Business BVI July 2019 by Business BVI

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JULY 2019

SPECIAL SECTION

A VIEW BEYOND THE HORIZON The territory is at a tipping point in its development as we struggle to manoeuvre what is a confluence of local and global challenges. We are in dire need for a shaft of light focused on our future. A future that must be driven by talent intensive sectors with a laser focus on high value added initiatives, innovation and technology. Irma has presented a strategic opening for a national transformation as we move up what we at Business BVI see as the ‘Second Mountain’ of our national development.

The 2030 Horizon: Look Right, Look Left, Look Right Again

The Post-Election International Challenges Ahead For The BVI

By RAY WEARMOUTH

By BENITO WHEATLEY

The Global Economic Outlook: Rollercoasters Have Frightening Falls But End Happily

Sailing Into The Headwinds Of An Evolving Global Economy

By ROXANE OSUNA & MARK PRAGNELL

By VANESSA KING & KERRY ANDERSON

CAPITAL ECONOMICS, LONDON

The Financial Services Sector: A Manifesto For The Future

Economic Outlook Of The Virgin Islands: How The New Government Plans To Manage Risks And Harness Opportunities

By NEIL SMITH & PETER TARN

By KINISHA FORBES & PATLIAN JOHNSON

The Transformative Role Of FinTech At The Regulatory Level

The Unprecedented Trio: The Catalyst For A BVI Renaissance

By JENNIFER A. POTTER

By BRODRICK PENN

84 RDA - The Mission: Rebuild The BVI SHAPING THE CONVERSATION WITH PAUL BAYLY

BUSINESSBVI.COM

Law | Governance

FEATURES 56 BUSINESS | ENTREPRENEUR

My time had come to take the plunge. What a plunge it was! By JULIA SHAMINI CHASE 90 TOURISM

Digital nomads, anyone? By SHEA ALEXANDER 98 TOURISM

Shaping the conversation with Radha Arora, President of Rosewood Hotels and Resorts 116 THE DECIDER

A storm-tested leader looks to the future An interview with VANESSA KING

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JULY 2019

Contents BUSINESS

18 MASTHEAD

18 OPENING REMARKS

THE RATIONALE OF REGULATION AND WHY WE COMPLY?

20 CONTRIBUTORS

59 A VIEW BEYOND THE HORIZON

90 TOURISM

BVI IS OPEN TO BUSINESS: ARBITRATION DIVERSIFYING THE JUDICIAL SYSTEM

23 41

ECONOMIC SUBSTANCE IN THE BVI: CHANGE, CHALLENGE AND OPPORTUNITY

BVI, THE INDISPENSABLE IFC: TOO LEGIT TO QUIT

THE GALLERY

BUSINESS

BACKING THE FUTURE: DATA-DRIVEN FINANCIAL SERVICES REGULATION AND COMPLIANCE

TOURISM

R E A L E S TAT E

ONE OF NATUREâ&#x20AC;&#x2122;S LAST LITTLE SECRETS: ANEGADA CONCH PILES HAVE LONG HISTORY

A TOURISM RENAISSANCE IN CGB, JVD, AND BREWERS

100 R E A L E S TAT E

108 BUSINESS BVI GUIDES

100

THE OUTLOOK FOR REAL ESTATE: The residential market in post-Irma era

116 THE DECIDER

B U S I N E S S BV I G U I D E S

108

BVI FAST FACTS

BUSINESSBVI.COM

Opening Remarks Russell Harrigan

MANAGING EDITOR & CHIEF CONTENT OFFICER

Oyster Publications LTD PUBLISHER

Portia Harrigan

PROJECT CO-ORDINATOR

Claire L. Shefchik SENIOR STAFF WRITER

Louie Acantilado Oyster Design Team CREATIVE

Russell Harrigan ADVERTISING

Portia Harrigan BUSINESSBVI.COM

No Room for Small Dreams Once the storm had passed and we’d conducted an initial assessment of how our families fared, we had a first hand look at the very serious damage to our homes and country. As citizens and residents, we faced many challenges, as we collectively looked to the future. Within a ‘few long’ hours, our lives were turned upside down and our daily reality was drastically altered to that of securing fuel for the generator, ice, water, navigating blocked roads and long lines at the supermarket and reaching out to family, friends and business associates globally. In addition to these must do daily chores, the bulk of my day was consumed by my then national tourism responsibilities, aimed at putting the BVI Tourism sector on a firm road to recovery. As I write these opening remarks, my first since Irma joined our national list of (unwelcome repeat) guests 21 months ago, a daily challenge etched in my mind, was getting through those very long dark nights. I can recall sharing with a UN consultant, who asked about one memory that stayed with me after the storm and I told her about the darkness at night and what it must have been like when Columbus stumbled upon these islands in 1493. Throughout the post Irma period and especially in the early days, inspiration was in very high demand. As someone who still likes old fashioned paper when reading in bed, I spent lots of night time hours reading, albeit by flashlight for the better part of the first month after the storm. On my opening list of books, I was immediately drawn to ‘No Room for Small Dreams - Courage, Imagination, and the Making of Modern Israel’ the last book by Shimon Peres, the late former Prime Minister of Israel. And I was not disappointed. It is an inspirational read for anytime, but it was particularly insightful post Irma, when life for the territory and the future looked very bleak.

Cover illustration by Oyster design team

Business BVI is a bi-annual magazine published by Oyster Publications LTD P.O. Box 3369, Road Town, Tortola, British Virgin Islands Tel: 284-494-8011 Fax: 284-494-3066 www.oysterbvi.com Email: info@oysterbvi.com Please send comments and address changes to this address.

Business BVI 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 this content 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.

JULY 2019

‘No Room for Small Dreams’ reminded me that as a territory we had ceased having big dreams. The book was a great mental trigger for a recovery philosophy that should guide the territory in its post hurricane rebuilding and beyond, into what I see as the ‘Second Mountain’ of our national development. In my mind, Irma presented the British Virgin Islands with an ‘Irma opportunity’ to reawaken our ability to dream big again, much as our daring early leaders. Leaders such as; H. L. Stoutt, Willard Wheatley, T. B. Lettsome, H. R. Penn, J. R. O’Neal, Theodore Faulkner and Noel Lloyd to name a few. Irma presented a strategic opening for national transformation, out of what was nothing short of a full scale disaster. It is a time for something greater than our individual interests, a time to dedicate our lives to our community, a time to be rational, relentless and community driven. A time to be conquered by the mountain and not self interest, a time to exit our individual and collective silos, a time to reawaken that can-do spirit that built the BVI, a time to be the disruptor and not the disrupted, a time for data driven and informed decision making and a time to end yesterday’s seat of the pants thinking and leadership. The territory is at a tipping point in its development, as we struggle to manoeuvre what is a confluence of local and global challenges. We are in dire need of a shaft of light focused on our future. A future that must be driven by talent intensive sectors with a laser focus on high value added initiatives, innovation and technology. What is needed is a

holistic strategy for the diversification of our economy, one that recognises our many strengths, but also appreciates our challenges. This must be formulated and informed by key global trends, not only in the economic and business space in which we currently earn our keep, but also with a keen eye on what’s around the curve. Our endgame must always be that of positioning the BVI to successfully navigate these trends, while always keeping top of mind life’s reality, that if you are not the Ivory, you are the carcass left behind. ‘No Room for Small Dreams’ must become BVI Scripture. Welcome to the relaunch of Business BVI and our July edition. Since our last edition in August 2017, we have used our Irma forced down time to completely redesign the magazine, our website and our Business BVI Weekly Newsletter which we will soon launch. Our evolutionary tweaking as I brand it, is intended to ensure that the we remain relevant to our readership, whilst reflecting current design trends in the global publishing space. Starting with our cover, you will notice we have deepened our minimalist approach with our continued use of original illustrations, reflecting the edition’s theme. On the content side, our pivot to the use of more infographics will not escape your attention, coupled with an expansion of our in-depth interviews, aimed at shaping the conversation. Our theme for this edition is ‘A View Beyond the Horizon’, which is intended to reflect where the territory is post 2017, while at the same time doing so with a watchful eye on the global trends and challenges facing the territory. We have introduced our first special section to focus attention on this theme, which begins on p.59 and looks at; The 2030 Horizon, Post Elections - International Challenges Ahead, The Global Economic Outlook, Sailing into the Headwinds of an Evolving Global Economy, The Financial Services Sector - A Manifesto for the Future, Economic Outlook for the Virgin Islands - How the New Government Plans to Manage Risks and Harness Opportunities,The Unprecedented Trio - The Catalyst for a BVI Renaissance, The Transformative Role of FinTech at the Regulative Level and RDA:The Mission-Rebuild the BVI. We have positioned the entire edition to not only look at the many challenges buffeting the territory, but to also offer up options for navigating what is clearly a very dynamic and turbulent environment ahead. See - The 2030 Horizon: Look Right, Look Left, Look Right Again (p.60) for the BVI in the decade which is about to unfold. Elsewhere in our tourism section see - Digital Nomads, Anyone? (p.90) and our Interview with Radha Arora, the President of Rosewood Hotels and Resorts (p.98) on how Rosewood is shaping and driving lifestyle and luxury travel globally. We get straight answers from our in depth interview with Vanessa King (p.116) on what it takes to lead in the aftermath of the hurricanes and beyond, and the challenges of taking the entrepreneurial plunge just prior to Irma, What a plunge it was! (p.56). A special thanks to our many contributors and advertisers, for without whom our relaunch would be nothing but a dream. Enjoy! Please let us have your feedback, questions and comments at russellharrigan@gmail.com.

Russell Harrigan MANAGING EDITOR & CHIEF CONTENT OFFICER

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Contributors 1.

Shea Alexander

DIGITAL NOMADS, ANYONE? (p.90) Shea represents a new generation of BVI writers that Business BVI is keen on introducing to the our readership, here his first article looks at an emerging global trend in tourism. He is entranced by the subtleties of the human psyche and trusting the infallibility of empiricism, Shea exists in a juxtaposed state of left and right brain. He is enamoured with the politics and economics of the Virgin Islands with a vested interest in our holistic advancement as a people.

Kerry Anderson

SAILING INTO THE HEADWINDS OF AN EVOLVING GLOBAL ECONOMY(p.68) Partner at O’Neal Webster, Kerry advises an international clientele on BVI law in funds, regulatory, corporate, commercial, and joint venture deals and acquisitions. His clients include US- and EU-based fund managers, closed-ended funds, open-ended funds, public funds, and segregated portfolio company funds. Kerry heads the firm’s New York City Office. Kerry joined his parter Vanessa King to give us a below the surface look at what the BVI must do to navigate an evolving global economy.

Julia Shamini Chase

3. MY TIME HAD COME, TO TAKE THE PLUNGE. WHAT A PLUNGE IT WAS! (p.56)

Shamini is no stranger to our pages and since her last article, has taken the plunge as an entrepreneur, just prior to Irma. What a plunge that must have been negotiating the post hurricane environment. She is Founder and MD of Gold Leaf Consulting Services Limited, a financial regulatory and compliance consultancy firm with offices in the BVI and Saint Lucia. With an LL.M. in International Banking and Finance Law from the University of London, finding practical, effective and timely solutions for her clients is her mission.

Edward Childs

THE OUTLOOK FOR REAL ESTATE: THE RESIDENTIAL MARKET IN THE POST-IRMA ERA (p.100)

THE RATIONALE OF REGULATION AND WHY WE COMPLY (p.48)

We welcome Simon to Business BVI, contributing two timely articles to this edition, one jointly with Professor Philip Treleaven and the other under his own steam. Simon is clearly a prolific writer and someone we believe walks around with completed articles in his head in a holding pattern. So stay tuned. He recently assumed the role of Head, Business Development and Marketing at BVI Finance having prior to served as Special Adviser to the CEO of the BVIFSC. He has extensive experience in the financial services industry including several years with the Dubai International Financial Centre.

Jerome RubinDelanchy

TO QUIT (p.52)

Out of the box, Jerome takes up the 20 year evolution of financial services driven by globalisation, the threat of money laundering and transnational organised crime with transparency becoming ubiquitous. Unlike OECD countries, the BVI and IFCs had to demonstrate their fight against criminality. BVI is still often called a tax haven. Why? Because NGOs like the TJN and others, established a decade plus, grew so big that they have to continue advocacy. They can’t just admit obsolescence. The BVI is a sound and reliable centre which works harder than many to demonstrate it meets international standards. Jerome is Deputy MD at ATU General Trust (BVI) Ltd.

Kinisha Forbes

ECONOMIC OUTLOOK OF THE VIRGIN 1

ISLANDS: HOW THE NEW GOVERNMENT PLANS TO MANAGE RISK AND HARNESS OPPORTUNITIES. (p.74)

FINANCIAL SERVICES REGULATION AND COMPLIANCE. (p.41)

We at Business BVI believe that ‘The Outlook for Real Estate’ is one of the most widely read sections of the magazine and it has become a bit of Business BVI Scripture in its own right. It has developed that credibility because it well researched, well written, graphically augmented with timely statistics and well informed by a keen sense of the real estate sector in the BVI. This is always informed by a watchful eye on the US and the wider global economy. This is all Edward Childs’ doing as we have for the better part of a decade turned to him for his reading of the tea leaves. As expected, the built real estate sector in the territory was not all pleased with Irma but as you will soon see from this edition’s update, the sector is also benefiting from an ‘Irma Opportunity.’

BVI, THE INDISPENSABLE IFC: TOO LEGIT

Simon Gray BACKING THE FUTURE: DATA DRIVEN 7.

Kinisha is another new generation BVI contributor, here with her first piece jointly with Patlian Johnson. She led the BVI Macro Fiscal Unit - Ministry of Finance, forecasting and analysing macroeconomic and fiscal conditions in the Territory and advising the Financial Secretary and the Minister of Finance. Her key research interests include inequality, efficient delivery of development outcomes, and the political economy of crises. She now heads Monitoring and Evaluation at the RDA. She is an analyst of political, social and economic features of the VI and the wider Caribbean.

Patlian Johnson ECONOMIC OUTLOOK OF THE VIRGIN

ISLANDS: HOW THE NEW GOVERNMENT PLANS TO MANAGE RISK AND HARNESS OPPORTUNITIES (p.74)

BVI FAST FACTS (p.108)

In this edition, Patlian takes on an expanded role beyond her yeoman role of ensuring that our Fast Fact Guide is current and informed. In this edition she partners Kinisha Forbes on a lead piece in our special section examining the economic outlook for the territory in the context of its post hurricane recovery and other global economic challenges. A key article for all those actively engaged in doing business or planning to do business in the territory in the near to medium term.

Vanessa King SAILING INTO THE HEADWINDS OF AN 9.

EVOLVING GLOBAL ECONOMY (p.68)

Rachael McDonald ECONOMIC SUBSTANCE IN THE BVI: 10.

CHANGE, CHALLENGE AND OPPORTUNITY (p.46)

JULY 2019

Vanessa is the managing partner of O’Neal Webster. She led her firm’s recovery post Hurricane Irma with offices in Tortola, London, and New York City. In addition to co-authoring this lead article she also sat down with Business BVI for an in-depth interview on the future of the BVI in the global financial services sector (p.116). Vanessa’s expertise is globally recognised by highly respected ranking bodies, including The Legal500, Chambers and Partners, IFLR1000, and CityWealth IFC Powerwomen.

Like a brave Marine, Rachael volunteered to provide our readership with her insight into what Economic Substance means for the BVI and the challenges and opportunities it presents for the territory. A timely read on what is a much debated topic in the territory as a new area of economic opportunity. As the managing partner of Mourant BVI, with extensive experience in all manner of corporate and finance transactions and regulatory matters, Racheal distills key aspects of the path forward.

Contributors Roxane Osuna THE GLOBAL ECONOMIC OUTLOOK: 11.

ROLLERCOASTERS HAVE FRIGHTENING FALLS BUT END HAPPILY (p.66)

Neil Smith THE FINANCIAL SERVICES SECTOR: A

18. Ray Wearmouth THE 2030 HORIZON – LOOK RIGHT, LOOK

15.

MANIFESTO FOR THE FUTURE (p.72)

With a rising protectionist political rhetoric and an increasingly gloomy economic outlook, globalisation, trade growth and investment flows are set to be destabilised. But despite the challenges ahead, the future demand for the services of the Virgin Islands will remain strong – although likely to shift further from the West to emerging markets. Sage advice on where the global economy is heading. We thank Roxane and Mark Pragnell from Capital Economics, London for this most important steer. Roxane is an economist in Capital Economics’ consultancy team, where she works on a variety of client assignments including those relating to IFCs. She has a particular interest and expertise in the mechanics and impacts of globalisation.

Brodrick Penn THE UNPRECEDENTED TRIO: 12.

THE CATALYST FOR A BVI RENAISSANCE (p.80)

It would have been an omission on our part not to have covered in our Special Section a comprehensive look at the current state of the territory’s recovery. For this, we turned to Brodrick Penn, Chairman of the Disaster Recovery Coordinating Committee (DRCC) an appointment by the Government which he assumed soon after Irma had passed. Brodrick must be commended for shouldering what is an enormous task and responsibility and for being a steady pair of hands, after all, this position is itself nothing short of being in the eye of a storm. We thank him for his efforts and that of his team and hope that at the appropriate time they are nationally recognised for their contribution to the territory’s recovery and rebuilding mission.

Financial Services is the dominant contributor of revenues to the BVI Treasury and by extension the national budget. Hence, so goes the sector so goes the quality of life enjoyed by all in the Territory. The sector exists under constant global threat from those who viscerally believe that the BVI has no place at this global table. In this edition we turned to Neil and Peter Tarn, both well positioned to provide deep insight as to the paradigm shift that must occur to unlock the potential of these islands. The key to effecting this shift is perhaps one that many countries overlook, and one overlooked here for some time. The million-dollar question is, does the BVI realise is potential? Neil currently serves as Director - Program Strategy Department at the RDA. Before that, he served in a number of senior government posts advising the BVIG on financial services policy.

MANIFESTO FOR THE FUTURE (p.72 )

17.

We welcome back Peter, here teaming up with Neil Smith to look at the paradigm shift that must occur to unlock the potential of these islands. The key to effecting this shift is perhaps one that many countries overlook, and one overlooked here for some time. The million-dollar is, does the BVI realise is potential? As the Chairman of the Executive Committee at Harneys, he is one of the BVI leading corporate lawyers, specialising in all aspects of the jurisdiction’s corporate law.

Professor Philip Treleaven

Mark Pragnell THE GLOBAL ECONOMIC OUTLOOK:

CHALLENGES AHEAD FOR THE BVI (p.64)

Benito was the perfect go-to man for a timely piece on the many post-election International challenges facing the BVI and how best to navigate the same. A Policy Fellow at the Centre for Science and Policy (CSaP) - University of Cambridge, where he is examining the future of the British OTs in relation to financial services, hurricane recovery, Brexit and partnership with the UK. He is Special Envoy of the BVI Government and Special Advisor on International Relations.

Peter Tarn THE FINANCIAL SERVICES SECTOR: A

FINANCIAL SERVICES REGULATION AND COMPLIANCE (p.41)

THE REGULATORY LEVEL (p.78)

14.

Benito Wheatley THE POST-ELECTION INTERNATIONAL 19.

16.

BACKING THE FUTURE: DATA DRIVEN

“For the first time, the Commission has had to contemplate the balance of competence in technology, analytical skills and issue resolution as compared with policy development and traditional industry experience.” This is a clear indication of the direct impact that FinTech is having at the regulatory level here in the BVI. From all indications this is how the future will continue to evolve in the sector. We thank Jennifer who is the Deputy MD, Corporate Services Division at the BVIFSC and uniquely situated for stepping forward to speak on what is a dominant trend in her space.

We asked Ray, Ogier’s BVI managing partner and regular contributor, to share his views on the edition’s theme ‘A View Beyond the Horizon’ from the perspective of financial services. What will 2030 look like? He has given us much to consider wether you are in his space or not. As he put it, “The age of genuine disruption in the way the world works has been upon us for a few years now. Indeed, as we head towards 2020, you could argue that it’s not just upon us, but literally all over us.” Wearmouth’s “BVI Pie” analysis in 2012 became a footprint for the data driven analysis of the Industry. He has spent a lot of time looking at data and markets, including substance dynamics and where we should be building capacity and capability.

Jennifer A Potter THE TRANSFORMATIVE ROLE OF FINTECH AT 13.

LEFT, LOOK RIGHT AGAIN (p.60)

We welcome Professor Philip Treleaven to Business BVI. FinTech is clearly a dominant topic in the financial services space globally and no less so here in the BVI. In this edition we look at the matter from both the regulatory level as well as the service provider level. It is a topic touched on in several of the articles on the sector. Clearly, one that will drive the sector well into the future. As Director of the Financial Computing Centre at the University College London, he is responsible for the UK PhD Centre for Financial Computing; a joint Doctoral Training Centre involving UCL, LSE, LBS and 15 major financial institutions.

ROLLERCOASTERS HAVE FRIGHTENING FALLS BUT END HAPPILY (p.66)

Mark is Director of Strategy and Consultancy, Capital Economics, London and was co-author of Creating Value: The BVI’s Global Contribution and led the team responsible for the innovative research that underpins the first report to highlight and quantify the value the BVI brings to the global economy. He has been a vocal but evidence-based advocate of offshore finance, especially British territories and Crown Dependencies – and has advised many of their governments and industry players. He coauthored this lead article with Roxane Osuna.

BUSINESSBVI.COM

JULY 2019

The Gallery

The Library at Oil Nut Bay

WHAT THE EDITORS ARE OBSESSING ABOUT IN THIS ISSUE

BUSINESSBVI.COM

The Gallery

THE MARINA VILLAGE AT OIL NUT BAY IS NOW OPEN

The Eco-Luxury Resort Community in Virgin Gorda, British Virgin Islands Unveils a Bustling Marina Village, Completing a Vast Expansion for Homeowners.

