s not enough work for two judges at the moment unless they’re both very lazy. I don’t think there would be enough. In fact, no, there would not be enough for two judges as things are now. Can you list three things that could take the court to the next level in its development? Justice Bannister:I think it would be the expansion of work and the introduction of a second judge, because that would mean you have two different types of persons deciding cases, which can only be good. If there were two commercial court judges, you’re bound to get strengths from that, because different people are expressing views on problems which are similar most of the time, and that’s good, I think. But you have to have the work to support it, obviously. So that would be beneficial. I do think that continued professional development for the local bar is going very, very well, but the more the better, obviously. As far as facilities go, obviously, this is a very fine facility indeed, but it can only accommodate one judge. If there was going to be an expansion, there would have to be some serious 67 sort of thought about where are you going to put the extra cases. It’s not beyond doing, because they could, I suppose, turn their attention back to Prospect Reef and give that a thorough go-over. It’s got a lot of good points, Prospect Reef, but it would need a bit of money spent on it. What’s the most enjoyable part of living in the BVI? Justice Bannister: I think it’s just an astonishingly beautiful place with a beautiful climate. And I now feel homesick when I go away. I would like to live here full time after we retire, but I don’t think that will probably happen for various domestic reasons: We have grandchildren in the UK and things like that. I do find it very attractive here: The people I find terribly attractive and very, very friendly. We had been here on a number of occasions before and we applied for the job because we liked it here. I wouldn’t have applied for it just to get a job. We think it’s a wonderful place. When all is said and done, what would you like your legacy to be as the territory’s first commercial court judge? Justice Bannister: I just think if people thought that I’d made a good job of getting it up and running, and then keeping it running, I’d be very happy with that. It’s been made immeasurably easier by cooperation from people. And everything I’ve asked for has been provided. I’m never told, “You can’t have this,” or, “You can’t have that.” I try to ask for as little as possible because we’ve got a ready-made facility and it doesn’t need much, but when I do need things, or ask for them, they come. I get a lot of help from the people I’m with. But I think it’s as short as that, really. I’d just like people to say, “Well, that was a good thing.” People trusted me when they appointed me. It could have gone horribly wrong for them, and I just feel that if they feel that that trust has been justified, that’s more than enough reward. I hope it carries on, too, when I go. I would like to think that it goes from strength to strength; I would very much like to feel that, because it’s been the most extraordinary opportunity. Interview conducted, condensed and edited by Russell Harrigan and Freeman Rogers.

BVI BUSINESS & LIFESTYLES

Financial Services

positionED for the future Cross-selLing & working together

simon owen managing director, hyperion risk solutions limited & insurance director of folio insurance management

he year 2011 seems destined to become one that will always be remembered in the financial world. With a US government downgrade in August, UK banks being downgraded in October and continuing uncertainties relating to the potential debt default by Eurozone members, navigating the markets can only be described as “challenging” at best. However, the show must, and will, go on.

Despite the obvious negatives, there is still much to be positive about in the offshore world, particularly in established and well-regulated jurisdictions like the British Virgin Islands. The BVI continues to attract significant numbers of funds and other investment vehicles to the jurisdiction. It remains a leading incorporation centre. It is widely recognized as a centre of excellence for trust and captive structures. All coupled with arguably one of the best legislative frameworks in the offshore world. Still, this poses the question: is this enough to allow the BVI financial services industry to rest on our laurels and hope the business continues to flow? The answer, sadly, is no. To survive this global economic environment and plan for the long-term, the BVI’s public and private sectors need to co-operate more than ever before. The private sector needs to innovate, cross-sell and work even more closely together. We must strive to become a jurisdiction that understands all of its products and their potential uses, not just those that we happen to specialize in as individuals or businesses. Similarly, the Government’s involvement is needed from Cabinet right through to the education system. We need to highlight our target markets and use all of the tools available to us. We must look to the future and resist the temptation to reassure ourselves that the achievements of the past will be enough.

Cross-Selling Opportunities

As my primary area of expertise is in captives and insurance, it would seem appropriate to give some examples of insurance products and vehicles and how they can potentially compliment other sectors of the financial services industry. Insurance is clearly not the only means of cross-selling we have at our disposal. However, it does suitably highlight how we can potentially enhance a client’s perception of the BVI from a functionary domicile to professional business centre.

Captives and (Re)Insurance Vehicles

In its simplest form, a captive is a wholly owned legal entity, purposely formed to underwrite the risks associated with its parent and/or its affiliates. Over time, the captive industry has evolved significantly and, although the term “captive” is still predominantly used to collectively describe a plethora of insurance and reinsurance vehicles, many are sophisticated structures that bear very little resemblance to the original concept. They can be used to insure anything from an automobile manufacturer’s product recall risks, to a Government’s exposure to natural disasters, such as hurricanes and earthquakes. The BVI has remained one of the world’s largest captive jurisdictions for a number of years now. The legislative framework compares favourably with that of our longer-established competitors and enables us to offer our clients a wide range of products and structures. A recently enhanced Insurance Act coupled with close working relationship between the private sector and the regulators has undoubtedly been a significant factor in the jurisdiction’s unprecedented growth. From a regulatory standpoint, the BVI is extremely well regarded by a number of international bodies. Looking from a cross-selling perspective, we must firstly consider the other business sectors of the BVI, the client access they provide and who may benefit from a captive. Firstly, we have the BVI’s biggest and most successful export; the business company incorporation sector. A significant number of businesses around the world include a BVI company in their corporate structure. Whilst it would be incredibly naive to think that a sizable proportion of the users of BVI companies would also require a captive, there are certainly some that would. The key is not to necessarily focus on the ultimate end users of a business company when selling other services. However, we must collectively do our utmost to ensure that related business introducers (law firms, accounting practices, banks etc.) are fully aware of our added ability to provide such services in the BVI.

We should also not forget the other financial services sectors. In a turbulent trading environment, captives can offer a useful risk management tool to investment advisors and fund managers. Similarly, captives are often used as estate planning and asset protection mechanisms, hence providing a useful link to trust structures.

Specialty Insurance

Another important aspect of complimentary services is the provision of insurance solutions to the financial services industry. These include the procurement of products specifically designed to protect the likes of law firms, trust companies, fund managers, administrators and independent directors and officers. In these uncertain times, there are few assurances provided by the wounded financial markets. However, if we can guarantee nothing else, it is that the current economic downturn will proliferate one already worrying trend; the threat of litigation from investors against financial institutions and investment managers. A greater focus on corporate governance and corporate responsibility, coupled with the escalating costs associated with defending lawsuits, means that the sourcing of protection against a number of risks is now an essential part of any fund manager’s business plan. With increased concerns relating to and the transparency of investment exposures, many investors are now taking a far greater interest in the insurance limits purchased by fund managers prior to their commitment to any investment. Investors’ need for retribution in the event of adversity is a clear reminder that internal controls and the purchase of adequate insurance coverage can no longer be overlooked, regardless of the size and investment strategy of a fund. The insurance requirements placed upon licensees falling under the remit of the BVI “Securities and Investment Business Act” also reflect the regulators’ pro-active approach in this regard. As industry specialists, we have developed a wide range of ideas; solutions and innovative policy wordings to provide the most effective possible insurance cover for complex financial and professional firms. We do not simply offer insurers’ “off-the-shelf” policies (which are generally drafted with the insurers’ interests as paramount), but we engage with the client to understand their business, culture, concerns and priorities, and then design and negotiate cover accordingly. Again, the fact that we have locally based companies offering expertise in this area is another good example of what the jurisdiction has to offer. Furthermore, these services are not limited to lines of business such as D&O insurance. For example, we can assist a real estate fund manager with expropriation concerns in North Africa with political risk exposure. We can assist an international oil exportation company purposely based in the BVI with insurance products to meet suit their risks and exposures. In fact, by doing so, we can even create a further layer of mind, management and control that is often sought by those forming a BVI business company. As mentioned previously, not all companies incorporated in the BVI are suited to this type of service. But we need to ensure that we have the expertise and resources in place for those that do.

Life Insurance Products

The use of trust instruments by both high-net worth’s (“HNWs”) and businesses is a growing global industry. The BVI has firmly established itself in this sector through the creation of innovative structures, such as Virgin Islands Special Trust Act (“VISTA”) trusts. From a family estate planning and wealth management viewpoint, life insurance often forms a significant part of any overall structure, offering the beneficiaries a means of settling any estate taxes and other associated liabilities and expenses in the event of a death. VISTA trusts also offer a useful segue into the similarities and possible synergies with life insurance products. One of the unique features of a VISTA trust is its ability to disengage the trustees’ management

responsibilities for the underlying businesses held by the trust (i.e. bypassing the “prudent man of business rule”). In summary, this provides the the directors of a business held by a trust to continue to make the key decisions to allow the business to be maintained without unnecessary and unqualified involvement from a trustee. Unfortunately, what the trust may not be able to do is completely circumvent issues that arise as a result of the death of a shareholder. However, were we to introduce a life insurance into the equation, we may be able to create a means of providing a fair and suitable payment to the shareholders family that simultaneously results in the shares of the business transferring to the other shareholders. Again this provides a great example of not only cross-selling, but actual product enhancement. And all under one small piece of sun-blessed sky in the Caribbean.

Future Growth: Working Together

So, how can we ensure that the cross-selling concept grows and evolves? There are no simple answers - but the continued collaboration of the private and public sector is imperative. The private sector’s primary responsibility is to make sure that the public sector is aware of our target markets. We now operate in a changing environment that is dependent on global tax co-operation, revolving around tax treaties and the signing of “Tax Information Exchange Agreements” (“TIEAs”). These are simply a sign of progress and are not something to be feared. However, we must work together to ensure that there is long-term benefit afforded to the BVI by signing such agreements. The future generations of the BVI may depend on it. It is also important to remember that our products are merely our tools. The best way to create a legacy and viable future in financial services for the young people of the BVI is to make sure we know how to ably use and adapt those tools. There are educational initiatives in place - there are just not enough of them. It is not something that can be immediately resolved 69 by the Government or the private sector alone. The continued success of the BVI relies on our continued partnership. One of the most precious and sometimes under-utilized resources we have in the BVI is wealth of international experience of its practitioners. This does not just solely relate to business experience, it relates to all manner of cultural and other qualities that have sadly begun to be overlooked. To me, the multi-cultural diversity of the BVI is one of its biggest strengths and will help form the basis of a prosperous future for younger generations in difficult economic times. To use the famous words of John Donne, “No man is an island.” However, some islands can become truly global... About the author:

Simon Owen has worked in the finance industry for over 18 years, specializing in investment strategies and insurance and reinsurance solutions. Prior to founding Hyperion Risk Solutions Limited, Simon spent a number of years forming and managing captive insurance and reinsurance companies. He also worked in the Lloyd’s insurance market for over a decade, latterly in the new business development division of a leading international reinsurance intermediary. Simon is the Managing Director of Hyperion Risk Solutions Limited and the Insurance Director of Folio Insurance Management Limited. He is a past Chairman of the BVI Association of Insurance Managers and has served as a member of the BVI Marketing Advisory Committee, the Financial Services Institute Advisory Committee and the Joint Anti-Money Laundering and Terrorism Financing Advisory Committee.

BVI BUSINESS & LIFESTYLES

size does not matter

we must innovate

& EDUCATE patlian johnson

China

My ongoing quest for adventure, knowledge and diversity provides the impetus every year for travelling outside my time zone to be immersed in a foreign landscape, culture and language. This year was no exception

globetrotting

desires

brought

me to China and Finland. Why these two apparently different places? China was on my list of top ten places to visit and Finland because I accompanied my father as a guest of the Finnish government in his capacity as Honorary Consul for Finland in the Commonwealth of Dominica. Little did I know at the time that my summer exploits to these two countries with distinct landscapes, cultures, languages and paths to economic success would become the foundation for my view that “size does not matter” in order to build a thriving State.

So since China’s success can be linked to factors other than just size does this mean that “size really does not matter”?

Shenzhen, China (pictured) One of the 9 cities forming Chinas planned Megacity. The population (of the Megacity) will be 42 million, roughly five times that of New York City. The Megacity will account for about 10% of China’s economy. The project is expected to take six years.

source: theweek.com

Shutterstock/Stanley Loong

and

China, a dominant force in exports for decades since crossing over from a centrally planned economy to a free market, is experiencing double digit growth. The level of economic growth and increased prosperity was quite evident during my stay. Infrastructural development was rampant in all cities and villages I visited between Beijing and Shanghai residential buildings were being erected to meet the demand of an increasin urban population. Highways, bridges, railways were being constructed to meet the growing transportation needs of the mobile China Facts population Emergent economic prosperity was Area 9,640,821 km2 3,704,427 sq mi also quite apparent. In a casual conversation with Population 2010 census a tourist from Switzerland regarding the large 1,339,724,852 quantity of local Chinese tourists he indicated Density 139.6/km2 that when he visited the mainland 15 years ago 363.3/sq mi GCP (PPP) Per capita $8,394 foreign tourists significantly outnumbered their source: wikipedia.org local counterparts. But today the Great Wall of China was swarming with eager school children, their parents and grandparents all anxiously partaking in capitalism coined by the west. But what has made China successful? Is it the law of numbers – the larger the population the better the prospect for growth and development? I do believe that China has capitalized on its huge population and geographical size to become the world’s largest exporter of manufactured goods and the second largest economy in the world. China possesses a large work force composed of highly skilled and semi-skilled persons and the country possesses vast areas of arable land and numerous industrial sites for agricultural and manufacturing purposes. But this is not China’s only secret to success! I believe leadership and governance has played a significant role. The Communist government over a period of time: opened up closed markets to foreign trade and investment creating more external markets and capital flows; encouraged private sector growth though various policy initiatives and restructured the economy to achieve efficiency gains through economies of scale and strategic allocation of resources.

Finland

This brings me to Finland a mere drop in the ocean compared to China in terms of population size, land mass and GDP but successful in its own right. Best known for the mobile giant Nokia, the Finnish economy has been growing moderately over the last decade. I learnt about the competitive manufacturing sector and governance structures during my visit to Turku (known for ship building and designated the World Design Capital for 2012), the House of Parliament and the Central Bank. My trip also afforded me the opportunity to initially inquire about the key to Finland’s success. When I posed the question to the Central Bank Governor he indicated that the Finnish economy benefited from: • The fall of communism in the neighbouring Soviet Union which

opened up trading possibilities and made the capital Helsinki the major sea and air hub linking western and eastern Europe; • Economic opportunities created as a result of joining the European Union and the euro-currency zone; • Fiscal consolidation (cutting of expenditure and exploring new ways to create the flow of foreign investment into the country); • Developing an open and competitive domestic market; Finland Facts • Investing heavily in human capital Area 338,424 km2 (ensuring that the labour force is 130,596 sq mi highly educated and meets the needs Population 2011 estimate of the technology sector); 5,391,699 Density 16/km2 • Developing policy for promoting 241/sq mi innovation and technology and valueGCP (PPP) Per capita $34,585 added industries; and source: wikipedia.org • As all economists would say: ‘keeping a close eye on inflation’.

What resonated during my trip was the creativity, innovation and entrepreneurial spirit of the Finnish people and the high level of encouragement by the elected officials in the form of policies, programmes and incentives. Upon my return to the BVI, fascinated and encouraged by what I saw and experienced, I decided to examine more carefully the Finnish success story. In the pursuit of diversification of their export product Finland progressed from a resource-driven economy dominated by timber to a knowledge-based economy dominated by technology. The Finnish model posits that innovation though industry leads to economic development and that knowledge fuels economic growth, industry transformation and social development. Finland has been particularly successful in using investments and advancements in information and communication technologies (ICTs) assisted by a highly educated and skilled labour force to grow its economy.

Invariably Finland has demonstrated its own compelling case for - size does not matter.

Lessons for the BVI

But can this also hold true for a small island developing state like the BVI given our even smaller size and scarcer resources? The challenges for the BVI are: diversifying the economy given limited resources and transforming the economy from merely service-driven to innovationdriven. This is of course a gargantuan undertaking but essential for our economic survival. What can the BVI learn from Finland’s philosophy and economic strategy? And how can we adapt the Finnish success model and translate it into our own successful model? My preliminary research has culminated in what I believe are some pertinent lessons for the BVI: • Develop a National Vision for growing the economy based on the principles of innovation, knowledge and technology; • Through public and private sector collaborations develop a strategy for realizing this vision by determining for instance: what industries are viable in the BVI; how do we develop our current compliment of resources to achieve this vision; and what laws, policies, agencies and incentives are required to promote innovation and entrepreneurism; and • Build a national consensus for this vision and strategy through continued education and sensitization. A strategy and implementation plan without the buy-in of the populace is counter-productive in a democratic society.

Developing, realizing and maintaining such a plan requires extensive investment in research and development and education. R&D originating from both public and private entities is imperative in harnessing ideas on how to expand existing industries and cultivating new ones. It will provide answers to what technologies to utilize, what markets to access and financing alternatives. In a small country with scarce resources it is 71 important to mobilize all human and intellectual resources. Education is a key element of any economy on the innovation growth path. Education policy must therefore address the adequacy of the curriculum to produce innovative minds required in the productive sector, the quality of teaching instruction and the resources available to teachers. Using the Finnish model success is also dependent on a country having strong governance and accountability, strong fiscal management, a history of economic planning, strong and reliable data, a strong coordination of policies among government agencies and the private sector and a strong financial sector allowing ready access to capital.

Conclusion

Size is by no means the predominant caveat for cultivating a successful economy. Can Finland’s success be replicated in the BVI? Absolutely! A ‘cookie cutter’ approach would be futile but a well researched, formulated and executed plan based on lessons from the Finnish experience while taking into consideration indigenous idiosyncrasies is the way forward. Like Finland, we (government and citizens) must be willing to make significant structural changes in a relatively short period of time, be flexible and responsive to change and focus on longer-term strategies even if it means forgoing short-term gains if we want to be in a position to achieve sustainable growth.

Shutterstock/Dainis Derics

Reference: Dahlman,C., J. Routti, and P. Yla-Anttila. 2005. “Finland as a Knowledge Economy – Elements of Success and Lessons Learned”. World Bank.

Aerial View of Helsinki Archipelago

BOOKSHELF

Fatal Risk: A Cautionary Tale of AIG’s Corporate Suicide Roddy Boyd “A sober work that appears to have been researched extremely thoroughly...more

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Disrupt Luke Williams “Luke Williams has a powerful message for companies today: Don’t wait for a couple guys in a garage to come up with an idea that will up-end

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Now You See It Cathy N. Davidson “Davidson isn’t the first to point out [our] anxieties about texting tots...But her

work is the most powerful yet to insist that we can and should manage the impact of these changes in our lives.” — Fast Company

First, Break All the Rules Marcus Buckingham and Curt Coffman

“This book challenges basic beliefs of great management with powerful evidence and a compelling argument... essential reading.” —Bradbury H. Anderson President and COO, Best Buy That Used to Be Us Thomas L. Friedman and Michael Mandelbaum

“... a book of exceptional importance, written on a sweeping scale with remarkable clarity by two of our most gifted thinkers... it should be read by policy makers and every American concerned about our country’s future.” —Elizabeth L. Winter, Library Journal On China Henry Kissinger

“Fascinating, shrewd... [The book’s] portrait of China is informed by Mr.Kissinger’s intimate firsthand knowledge of several generations of Chinese leaders. The book deftly traces the rhythms and patterns in Chinese history... even as it explicates the philosophical differences that separate it from the United States.”— Michiko Kakutani, The New York Times

The Social Animal David Brooks

“...with the wry wit of a James Thurber, he explores the unconscious mind and how it shapes the way we eat, love, live, vacation, and relate to other people...he takes us one layer down, to why we live that way.” —Walter Isaacson Leaving Microsoft to Change the World John Wood

“In this captivating memoir....Wood provides recipes for how to succeed at operating nonprofit firms globally, regardless of local cultures.” — Library Journal Onward Howard Schultz and Joanne Gordon

“...refreshingly candid, compelling narrative demonstrates what it takes to lead in these extraordinary times... a rare first-hand account at how one of the world’s most iconic brands overcame the challenges that confront us all.” —Indra Nooyi, Chairman and CEO of PepsiCo

The Big Thirst Charles Fishman

“An engrossing, globe-trotting narrative [and] a comprehensive, remarkably readable panorama of our dependence on- and responsibilities to- a priceless resource.” — Publishers Weekly (starred review) Steve Jobs Walter Isaacson

“I only stopped turning pages when my free time was at an end. Whether you subscribe to what he accomplished or not, there aren’t many lives like the one Steve lead.”— theflesheatingzipper.com In The Plex Steven Levy

“The rise of Google is an engrossing story, and nobody’s ever related it in such depth.” —Hiawatha Bray, The Boston Globe Wizard of Lies Diana B. Henriques

“...an impressive, meticulously reported postmortem not only of the Ponzi scheme but also of Madoff’s entire career...” — Bloomberg Businessweek

BVI BUSINESS & LIFESTYLES

PENSIONS

the need to shift

the pendulum clarence m. faulkner gregory e. hinkson

The Three-Pillar Framework For many baby boomers, the topic of pensions is something they are paying greater attention to and are especially exploring light

the several

likely

consequences

factors,

such

in the

governance, the economic crisis, slowed 74

economic growth and depressed financial markets. Indeed, the old adage that my retirement “is protected” or “somewhat guaranteed” has drifted under a cloud of uncertainty. This has forced fiduciaries and pension plan sponsors to rethink and ask the question, “Are we executing our responsibilities towards the long term sustainability of our pension commitments?” Such universal concerns are no different in the Virgin Islands. Against the backdrop of social policy and social protection, in October 2010, the Government of the Virgin Islands passed into Law The Labour Code, 2010 which mandates that “An Employer shall make provisions for retirement benefits to be paid to his or her permanent employees by means of a pension scheme, an annuity, provident fund or other form of retirement scheme which maybe contributory.” Such efforts should go a long way towards closing the gap between an individual’s pre-retirement standard of living and that expected during their retirement years. A combined social security and private pension system to provide overall coverage is required. The system provided by the State must ensure that at least a minimum income level can be provided to all individuals. However, those individuals who earn higher income during their working lives should make additional arrangements since Social Security alone may not be sufficient for such individuals. These individuals must take responsibility if an income in retirement is to be adequate for their needs.