Oil Nut Bay has unveiled their hotly anticipated last stage of development, The Marina Village and Nova Restaurant. The new Marina provides a glimpse into the Oil Nut Bay lifestyle for day guests and overnighting yachts, as well as a launching point into the many wonders of the BVI’s for their home owners. The Marina Village is already set to become the new hub of Virgin Gorda and will feature the Marina’s signature overwater restaurant, Nova, complete with a suspended pool, bar, overwater hammocks and daybeds. Nova Restaurant, Bar & Lounge Nova is about bringing people together, a place where homeowners and guests can lounge pool side or suspended over the water on a luxurious daybed or hammock. The restaurant’s small plate menu is all about imaginative cooking inspired by cuisine from around the world. The dishes focus on the best products available, procured locally whenever possible. The menu is intended to be shared and is available all day. Signature dishes include Salt Baked Heritage Beets; Copper Pot Cauliflower; Surf and Turf sliders; Driftwood Sashimi with BVI Sea Salt and Wahoo Poke. Signature cocktails will include the summer staple, Wild Side Spritz, a delicate blend of Vodka, Rosé Aperitif Wine and

The Marina Village

Fresh Lime; Oil Nut Bay Swizzle, a careful blend of Gin, Velvet Falernum, Pineapple, Turks Head Cactus, Sage, Lime and Mint; and finally Bonefish Beach a balance of Tequila Blanco, Gentian, Celery, Grapefruit, Lime and Salt.

The Marina Village will also house The Coffee Shop, serving hand crafted beverages featuring Virgin Island Coffee Roasters, who are dedicated to producing small batch artisan coffee, in addition to house made pastries, cakes and breads. The Market which will sell gourmet and basic

provisions for homeowners and passing yachts, wines, spirits and a selection of “To Go” dishes from the Nova restaurant Menu. T he Nova Restaurant

The Boutique features chic resort wear for men,

women and children from international and Caribbean designers exclusively curated for Oil Nut Bay. Finally, The Library has been thoughtfully curated by a group of book lovers from the Ultimate Library. The collection has been designed to educate, entertain and inspire, and is tailored to Oil Nut Bay’s location in the British Virgin Islands. Oil Nut Bay’s state-of-the-art Marina includes an eventual 93 berths that are perfectly situated in the natural harbor of Deep Bay. The Marina can accommodate yachts up to 130 feet (40 meters) and a draft of up to 8 feet (2.4 meters). Berths are privately owned by Oil Nut Bay homeowners and are also available for nightly reservations. www.oilnutbay.com

The Coffee Shop

About Oil Nut Bay Accessible only by boat or helicopter, Oil Nut Bay is an exceptionally secluded, sustainably preserved and multigenerational residential and resort community offering unique home ownership and villa rental opportunities. With multiple unique neighborhoods spread across an expansive 400 acres, the 40 home owners from around the world, as well as guests, can choose from beachfront villas to estates set on the hilltops, all with breathtaking water views. The community boasts world-class dining with two restaurants, a Beach Club, Marina Village with shops, watersports, tennis, pickle-ball, a learn-through-play kids’ club called The Nut House, Nature Center and community garden. Oil Nut Bay is one of the world’s most secluded and most pristine natural settings—with all homes meticulously built in harmony with nature. The community offers the benefits of a full resort with world-class amenities with the privacy of just a few homes.

The Gallery

27 THE MOORINGS 5000

SAILING CATAMARAN USHERS CHARTER VACATIONS INTO A NEW ERA The Moorings, the world’s premier yacht charter company, has a long history of industry-leading creativity and innovation in yacht design. In partnership with South African yacht builder Robertson & Caine, The Moorings has launched numerous charter catamarans that have won ‘Boat of the Year’ honours over the past 20 years, including the Moorings 4500, Moorings 4000, Moorings 3800, Moorings 4400, Moorings 4800, the new Moorings 4500, and now, the Moorings 5000. The Moorings 5000 made its global debut in the British Virgin Islands in 2018, and promises to become a staple in The Moorings charter fleet in the years to come. A vision on the water, the 5000 sets a new standard for charter catamarans, accommodating up to 11 guests on a modern vacation platform with all the comforts of home. With features such as zoned air-conditioning for personalised climate control, expansive saloon with upgraded appliances, spacious owner’s suite, forward-cockpit seating area, skylight, water-maker, electric grill, outdoor refrigerator, complimentary wi-fi, underwater lights and weather-resistant fitted cushions throughout, every detail has been thought-out in this design.

Most importantly, the 5000 features an elevated lounge area, unique among Moorings charter yachts, which takes outdoor living to new heights. Wraparound seating with a comfortable table and even a sunbathing area make this the ideal space to soak in 360-degree panoramic views. The elevated area was specially designed to allow optimal head clearance with the boom, creating a safe and comfortable living space both under sail and at anchor. Available in both a 4-cabin and 5-cabin layout, this yacht can be chartered in Bareboat, Skippered, and all-inclusive Crewed Yacht vacation formats.

Visit www.moorings.com/5000 for detailed yacht specs, pricing and availability of this signature sailing catamaran.

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Tanya Cassie-Parker appointed as new managing partner Harneys has announced that British Virgin Islands’ Managing Partner Colin Riegels will step down on 30 June 2019 to return to full time academia. Partner Tanya Cassie-Parker will become the new BVI Managing Partner from 1 July 2019. Firm Chairman, Peter Tarn, said: “I would like to congratulate Tanya on her promotion and wish her every success in her new role. I am certain that under her leadership, the BVI office will continue to grow and thrive as it serves our international client base around the globe. Although Colin will be greatly missed, I am pleased we have managed to entertain someone of Colin’s intellectual calibre and inquisitiveness for so long.” Colin commented: “I have worked with Tanya for just under 20 years now; she is a superb lawyer and manager. I feel very confident leaving the future of Harneys in the BVI in her eminently capable hands.” Colin leaves the firm to return to the Faculty of Law at the University of Oxford, where he will be undertaking his doctoral thesis on cross-border enforcement of security. Colin will remain connected to Harneys on a consultancy basis. Tanya joined Harneys in 1999, specialising in aircraft finance and ship finance. Prior to relocating to the BVI, Tanya worked in the firm’s Hong Kong office. Today, she advises clients on various forms of corporate finance, including bilateral and syndicated loans, bond issues, project finance, property financing, lease finance and general aspects of banking and finance law. Tanya commented: “I would like to wish Colin the best on his journey into academia, and to thank him for guiding the BVI office through the highs and lows of the last two years, in particular the very difficult period in the immediate aftermath of Hurricane Irma.” Harneys is the BVI’s largest and longest-established law firm, with dedicated practice groups for all areas of commercial legal practice, each led by experienced, market-leading professionals. Harneys also provides fiduciary services to our clients through our associated corporate, trust and private wealth services business, Harneys Fiduciary, and is one of the few law firms in the BVI to offer these type of services.

BVI and LIFElabs.io enter into first-of-its-kind partnership to provide blockchain-based financial transactions and rapid cash response for emergencies Premier and Minister of Finance for the British Virgin Islands, the Honourable Andrew A. Fahie announced recently the forming of a partnership with the company, LIFElabs.io, for the purposes of providing Rapid Cash Response in the event of an emergency, and also creating an alternative digital currency payment method for facilitating ongoing financial transactions across the network of islands. Premier Fahie, a thought leader in the fast emerging blockchain technology space, stated “It is of utmost importance that our citizens receive immediate and proportional response in the midst of emergencies. LIFElabs’ innovative financial technology comes at a pivotal time for our people and our economy, while the memory of recent natural disasters remains fresh in our minds and hearts, and the pressure for increased economic efficiency keeps mounting. It is with high expectations that we enter into this unprecedented partnership, together, building a better BVI for the future.” In this ever-changing landscape, Premier Fahie has recognised the opportunity to be an early adopter, promoting this pioneering industry in the British Virgin Islands. Provisions have already begun to host blockchain conferences in the near future, while welcoming new business opportunities.

strive for, and LIFElabs.io is committed to making a substantial and compelling difference in the philanthropic sector. Innovation, growth and philanthropy are at the core of this partnership as we strive to deliver a program that has never been accomplished before. The LIFElabs.io implementation for the BVI will allow island residents to download the LIFEwallet® app on either Apple iOS or Google Android mobile devices, accessing an account that can have funds deposited into it whenever a disaster strikes. For users who do not currently have smart mobile devices LIFE will provide for digital currencies to be sent and received via SMS. The wallet app can also be used for peer-topeer (P2P) transactions, or in daily commerce, purchasing essential goods and services from local businesses. LIFElabs.io pioneering blockchain technology is a major advancement over traditional banking, where ‘bricks and mortar’ locations can be damaged or destroyed, and thereby preventing access to much needed funds during an emergency or humanitarian crisis.

LIFElabs.io CEO, Sanjay Jadhav remarked “The intrinsic value of LIFElabs.io’s platform is found in its trifecta of security, transparency, and efficiency. It is estimated that adopters of our blockchain Platform as a Service (PaaS) will reduce their current transactional fees in excess of 50%, all while incurring zero out of pocket cost to implement it, speeding the average transaction time exponentially compared to Automated Clearing House (ACH) electronic payments, wired or over the counter cash transactions.”

LIFElabs.io will also allow people from across the world to donate directly to the BVI/LIFE Rapid Response Cash Fund in the event of an emergency with incoming funds confirmed on the blockchain by anyone with access to the Internet. Local charities will also be able to play a key part in supporting communities that require immediate help. This charity platform will ensure the public can see exactly where their funds are being used and for their intended purpose, creating trust for communities in hardship and transparency for the donors, utilising the transactional service and ground-breaking technology provided. This, is in stark contrast to the 2010 earthquake in Haiti, where unfortunately only a fraction of the donated funds from across the world actually reached the local communities in need.*

The British Virgin Islands has an estimated GDP of over $1 Billion, and suffered damages in excess of $3 Billion during hurricane Irma. Swift response to natural disasters is a goal that all governments

*Source UN - The United Nations said that in total $13.34 billion had been earmarked for the crisis through 2020, though two years after the quake, less than half of that amount had actually been released, according to U.N. documents.

WITH THE GLOBAL POPULARITY OF GIN SHOWING NO SIGN OF COOLING OFF

ENTER BVI GIN BVI GIN is a new product, launched by the Little Bay Distilling Company in the British Virgin Islands last September. BVI GIN is a small batch craft gin which was created in the territory and distilled and bottled on the island of Tortola. Following hurricane Irma in September 2017, there was a great deal of news of devastation coming out of the BVI. Through our product, BVI GIN, we wanted to spread more positive messages about the territory; messages of resilience and that the destination is fully open for business. We therefore set to work creating and developing BVI GIN. We have created a traditional London Dry Gin with Caribbean influences. Whilst BVI GIN leads with juniper, there is a noticeable citrus flavour from grapefruit and lemon, which is balanced with floral notes taken from the hibiscus flower. BVI GIN has a naturally sweet finish, coming from cassia bark and liquorice root. The resulting gin is light and refreshing and pairs perfectly with tonic or Ting, and a twist of grapefruit. We are very proud that BVI GIN was recently awarded â&#x20AC;&#x153;Best Gin in the Americasâ&#x20AC;? by The Gin Guide. The Gin Guide Awards is an independent, global celebration of the historic, diverse and growing gin industry. Highly recognised and respected by the trade and consumers alike for its rigorous and quality-focused approach, The Gin Guide Awards serve to highlight the exceptional products, distilleries and people within the gin industry across the world. www.bvigin.com

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Chef Flax Charles participates in prestigious James Beards House Dinner The James Beard Foundation (JBF) recently announced that Chef Ariq Flax-Clarke of the British Virgin Islands will be participating as a guest chef at the landmark James Beard House in early June. The event started with a fundraising dinner cooked by Chef Wolfgang Puck in early 1987, the James Beard House Foundation Dinners have become to signify milestone achievements in the careers of top chefs including Tom Colicchio, Marcus Samuelsson, Nancy Silverton, and Dominique Crenn. Ariq hails from the sister island of Virgin Gorda and is currently in his final year at Johnson and Wales University in Miami, Florida. As Ariq grows, so does his culinary repertoire. In 2012, Ariq won the Annual BVI Junior Chef Challenge. He later won the silver medals at the Caribbean Hotel and Tourism Association (CHTA) Taste of the Caribbean Competition in 2017 and 2018. Chef Ariq, alongside celebrity Chef Fed Federer participated at the BVI Tourist Board’s first Taste of the BVI Cook Off in Tortola and Virgin Gorda. This collaboration earned them winners of the event in Virgin Gorda. Ariq won the BVI Agriculture Week 2014 “Preserves and Candy” competition. He joined the BVI National Culinary team in 2015 when they won the silver medal. Ariq and his sister Sapphire, created “The BVI Coconut Escape” the featured drink at the Miami Open Tennis Tournament in 2017. In February of 2018, and 2019, Ariq was a featured chef at the South Beach Food and Wine Festival where he represented the BVI. He has also gained culinary experience as an intern at Rosewood Sand Hill Resort in Menlo Park California during the summer of 2018. Earlier this year, Ariq had the distinct opportunity to demonstrate his culinary skills at the Citi Taste of Tennis events in Indian Wells, California and Miami, Florida. “It is an honor for me display my culinary talent and present fine cuisine of the British Virgin Islands at this very prestigious event”, Chef Ariq said. Sharon Flax-Brutus, Director of Tourism said, “The BVI’s representation at prestigious events such as the James Beard House Foundation Dinner presents the Territory with the perfect opportunity to present our local cuisine and extraordinary culinary talent. Chef Ariq is one of an amazing group of emerging young talent on the British Virgin Islands’ culinary scene. We hope this youth movement will continue to inspire other young persons in our community to not only find job and entrepreneurial opportunities in our Territory but like Chef Ariq, also exhibit the talent and the cuisine of the BVI on the international scene.” The British Virgin Islands is increasingly becoming known for its culinary experiences and is no stranger to the James Beard Foundation Dinner event. In June 2017, Chefs Neil and Erika Cline set the bar of the BVI’s reputation of culinary excellence. The BVI is emerging as a favourable gastro destination as it prepares for its annual BVI Food Fete in November , where local and international culinary talent is showcased.

RETAINING NATURE’S LITTLE SECRETS by Zarrin Tasnim Ahmed (The BVI Beacon) Nearly five hours into hiking the forests of Guana Island, scientists found just what they were looking for: two healthy corita plants, of the endangered species Agave missionum. They quickly recorded what they found and specific coordinates to help them find the plants again in the future. Work like this has been going on for decades in the territory, and for good reason. The Virgin Islands is home to 18 officially designated “tropical important plant areas,” according to scientists who just launched a guidebook titled Retaining Nature’s Little Secrets, copies of which will be distributed in the summer. On April 2, the National Parks Trust in association with the Royal Botanical Gardens KeW and researchers from the RBG KeW UK Overseas Territories Programme held a public lecture at H. Lavity Stoutt Community College on their findings in the tropical important plant

areas, also known as TIPAs. From fieldwork and data collection between 2016 and 2018, the scientists were able to determine which plants fell into various categories of endangered species. Scientists have also identified five threatened habitats throughout the territory using globally recognised standards: mangroves, dry salt flats, semi-deciduous gallery forests, coastal shrublands, and upland evergreen forest. Part of KeW’s international effort to identify TIPAs across the globe, the VI network is the first to be completed and fully documented, according to Dr. Colin Clubbe, head of conservation science at KeW. Other countries that are currently identifying TIPAs include New Guinea, Bolivia, Guinea, Cameroon, Mozambique and Uganda. Natural Resources, Labour and Immigration Minister Vincent Wheatley also spoke at the event, explaining the significance of the work in the VI. “The scientific work conducted has ensured better protected and preservation of habitats that are unique to our Virgin Islands,” Mr. Wheatley said in opening the lecture.

Corita plants, of the endangered species Agave missionum

The Virgin Islands is home to 18 officially designated “tropical important plant areas”

Global Initiative The project is part of an international KeW-wide programme which began in 2015 with Phase One: identifying TIPAs. Working closely with the VI and six other countries around the world, Dr. Clubbe explained how the TIPAs were the first identified in the VI. There are three criteria under which a TIPA can be designated: threatened species, threatened habitats, and botanical richness. “The BVI is the first place in the world that has applied these international criteria, rigorous science, to identify what are the most important areas,” Dr. Clubbe said. Eventually, the research conducted will be a beginning to a global strategy that feeds into Sustainable Development Goals laid out by the United Nations General Assembly in 2015 for the year 2030. In this way, he added, the TIPAs identified in the VI will have a long-term ripple effect. “This is part of a global initiative,” Dr. Clubbe said. “The TIPAs programme is to try and identify these priority sites and work toward conservation and management of these sites.”

Only in the VI Dr. Martin Hamilton, a research leader from the KeW UKOT Programme, shared with the audience of a couple dozen people four endemic plants that so far have been found only in the VI: the Vachellia anedagensis (poke-me-boy), Metastelma anegadense (wire wist), Senna polyphylla variation neglecta (a bush with yellow flowers), and the Pitcairnia jarechii (a part of the bromeliaceae family). These species are on the Red List of Threatened Species, a comprehensive inventory published by the International Union for Conservation of Nature.

The VI has 35 species of “national high conservation importance,” 25 of which are globally threatened, according to the scientists. All of this information is in Retaining Nature’s Little Secrets, which will be launched in July. The guidebook will be distributed across the territory, including schools and tourist areas, in order to educate residents and visitors about the important plants and areas. Asked by an audience member what residents should do with this information, Nancy WoodfieldPascoe, deputy director of science,

research and environmental policy at the NPT, encouraged people to ask themselves, “How can I spread this information?” Whether it’s a boat captain pointing out certain plants or educators teaching children about ecology, there are many ways to speak for the endangered species on the islands, she said. Another thing residents can do is trust in technology that allows builders to plan their houses without tearing down the land, Ms. Woodfield-Pascoe added.

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SOGGY DOLLAR RUM COMES HOME Since its launch in October, Soggy Dollar Rum — in both its dark and island spiced iterations — has been for sale online and in shops in the United Kingdom and United States. But save for a trip over to Soggy Dollar Bar in White Bay, Jost Van Dyke, it wasn’t easy to find in its home base of the Virgin Islands. However, starting this spring, more VI residents and visitors have been able to pick it up in the place of its birth. “It’s been received very well in the States [and] we’ve had incredible results online,” said Jerome “Jerry” O’Connell, owner of the nearly 50-year-old beach bar, adding that the rum is distributed in the BVI through Caribbean Cellars. “We’ve done very well for six weeks in the USVI. Now we’re getting over to Tortola.”

Origins Although he first hatched the idea of making rum more than five years ago, Mr. O’Connell, who has owned Soggy Dollar since 2004, didn’t get it off the ground until last year. First of all, not just any rum would do. “The Caribbean is the rum capital of the world,” he said. “We [at Soggy Dollar] use more rum than anyone else in the area. It just seemed like Soggy Dollar equaled rum. And we didn’t want just any rum. We wanted a premium rum.” The base is a blend of rums from Jamaica, Barbados and the Dominican Republic. Soggy Dollar then adds it own spice mixes for both its dark and spiced versions. The flavours include caramel, vanilla, coconut, orange, pineapple, nutmeg and VI-inspired spices. The rums are then aged in oak casks and bottled and shipped from the UK. The attention to detail has paid off: the product won gold in the 2019 Global Spirit Masters Awards. Although other spirits — including the longstanding Callwood Rum and newly launched BVI Gin — are bottled on Tortola, Mr. O’Connell said that spirits in the VI are always “going to be limited by our size. “I think the challenge for us was that we could not produce the quantity that we needed to do on Jost Van Dyke,” he explained. An even greater challenge was Hurricane Irma, which flattened most of White Bay in 2017. As Mr. O’Connell and his staff struggled to rebuild the bar nearly from scratch, the slowdown in business offered the chance to finally concentrate on the launch of their new product. “The rum was always a fun thing to work on even when times were tough,” he said. “It helped us get through.”

“We use more rum than anyone else in the area. It just seemed like Soggy Dollar equaled rum. And we didn’t want just any rum. We wanted a premium rum.”

Island woes Mr. O’Connell, who lives in Great Harbour, admitted that it’s been tough running a worldwide beverage business from a tiny island of around 300 inhabitants. “There are so many logistics to the spirits business,” he lamented. In fact, Mr. O’Connell’s son had to move to the US temporarily in order to deal with the red tape there. “Trying to deal with the US and get approval is almost impossible long distance,” he said. Most sales still originate on the business’s website. So far, they’ve been able to get their product in bars throughout South Florida, as well as in all 30 locations of the Turtle Bay Caribbean Bar and Grill, a UK restaurant chain. Initially, getting the product in front of decisionmakers and tempting them to make the switch was also an uphill battle. However, Soggy Dollar is already ahead of the game in brand

recognition. “I think the really exciting part is people love the Soggy Dollar story,” Mr. O’Connell said. “Now that we’re getting in front of people in the US… they are willing to take it on.” Caribbean spirits For promotion, Soggy Dollar has been criss-crossing the ocean alongside partners at the BVI Tourist Board and The Moorings, promoting rum at boat shows in sailing capitals like Palm Beach, Florida and Southampton in the UK. This year, the brand sponsored the Hitmakers and Rum Chasers concert series, which finished in St. John in April, with songwriters including Jon

Nite and J.T. Harding, who penned country hits for artists like Kenny Chesney and Keith Urban. The rum will continue to expand, said its founder, with the UK distributor soon moving into France, Germany and Spain. “We’re thinking international,” he added. The new rum is timed right to catch the wave of craft-distilled spirits both here and elsewhere in the Caribbean, which in some cases are replacing the old standbys, he said. “In the Caribbean, dark rum has been forever,” he said, “but now you’re seeing all kinds of dark rums and aged rums, and winning over some bourbon and whiskey drinkers. It’s a whole different story.”

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Benefits of IFCs Crucially, the report explained how IFCs can help overcome barriers to investment in developing countries by providing secure jurisdictions -which aren’t always readily available -- for dispute resolution and collateral arrangements. Foreign direct investment and emerging-market funds were responsible for 75 percent of new business entities in the BVI, largely between greater China and developing countries. Between 2007 and 2014, 41 percent of BVI-domiciled entities were involved in FDI, and 16 percent were involved in EMF activity.

The value of IFCs to developing countries

A new report is showing that international finance centres (IFCs) like the British Virgin Islands solidified their contribution to global value between 2007 and 2014, facilitating an additional $1.6 trillion of financing to developing countries. The report, titled “International financial centres and development finance,” by Dr. Judith Tyson at the Overseas Development Institute, found that international finance galvanised through IFCs boosted developing countries’ gross domestic product by $400 billion and tax revenues by $100 billion during that period. Many of these were couched in areas crucial to economic growth, like infrastructure and financial services. “International finance centres play a crucial role in funnelling much needed investment to developing countries,” said Dr. Tyson, by providing “the investment needed to create jobs, build critical infrastructure and drive economic development in some of the world’s poorest nations.” Thirty percent of all international investment stock is channelled through IFCs, which, as of 2012, totalled more than $6.5 trillion. In fact, the report found that nations would have missed out on over a billion dollars of incremental financing over the last decade if it were not for IFCs.

Dr. Tyson said the report highlights the benefits of IFCs that have too often been neglected, especially amid the barrage of new regulations coming from the United Kingdom and the European Union, intended to crack down on perceived illicit activity. “The danger of the current reform process is that, in their zeal, the various authorities will throw the proverbial baby out with the bathwater,” said Dr. Tyson, “impairing the development community’s ability to deliver one of its most important policy goals — the mobilisation of private finance for development while having a negligible effect on corruption and tax evasion in developing countries.”

Case studies To gauge the real-world impact of IFCs, the report looked no further than Norfund, a development agency formed by the government of Norway to provide aid to poorer countries, and that Simon Gray, head of business development and marketing for BVI Finance, called “a cautionary tale for those who think that multilateral development banks and [direct foreign investors] should not use IFCs.” Norfund was for a long time regarded as one of the best governed agencies of its kind in the world. However, it stopped channelling funds through IFCs in 2009 as a result of political pressure. Norfund made no new investments in sub-Saharan Africa in 2010 and 2011, and halted pipeline deals in agriculture and small-enterprise because they couldn’t be restructured. “Obviously the politicians thought this was probably a good idea but there was a consequence to the ordinary people in those countries,” Mr. Gray said.

New reforms In addition, the report found that despite oft-heard naysayers, tax avoidance actually dropped after 2008. International standards introduced by the Global Forum on Transparency and Exchange of Information for Tax Purposes and the Financial Action Task Force, to which the BVI adheres, resulted in the use of BVI vehicles for tax structuring as a percentage of total activity declined from 19 percent in 2007 to eight percent in 2014, a near 60 percent change, according to the report. As of mid-2017, these standards had $85 billion of new taxes for member countries FATF has also established global standards to combat money laundering and terrorist financing. Despite the effectiveness of these reforms, Dr. Tyson is calling for universal standards and donor assistance to bolster weak resources in some of these countries, which can hinder them in tackling the root problem of illicit activity, like domestic corruption. The reach her conclusions, Dr. Tyson used interviews with multilateral development banks, direct foreign investors and professional practitioners, and secondary sources such as the International Monetary Fund and United Nations. “These important benefits of IFCs for developing countries are often neglected in the debate surrounding policy, regulation and reforms targeting IFCs,” explained Dr. Tyson. “More balance is needed in policy and public dialogue to reflect IFCs’ positive impact, as well as recent significant strengthening of the regulatory environment in IFCs. Lorna Smith, former executive director of BVI Finance, which supported the report, added, “The strengths and attractiveness of IFCs are clear. They provide secure, reliable and efficient jurisdictions that allow investors to mitigate the risks and barriers to investing in developing countries.” See link for complete report. www.bvifinance.vg/Portals/0/xBlog/ uploads/2019/1/18/ODIReport.pdf

A new innovative Jost Van Dyke spa that brings the ocean in

Spa visits -- whether for a deep-tissue massage, aromatherapy or just to relax and unwind in blissful peace -- are a frequent ingredient of the best Caribbean vacations. Dale Mapp, however, envisioned something different. When he arrived from his native Barbados a few years ago, he was inspired by the calm, clear waters of Jost van Dyke. He conceived of Ocean Spa BVI, a floating oasis in White Bay. It was almost complete when Hurricane Irma temporarily blew away his dreams. “It was actually completed before Irma, but I had no choice but to rebuild and not give up, so I continued,” he said. “It’s made from salvaged materials after Irma, with bits of people’s roofs on it and stuff like that: wooden gates, storage boxes, closet doors and things.” He opened in October 2018 and called the experience “nerve-wracking.” “Not sure if we could get a hurricane again and it would be over before I got started,” he said. “I wanted it to be on one of the most beautiful beaches in the BVI.” However, he survived and has gone on to gain national and international media coverage and a steady stream of customers, who may come to White Bay for the painkillers, but might linger on for something truly unique. “It adds depth to someone’s vacation,” he says. “The bars and everything, that’s fun, but how you really sustain the tourism industry is how you involve the people.” Mr. Mapp, with an extensive background in hospitality -- managing everything from restaurants to casinos-understands what appeals to vacationers, and convenience is definitely on the top of the list. The nature of its location adds that convenience factor. White Bay gets most of its visitors via boat, and they can easily kayak, paddleboard, or dinghy over to the spa without ever having to go ashore. “I remember guests telling me, ‘to have a spa treatment, I have to cross the shore, across the sand across to the lobby, and then make it back to the beach,’” he said. “I needed a place more accessible.” But the biggest draw is the ocean itself, which Mr. Mapp tries to incorporate into everything he does, from aromatherapy to romantic sunset massages. There are portholes in the sides of the spa so guests can watch the waves while they relax. I’m fascinated with the ocean, its healing properties,” he said. “Really and truly that’s how I want to spend the rest of my life — surrounded

by ocean water and breathing clean air — and I want to expose other people to the health and benefits of it. We take the ocean for granted when we really shouldn’t...something as gentle as a sway of the spa, the sound of the ocean, the smell of the salt air, the sun coming through the window,” he said. “When you combine all these things, Mother Nature has done more than half the job for me.” www.oceanspabvi.com

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VOYAGE 480 ELECTRIC

GOING GREEN The first VOYAGE 480 Electric arrived at Soper’s Hole Marina Tortola in January 2019. “Electrified” passed her 5000 miles delivery test from Cape Town South Africa with flying colours and has been impressing sailors ever since. She has been sailed by her proud owners, yachting journalists, VOYAGE charters BVI staff and managers. Charter clients stepped aboard in March welcoming many clients before taking a Fall break to be displayed in the Annapolis Sail Boat Show in October. “Electrified “is paving the way for more Eco-friendly VOYAGE yacht models and will be joined in the BVI by two VOYAGE 575 Electrics in summer 2020. In keeping with the rest of the fleet at VOYAGE Charters BVI, the VOYAGE Electric models are luxuriously appointed and available for Bare Boat, Captained and All -Inclusive Crewed Charters. In addition to charter versions, all new VOYAGE yacht models are available in Owners Versions for private purchase exclusively through VOYAGE Charters BVI. Cruising World’s Elaine Lembo wrote the March edition’s Green Waves article and below is some Q&A that the piece was based upon; Chartering the VOYAGE 480 Electric

Are more credentials required of bareboat charterers interested in taking the cat out on charter? Bare boat charter clients will fill out our standard sailing resume and the VOYAGE 480 Electric requires no additional experience or qualification than a standard diesel engine version. What is addressed in the skipper checkout? Our check-out briefings are very thorough and cover all facets of operating the vessel. It is an advantage of being a single brand fleet operator that our staff have extensive knowledge of VOYAGE vessels, which have common systems and layouts across the model range. In addition to our standard briefing, the VOYAGE 480 Electric check out will cover; • Location and operation of the Oceanvolt controls and displays. • Operating the vessel under power. • Using propeller regeneration whilst under sail. • Battery bank charge levels. Is it more complicated? The sailing systems on the vessel are identical to a regular VOYAGE 480 so there is no added complication there. When it comes to operating under power or using the house systems, we think most clients will find the vessel easier to operate than

a conventional diesel engine model. Everything is powered from the 35K lithium iron phosphate battery bank which is automatically charged via solar panels, propeller regeneration or the DC generator. The solar charging requires no management from the skipper, the propeller regeneration is simply switched on at the helm when the vessel is under sail and the DC generator switches on automatically when the battery bank calls for charge. Does it cost more per charter than a sailing cat that is not electric powered? The VOYAGE 480 Electric does cost more to build than a conventional charter version of the vessel. Bare boat mid-season pricing is approximately 12% more than a standard diesel engine VOYAGE 480. What support does Voyage provide during the charter? A great feature of the Oceanvolt SEA system is its Remote Service Interface. This allows the whole system to be connected to the boat’s wi-fi network, which enables the base staff, as well as Oceanvolt technicians, to remotely monitor, diagnose, and troubleshoot issues on the boat. In addition to this, our Soper’s Hole Marina office and reception are fully operational again. Phone in technical support goes to our resident base manager and chase boat calls can be made to any of the BVI harbours, other than Anegada. www.voyagecharters.com

37 Quito’s Inn raises the bar in accommodations For over three years, the shell of the new $7 million Quitos Inn has soared over the small beach community of Cane Garden Bay, promising visitors, when it opened, the kind of high-rise luxury hotel experience not yet found in that area of the island. Owners Quito Rymer and Kimberly West-Rymer had planned to finally throw open the doors in December 2017, but Hurricane Irma stopped them in their tracks. It wasn’t just the physical destruction from the storm, either. Logjams getting needed materials and skilled workers also “pushed us back 18 months,” said Ms. Rymer. This spring, though, it was finally time. The Rymers understand what it means to (re)build. After opening three decades ago with just eight hotel rooms, they added 10 more rooms over the years, all while building the Gazebo’s reputation on live music and vibrant art from Mr. Rymer and a rotating cast of artists. That won’t go away with the new amenities. “We are offering a ‘beach chic’ vibe, with gorgeously furnished rooms, a spa, exercise facilities, a pool and a conference room,” said Ms. Rymer. “All attached to, and supported by the newly reopened Quito’s Gazebo.” The gazebo, levelled for the storm, opened in December, just in time for the 2018 high season. The hotel completes the effect. And while Ms. Rymer acknowledged that the 21-room, multistorey hotel is unlike anything quaint Cane -- known mostly for its calm anchorages and casual beach shacks -- has seen before, she explained that visitors’ demands have grown more sophisticated since Quito’s first opened. “Cane Garden Bay is one of the top tourist destinations in the BVI, and we believe we will be filling a gap in the higher end accommodations for travelers who desire a more polished experience. while still having a ‘toes in the sand, wind in the hair and salty sea’ experience,” said Ms. Rymer. Although the area has recovered exponentially from the leafless, debris-littered landscape residents found after the storm, difficulties remain. Other businesses in the area have been frustrated by insurance woes and the struggle to get proper materials and labour with so many of their neighbours fighting for the same resources. What’s Quitos secret? “Patience,” said Ms. Rymer. However, the drive shouldn’t come from the private sector alone, she said, adding that the government has a role to play “in making sure the Cane Garden Bay area is clean and clear of derelict vehicles, boats and houses. The bay is a beautiful part of Nature’s Little Secrets,” she said, but those power “to make changes and enforcing of laws to continue to improve the quality of life for all of us, visitors and residents alike, in Cane Garden Bay.” And even though the inn may be a large hotel relatively, its DNA comes right out of the soil. “The fact that the hotel is locally owned and built is something we are very proud of,” she said. www.quitosltd.com

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natural environments that can be found anywhere in the world. Your new Government will protect, harness, develop and promote all that is good about the BVI, both domestically but also on the international stage,” he continued.

Premier and Minister of Finance, Honourable Andrew A. Fahie being appointed and sworn in. (Photo credit: Ronnielle Frazer/GIS)

Premier Fahie affirms his commitment to the people of the Virgin Islands following ministerial appointments Following the swearing in of his Cabinet and Junior Ministers on March 1, Premier the Honourable Andrew A. Fahie is reinforcing his commitment to the people of this Territory. The appointments are as follows: Premier and Minister of Finance, Honourable Andrew A. Fahie; Minister for Health & Social Development, Honourable Carvin Malone; Minister for Transportation, Works & Utilities, Honourable Kye Rymer; Minister for Natural Resources, Labour & Immigration, Honourable Vincent Wheatley; Minister for Education, Culture, Youth Affairs, Fisheries & Agriculture, Dr. the Honourable Natalio Wheatley; Junior Minister for Trade and Economic Development, Honourable Sharie de Castro; and Junior Minister for Tourism, Honourable Shereen Flax-Charles.

Premier Fahie said, “This is a tremendous opportunity for the people of the BVI. We campaigned with a clear vision to set the country and its people on course for future sustainability and prosperity, whilst also addressing the most pressing issues of today through a clear plan of action.” He added that the new ministerial assignments will strengthen the Government’s ability to deliver on their agenda for the Territory. He said, “Our first order of business will be to undertake a comprehensive review of the state of the Territory which will greatly assist us to more effectively tackle the many challenges which must be addressed.” “The BVI is blessed with untold potential, talented people and of course some of the most beautiful

Premier Fahie said that a sound economy will be vital for us to be able to implement our plans. Our financial services industry was vital to the recovery of Government revenues following the hurricanes at a time when the tourism industry had been devastated. It faces continued challenges in the international arena and we will continue to work closely with our industry and regulators to ensure that it continues to thrive. Following passage of the Economic Substance Act, we expect to see many more opportunities for employment in the sector and will be discussing with the industry how these can be maximized to the benefit of BVIslanders. “The rebuilding and expansion of our tourism industry will be a major focus. It is essential that our industry is made resilient and sustainable in order to face the climate change challenges that we will undoubtedly face. This will require significant infrastructure investment and proposals in this area will be a priority for your new Government.” “I am truly honoured and humbled by the confidence placed in me and the entire Virgin Islands s Party team. I will carry this great responsibility forward with integrity and I will always strive to do what is best for the BVI and its people. Let us move together in one direction forward, as one people and a united Virgin Islands.”

39 1

HOUSE OF ASSEMBLY MEMBERS 1.

Honourable Neville A. Smith, Deputy Speaker of the House of Assembly and Territorial At-Large Representative

Honourable Baba Aziz, Attorney General

Honourable Shereen D. Flax-Charles, Junior Minister for Tourism and Territorial At-Large Representative

Dr. the Honourable Natalio D. Wheatley, Deputy Premier, Minister for Education, Culture, Youth Affairs, Fisheries and Agriculture and Seventh District Representative Honourable Kye M. Rymer, Minister for Transportation, Works and Utilities and Fifth District Representative

Honourable Sharie B. deCastro, Junior Minister for Trade and Economical Development and Territorial At-Large Representative

Honourable Vincent O. Wheatley, Minister for Natural Resources, Labour and Immigration and Ninth District Representative

8. Honourable Carvin Malone, Minister for

Health and Social Development and Territorial At-Large Representative

Honourable Andrew A. Fahie, Premier, Minister of Finance and First District Representative

10. Honourable Marlon A. Penn, Leader of Her

Majesty’s Loyal Opposition and Eight District Representative

11. Honourable Julian Fraser, RA, Member of Her Majesty’s Loyal Opposition and Third District Representative

12. Honourable Alvera Maduro-Caines,

Member of Her Majesty’s Loyal Opposition and Sixth District Representative

13. Honourable Melvin M. Turnbull, Member of Her Majesty’s Loyal Opposition and Second District Representative

The Gallery

Events

JULY

6 Firecracker Regatta & Chili Cook-off 7 Foxy’s Hemp Fest 16 Trellis Bay Full Moon Party 16 Foxy’s Full Moon Party (Great Harbour) 24 Summer Sizzle BVI 25 BVI Emancipation Festival 27 Christmas in July

BVI Emancipation Festival July-August. A celebration of our ancestors’ freedom from colonialism and our cultural history. During time we showcase the culture and history of our people in grand style with extravaganzas of local and international music, pageants, Food Fairs, j’ouvert (street jamming), parades, gospel celebrations and folklore presentations.

AUGUST BVI Food Fête November. Highlights the exquisite flavors of British Virgin Islands cuisine during the popular Barefoot Gourmet Soirée and annual Anegada Lobster Festival where succulent Spiny lobster is served a number of ways.

www.bvitourism.com

Facebook: @bvifoodfete

Taste of Virgin Gorda

Full Moon Parties Monthly. Come for the Full Moon activities and parties. Trellis Bay hosts a dinner buffet, Mocko Jumbies, live music & Foxy’s serves up their world famous BBQ with live music and more.

November. Don’t miss out on your chance to sample tantalising food, incredible wines and amazing entertainment on the water’s edge! We are excited as we bring a wide cross section of BVI residents in one location to celebrate -FOOD.

www.bvitourism.com/ full-moon-parties

www.bvitourism.com/tastevirgin-gorda

NOVEMBER

www.bviarbitrationconference.com

Summer Sizzle BVI July. The Caribbean’s premier fashion and lifestyle event is held annually in the British Virgin Islands. A highly anticipated event, attracting designers, models, entertainers, fashion influencers, press, celebrities and visitors. www.summersizzlebvi.com

JULY 2019

ww.bvitourism.com/anegada-lobster-festival

6 Foxy’s Irmaversary Event 14 Trellis Bay Full Moon Party 14 Foxy’s Full Moon Party (Great Harbour) 14 Back to School Regatta

8 Interline Regatta 13 Trellis Bay Full Moon Party 13 Foxy’s Full Moon Party (Great Harbour) 19 Willy T Virgin’s Cup 21 St. Ursula’s Day

November. Arbitration 2.0 Business BVI in partnership with the BVI International Arbitration Centre are pleased to convene the 3rd BVI International Arbitration Conference November 18-22, 2019. The biennial conference attracts leading speakers, influencers and thinkers from global Arbitration Space.

Anegada Lobster Festival

SEPTEMBER

OCTOBER

3rd BVI International Arbitration Conference

November. For everyone who loves food, lobster, and dreams of the British Virgin Islands! This two-day culinary event is held on the shores Anegada where some of the BVI’s most talented chefs will cook sumptuous lobster dishes!

5 Emancipation Festival Grand Parade 6 Emancipation Festival Horse Race 7 Emancipation Festival East End Event 15 Trellis Bay Full Moon Party 15 Foxy’s Full Moon Party - Great Harbour 31 Foxy’s 81 Laps Birthday Celebration

Tourism Month 2 Foxy’s Cat Fight & Halloween Ball 2 Double-Handed Race 2 9th Annual BEYC Pro Am Regatta (TBC) 7 Barefoot Gourmet Soiree 7 10th BVI Charter Yacht Show 9 Taste of Tortola 12 Trellis Bay Full Moon Party 12 Foxy’s Full Moon Party (Great Harbour) 12 Jost Pork (Jost Van Dyke Pork Festival) 16 Nanny Cay Round Tortola Race 18 BVI Int’l Arbitration Conference 23 Taste of Virgin Gorda 28 Foxy’s Thanksgiving Dinner 30 14th BVI Half Marathon 30 Anegada Lobster Festival

DECEMBER

4 Necker Cup 6 Christmas on DeCastro Street 12 Trellis Bay Full Moon Party 12 Foxy’s Full Moon Party (Great Harbour) 13 Grandma’s Christmas Virgin Gorda (TBC) 14 O’Neal & Mundy Commodore’s Cup 25 Christmas Day 25 Foxy’s Christmas Dinner 26 Boxing Day 26 Boxing Day Horse Races 31 Foxy’s Old Year’s Night Celebrations 31 Fireball New Year’s Eve Bash (Trellis Bay) Public Holidays (in red) celebration date subject to change

Business

GLOBAL BUSINESS | BVI BUSINESS | ENTREPRENEUR

BACKING THE FUTURE

DATA-DRIVEN FINANCIAL SERVICES REGULATION AND COMPLIANCE By PROFESSOR PHILIP TRELEAVEN SIMON GRAY

ata-driven regulation and compliance are the key to a successful future financial services industry. With regulators being the ‘public champion’ for these new data technologies, this article explores the automation of regulation and compliance and areas that offer significant potential to transform services and support the work of regulators. In this article, Simon Gray of BVI Finance and Professor Philip Treleaven, of University College London, help readers navigate the sometimes tortuous legal, regulatory and technological “rocks” of FinTech. The data science technologies of artificial intelligence (AI), Internet of Things (IoT), Big data and behavioural/predictive analytics, and blockchain are poised to revolutionize regulation and compliance; and create a new generation of RegTech start-ups. Examples of current RegTech systems include: Chatbots and intelligent assistants for public engagement, Robo-advisors to support regulators, real-time management of the compliance ecosystem using IoT and blockchain, automated compliance/regulation tools, compliance records securely stored in blockchain distributed ledgers, online regulatory and dispute resolution systems, and in future regulations encoded as understandable and executable computer programs.

BUSINESSBVI.COM

Business | GLOBAL BUSINESS

“IT IS THE OBVIOUS WHICH IS SO DIFFICULT TO SEE MOST OF THE TIME. PEOPLE SAY ‘IT’S AS PLAIN AS THE NOSE ON YOUR FACE.’ BUT HOW MUCH OF THE NOSE ON YOUR FACE CAN YOU SEE, UNLESS SOMEONE HOLDS A MIRROR UP TO YOU?” ISAAC ASIMOV, I ROBOT.

JULY 2019

GLOBAL BUSINESS

Why Automate Regulation and Compliance Automation is all the rage, but why is this happening and what are the benefits? In short, money – cost savings and greater efficiency are both imperatives and key drivers. Indeed, the UK Chancellor Philip Hammond put it well in a speech to the second International FinTech Conference in London in March 2019. His speech covered many areas of financial innovation, but perhaps the most significant aspect from a compliance perspective, was his announcement that the FCA and Bank of England are moving towards automating regulatory compliance. The intended benefits of this automation will likely be reduced costs for financial services firms, as well as the removal of a key barrier for FinTechs as they enter financial services markets. Indeed, the proposed automation is part of the government’s new FinTech Sector Strategy, which seeks to retain the UK’s position as ‘the global capital of FinTech’ well beyond Brexit. The UK has reason to be proud of its innovation. After all, FinTech contributes nearly $7 billion to the UK economy each year and London is home to 17 of the top 50 international FinTech firms. Indeed, in 2017, investment in UK FinTech more than doubled. For a country that launched the industrial revolution, evidently innovation and entrepreneurship is far from over. Let us now translate some of these concepts into normal language by exploring their definitions.

Data Science & Technologies In transforming regulation, the core technologies are: Data Facilities: online facilities of regulatory data collected by national government agencies, and often open source for public access and analysis (e.g. www.data.gov, https://data.gov.uk);

Artificial intelligence (AI): systems able to perform tasks normally requiring human intelligence;

Internet of Things (IoT): is the internetworking of ‘smart’ physical devices, vehicles, buildings, etc. that enable these objects to collect and exchange data;

Behavioral/Predictive Analytics: the analysis of large and varied data sets to uncover hidden patterns, unknown correlations, customer preferences etc. to help make informed decisions;

Chatbots: systems for interacting with regulated companies, registrants and the general public using natural language and speech;

Blockchain Technologies: technology underpinning digital currency, that secures, validates and processes transactional data.