Modern pension systems are increasingly combining elements of different pension pillars. The First Pillar is through social security systems that provide retirement income typically set according to accepted entitlement criteria. This First Pillar is expected to be supplemented by employer sponsored or individual pensions (Second Pillar), and by private savings (Third Pillar). The role of Second Pillar pensions would be to ensure maintenance of an established standard of living in retirement for those for whom the First Pillar pension would not achieve this target. An effectively regulated private pension and approved retirement arrangements as part of the Second Pillar must be encouraged as a favorable means through which private and public sector workers and their employers can save so as to supplement the basic Social Security benefits. Within Second Pillar pension systems there is an increasing shift in employer sponsored pension plans from defined benefit (DB) to defined contribution (DC), and DC is likely to be the typical arrangement for private pension systems, at least in the medium term. With a DB pension system, the employer takes on the risks and costs of pensions, and will bear the risks of investment performance, salary inflation, longevity, interest rates and regulatory changes. In DC systems, these risks are generally borne by the members, with employers expecting to make specified contributions, but no promise is made of what members will receive at retirement.

Portability and Education

The word ‘pension’ for many people denotes old age and something, which is viewed as occurring a long way in the future. Consequently, there is typically a failure by individuals to start providing for their retirement at an early stage in their working lives and subsequently to save at an adequate rate. To ensure that the general public has a greater understanding and awareness of pensions there is the need for an effective educational awareness programme undertaken or facilitated by Government in conjunction with relevant public and private sector partnerships. A feature of modern Second Pillar pension systems is a portability provision whereby pension funds are portable from one employer to another. It is therefore necessary to include an option in plan design whereby members’ pension rights are transferred or preserved on changes of employment, usually after the attainment of stipulated conditionality associated with service to an employer. In addition plan members under reciprocal arrangements, would be able to move their pension entitlements when they change employment across various countries.

Pensions Coverage

With the passage of The Labour Code, The Virgin Islands has laid the foundation to join some of the other countries in the region such as Bermuda and the Cayman Islands, which were some of the first to pass specific pension legislation. The National Pension Scheme (Occupational Pensions) Act 1998 of Bermuda came into operation on January 1, 2000 and stipulates that employers must establish and maintain a pension plan for their employees. In the Cayman Islands the National Pensions Law became effective in 1998 and, like the Bermuda law, requires that employers provide a pension, or make contributions to a pension plan for their employees.

Legislation and Regulation

Having laid the base for the provision of retirement benefits, the Government of The Virgin Islands should take the next logical step to enact specific legislation to define the rights and responsibilities of participants in the pension system along with the rules and regulations pursuant to it. This will include establishing the regulatory framework to ensure that standards governing the pension system are appropriate and in the best interest of the public. Currently, local pension arrangements are to be considered by the Inland Revenue Department. The Income Tax Act imposes a regulatory requirement within which these private pension plans must operate to maintain their tax favorable status. In addition, pension plans, which are established under trust, are subject to trusts legislation and general trusts law, which determines the rights available to members of those plans. Improved governance of pension funds is crucial to the long-term sustainability of the pension industry. It is generally agreed that a key role of a pension regulator is to administer and enforce pension legislation. Pension regulation aims to protect the benefits of all those who have pension plans; to reduce the risk of problems arising, and to promote good practice and sound administration. The regulator will need to be cognizant of the fact that the entities being regulated are generally non-profit and exist to provide benefits that contribute towards social good.

Impact of Private Pension Funds

As the size of private pension funds continue to grow these funds will increasingly be viewed as providing a significant source of capital for investment and these funds will likely influence the structural changes happening within the financial markets. Private pension funds can play a major role in the development of regional economies and their capital markets by the sheer size of funds of pensions that are available to be invested in equities, government and corporate securities. These funds can equally influence the supply and type of financial instruments issued by both the private and public sector, as pension fund investments are generally long term in nature.

Summary

On a global basis the cost of pension provision, both in the public and private sector, is rising at a significant rate and demographic changes such as improved longevity are accentuating this potentially costly experience. Social Security is designed to ensure the continuation of essential living standards in retirement, however, not enough people are saving sufficiently to provide the income they will need or would like to have in retirement. Individuals should recognize that the primary responsibility for ensuring that they have adequate provision in retirement rests with them. Employers, the Government and the pensions industry can provide much support but ultimately it is up to individuals to prepare for a crucial part of their lives and future well being. The pension system in the Virgin Islands is poised to develop and is expected to operate on a very sound model. With the advent of appropriate pension legislation and regulations, the industry should offer a new era in the protection of private pension plans.

Mr. Clarence M. Faulkner & Mr. Gregory E. Hinkson are Directors of Pension Management Interactive, Inc. (PMI), a BVI based firm providing consultancy, management and administration services to Private and Public pension plans.

BVI BUSINESS & LIFESTYLES

Congratulations to our Editorial Board Members

Lorna Smith Lorna Smith awarded an OBE

espite ostensibly moving from the public to the private sector, Lorna Smith OBE is still heavily invested in the well being of this territory and this region. Ms. Smith was permanent secretary in what was then the Chief Minister’s Office now Premier’s Office until 1997, when she took a year’s sabbatical in the United Kingdom, working in financial services administration and earning her qualification as a chartered secretary. “I came back after a year and rejoined the public service and started out with public sector reform,” she said. Under the administration of Governor Frank Savage, Ms. Smith, who is married to the Premier Dr. D. Orlando Smith, returned to the UK to study modernizations that had been made to that country’s public service. And in 2001, the government launched the “Professional Services Delivered to the Public” initiative. “The whole objective was to modernise the service,” she said. “We established a separate Human Resources Department and charters for every government department, every ministry – we hired a consultant to come and assist us, of course.” Government departments had to state their general objectives and reasons for being. They made commitments to providing timely customer service, answering phones during business hours, for instance, and responding to public inquiries in a certain amount of time. “One of the other objectives was to create a flatter structure,” she said. “Whereas governments tend to be very hierarchical, we wanted to have it as flat as possible, bringing certain elements into the ministry, rather than having a ministry and the departments.” Reducing travel and communication overhead and using modern information technology can still help Government cut costs and respond to the public that much more efficiently, said Ms. Smith, who’s still called upon to give presentations on public service modernisation. Later, beginning in 2002, Ms. Smith took charge of the BVI International Finance Centre and later, in 2004, established the first BVI London Office. In that office, she represented the territory in negotiations with the UK government, meeting with

members of Parliament and providing consular assistance to Virgin Islanders in the UK. Later, she was director of the International Affairs Secretariat, where she led negotiations for tax information exchange agreements between the Virgin Islands and a number of other countries. Since retired from the public service, Ms. Smith, now head of the consulting form LGS Associations, has been retained by the World Bank to negotiate such agreements on behalf of other Eastern Caribbean States. “That was done very quickly,” she said, adding that she’s now engaged by the Commonwealth Secretariat to help several countries in the region meet their transparency and other requirements as members of the Organisation for Economic Cooperation and Development Global Forum. She’s also helped private organisations improve their level of customer service, just as she once did for the public service. “I’ve done some, if you want to call it, motivational speaking,” she said, helping hotels and groups like the Bitter End Yacht Club in “raising their game.” Additionally, as president of the Rotary Club of Tortola, Ms. Smith helped raise money for youth and sports programmes and helped organise seminars to train schoolteachers in working with children with special needs. “That was something we’re very, very pleased with,” she said, explaining some teachers didn’t realise the variety of special needs students could present. “The fact that the kid doesn’t have Down syndrome or something that’s very obvious, doesn’t mean they don’t have special needs.” And, in a ceremony at Government House this past May, Ms. Smith was formally presented with a medal, declaring her to be an Officer of the Order of the British Empire. “It does add a little more status,” she said, explaining that, on the whole, people have been “very congratulatory” since she received the honour. “Of course, there are some who say it’s not deserving, a few,” she explained. “You always have your detractors, which doesn’t bother me one bit.”

Martein van Wagenberg

and

Martein van Wagenberg takes over Rosewood’s Las Ventanas al Paraiso, CaBo San Lucas, Mexico steven melendez

fter almost seven years at the helm of Rosewood Little Dix Bay, the famed Virgin Gorda resort opened by Laurance Rockefeller in 1964, Martein van Wagenberg recently relocated to Mexico, where he’s now managing director of Las Ventanas al Paraiso, a Rosewood resort in San Jose del Cabo. Mr. van Wagenberg fondly remembers his time in the Virgin Islands, he said in a recent interview. “I felt very much at home in the British Virgin Islands,” he said, “I was very fortunate to have the opportunity to experience life in the BVI as it is: wonderful people, getting involved in the community, developing people of the BVI through the resort and even dancing on a Friday night at Chez Bamboo!” During his tenure at Little Dix, Mr. van Wagenberg worked to modernise the resort, he said, replacing small rooms with oceanfront junior suites, for instance, and expanding guestroom bathrooms while adding outdoor showers. “By updating the property, we became a little more contemporary and a little more edgy, giving a feeling of understated elegance but keeping the natural look and style that Laurance Rockefeller desired when he opened in 1964,” he said. “The splash of colour inside the rooms is very refreshing, using sky blue and flamboyant orange” and letting guests “relax in their rooms and enjoy the tranquility and calm, together with ocean views that the resort offers.” “Most important, though,” he said, “is the contribution made by the resort staff members.” “The setting is absolutely beautiful and the work that they do to make that happen and offer our guests a most memorable visit and happy vacation is truly incredible,” he said. On his arrival at Rosewood Little Dix Bay from Grace Bay Club in the Turks and Caicos Islands, Mr. van Wagenberg hired a training manager and focused heavily on developing and building employees’ skills. “It’s just wonderful to see when people pick up and enjoy what they’re doing, and by training and coaching them, you’re able to promote them within a relatively decent period of time,” he said. At Little Dix, he arranged for employees to spend some time working at other Rosewood properties, so they could exchange ideas with their counterparts around the region and even around the world. For many, who have only worked at Little Dix Bay, it is a great eye opener and develops a further understanding of the guests’ needs, he said. Earlier this summer, the opportunity came along at Las Ventanas al Paraiso, he said, “sometimes you have to take other challenges, and this particular one came along: It is the best resort in the Rosewood portfolio, and it is very much high up in the world.” At Las Ventanas, he looks forward to duplicating his success at developing and promoting staff members at Little Dix. “I felt it was the right time, it is the right position, and I really look forward to seeing what I can do here. My desire is to develop some more employees again to higher levels and

hopefully creating more opportunities and perhaps better lives for them,” Mr. van Wagenberg said. The resort emphasis is on the quality of service it provides for guests “If a guest likes a specific something special for dinner or lunch, then here we make a special dish automatically for them,” Mr. van Wagenberg said. “If a guest just suggests something, then we get it, and if we don’t have it here, then we go to get it.” Guests can also “challenge” the resort executive chef, he said. “If you think you can cook this wonderful dish, then you can prepare that,” he said. “If the meal’s very good, it gets put on the menu for a week, and if it needs a little work, it can become the special of the day. If it needs a little bit more, then we give the guest a couple of shots of tequila,” Mr. van Wagenberg said. As far as the Virgin Islands goes, Mr. van Wagenberg said he’d like to see the tourism industry one day benefit from air connectivity to the mainland United States. “I’m happy to hear through the rumour mill here that we are looking a little more seriously at the extension of the runway here in Tortola, at Beef Island, which is something I always believed should happen,” he said. “Direct access from Miami or from Atlanta is vital to open up a big market, and that is something that is desperately needed in order to move Tourism forward in the BVI.” He would also like to see Virgin Islands youth better prepared for work in the tourism industry through the school curriculum. He cited a BVI Tourist Board table setting competition for teenagers, which he said give students the opportunity to try working at a first-class resort. “I am very thankful and appreciative for the opportunity that I had in the BVI, I too learnt a great deal and it will always be very close to my heart, that’s for sure,” Mr. Van Wagenberg said in conclusion. “I look forward to returning one of these days as a guest.”

Transforming BUSINESS

in the

Telecommunications

Virgin Islands

fundamental strategy for Digicel on entering any

in the financial, tourism, distribution and retail sectors. Digicel has a proven track record in delivering secure, reliable and value-for-money telecommunication services which drive its customers’ business Kiteboarding Photo success by creating greater operational efficiencies Courtesy: Sayula Hirst and reducing their communication expenditure. Bates said customers want a telecommunications provider that understands and meets their needs. “We understand that no two businesses are the same; our full suite of services, ranging from mobile converged messaging, fixed voice, PBX and dedicated Internet, can be tailored to provide the mobility and 79 flexibility that are crucial to any business’ success. Our anywhere solutions make the concept of the mobile workforce a reality for any business.” He said Digicel BVI holds the highest level of BlackBerry, Cisco and Avaya certifications and can recommend and deliver the right solutions for businesses to compete in today’s knowledge economy. Bates is very optimistic about the future and role of the telecommunications industry here in the BVI, with the key opportunity being in ICT or Information and Communication Technologies. He is confident that ICT can contribute to a country’s economic growth by developing the scope for “With high prices and poor quality service being the status quo, the market technologies such as mobile broadband, high speed Internet and computing. was crying out for change and Digicel challenged the monopoly’s stronghold Digicel recently acquired Netxar Technologies, a leading provider of and has delivered on its promise,” Bates declared. He said since Digicel’s Cisco Systems technology in the region and this now strengthens Digicel’s arrival, there has been a significant decrease in calling rates and a marked ability to offer a full suite of ICT services here in the BVI. Expanding these improvement in customer service levels in the industry. Digicel has been technologies creates growth and the fact that technologies make it easier delivering the best customer care from its state-of-the-art flagship store in the for people to interact and make workers more productive, creates additional capital Road Town and locations in West End and in Virgin Gorda. benefits to businesses, he added. “In addition, Digicel prides itself in being a good In terms of mobile broadband, Digicel is rolling corporate citizen and strongly believes in giving back out mobile 4G (based on HSPA+) across a number of to the community,” the CEO said. “We are proud markets in the Caribbean, most recently the Cayman sponsors of KATS, Special Olympics, the rugby Islands and Bermuda. HSPA+ delivers speeds up to schools programme and a number of other sporting five times faster than traditional 3G technologies. and community based activities.” “BVI will come on stream over time, but suffice it Like any good business, a highly trained and to say that we ultimately see all things converging to dedicated staff is crucial. The Digicel CEO credited LTE over the next few years,” Bates revealed, adding the employees for their commitment and dedication that as such, all of the technology investments across over the years, saying this has been one of the main the Group are made with that end game in mind. drivers behind Digicel’s success. He concluded: “I think every business should As Digicel observes its third anniversary, the regularly review the performance of its telecoms company is firmly established in the BVI now at the provider and ask the question: Is your provider looking number two position in the market. after you? As it is your right to get value for your The Digicel business has the growing support of money and the best service available. And if there is a number of BVI’s leading businesses, ranging from any doubt in their mind that they’re not, we’d love Alan Bates, CEO Digicel BVI For more information, visit www.digicelbvi.com. small to medium enterprises to large organizations them to come and talk to us here at Digicel BVI.”

market is to change things for the better by investing in technology and infrastructure, developing its employees and giving back to the community. Getting that balance right is key, according to Chief Executive Officer of Digicel BVI Alan Bates, who has headed the company since it launched operations here in November 2008. Coming into the British Virgin Islands as the 3rd mobile phone provider was not at all a daunting task for him. And his determination remains to ensure that Digicel delivers the best value, best service and best network as it rises to the coveted number one position in the industry, not only because this would be a pinnacle of achievement for the business, but primarily because Digicel believes that the people of the British Virgin Islands deserve better - and should benefit from - improved telecommunication services.

BVI BUSINESS & LIFESTYLES

Education

It’s time to hit the A GENERATIONAL PERSPECTIVE kevin malone

he 21st Century has proven to be a defining time in the history of global economics. Countries around the

world, big and small, have watched their economies retreat to a place of anemic growth or no growth at all coupled with significant government dependency. Many global economists assert that this is

a direct result of lack of long-term economic strategy, and investment and diversification by both the public and private sectors

How We Got Here:

As shown by the global financial crisis of 2008, single sector economic focus will inevitably weaken an economy by discouraging the economic diversity required to withstand occasional cracks in the economic foundation. However, the global financial crisis has also provided a unique opportunity for emerging economies, such as the British Virgin Islands, to begin laying the necessary foundation that will position the BVI as a 21st century economic leader in the Caribbean. The BVI is a unique country, and even more so when viewing the Caribbean through singular lens. For the last 30 years, the BVI has enjoyed a low poverty rate, economic growth and stability and an educational system that has trained citizens to become leaders in a locally based economy. Over the last 10 years however, an unfamiliar reality has slowly penetrated the BVI society, this reality is called “Exclusion”, in which qualified BVI citizens are perceived as being “excluded” from some private sector jobs. The BVI currently boasts a 98.5% high school graduation rate, yet antisocial and deviant behaviour amongst the youth is steadily increasing. The BVI boasts an unemployment rate of between 3 and 4 percent, yet high numbers of youths have never seen employment. The youth of the BVI are being educated in a school system that is preparing them for a world, which in many ways no longer exists.

An Inconvenient Truth:

There is an inconvenient truth that has become the norm within the BVI private sector. It is a norm of skepticism and hesitance towards employing BVI citizens to fill positions within lucrative sectors such as financial services. As a result of this, there is a standing dependency on the government to provide employment to those whom are rightly or wrongly being rejected from the private sector. In the long term this could have devastating effects on the BVI, as it could continue to increase the size of government, leading to a socialized society in which dependency increases. The private sector of the BVI is no different than that of free market societies around the world. The goal of a competitive corporation is to continually increase revenue and ensure a fair return on investment. Across the world, industries such as financial services is an extremely challenging area to break into for first time job seekers. These employers seek out individuals with specific experience and an educational background to match. However, even with this criteria met, each company differs in specific qualities or characteristics they may be seeking. Thus, we draw the conclusion that lack of hiring amongst locals isn’t a matter of cultural preference, or disenfranchisement, it’s a matter of preparedness and mutual confidence. Both are equally important, and it all starts with education.

Spectators vs. Partakers

Education is the bridge between the employable and the employer. It is the foundation of the modern economy and it is ultimately reflected in economic performance. With this in mind, it is essential that education policy reflect the status and realities of the current economic market as well as future trends. Such a policy must begin to manifest itself as early as at the high school level and continue all the way through college. The world has become an evolving economic experiment one that is based more on specialties than abilities. This means that those who are not properly trained in industries such as energy, financial services, and technology will increasingly find themselves locked out of a global economy which can be enormously rewarding to those with the right key. It is no wonder that BVI citizens are too often these days finding themselves on the outside looking in at the fruitful opportunities developing in their own country. The global market dictates what it expects with regards to human capital, and in order for citizens in the BVI and around the world over to take part in the new global economy; they must be properly prepared. It is up to each of us to absorb the education afforded to us, but we must ensure that the education provided is focused on the economic areas that will enable us to be partakers and not spectators.

Focus Areas

A Standing Public/Private Committee

The private sector and BVI government have huge stakes in the success of a globally competitive BVI workforce. It creates a stimulating effect for the economy given that it provides the foundation for BVI citizens to become leaders in the industries of the 21st century. The importance of successful locally owned businesses in a small society is crucial to the long-term sustainability of that society. Simply put, locally owned business means locally generated capital, which is re-invested locally. Business leaders in the BVI have both a responsibility and an economic interest in seeing the inclusion of BVI citizens in all areas of their workforce. Lucrative sectors such as financial services have the potential to dramatically increase local income, which could be re-invested locally. This is a “win-win”, both stimulating local business, as well as providing a substantial increase in tax revenues to the treasury. Given the critical importance of both parties joining forces, one of the immediate steps that must be taken is the creation of a Standing Committee consisting of the Ministry of Education and the local business leaders from at least three globally competitive sectors such as, tourism, alternative energy, and financial services. This committee should be tasked with advancing specific ideas regarding how to better educate and prepare students at all levels, as well as individuals currently in the workforce. Finger pointing provides no benefit to jobseekers, thus this committee must be solutions oriented. The private sector should spell out the specifics of what they need from a human capital standpoint to make their businesses globally competitive, and the government in turn should detail how the private sector can help them in accomplishing this goal. In a small and closely knit society such as the BVI, there is no reason why leaders from both sectors should not be on the same page in terms of how best to work together in giving the BVI a global competitive edge in the 21st century. The government should in no way seek to dictate the terms and conditions under which a private company builds it’s workforce, but it has every right to be alarmed by the lack of local participation in sectors which are currently thriving in the BVI.