Big Data: is the process of examining very large data sets to uncover hidden patterns, unknown correlations etc.; data sets that are so complex that traditional data processing application software is inadequate to deal with them;

Let us now illustrate these vital technologies in more detail

Big Data Regulators collect huge volumes of data (increasingly open sourced) and thus has major opportunities for socalled Big data (analytics). In general, Big data provides the opportunity of examining large and varied data sets to uncover hidden patterns, unknown correlations, customer preferences etc. Big data encompasses a mix of structured, semi-structured and unstructured data, gathered formally through interactions with citizens, social media content, text from citizens’ emails and survey responses, phone call data and records, data captured by sensors connected to the internet of things and so on. The notion of ‘Big data’ is both increasing in volume, variety of data being generated by organisations and the velocity at which that data is being created and updated; referred to as the 3Vs of Big data.

Artificial Intelligence Technologies AI technologies power intelligent personal assistants, such as Apple Siri, Amazon Alexa, and ‘Robo’ advisors, and autonomous vehicles. AI provides computers with the ability to make decisions and learn without explicit programming. There are three main branches:

Behavioural and Predictive Analytics

Closely related to Big data is behavioural and predictive analytics that focuses on providing insight into the actions of people. Behavioural analytics centres on understanding how consumers act and why, enabling predictions about how they are likely to act in the future, predictive analytics is Machine Learning: a type of AI program the practice of extracting information with the ability to learn without explicit from historical and real-time data sets programming, and can change when to determine patterns and predict exposed to new data; future outcomes and trends. Predictive analytics ‘forecasts’ what might happen Natural Language Understanding: in the future with an acceptable level the application of computational techniques to the analysis and synthesis of reliability, and includes what-if scenarios and risk assessment. of natural language and speech; and Sentiment Analysis: the process of computationally identifying and categorizing opinions expressed in a piece of text.

Blockchain Technologies Perhaps the most popular and much coined term in FinTech, the core blockchain technologies are: Distributed Ledger (DLT): a decentralized database where transactions are kept in a shared, replicated, synchronized, distributed bookkeeping record, which is secured by cryptographic sealing. The key attributes are: resilience, integrity, transparency, and unchangeable or mostly ‘immutable’. Smart Contracts: (possibly) computer programs that codify transactions and contracts which in turn ‘legally’ manage the records in a distributed ledger.

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Business | GLOBAL BUSINESS

Automating Regulation & Compliance

Regulation and Legal Status of Algorithms

A core focus of regulators of late has been the challenge of Digital Regulatory Reporting (DRR). Indeed, the Financial Conduct Authority (FCA) issued its Feedback Statement on its Call for Input FS18/2 in October 2018. This call for input outlines a “proof of concept” developed at its TechSprint initiative in late 2017, seeking to make it easier for firms to meet their regulator reporting requirements and improve the quality of the data that they provide. The feedback analysis weighs up the pros and cons of each of the following concepts, namely: disambiguation of reporting requirements; common data approach; mapping requirements to firms’ internal systems; a mechanism for firms to submit data to regulators; utilising standards to assist the implementation of DRR; a common data model; application programming interfaces; DLT networks; disambiguation of regulatory text; and of course uItlising standards to assist the implementation of DRR

Legal redress for algorithm failure seems straightforward. If something goes wrong with an algorithm, just sue the humans who deployed the algorithm. But it may not be that simple: for example, if an autonomous vehicle causes death, does the lawsuit pursue the dealership, the manufacturer, the third-party who developed the algorithm, the driver, or the other person’s illegal behavior? This stimulates the debate of whether or not algorithms should be given a legal personality in the same way as a company.

In terms of the potential benefits of DRR, these can be summarised as follows: • a reduced need for firms to interpret rules, making the information submitted to regulators more accurate and consistent; • increase in efficiency via reductions both in time and costs taken in complying with regulatory reporting requirements; • increase the attractiveness of the test jurisdiction’s regulatory framework for firms operating or considering operating in a certain jurisdiction; • increase the consistency of the information that regulators receive by reducing potential ambiguity within reporting requirements; • potential to implement future reporting requirements more quickly, and to improve the quality of data that are received were also commonly noted benefits; • provision of higher quality data is seen as a potential benefit for both regulator and regulated • potential improvement in information sharing between firms - specifically internal risk and management purposes.

As we know, a ‘Legal person’ refers to a non–human entity that has a legal standing in the eyes of the law. A graphic example of a company having legal personality, is the offence of corporate manslaughter, which is a criminal offence in law, being an act of homicide committed by a company or organisation. Another important principle of law is that of Agency, where a relationship is created, where a principal gives legal authority to an agent to act on his behalf when dealing with a third party. An agency relationship is a fiduciary

Conclusion The prolific short story writer, Saki (H.H. Munro), used the term: “Design in haste, repent at leisure”. It is fair to say that a number of key regulators, such as the FCA, ASIC, Singapore, and the BVI’s Financial Services Commission are backing the future and facilitating innovation fast but their high level of consultation with key industry players means that repentance is unlikely – and why, with such cutting edge initiatives, should it be?. We all know about tempus fugit and time flying but some of these leading regulators may just be more about carpe diem or seizing the day. Long may it continue…! If robots do their jobs, then perhaps some complacent regulatory noses deserve to be put out of joint and it may be appropriate to “cock a snook” at the also rans.

Time will tell. | BB

JULY 2019

one. It is a complex area of law, with concepts such as apparent authority, where a reasonable third party would understand that the agent had authority to act. As the combination of software and hardware is producing intelligent algorithms that learn from their environment. It is conceivable that, with the growth of multi algorithm systems, decisions will be made that have far reaching consequences for humans. It is this potential of unpredictability that supports the argument that algorithms should have a separate legal identity, so that due process can occur in cases where unfairness occurs. The alternative to this approach, would be to adopt a regime of strict liability for those who design or place dangerous algorithms on the market. To deter behaviors that appear or turn out to have been reckless. Is this a case of bolting the door after the horse has escaped?

BVI Business

Relevant entities The ESA came into force on 1 January 2019, immediately applying to in-scope entities formed on or after that date and, in relation to pre-existing in-scope entities, with effect from 30 June 2019. The ESA applies to vehicles with legal personality registered in the BVI, including companies and certain limited partnerships. The in-scope entities are referred to as “legal entities” and do not include trusts, partnership and limited partnership vehicles without legal personality, or entities which would otherwise be in-scope but are classified as “non-resident” due to their tax residence being in a jurisdiction outside the BVI. Legal entities that can demonstrate, by supplying appropriate evidence, that they are tax resident in another jurisdiction, fall outside the substance requirements of the ESA. Relevant activities

The ‘greylist’ and uncertainty

ECONOMIC SUBSTANCE IN THE BVI: CHANGE, CHALLENGE AND OPPORTUNITY By RACHAEL MCDONALD

Change – new economic substance legislation The EU has long been leading the charge on setting international standards relating to tax governance. Concerns about low or zero tax jurisdictions, such as the BVI, granting tax advantages without also requiring real economic activity and presence within the jurisdiction is nothing new. However, in 2016, the EU set additional criteria relating to 1) tax transparency, 2) fair taxation and 3) anti-base erosion and profit-sharing (BEPS) measures by which to assess countries and, in 2018, the OECD included low and zero tax jurisdictions outside of the EU (including the BVI) as part of its remit. Whilst the BVI was found to be compliant in relation to tax transparency and anti-BEPS measures, it was found wanting in being able to demonstrate economic substance. In response, the BVI introduced the Economic Substance (Companies and Limited Partnerships) Act, 2018 (as amended, the ESA). The ESA specifies new economic substance requirements and an enforcement regime in the BVI.

JULY 2019

The BVI is currently on Annex II to the EU’s list of non-cooperative jurisdictions for tax purposes, or the ’greylist’, as a jurisdiction, which is cooperative, but requires further technical guidance from the EU, in particular around the economic substance requirements for collective investment vehicles (CIVs). CIVs (which are essentially established to facilitate international cross-border investment in a tax-neutral jurisdiction) are not intended to have economic substance in the offshore jurisdiction. The EU Council has recognised that reduced substance requirements should apply to CIVs, but has not indicated what those requirements will be. The BVI has been granted until the end of 2019 to adapt its legislation to address economic substance concerns and, although the BVI’s International Tax Authority (ITA) has recently produced a draft Economic Substance Code (the Code) setting out the effect of the ESA in rules and guidance, there currently remains uncertainty around the acceptable requirements for CIVs and the ongoing review and revision of the ’blacklist.’ Further technical guidance is expected from the EU by mid-2019, but it is likely that the BVI’s substance regime will be in full effect before further guidance and clarification are given and the ESA will need further amendment. This article considers the current status of the BVI’s new economic substance regime and some of the challenges and opportunities it presents. The new regime – to whom does it apply?

A BVI vehicle which is a legal entity for the purposes of the ESA is required to meet an economic substance test if it conducts one or more “relevant activities”. This term captures regulated activities, such as banking business, fund management business, and insurance business, together with distribution and service centre business, finance and leasing business, headquarters business, holding business, intellectual property (IP) business, and shipping business. If a BVI vehicle is a legal entity, is conducting a relevant activity, and is not tax- resident outside the BVI, it will be required to meet the substance test imposed by the ESA. The economic substance test All in-scope legal entities carrying on a relevant activity must have an adequate number of suitably qualified employees physically present in the BVI and appropriate physical offices or premises. All in-scope legal entities (other than those carrying on holding business) must also conduct core income-generating activity (CIGA) in the BVI, incur adequate expenditure, and direct and manage the relevant activity in the BVI. Different substance requirements apply depending on whether the legal entity is carrying on (i) holding business, (ii) IP business or (iii) any other type of activity, and an entity can carry on more than one relevant activity at a time. Fewer requirements apply to holding business, whereas additional requirements apply to IP business. The Code The substance test (including what is “adequate”, “suitable” or “appropriate” in relation to expenditure, number of employees and premises in the BVI)

BVI BUSINESS

essentially requires each legal entity to analyse its operations and circumstances to be able to assess whether the test is met and to report accordingly. The Code provides some guidance on the practical application of the substance regime. Whilst it does not define the above terms, in practice there will need to be some degree of proportionality applied to the size of the entity’s business. The ESA is not meant to require any entity to engage more employees, have more premises or incur more expenditure than it needs, and local companies (having their staff, place of business and incurring expenses in the BVI) should be able to easily demonstrate substance. Ultimately the aim of the ESA and the Code is to ensure that BVI entities conducting relevant activities have real substance within the BVI, rather than being used to enable structures with artificial arrangements with entities in countries with higher rates of taxation (which reduces the amount of income that is subject to taxation in those countries). Penalties The penalties for a legal entity failing to meet the substance test are an initial fine of up to US$20,000 (US$50,000 for certain IP related legal entities). Ongoing failure to meet the test could lead to an additional penalty of up to US$200,000 (US$400,000 for certain IP legal entities) and may also lead to the legal entity being struck off. Failure to provide substance information could, in itself, lead to a fine of up to US$75,000 and up to 5 years in prison. Outsourcing The Code helpfully provides further guidance around outsourcing, which is likely to be of particular relevance for holding business. A legal entity may outsource CIGA to a third party (such as a BVI registered agent (RA)) and count this towards compliance with substance requirements provided that: • the third party carries on that activity in the BVI; • records are kept evidencing the work carried on for the legal entity; and • the outsourced activities are monitored and controlled. Indeed, for passively managed holding business, it is difficult to see what else it would need other than a BVI registered office and RA that can consciously allocate one of its staff to administering that entity and recording this. In such circumstances, this may be sufficient to comply with the substance requirements. Whilst the Code is still in draft and there may be some further updates, particularly around the requirements

for CIVs, it is clear that the ITA expects legal entities and their agents and advisers to rely on it. Timing for reporting Legal entities existing before 1 January 2019, have until 30 June 2019 to comply with the regime, but should ideally be assessing now whether they meet the substance test so that they can report accordingly 6 months after the end of their relevant financial period. For example, the first reporting deadline under the regime, for legal entities having a financial period ending 29 June 2020 would be 29 December 2020. Reporting via the BOSS System The Beneficial Ownership Secure Search System (BOSS System), established in 2017, to enable the automatic exchange of beneficial ownership information, is being extended for legal entities to report their substance-related information. The ITA will also use it to monitor compliance with the ESA. All legal entities are responsible for providing accurate and complete substancerelated information, including: • identifying the relevant activities (if any) carried out; • confirming their jurisdiction of tax residence (and if they are resident outside the BVI, providing supporting evidence); • if they carry out relevant activities and are not tax resident outside the BVI, providing information to evidence if they meet the economic substance in relation to each relevant activity they undertake. Legal entities will need to provide the above information to their RA for each relevant financial period. Currently, it appears that the RA will only be responsible for taking reasonable steps to request and collect the information from legal entities and to submit the information (in the same way that RAs currently submit beneficial ownership information via an RA database). At the time of writing, we understand that the ESA will be amended to make this clear. The RA database and the BOSS system are not public, but may be searched by, among others, the ITA and overseas law enforcement authorities. In addition to monitoring and determining compliance with the regime, the ITA will be required to disclose economic substance information to relevant overseas competent authorities. BVI’s Opportunity This new substance regime means that the level of substance of a number of BVI entities must increase within the BVI. In a recent speech to members of the BVI Investment Club, Lorna Smith, OBE and former CEO of BVI Finance,

said that facilitating economic substance could be “transformational for the BVI”. At a minimum, expansion of local direct services, such as managed office space, local directors, qualified and experienced employees, the ITA and related capability, will all be needed as well as all of the ancillary services associated with ensuring businesses and their people are supported. To meet this expectation will mean, maintaining a high standard of living with access to quality accommodation, both short and long term, ease of transportation, delivery of basics of life – food, electricity, general goods and services, telecoms, health, education and infrastructure generally. The opportunity here for the BVI, is the improvement and expansion of the local business environment for both immediate and longer term sustainable economic growth. Challenge The sort of action the BVI needs to take to move it to the next level of competitiveness present nothing particularly new. The 2014 McKinsey Report “Building on a thriving & sustainable Financial Services Sector in the British Virgin Islands” set out a number of priority recommendations for the BVI financial services industry, which hold true. These priorities all remain fundamental to a strong and globally competitive platform for BVI business. Bearing in mind the McKinsey recommendations, the following are key deliverables for the BVI to position itself to take advantage of the opportunity presented by the ES regime and which will also encourage yet more business to come: • enhanced customer service levels in both the public and private sectors across specialised financial services business as well as local service and supply chains, together with a co-operative approach to the facilitation and regulation of international business; • a welcoming and collaborative local business environment, that effectively and efficiently taps into global intellectual, financial and human capital, whilst ensuring that local talent is nurtured by such capital; • incentivising and prioritising business requirements for the financial services industry, as well as those relating to the supply of local goods and services and social needs (eg medical facilities, schools, quality roads, effective waste and sewerage disposal, quality rental and other accommodation); • investing in infrastructure and services: world class telecoms and efficient access to the BVI by sea and air are important to attract

global business to carry on with enhanced presence in the BVI. This in turn stimulates local economic growth and prosperity for the Islands’ residents; and • building on and improving local capability through enhanced education and targeted curricula. This is certainly a longer term ambition, but will set up generations to come to lead the way in the growth and further development of the BVI. Specifically Sustainable growth and the ability to effectively continue a world class environment for more substantive business will require: • strong and strategic Government leadership; • targeted and committed investment from both the public and private sector; • active collaboration between the Government and all stakeholders; • harmonisation of Government departments; • business-friendly policies, efficient trade/business licence processes and labour and immigration procedures - critical to attract and retain the skills needed to provide the required services and valueadded businesses • sophisticated educational opportunities to increase and support the local talent pool to ensure the future of the BVI’s growth and development is led by the next generation; and • understanding from those living in the BVI of the significant part the financial services industry plays in enhancing prosperity and quality of life. The opportunity is right now The economic substance regime is already in effect in the BVI. There is a relatively short window of opportunity for the BVI to work on the infrastructure and systems it needs to capitalise on the significant opportunities brought by this regime. The opportunity is huge. Even if just a tiny fraction of all the BVI business companies and limited partnerships each set up a substance operation in the BVI, it will be a game changer for the local economy and its residents. The BVI has always been flexible and ultra-responsive as a jurisdiction when implementing and complying with ever-changing international best practices. There is absolutely no reason, with sufficient and dedicated support from all stakeholders, why the Territory cannot build on this successful approach, and for its economy and inhabitants to continue to prosper as a result. | BB

BUSINESSBVI.COM

Business | BVI BUSINESS

here is a well-known character in the New Testament Book of Luke called Zacchaeus – and Zacchaeus had an important if unpopular job – you see, he was a tax collector – in particular, collecting taxes for the despised Romans. Advance forward, some 3,000+ years and one might argue that Zacchaeus is a financial services regulator. Yet the role of a financial services regulator has never been more important. In this article, Simon Gray, who has been both regulator and regulated, discusses why we comply and comments on the perils and pitfalls of non-compliance. He does so, using the symbolism of a cricket match. Groupthink George Orwell coined the term “Group Think” in his terrifying look into the future, in his novel: 1984. Groupthink is a psychological phenomenon that occurs within a group of people, in which the desire or harmony or conformity in the group results in an incorrect or deviant decision-making outcome. Group members try to minimize conflict and reach a consensus decision without critical evaluation of alternative ideas or viewpoints, and by isolating themselves from outside influences. The risks from the consequences of group think are well documented in history – for example, the rise of the Third Reich of Nazi Germany, the Bay of Pigs invasion, the Vietnam war, the 2003 invasion of Iraq and the rise of the neo cons and perhaps also the 2016 US Presidential election. Group think in firms, where cohesive groups take poor decisions with limited scrutiny, can lead to poor governance and insufficient challenges and this is another good reason why it is important to comply and for a Compliance Officer to have the status and gravitas to “blow the whistle” on non-compliant and risky behavior.

THE RATIONALE OF REGULATION AND WHY WE COMPLY? By SIMON GRAY

“Thaw with her gentle persuasion is more powerful than Thor with his hammer. The one melts, the other breaks into pieces.” Henry David Thoreau

JULY 2019

Moral hazard and regulation: The law of unintended consequences An interesting consequence of proactive regulatory solutions, following the global financial crisis of 2008, has been the concept of moral hazard and its part in rationalising why it is so important to comply. By way of example, the banks that caused the global financial crisis were in some cases allowed to collapse – a rationale event designed to recognise the risks and dangers of irresponsible behavior. However, the very nature of the dark side of financial services, where products such as sub-prime mortgages were sliced and diced using esoteric instruments such as credit default swaps, ultimately nearly caused a systemic collapse of the entire global banking system. The solution was swift – central banks stepped in to intervene. This swift action avoided the feared systemic collapse, albeit only just. Yet it also created

a potential new risk – that of knowledge of inevitable intervention by Central Banks using tax payers money. Paradoxically, this can potentially lead to the moral hazard of actually encouraging such foolish behavior, safe in the knowledge of a government safety net. Ironic indeed…! On a more mundane level, what of the situation where a regulator compels a bank to be subject to deposit protection insurance.? This is a good thing but potentially it could encourage the bank to make irresponsible decisions and practices, knowing that it is protected by the government. This is the law of unintended consequences. Pity the poor regulator. Regulation must at times seem like a thankless task sometimes criticised for doing too much and occasionally criticised for doing too little. Damned if you do, damned if you don’t. Thankless perhaps, important most definitely. Cricket and Regulation Given the excitement witnessed by the Windies vs England test series earlier this year, it seems appropriate to use a cricket analogy metaphorically, to describe regulation and why we comply. To this end, I will provide three elements of cricketing comparison - the Umpire; the Groundsman and the Post Match commentator. And, lest we forget, traditional cricket matches of three-day tests do require great patience – another fine quality of those engaged in regulation. The Umpire The first key duty of the regulator, is to make sure that the regulated do indeed play by the rules – and of course this extends to the Compliance Officer, as bridge between regulator and regulated. And in this regard a good regulator, needs to be like a good umpire at a cricket match. Constantly on the pitch, keeping up with what is going on, observant, respected, determined when challenged, fair and consistent. Resolute where required. At the centre of the action, without being the centre of attention – and remember always surrounded by 11 members of one team, with two players from the rival team in front of each set of stumps. Being an umpire can be lonely – as can being a Compliance Officer! This requires rules to be set and to be enforced. Poor play to be dealt with fairly, consistently and decisively. But ultimately the rules will be of little interest or value to the customers of financial services licensees, if there is no competition between the players in the first place. So, where possible, it is important to use regulation to drive the appropriate incentives and conditions for healthy, competitive and innovative markets, which deliver good outcomes for both markets and of course for consumers. This is a good reason why we comply.

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And that is easy to say, but significantly more challenging to do. Financial services markets – both retail and wholesale – are characterized by complexity, customer biases, potential conflicts of interest and information asymmetries. The demand side is, therefore, less likely, or less able, to correct market excesses.

Substance – but it is not just about producing legislation and Guidance Codes – it is also about proof of implementation – “what gets measured gets done”. No one took the IMF Standard Setters seriously when they had principles, but did not test measurement against them. They certainly do now. Woe betide a country that boasts full compliance, but then fails the test when measurement is applied.

This is one of the reasons that leading regulators now employ psychology by using behavioural economics in a regulatory context. Seeking to ensure that regulatory interventions reflect the reality of how people and markets actually behave, not how a regulator might hope, or even expect, them to behave. This has become a trend – indeed, the worldwide interest in this is illustrated by the recent US presidential executive order to agencies to use behavioural economics across policy making. And of course, we all look with interest at the behaviours of the current occupant of 1600 Pennsylvania Avenue.

Put simply, global clients will come to the BVI if they believe they will receive high quality, innovative services and be treated fairly and honestly. And if they do not believe that, they will go elsewhere. And as I have described we have a key role in that – ensuring we create the conditions to allow competition and innovation to flourish within a set of clear, proportionate and well enforced rules. But perhaps, there is also another role for regulators and compliance staff. To conclude the cricket reference, I would compare regulators and compliance staff to the post-match commentator. Facilitating debate which reflects on, and analyses, past performance. Supporting and working with industry and other interested parties to try to find new solutions to old problems. Constantly challenging the industry to do better and pushing them to go further and faster in the quest for change. And we should be in no doubt, that these methods – the push for higher than required voluntary standards – sometimes called “goldplating” - can be a very effective tool.