Credit: J. Donovan

Having been educated in the British Virgin Islands high school system, I can say first hand that the subject focused curriculum is advantageous in that it provides an early start to acquiring specific professional skills. In most countries around the world, high school is a place where general learning takes place with occasional inclusions of specific focus areas. This being the case, it is essential that the subject-focused curriculum reflect the leading global industries of the 21st century. Financial services are now the primary source of revenue to the treasury of the BVI Yet, it only accounts for a small percentage of the territory’s Gross Domestic Product. This is because we passively observe millions of dollars in revenue from the sector while not playing a significant enough active role in the industry ourselves. In such a lucrative and transcending sector, there is no reason why the BVI should not be a nation producing stockbrokers, investment researchers with a locally based Financial Exchange Market. Alternative Energy, while still in its infancy, is an area that is going to be with us for generations to come. If we’ve learned anything in this the first decade of the 21st century, it’s that low energy 81 prices are gone forever. Globalization has caused energy prices to be inextricably tied to emerging economies, which dictate the price of everything from gas to electricity around the world. As has been seen in the BVI with the demand challenges for electricity, new energy sources are essential to the long-term economic strength of the territory. By adding Alternative Energy as a subject area of emphasis, we will be laying the foundation to produce energy specialists who in years will be able to help the territory to meet its demand for energy in a cost-effective manner. Tourism is another sector where locals have considerable familiarity, but where ongoing training and exposure is required and must be institutionalized. This is one of the low hanging fruits with regards to education opportunities. It is absolutely essential that tourism be integrated into the high school curriculum. As a Caribbean country, the BVI will forever be engaged in stiff competition with its Caribbean neighbours and increasingly, with other global destinations. The countries, which are best positioned and most prepared, will win the future in tourism. This will only happen through innovation, new ideas and a long-term vision. Educating students at the high school level in tourism, gives them a decisive head start against the competition.

BVI BUSINESS & LIFESTYLES

Ambitious Goals

Every goal must have a strategy in order to maintain focus to achieve the goal. Given the importance of education in determining the future of the BVI’s economy, all leaders and concerned parties must come together to set bold and aggressive goals. This will serve as motivation to teachers, students, policy makers and the private sector to do their part towards ensuring that this goal is met.

The BVI should set specific 15-year targets. I have taken the liberty to list a few below: 1. At least 15% of all new business incorporations by local citizens should be in the alternative energy or financial services sectors. 2. At least 15% of all BVI homes should source 50% of their energy needs from alternative energy. 3. The BVI should have a fully functioning financial exchange market in which local companies can be publicly traded and government bonds are sold. 4. The BVI should have increased by 50% the amount of annual revenue recognized from the tourism sector. 5. The BVI private sector should establish five major tourist attractions in the territory, while the government should completely transform every critical historical site across the territory into modern visitor attractions appealing to both tourists and locals.

The Choice

The only way for the BVI to successfully push forward in the 21st century is to set aggressive goals that will motivate us to go the extra mile. The world is a rapidly changing place, and the countries that aren’t changing accordingly are finding themselves lagging behind in a constant state of reaction. The global recession and near depression of 2008-2009 caused a dramatic drop in tourism revenue for the BVI, and this gives credence to the fact that an economy that isn’t diversified is an economy that is incapable providing a consistent growth. Building a strong economy is similar to building an investment portfolio; you must diversify to minimize risk. The “all for one” economic approach that has worked so well for the BVI over the last 30 years is no longer viable nor is it sustainable. The BVI has an opportunity that few Caribbean countries share. It has an economy that is still fundamentally strong enough to allow for long-term structural change. However, an opportunity can only be defined as such if it is recognized. Thus for the sake of the BVI’s future, all leaders and concerned parties, Belonger and Non Belonger alike must join forces towards implementing the change that is necessary for the BVI to transform itself and move to the next level. Big ideas lead to big solutions, and big solutions foster innovation and hope. We should start the process

by hitting the reset button in education.

“

Every

goal must have a strategy in order to maintain focus to achieve the goal.

”

BVI BUSINESS & LIFESTYLES

An Interview with the New Premier Dr. D. Orlando Smith

The New Government’s Economic Agenda freeman rogers & russell harrigan

Premier Dr. D. Orlando Smith, NDP 84

n Nov. 7, 2011, Dr. Orlando Smith’s National Democratic Party swept back into power,

unseating

the

former

Virgin

Islands

Party-led

government by winning nine of 13 seats, a clear and decisive majority in the new House of Assembly. Days later, the new premier sat with Business BVI to discuss his government’s economic agenda for his second term in office. Premier, you have taken over the territory at a very challenging and pivotal time in our history, when the economy is facing major headwinds. Four years from now, when we look back, what would you hope you would have accomplished? Premier Smith We are looking forward to taking this Territory to a

different economic level where anyone who wants to be employed is fully employed; where entrepreneurs and businesses can find their business niche and opportunities; and where everyone can afford to take care of the economic needs of their families. I’m also looking forward to having an economy which will be sufficiently able to help us repair our infrastructure — such as roads, the sewage system, water supply — and also to be able to adequately look after our seniors and retirees.

We are looking forward to taking this Territory to a different economic level where anyone who wants to be employed is fully employed; where entrepreneurs and businesses can find their business niche and opportunities. What is your number one economic priority? Premier Smith Our number one priority is fixing the economy. Right now

we are concentrating on re-energizing tourism because we know that at this point, even though we’re challenged in all our areas, financial services has been somewhat holding steady, but it needs the support of its twin sector. We know we are falling far behind in tourism, so we are diligently working toward improving different aspects of the sector so that we are competitive with the rest of the world. A recent study by one of the United Nations (UN) agencies stated that tourism is the quickest way for countries in the Caribbean to build Our number one priority their economy and we is fixing the economy. agree and will move forward accordingly. As far as tourism is concerned, there are many strategies we have to deploy in order to strengthen and boost our tourism product. We’ve got to rebuild and, invigorate our tourism marketing strategy. We’ve got to develop or fix the tourism plant. We’ve got to reintroduce and address the whole question of standards in all of our properties, and we’ve got to make sure our roads are in good repair. Also, we’ve got to better manage our beaches, which are one of the major attractions of the tourism product. One of the beaches we’re going to concentrate on, of course, is Brandywine Bay, because we see that as important, particularly in the cruise tourism sector.

In that regard, how critical is the extension of the runway at the T.B. Lettsome International Airport in terms of the future of tourism in the territory? Premier Smith First of all, I was discussing what we need to do to fix the tourism plant, and also to promote the territory as a destination. But of course, we’ve got to get visitors here. They want to come, but we’ve got to make it receptive, including the development of getaway activities that leads to memorable and treasured experiences in the Virgin Islands. Additionally, we must develop the historical sites so that the history of our islands is preserved. One of the examples of that, of course, was the Lower Estate Sugar Works, which we worked on and developed in the last National Democratic Party administration. We’ve got to deal with green spaces. The Queen Elizabeth II Park is one of such space we’re going to be concentrating on. Our goal The other challenge is to ensure that the Virgin is to get Tourists here... Islands offer unforgettable experiences. By strengthening Hence, the extension our tourism product, we of the airport is will make sure that when very important. the visitors come, they have a good experience, and return again. The other challenge is to get them here, and while it is possible for them to come through St. Thomas, USVI and traverse by ferry, or even through Puerto Rico, those avenues are challenging and are becoming even more so — particularly the Puerto Rico option, because of the reduced flights by American Airlines. I know that JetBlue has taken up some of the slack where American left off coming from the mainland to Puerto Rico. But while that would be a help, the fact still remains that if we can get our visitors direct, we will be in a far better position from a competitive standpoint with our competitors in the region. Many of them now have direct flights from the US mainland. As it becomes even more competitive; we’ve must step up to the plate and make sure that we can provide such convenience. Hence, the extension of the airport is very important. In the campaign, you and your colleagues talked often about the need for local and foreign investment. How will you go about attracting such investment given the state of the global economy and the territory’s previous record with investors? Premier Smith That is certainly going to be a difficulty, but the reality

is, we do have a destination that is attractive to investors because of the natural beauty of these islands, where they are located, the way they are arranged, great for sailing, etc. Therefore, there will be investors who will be interested. The charter boat industry is doing well, and they expect to have a very good season. That obviously speaks to the conditions for sailing that you find in the VI. And in a similar way there are other conditions, which will, I think, encourage other investors. The challenges that we had been seeing before our last administration was [that the BVI was] sort of unfriendly towards investors — certainly external investors. We had repaired that to a large extent. We had people who were very interested in helping us to develop, particularly, our tourism infrastructure. But I think the election results, which gave us quite a mandate to carry forward, should be a signal to potential investors that the people in the BVI are ready for a change of attitude toward development of our industries — with the caveat, of course, that any development must be to the benefit of the British Virgin Islands. This means that we must involve BVIslanders as far as possible as the Territory develops.

One of the things that you talked about every night during the campaign was re-establishing the small business bureau. Why do you see this as so important? Premier Smith I think everybody acknowledges that having a thriving

business sector — small and medium and large — is important to the economic growth of any country. And the same goes for the BVI. So we have got to do what we must in order to develop that strong business sector. We know that tourism and financial services are the drivers of the economy. The business sector is what really drives that internal economy, especially helping money to circulate so that everybody can benefit. So it is important that we take all the steps we can to improve our business sector, and to give whatever assistance we can to existing businesses, and also to people who wish to get I think everybody into businesses: to be able to start a business, acknowledges that having a do the right things and thriving business sector — have the necessary small and medium plans prepared. We must be able to assist and large — is important them to get access to to the economic growth finance and technical of any country. support, especially during their first couple years. By doing that, we will be able to grow the economy and provide more employment. As you know small business drives employment opportunities. Among things what we have to do, apart from accessing the capital, is to make our businesses more competitive, especially with the neighbours. 85 Right now we spend a lot of money in our neighbouring countries — St. Thomas and Puerto Rico — and this is largely driven by prices. A lot of the price difference has to do with the freight and shipping charges. We will review how we address those charges. In the initial stages, we can remove or change the levy on freight, and this we will do. But in the longer term, we must have discussions with shipping agents and freight carriers to get the products from the US mainland directly to the territory in a more cost effective manner. This will go a long way towards making our businesses more competitive. Your party’s election manifesto mentioned establishing a closer union between tourism and financial services. Why is this important, and how will you go about it? What fundamental changes do you have in mind? Premier Smith They are the two main drivers of the economy: tourism

and financial services, and both of them are basically services that we export. We have to marry the two and develop a closer union, especially between the marketing aspects of both sectors. We can develop closer linkages and perhaps brand BVI by developing a marketing strategy involving both sectors and the Virgin Islands Shipping Registry in terms of having a brand that can be sold globally. Can you give a specific example of how that might work?

Premier Smith To a great extent we are targeting the same market segment

for both sectors. For example, in the area of conferences: In financial services there tends to numerous conferences. Providing adequate conference facilities would be a great first step. Such as facility enhances tourism. Therefore, you kill two birds with one stone. The long term potential for growth in the area is substantial fostered by vibrant strong financial services sector.

BVI BUSINESS & LIFESTYLES

I’m sure at some point you will be encouraging people to come to the BVI to invest? Premier Smith Certainly. It’s important now to get out there and promote

Brand BVI. We’ve fallen behind the eight ball, so we have to do whatever is necessary reposition the territory.

Your party’s manifesto also spoke extensively about developing a partnership with the private sector. Why is this important, and how will you go about it? Premier Smith We already have a close work partnership with the BVI Financial Services sector, and that has worked very well to our mutual advantage. That will be encouraged. They’re the ones who do the business; we’re the ones who are responsible for the regulations as we work with the international regulators. So it’s important that we continue to build that relationship. That could only be a win-win experience. In the same way, we have to develop a relationship with people who work in tourism, and, in fact, all aspects of business. This is why we’re developing things like the National Business Bureau to foster the interface between government and the private sector. In the area of financial services, what do you see as some of your administration’s biggest challenges? Premier Smith I think it’s acknowledged that we have quite a good

regulatory programme. But what we have to be careful of, as always, is to make sure we don’t getover-regulated to the extent that we drive business away. One of the challenges we do have right now, apart from the regulation in that area is the other regulations within government services. We’ve got to cut the red tape, essentially. It’s too difficult and takes too long to get work permits, trade licences, that sort of thing. We have to work on making sure those things happen efficiently. The mantra that we have to develop in government is that we are here to help the people of the country, not to get in the way of what they are doing. We must have regulations, butour focus is to help with developing this Territory. And where we see a problem, we have to help people to get around the problem and not just to put roadblocks. That is the role that government and the ministers and the public service have to play. There are a lot of young local entrepreneurs who are keen in investing their money in the BVI, but in many cases they are put off by the red tape. Should we be able to say to them, then, that they can expect a red carpet from this government? Absolutely. Red carpet, indeed. Regulation we must have, but we must make sure that those regulations can be interpreted in such a way by the government that they’ll be able to facilitate business as opposed to driving business away. Your administration was largely responsible for establishing the BVI London Office. Given the global situation in which we find ourselves, is your government looking at establishing a similar presence in Asia or North America? Premier Smith I think it’s something that we had discussed before, and

it’s something that certainly we must look at. It is okay to say we are advertising the BVI, but if we have an office of some sort, then we can have a more direct presence, especially when it comes to dealing with the business companies or even government officials in those countries. That is what the BVI London Office was set up to do: to be able to deal with London; speak to the business community; let them understand what we do here and what opportunities may arise for us and the United Kingdom (UK); also to represent us in the UK, because if we have a good working relationship through the London Office with the British government, that could help to ease a lot of the relationships between us, because there could be a direct discussion between us, face-to-face on the ground. The same goes for Brussels, where we do have a presence.

In your last administration, you focused a lot on training in the hospitality sector. Will you revive your plans to establish a full hospitality training facility in the territory? Premier Smith Training is essential to the development of any service

industry. And certainly that’s where we are. While we’ve been in tourism and financial services, we haven’t been in that long, and certainly we do not have a culture of service first in the BVI. We still see, in some ways, service as servitude, and we have to get around this. So we’ve got to start early in the schools teaching the importance of our industries to our young people so they’ll understand; so they’ll see working in the tourism industry is something that is filled with opportunities. What we were trying to do with Prospect Reef, We’ve got to cut the and we still have red tape, essentially. the opportunity to do, is to develop It’s too difficult and takes a training centre too long to get work permits, that involves all trade licences, that sort of aspects of the tourism sector — a thing. We have to work on place which would making sure those things belong to the BVI, and where happen efficiently. BVIslanders would develop that service attitude, and, I think, a certain pride in the product. Of course, my particular interest in doing this is not for the major hotels, but initially for the smaller hotels and the villas that can’t afford a training programme. Lately, there has been a lot of talk about green business here and abroad, and your party spoke a lot about alternative energy during the campaign. Do you have any specific plans to support green business in the territory? Premier Smith We are very much interested in that whole area, and

certainly in alternative energy. Just a few days ago, I had the opportunity to visit the establishment on Cooper Island. Right now, 75 percent of their energy is provided by solar, and they’re hoping within the next two years to be 100 percent by using solar and also perhaps by introducing wind turbines. So these are areas, which we had discussed before. I know that these are areas, which some businesses are looking at, and certainly something we will encourage as a government. Right now there is legislation on the books that discourages the use of alternative energy: Do you think you’ll revisit that law? Premier Smith Yes, certainly we’ll revisit it. Interview conducted, condensed and edited by Russell Harrigan and Freeman Rogers.

BVI BUSINESS & LIFESTYLES

How can

island economies get infrastructure

Thinking Issues

projects off the ground?

russell crumpler

n 2010, KPMG conducted its first island economies research report, examining island infrastructures and assessing how governments were planning, financing and implementing infrastructure development. We explored the gap between infrastructure requirements and the availability of funding, finding that in many cases the infrastructure funding requirements would exceed total annual revenues for the governments concerned. We found that capital expenditure, at current levels, would be insufficient to meet infrastructure requirements over the next five years. Since this report, the global economic outlook has deteriorated further. Following well-publicized sovereign debt What is PPP? and finance issues in countries such as Greece (as Public-private partnerships, well as closer to home in jurisdictions such as Turks & or P3s, are arrangements Caicos Islands) the ability for Caribbean governments between public sector to raise the funds for expensive infrastructure by authorities and private sector traditional means has dramatically declined. organizations or entities, where the private sector In the British Virgin Islands the economy is particularly contracts to provide a specific dependent on the twin pillars of tourism and financial services. Both of these sectors remain depressed due to global economic public sector service. In this conditions as well as increasingly sophisticated regional and context PPPs are related to international competition. Therefore, governments have infrastructure projects. to maintain a delicate balancing act between investing in Private sector involvement infrastructure that attracts people and institutions to the islands (airports, ports, internet capabilities) and infrastructure that can be across up to four improves the on-island experience of inhabitants and visitors stages of a projectâ&#x20AC;&#x2122;s life â&#x20AC;&#x201C; alike (hospitals, roads, waste water management). It can Design, Build, Operation and easily be argued that investment in the former, which can be termed economic infrastructure, will create additional Maintenance. A full PPP across revenues, which can in turn allow for the provision of all four stages can often last the latter, necessary social infrastructure. However for well over 25 years. such arguments do not take into account the social infrastructure needs of the local population â&#x20AC;&#x201C; a very Financing models can often important consideration and something that all public be innovative with the private policy decision makers will be acutely aware of. sector earning revenues via The picture is certainly not all negative though. A properly devised national strategy for infrastructure projects that combinations of user charges, either has cross-party support or becomes the responsibility of direct & indirect taxation, sale a non-partisan statutory body has been shown to be a cohesive & lease back arrangements starting point in other jurisdictions. Such a plan also gives comfort to off-island developers and investors; two sets of stakeholders and traditional loans. that hold the keys to solving the funding issues outlined above.

Private Sector Solutions

Increasingly the governments of island economies are turning to the private sector for assistance in infrastructure projects. This assistance may take the form of Joint Ventures, Public Private Partnerships (see boxed text) or even privatizations. On initial consideration, the benefits of such arrangements with the private sector can be considered to be largely financial and are, therefore, seen as a solution to the issues outlined above. However, much of the benefit to the public sector will also come from the transfer of financial or operational risk to third parties. Furthermore, the private sector is able to bring highly skilled and specialist experience to the table. For example, Balfour Beatty, the UK’s largest construction company, is able to call on the experience of over 50,000 employees across the globe. By taking steps to ensure such parties work closely with government and, wherever possible local contractors, an infrastructure project has the best chances of being delivered on time and on budget. The involvement of internationally recognized companies also helps attract financing at the right price.

The Challenges of Working With the Private Sector

PPPs and other arrangements between the public and private sectors are not without challenges. They are complex transactions that require sufficient experience on the part of government procurement and project management teams in order to be successful. Governments must also be able convince the electorate of the benefits of a venture involving the private sector, details of which might be difficult to explain and benefits not be realized in the short term. So what are the key elements to attracting the right parties to the table to ensure a successful start to public/private infrastructure project?

Transparency

In order to attract the best developers and investors to an infrastructure project, the bid process needs to be clearly set out at the outset. It is also absolutely crucial that it is exceedingly transparent. It takes considerable time and effort for a developer to prepare a technical bid and, therefore, they are very unlikely to embark on such a process without feeling assured that their bid will be treated equitably. One of the easiest and consistently used best practices to ensure transparency is for all qualifying bidders to be assessed on a no-name basis. The bid team, which should include the key decision makers, will select from company A, B, C etc. and only find out the identity of the winning bidder once the decision is made. Another mechanism for reassuring the infrastructure industry that there is an even playing field is the use of a ‘fairness monitor’. For example, KPMG was the fairness monitor for the Bermuda Hospital PPP (please refer to the boxed text for further details of this project) and issued a fairness opinion with regards to the bid process.

Standardization

All bidders should be asked to submit details on standard documents. Ideally these documents will be based on international norms – for example Canada and the UK each have bid documents that are used for the significant majority of infrastructure projects and which can easily be tailored for use in island economies. It is also advantageous to use the same documents for successive projects. This way repeat bidders are already comfortable and familiar with the jurisdiction’s procedures.

Credible Partners

The involvement of the right advisors both on and off island from the very outset of a planned infrastructure project is critical to success. Such advisors include engineers, lawyers and accountancy professionals. Engaging advisors from outside of the territory who have already dealt with the major developers and financiers and have strong infrastructure experience will help ensure a successful bid process.

Planning, planning, planning…

In conjunction with project advisors, all aspects of the project need to be planned to a high level of detail. Resources need to be available from the Public Sector to ensure that all deadlines through the bid process are meet and that the public sector’s credibility with developers and financiers is maintained.

Stakeholder Interaction

Prior to inviting developers to submit proposals it is well worth taking the time to visit them in a marketing road show. This will help allay their concerns, provide useful background information and most importantly ensure that the best bids are received. The marketing road show also helps determine the level of interest within the industry for the proposed project and hence whether a partnership will be viable.

Clear Message

Governments need to be able to articulate exactly what they want developers to bring to an infrastructure project. This needs to be decided before a project is taken to market and needs to remain rigid throughout the bid process (and beyond). The development of a non-partisan national plan will undoubtedly support this clarity.

Bermuda Hospitals Board PPP Can Work in an Island Setting

On 1 December 2010 the Bermuda Hospitals Board entered into a PPP arrangement with Paget Health Services (PHS) (a consortium of Bermudian and international companies) to design, build, finance and maintain the redevelopment of Bermuda’s acute care hospital. The cost of the design and construction of the new building will be $247 million. This was the culmination of a 25 month process involving the BHB, Bermudian Government and both on-island and international advisors. The project was delivered to contract signing stage on time and construction commenced in January 2011. The Project is currently progressing on budget and on schedule. The project progressed from selecting a preferred bidder to financial close in two months, setting the gold standard not just for Bermuda, but for complex infrastructure projects globally. This was achieved by careful adherence to the principals set out in this article. For further details please visit: http://www.bermudahospitals.bm/bhb/initiativesInProgress/redevelopment-project/index.asp

Access to the Market Place

Developers will need to have a clear understanding of any tax, planning or other benefits that will be offered as incentives to ensure the project is viable. A clear, and preferably time shortened work permit procedure also needs to be set out. The shortened element, which can be applied in specific circumstances and is successfully in use in jurisdictions such as the Cayman Islands, can be absolutely critical to the success of a project – if an issue occurs during the construction cycle a developer needs to know that he can have a solution delivered to the island at very short notice. The alternative is cost and time overruns. An element of the scoring of bids can, and most probably should, give weight to the use of local resources. However, care needs to be taken to ensure that the number of bidders is not restricted by a limited number of local firms that can assist. One solution may be to have local firms prequalify and to provide general credentials to all bidders.

Governance & Decision Making

Any developer bidding to undertake an island infrastructure project needs assurance that a decision maker is part of the project team – i.e. if a step needs approval on an immediate basis this can be arranged and time delays avoided.

How big does a project need to be for international developers to consider it viable?

There is no golden rule, however a project under US$30million will be unlikely to attract the caliber of developer required, or the right financing. It is possible that, for smaller projects, a developer may be able to bid ‘off-balance sheet’, i.e. finance the project themselves. However, they are only likely to do so if they can see a long term stream of potential projects in a particular location. Other alternatives to achieving critical mass include bundling similar projects together (i.e. airports, ports and roads) or working with regional partners (for example developing a plan to expand port facilities in the BVI and USVI at the same time). A note of caution however, if a project is too small there is a danger that a developer’s B or even C team will be put in place at the delivery stage.

Stephen Coburn / Shutterstock.com

Conclusion

Critics of using private enterprise to assist with public infrastructure projects abound, and indeed there are some examples of spectacular failures and overruns. However, the reality is that in today’s world there are very few alternatives for the delivery of much needed infrastructure in a timely and effective manner. Even if island governments had unlimited financial resource, the very nature of their role precludes the employment of all of the specialists required to deliver a successful project and, therefore, working with the private sector is crucial. By establishing parameters based on those set out above, such a partnership can be exceedingly beneficial for government and, most importantly, the country as a whole. In our experience, when care and effort is taken to align objectives, true partnerships can be successfully achieved. The information contained herein is of a general nature and is not intended to address the specific circumstances of any particular individual or entity. For further details, please contact: Russell Crumpler, Director, Advisory, KPMG (BVI) Limited Tel: +1 284 852 4814 e-Mail: russellcrumpler@kpmg.vg Web site: kpmg.vg About KPMG (BVI) Limited KPMG’s expanding team moved to new premises within the Banco Popular Building in April 2011. We have the local expertise and island insight to add value to our local and international clients. Our high performing people are our greatest asset. We use our experience to cut through complexity, delivering informed perspectives and clear solutions for the benefit of our clients and stakeholders. About KPMG International KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 146 countries and have 140,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such. © 2012 KPMG (BVI) Limited, a British Virgin Islands limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity.

BVI BUSINESS & LIFESTYLES

Those elected to govern Election Results freeman rogers

inutes after his National Democratic Party officially won the November 2011 election, Dr. Orlando Smith made an ambitious promise.“This country,and everyone in the BVI, will be better off at the end of our four-year term,” he told a cheering crowd at the Sir Rupert Briercliffe Hall in Road Town, where votes were tallied. Considering the global economic climate, this promise will be difficult to keep. But voters seemed to believe the NDP is up to the challenge. After a contentious campaign season, the party swept the former Virgin Islands Party-led government out of office, winning nine of thirteen seats in the House of Assembly. Many commentators called the election one of the most critical in the territory’s history. In the months leading up to Polling Day, candidates debated issues ranging from crime to governance, but one topic dominated the discussions: the economy. In rallies and advertisements, office-seekers argued about the best way forward as the world struggles to recover from a prolonged recession.

The VIP, led by former Premier Ralph O’Neal, claimed that it had done its best during the previous four years. Stalled projects and other woes, members said, were the result of economic factors beyond the territory’s control. Dr. Smith’s NDP begged to differ, faulting the VIP government for the BVI’s recent financial difficulties and promising to do better. Fourteen independents also weighed in, as did four candidates running with the newly formed People’s Patriotic Alliance.

The Results

On Polling Day on Nov. 7, election results began to trickle in at about 10 p.m. as the district count wrapped up in schools and community centres around the territory. Shortly before midnight, news reports confirmed that Dr. Smith’s NDP had emerged victorious in the district race, winning five seats to the VIP’s four. By then, celebratory motorcades were under way around Tortola: NDP supporters were confident that the party would also triumph in the at-large race, where it has traditionally been strongest. They were right. When the counting finished the next morning, the NDP had taken all four at-large seats. Dr. Smith now Premier came out on top, pulling in a record 5,117 votes. After the results were announced at the Sir Rupert Briercliffe Hall, he took the stage to introduce the new government. “These guys are here to work for you,” Dr. Smith said. “During the next four years, together as a team, we’ll be looking after your affairs.” Winners and losers alike attributed the NDP’s win in large part to a high turnout of young voters, who were assiduously courted by the party. Businessman and Lawyer Myron Walwyn, a 39-year-old political newcomer who since has been named Minister of Education and Culture, spearheaded efforts to reach out to youths, utilising social networking sites and working closely with a group of young supporters. The election results seemed to solidify the two-party system that has emerged since the NDP first entered the ring in 1999. Since then, only one independent candidate has won, and he has since joined the VIP. This year proved no different: None of the 14 independents came close to winning a seat. The four at-at- large hopefuls who ran with the newly formed PPA fared little better, though they promised to return in 2015 with a full slate of candidates.

Back in the Saddle

The NDP’s return to power came four years after voters decreed an ignominious end to its first term. In 2007, the party was ousted by the VIP in a ten-to-two landslide, with the one successful independent joining the VIP on election night. At the time, both parties agreed that controversial tourism development projects, or the public’s perception of them, played a major role in the NDP’s defeat. Now marketing itself as “the new NDP,” the party has promised to do better. During a swearing-in ceremony two days after the election, Dr. Smith stressed the party’s commitment to communicating with the public. “We will keep you apprised of plans and activities that we carry out on your behalf,” he told attendees. “We hope in turn that you will continue to respond to us and to let us know what we’re doing right and what you think we’re doing wrong. We learnt the hard way of doing otherwise four years ago, and will not repeat that error again.” The new premier also pledged to resume his efforts to stimulate the economy. “We will actively encourage investment in both our tourism and financial services sectors,” he said. “And let me be clear: When I talk of investment, I speak of investment by BVIslanders as well as investment from international sources that does not compete with or strangle local investment.”

The New Ministers

Also during the ceremony, Governor Boyd McCleary swore in the new government ministers. Besides premier, Dr. Smith is also the minister of finance and tourism. He is backed by Deputy Premier 93 Dr. Kedrick Pickering (R-D7), who has held office since 1999. Dr. Pickering was also named Minister of Natural Resources and Labour, his first ministerial position. Ronnie Skelton (R-at large) will serve as Minister of Health and Social Development, which was one of his responsibilities under the previous NDP-led government. The new Minister of Communications and Works is Mark Vanterpool (R-D4), who has served with both major parties. Mr. Walwyn, the Minister of Education and Culture, is the only minister who is new to elected office. Across the aisle, the four-member, all-VIP opposition will be led by former Premier Ralph O’Neal, who has held office for 36 years. During a press conference days after the election, VIP members promised to work closely with the new government while helping to hold it accountable. Many of them, including former Communications and Works Minister Julian Fraser (R-D3), also acknowledged the coming challenges. “The people of the territory,” he said, “need to be patient with the National Democratic Party as they seek to do the work of the people.”

NDP IS UP TO THE CHALLENGE! NDP IS UP TO THE CHALLENGE! NDP IS UP TO THE CHALLENGE!

Business BVI Digital

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POSITIONING FOR THE FUTURE A

vance lewis

magine an object hurtling on a highway

at approximately the speed of light. In the imagined scenario the object could be energy in the form of a laser beam on what was once imagined to be the Global Digital Highway (GDH).

In the late 1980s, Sir Eric Sharpe, a past visionary and the then Chairman of the global telecommunications company Cable and Wireless Plc, had a vision of Cable and Wireless building such a GDH connecting together major cities around the globe. His vision was to provide first class telecommunications service to all commercial and industrial centres around the world. This would be done by use of a network of submarine optical fibres built undersea. Towards the end of the 20th century, an information technology explosion commonly called the “Dot Com” boom, led to the development and laying of a preponderance of submarine cables by various operators around the world. With this expansion, it seemed as if Sharpe’s vision of the GDH was inching towards reality. Shortly afterwards, forces including those associated with the millennium changeover caused an oversupply of capacity versus demand on international telecommunications routes and temporarily halted the expansion of construction of cable systems - and like many terrestrial highway projects, the GDH stalled. Enter, the new regional East West submarine optical fibre system (EWC). The EWC is a privately owned cable system, currently being built by Cable and Wireless. The system connects the Eastern Caribbean islands with those in the Western Caribbean as part of what may not be a Global Digital Highway, but could be considered a Pan Caribbean undersea digital highway, which affords regional businesses a myriad of luxuries, benefits and opportunities. Telecommunications users can now bask in the luxury of use of smart electronic devices to virtually interact in cyberspace. Video conferencing, once considered a luxury can be used in our everyday lives via an e-enabled interfaces. Some of the benefits are: cheaper call delivery leading perhaps to more attractive pricing plans in an effort to keep more users on-net; faster and greater ease of call connections to Pan Caribbean and global destinations enabled by less congestion and more bandwidth on previously under-dimensioned routes; lower latency on data and internet resulting in higher speeds and clearer video connections. What was once considered the unimaginable, can now become reality thanks to the more intertwined network. Telemedicine and other similar applications will soon become a reality. Offices in the Eastern Caribbean can now partner with others in the wider Pan Caribbean basin via regional data centers, which afford data protection via diverse telecommunications links.

Telecommunications is very capital intensive and hence international cable systems are not predominantly privately owned. Indeed, most systems are conceived and put together by a consortium of multiple telecommunications partners who become co-owners of the system. Examples of non-private systems are the Americas and Columbus systems as seen in diagram 1. Typically, prior to the commencement of construction of a system, potential owners would carry out a data gathering exercise to determine what the individual capacity needs are likely to be using forecast models. The system would then be designed to meet the specifications of the owners on an aggregate basis. This would be followed by an exercise to determine the financial cost of the system. Permission would then be sought from Territorial Governments to provide landing points followed by conducting of surveys to DIAGRAM 1: Examples of private systems are (East West Cable) EWC and Private Trans Atlantic (PTAT) systems (both owned by Cable and Wireless)

ensure that landing points would not compromise natural habitats and other environmentally sensitive areas. The visible part of the implementation of these submarine systems would of necessity consist of preparation of landing sites including the construction of duct routes and the actual landing of the shore end of the cable. Earlier, I alluded to some of the benefits that accrue to the region as a whole. Letâ&#x20AC;&#x2122;s focus on the British Virgin Islands for a moment, where the East Caribbean end of the EWC terminates. Tortola, the largest of the British Virgin Islands, is geographically located at the northern end of the Eastern Caribbean island chain, which is a strategic point for telecommunications transit. It may be considered the International gateway to the Caribbean. The Economy of the British Virgin Islands is supported by the twin pillars of tourism and offshore finance, with an emphasis on Company incorporation and registration.

DIAGRAM 1: EWC which connects the British Virgin Islands to Jamaica via a branching unit which provides a spur into the Dominican Republic.

Anyone who is involved in business knows that effective communications is the lifeline of a successful business. Diagram 1 above shows what can be described in its simplest form as an undersea communications network connected together in an Olympic ring type format. As Tortola is central to the undersea network, it can be considered a magnet to attracting new businesses to the territory and also generate new ideas for the successful running of existing businesses. For instance, a business in Panama can very easily integrate its branch in the BVI into normal business processes that hitherto would have been impossible. The decision for e-enablement can be made with increased confidence because of the

interconnection of the very systems shown in the diagram. If one route should fail, then traffic can flow via other routes. This may lead in the future to a flattening effect of our Pan Caribbean region as it has already revolutionized the world. An agricultural business in Latin America will soon be in a position to incorporate its offices in the BVI for certain tax related advantages, while continuing to take advantage of the relatively inexpensive labour that the Latin or Central American market offers. Production and operations can be then 99 enabled on an e interface as a normal business process. 9999 By use of what was envisaged to be the GDH, businesses the world over can operate as if they existed on the same land mass.

Conclusion

How we use communication is largely up to us; but what is clear, is that in business, we must always strive to use it as a tool to enable an increase in consumerism, improve efficiency and choice. These are the factors that are known to drive up business profitability and shareholder satisfaction. We have already seen the effect of technology driving social networking to influence change in our lives in the 21st century. This is only the beginning. As we strive to innovate and drive more change to the way we currently do business in the world, and specifically in the region, undersea Digital highways will remain a key constituent in changing the way we do business now and in the future. In the case of the BVI they may very well point the way to new industries.

We must be innovative!

There was a time.. not sooo long ago..

when the ultimate sign of achievement was the corner office. However, today’s successful entrepreneur or businessperson is just as likely to be sealing the major deal on the street corner – thanks to Smartphones and Mobile Business Applications. 100

SteveGoodman

Smartphones: Are Indispensable to Keeping Up 2012 Ratings With Your Clients

nce looked at only as the “must have” toys of the upper execs, companies worldwide, and here in the BVI, are now turning increasingly to Smartphones to run Enterprise IT solutions for all employees. In fact according to a recent report by Forrester Research, firms across the globe are embracing the idea of BYOD. No, that is not some new fraternal business organization. “BYOD” stands for “Bring Your Own Device,” and it refers to the idea that companies realize that employees most likely are already carrying a Smartphone or tablet computer of their own, upon which they would prefer to run all of their personal, as well as, work related applications. BYOD literally encourages key employees to “use their own devices.” All that is required is some form of secure corporate desktop, which could be cloud based, running alongside consumer IT applications.

With the introduction of the Droid, giving the Apple OS a run for its money, consumers now have many more Smartphones to choose from. Telecom experts definitely agree that they are seeing an upward trend of businesses using Mobile Business Apps. Mobile-productivity software is not a new idea. The big boys in the Fortune 500 have been using such solutions for several years now. The big change is that with the introduction of the Apple iPhone, the Droid, Blackberry, LG’s Voyager etc, that offer fast processors, amazing amounts of storage, and positioning technology all in an affordable package, almost any size business can now access this kind of technology. It is not just the cell phone manufactures that are embracing this trend. Service providers understand that we are entering into a new era of Mobile Business Operations becoming

Definitely Not

FREE >

Mobile Smartphone Devices Blackberry | iPhone | Droid

essential for business of all sizes, and for them that means new markets. "We definitely see ourselves getting into more managed services for our business clients," says Mike Willsey, director of enterprise segmentation for Verizon Wireless. "It's not about just plain connectivity anymore."

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There’s an App for That!

So which Smartphone is right for your business will really come down to a lot of personal choice, based on size, power, feature sets, and network availability. However, no matter which you choose, here are some of the most popular “must have” business apps for the most common Operating Systems.

So Which Phone IS the Smartest? With many more choices of Smartphones available now, is there any one that is better for your business? It really comes down to what you expect, or need your phone to do. The smartest thing about any cell phone is Internet access. This means you not only can find the best place for that lunch meeting, but more importantly, all of the latest cell phone operating systems allow you to synch your phone to your desktop computer. This means you will not only be able to send and receive emails, but also store, view, and work on documents directly on your phone! And that is just the tip of the iceberg. The growing number of third party “apps” not only will allow you to view the latest video from Lady Gaga, but there are many ways you can actually run your business and improve your bottom line by using a Smartphone and Mobile Business Apps. With the right kind of apps, now available for most of the major Smartphone Operating Systems you can easily: • Manage customer relationships • Create and manage documents on the go • Keep track of time spent on a project • Process payments • Manage digital files • Hold remote meetings

EVERNOTE FREE iOS & Android The ultimate “digital personal assistant.” Store everything you don’t want to forget, web research data, meeting notes, audio recordings, & photos!

SQUARE FREE iOS & Android Accepting credit card payments is easy anywhere. Simply slide card through reader & interface directly to your device!

This is just a tiny sampling of the multitude of business apps available for your cell phone, and the best thing is most of these are FREE!

MILES TRAC $1.99 Android

TRIP CUBBY 4.99 iOS Both allow you to track time spent in traffic and miles travelled. Great for tracking mileage allowances during Tax Time!

Work “Smarter” not Harder

MIGHTY MEETING basic FREE Pro $4.99/month iOS & Android Store and present PPT on the go!

TANGO FREE iOS & Android Video-conferences on your Device!

Interestingly enough, in addition to using a Smartphone to run business apps, there are certain businesses that are creating apps to promote, and have customer’s access, their businesses. According to a recent article in Inc. magazine, if your target market is young and upscale, the type of demographic who are most likely to be carrying a Smart mobile device, then you are missing out on a huge marketing opportunity if you do not create an app for your business. David Daoud, Director with IDC research, when discussing Smart mobile computing and the sales channel said, “if you already serve consumers direct, that bodes well for your [mobile app] opportunities. There is a lot of opportunity in the “prosumer” market via applications designed for consumer-centric markets, but that also bleeds into the business sector...” The bottom-line is, that any Smartphone will help you organize the day to day operations of your business, always have contacts handy, keep track of appointments, reach your customers, and conduct business, anywhere any time – which all adds up to more efficiency, and greater profits!

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Tourism & Real Estate

A $65 MILLION OPPORTUNITY FOR THE BVI

moorings’ & sunsail’s MASSIVE FLEET I N V E S T M EN T jason smith

t turns out you can buy a lot of yachts with $65 million dollars. TUI Marine, which operates the Moorings and Sunsail yacht charter brands, is spending that much worldwide to buy 173 yachts in 2011 and 2012. The money will purchase both monohulls and catamaran, an investment needed to ensure Sunsail and The Moorings’ position as leading yacht charter brands, according to Jonathan Grisdale, TUI Marine’s CEO. “We want to ensure we exceed our customers’ expectations and deliver the best product,” he said. Despite the uncertain economy, yachts that emphasize sailors’ comfort – with features such as air conditioning, complete navigation electronics, snorkeling gear and MP3compatible stereo systems – continue to be popular, he said. “Customers are prepared to pay a little more to have the latest, most innovative products,” the CEO said. As TUI Marine’s biggest chartering base – nearly four times the size of the company’s other bases – the BVI will be a big recipient of the those new boats, Mr. Grisdale said. The Sunsail base will see over 45 yachts, some of which will be used to expand the company’s flotilla fleet in the BVI. The Moorings base will see an additional 30 boats to supplement its bareboat, crewed-yacht and powerboat fleets, Mr. Grisdale said. The first boats were scheduled to be delivered beginning in November just as this magazine was going to press. The yachts are built by manufactures to TUI Marine’s specifications. The Robinson & Caine factory in South Africa built the Sunsail 444, a four cabin, four-head catamaran that can accommodate up to ten passengers. The factory also makes the Moorings 3900, a catamaran with three cabins and two heads. Sunsail’s newest monohull, the Sunsail 41, will be among the boats bound for the BVI, according to a company press release. The yachts are manufactured by the French yacht builder Jeannau and feature increased interior space and a redesigned deck. Beneteau, another French manufacturer, makes the Moorings 50.5, a type of monohull that will be introduced to the BVI’s fleet as part of the investment. The Moorings has a long history in the BVI and played a key role in establishment of the charter yacht industry here over 40 years ago. Charlie Cary, an American industrial engineer, founded the company on Tortola with his wife Ginny. According to a press release issued at the time of Mr. Cary’s death in 2007, the couple had been sailing as a hobby for many years aboard their boat Flying Ginny. Mr. Cary’s engineering career prospered and just before his 50th birthday, he was transferred to the northeastern United States. His first experience with a blizzard convinced him that the cold was not for him and the couple moved to the BVI to found The Moorings in 1969 with a fleet of six Pearson yachts. From there the brand grew worldwide, expanding with bases in the Mediterranean, Pacific and Caribbean. The Moorings and Sunsail brands were brought under the same ownership during a 2007 merger. Currently the BVI base operates a combined total of around 385 boats in the BVI during the peak tourism season, according to Clarence Malone, the base’s director of operations.