The groundsman as policy maker Which brings me on to the second key role – that of the effective policy maker. And to continue the cricket metaphor one can see this function as similar to that of the groundsman ensuring that the cricket pitch is in good functioning order – maintained properly to withstand the natural elements and sometimes even aggressive play. An important reason why we comply is to ensure the best environment allows competition to take place. In cricket terms again, to have a level playing field which does not advantage one participant over another. To set boundaries that are clear, fair, consistent and predictable, but within those criteria, enabling firms to innovate and develop new approaches and provide new services. And what better example than the concept of the regulatory sandbox to help FinTech start-ups. This remains an important initiative for the BVI and with good compliance comes credibility – indeed, an important marketing tool for any international financial centre, is not only to follow the IMF Standards espoused in the Principles of IOSCO, the IAIS, FATF (OECD) and the Basel Committee, but to seek to obtain as near close compliance as possible in any final report. Hence another good reason why we comply. We also need to be aware of the danger that regulation itself protects incumbents from competition. But, effective sustainable regulation is not just about challenging rules that are no longer needed. It also requires regulators and compliance officers to have the confidence and the courage, at times, to swim against the tide. To recognise and act to address emerging risks or developing practices that are undesirable. At this juncture, history proves instructive. Regulators have too often allowed issues to grow in size and importance when rapid action may, although unpopular at the time, have prevented much larger problems. And who will thank the timid Compliance Officer, who failed to flag the risks that could follow from a certain course of action? Robust and good business policy is not about jam today and risk tomorrow – that is not a legacy for good business practice. To quote Winston Churchill we have too often

Conclusion

seen that ‘when the situation was manageable it was neglected, and now that it is thoroughly out of hand we apply too late, the remedies which then might have effected a cure’. In effect, too little too late. A sustainable long-term robust and practical model for regulation requires both regulator and regulated to get this balance right more often than we have in the past. “Post-mortem” The post-match commentator And this brings me to my final point. My firm belief is that if the financial services industry is to restore the trust and confidence of those it is here to serve, firms should not just aspire to meet our rules. They should aspire to be better than that. No-one can realistically imagine that a credible financial centre’s elevation to global standards would be accelerated by a tendency for tick-box compliance. It was driven by professional excellence, creativity and integrity. And I cannot imagine a future under which that will be any different. Witness the robust and timely approach we have taken with Economic

So we comply with financial services regulation because it is good business practice to do so. It is about morality – doing the right thing. We comply to help mitigate the adverse effects of information asymmetry between those with superior knowledge and those without. It is about market integrity – helping cope with calamities and avoiding or at least mitigating the occasional crisis - thereby promoting financial stability. Compliance helps protect investors, it helps democratise investment – educating the general public in the wherewithal of finance and it also helping boost economies. And it is often associated with more advanced economies. Recent changes brought about by the new Economic Substance requirements from the European Union are not focused solely on the BVI – but on the entire world. We have a common interest in ensuring that the BVI continues to have a world leading offshore financial services industry, known for its integrity and creativity. We need to make sure that we have a landscape that ensures clean financial service activity and protects consumers through fostering competition between firms and innovation. A sustainable approach to regulation, which breaks the regulate, deregulate, repeat cycle is critical to that. This requires all of us – regulators and regulated alike – as well as individuals – to play our part in changing the way financial services operates, not just for now but for the long term. This is why we comply – and of course it would be completely irrational not to. | BB

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Beacon AD

JULY 2019

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hile Caribbean beaches, crystalline waters, charter boats or luxurious villas should be more than enough reason to come to the BVI, “Nature’s Little Secrets” is also ripe with business opportunities. It is the best of both worlds: Fortune 500 CEOs will come sailing in the British Virgin Islands or enjoy some local cuisine, but they will also carry out business in paradise. If the perception of an arbitral institution is closely linked to that of the host country, the BVI International Arbitration Centre is off to a great start. The territory already boasts an excellent reputation as a premier offshore financial centre, so the diversification of the judicial system was a very smart move. The Government of the British Virgin Islands has taken serious steps over the past decade to enable the Territory to hold itself out as a centre of choice for international arbitration, thrusting business tourism into new heights. In fact, the BVI boasts an excellent modern Arbitration Act, based on UNCITRAL model law. The confidence and transparency brought up by having a recent Arbitration Act, is a powerful differentiator. BVI’s arbitration laws are impartial, efficient and designed with modern international arbitration in mind. They afford parties a speedy dispute resolution mechanism that is enforceable globally, because the BVI is party to the New York convention. Businesses, worldwide, are using arbitration to manage the risk in their contracts: now, the BVI has become a one-stop-shop, from setting-up and managing corporate structures to dealing with contractual issues efficiently.

Arbitration clauses: the key to smart negotiation The BVI is open for business, and the growing number of legal counsels and firms embracing the BVI IAC’s clause is no accident. The arbitration clause in a client’s contract can make all the difference. Unfortunately, parties and counsels have often overlooked arbitration clauses when negotiating contracts and used default arbitration clauses. This often is a mistake. The key to choosing the right arbitration clause is to review and understand one’s individual requirements. Is available diversity in arbitral tribunals important? Is there a need for specific languages or expertise? Perhaps it is a matter of being able to appoint arbitrators with a specific geographical expertise, or outside of the panel of arbitrators of a given institution? Is this about the location and facilities for hearings? Understanding the arbitral procedural rules one will need to abide by is also serious business. All these choices will dictate whether an arbitration will be successful and how a dispute will

be resolved. It is critical not to overlook them, even though they can lead to tricky conversations when trying to push a deal through. Albeit recently created, the BVI International Arbitration Centre was set up by professionals with years of experience in international arbitration. The Centre is already picking up pace and fast becoming a great new option in the world of dispute resolution. Boasting a state-of-the-art Arbitration Centre headquarters with magnificent views of the Road Town Harbour, the BVI IAC also prides itself on having one of the most diverse panels of arbitrators in the world. The Territory also offers great flexibility, a premium location at the crossroad of the Americas, privacy, cost control, a simplified process, access to premier tribunals, and no appeals. Moreover, once an arbitration is over, clients can celebrate sailing or diving our turquoise waters. Chief Executive Officer Francois Lassalle and his team have put in a great deal of work to establish an institution that surpasses international standards.

Francois Lassalle CEO, BVI IAC

Arbitration: increasing diversity, boosting the economy The Caribbean already attracts a swathe of litigations and ad-hoc arbitrations. The region, unbeknownst to many, is already highly sophisticated, but the BVI just raised the bar even higher. It is set to attract much international work and morph regional ad-hoc arbitrations into institutional ones, thereby boosting the region’s economies and attractiveness to international investors. According to Mr. Lassalle, “The BVI, through the International Arbitration Centre, is in a unique position in the Caribbean to attract a range of work from the Americas, North vs. South American disputes, regional disputes or disputes related to the offshore financial services sector. I look forward to growing the institution further with the help of our ever-increasing number of friends and supporters.” Mr. Lassalle also recognised the Centre’s highly diverse panel of arbitrators in both expertise and ethnic background. The BVI IAC’s offering is second to none, proposing a discrete, private, cheaper, faster, focused, and internationally enforceable arbitration experience. A proper alternative to many more established centres, in a better location. When drafting agreements, businesses must make a simple but fundamental choice and, ensure they fully understanding their requirements. Should the need arise, the BVI IAC stands ready to serve and provide world-class administration services to its clients. | BB Photos taken during the 2017 BVI International Arbitration Conference at BVI International Arbitration Centre, Tortola, BVI

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BVI, THE INDISPENSABLE IFC

TOO LEGIT TO QUIT By JEROME RUBIN-DELANCHY

It was almost 20 years ago when I first set foot in the then so-called “offshore financial world”. Coming out of the French schooling system, I had basically zero knowledge of this industry. I had been offered a job by a recruitment agency in Switzerland. Honestly, even after my first interview with the company, I was skeptical about the position and what was actually expected of me. When you come from a background completely unrelated to the traditional fiduciary world, it’s hard to appreciate what “company administration” means, and it is somehow even more puzzling when exotic countries like the British Virgin Islands are thrown in the mix. Eventually though, I was offered the job. Still doubtful about the legitimacy of the company (more than its integrity), I accepted the offer. After all, I was in my early 20s, it was my first job, and more importantly, the compensation was attractive. That company I am referring to, you may have heard of it, was Mossack Fonseca.

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Within the two years I spent with the Company, I learnt a lot about the industry on many different levels. I also gained exposure to the world of wealth management; even more since I was in Geneva, a leading Financial Centre. But back in the early 2000’s, the rules did not look anything like today. The firm was operating within a group, with front offices located in financial hubs and back offices in Panama, BVI and other jurisdictions. In Geneva, we worked with intermediaries like law firms, banks, trust companies. They would order companies, request “local directors” and coordinate their clients’ operations. Of course transactions were conducted daily, which meant getting documents signed by the directors. But time was of the essence, and we had to go above and beyond to assist our partners. Original documents often had to be delivered the same day, meaning there was no time for a cross Atlantic trip. But thankfully, we had stacks of blank pre-signed paper. This is when I understood why my lack of knowledge of the offshore world was irrelevant. My most important skills needed, were computer science and customer service. Today, this sounds a bit outrageous, doesn’t it? But this was the reality of the time, and a reality that was shared amongst many other players in the field. Those intermediaries I referred to earlier, they were not only in Geneva, but also in France, the UK, etc. It doesn’t mean the business was illegitimate though; it just means there was less control and transparency, everywhere! If you read the 2002 International Monetary Fund’s working paper on Offshore Financial Centres (“OFCs”), you will get a clear understanding of why smaller jurisdictions developed their legal and economic systems with the aim of becoming OFCs. That industry facilitated the creation of employment and revenues for the respective governments, therefore boosting the growth of their economies. OFCs provided important and legitimate services for private investments, asset protection and estate planning. Are those not objectives we are ultimately all seeking? But with increased globalisation, the threat of money laundering and transnational organised crime became more and more visible. The terrorist attacks of 2001 largely contributed to an intensification of international efforts to combat criminality. Transparency became the KEY word. But let’s also not forget the financial crisis of 2008 which left many large nations facing challenges, with rising debts putting pressure on government finances across the globe. In 2000, government debt averaged 66 percent of gross domestic product across all major advanced economies. By 2015, debt had risen to 84 percent. Financing the debt through fiscal austerity became all governments’ top priority and countries with a low tax regime became target number one. “Criminality” “tax evasion” “terrorism financing” became an easy pretext for both governments and Non-Governmental Organisations (“NGOs”) to increase pressure to achieve those objectives. Let’s tax more to finance our debts! There is no denial of the risk that OFCs represented, and it would be naïve to assert that OFCs were always used for legitimate motives. But it is now time to realise that there is water under the bridge and the industry has changed. Here I am, almost 20 years later, based in the BVI with an executive role for a successful company that provides a broad range of fiduciary, wealth management, and investment services. I think I am in a good position to testify and demonstrate that the offshore business has changed entirely. And by the way, we no longer talk about OFCs, but International Financial Centres (IFCs). BVI is one of them, and a successful one. Unlike any other OECD countries, the BVI, and IFCs in general, had to go the extra mile to demonstrate

their active role in the fight against criminality. Everyone must appreciate the high level of regulations and transparency which the jurisdiction implemented to prove its legitimacy. Unfortunately, the public perception got somehow stuck in the 2000s - BVI is still often called a tax haven. Why? Because some NGOs, like the Tax Justice Network and others that were set up over a decade ago, grew so big that they have to continue advocating for their cause. They can’t just admit their purpose has become obsolete, so they continue using sensational journalism to influence public opinion. They might be right, just preaching to the wrong choir. The BVI is a sound and reliable centre which had to work harder than many other nations to demonstrate it meets all international standards. Foreign investors who use the BVI as part of their financial planning or international operational strategies do have a legitimate reason to do so. As a matter of fact, the level of control is so high that criminals dare not even think about using the BVI to facilitate money laundering or tax evasion. Instead they are going to much larger, bureaucratic, less Anti-Money Laundering (“AML”) educated countries. Some of those countries are OECD members. I often wonder if people do appreciate that every single person working in the BVI Financial Services Industry has to undertake regular AML training. Is that the case in all G20 countries? So you may ask why would someone use the BVI if it’s not to engage in tax evasion or other illicit purposes? Well, there are many reasons. First, obviously, BVI companies are widely used to hold private wealth. An individual who has assets he wishes to invest and grow for the benefit of his heirs, while at the same retaining control of management and distribution, may opt for a BVI personal investment company (“PIC”). It offers a lot of benefits in terms of wealth accumulation, continuation, succession planning, liability protection, etc. Similar to an investment fund which is pooling assets from different investors, a PIC is the perfect vehicle to consolidate the holding of personal wealth. But there are other important benefits on a larger scale. One of the main benefits of the BVI’s legal system is the fact that it has flexible corporate legislation, ideal to facilitate cross-border trades, investments and businesses. The capital structure of a BVI company is simple. There is no concept of share capital and no requirement for par value shares. In an Initial Public Offering (“IPO”) context, this provides a great advantage when it comes to offering or marketing the shares. Those features combined with others have made the BVI one of the leading jurisdictions to establish a SPAC (Special Purpose Acquisition Company). A SPAC is a simple company specifically created to raise capital through an IPO, which then goes on to use the cash raised to make strategic acquisitions. In 2017, SPACs actually made up nearly 20% of all IPOs recorded that year. A SPAC will typically partner with the CEO of a private equity firm or an investment bank to pursue acquisitions, with a sector-specific focus. Together, they issue shares through the IPO, with an institutionally backed SPAC usually raising between $200-$600 million. Once the IPO is successfully completed, the CEO and his team have two years to find an appropriate acquisition target which is then merged into the SPAC to create a newly formed publicly listed company. BVI companies are also used by large cap companies to manage their cross-border activities, including in the context of joint-ventures and acquisitions, and particularly where it involves parties from different countries. Rather than selecting the home jurisdiction of any of the partners, or the jurisdiction where the business is located, a neutral and safe platform that provides a level playing field,

neutrality, and corporate governance benefits is often the preferred option. BVI is also the ideal jurisdiction for investment funds, investment managers, and other investment activities, thanks to its legal and regulatory regime. At the end of 2018, approximately 2,000 investment funds and investment business license holders were registered with the BVI Financial Services Commission. There are many more advantages of using BVI structures. I would recommend the reader to take a peek at the 132 page summary published by Capital Economics in June 2017 entitled “Creating Value: the BVI’s Global Contribution”. Looking at the global picture, what (if anything) does the BVI bring to the world in terms of value? Well, the reason why the economic growth of the poorest nations in the world is held back is because they lack financing. Without money, there is no development. Mobilising international funding is therefore crucial for these economies, but international private investors are very hesitant to do so for obvious reasons. The political and macroeconomic instability, which includes corrupt judicial systems, lengthy unpredictable legal processes, and possibly political interference in private property rights, create a risk which is too high when compared to the potential return. By investing through IFCs, investors mitigate those risks since IFCs are subject to the legal jurisdiction of strong economies like the US and the UK, which are fair, impartial, and predictable. Additionally, the same investment funds I referred to earlier, are often used as collective schemes to invest in developing countries. By pooling funds from a number of sources to facilitate diversified investments, the risk is mitigated and the potential return becomes greater. The credit for the increased mobilisation of finance in developing countries is already highly recognised by development banks. The CDC Group in the UK for example, which invests exclusively in low income countries, organises more than USD 1 billion of private cofinancing annually. They recognise that intermediate jurisdictions are necessary to provide straightforward and stable financial, judiciary and legal systems for investments. They also confirmed their use of IFCs as neutral jurisdictions to provide legal certainty since some of the assets they invest in are not sufficiently protected by the legal systems of the developing countries. Whether or not you already have an opinion on the topic, have you considered why it is important for IFCs not to give in to the pressure of international tax policy? Well, it is a fact that many developed economies and emerging countries are suffering from over-bureaucratisation. If those countries did not have to compete with IFCs, they would not be pushed to modernise their financial laws and regulations. With a lack of competition, there would be no drive to optimise outdated laws that are poorly adapted to the international market, hence limiting a flow of trade to the lowest level required to subsist. Mr. Citizen, a small investor or even just a customer, would probably be suffering the most from those policies if there was no global competition driven by IFCs. To recap, the BVI is an International Financial Centre. As a matter of fact, it is growing at a fast pace because it is able to quickly adapt and comply with new global standards and because it doesn’t have over-bureaucratised complex systems. The downside, which is slowing the growth of the country as a financial hub, is its accessibility. But as everyone knows, mobility is on the rise and foreign policies like BEPS initiatives which may feel like a threat to sovereignty are actually benefiting the country. Bring it on! | BB

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The Decider

BVI FINA

JULY 2019

ANCE

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Entrepreneur

My time had come, to take the plunge. What a plunge it was! By JULIA SHAMINI CHASE

hen I was invited to write a piece on the architecture of a successful business roll out, my immediate reaction was “Me? I’m still trying to find my footing in this quest!”. There it was, that four letter word which handicaps most of us in the pursuit of our dreams and continues to haunt through this journey – “FEAR” …always lurking in the background usually accompanied by its dearest ally, SELF-DOUBT. However, one of the first lessons you are forced to learn in entrepreneurship, is to embrace FEAR. So, in embracing, I reviewed my own journey towards establishing Gold Leaf Consulting Limited (“Gold Leaf”) which began in August 2017, but the seed was sowed from as far back as law school. I always wanted to establish my own firm, it was my personal symbol of accomplishment and would allow me the opportunity to design the life I wanted to live. My preparation for Gold Leaf started prior to my resignation from my previous employment; when I realised that the corporate and financial security that I enjoyed was also a handicap as it did not facilitate a work/life balance I was happy with and neither was I pursuing my dream of entrepreneurship and mentoring. My departure from my former role as General Counsel and Head of Compliance of a very reputable trust

JULY 2019

company where I invested the proverbial “blood, sweat and tears” came on the heels of a promotion which I worked hard for - but… “was this what I really wanted?”. I did not feel a sense of satisfaction or accomplishment. “Would this give me the internal satisfaction I always aspired to find?” No, by staying, I would be bringing to fruition the business plans and ideology of a board of directors focused on goals which were different to mine. My desire and at that time, need, for a more balanced work/ life was also a catalyst prodding me towards entrepreneurship. It became a difficult to consistently balance excelling at work; be a caring daughter; a present and involved mother; a supportive wife; and…maintain my sanity. My professional accomplishments until then were perceived as, “bright” and “lucrative”, but it fervently competed with my personal priorities. My time had come, to take the plunge. What a plunge it was! No amount of planning and preparation readied me for the series of events which should have derailed me from my journey. I was prepared to officially launch Gold Leaf… but not for Hurricane Irma. My meticulous planning dissipated with Hurricane Irma and relocated me to my home island of Saint Lucia. I then went through a series of successive tragic and personal events whilst still trying to determine what would happen to Gold Leaf. After all, it was a company designed to launch in

the BVI, to cater to BVI clients and with a presence in the BVI… but I needed to be in Saint Lucia. My solution… I re-strategised and commenced operations from Saint Lucia, reacquainting myself with its regulatory landscape, whilst trying to maintain a remote presence in the BVI market. In January 2019, Gold Leaf re-opened its head office operations to the BVI, where business has continued to grow whilst maintaining an office and affiliated law firm in Saint Lucia. Despite the many varying circumstances, Gold Leaf had survived, not in the initial order planned but it had maintained a pulse and sprouted… it has indeed been a success. My journey may be described as “different” and continues to evolve, and the following are some of the principles I continue learning to embrace (and at times still struggle to embrace), to launch a successful business.

ENTREPRENEUR

business lines. So, I decided to give this dream of mine a fighting chance – I needed to embrace the fear and provide Gold Leaf with an opportunity to bloom. Regrettably, fear does not dissipate after the plunge. It shadows throughout your journey. Businesses evolve; you will be required to step outside your comfort zone and take risks to grow. Fear still shadows me when I contemplate the necessary steps to expand resources to accommodate a growing business. I’m often temporarily paralyzed with fear – “am I ready to take on this liability?”; or attempting an innovative way to deliver a new product or service offering – “how will it be received, if at all? Don’t let fear handicap you. Let it be your driver; your motivation.

“Nobody who ever accomplished anything big or new…did It from their comfort zone. They risked ridicule and failure”. - Jen Sincero

Fear will handicap you, learn to embrace it!

Believe in yourself, your product, your worth.

“Success is the ability to go from one failure to another with no less of enthusiasm”

f you do not believe in yourself, your product and your worth, then why should clients believe in your business or product?

– Winston Churchill

In the beginning, it becomes important to balance this confidence with your pricing. Yes, I know my worth and the gold standard quality of Gold Leaf’s product but this client is new and unfamiliar with it.

nless personal circumstances have plunged you into the world of entrepreneurship, it is in most instances a painful effort to “abandon” your corporate security to “go out on your own”. Within my first months of launching Gold Leaf, with the unanticipated relocation and expenses post Irma, I thought that the universe was sending me a HUGE sign, to “abandon ship!”. But I considered, “have I really given my dream my best, notwithstanding the circumstances?” I wasn’t convinced that I had, and I genuinely felt that I was searching for excuses to abandon the plan, my “dream”. “Is it fear that’s crippling me?... Everyone would understand that with the Hurricane, perhaps job security is what’s more important”. Why am I considering what “everyone” outside of my supportive family thought?! I realised that if I allowed fear to handicap me and not pursue Gold Leaf, I would always wonder, what if? and most likely live with regret. I also wanted to develop a new branding for Compliance – to change the perception and develop a unique “Gold Standard” of Compliance: To shift it from being perceived as robotic and a handicap to business, but, instead, understood and embraced as a necessary element to efficiently grow and sustain

Plans fail, circumstances change, keep going.

his was one of the most difficult lessons I continue to learn. I am a meticulous planner! After all, “if you don’t plan, you are planning to fail”. But…no one told me how to deal with THE PLAN failing! The truth is, despite meticulous planning which is indeed essential, always prepare or be open, to circumstances unexpectedly changing. I recall the time I was confident that I would secure a client retainer which suddenly fell through. I also recall my unexpected, unbudgeted expenses in relocating to Saint Lucia, on the heels of having lost equipment and material purchased to commence operations in the BVI. I had to shake off the confusion, the discouragement and move on. I learnt to improve my pitch and institute a solid and frequently tested continuity plan for Gold Leaf. As beautifully articulated by Maya Angelou “You may not control all the events that happen to you, but you can decide not to be reduced by them”. Therefore, re-strategise and most importantly learn from the experience. Anticipate things not going your way. Learn not to be paralysed by a plan failing, learn to work around it.

It will therefore require you to be flexible in your marketing and pricing to allow clients to get to know you and your product. To put it loosely, whilst still knowing your worth and product, at least in the beginning, you will need “to lose some to win some”. Therefore, with new clients, I provide initial free consultations and competitive pricing packages, to allow the prospective client to become familiar with Gold Leaf, its standard and expertise and most importantly, to build client confidence. This has assisted with developing and nurturing strong business relationships and a solid reputational branding which has resulted in clients confidently investing in the value of service guaranteed from Gold Leaf. Conversely, once you have created your name and a solid branding, it is also important to set your fee at your worth, of course following market research so you are not pricing yourself out of the market. Clients will always seek the best value for the lowest price possible. It is important to not “low ball” yourself by accepting much less than you are worth; assess the demands and value of the task; will it absorb a significant amount of your time? Be confident in your worth, set your fee, adequately justify and stand by it.

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Carve out your space. Know your skill and your strengths.

s a specialised regulatory lawyer with extensive experience in financial regulation and compliance this was my area of expertise. However, what makes Gold Leaf’s solutions and by extension me, unique? For me, it was my commercial and operational experience. I excelled in my professional career particularly at communicating and finding compliance/regulatory solutions which were effective yet pragmatic. I have a naturally outgoing personality and I enjoy client interaction. There was a need for compliance buy-in in the BVI. Compliance is often viewed as an imposition of rules not understood by many institutions who are absorbed focusing on building their businesses. Because of this lack of understanding of the regulatory obligations, financial institutions find it difficult to effectively communicate these obligations to their underlying customers, often resulting in frustration. As a result of my personality, my passion for the field of regulation and compliance and my love for teaching, my aim through Gold Leaf has been to deliver a different type of compliance experience. I therefore carved out my space. Gold Leaf provides a number of unique and innovative products and customised solutions (referred to as “Gold Leaf Solutions”) which allow our clients to focus on their business and develop new and innovative products, whilst we safeguard their reputations by ensuring and monitoring their compliance with regulatory obligations. This is distinguished from the traditional compliance outfits and regulatory legal departments commonly criticised for being robotic, not understanding the client’s business and regurgitating regulatory requirements in an unrelatable way. Gold Leaf, as a result of its commercial savvy and operational experience designs bespoke solutions which can be rolled out to underlying customers of clients in a “customer friendly way”. In carving out your space, also be mindful of a tendency to spread yourself thin; grabbing whatever business comes your way. This occurred with me in the early stages of operations. Carve your space, define your brand/skill set. Stick to your competencies.

JULY 2019

Stay focused and set goals.

looked forward to carving out my own schedule, working on my own time. I was always a very disciplined, hardworking and dedicated employee, so of course, it would be natural to apply this for myself! Wrong! Initially I perceived time to be on my side, because I had the ability to set my own agenda. I always heard that on launching a new business, be prepared to become the “cook and bottle washer”, and that is indeed correct, unless you have a surplus of finances to hire administrative and other support staff right off the bat! A substantial amount of time is not only spent on delivery of services but performing back-office support functions such as installing printers and becoming, as best as possible, an excel guru (thankfully for all of these Google becomes your best friend!). Therefore, more time is initially spent on all the back-office elements in preparing a product or service for delivery. However, once systems and procedures in place, the process becomes more fluid. Initially I thought that Gold Leaf would allow me more available time to pursue personal interests…not in the beginning! If you start off as a sole proprietor as I did, there is no deputising regime where someone else is picking up emails in your absence; there’s no out of office response and clients won’t wait. You may actually find yourself working more hours but, at least it is an investment in YOUR own business. A natural reaction in the beginning would be for you to consider “throwing in the towel”. I contemplated that many times, when a plan failed, when I was afraid to take a step out of my comfort zone. Returning to the environment of corporate and financial security was my nagging “fall back solution”. However, if entrepreneurship is your goal, those reactions are normal. Stay focused. Set daily, weekly and quarterly goals. Eventually, the “fall back solution” dissipates.

Whilst not wanting to undermine the circumstances of males in the work place and in entrepreneurship, the truth is that most women are faced with the harder task weighing the “flexibility” of entrepreneurship versus “enjoying” (or perhaps tolerating) corporate security. Most career women at some point face the arduous juggling act of climbing the corporate ladder in your institution, the demands of family life and maintaining some form of “inner peace” and sanity for yourself. Something eventually suffers. And there is absolutely nothing wrong if one decides that a priority is to climb the corporate ladder and then attend to other priorities thereafter; everyone’s goals and priorities are personal and unique to them. If it is indeed your vision to go out on your own as an entrepreneur, let no one discourage your ambitious attitude: Be your own motivation. In this new environment with the requirement to establish “Economic Substance”, it is an opportune time for not only firms, but individuals to become innovative in determining how they can benefit in providing products and services required to establish substance in the BVI. Most successful corporate entities started with just the vision and drive of one person. Think outside of the box! Research and learn the market and your offering – “is there a need?” “how do I distinguish my product?”. Once you have planned as best as you can, you will know when the time is right to plunge into the world of entrepreneurship. | BB For more information on how Gold Leaf Consulting Limited can help you achieve and maintain a solid regulatory standing, please visit our website at www.goldleafbvi.com or email us at info@goldleafbvi.com.

RAY WEARMOUTH BENITO WHEATLEY ROXANE OSUNA MARK PRAGNELL VANESSA KING KERRY ANDERSON NEIL SMITH PETER TARN BRODRICK PENN KINISHA FORBES PATLIAN JOHNSON JENNIFER A. POTTER PAUL BAYLY

SPECIAL SECTION

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A VIEW BEYOND THE HORIZON

box for the new Robot Consumption Tax that you will be personally responsible for, following its hastily planned introduction, based on a not-yet global standard. You can discharge the tax from your flip-coin credits and report immediately to all 32 of the international taxing authorities where you transact digitally. Please pay your griduse bill, copyright surcharge and exit. After you’ve scanned the rest of this article of course. We will apologise now for that abrupt command, in hope that it will help you develop your emotional intelligence predictive readers more widely.

RAY WEARMOUTH

The 2030 Horizon: Look Right, Look Left, Look Right Again

ertain industries and sectors have been fundamentally changed or completely displaced, while others sit anxiously awaiting their fate. Technological advancements have played a very central role in these changes of course, but they also coincide with what appears to be a wider dynamic of more disparate views on globalisation, a lack of geo-political cohesion and new behavioural patterns in society itself. Brexit is perhaps an example of how things can play out when there is a confluence of the above ingredients. So if we look ahead to 2030 as a line on the horizon, what can the British Virgin Islands (BVI) financial services sector most likely expect to see then? How much clarity is likely, what are the opportunities and where

JULY 2019

will we be? While many items swirl around us in these current at times confusing winds of change, we can hold tight to some of the more certain and fundamental global economic assumptions, which are highly unlikely to change within that timeframe. They will stay fairly rigid while some of the more transitory elements blowing around in the wind at the moment will probably not even feature on the horizon at all, despite their current presence and apparent prominence. We will look at the 2030 horizon in fairly macro terms, but at the same time also drill down in a few areas which are currently topical. But let’s start with robots! DEAR # ROBOT #

You are quite right to think that our human readers have, with a probability of over 50%, already decided that the title is a geographic reference to east and west, with the BVI as our baseline reference point. It’s not a reference to crossing a road, although some measured caution does also apply as well. It is also correct to assume, dear robot, that we are at ground level, not hovering, and facing due north. More on that later, but while you’re on, between now and 2030 please make an appropriate annual provision in your self-accounting locked-

By 2030, it seems unlikely that we’ll have robots or avatars actively working for us just yet, but we will have figured out, in very significant ways, how to better channel, organise and regulate data flows and usage. Automation will improve the speed and accuracy of almost all processes that our industry undertakes, but at a fairly major cost. By 2030, we will still be bearing the cost of that advancement, as investment costs are amortised over that period. Those firms who have invested and are playing a longer term game can look forward to the unit cost of production (service) reducing significantly in the 2030 to 2040 period. Profit margins will be squeezed before then, but expand beyond 2030, so there is a very meaningful destination to get to. Firms and we dare say jurisdictions which do not invest in automation to satisfy clients’ increased demands for speed, accuracy, convenience and digital interaction in all things, will most likely face extinction. Consolidation amongst registered agents, law firms, accountancy practices and industry-wide firms more generally seems inevitable. The BVI has invested very heavily in technology over many years via the Corporate Registry and the Beneficial Ownership Secure Search System (BOSS). The prudence of that investment, which we do not always appreciate, will become widely recognised and applauded in the lead up to 2030, particularly as BOSS-like systems become adopted by several other countries, including major ones, and begin to speak to each other with built-in systemic defaults and protections. Corporate Registries will probably not be speaking to each other by 2030, out of choice, but our ability to plug into other interfaces, easily, if needed, is a major plus for us. Our core operating systems are very fit for 2030 purposes and that fact alone should not be underestimated at all. The ground work has been done and it leaves us in a strong, adaptable position.

A VIEW BEYOND THE HORIZON

GOVERNING DYNAMICS – THE GLOBAL ECONOMIC DRIVERS

currency, should be much higher up our planning stack as we move towards 2030. A good first step at the national level would be to establish a presence similar to BVI House Asia, established in Hong Kong approximately six year ago and before that in London.

As we take decisions that will affect our path towards 2030, we should keep a very clear and constant focus on the big picture, the global economic drivers. Almost all economic data that looks towards 2030 and beyond, confirms what most of us probably feel anecdotally and see as something of a given. But it is good to see it in the cold light of day. China and the USA are paramount, and that will not change. The data in Table 1 is HSBC’s global view (September 2018). If we’re choosing which fields to play in, this is pretty conclusive.

2030: Long-term global GDP rankings Emerging-market countries GDP (trillion US dollars)

2018

2030

US 20.4 China 14.1 Japan 5.2 Germany 4.0 UK 3.0 France 3.0 India 3.0 Italy 2.2 Brazil 2.1 Canada 1.8

China 26.0 US 25.2 India 5.9 Japan 5.6 Germany 4.9 UK 3.5 France 3.4 Brazil 3.1 Italy 2.4 Korea 2.2

The age of genuine disruption in the way the world works has been upon us for a few years now. Indeed, as we head towards 2020, you could argue that it’s not just upon us, but literally all over us.

The Two Powerhouses China and the USA are hugely dominant, not just in GDP terms, but in several other key metrics, including most importantly for us, widespread international trade rounded out with large self-supporting internal markets. The very fortunate thing for our sector is that we are already in those markets. And we should continue to spend most of our time focusing on them. So we look right (east) first for a number of well-known reasons. China will outgrow the USA, but our roots are also much older, deeper and far more developed in the Asian market than the USA. The BVI-professional numbers in Hong Kong and China may match or even out-weigh, by 2030, the relative numbers in the BVI. They are probably already a lot closer than we realise. Hong Kong is very much an extension of our home market. We need to continue to monitor, manage and

grow these connections and numbers. The obvious area for development is language capacity and how we can better serve the Chinese market through enhancements there. Voice technologies will take us most of the way, if not the whole way. Looking left to face towards the USA, we know that we most typically enter that market by cross-border work which takes us, and then keeps us, there. We certainly have more work to do in that market. When you look at the numbers, an obvious conclusion is that we really should properly reignite our funds offering. Major results overnight are unlikely but winning a greater share of a huge market which is on our doorstep, and shares the same language and

We finally look right one more time, back across to acknowledge that China is the most important market in our world. In doing so, we also survey LATAM, Europe, the Middle East and Africa. They are all important markets, to differing degrees, that demand our time and energy, but it should be proportionately applied as those economies shift and change somewhat, particularly those where we’ve had little historic trade. India remains a market to watch, but the extent to which it may develop for our industry remains very moot. Any meaningful entry would most likely come on the tails of one of our other markets taking the lead and pollinating it for us. It also bears noting that the USA’s and China’s approach to doing international business is more “2030” than that of most other countries, as well as their regulatory deployment and taxation systems. The USA and its views on CRS is a good example. They are somewhat different to, say, the European Union (EU). Stuck in the Middle With Glue While we are inextricably attached to the United Kingdom (UK) as an Overseas Territory on a constitutional footing, that does not automatically extend to day to day business per se. London is an important market for BVI financial services and our main touch down point between east and west. How Brexit, the EU and London as a financial services centre all play out over time are variants that we will need to react to in some way, but they are not fundamental risk areas alone. The business world affected by Brexit, and concerns of EU overreach, all remain stuck in glue and that could last for several more years. There is some impact on our business but it’s no greater than it is on other jurisdictions and businesses. It is also something that we are quite well insulated from on a commercial level, our key markets being elsewhere. As such, while there is an attachment politically, it’s not absolutely critical economically as we look to 2030.

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A VIEW BEYOND THE HORIZON

THE PRODUCT MIX

Our product offerings will not change fundamentally between now and 2030. Our core product of providing BVI entities and services around them will remain the same. The businesses built from and around them, since the early 1980’s, will not change too much either. Lawyers, accountants, compliance teams, fiduciary departments, registered agents, insolvency practitioners and so on will remain ever present. Continued demand for a neutral forum for both international trade and dispute resolution will feed more growth, and that will remain the key driver at the heart of our industry. The overall size of the industry is likely to continue to grow. All driven by the global economic drivers noted above. Incorporation figures will increase and decrease at various times, reflecting the wider supply and demand cycles of our key markets. We should not be overly fixated with those figures, albeit that they are an important indicator. Looking at the industry in totality must remain the prime focus. We will sandbox new global products from time to time but not jump in. Applied blockchain stays, digital currencies get supra regulated more generally and almost all fail. FinTech thrives and technology continues to advance at an ever rapid pace. CLIENTS AND SERVICE DELIVERY

By 2030 our clients will have changed, but probably not as much as we think. What will change dramatically, and rapidly, is how we provide our services to those clients. Banks, financial institutions, corporates and private clients will all have similar constitutions, formats and make-ups to those that are in place now. The personnel and decision makers at those organisations, as well as individual clients, will change somewhat in age demographics, but we will still see a strong cadre of retiree baby boomers (born 1946-1964), a dominant body of Generation X (born 1965-1976) and a growing section of millennials (born 1977-1995) in the mix. Gen Z (born 1996-to-date) will have started to appear. Almost all of those generations operating in our world are already very much “2020” in how they have adapted to, and use, technologies. Even those who have not, tend to readily appreciate and accept that the rest of the world has moved on. Their buying choices vary

JULY 2019

in wider markets, but in ours they tend to revolve around service and price. Delivery of our services is where things move on quickly. If service providers cannot offer a complete smartphone only service (retina and fingerprint readers for client-due-diligence and security protection) in the coming years they will most likely not make it to the 2030 horizon. Clients are buying convenience and ease of use, with speed, accuracy and cost all implied as a given. The cost of digital security will be implied too and businesses will need to make major, continued investment. We can all hope of course that talking to another human being and having a business relationship built on reliability, trust, longevity and sometimes friendship, still matters.

exchange of information flows between nations, including CRS (Common Reporting Standard) and others, are more than adequate to allow bona fide regulatory access to information for all the right reasons. If we are wrong on this supposition and public UBO registers did become a global standard, and the BVI adopts them at the same time as its key markets, that will be fine. The UK is of course putting its plans (and ours) ahead of the international curve and we will see where that takes them, and us. Time will tell that story. Our Financial Services Commission will remain our global standard bearer and the International Tax Authority’s role in international relations will become more central than ever before.

INTERNATIONAL REGULATORY OUTLOOK

The OECD will play an increasingly important role in our industry. By 2030, it should finally be able to help curtail arbitrary and unfair trade and taxation determinations or blacklists by individual countries or blocks, and, one hopes, adopt genuinely global standards only when there is genuine global commitment to do so. We will continue to see ripples of new global regulation from time to time like the EU Code of Conduct’s recent work on substance. Increased economic substance within our industry and within the BVI itself will continue to grow naturally but extended OECD work on the same front and digital taxation in particular may lead to different approaches which do not demand substance at the point of activity generation. Base Erosion and Profit Shifting (BEPS) will remain front and central but exchange of information may prove to be the best global solution to a country by country issue, without much more ado. We may explore some limited corporate taxation before 2030 but that seems unlikely. Global tax harmonisation will probably remain a vain hope as will a global minimal tax regime. The OECD and its 129 or so member countries will continue with their various work streams and the BVI will rightly adopt global standards when they become just that, global. Data privacy rights will gain increased momentum and will prevent public UBO (Ultimate Beneficial Owner) registers from becoming the international standard. Part of the rationale will include the conclusion that the existing

2030

We’ll see China and the USA dominate the 2030 horizon. Our focus will be largely to the east, but we’ll remain relevant in most of the markets that we are currently in. What we offer will essentially be the same. We’ll offer it digitally interfaced and it will require significant investment from industry businesses to satisfy this demand, which is binary. In or out. Data security is taken as read, but not cheap for businesses to provide. The BVI’s core infrastructure via the Corporate Registry and BOSS allows the industry to react well to changing global standards as the OECD introduce them. The focus will be on information exchange which we can satisfy relatively easily. Continued BEPS work and approaches on harmful tax practices will struggle to find a global standard. Global tax harmonisation is unlikely. Public UBO registries do not become a global standard because the right to (data) privacy prevails. Exchange mechanics are accepted as part of negating that need. Our industry and clients can only play a reactive role to such dynamics which will hopefully become more international in implementation, meaning that smaller countries are not singled out or treated differently and or unfairly. Our clients are completely transparent to us, privately, and digitally. They are fully secure with easy verification both ways. Our clients just want everything then and there, on one screen. You do not unwrap your first robot just yet, but you do enjoy telling younger colleagues that there used to be this odd thing called a telephone. You had to pick up a handle (don’t say receiver) and dial it. How old fashioned. | BB

A VIEW BEYOND THE HORIZON

GLOBALLY SPEAKING

Visualizing the State of Government Debt Around the World Gross Domestic Product (GDP) measures the total value of the goods and services produced within a country over a period of time, like a year or fiscal quarter. The ratio of debt-to-GDP makes it possible to compare relative debt levels across many different countries. The U.S. is able to carry a much larger debt in overall terms than smaller countries like Belgium because the economies are of such a vastly different size. Think about it like this. It’s no problem for Bill Gates to have a credit card bill for $50,000 because he has billions in the bank, but for the average American, that would mean bankruptcy. We used the latest (October 2018) complete set of numbers from the International Monetary Fund to plot debt-to-GDP ratios between countries in an interesting visualization. Countries with larger ratios appear bigger, redder, and toward the center of the visual. Our approach places the countries with the most significant debt problems at the center, letting you see which places are more likely to have substantial issues in the future.

Countries with the Biggest Debt to GDP Ratio 1. Japan

238%

2. Greece

182%

3. Barbados

157%

4. Lebanon

147%

5. Italy

132%

6. Eritrea 131% Republic of Congo 131% 7. Cabo Verde Portugal

126% 126%

8. Sudan

122%

9. Singapore

111%

Countries with the Smallest Debt to GDP Ratio 1. Macao (SAR)

0.0%

2. Hong Kong (SAR) 0.1% 3. Brunei

2.8%

4. Afghanistan

7.0%

5. Estonia

9.0%

6. Botswana

14.0%

7. Russia

15.5%

8. Saudi Arabia

17.2%

9. DRC

18.1%

10. Paraguay

19.5%

How to read this graph: The size of each country corresponds to its Debt to GDP ratio. Countries with ratios over 50% are colored red while countries under 50% are colored green. Icons of countries with higher Debt to GDP ratio are appearing bigger.

Debt to GDP Ratio 2017 (%) 200% and more 100% - 199.9% 50% - 99.9% 20%- 49.9% 10% - 19.9% Less than 10%

The first and most obvious insight that our visualization reveals is how developed countries have the biggest debt problems. Japan immediately stands out as the single most prolific spender with a debt-to-GDP ratio of 238%. That means the entire Japanese economy, the third largest in the entire world, doesn’t produce nearly enough value in 2 years to pay off its entire debt. Greece is not far behind at 182%, followed by Barbados (157%) and Lebanon (147%). The U.S. has the 13th worst ratio in the world at 105%. Immediately outside this inner ring of heavy spenders are several small or developing countries with enormous financial challenges. Egypt (103%), Cyprus (97%), Mongolia (84%), Brazil (83%) and Yemen (74%), to name only a few, clearly have debt problems that could spark financial problems for the rest of the world. And then there are a host of green countries along the outside of our visual worth mentioning, especially China (47%), which has the second biggest economy in the world but a remarkably healthy national balance sheet. Granted, the country is still undergoing substantial urbanization and modernization, but the fact that it has such a low debt-to-GDP ratio suggests that it can spend buckets of additional money solving its challenges. Also take a look at Russia at only 16%. The Russian economy is plagued by corruption and slow growth, but at least it won’t have a debt crisis anytime soon. Another way to think about this visual is in terms of spending and revenue, which is to say, should countries with high debt-toGDP ratios spend less money or collect more tax revenue? We doubt any country can actually “grow” its way out of a crushing debt burden worth more than its entire GDP without making substantial changes to its fiscal behavior. Policymakers will eventually have to solve this problem, and either option poses serious challenges to economic growth. (howmuch.net/articles/state-of-the-worlds-government-debt)

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A VIEW BEYOND THE HORIZON

BENITO WHEATLEY

The Post-Election International Challenges Ahead For The BVI The Virgin Islands Party (VIP) Government led by Premier and Minister of Finance Andrew A. Fahie has taken the reigns of state at a time when the British Virgin Islands (BVI) faces unprecedented international challenges that must be strategically addressed to secure the economic and political future of the Territory.

he most pressing international issues are the United Kingdom’s (UK) push for an immediate commitment by the BVI to implement a public register of beneficial ownership by 2023; and the European Union’s (EU) insistence that this year the Territory fully implement the economic substance requirements the House of Assembly has legislated for BVI companies that are tax resident in the jurisdiction. These pressures threaten to erode the BVI’s competitive edge as an International Finance Centre (IFC) and places at risk the more than 65% of government revenue generated by the financial services industry. Unfortunately, the BVI’s international challenges do not end there. The looming threat of further UK Parliamentary action to impose policies on the BVI and other Overseas Territories (OTs) without their consent, remains present as evidenced by the recommendations recently made by the House of Commons Foreign Affairs Committee (FAC) in its report, Global Britain and the British Overseas Territories: Resetting the Relationship. The committee calls for the UK to force the OTs to legalise same-sex marriage, abolish Belonger Status as a category of citizenship, and for each OT to permit legally resident persons from the UK and other OTs to vote and run for office. Farther afield as Brexit draws closer, the BVI is poised to lose its political status in the EU as one of the Overseas Countries

JULY 2019

and Territories (OCTs) associated with the bloc. Among other things, the BVI will no longer serve as Co-Chair alongside the European Commission of the OCTEU Financial Services Working Party in Brussels where the Territory has been highly effective in its role as a facilitator of policy dialogue with the EU on financial services matters. The BVI will also lose access to EU funding after 2020 for sustainable development projects in areas such as climate change, biodiversity and sustainable energy. At the global economic level, the BVI will eventually feel the latent effects of the United States (US) trade war with China as prices rise on US goods imported by the Territory that are affected by higher tariffs. A protracted trade war also holds the potential for a recession in the US and would undoubtedly affect tourist arrivals to the destination from its largest market.