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TOURISM DEVELOPMENT & REAL ESTATE

The difference in TUI’s two main brands – Sunsail and The Moorings – is one mainly of geography, Mr. Malone said, though The Moorings is marketed as the company’s premium brand, he added. Moorings customers largely come from the US and Canada whereas the Sunsail brand is stronger in the United Kingdom and European markets. “We thought that for the most part we were fighting for the same customers,” Mr. Malone said. “We found that after the merger that that wasn’t necessarily the case.” Unique to the BVI base is the Footloose brand, which operates older Moorings and Sunsail boats at a reduced price. Through the Sunsail and Moorings brands, the company buys yachts directly from manufacturers and sells them to individual owners who lease them back to the company. When the owners aren’t sailing the boats themselves, the yachts can be chartered out by other sailors, for which the owners receive a monthly payment. While its business is sill mostly bareboat-related, Mr. Malone said the BVI base, also offer crewed yachts and maintains a fleet of power catamarans, a growing market for the company. Mr. Malone, who started his career at The Moorings as a dockhand in the 1970s, said the growing popularity of powerboats and increased demand for catamarans has surprised him over the years. Ten years ago, the company’s fleet consisted of about 75 percent monohulls and 25 percent catamarans. This year, the fleet is made up of close to 60 percent monohulls and 40 percent catamarans, he said. “I remember when I came here a long time ago – over 30 years ago – we didn’t have any catamarans, not one,” he said. Mr. Grisdale, TUI Marine’s CEO, said that the increasing popularity of catamarans is a global trend. “Cats continue to be a popular choice for charterers and we anticipate more mainstream travel 108 growth from our all-inclusive crewed yacht product, as well

a fleet of 6 in 1969 has globally grown to over 2500 today

as the powerboat fleet,” he said. “Also we continue to introduce new sailors to chartering through Sunsail’s sailing schools in the BVI and around the world.” Catamarans made up about 45 percent of the new boats purchased under The Moorings fleet investment, he said. About 30 percent of the boats purchased as part of Sunsail’s investment were catamarans, he said. Mr. Malone said that he sees more families and firsttime sailors on the water, many of who want the extra space, privacy and comfort a catamaran can offer. “The kids love the catamarans, the space it offers, especially on deck so you find that the catamaran is growing,” he said. “If you’re traveling as a family, it’s a perfect option.”

Mr. Malone said that despite the down economy, the close proximity of the islands, the usually calm waters and the natural beauty of the BVI means that sailors continue to be interested in coming to the territory. “The weather conditions are perfect especially for first timers, if you’re sailing for the first time, it’s a perfect place to be,” he said. That continued interest translates into business activity, not just for his company and its 300 staff in the territory, but also for the BVI economy as a whole, Mr. Malone said. In addition to the taxes and fees that government receives from yacht charterers, visitors spend money with taxi drivers, at retailers and at outer island bars and restaurants. “It goes on and on and on. The fact that we’re here and able to invest in these difficult times, I think it says to the government and to the staff that we – TUI Marine, The Moorings, Sunsail – plan on being here for a very long time,” Mr. Malone said. The Interline Regatta, an annual gathering of sailors from the airline industry, is a good example of the buying power of charter guests, he said. The event, which celebrated its 30th year in October, brought down an estimated 300 sailors on 50 yachts, Tanya Whistler, commercial director at The Moorings’ BVI base said. She said that the event started as an informal gathering of airline industry personnel but has since evolved to include a weeklong series of races during the day and parties at night. Hosting those parties meant increased sales

for the bars and restaurants that served as the regatta’s official stops. For example, the Jolly Roger Inn, which served as one of the stops, hosted a themed party for 200 to 300 participants, most of who came in pirate costumes. “Regattas are certainly important, and a lot of the local people came in because they knew it was going to be a good night,” said Lorenzo Hughes, the inn’s owner. Mr. Malone said that he’s seen Interline participants grow more competitive over the past 30 years. “You have a lot of the same people coming back,” he said. “They’re very competitive, in respect to the racing but at the end of the day it’s all about the fun. They just have a great time.” He added that it’s the biggest group the BVI base sees at any one time during the year, a statement Ms. Whistler agreed with. “Over the years it’s just grown and grown and grown. We’d seen kind of a fall-off in the last few years, so this is us coming back up to peak,” she said. She added that the event kicks off the high season for The Moorings and acts as a barometer for the coming year’s activity. “It’s looking pretty good,” she said. “Fifty boats, not bad at all. Obviously, airline crew has that advantage that they are flying [at a free or reduced rate], but it’s still not cheap. You’re chartering boats, you’re paying for races, you’re eating out, and there are tons of parties. They’re spending masses of money.”

BVI BUSINESS & LIFESTYLES

110

SCRUB ISLAND RESORT TEAMS UP WITH MARRIOTT FOR

OPPORTUNITY jason smith

The private boat owners and passengers who take then ten-minute ferry ride from Trellis Bay to Scrub Island Resort usually reach the same conclusion rather quickly: the island is a pretty special place. Joe Collier thinks so too and would like more people to know why. Mr. Collier, the developer behind the 67-room luxury resort, recently signed up the property with Marriot’s Autograph Collection, a brand of independently owned hotels. The affiliation will link Scrub up to the international hotel brand’s resources, rewards programme and reservation system, but Scrub will maintain its character and independence, Mr. Collier said. “You’re able to do all that but you’re able to be unique. Because there’s lots of travelers out there who don’t want to stay at a cookie-cutter property,” he said.

arriott created the Autograph Collection in 2009 to showcase “exceptional” properties each chosen for their “originality, character and uncommon details,” according to the firm. The collection currently boasts more than 20 properties in the United States and Europe, a number that Marriot hopes to double in the coming months. When Scrub Island officially joins the collection in early 2012, it will be a “first” for Marriott, according to Kip Vreeland, vice president for the Autograph Collection. “As our first Caribbean resort in the exclusive Retreat category, we are confident that our Autograph Collection guests will embrace this unique resort as the newest member of our portfolio,” Mr. Vreeland said. Mr. Collier said that staff at Scrub is busy completing the operational changes needed to join the collection and has already integrated the property into Marriott’s reservations system. Just as the high tourism season began in November and shortly before this magazine went to press, the new reservations system has already generated “phenomenal activity” for the resort, Mr. Collier said. “We’re really excited. Just three weeks on Marriott’s system and we’ve already booked something like 1,500 room nights in three weeks,” he said. The developer said he expects the resort to be a major destination for members of Marriot Rewards, a guest loyalty programme. “They’re looking to stay somewhere unique and really special with their points so that UNCOMMON DET will be a good method for us to keep the property at a high level of occupancy during the off-season,” he said. “So we won’t go through the significant dips in the level of occupancy that you experience in the Caribbean.” Construction on the first phase of development at the 230-acre mixed-use resort community finished in August. The resort consists of 67 hotel rooms, 11 two-bedroom villas, 5,000-square-feet of retail and commercial space and a 60-slip marina. The resort’s conference and meeting facilities can accommodate up to 150 visitors, and since Scrub’s opening last year, they have frequently hosted local and international events. Mr. Collier said that with the major construction works finished, the next task will be to install a sprinkler system, a requirement of the Autograph Collection. He added that the property will also undergo extensive landscaping. “We have a fully functioning resort. We’re just looking to get rid of concrete. We want to see less and less concrete with every week that goes by,” he said. Now the resort’s staff can focus on adding touches to make guests’ stay memorable. “People when they stay at a property like this, when they go home, they don’t want to go back and say ‘oh, yes the headboard on the bed was so wonderful, it was made of mahogany.’ That’s not really what people remember,” Mr. Collier said. “Most people go home and say, ‘Gosh every night they light these torches and they have this lobster cookout on the beach, and that kind of stuff.” He said that one idea being considered is a guided stroll at night so that guests can view tarpon and eagle rays from the dock. “We have some underwater lights at the marina. It’s like an aquarium at night, you can see all this stuff,” he said. Mr. Collier said that the “little touches” will help drive repeat business and make for a memorable stay. “We’re putting a solar-powered refrigerator on the very, very far end of the island and people can take a hike to the other end of Big Scrub Island and get a cold beer or something out of the refrigerator. Experience. It’s got to be all about experiences,” he said. Like resorts all over the region, Scrub has been affected by the global economy, but has been “pleasantly surprised” by economic activity in June and July, Mr. Collier said, adding that he has high hopes for the new partnership with Marriott. “We’ve gotten very bullish. Now that we went live in Marriott’s system we’re rather excited,” he said. “We’re forecasting, making a few guesses, based on where we think this Marriott affiliation we’ll take us but so far we’re ecstatic,” he said of the upcoming tourism season.

Originality,

Character &

111

REAL ESTATE & TOURISM DEVELOPMENT

Cross Roads of

at the

A P e rsp e ctiv e o n air l i f t i n th e vir g i n is l a n d s denniston fraser managing director BVI airports authority

112

rom Sea Ports to Railroads; Highways to Airports; transportation infrastructure has been the basis of business location and commercial development. Air Transport supports activities in the international exchange of commodities. It is an essential ingredient in growing the economy and is indispensable for the recruitment of international companies. An expanding aviation environment gives rise to globalization, speed, connectivity and an ever-increasing tourism industry. Certainly there is a correlation between the economic growth of the Virgin Islands and a growth in air traffic. The benefits that would be derived from the direct, indirect and catalytic effects of air transport would all contribute immensely to empowering the BVI, making this Territory “a force to be reckoned with.”

OPTION 4

The question is asked, “Why should we expand when we have such limited rooms whether they are on land or sea?”

One should realize however, that the two must go hand in hand. I agree that we cannot develop an airport with insufficient beds for our overnight and vacationing guests. By the same token, we dare not build hotels and/or add rooms to our inventory in the absence of adequate airlift. Increased airlift in support of such ventures requires an expansion of the airport facilities and in particular, the expansion of a runway to accommodate a wider variety of private and/or corporate jets and larger commercial carriers. While the above issues are all important concerns, a fundamental national question must first be discussed. Is there a workable National Development Strategic Plan (NSDP) in place for the Territory as a whole? In the competitive global market place, the question, which instinctively arises, is how do we as strategic leaders work in an integrated way to ensure that the Territory moves forward with a collective vision and

OPTION 6

focus on acquiring and maintaining a competitive advantage for the BVI? The desire is for a long-term National Development Strategic Plan (NDSP) for the Territory: In essence, a Master plan for the Territory; sub sectors to this plan being, population, immigration, health, social welfare and transport plans. The transport plan would necessarily include a plan for the aviation sector. In this plan we must discontinue a myopic view of the airport. The question should be asked, “How important is the airport to our industry?” Like China and Asia, the BVI should appreciate that the airport is an absolute necessity for our growth. We should be marketing, positioning and re-branding ourselves, the results of which would create an economic impact nationally, regionally and internationally. The growth of aviation therefore should not be feared or viewed as inimical to the bottom line. Growth in our aviation sector is not mutually exclusive but rather, must be done in tandem with other efforts designed to grow the Territory as a whole.

The current Master Plan delivered in July 2011 looked at development from a high-end/low density standpoint; a medium income/higher density tourism development and, a mixed approach. Traditionally, the BVI focused on relatively high-end tourism with a focus on the Boating Industry. To determine the future objectives for airport infrastructure development, three strategies must be taken into account: 1. Should we continue the current emphasis on high-end/low density tourism and accept low to moderate growth rates; 2. Should we emphasize mid-range income/higher density tourist development; or; 3. Should we cater to a lower income/mass tourism scenario?

A National Development Strategic Plan would select a strategy that identifies the Territory’s target position in the next 30 years. Armed with the NDSP, we would then review the advantages, disadvantages and concerns of all airport development options before deciding on the way forward. Then, we must dovetail the airport development strategy into the Territory’s National Development Strategic Plan so that the Territory can benefit from the deliverables. While these scenarios were taken into account in the recently completed Master Plan, we must be mindful that master plans are essentially living documents that require continual revision and updating. Some experts even believe that master plans should be revised every 2 – 3 years. The option recommended by the Master Planners (Louis Berger Group) for expansion of the TB Lettsome International Airport was, Option 4. This Option suggested a 6,070 feet (1,850m) runway aligned in a more northeasterly direction (see inset). This runway would cater for instrument landing and hence, the clear and graded area will be extended to a width of 300 feet. This Option will maximize land construction on the airport property and extend the runway some 2,444.2 ft (745m) towards Marina Cay and some 623.3 ft (190m) into Well Bay and Beef Island Channel to accommodate regional jets and large aircraft such as the Boeing 737, to reach the US Mainland. This Option preserves Trellis Bay, continuation of the airport Operations during the project and, allow for future expansion to greater lengths if so desired or needed in the future. However, the salt pond to the north of the runway will disappear and both Long Bay and Well Bay will be affected somewhat by the runway safety areas. This Option also includes an eastward extension of 110,330 square feet of the apron, a reconfiguration of the existing apron to accommodate two stands for the B-737 aircraft, strengthening the commercial apron and taxiways and the relocation of the Rescue and Fire Fighting facilities. The cost of this Option is expected to be approximately, US$ 70 million and could be completed within an 18-month period. The main concern with this Option is the elimination of the salt pond, located north of the current runway. A second Option being explored by the Board of Directors is an extension in the current direction to a 6,300 feet runway (1,000 feet to the east & 500 ft to the west), also known as Option 6. With the exception of the change in runway direction, this Option incorporates all the basic requirements stated in the previous Option. Option 6 significantly reduces the cost to approximately US$38 million. It is the more environmentally friendly Option as it is a non-instrument runway, thus the foot prints, unlike Option 4, does not encompass the salt pond to the north of the runway. This Option, however, is not particularly amenable to future widening and/or lengthening. Yet another option spoken of less frequently and unofficially is the re-starting of a national airline. The advent of a local airline allows us to control our destiny. The option will be ours as to whether we arrange scheduling to meet certain carriers at a regional hub or whether we prefer direct flights to the US or a combination of both. However, before

considering any of the aforementioned options we must consider and develop the National Development/Strategic Plan (NDSP). Airports are drivers for economic development, competitiveness and prosperity. They are more than just aviation infrastructures. They are multi-modal, multi-functional enterprises and commercial developments within and well beyond their boundaries (now known as the aero-tropolis). According to Dr. Charles E. Schlumberger, “Air transportation has become the key element for global economic development. Together with the tourism industry, when taking all direct, indirect and induced economic effects into account, it represents the single most important economic sector”. (Dr. Charles E. Schlumberger, The World Bank). Armed with this information, in order to develop the airport we must employ an aggressive marketing strategy at the very top levels. It is important to note that airlines do not serve airports they serve markets. Gone are the days when a nation would build an airport or expand to a long runway and expect the airlines to come. The reality of today’s economy dictates that airlines will not come, regardless of the length of the runway or, how pristine the airport surroundings may be. Bottom line is: There must be passengers to fill the seats if we expect the airlines to come. Hence, if the BVI is to remain a viable player in regional tourism, there must be a concerted effort by the BVI Tourist Board and the BVI Airports Authority to develop a marketing strategy that will capture the clientele that fits the profile being targeted by the Aviation sector in a National plan. We should not at all exclude the idea of a deep-water cruise pier at Beef Island. With this, both the airport and tourism stand to benefit. Such a 113 pier could be developed as a cruise hub for the Caribbean. Why not start a cruise in the Virgin Islands as opposed to San Juan? This will benefit the airlines, the airport, the taxi industry, and tourism as a whole. It could also boost the idea of year round tourism for the BVI. Think about it. We fly all the way to Miami to take a 3-day Bahamian cruise. Could there be such a thing as a Virgin Islands cruise? I firmly believe that with a National Development Strategy Plan along with the great minds on both the Tourism and Airports Boards we can take the Tourism/BVI brand to another level. To conclude, we must develop these islands not only for its citizens and residents but also for foreign investors. To attract investors we will need a stable political climate, low crime rates, stable currency, and an efficient and effective legal system; all of which for the most part we possess. The one ingredient that is lacking is adequate infrastructure including a runway that accommodates large jets traveling nonstop directly to airports up to, 1500-2000 miles away, including Miami, Atlanta and beyond, from the TB Lettsome International Airport. The simultaneous development of hotel rooms, conference centers, and widening our tourism target markets (possibly eco and medical tourism) are a must. If we are to truly capture our share of the global aviation, commerce and tourism markets, the BVI must ensure that our existing and potential investors have access to and from the Territory to enhance and maintain their ability to compete in their respective industries.

take the BVI brand to the

level

TOURISM DEVELOPMENT & REAL ESTATE

SUP

Stand-up paddleboarding. If you haven’t already tried it,

Floating to the top todd VanSickle

you probably know someone who has. 114

It looks easy enough, so there is a good chance you thought to yourself, “I can do that.” And you are probably right to think so.

Photo: Courtesy Gunner

tand-up paddleboarding (SUP) is as easy as standing on an oversized surfboard and propelling yourself through the water with a paddle. (Hence, the name.) Its simplicity may be the reason it is attracting more and more people, while businesses throughout the territory look to cash in on its popularity. “It is growing by leaps and bounds,” HIHO owner Andy Morrell said. Since 1993, Mr. Morrell has been organizing the Highland Spring HIHO Windsurfing race. The seven-day event features windsurfers racing more than150 miles throughout the BVI. The organizer has always been looking for something to compliment the event and it wasn’t until two years ago he added SUP. Now paddleboarders out number the windsurfers. As event participation swells, so do sales at his clothing store. Boards cost more than $1,000 and a couple hundred dollars more for a paddle. On average, Mr. Morrell’s store carries 10-20 boards at all times. He encourages people to rent boards and try it before making the investment. Renting runs about $220 per week. Purchasing a used board is another good option. “You can get into it for under $1000,” Mr. Morrell said. “There aren’t a lot of shopping options here. No one else is selling SUP here. We support the sports that we like, with a view of getting more people into the sport.” Stand-up paddling has recently gone mainstream, while some consider it to be the fastest growing sport in the world. In fact, magazines have popped up dedicated to the water sport, while traditional surfboard shops have had no choice but to start carrying SUP equipment. For more than 12 years surfboards have been part of Mr. Morrell’s inventory and cost considerably less than a stand-up paddleboard. But surfing is more daunting and doesn’t have the mass appeal that SUP has. Mr. Morrell said a lot of women and older surfers are now getting involved in the sport. SUP can be done in various water conditions. It doesn’t rely on waves, but isn’t limited to flat seas. In the US, paddleboarders have taken to lakes and rivers. Here in the BVI, several SUP events have been held and more are being planned. As more people get involved, a greater demand for equipment and merchandise is created. SUP has given Mr. Morrell’s business some extra buoyancy during a troubled economy. By diversifying his event and merchandise line, he has created a new stream of revenue from unlikely customers. Aside from the BVI, the retailer currently supplies stores in the United States with clothing designed for SUP. Suntek shirts that cost more than $40 have been popular with SUP enthusiast here and abroad. “Some of the products we make are perfect for paddling,” Mr. Morrell said. “We actually sell a lot to SUP stores in the US. It has grown into a nice, little niche in our clothing line.” He estimates about 60 stores carry his products in the US. For some stores, SUP has helped get his foot in the door allowing him to supply them with other clothing products. On average he attends about four tradeshows a year, where he is able to make new business connections. He hopes to have his products in 100 US stores by the end of the year. Mr. Morrell’s BVI business is not the only one benefiting from SUP. He sees the territory becoming a destination for SUP. Ideally, he envisions charter boats carrying paddleboards for its guests. Although sailing and SUP is a good fit, Mr. Morrell said charter companies are a little hesitant to purchase a “toy” in a bad economy, when most charter boats already have a kayak onboard. But SUP boards are typically lighter than a kayak, easier to transport and store, and require little instruction to get started. Mr. Morrell remains optimistic that if the territory markets its self as a SUP destination, visitors will spend money in various tourism sectors, such as restaurants, taxis, hotels and stores. Carnival cruise lines have already started to offer SUP excursions in the Bahamas, which start at $69.95 for adults. And the USVI is now hosting SUP events. In September, St. Croix held its first SUP race, which attracted more than 40 competitors. Including SUP into the HIHO race has been one way to get more visitors to come to the BVI. Mr. Morrell’s business has reaped some of the benefits as visitors purchase clothing as souvenirs and competitors are donned with custom-made jerseys. He has received orders from other event organizers in the US that now want “jerseys” that his company makes. “They loved it and now other race [organizers] are asking for blank jerseys so they can put their logo on it,” Mr. Morrell said. “We added paddleboarding to the HIHO race and that has made a huge difference. It has allowed us to get our brand into stores.”

Competitors from around the world compete in the paddleboarding division of the Highland Spring HIHO event.

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Photos: Courtesy of go-hiho.com.

TOURISM DEVELOPMENT & REAL ESTATE

big Yachts mean big business jason smith

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TOURISM DEVELOPMENT & REAL ESTATE

SAILING IN THE BVI

may be known as a sailor’s paradise, but those who don’t have the sailing experience for a bareboat trip needn’t miss out on all that 118

“nature’s little secrets” have to offer, thanks to charter yachts. Typically

about

seven

days,

a crewed charter trip can cost $5,000 to $50,000 a week, and be a romantic getaway, a water sports adventure or family vacation, said Janet Oliver, executive director of the Charter Yacht Society. “We have the 42-foot, single-hull Corus, that takes two guests — They do a lot of anniversary trips — all the way up to the Cuan Law, which is a large trimaran that can take 20 guests, has maybe six crew and dive instructors and an onboard engineer,” Ms. Oliver said of the 80 CYS member vessels. Each vessel’s crew lives aboard and has its own speciality – and personality – so guests who sail with a crew often wind up bonding with them over the course of a trip. Many crews even find that when they’re ready to move on to another vessel, their charter guests come along, too. “There’s a saying we have, ‘come as strangers, leave as friends,’” Ms. Oliver said. Alex Ball, captain of the 57-foot Ma Ha, said this happens often. “I get emails just about every day from former guests,” he said. “They want to

check in and see how I’m doing.” Mr. Ball has even had former charter guests meet his parents, also sailors, when they were passing through the same port. “A lot of people end up feeling like family; their kids I would treat as my own,” Mr. Ball said. That kind of bond is exactly what Ulla Gotfredsen, owner of the charter-booking agency Amazing Charters, hopes to help create for her customers. “When you’re booking for customers, you’re looking for a good fit of personalities,” she said. Ms. Gotfredsen will look to the age, professional background, hobbies and service style of the crew to match them to her customers. Some crews offer SCUBA or sailing lessons, others like to take guests to hiking spots. Captain Tim Schaaf even plays music with his guests. “It’s really a huge range of talents and backgrounds that they all have,” Ms. Gotfredsen said. Often, charter guests have various tastes and wants within their family, which crews are accustomed to dealing with. “Maybe a sailing trip is the husband’s dream vacation, but the wife wants to have more creature comforts. Or sometimes you might take the parents to a quiet beach and take the kids wakeboarding,” Mr. Ball said of past guests. Most crews are a captain and chef, and there’s been a greater appreciation for the high-quality cuisine by charter yacht chefs, who compete amongst themselves for bragging rights at the CYS’ boat show every year. This year, they’ve released a cookbook of recipes from some of the best charter yacht chefs. Ms. Gotfredsen thinks of the vessels as “floating boutique hotels,” and markets them to her customers as vacation and, more recently, as business lodging.

Photos: Courtesy of Cuan Law.

he British Virgin Islands

Highly trained culinary chefs prepare meals, like these served aboard SV Viking Dream, based upon the preference and request of their guests.

Food Photos: Courtesy of Viking Dream.

“For the folks who have to travel 200 days a year and have to look at the stationery on the desk to remember where they are, waking up in the bay to the smell of fresh coffee and their favourite bread baking is a great experience,” Ms. Gotfredsen said. While business a traveller staying on a crewed yacht is still considered out-of-the-ordinary, she thinks the combination transportation and lodging will have a special appeal to some up-market business travellers. Back on shore, not all residents notice, but the charters are big business – about $40 million annually, Ms. Oliver said. “Our members spend about $1.2 million provisioning at Rite Way,” she said. She likes to compare the 125 crewed charter yachts based in the BVI to the money counting machines at banks. As soon as they get payment, the crews, who sometimes own but nearly always manage the vessels, turn around and put

the money into the vessel or provisioning for the next charter. With that in mind, CYS has been helping build relationships between the charter crews and other local businesses. They’ve also been reaching out to government and schools to help people understand more about the industry. The CYS will often support the BVI Tourist Board at boat shows abroad, and Ms. Oliver herself occasionally speaks to students in the territory. “I tell them what we do and explain that you don’t have to be the fastest racing sailor to captain a boat, and to run this kind of business,” she said, “All you have to do is be able to provide good service.” Which is what the whole business boils down to, said Mr. Ball. “At the end of the day, you’re there for silver service, to provide for everybody.”

A Crewed Charter Yacht... A Perfect Option for the Business Traveller.

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After your morning snorkle your crewed yacht charter can get you to your meeting. Most offer wifi onboard so you are never ‘really’ away from the office.

Photos: Courtesy of Viking Dream

The Charter Yacht Society of the British Virgin Islands may be contacted via: bvicrewedyachts.com

TOURISM DEVELOPMENT & REAL ESTATE

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The Outlook for Real Estate 2012 A PURCHASER’S MARKET

edward childs

he longer an economic down turn lasts, the easier it should be to predict that the end is in sight. Now entering the fourth year of the slowdown (it is preferable not to use the word

“recession” at this point), the short term outlook remains “cloudy with a strong chance of rain”, as economic indicators in North America remain confused and the Eurozone is in turmoil with an expanding sovereign debt crisis. Predicting the medium term outlook in the current economic climate remains difficult as discussion once again turns back to “double dip”. Even when it is determined that the North American and European economies have turned the corner, just as the Caribbean was slow to enter the recession, so will it be slow to react to improved economic conditions as external investment will take time to trickle back into the region. 2011 has demonstrated a marked similarity to 2010 where stronger first quarters were marked by major natural catastrophes which later combined with worrying economic data to create a summer slow down. Investor confidence remains low as a series of negative events (the Japanese Tsunami in March, the Eurozone debt crisis, the ‘Arab Spring’, the conflict in Afghanistan and turbulent weather in the US, continue to impact short term growth in North America and Europe contrasting with strong growth in South American and Asian economies. The debt crisis has spread to the United States with its $15 trillion national debt. Congress and the White House set the battleground on the approach to reducing the debt with a cliffhanger vote at the start of August reaching a “compromise” to extend the debt thus avoiding a default. Despite the eleventh hour compromise, the debt rating for America was reduced from AAA to AA+ by Standard & Poor’s which became a catalyst, along with continued concerns for the Eurozone, for a two week run on the market in early August with the largest stock market declines witnessed since 2008.

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TOURISM DEVELOPMENT & REAL ESTATE

The Caribbean region is a spectator to the larger stage, dependent as it is on external investment, which drives the islandsâ&#x20AC;&#x2122; economies. Over the past forty years, tourism has emerged as a major industry across the region and more recently the rise of the offshore financial sector has improved the economies of many islands. Both industries have been impacted by the economic crisis although these industries have steadied over the last couple of years. However concerns remain about the airlift to the region which impacts tourism, coupled with the long-term implications of ever tightening restrictions on offshore financial centres. The regional real estate market is also reliant to a greater extent on external investment, although many of the larger islands have established internal markets, particularly for commercial property. For the most part, this external investment has dried up with just a fraction of the investment being made compared to previous years. With the US housing market remaining in a precarious state, there is little appetite for investors from North America (which has been traditionally the most important source of investment for islands in the northern Caribbean) to invest in second homes in the Caribbean. This lack of investment has impacted both the individual homeowners seeking to exit their Caribbean investments but also the real estate developers who had commenced various developments but were subsequently caught by the economic recession. On a regional basis, the past twelve months have seen a change in attitude of the banks and other lenders to commercial and resort projects that have struggled under the difficult economic conditions. As the

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recovery has become protracted, we have witnessed an increasing number of tourism related projects going into receivership and liquidation as the lending partners make difficult decisions to bring under performing properties to the market. The new Viceroy project on Anguilla has seen the debt on the project acquired by Starwood Capital and in turn the property itself being acquired by Starwood after the holding company went into Chapter 11 proceedings and the subsequent sale at auction. Nearby, also in Anguilla, the troubled Temenos development has just been sold in receivership with the eventual sale reflecting a fraction of the original capital investment. In the BVI, we have had a sobering year as the sales activity has continued to be slow while the number of houses placed on the market has risen. With very few investors searching for a home, many homeowners are now considering their options (or lack of) and for those seeking to exit sooner than later, and the inevitable reduction in asking price. In last yearâ&#x20AC;&#x2122;s edition of the BVI Business, we introduced the research we undertake based on completed sales of villas over $500,000. The following graphs illustrate graphically the current state of the residential real estate market in the BVI, which is echoed across the region.

From the peak of the market in 2008 (which was based on sales contracted generally in 2007 or earlier), the market has dipped in consecutive years. The full impact of the downturn, however, has not been evidenced until 2011 when the first six months figures demonstrate the continued lack of sales of villas over $500,000. In 2008 there were a total of 29 villa sales over $500,000 at a total value of $46,414,729 and an average price of $1,600,508. By 2010, the number of sales had dropped to 21 with a total value of the transactions at $18,386,000 although six of these sales were at Scrub Island and had first contracted prior to 2007. If these sales are excluded from the graphs, the sales in 2009 and 2010 reflected similar figures with 15 sales in each year at total sales values of $14,609,000 and $12,479,000 respectively. The average home price had also fallen to $973,937 in 2009 and to $878,267 by 2010. The first six months of 2011 have seen a total of six sales, four of which are to belongers and two to non-belongers. Of the two non-belongers, one is resident on Tortola. All six sales are of properties below $1.0M and the average villa price has now dropped to $602,000. The total sales value of the six sales amounts to $3,708,400. In contrast, the first six months of 2010 had a total of 12 sales at a total sale value of $11,632,650. Categorizing the home sales by sale price further illustrates the impact of the downturn on the BVI real estate market. The following graph categorizes each sale into one of three price bands: up to $1.0M; $1.0 to $3.0M and over $3.0M. The data for the years 2003 to 2010 and the same January to June comparison for 2010 and 2011 is as follows:

All Graphs | Source: BVI Government Land Registry

Compiled: Smiths Gore

The market for villas below $1.0M has dominated since 2003 however there was a substantial increase in sales in the $1.0M to $3.0M price band between 2007 and 2008 at the height of the market. There have been only five sales of villas above $3.0M again in 2007 and 2008. The graph illustrates how the market tailed off in 2009 and 2010 while the first six months comparison between 2010 and 2011 indicates a further softening of the market as all completed sales dip below the $1.0M mark in 2011. We can draw a number of conclusions from the data above: · The real estate market has reacted in the BVI in the same manner as other islands throughout the Caribbean. The overseas investor has all but disappeared and, in the BVI, the importance of the local investment market has become evident to keeping the market somewhat active. · The market over $1.0M has become tight as the purchasers who are in the market are generally seeking value for money. Vendors are having to adjust their asking prices in line with the current levels of activity. · Total value of transactions and average house prices are now considerably below the height of the market in 2006-08. In 2008 the average sale price was $1.6M against $600,000 in the first six months of 2011.

Having presented the data above, it is important to recognize that this represents historic trends and given the time lag in processing sales in the BVI, the data will not provide any clues as to when the market is turning. The question for both vendor and purchaser is where on the graph are we at the moment? Has the bottom of the market been reached and when will overseas investment, which drives the market over $1.0M, return to the region? Needless to say these are difficult questions to answer but with the real estate agents remaining quiet over the summer of 2011, the general view is that the remainder of the year will not show a great deal of improvement Certainly, there is some activity from overseas investors which will help improve on the figures seen in the first six months of 2011, however there is a not a general return to activity that will herald an upturn in the market. It is important to keep development in the BVI in context with the region and while the data above reflects the picture around the Caribbean, there are pockets of activity in the BVI, which stand out against the general trends. The Oil Nut Bay development in Virgin Gorda has been joined by the YCCS Marina Virgin Gorda, a development by Victor International, which has been branded by the renowned Costa Smeralda Yacht Club 123 from Sardinia. Official opened in March 2011 with the inaugural Boats International Caribbean Superyacht Regatta and Rendezvous, this marina will attract a new market – the super yacht crowd that otherwise holiday in better-known destinations in the Caribbean. In the meantime, development continues at Oil Nut Bay with the completion of the beach club and the first homes being finished and more under construction. What is not seen with these two projects is the massive infrastructure investment in underground water and electricity utilities, the paving of roads and the completion of storm water drainage systems. The investment into this scheme is in marked contrast with most Caribbean developments where activity has either halted or is at a level, which reflects the lack of market activity. Staying in the North Sound area, the Mosquito Island development is now breaking ground with infrastructure for the common areas under construction. The development plan is for seven sites on the island plus a home for the owner, Sir Richard Branson. While the island has attracted publicity internationally for the importation of lemurs, the on-going development of the island, combined with the up-market homes that will be developed there, will help keep the North Sound area of Virgin Gorda in the lime light for some time to come. Looking forward to the time when the market does begin to pick up, the real estate industry needs to react positively to overseas investment. The Achilles heel for real estate investment in the BVI has always been the landholding license procedure, which, in the past, has turned many potential investors away from the BVI to other more favourable and hassle free jurisdictions in the

The first six months of 2011 saw a total of 6 sales (in the BVI)

Categorizing the home sales by sale price – further illustrates the impact of the downturn on the BVI real estate market.

TOURISM DEVELOPMENT & REAL ESTATE

For purchasers, now is certainly an excellent time to step into the market...

Caribbean where the processing time has been shorter with fewer restrictions on investment. While the economic downturn has allowed faster processing times for landholding licenses, the total process once a sale price has been agreed, still takes over six months by the time a landholding license application is submitted, approved and eventually signed off by the Governor. With an election due in late 2011, the real estate market could be jump started by the new administration (of whatever political make up) reviewing the processes involved in the landholding license application to ensure that sales are not lost as a result of Government administration issues or â&#x20AC;&#x153;policiesâ&#x20AC;? which place the BVI is a negative light compared to other Caribbean jurisdictions. For the homeowner looking to sell sooner than later, success in achieving a sale will be predicated on pricing to current market conditions. For purchasers, now is certainly an excellent time to step into the market before sales pick up and prices start to increase. In short it is a purchaserâ&#x20AC;&#x2122;s market.

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Green Opportunities

GREEN OPPORTUNITIES

In much of the United States, including the US Virgin Islands, federal and local authorities provide incentives to businesses and homeowners interested in migrating to renewable sources of electricity, such as solar and wind power.

In the USVI Governor John de Jongh has announced a goal of

reducing fossil fuel use 60 percent by 2025,

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AND THE BVI steven melendez

ll over the world,countries large and small are looking beyond traditional sources of electricity. Alternatives such as solar, wind, coal and nuclear are all getting close consideration to lower power bills, reduce reliance on the goodwill of fuel exporting nations and to control global warming.

a net-metering programme allows residents with rooftop solar arrays to sell excess energy to the Water and Power Authority at the retail rate. Low-interest loans have also been made available through the territory’s Energy Office to residents buying solar generating and water-heating equipment. In the BVI however, a 1979 ordinance bars anyone beside the BVI Electricity Corporation (BVIEC) from generating electricity for anyone else without permission from the Minister of Communication and Works. In processing applications for permission, the minister is required to consult with the BVIEC, taking into account its future plans and “giving precedence to” the corporation’s interests. A petition being circulated by the nonprofit group Green VI urges a repeal of the 1979 ordinance. “We urge Government to amend existing legislation and promote clean, sustainable energy and energy conservation in the BVI,” reads the petition, arguing a change in the law would stabilize energy costs in the territory. “The BVI is blessed with abundant sunshine and trade winds,” the petition begins. “We want to use these to produce our own clean energy so that we are less dependent on imported, expensive, and polluting fossil fuels.” Candidates seeking office in the 2011 general elections also pushed for the VI to adopt alternative sources of energy. “We must work towards a pivot in our production and consumption to cleaner supplies such as natural energy: solar, wind turbine and tidal,” Preston Stoutt, an independent candidate for First District representative, wrote in his platform. “Currently, consumers are burdened with paying extremely high electricity rates, with the fuel surcharge accounting for close to half the bill.” Myron Walwyn, an at-large candidate for the National Democratic Party, also advocated the territory take a serious look at not only allowing but also encouraging alternative energy, to reduce electricity costs. The ruling Virgin Islands Party has also investigated alternative energy options through the Ministry of Natural Resources and Labour. At H. Lavity Stoutt Community College, officials are considering installing a small pilot solar generating installation, said HLSCC President Karl Dawson. “Our plans are not finalized, but we are very much interested in pursuing it, because just like everyone else, we feel that we must be, as a global community even, be on the lookout for alternative sources of energy other than fossil fuels,” said Dr. Dawson. “We believe that this technology will become more prevalent in the British Virgin Islands.” And when that day comes, local technicians will need to be “trained and ready to install and maintain the various types of technology,” Dawson added. “The college could one day be involved in training new technicians and getting established electrical technicians retrained in the new technology.”.

In the meantime, Dr. Dawson said, college officials are speaking with the BVIEC and with Port Purcell-based Alternative Energy Systems to hammer out the details of the project, hopefully constructing something that will power some part of the college’s Paraquita Bay campus. “Within this academic year, we’re aiming that we would like to see this project move forward, “Dawson said, adding that he hopes to get students involved as soon as possible in whatever gets built. If the territory can build a solid corps of technicians trained in alternative energy technology, there’s a potential for exporting that talent to nearby jurisdictions, like St. Maarten or the USVI, said AES General Manager Jacco Bos. “The faster we implement it, the greater the skill base grows in the BVI,” said Dawson. “There’s a huge opportunity…[and] the leaders get the largest chunk of the pie.” Workers would be needed to install solar and wind systems, do maintenance on wind turbines and do the general construction work necessary to get the systems in place, he said. Dawson continued, “We can export engineering expertise, just as other countries like Germany have done so successfully with other areas of technology. HLSCC could offer training for, say, solar technicians and offer exams for electricians to receive internationally recognized certifications in the field.” And having the VI be a leader in alternative energy technology could attract visitors to the territory for conferences — and could help bring more tourists interested in spending their money in an environmentally progressive environment. “You create a story that people are interested in, so they pay attention to the BVI, and that’s going to attract tourism on its own.” Some VI resorts, which are off the BVIEC grid, have already been able to start making the switch to alternative energy. The resort at Cooper Island now generates about 75 percent of its energy from solar, said Sam Baker, a manager at Cooper Island Beach Club. “It’s just worked very well for us, actually. We’ve had a tremendous amount of interest from our guests.” According to Baker, many guests have already said they chose Cooper Island because of its environmental policies. The resort’s started integrating environmental issues more heavily into its marketing material, and has already received coverage in publications like Travel & Leisure. And adding solar has meant the resort has been able to deliver better service to guests. “They used to run the generator probably half the day, and then when it was off, that meant no power at the resort — no blended drinks,” said Baker. “Now, they can offer a “full-service resort” with a fully working bar and other facilities throughout the day. We’re still being eco-friendly and using less diesel than we ever did.” Cooper Island also has a test turbine installed gathering wind data, and after a year of operation, they’ll be able to get recommendations on adding wind to their energy portfolio. “All our guests have been very interested in that, and many have asked for tours of the solar generating system. We do have leaflets that are available for guests who have just come off the yachts, with 18 points of what we do to green up the BVI. Baker adds that they’re adding more solar panels on the roof of the staff accommodation buildings,

“We should be carbon neutral by 2015,” and weaned off fossil fuel, except for backup generation and transportation. We’ll only have to use it for the boats — if they could invent a solar boat, that would be great.” The Peter Island Resort & Spa also generates about 60 percent of its power requirements through wind turbines, though the generating system was damaged last year during Hurricane Earl. Plans for Sir Richard Branson’s Mosquito Island resort include using wind power to help Sir Richard build “the most eco-friendly island in the world.” And Eustatia Island in North Sound, another private island with villas available for rent, already boasts nearly 100 percent reliance on solar power. “Generators are available as back up power source in the event of an emergency but rarely employed,” according to the island’s website. But on the territory’s more developed islands, fully integrating solar and wind power into BVIEC’s grid isn’t practical with the utility’s current systems, BVIEC General Manager Leroy Abraham has said. The utility’s line workers are trained to disconnect power to an area of the grid before performing repairs, which he said would make it difficult to fix outages if customers were feeding power into the grid. In other jurisdictions where net-metering is in place, utility crews do live-line work, working on areas of the grid when they’re still electrified, said Abraham. Having manual shutoff switches requiring line crews to disconnect customers feeding into the grid would be impractical, and automatic shutoff systems are still “very much in their infancy,” Mr. Abraham told the BVI Beacon earlier this year. Others in the industry have argued the automatic shutoff switches could be a safe solution. A post on the AES website points to IEEE 1547, a standard issued by the Institute of Electrical and Electronics Engineers “for Interconnecting Distributed Resources with Electric Power Systems” and ensuring, among other things, the safety of those using and working on the power grid. The standard, which has been adopted by the US government, requires that distributed systems, like home solar generators, stop sending power to the rest of the grid if any abnormal conditions are detected. Underwriters Laboratories Inc., the 129 international safety testing organization, has also adopted safety standards for such generating equipment. Some time in the future, Mr. Abraham has said, the BVIEC is likely to transition to doing live-line work.

HLSCC could offer training... offer exams for electricians to receive internationally recognized certifications in the field.” In the meantime, he’s said, the corporation would be open to signing power-purchase agreements with developers who’ve spoken to the Ministry of Natural Resources and Labour about building their own largescale renewable generating stations, perhaps using solar, wind or wasteto-energy technology. That last kind of system would convert some of the territory’s garbage into electricity, rather than just smoke and ash. And moving to renewable energy will help to stabilize local energy prices, which are now tied to the global price of oil, said AES’s Mr. Bos. Solar and wind systems, on the other hand, boast fixed upfront capital costs and understandable lifetime maintenance costs, “It’s not just environmental sustainability - it’s also economic stability,” Bos explained. “We have no control over diesel prices - we’re just at the mercy of the cost of a barrel of oil.”

Around the Region

AROUND THE REGION

132

BAHA MAR

THE $3.4 BILLON BAHA MAR RESORT THE LARGEST SINGLE - PHASE RESORT DEVELOPMENT IN THE CARIBBEAN inderia saunders

133

While in the country, the workers will be housed on the 1,000-acre property in accommodations rivaling that of a mini city. There is everything from dining rooms and prayer rooms to tennis courts and libraries for their entertainment during their stay in The Bahamas. The Chinese workers will largely be responsible for the work on the hotels and condos, while the Bahamian workers will complete a commercial village as well as working on the re-routing of the road to accommodate the property’s expansion. At the end of the construction, says the Bahamian government, the resort’s workforce will be 98% Bahamian. To enhance the skills and employability of the local workforce, Baha Mar has created the Baha Mar Training and Service Academy and has committed an initial $8 million towards the training of the Bahamian workforce in skills needed in both the construction and hospitality industries.