This assortment of issues are among the current international challenges confronting the Territory. To effectively respond to them, the BVI requires engagement strategies with its major international partners such as the UK, EU and United Nations (UN) to manage the problems that confront the Territory. Longer term, however, the BVI will need a comprehensive international strategy to guide the Territory’s approach to the changing global economic and political landscape. Among other things, such a strategy should include expanding the BVI’s international presence, particularly in North and Latin America while deepening the BVI Asian footprint where new commercial opportunities await the jurisdiction.

A VIEW BEYOND THE HORIZON

UNITED KINGDOM

Despite current strains in the BVI-UK relationship, the UK remains the BVI’s principal international partner. Renewed effort must be made on both sides to keep the relationship on a stable footing. The BVI can ill afford an adversarial relationship with the UK as the islands continue to recover from the 2017 hurricanes. On the question of public registers, the Territory must join forces with other OTs (i.e. Bermuda, Cayman and Turks & Caicos) whose financial services industries are also threatened by the provisions of the UK Sanctions and Anti-Money Laundering Act 2018. Together they must persuade the UK Government not to force the OTs to implement public registers until substantial progress has been in establishing public registers as a global standard. Until the issue is resolved, the BVI and UK must compartmentalise the public registers problem and not allow the issue to derail their cooperation in other areas where working together can lead to mutually beneficial outcomes. The departure of Prime Minister Theresa May from office and appointment of a new Prime Minister before the end of July presents an opportunity to reset the UK relationship with the BVI and other OTs which should not be passed up. Stable relations with the UK can provide the BVI with strategic space and greater scope to pursue its interests as the society rebuilds. EU

The EU has stood as a pillar of the BVI’s international relations for nearly two decades. The loss of Associate/OCT status in the EU and end of development cooperation with the bloc, leaves gaps that must be filled. In direct response, the Territory must follow through on its plans to replicate as many of the existing benefits of its relationship with the EU as possible by upgrading its membership in the Caribbean Forum (CARIFORUM) from Observer to Associate Member and by joining the Economic Partnership Agreement (EPA) between the EU and Caribbean for trade purposes. This approach can be complimented by engagement with the EU via the BVI’s Associate Memberships in CARICOM, OECS and the Association of Caribbean States (ACS). The Territory may in fact in the future require a regional approach to tackling issues with the EU on matters such as international tax.

The future of BVI development cooperation rests with the UN as the Territory begins to shift its cooperation from the EU to UN agencies such as UNDP and UNICEF. The BVI also remains engaged with the UN’s Economic Commission for Latin America and the Caribbean (ECLAC) on the preparation of a national development plan and integration of the Sustainable Development Goals (SDG) into the Territory’s development objectives. The BVI itself is also actively promoting the UN’s 2030 Agenda for Sustainable Development in its capacity as a Vice Chair of the Caribbean Development and Cooperation Committee (CDCC) that is ECLAC’s permanent subsidiary body for the Caribbean. Additionally, UNDP and BVI are developing a partnership agreement to continue UNDP’s support for post-hurricane recovery and preparation of sectorial plans. However, where it concerns climate change and biodiversity, the Territory will have to persuade the UN that there is a moral obligation to permit the BVI, as a Small Island Developing State (SIDS) to access UN funds such as the Global Climate Fund (GCF) and Global Environment Facility (GEF). These funds can support the Territory’s efforts to tackle biodiversity loss and undertake climate change adaptation measures. The BVI must also apply for Associate Membership in the Food and Agricultural Organisation (FAO) and the United Nations Framework Convention on Climate Change (UNFCCC) to support its food security and climate resilience goals.

EXPANSION OF BVI PRESENCE IN THE AMERICAS

The international challenges currently facing the BVI, demand that the Territory continue to strategically expand its international presence in order to strengthen its global position and capitalise on commercial opportunities and development cooperation with new partners. Presently the BVI maintains permanent missions in Europe (i.e. BVI London Office) and Asia (i.e. BVI House Asia–Hong Kong) to facilitate its primary commercial and diplomatic relationships in the region. The Territory must go a step further and establish new missions in North America and Latin America, particularly as the jurisdiction begins to fill the diplomatic gap left by Brexit. In North America, the US is the BVI’s primary trading partner, source market for tourists and source of investment and technology. Additionally, the bulk of BVI college/university students and the Territory’s diaspora are located in the US. The BVI should set a goal of opening a mission in Washington, DC to facilitate its commercial and other interests in North America. Serious consideration should also be given to setting up a Government Liaison Office in St. Thomas as the main US transit point for travellers bound for the BVI. South of the US, Latin American is the

next economic and political frontier for the BVI as the region continues to grow economically and demographically. The Territory requires a permanent mission in the region to begin exploring opportunities of different kinds. Panama is the logical country of choice as a commercial gateway to Latin America, a global shipping hub and a diplomatic corps that is broadly represented.

FORGING AHEAD

The BVI faces strong headwinds in the international arena as external forces continue to reshape the global economic and political landscape. The Territory must adjust and adapt to these new conditions if it is to survive and secure its future. The current international pressures emanating from the UK, EU and US-China trade war must be carefully managed through robust engagement with these international partners, while leaning on the UN to buttress the BVI’s position. However, this alone will not suffice. The Territory must expand its international presence and replace the EU political plank it will lose after Brexit. The BVI will survive the current international challenges it faces, but to thrive it must develop an international strategy to chart its longterm course in a dynamic world. | BB

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A VIEW BEYOND THE HORIZON

ROXANE OSUNA & MARK PRAGNELL

CAPITAL ECONOMICS LONDON

The Global Economic Outlook: Rollercoasters Have Frightening Falls But End Happily With a rising protectionist political rhetoric and an increasingly gloomy economic outlook, globalisation, trade growth and investment flows are set to be destabilised. But despite the challenges ahead, the future demand for the services of the Virgin Islands will remain strong – although likely to shift further from the West to emerging markets.

JULY 2019

GLOBALISATION AND THE RISE OF OFFSHORE FINANCE

In the last twenty years, fuelled by trade liberalisation, falling costs of transportation and labour mobility, globalisation has propelled trade. Between 1986 and 2008, global trade in goods and services grew at more than twice the pace of global economic output. Alongside this, the development of robust and deep capital markets has played a key role in financing economic growth, while deregulation by governments and the removal of capital controls have rolled back limits on foreign investment. Advances in information technology have permitted world-wide, 24-hour-a-day trading, with near instantaneous execution of transaction. Capital can now reach its most productive uses – irrespective of location and with speed. The result has been a surge in demand for services that facilitate efficient and secure crossborder transactions and, consequently, clusters of specialist financial and professional services businesses, like the BVI, to service this ‘offshore’ (i.e. cross-border or nondomestic) activity. Exhibit 1: Comparison of global trade (exports of goods and services) and offshore finance Global trade as a share of GDP, per cent (LHS) External liabilities in offshore finance, $ trillions (RHS 40

5 4

0 1980

1984

1988

1992

Sources: World Bank, Bank for International Settlements

1996

2000

2004

2008

2012

2016

A VIEW BEYOND THE HORIZON

THE CURRENT GLOBAL ECONOMIC OUTLOOK IS SET TO DISRUPT TRADE GROWTH AND INVESTMENT FLOWS

As the global economy has been (slowly) recovering since the global financial crisis, not all have continued to reap the benefits of globalisation. The richest one per cent have seen their real incomes rise by more than 60 per cent while the lower and middle income classes in the Western world have seen their cost of living increase, real wages fall and benefits decrease. Despite the perceived benefits of globalisation and the growing demand for the services that facilitate it, an opposing agenda of political protectionism and populist measures has erupted in Western democracies. Some have introduced new protectionist trade measures at the fastest pace since the 2008 financial crisis. In 2016, global exports of goods and services as a share of output fell from 31.0 per cent the year prior, to 27.6 per cent. Against this backdrop, a wave of regulatory requirements and sanctions have been introduced by the likes of the European Union to challenge international finance centres, including the BVI. The United Kingdom’s Sanctions and Anti-Money Laundering Act 2018 is just one measure that will impact business offshore. Many centres, including the BVI, have already worked hard to meet and exceed global standards of tax transparency and information exchange. Still, these new pressures have left offshore centres with new obstacles to overcome – not least that of rebuilding public perceptions as, ultimately, these will dictate what market centres are able to access, and what services they can focus on. Meanwhile, global growth looks set to fall to its weakest pace since the financial crisis. After growing by 3.6 per cent in 2018, it is poised to hit a decade low of 2.8 per cent in 2020 as economies slow and underlying demand softens worldwide. In the United States, growth slowed down in late 2018. We expect to see 2.2 per cent growth this year, falling to 1.2 per cent in 2020 as the fiscal stimulus continues to fade and the lagged impact of past monetary tightening feeds through. But the United States market remains robust. Consumer expenditure will increase as falling energy prices provide a boost to households’ purchasing power; and, with consumer prices flat, that points to a

similar gain in real consumption over the coming months. The tourism industry in the BVI is likely to benefit from this. The United States accounts for the majority (63 per cent) of inbound visitor arrivals to the destination. China grew at its slowest since the 1990s last year (though it still grew at a whopping 6.7 per cent according to official data; our estimate is lower, but still a decent 5.3 per cent). Much of it relates to China’s attempt to move away from its long-established practice of debt-fuelled investment growth. While both monetary and fiscal policy are now set to be loosened by the People’s Bank of China, the scale of stimulus will be smaller than in previous cycles and growth will probably stabilise at around 4.5 per cent by 2020. The decision to deleverage has come at a tough time but, overall, policy priorities are shifting in favour of supporting long-term growth. Ongoing trade tensions between China and the United States have caused a dip in business confidence in the run up to 2019. But trade between the United States and China accounts for less than five per cent of global exports, and their changes in export growth account for less than 0.1 percentage points of the 2.5 percentage point decline in world trade growth. In the euro-zone, weak growth can be attributed to Germany’s falling manufacturing output, which contracted for the first time this March in more than four years. Worries of a recession are rising, with the European Central Bank now expected to engage in quantitative easing by 2020. Growth is expected to bounce from close to zero in early 2019 to one per cent later in the year. This is the slowest expansion in four years. Brexit uncertainty has compounded the weakened confidence and investment. However, we do not believe this will be a big barrier to an eventual rebound in growth. The United Kingdom has continued to grow despite the uncertainty and we anticipate a decent performance in coming years.

returns. Firms that want to borrow still desire increased competition among providers of capital to ensure they can do so at a lower cost. There is still a strong drive for freedom of movement and access to global labour markets, which are as a whole looking healthy. There remains good reasons to believe that many of the drivers of the historical success of offshore centres, including trade, migration and deeper and more sophisticated capital markets, will continue. Future growth in demand, however, is likely shift from the West to more emerging markets. New long range forecasts from our Corporate Strategist: Global service show the scale of upcoming economic rebalancing from old powers to new.

Exhibit 2: Global real GDP, 100 = total global GDP in 2018

2018 2039

North America

Euro-zone

China

India

Other Emerging Asia

16.5

11.7

18.7

7.7

9.9

7.4

26.9

14.6

31.4

25.5

21.8

11.6

EM Europe

Latin America

MENA

Sub-Saharan Africa

Other advanced

6.8

4.5

2.0

5.2

2.1

11.6

8.3

5.4

7.5

4.3

Other emerging

Sources: Capital Economics

Although the large Western economies account for much of the current demand for offshore finance, their dominance is being eroded. Asian middle classes have seen their real incomes rise by over 60 per cent between 1988 and 2008. By 2020, Asia is set to become home to half of the world’s mass affluent. This bodes well for the BVI. Our 2017 study for BVI Finance found that Asia is already responsible for more than 40 per cent of the $1.5 trillion mediated through the BVI. Today, Asia accounts for 38 per cent of global output. Over the next decade, the Belt and Road Initiative is expected to increase China’s outbound investment by $25 trillion. India still has some catching up to do, with a per capita gross domestic product of only twenty per cent that of the European Union (adjusted for price levels). But we expect India to sustain annual growth of five-to-seven per cent over the next two decades, making it the fastest-growing major economy in the world. Its gross domestic product is now double the size of Germany’s. Likewise, Vietnam has consistently remained one of the region’s best performing economies, with exports continuing to outperform those from the rest of Asia. THE BVI MAY EXPERIENCE SOME TURBULENCE IN THE SHORT-TERM, BUT THERE ARE PLENTY OF OPPORTUNITIES AHEAD

DEMAND FOR INTERNATIONAL FINANCIAL CENTRES REMAINS STRONG

There are many obstacles to come. As growth slows in the established industrialised nations of Europe and North America and emerging nations begin to further outpace them, demand patterns will shift and new players are likely to enter the global arena. The rising international pressures around compliance and transparency will make it harder for offshore centres to access this underlying demand, meaning that, moving forward, they must work out their role in the current and future economic landscape and leverage their existing strengths to measure the trade-offs between value and growth.

Looking further ahead, there is no sign of a wholesale reversal of cross border capital flows, foreign direct investment or foreign ownership of assets. Investors still seek opportunities to match their portfolios of investments and their desired profiles of risks and expected

The BVI are well positioned to withstand the existing gloomy economic outlook. Its existing footprint in growing markets and commitment to global standards not only set the BVI at the forefront of international corporate restructuring for international investors worldwide, but ensure that the Territory will continue to grow and capitalise on the opportunities that lie ahead. Emerging markets, such as China, will continue to choose the BVI as a leading investment partner. | BB

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A VIEW BEYOND THE HORIZON

VANESSA KING KERRY ANDERSON

Sailing Into The Headwinds Of An Evolving Global Economy

SETTING THE STAGE: GLOBAL ECONOMIC CHALLENGES

When viewing BVI’s prospects for economic development, the horizon looks endless. Change simply needs vision and proactive, intelligent management to ensure it is implemented and adopted. How the Territory chooses to take hold of advantages and act on opportunities will make a world of difference in its ability to race against the headwinds.

he world economy continues to grow, not only in complexity but in competitiveness. Although the British Virgin Islands is recognised as a significant contributor to global wealth, the country continues to face headwinds in the race to keep pace with evolving trends in technology, education, infrastructure, and data stewardship. To maintain (and grow) its relevance in the global economy, the BVI can no longer ignore deficiencies in its domestic economy and expect to compete, effectively. Change and investment must occur. How leaders, decision makers, citizens, and residents accept and manage necessary change will make all the difference. It is one thing to establish new expectations and quite another to provide the support, talent, and

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financial investment that will allow the BVI to implement changes and thrive in the 21st century global economy. Looking back to the 2017 hurricanes Irma and Maria, the wake-up call they delivered was unwelcome. But there is a silver lining. Disruption can serve as a catalyst for progress. In this case, perhaps, it has energised the country in its march toward increased global competitiveness. The sweeping change of BVI government in February 2019, to many, signals a healthy disruption to the status quo—a renewed will to achieve a higher level of government performance. But beyond government, meaningful transformation requires a mindset, across all people and all interests, that fosters and supports entrepreneurial vision and creativity, and a commitment to adapt to change.

In 2014, the BVI engaged the prestigious McKinsey and Company, an American world-wide management consulting firm, to prepare a report titled “Building on a thriving and sustainable financial services industry in the British Virgin Islands,” commonly referred to as the McKinsey report. The report identified significant factors affecting the BVI financial services economic pillar. The top four external factors the report identified are: 1. The increase in international pressure for greater transparency to identify potential tax evasion in the face of eroding tax bases in G1 countries following the global recession. 2. The policy changes by major international banks in response to home regulators which make it difficult for BVI companies to open bank accounts. 3. The proliferation of low-cost, competitor jurisdictions, and market competition in general. 4. The acceleration of the international regulatory environment.

A VIEW BEYOND THE HORIZON

In the intervening years, between 2014 and the present, several developments tightened the grip of these four factors. Stolen offshore financial data (commonly called ‘leaks’) found their way to international news organisations, raising privacy concerns and setting off public relations crises for certain jurisdictions. The BVI found itself in the periphery of its crosshairs. In 2018, the United Kingdom passed the Sanctions and AntiMoney Laundering Act 2018. Section 51 of the Act anticipates legislation that will introduce publicly accessible beneficial ownership registers for BVI companies if the territory has not done so on its own by December 31, 2020. Further, in 2018, responding to demands for transparency, fair taxation, and antiBase Erosion and Profit Sharing (BEPS) from the European Union’s Economic and Financial Affairs (ECOFIN) Council and Code of Conduct Group on Business Taxation (CCG), the BVI passed the Economic Substance (Companies and Limited Partnership) Act. Jurisdictions that fail to meet ECOFIN and CCG criteria are placed on a list of noncooperative jurisdictions until they comply. It is the last category, anti-BEPS, which requires jurisdictions to show “real economic activity” and meet substantial economic presence for registered entities that presents a particular challenge to the BVI. The Act took effect as of January 1, 2019 and introduces economic substance requirements for companies and certain limited partnerships that have opted to have BVI as their tax residence. These developments, among others, underscore the sensitivity of the BVI economy to external shocks and global economic challenges. They should also reinforce the need to think differently. KEY ECONOMIC INDICATORS

New incorporations are generally looked at as an indicator of the financial services sector’s performance. Although not a complete picture of the industry, it is its base. Incorporations generate revenue streams in many sectors of the economy other than incorporation fees, such as registered agent, company management, and legal services. These revenues feed into the wider economy through banking, real estate via commercial leasing, and general spending—food, medical care, travel, insurance, and others. Although 2018 was a good year for incorporation figures, a comparison of 2018 to 2014 data, shows a decline in

new incorporations of approximately 30 percent in Q1, a decline of 20 percent in Q2, and an approximate decline of 31 percent in Q3. Trademarks also declined, while patents fluctuated. Limited partnerships, investment funds, insolvency, and domestic banking all experienced growth, yet not enough to offset the drastic decline in revenue streams from incorporations. Five years after McKinsey, in a postIrma environment, the data shows that it is even more critical for the BVI to push forward on priorities. Moreover, dependence on financial services as a major economic driver has its risks. What then is needed to propel the economy forward and outward? A strategic shift that recognises and leverages the broad range of opportunities in the BVI economy—one that fosters and rewards a culture of excellence. In other words, make smart strategic choices and meaningful changes to thrive.

PRIORITY INITIATIVES

The McKinsey report identified 10 priority initiatives to propel the BVI’s financial services sector forward in an interlinked, global economic environment. Of the 10, three stand out as particular areas of concern in the post Irma and Maria environment: 1. Strengthen BVIslander capabilities. 2. Invest in infrastructure. 3. Reform immigration and labour policies. Among the reasons why these three are particularly critical is that they apply broadly across the BVI economy, not just the financial services industry. In addition, all three areas are closely intertwined.

MANAGING CHANGE

Globalisation and technological innovation feed an evolving business environment with a constant need for change. Still, many organisations struggle to make even necessary changes. Why? In reality, managing change is less a matter of pushing through discrete projects and more about organisational readiness to accept that continuous adaptation is necessary to compete. A country rarely considers itself an organisation, but in fact, it is an organisation of citizenry and leadership, businesses and residents. To reverse the underlying threats to BVI’s economic growth and development will take not only assessing and changing priorities, plans, and projects, but also nurturing an adaptive mindset across the organisation. Everyone in the “organisation” has a role in managing that change. Traditional methods of change management can be deployed to redirect or redefine the use of resources, processes, budget allocations, or other operations. Certainly, Government and leaders in business, education, health care, and more, must prioritise, own, coordinate, and manage their projects appropriately. They must take all approaches necessary to prepare, support, and help individuals and teams coordinate efforts to reach desired outcomes. Yet, more importantly, all work must fit into the greater purpose— to create excellence throughout the organisation, which will allow it to compete on the global level.

STRENGTHENING BVISLANDER CAPABILITY

One can easily point to undisputed examples of BVIslander excellence, from Madame Chief Justice the Dame Janice Mesadis Pereira DBE, to world-class sailor Thad Lettsome, and many in between. Yet, there are real tensions felt by the local, employable population, especially surrounding the persistently high number of foreigners in all levels of the workforce. Notwithstanding, strengthening local capability is possible and excellence is achievable if initiatives align education and training with bonafide opportunity. Education and training must be aligned with opportunity. The areas of education, labour, and immigration, under the purview of Government, are where proper data stewardship could provide information regarding persistent or increasing levels of foreign labour. Government can utilise this data to set educational priorities. Areas of cultural significance also require discrete attention, as does consideration on a sector by sector basis to determine where it is most advantageous to train BVIslanders or continue to import foreign labour. Similarly, before new and innovative economic products and vehicles are developed and rolled out, careful thought must be given to: • whether capacity exists in the market to support these products; • where that capacity lies; and • when and how to build and foster BVIslander capabilities.

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A VIEW BEYOND THE HORIZON

THE BVI MUST PRESERVE AND PRIORITISE THE ETHIC OF DISCIPLINE, INTEGRITY, AND EXCELLENCE

comprehensive, here are two policy examples that could be easily changed as a result of a gap assessment:

Excellence doesn’t come about by accident, but it isn’t rocket science either. The values instilled by generations of elders have been proven true, over and over again, across peoples, classes, and cultures. A quick look at the BVI’s marine industry is useful as a lens to illustrate the foregoing points and the various ways government policy can be used in the service of building capacity.