135

Throughout the construction phase, Sands expects growth opportunities in the areas of financing, development, supplies, exchanges, language development and tourism, to be presented for many in The Bahamas. And he expects much of the region to form ties with China, given it was that country’s single largest one time investment in tourism in the region. Says Sands, “There have been many other projects performed by the Chinese, but none the size of Baha Mar. This is the first time this organization has ever lent to a resort entity, making this an unprecedented occasion in the hospitality industry.” Some amenities of the project will include a 50,000 square-foot retail village combining an upscale shopping experience with Bahamian arts and crafts, chef-branded restaurants, and entertainment venues. There will also be, a 20-acre Eco Water Park and pool experience as well as three spas, including the largest spa in the Caribbean – all along 3,000 feet of the most pristine beach in the country. There are also plans for an 18-hole Jack Nicklaus Signature Golf Course, which will be a championship course.

an elevated experience at sea level an elevated experience at sea level

MOVING TO THE BRITISH VIRGIN ISLANDS

136

moving to the britis h

virgin

times.

islands

Many dream of living in paradise, waking up to the sound of breaking waves, relaxing on white-sand beaches and living in a place where both the sky and sea are blue and the people are friendly and laid-back . Once you have decided to make this dream a reality and just before you take the leap you need to consider the practicalities such as informing your loved ones of your decision (highlighting the benefits to them as you do so), researching the cost of living and finally securing a job that is going to enable you to make this life style change. The British Virgin Islands, a beautiful collection of 60 islands, cays and rocks in the north eastern Caribbean some 60 miles east of Puerto Rico offer what many expatriates are looking for. The strong economy, characterized by a growing tourism and financial services sector, a strong public sector and a growing private sector continues to draw people from virtually every country in the world. The process of emigration is fairly straight forward once you know what to expect and how to go about it. WORK PERMIT AND IMMIGRATION MATTERS Once you have found your ideal job in the British Virgin Islands, if you are not a citizen of the BVI, you must obtain a work permit. This permit allows you to legally work in the Territory for a specific employer. Even if individuals plan to work for a few months, a Temporary Work Permit must be obtained. While work permits are being processed, perspective employees must reside outside of the BVI. Work permit applications are filed by the employer and not the employee. A new work permit application form must be filed with supporting documents, such as: • Cover letter from employer • Perspective employee’s resume • Proof of qualifications for the job • Copy of newspaper advertisement of the job • 1 passport sized photo of applicant Work permit applications are processed within 30 working days. Once the work permit is approved, the application if forwarded to the Immigration Department. Immigration then grants a clearance letter which will be used by the employee to enter the Territory. The employer will be given the clearance letter and a medical form to forward to the employee. A thorough medical must be done and a medical certificate granted before entering the BVI. Once the employee enters the Territory, the medical certificate must be approved by the BVI Health Services. If any additional vaccinations or test is needed to be done, this can be done by the Government’s health clinic. It is important to note that citizens of particular countries must obtain a visitor’s VISA to enter the British Virgin Islands. This can be obtained at the nearest British embassy in the applicant’s home or residing country. A full list of qualifying countries can be obtained from the Deputy Governor’s Office website at www.dgo.gov.vg. Additionally, while the need for passports to enter the BVI for United States and Canadian citizens have been extended; citizens of those countries are urged to obtain passports to enter the BVI. Upon entering the BVI, all expatriates must have a return ticket to their home country. Once in the BVI, the employee can receive their work permit by visiting the Labour Department. The Territory’s new work permit cards are a highly sophisticated holographic cards, that can also be used as a pictured identification card and are the size of a regular bank card. It is very important that work permit holders have their work permit cards on their person at all

Once the card is received, employees must take the card and job letter to the Immigration Department. There a stamp is placed in the employee’s passport showing that the employee is a legal resident of the BVI. Once this process is done, employees are legally permitted to work, reside and travel in and out of the British Virgin Islands. Labour Department Immigration Department

284 468 3701 ext. 4708/ 4780 284 468 3701 ext. 4700/ 4770

SOCIAL SECURITY 137 Social Security is a compulsory insurance plan to which employers, employees, self employed individuals must contribute. It is designed to protect insured persons from financial distress by providing partial income replacement when particular contingencies arise. Sickness, maternity, invalidity, age, funeral, survivor’s and employment injury benefits are paid to qualified persons. All working individuals between the ages of 15 and 65 years must register with the Social Security Board and obtain a BVI Social Security card. This is a one time registration. To register, persons must fill out an Employee’s Registration Form and submit proof of birth, i.e. birth certificate or passport. Forms may be collected and filed at the Board’s office in Road Town. Social Security payments are mandatory. Contributions for private employees and self-employed persons are 81/2 percent of insurable earnings. Employees contribute 4 percent of that total and 41/2 percent is contributed by employers. Civil servants contribute 71/2 percent; 31/2 percent by employee and 4 percent by Government. Social Security contributions can also be voluntary for persons who have worked in the Territory and are living abroad or for persons who no longer work but are not at the eligible age of 65 to collect benefits. This contribution is 7 percent of earnings established by the Board. Social Security Board 284 494 3418 TRAVELLING TO THE BRITISH VIRGIN ISLANDS The Terrance B. Lettsome International Airport is located on Beef Island. It is the Territory’s main airport with internationally recognised airport code, EIS. Some travellers fly into the United States Virgin Islands’ island of St. Thomas at the Cyril E. King International Airport, code STT. After arriving at this airport take a 5 minute taxi ride to the waterfront ferry terminal in Charlotte Amalie where you can catch various ferries over to the BVI. The ferry ride is usually 45 minutes to West End, Tortola or 60 minutes to Road Town, Tortola. In St. Thomas, persons may also travel via sea plane to the BVI’s Sister Island of Virgin Gorda. If you choose to arrive in the BVI, via the USVI, you must clear immigration in the British Virgin Islands.

MOVING TO THE BRITISH VIRGIN ISLANDS

SHIPPING TO THE BVI Shipping personal effects from home furniture, personal goods and even vehicles can easily be done through a shipping agent in the Territory. Once you have identified the agent you would like to use, that agent will inform you of the closest company to your address in your home country that you can have items delivered to or packed for pick up. As the sender, you must provide shipping agents with a list of items to be shipped as well as their estimated costs.

Residents in the BVI can also obtain United States mail boxes through various companies in the BVI. This allows persons to have their international mail sent to a US post box and delivered by their hired company to the BVI. This is an excellent resource when ordering items online or to receive mail quickly from the United States. Major courier companies such as UPS, FedEx and DHL also operate in the BVI. Post Office

284 468 3701 ext. 4996

HOUSING The real estate market in the BVI is growing steadily. At times it may seem difficult to find your right home in paradise, but with persistence and a good realtor, in no time you can be listening to the waves, watching the sun come up from the hill tops or living in a town that still has more greenery than most in other parts of the world. Unlike some countries, the British Virgin Islands does not have a Housing Authority. Prospective tenants and home owners are responsible for finding living arrangements and negotiating the best rent and lease. Many landlords offer short term lease to accommodate the Territory’s migrant labour force. The average starting rent of a two bedroom apartment in the BVI is approximately $800. Most land lords require two months rent as a refundable deposit along with proof of income - such as a job letter, before renting to new tenants. If you are in the market to purchase or build a home, all expatriates must obtain a Non-Belonger Land Holding Licence. The application process is managed by the Ministry of Natural Resources and Labour. To obtain this licence the following documents are needed with a completed application form: Make certain you receive all documents and agreements pertaining to your shipment from the partnering agent in your home country in order to retrieve your goods once they have landed in the BVI. After that has been completed, 138 items are then shipped to the Territory. Once they have arrived you will be notified by the local shipping agent who will sign release forms to be presented to port authority and Customs officials to clear your items. The cost of shipping items to the Territory varies widely. Ensure that you research estimates from companies before deciding on a final shipping agent. Once your items arrive in the Territory, you will only then be charged for the service. It is always recommended to insure items with the shipping agent. To declare goods with Customs you must have an itemised list of goods shipped and their costs. Government waves up to $1000 for new residents on goods imported. The following is a break down of duty charges for other items: • Vehicles • Household goods/furniture • Electronics/ computer hardware • Clothing • Reading materials Her Majesty’s Customs

20% 15% 15% 10% 0%

284 468 3701 ext. 6800/ 6802

MAIL Though the Territory does not have home mail boxes, the mailing service is much like most postal services world wide. Without a private mail box, persons can collect mail sent to them at their community post office. Residents may apply for private mail boxes by submitting an application with the BVI Postal Service at the main Post Office in Road Town, Tortola. The annual cost for these mail box rentals is $35 for a letter size box. In 2006 the BVI launched its internationally recognised postal codes. These postal codes allow other mail services to have an exact and distinctive code for the Territory. This works just the same as zip codes in the United States and postal codes in the United Kingdom and Canada. This allows mailing companies to process mail to be shipped to the Territory more efficiently. Ultimately, this allows residents in the BVI to obtain their mail in a more timely manner.

• A police certificate • Four consecutive newspaper clippings of the property’s sale ad • A valuation report of the property • A financial statement showing one year of banking practices • Two references • Sale agreement for the property • Proposed purpose of property • A detailed description and time table of any works to be done on the property. The Ministry of Natural Resources and Labour reserves the option to ask for additional supporting documents from applicants. A non refundable fee of $200 is required for processing of the application. For corporate groups the application fee is $500. The average processing time for a Non-Belonger Land Holding Licence is 12 to 14 weeks. Once a licence is granted, property owners must follow development agreements that were stated when applying for a licence. Failure to do so may result in a fine of 40 percent of the cost of the property of forfeiture of the property. Property taxes are payable annually to the Government’s Inland Revenue Department. If home owners are seeking to rent their property, non-belongers or persons that are not citizens of the BVI, must seek permission from the Ministry before undertaking such a venture. Ministry of Natural Resources & Labour 284 468 3701 ext. 2147/ 2137 Inland Revenue Department

284 468 3701 ext. 2155/ 3140

TRANSPORTATION The British Virgin Islands does not have a public transportation system. However, taxi services may be called from any location on islands. Various ferry services operate inter-island shuttles throughout the major islands of the British Virgin Islands, Tortola, Virgin Gorda, Anegada and Jost Van Dyke. Plane services may also be obtained to travel from Tortola to Anegada and Virgin Gorda.

DRIVER’S LICENSE Visitors to the BVI may obtain a Temporary Driver’s Licence from the Licensing Department or car rental companies. For $10, drivers will get a temporary licence that is good for 3 months. If stopped by authorities, visitors must have this temporary licence along with their passport. If you plan to live and drive in the BVI for longer than 3 months, a BVI driver’s licence must be obtained. To obtain such a licence, once the temporary licence has expired, driver’s must file an application at the Vehicle Licensing Department, along with supporting documents; work permit, passport, BVI Social Security card, and temporary licence. Additionally, a written driver’s test must be taken. The written test is administered from 8:30 a.m. to 1:30 p.m. daily. Once a driver passes this test, a BVI licence will be granted. If a new resident is importing a vehicle into the Territory or purchasing a vehicle in the BVI, the vehicle must be registered and licensed in the BVI. Drivers may purchase licence plates from the Vehicle Licensing Department, then have the car insured and inspected before the car is registered and qualified to be driven in the BVI. Vehicle Licensing Department 284 468 3701 ext. 4938/ 4939 Banking The British Virgin Islands hosts a variety of private and public banks that are recognised internationally. Some of these institutions are: Banco Popular Scotia Bank First Bank First Caribbean VP Bank Presently the BVI does not host any credit unions. Once becoming a resident of the BVI, to obtain a bank account, persons are required to show proof of identification, passport as well as a social security card. Some banks allow residents to use a United States social security card when registering for an account. Account holders may then begin to build a financial identity within the BVI’s banking system. Persons may apply for credit cards, loans and mortgages and even consolidate accounts from their previous country of residence. HEALTH SERVICES Health care in the British Virgin Islands remains relatively inexpensive to consumers in comparison with other developing Territory’s. Peebles Hospital, the main hospital servicing the BVI is on the island of Tortola. Presently the hospital is being developed into a major health resource for the BVI. This includes renovations to the existing structure as well as building more rooms and improving the technology used at the facility. A number of private clinics also service residents of the BVI. These clinics have on staff senior medical professionals that are general doctors as well as practising physicians in a wide range of specialisations such as gynaecology and obstetrics, cardiology as well as dermatology. Supporting these clinics are various private pharmacies with competitive pricing for the latest medicines. EDUCATION There is a wide variety of child care facilities in the BVI. Day care centres accept children as young as 4 months old. The cost of this type of care ranges from $160 to $300 monthly. The average school year begins in early September and ends in late June. Children that will be at least 5 years old within the school year and up to 16 years old are required by law to attend some form of matriculating educational facility, this also includes home schooling by a child’s parent. If expatriate parents are travelling with children to take up residency in the BVI, the parents must seek permission from the Immigration Department to have the child in the BVI for the purpose of attending school. There is a separate application to have the child enrolled in the school system. When in the BVI, the Education Department will facilitate the processing of

applications for entrance into the BVI school system. It is important to note that if a parent plans to enrol a child in a private institution or home school their children, they must also register with the Education Department. Parents are then responsible for the filing of applications at private institutions. Parents have a choice of two schools when entering the public school system. While there are numerous primary schools, there is only one public secondary school on Tortola, Virgin Gorda and Anegada. Students living on Jost Van Dyke must commute to Tortola to attend high school. The following information about the child or children is required when applying to attend public schools: • List of previous schools attended • Birth certificate • Immunisation card • School report or transcript • BVI Health Services authorisation of child’s immunisation card Of the parents, the following documents are needed: • Work permit card • Passport • Contact information Once the child is approved by the Education Department to attend a public school, a letter is sent to the Immigration Department and the appropriate authorisation is placed in the child’s passport, declaring the child a legal resident of the BVI. There are a number of private primary and secondary schools in the BVI. Tuition for such schools starts at $300. Parents wishing to home school their children are required to submit a course outline as well as the home school programme they intend to follow. Closing dates for school registration are April 30 for entrance beginning in September of the same year and November 30, for entrance in January of the upcoming year. The Territory currently has two tertiary institutions. Students may obtain 139 accredited associates degrees from the H. Lavity Stoutt Community College as well as certification for various courses. The BVI also hosts a campus site for the prestigious University of the West Indies. Students are able to enrol l in classes and participate in face to face as well as teleconference and distance learning courses. Applications to attend these institutions are available at their offices on Tortola. Education Department

284 468 3701 ext. 2036/ 2037

LIBRARY SERVICES There are five public libraries in the BVI that are located on the Territory’s four main Islands. Two on Tortola; in Road Town and East End, one on Virgin Gorda, Anegada and Jost Van Dyke. To obtain a permanent library card, persons must be residing in the Territory for at least 6 months. If visiting the Territory for shorter than six months, visitors may obtain a temporary card by paying a refundable fee of $5 and submitting the name of one reference that can return borrowed books in your absence. Library Services

284 468 3701 ext. 4931/ 4932

FAST FACTS

The British Virgin Islands

The Caribbean Region

Anegada

Jost Van Dyke Virgin Gorda

Tortola

FACTS AT A GLANCE Social Demographics Population

29,537

Population Density

183.2 km2

Population Growth Rate

2.5%

Nationality Ratio

65.8%

Literacy Rate

98.2%

Life Expectancy at Birth

79.32

ajor Religious M Denominations

ethodist, Anglican, Roman M Catholic

Climate and Geography

140

Area

57.08 sq. miles

Rainfall

40”

Temperature

28°C

Time Zone

Atlantic Standard Time (AST)

Government Capital City

Road Town

Dependency Status

British Overseas Territory

Judicial System

Common Law

Head of State

Queen Elizabeth II

(represented by the Governor)

Economy Currency

United States Dollar

GDP (nominal)*

US$ 894 million

GDP per Capita

(nominal)*

US$ 30,282

Inflation Rate (2009)

2.4%

Unemployment Rate 1

3.1%

Labour Force ^

19,319

Major Industries

Tourism, Financial Services

Communication Country Phone Code

284

Zip Codes

VG1110, VG1111, VG1112

Telecommunication Providers

Source: BVI Development Planning Unit | * 2010 estimates | ^ 2009 figure 1 Please note that the rate of unemployment is based on 2001 census figures.

fast fact guide To the BVI POPULATION AND LABOUR FORCE The population of the British Virgin Islands (BVI) is diverse and growing. The majority of persons are of Afro-Caribbean decent (approximately 82 percent based on 2001 census figures). Minority ethnicities include Caucasians, East Indians, Middle Eastern, Chinese, and Portuguese. Between 1991 and 2001 (the dates of the last census) the population increased by approximately 44 percent and based on projections it is expected to grow further as the demands for labour increase. An updated count, composition and distribution of the population will be available subsequent to the 2010 census. The major force driving population growth has been immigration mainly to meet the shortage in local labour supply. Approximately 74 percent of the employed are foreigners (based on 2008 employment information) thus accounting for a diverse and varied labour force. The Government sector is the major employer followed by the tourism industry and the financial services sector. Annually there are twelve paid public holidays and the local labour code sets modest requirements for paid sick and holiday leave. Trade unions are virtually non-existent and work days lost through industrial action are infrequent. Local law provides for a work permit regime. Under this system a foreigner will only be granted with a work permit if a qualified local is not available to fill the position. The government has set a minimum wage of $4 per hour to ensure that lower skilled workers would maintain a minimum standard of living. EDUCATION Publicly provided education is free at the primary, secondary and now territory levels thereby facilitating access to all children. Education is compulsory up to the age of 16. The Government’s Ministry of Education operates 17 primary schools and four secondary schools, including a technical-vocational school and a school for disabled students. There are also several private primary and secondary schools; some parochial and some secular. The H. Lavity Stoutt Community College (HLSCC) is a two-year tertiary institution offering associate degrees in the areas of business, natural science, social services, hospitality, computer studies, marine studies and financial services. The College also offers specialty courses based on the needs of the labour market. Through affiliations with other tertiary institutions HLSCC also offers degree and master’s programmes. The Education Act, 2004 regulates all aspects of the Territory’s education system including Early Childhood Education.

HEALTH Government health services are provided free to certain groups including full-time school children, the elderly, the mentally ill, health workers etc. Currently, primary health care is provided by Peebles Hospital, with additional services provided by a small private hospital and several private medical clinics. Patients requiring treatment services beyond the scope of Peebles Hospital are referred to Puerto Rico, the US Virgin Islands, Jamaica, Barbados and mainland United States. The Government of the BVI has embarked on extensive development of the health care infrastructure and administration with the aim of improving primary health care services. In 2004 the Peebles Hospital annex was officially opened, and the construction of a new state-of-the art hospital is expected to be completed in the near future. In 2007, a helipad to facilitate the transfer of patients from the outer islands to Tortola was completed. The BVI Health Services Authority established under the BVI Health Services Authority Act, 2004 is responsible for managing the public health care service throughout the Territory including the general administration and functioning of the Peebles Hospital and the recruitment and training of health care professionals. ECONOMY The BVI economy has transformed from agriculture-based to service-based over the last 50 years with two distinct economic pillars emerging, namely Tourism and Financial Services. The economy has grown significantly over the last 25 years mainly due to developments in the tourism and the financial services industries with spill-over effects in the construction sector, both private (residential and commercial) and public. For the majority of the past decade economic growth has been positive and increasing steadily. In 2008 and 2009 however, GDP fell due to the effects of the downturn in the global economy but rebounded slightly in 2010. The economy is one of the strongest in the Caribbean and BVI has one of the highest GDP per capita incomes. Prices in the BVI have increased moderately over the last five years with an average growth rate of 2-3% with the exception of 2008 where average prices increased by 7% mainly due to rising commodity prices and oil prices. Inflation is mainly “imported” from the United States. The BVI’s principal trading partner is the United States. The majority of imports (goods) originate from the United States including Puerto Rico and the US Virgin Islands. Similarly, the vast majority of BVI exports (in the form of services - specifically financial services and tourism) are used by United States consumers. The BVI is not a major exporter of goods. The steady growth in government revenue is driven mainly by financial service levies but also payroll taxes and import duties. In order to ensure sustained growth the BVI government continues to implement measures aimed at increasing revenue collection and managing expenditure levels. ECONOMIC INDICATORS

With its crystal clear waters and white sand beaches, breathtaking scenery, intricate coral formations, tranquil atmosphere and warm people the BVI is a popular destination for sports enthusiasts as well as those who want a peaceful vacation. The largest island Tortola is the major hub for most visitors and the starting point for discovering the other islands. Major attractions include the nature trails at Sage Mountain National Park, the huge boulders at the Baths, the pristine waters of White Bay, the wreck of the Rhone and the flamingos at Nutmeg Point. Yearly scheduled activities which attract numerous visitors include: the Emancipation Festival in August, the BVI Music Fest in May, and the BVI Spring Regatta in April. Sailing is one of the most popular activities for tourists. The year round trade winds and numerous islands, inlets and cays has given the BVI the title of the ‘sailing capital of the world’. Other water sports such as scuba diving, snorkelling, windsurfing, kite boarding and kayaking are also extremely popular. The BVI is also a popular port of call for major cruise ships. Annual cruise tourist arrivals exceeded half a million annually since 2007. Although smaller in number overnight tourists contribute a greater percentage to government revenue and economic growth. The Government of the BVI is committed to the sustained growth and development of the sector. The Government continues to upgrade tourist attractions and infrastructure (such as improvements to the port facilities) and encourages private investment in the sector. Through the BVI Tourist Board numerous marketing initiatives have been developed to promote and enhance the Territory’s tourism product. The “Jewels of the BVI” programme promotes a collection of locally owned hotels, inns and villas by providing valuable information about the properties and activities via an official website (www.jewelsofthebvi.com) and a hotline. The “BVI VIP Club” rewards repeat visitors with special discounts at participating businesses throughout the Territory, special arrival privileges at the airport and tourism updates via a newsletter subscription. In 2010 just over 840,000 tourists visited the BVI with the majority of them originating from North America. Cruise ship tourists accounted for approximately 61 percent of this total while overnighters make up 39 percent of tourist arrivals in 2010. FINANCIAL SERVICES FINANCIAL SERVICES

2009

2010

Trust (General) Class I, II & III

105

100

Trust

(Restricted)

119

Company Managers

Registered Agents

125

Banking and Fiduciary Banking

(General and Restricted)

MEASURE

2007

2008

2009

2010

Nominal GDP (US$ millions)

1,011

992

876

894

Captives

279

219

Nominal GDP Growth (%)

8.2

(1.9)

(11.7)

2.1

Domestic

Professional

170

137

Professional (Cumulative Active)

1905

1759

Private

Private (Cumulative Active)

816

741

216

206

– revised estimates

Inflation (%) Unemployment

(%)

GDP per capita ($)

– revised estimates

2.5

7.5

3.0

2.4

Managers

3.1

Mutual Funds

36,731

35,151

30,331

30,282

MAJOR SECTORS TOURISM TOURIST ARRIVALS

Insurance

2009e

2010e

Actual Change

% Change

Overnight

308,793

330,343

21,550

Public (Cumulative Active)

Excursionist

548,071

512,154

(35,917)

-7%

Incorporations

TOTAL

856,864

842,497

(14,367)

-2%

421

464

10%

(Cruise Ships & Day Trippers)

Cruise Ship Calls

Source: Development Planning Unit e Estimate

Public

BVI Business Companies

47,477

59,624

BVI Business Companies (Cumulative Active)

410,293

459,364

Insolvency Practitioners

Source: Financial Services Commission

141

FAST FACTS

FINANCIAL SERVICES The growth of the financial services sector in the BVI was mainly due to the success of the International Business Company (IBC) (now known as the BVI Business Company subsequent to the enactment of new incorporation legislation – BVI Business Company Act, 2004) first unveiled in 1984. In later years the BVI secured business that was redirected from Panama during the Noriega regime and from Hong Kong when it was handed back to China in 1997. The Asian market thus accounts for a large portion of company incorporations in the BVI. Modern and innovative legislation, a robust regulatory framework, clever marketing, economic and political stability, quality technology and communication facilities and a full range of legal, banking and account services have contributed significantly to the continued growth of incorporations. Closely related sectors such as captive insurance, investment business (mutual funds), trust and estate formation, company management, corporate restructuring, securitisation, insolvency and shipping and trademarks have developed. The industry is regulated by the Financial Services Commission (FSC) which is an autonomous body responsible for the licensing, regulation, supervision and inspection of all financial services business. Marketing of the financial services sector is conducted by the International Finance Centre (IFC) – a department within the portfolio of the Premier’s Office – which has organised various road shows in some of the major financial centres such as London, New York, Hong Kong, China, Dubai and Qatar. The Financial Investigation Agency (FIA) which was launched in 2004 functions as a specialist investigative law enforcement arm of the government with the objective of curbing financial crime. Its primary focus is to investigate the BVI financial services industry and support the Virgin Islands mutual legal assistance regimes.

142

BUSINESS COMPANIES The BVI is one of the largest centres for the incorporation of business companies with around 1 million companies (end of 2010) incorporated since the enactment of the International Business Companies (IBC) Act in 1984. Approximately 450,000 are still active today. Because of the flexibility of its use BVI business companies have been used in a plethora of business transactions and structures including structured finance and securitisation, succession planning, IPOs and listings on stock exchanges and joint ventures etc. The incorporation regime has changed somewhat with the introduction of new company legislation – the BVI Business Companies Act, 2004 which replaced the IBC Act repealed on January 1 2007. The core features of the IBC Act which made it a success remain along with improvements to ensure the longevity of the Virgin Island’s market share. The new Act for instance widens the range of corporate vehicles available for use, simplifies the statement of capital and the registration of charges. INSURANCE (CAPTIVE) The BVI captive insurance market is one of the fastest growing and largest in the world. At the end of 2010, 219 captive insurance companies were licensed with the majority of business originating from the United States. Other countries of origin include Guernsey, Taiwan, Switzerland, the Middle East and South America. In addition to this excellent geographic spread of business, there also has been a significant distribution of captives from an industry segment standpoint. The captives cover the following industries: finance and insurance, construction, health care and retail trade. The domestic insurance market is, however, smaller in comparison with only 36 companies licensed at the end of 2010. The new Insurance Act, 2008 which replaced the 1994 provides a modern structure for licensing, supervision and administration of insurance business in the Virgin Islands while simultaneously meeting international insurance standards. The Insurance Regulations 2009 which replaced the 1995 regulations provides clarity on details relating to insurance business in and from within the BVI. Both came into force on February 1st, 2010. INVESTMENT BUSINESS The BVI is one of the premier jurisdictions for fund domiciliation and is now is regulated by new state of the art legislation. The Securities and Investment Business Act (SIBA) and Regulations came into force on 17th May, 2010 and replaced the Mutual Funds Act of 1996. SIBA sets out the

new legislative framework under which the Financial Services Commission (FSC) regulates individuals, mutual funds and other investment related entities conducting business in and from within the BVI. Persons such as investment advisers, those dealing in investments or arranging dealings in investments, managers, custodians, those providing administration services with respect to investments, and operators of investment exchanges are now required to be licensed. SIBA introduces the authorised representative regime where all BVI funds are required to appoint an authorised representative resident in the BVI and licensed by the FSC. The new legislation also provides a framework for dealing with insider trading and market abuses. In addition, all existing public, private and professional mutual funds previously authorised under the repealed Mutual Funds Act, 1996 are required to comply with the relevant sections of SIBA by December 31st, 2010. The professional fund is the most popular of funds registered and recognised in the BVI. 65% of active funds were professional funds, 27% were private funds and 8% were public funds based on 2010 figures. BANKING The Virgin Islands is characterised as a conservative banking jurisdiction. At the end of 2010 there were 7 banking institutions licensed to operate in and from within the BVI with total assets of approximately US$2.5 billion. The domestic market is serviced by six commercial banks which offer a wide range of competitive services: Scotia Bank (BVI) Limited, First Caribbean International Bank, First Bank Virgin Islands, Banco Popular de Puerto Rico, VP Bank (BVI) and the National Bank of the Virgin Islands. The banking sector is regulated by the Financial Services Commission under the Banking and Trust Companies Act, 1990 and subsequent amendments. INSOLVENCY The Virgin Islands boasts a modern comprehensive insolvency regime that meets the needs of the growing incorporation, investment and financial services activities in the BVI. The governing legislation, the Insolvency Act 2003, makes provisions for the licensing and regulation of insolvency practitioners a wide range of liquidation and rehabilitation alternatives, a director’s disqualification regime and the establishment of an Official Receiver’s office. To date (2010) 20 insolvency practitioners are licensed under the Act. TRUST MANAGEMENT Trust Management forms a major component of financial services activity in the Virgin Islands. The BVI trust sector has experienced moderate growth since 1995 growing on average at a rate of 4% annually. Revised legislation, together with the highly flexible BVI Business Company, has opened up wider markets for the BVI trust. Trusts are formed under the Trust Ordinance 1961 (based on the English Trustee Act 1925), as updated and amended by the Trustee Amendment Act 1993 and 2003. The amendment Acts considerably modernise and update the legislation, creating a more flexible regime for trusts. Changes include provisions to make trusts more attractive in a commercial context and a new set of conflict of law rules that contain robust, comprehensive, and carefully crafted provisions to protect BVI trusts against “forced heirship” claims. In addition, the rules surrounding trust duty have been updated to make it clear what documents are subject to trust duty and how this must be paid. At the same time, rules which require no public register of trusts in retained, thereby protecting confidentiality. The Virgin Islands Special Trusts Act, 2003 (VISTA) is another piece of legislation which updated the trust regime. VISTA trust, overcomes many problems associated with the “prudent man of business rule”, which typically made trusts unattractive vehicles to hold assets which settlers intended trustees to retain. The Act enables a shareholder to establish a trust of his company which disengages the trustee from management responsibility and permits the company and its business to be retained as long as the directors see fit. The majority of Virgin Island trusts are exempt from all taxes provided there are no beneficiaries resident in the BVI, and that the trust does not conduct any business in the BVI or own any land in the jurisdiction. There is a large and sophisticated community of professional advisers on trust matters in the Virgin Islands. Companies offering trust services must be licensed under the Banks and Trust Companies Act, 1990.

SHIPPING As the sailing capital of the Caribbean and an esteemed corporate domicile, the Virgin Islands is also a popular jurisdiction for the registration of ships. In 2010 ships 282 ships were registered and to date approximately 3,557 vessels have been registered in the BVI with the majority being pleasure vessels As a Category One Register, within the Red Ensign Group, large vessels of unlimited tonnage and mega yachts of up to 3,000 gross tons can be registered in the Territory. In both instances, the owners must be a Virgin Islands citizen, British citizen, British Overseas Territories Citizen, British subject, a British national under the Hong Kong Order 1986, a national of a European Union member state, or a body corporate incorporated in a member state of the European Union or a British possession, including the Virgin Islands. If you do not meet the nationality requirement, you may register a company in the Virgin Islands in order to register a vessel. Registration procedure also requires the de-registration of the vessel from its current registry, a survey of the vessel and the submission of ownership documents to the Registrar of Shipping. The registration fee is $550, and an annual fee of $100 is payable to maintain registration. In addition, there will be legal fees charged by the firm you choose to assist you with registration. TAX INFORMATION EXCHANGE AGREEMENTS The purpose of Tax Information Exchange Agreements (TIEAs) is to promote international co-operation in tax matters through exchange of information. TIEAs grew out of the work undertaken by the Organisation for Economic Cooperation and Development (OECD) to address the lack of effective exchange of information among financial centres. Information exchange is based on requests relating to specific criminal or civil tax matters that are under investigation. The BVI has a long tradition of providing legal assistance to foreign regulatory and law enforcement authorities and continues to be committed to the OECD’s principles of transparency and effective exchange of information. Under the guidelines provided by the OECD and the new international tax standard emanating from the G-20 Summit in April 2009, jurisdictions are required to sign at least 12 TIEAs. To date the BVI has signed 21TIEA’s securing a spot on the “white list” of those countries including the United States, United Kingdom and Canada which have substantially implemented the internationally agreed tax standard as set by the (OECD). In addition to the United States, the BVI has agreements with the United Kingdom, Australia, France, the Netherlands, the Netherland Antilles, New Zealand, Greenland, the Faroes, Aruba, China, Portugal, Czech Republic, Ireland, Germany, India and the Nordic group of countries including Denmark, Finland, Iceland, Norway and Sweden. REAL ESTATE Foreigners planning to purchase property in the British Virgin Islands require a Land Holding License. Agreements to purchase property are therefore made contingent upon such a license being obtained by the purchaser. Application for a Non-Belonger Land Holding License is made to the Government of the British Virgin Islands, Ministry of Natural Resources and Labour. If the application for a license relates to undeveloped or partly developed land, the applicant will be required to make a commitment to the Government of the British Virgin Islands to expend a specified sum on development within a specified time period. The purchase of property by all persons including citizens and foreigners is subject to a Government stamp duty subsequent to transference of the property. The rate of 12% of the purchase price or appraised value whichever is higher, is payable by any foreigner and citizens are required to pay 4%. The stamp duty on leaseholds is lower. Other costs associated with the purchasing of property in the BVI include: legal fee (usually between 1.5% to 2% of the purchase price), bank fees, 10% deposit to the seller’s agent to be held in escrow on the signing of the purchase agreement, pending acceptance and completion. There are no restrictions on an overseas investor re-selling a developed property. The property must however, be advertised for four weeks in the local press to give any local person the opportunity to purchase the property on the same terms.

BVI COMMERCIAL COURT The BVI now has a state of the art Commercial Court to serve the expanding needs of commercial litigation in the Territory and the Eastern Caribbean. The commercial court is a division of the regional Eastern Caribbean Supreme Court (ECSC) and will hear commercial matters from nine Caribbean nations and territories, including Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts and Nevis, St Vincent, St Lucia and the BVI. The court officially opened on 30th October, 2009 (although it was in operation since May 2009) and specialises exclusively in domestic and crossborder commercial and insolvency matters. Prior to the establishment of the Commercial Court, all cases were handled by the High Court. INFRASTRUCTURE ELECTRICITY Electricity in the BVI is 110/220 voltage. This Power is generated by the BVI Electricity Corporation, which is owned by the BVI Government. Water The BVI Water and Sewerage Department, provides potable water throughout Tortola, Virgin Gorda, Jost Van Dyke and Anegada. Most of the water sold by the Water and Sewerage Department is desalinated sea water, treated through the process of reverse-osmosis. In addition, most buildings and homes are constructed with cisterns (Water Tank). Rainwater is collected in these cisterns from the roof of the buildings or homes and flows into the cisterns through a guttering system. This water is safe for domestic use. There are also several local water companies which sell purified drinking water. Telecommunications The BVI has a modern and high-quality telecommunications infrastructure. This existed since the 1960’s. In 2006, the Government passed a new Telecommunications Act, which provides for gradual liberalization of the telecommunications sector. Because of this, there are now two companies offering mobile telephone services, with pending competition in other service 143 areas. The area code is 284 and available services include long-distance and local land-line communication, wireless connectivity, high-speed Internet, and cable television. Transportation It is easy to get around the BVI. Vehicles such as cars, buses, taxis etc., private and commercial boat services, and airplanes are among the most frequently used means of transportation in the BVI. The Territory has a road network of approximately 200 miles, of which 160 miles are paved. These include main roads, primary, secondary, collector, and access roads, as well as agricultural feeder roads. The Public Works Department is the department charged with the periodic maintenance of this road system. This department also spearheads plans for road expansion. There are four official passenger sea ports in the BVI: Road Town and West End on Tortola; Great Harbour on Jost Van Dyke; and Spanish Town on Virgin Gorda. Port Purcell, near Road Town, hosts the principal cargo port in the Territory. The BVI Ports Authority manages the port facilities at the various locations, as well as the Cruise Ship Pier in Road Town. Airports The BVI Airports Authority is the administration that oversees the airports. The Terrance B. Lettsome International Airport (code: EIS), is the main airport in the BVI; and is located on Beef Island which is joined to Tortola by a short bridge. There are daily flights to and from Puerto Rico, Antigua, St. Martin and other Caribbean Islands. The Government operates a helipad in Road Town and a number of private islands also maintain helipads. Entry and Immigration Visitors to the BVI may be granted entry for up to one month at the ports of entry, providing they have return or ongoing travel arrangements, accommodations while in the Territory, and proof of sufficient means of support. Visitors wishing to stay longer must apply in person at the Department of Immigration in Road Town, or the Valley, Virgin Gorda.

FAST FACTS

A valid passport is the principal requirement for entry into the BVI. On arrival to the BVI, you will go through screening by the Immigration as well as Her Majesty’s Customs. Your luggage and person are subject to search. Persons from the following countries must apply for a visa at the nearest British Embassy before travelling to the British Virgin Islands. Afghanistan Armenia Benin Burundi Albania Azerbajan Bosnia-Herzegovina Burma Algeria Bahrain Bulgaria Cambodia Angola Belarus Burkina Cameroon Central African Republic Chad China (except Hong Kong) Columbia Comoros Congo

Cuba Djbouti Dominican Republic Egypt Equatorial Guinea Eritrea Ethiopia Gabon Guyana Haiti Indonesia Iran Iraq Israel Ivory Coast Jamaica Jordan Kazakhstan Kirgizstan North Korea Kuwait Laos Lebanon

GOVERNMENT LISTINGS Government Ministries

Central Administrative Complex Road Town, Tortola British Virgin Islands www.gov.vg 144

Premier’s Office Tel: (284) 494-3701 ext 2152/2058 Fax: (284) 494-6413 premieroffice@gov.vg Ministry of Finance Tel: (284) 494-3701 ext 2144/3306 Fax: (284) 494-6180 www.finance.gov.vg Ministry of Health and Social Development Tel: (284) 494-3701 ext 2174/2172 Fax: (284) 494-5018 ministryofhealth@gov.vg Ministry of Communications and Works Tel: (284) 494-3701 ext 2183/2163 Fax: (284) 494-3873 Ministry of Natural Resources and Labour Tel: (284) 494-3701 ext 2147/2137 Fax: (284) 494-4283 Ministry of Education and Culture Tel: (284) 494-3701 ext 2151 Fax: (284) 494-5421

Liberia Libya Macedonia Madagasgar Mali Mauritania Maldova Mongolia Morocco Mozambique Myanmar Nepal Niger Nigeria Oman Pakistan Peru Philippines Qatar Russian Republic Rwanda Sao Tome & Principle Saudi Arabia

Senegal Slovakia Somalia Sudan Suriname Syria Taiwan Tajikistan Thailand Togo Turkish Republic of Northern Cyprus Turkenistan Ukraine United Arab Emirates Uzbekistan Vietnam Yemen Yugoslavia Zaire

Statutory Bodies/Associated Agencies BVI Commercial Court Main Street Road Town, Tortola Tel: (284) 468-2724 Fax: (284) 468-2729 cdecsc@gov.vg

BVI International Finance Centre Haycraft Building, Pasea Estate Road Town, Tortola Tel: (284) 494-4335 Fax: (284) 468-1002 info@bviifc.gov.vg www.bviifc.gov.vg BVI Tourist Board 2nd Floor, Akara Building De Castro Street Road Town, Tortola Tel: (284) 494-3134 Fax: (284) 494-3866 info@bvitourism.com www.bvitourism.com Financial Investigations Agency 2nd Floor, LM Business Centre Fishlock Road Road Town, Tortola Tel: (284) 494-1335 Fax: (284) 494-1435 fia@bvifia.org www.bvifia.org Financial Services Commission Pasea Estate Road Town, Tortola Tel: (284) 494-1335 Fax: (284) 494-1435 webmaster@bvifsc.vg www.bvifsc.vg

2012 Public Holidays New Year’s Day H. Lavity Stoutt’s Birthday

Monday, 2nd January (in lieu of Sunday, 1st Jan.)

Monday, 5th March

(in lieu of Wednesday, 7th March)

Commonwealth Day

Monday, 12th March

Good Friday

Friday, 6th April

Easter Monday

Monday, 9th April

Whit Monday

Monday, 28th May

Sovereign’s Birthday

Saturday, 9th June

Territory Day

Monday, 2nd July

(in lieu of Sunday, 1st July)

Festival Monday

Monday, 6th August

Festival Tuesday

Tuesday, 7th August

Festival Wednesday

Wednesday, 8th August

St. Ursula’s Day

Monday, 22nd October

(in lieu of Sunday, 21st October)

Christmas Day

Tuesday, 25th December

Boxing Day

Wednesday, 26th December

Telecommunications Regulatory Commission Fishlock Road Road Town, Tortola Tel: (284) 494-6786 Fax: (284) 494-6786 www.trc.vg Virgin Islands Shipping Registry Sebastian’s Building Administrative Drive Road Town, Tortola Tel: (284) 468-2902/2903 Fax: (284) 468-2913 vishipping.gov.vg www.vishipping.gov.vg

Government Overseas Offices BVI London Office 15 Upper Grosvernor Street London WIK 7PJ United Kingdom Tel: + 44 207 355 9570

BVI Tourism Offices

Italy Aigo Communicazione Pizza Caiazzo 3 20124 Milano, Italy Tel: 39-02-667-14374 Fax: 39-02-669-2648 staff@aigo.it Germany Schwarzbachstr, 32 40822 Mettmann Bei Düsseldorf Germany Tel: 49-2104-28-66-71 Fax: 49-2104-91-26-73 g.romberg@travelmarketing.de

PUBLISHER’S NOTE All of the information in this guide has been carefully collected and prepared, but it still remains subject to change and correction. Use these contents for general guidance only and seek extra assistance from a professional adviser with regards to any specific matters. Readers can contact the relevant authorities mentioned in this Fast Fact Guide.

United Kingdom 15 Upper Grosvenor St. London W1K 7PJ Tel: + 44-207-355-9585 Fax: + 44-207-355-9587 infouk@bvi.org.uk New York 1 West 34th Street Suite 302 New York, NY 10001 Tel: 800-835-8530 / 212-563-3117 Fax: 212-563-2263 info@bvitourism.com

Immigration/Labour Information Immigration Department 1st Floor, Ashley Ritter Building Road Town, Tortola Tel: (284) 494-3471 or 494-3701 ext. 4700/4770 Fax: (284) 494-4399 immigration@bvigovernment.org

Labour Department 2nd Floor, Ashley Ritter Building Road Town, Tortola Tel: (284) 494-3451/9 or 494-3701 ext. 4708/4780 Fax: (284) 494-4399 labour@bvigovernment.org

Emergency Numbers

Police, Fire & Ambulance 999/911/112 Virgin Islands Search and Rescue 767 BVI Electricity Corporation 494-3911 Fire and Rescue 494-3473 Hospital 494-3497 Police Headquarters 494-3822 Water and Sewage 494-3416