• Where needs are being met by nonBVIslander workers, training contract requirements for businesses can be introduced.

It’s fair to say that the marine industry was a precursor to and spur for the financial services industry. The BVI’s long tradition of sailing, fishing, and watersports keeps the marine industry lucrative. The industry serves visitors, locals, and residents, alike, and local talent appears to be plentiful. However, one can observe that relatively few BVIslanders maintain ownership or key positions in the industry. A tradition of protectionism around culturally significant industries, such as the marine industry, is often seen as a means of redressing the imbalance. However, here we often see a perverse effect that BVIslanders are noted as partners in a business but in reality they have little participation in the operation. One change that could be made to increase local opportunity and grow the marine industry is to address certification roadblocks. For liability reasons, no maritime business can afford to allow uncertified persons as captains or first mates on vessels, no matter how talented they may be. BVIslanders’ access to certification programs for maritime credentials and related areas is definitely an obstacle. To address this impediment, program scholarships at the college could be increased and international certification agencies could run recurrent programs in the BVI, including training BVIslanders to establish and lead (and own) local certification programs. While certification is a first step, it is no guarantee of access to key industry positions, upward mobility, or capital. Again, Labour and Immigration along with the Trade Department could provide data on ownership and employment in the industry to policy makers. Such data would allow Government to conduct a gap assessment and identify where and how BVIslanders can be trained to fill those gaps. While by no means

JULY 2019

• Where gaps remain, Government can source startup capital to enable BVIslanders to enter and compete in the industry. Of course, such changes would require strong mentors who understand the industry, the position of BVIslanders within it, and what they need to succeed. But working to advance policies and programs that foster excellence at all levels, from policy makers to participants, present an ideal opportunity for community-government cooperation which could build and diversify the BVI economy, while strengthening local capacity. Although these examples are based on the marine industry, they can be applied to a wide range of existing or new industries, with appropriate modifications for nuances. How might Government apply the gap assessment, policy interventions, and a culture of excellence in tourism or financial and legal services? What about agriculture, transportation, trades, and home services, such as joinery, carpentry, smart home connection, landscaping, HVAC, plumbing, electrical, and cleaning services? Or renewable energy? Technology? When viewing BVI’s prospects for economic development, the horizon looks endless. Change simply needs vision and proactive, intelligent management to ensure it is implemented and adopted. How the Territory chooses to take hold of advantages and act on opportunities, will make a world of difference in its ability to race against the headwinds. INVEST IN INFRASTRUCTURE

Given the myriad infrastructure challenges in a post-Irma environment, both short and long term planning should be considered urgent. In the short term, basic needs must be addressed, but not to the exclusion of long-term goals. To keep pace in the global economy, Government must lead in creating a first rate infrastructure strategy that considers all aspects of industry, transportation, buildings, health and human services, and importantly, people. Until robots

rule the world, human capital remains a valuable asset and part of a country’s infrastructure. Roles may change and new technologies may require people to adapt in unforeseen ways, but essentially, countries that understand the importance of nurturing and growing their human capital tend to succeed, greatly. EDUCATION

Experiments with the BVI educational system over the past few years, such as the greater emphasis on Caribbean Examinations Council (CXC) external examinations, have confirmed that the country has students who can compete with the best in the region and, therefore, the best in the world. However, that level of performance needs to be replicated, broadly. BVI school infrastructure—buildings, educators, technologies, and systems— need constant attention in order to meet (or exceed!) evolving standards. However, a more immediate need stands in the way. Many BVI children and young people are still attending classes in make-shift structures on half-day schedules since the hurricanes of 2017. To compete at world-class levels in any economy or industry, a country cannot devalue the instructional needs of its children and young adults. Information technology used in advanced educational systems that are needed to foster achievement and excellence cannot be installed in tent schools. Beyond rebuilding damaged schools or building state of the art new schools, changes to systemic infrastructure also could be re-envisioned. The introduction of CXC shows that it is beneficial to look beyond our shores for successful models. While it has become almost second nature to look at systems in the United States, the most recent Global Education Survey, which assesses education in 72 countries from a wide range of economies every three years, finds that Singapore is the top performing country. The core component of the survey tests 15-year-olds for establishing the basics of what every child should know before leaving school. In Canada, Estonia, Finland, Hong Kong (China), Japan, Macao (China), Singapore, and Viet Nam, nine out of every 10 students have mastered those basics. (All volumes of the reports are freely available to read online.[2]) Modern educators now know that successful educational systems are engineered to foster the natural curiosity of students, their capacity for innovation, their ability to solve problems, and an understanding of how their lives relate to their communities, their country, and the world. To advance, the BVI will require top-flight educators in sufficient numbers who are

A VIEW BEYOND THE HORIZON

growing constituency to facilitate the transfer of business intelligence and capital. To deny the intense pressure that the EU’s economic substance requirements place upon the BVI’s domestic economy is foolhardy. All initiatives mentioned throughout this article are interlaced with the country’s ability to realise onthe-ground substance—infrastructure, education, human capital, direct investment, change management. Without reliable high-speed internet or modern and effective transportation systems, the BVI simply cannot attract global businesses. And, without increased economic substance, a very critical sector of the domestic economy is threatened—BVI financial services. LABOUR & IMMIGRATION REFORM

trained to implement such systems. Government could consider initiatives such as improved teacher education opportunities, greater access to professional development programs on an ongoing basis, and rewards for exceptional teacher performance. These types of programs will not only bring immediate benefits for students, but will help BVI schools retain excellent teachers and attract new generations of top performers. Finally, to develop effective educational infrastructure, provocative questions must be asked and answered. For example, could the system benefit from single sex education? Can investment in foreign language education yield a competitive advantage to BVI businesses in this increasingly interlinked, global economic environment? In Curacao, for example, a majority speaks four languages, English, Dutch, Spanish, and Papiamento; three are official languages. How might educators increase capacity in science, technology, engineering, arts, and mathematics? What resources do we have in place and what others are needed to achieve STEM goals? If the BVI does not start asking and answering the tough questions, it may miss a profound opportunity to build out its human capital. Competition demands adaption and education is not an area for indifference. TECHNOLOGY

Technology touches every aspect of our lives. Investment directed to expanding the availability of super high-speed internet—and lowering its costs to end users—is crucial for attracting foreign direct investment. The tourism sector, for example, which has room to grow, needs reliable highspeed internet to complete resort upgrades and initiate new development. An expansion of this industry would spread economic benefits across the Territory. The sector showed much promise with visitor numbers more than doubling between 2014 and 2016[3] from 513,118 to 1,124,380. Surely, every area of the BVI economy would benefit from improved connectivity, including homes, hospitals, local businesses, and schools. TRANSPORTATION AND TECHNOLOGY

Beyond the internet, transportation infrastructure is a major obstacle to improving BVI’s global position in three key areas: tourism, direct investment, and economic substance. Options need to be explored to make transportation in, out, and across the BVI and the Virgin Islands

easier, more efficient, and more reliable. Technology can lead the way. Throughout the world, competitors are using technologies to guide transportation infrastructure decisions. Data extracted from connected systems and software help governments and businesses make better choices when determining timing, capacity, and methods for transporting people and goods. It also assists in making smart decisions on where to invest resources. For example, would the greatest return on investment lie in an airport expansion on Tortola or in hourly highspeed ferries from St. Thomas serving Tortola and Virgin Gorda? Building an airport on Tortola does not guarantee that transportation patterns will change. Cost and availability of flights, speed and efficiency of implementation, and other possible scenarios are critical data points to add to the equation. Similarly, BVI could seek out transportation technologies and policy innovations to relieve parking issues and congestion within Road Town, and to improve transportation and commerce between each island. Of course, all progress requires capital, but funding should not be the stumbling block. While access to international capital in grants and loans must be evaluated, Government can also take advantage of resources within its shores. Many high-net-worth individuals who control market-leading, international companies hold significant investment in the BVI. Government could pursue working relationships within this

Everyone would agree that labour and immigration reform cannot be taken lightly, but it can be addressed effectively to open doors and fill in gaps. The BVI can expand economic opportunity, build schools, accelerate learning, and train and reward teachers for their success, but until then, how will it attract new companies required to prove economic substance demanded by the EU? Where will they get the employees they need to run their high tech systems or manage their complex organisations? Businesses need not only physical infrastructure, they need human infrastructure—talent and skill. Labour and immigration reform can meet these challenges. Like any change that occurs in an organisation, having an open mindset to labour and immigration reform is critical. As a country, the BVI has proven its resilience in the wake of storms, and more. With that same fortitude, it can approach reform because the outcome will leave the country in a better place— one that shouts we are excellent, we are adaptive, and, we are open for business on a global platform. Change is less a matter of pushing through discrete projects and more about fostering an environment and mindset that enables it. As the BVI sails through the headwinds, without a doubt it will do so by employing informed, deliberate, and managed change across the “organisation.” The alternative is not an option. BVI must take every opportunity to adapt and leave a thriving legacy for its children, their children’s children, and beyond. | BB

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A VIEW BEYOND THE HORIZON

NEIL SMITH PETER TARN

The Financial Services Sector: A Manifesto For The Future The paradigm shift that must occur to unlock the true potential of these islands however, remains elusive, even to those that have nothing but the best intentions for the people and future of these treasure islands. The key to effecting this paradigm shift is perhaps one that many countries overlook, and one which the BVI has overlooked for some time now.

A HISTORICAL CONTEXT

There is nothing new in the prediction of the end of the offshore industry and the BVI has been involved in a struggle to protect its financial services industry for several decades. To date those predictions have all proved false and the industry has continued to thrive because it fulfils a real need. It provides a vital part of the wiring for international capital flows and for the BVI in particular because, as yet, nobody has come up with a risk allocation vehicle as sophisticated and flexible as the common law company. However much its opponents pretend that it is about secrecy and about tax, those realities have always trumped the propaganda. The struggle began in earnest with the publishing of the report by the OECD, “Harmful Tax Competition – An Emerging Global Issue” in 1998. The report focused on the way commercial ventures shifted profits to jurisdictions that had little or nothing to do with the profits that they were making. The OECD was concerned that jurisdictions like the BVI, had created low tax regimes without mandating that these

JULY 2019

companies have the corresponding levels of economic activity within their borders to generate this activity. The report saw low tax jurisdictions as intentionally competing with others by undermining their tax bases and attracting companies within their borders for no other reason than to avoid tax. In 2001 the global community decided to focus on some of the other issues in the 1998 report, such as transparency. That was entirely logical, since the tax treatment of any profits booked in places such as the BVI, once easily identified could be taxed elsewhere if appropriate and any failure to tax income or profits elsewhere in the world became exactly what it should be; a failing of that other country’s system. The BVI in its commitment to ensuring the legitimacy of its financial services sector, made all the requisite improvements to its existing regulatory framework to ensure that it was able to meet the standards that are set out in this regard. In 2008, the global financial crisis resulted in a renewed focus on the matter of harmful tax practices and

the Base Erosion and Profit Shifting (BEPS) initiative was developed within the OECD organisation. BEPS focused primarily on the practice of companies being able to register their profits in another jurisdiction in which they were not doing business, and specifically in a jurisdiction that had low to minimal taxation levels. This initiative brought the topic of substance back to the forefront. For many years this too had a logical basis and the focus was around double tax treaty countries (not the BVI), where profits could be booked and taxed at a low rate, but and benefit from an exemption from the corresponding tax elsewhere. In 2016 the European Union widened its internal tax harmonisation efforts to include significant third countries. These “third countries” were jurisdictions that in the opinion of the EU, were regularly part of the business activities that EU member state entities and the EU citizens participated in. In the BVI’s case for example, BVI structures were seen to be part of the business transactions that were developed and used by members of the European Union. The facts probably do not bear that out as BVI entities are

rarely used in the EU. The EU assessed these jurisdictions on; 1. Tax Transparency 2. Fair Taxation 3. Base Erosion and Profit Shifting. As expected, the BVI and its contemporaries faired well in respect to these criteria. However, in respect to its “facilitating” of offshore structures, which could be linked back to the fundamentals of the BEPS initiative, the BVI was assessed to be deficient. The ensuring effort put out by the BVI, resulted in the Economic Substance, Business Companies and Limited Partnership Act 2018, amendments to the Beneficial Ownership Secure System Act and the introduction of the Economic substance code; all meant to position the British Virgin Islands to meet the requirements of the European Union’s economic “standards”. The BVI as one would imagine is no stranger to these events and this effort has been the latest in a long line of adjustments that the BVI has had to make over the years since its entrance into the financial services industry.

A VIEW BEYOND THE HORIZON

THE CURRENT ENVIRONMENT

What this latest interest from the EU should remind us of, is that in a developing global landscape, constant change is required merely to maintain one’s position in relation to those that exist in the same space. Arguments as to whether those that possess the ability to impose their might on those that cannot oppose them should not preoccupy us, as it does not achieve anything worthy of note, except frustration. It is after all the law of the jungle. In addition, the BVI has also demonstrated an enviable ability to overcome adversity; in some instances, through shear determination, in others through innovation, but in most instances through a potent mix of both. However, this fight for survival is never without cost. Hence the industry in the BVI and its citizens do have cause for concern, about the future, in the sense that although it can be bright if we continue to innovate, it can just as easily indeed be dim. The cheese will continue to move and the BVI in realising this, should remain vigilant and be preparing to follow it; if they in fact would like to continue to eat cheese. The constant on which we can depend in the BVI economy is change. First is the realisation of the fact that the environment in which BVI as a territory is operating is rapidly changing. Customers demand more efficient, and reliable services to support their businesses. The BVI must be prepared therefore to ensure that the infrastructure needed to shore up this business exists. The services will range from telecom services to efficient and timely maintenance services. More and more, the society in which we live is becoming less tolerant of services that are costly or inefficient or both. Next, the current status quo in respect to the processing of official approvals needed to facilitate business growth, is suboptimal and in need of enhancement to improve economic competitiveness. A MANIFESTO FOR THE FUTURE

The BVI has remained relevant because it has been able to adopt quickly to the changes that have been placed on the International business sector. However, these changes have not required it to change the fundamental way in which it does business, and essentially we have merely adjusted the original IBC model introduced in the mid1980’s. This model though, is being subjected to much pressure over the years and is becoming increasingly more expensive to maintain. Put another way, the agility that the BVI has displayed over the last four decades has been only two dimensional; it has been agile in adapting its laws and its regulatory apparatus. It has not been agile (and has not been required to be agile) in changing its on the ground business environment, which in many ways remains stuck in the 1950s; for example, is a BVI trade license still relevant in its current form? The substance challenge cannot be met by regulatory and legal reform alone and therefore requires new ways of thinking and an acceptance that the footprint of the industry will have a greater impact on everyday life. Leadership over the years has demonstrated non-partisan support for its financial services sector from inception and no one seriously doubts its desire to continue to do so. Fulfilling that desire is, however, going to become a whole lot harder and increasingly questions are being asked about the profitability of the sector, and the reasoning behind the BVI’s continued efforts to keep abreast of the obligations that are being placed on it. Some suggest that perhaps the time has come for the BVI to bow out of this game while others explore the notion that we develop other industries that are less challenging. There is no doubt that the BVI faces a fork in the road. It is also no question that the BVI is a small fish in big pond and can be gobbled up quite easily by decisions and actions taken by others who are much bigger and have more resources. The paradigm shift that must occur to unlock the true potential of these islands however, remains elusive even to those that have nothing but the best

intentions for the people and future of these treasure islands. The key to effecting this paradigm shift is perhaps one that many countries overlook, and one which the BVI has overlooked for some time now.

more of what currently exists as opposed to a digital approach, which would achieve a new, but innovative way of solving an old problem and thus opening the door to new possibilities that can be harnessed for its benefit.

Although the BVI is often seen as a twotrick pony, that is not by any stretch of the imagination the case. The milliondollar question though is, does the BVI realise its potential?

Fortunately, BVI seems to be sufficiently concerned about the fact that its livelihood is being seriously threatened, that it is scanning for innovative approaches to thrive in the new environment. This is being evidenced by modifications to BOSSs for example that allows the ITA to have unprecedented capabilities in its role to manage BVI’s international tax treaty obligations; including the management, monitoring and enforcement of the provisions of the ESA. Unfortunately, however there is also the possibility (or promise) that this may be yet another episode where they can get by to live another day, without fundamentally changing the way we do business; essentially using the same trap to capture an increasingly sophisticated mouse.

A few things come to mind when making this declaration. The BVI has not tapped into the enormous potential that lies beneath the waves over which it has control, nor has it tapped into its latent telecommunications capability that sits at its shores. Instead it continues to be constrained by a lack of imagination and complacency that holds it prisoner and compromises the future of its citizens. In a digital world therefore the BVI should be able to continue to punch above its weight and the advances in communications and knowledge sharing which we continue to see can only be positive for a territory whose innate disadvantage is being physically small. Challenging that “smallness” in a Blue/ Green nation and cyberspace together is possible. VIRRGIN and BOSSs are two clear examples of decisions that have been taken by the BVI that allow it to compete at a level that belies its size; and continued advances in the direction that these systems point to will position the BVI at the forefront of what is possible. The challenge remains however, that despite these advances, the BVI is yet to make the connection between its ability to innovate and the use of information technology to shift its economic development and create a higher living standard for its citizens. In many ways the BVI is continuing to focus on the development of a better analog solution and in most cases using IT to do so, when in fact the infrastructure is within its grasp to be an innovator in a digital world; a fact that was clearly demonstrated in the failure of the Micro Business Company’s product to take root. The ability of the BVI to tinker at the edges of its fundamental model and way of doing business has also not helped in recognising that it could be pursuing a paradigm shift, as a means of ensuring its ability to thrive in the future. Now faced with the introduction of economic substance, the potential extraordinary gains that knock at its doorsteps are again being viewed through an analog lens, that requires

The clear advantages for the BVI going forward, lies in its ability to adapt quickly, and in the face of having to up its game to survive, the processes that may be required to do so will be the enablers of a more resilient economy. Yet it is also important that the BVI government does not jump ahead of itself, and hence should concentrate solely on the essential items that would facilitate the growth of the economy in this new requirement; one that requires more emphasis on the quality of the business presence in the BVI, as opposed to the quantity of businesses that domicile here. By focusing on these enablers, one can expect that the private sector will do the rest, and some existing industries will grow while others will be developed to support it. Interestingly these enablers are known and have been discussed over the years; the hope is that the pending rough seas ahead will improve the BVI’s focus in looking forward, and once done, to chart a course that navigates it. The future of the BVI financial services sector is bright. But only if the BVI does what it did almost four decades ago when the newly elected Reagan Administration unilaterally cancelled what was up until then, a cash cow for the BVI; the US-BVI double taxation treaty. The BVI can again forge ahead as it did then; by using adversity as a catalyst for change. It is in our DNA. | BB

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A VIEW BEYOND THE HORIZON

KINISHA FORBES PATLIAN JOHNSON

Economic Outlook Of The Virgin Islands: How The New Government Plans To Manage Risks And Harness Opportunities The Virgin Islands’ economy has fared better than anticipated in the wake of 2017’s devastating storms. In 2018, a resilient financial services sector, recovering tourism industry, and booming construction projects combined to buttress economic growth in the Territory. The Government has projected constant Gross Domestic Product (GDP) growth at 2.3 percent in 2018, following a 3.7 percent decline in 2017 (Table 1). This momentum of positive growth will now need to be built upon in propelling the Territory to achieving sustainability beyond recovery.

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POSITIVE PROSPECTS FOR SUSTAINABLE GROWTH

VIP PLANS TO PRIORITISE PEOPLE’S PROGRESS

The specific features of our economic outlook can be outlined by examining three indicators: the relative size of the economy, movement in consumer prices, and the number of persons employed. Medium-term annual economic growth from 2019 to 2021 is expected to fall between 2 and 3 percent annually, reliant on our ability to strategically manage risks. Movement in consumer prices, measured by inflation, has ticked up in the post-hurricane environment, at an estimated 2.1% in 2018, with increased demand for goods and services used for recovery. While inflation is an expected by-product of growth, public sector efforts to contain costs can help in constraining inflation, as the Government is a major consumer of goods and services in the economy. High levels of inflation threaten living standards, where prices push goods and services out of people’s reach.

The main role of public sector efforts must be advancing the wellbeing of people. This is achieved by facilitating widely-shared economic growth, which secures a good quality of life for all; regulating certain activities to ensure that the public interest is protected and advanced; and caring for the most vulnerable. Given that people are central to public policy, the size of the economy, the relative level of prices, and employment numbers are relevant only insomuch as they inform on the status of people’s lives.

Employment in construction since the hurricanes has risen noticeably, cushioning declines in the number of persons employed in the tourism sector. While official employment statistics for 2017/18 are not yet available, growth projections suggest that employment in the construction sector will continue to be heightened over the next three to four years, and the tourism sector and associated jobs are expected to substantially recover for the 2019/20 tourist season (Tourist arrivals for the first two months of 2019 reached 88.7% of prestorm arrivals – Figure 1). This indicates positive prospects for both job and wage growth in the medium-term.

The newly elected Government administration’s Manifesto outlines its plans under the theme “Restoring Hope and Prosperity for All”. In the current recovery context of the Virgin Islands, the Manifesto states emphatically that people must come before projects. Indeed, any project being implemented to resolve existing problems or take advantage of opportunities is, in summary terms, aimed at improving the standard of living of the Territory’s people. Where we confront our challenges and fully realise emerging opportunities, the economic outlook for the Territory holds significant promise. Analysis of the Manifesto’s initiatives can present a picture of how the Territory’s economy and people will fare, where the Government is able to effectively implement its plans, harness opportunities and address three key risks: the risk of a stalled recovery, the risk to our business model, and the risk of uncertainty.

A VIEW BEYOND THE HORIZON

In its Manifesto, the new Government has acknowledged the need for rebuilding resilient infrastructure and its importance in advancing our economy. This suggests understanding that full restoration and upgrade of the Territory’s infrastructure are paramount and urgent, given that“[...] a resilient infrastructure is vital to position us for success. In order for us to meet future challenges, our infrastructure must be upgraded innovatively and resiliently, with highly skilled workers and solid building standards” (VIP 2019 Manifesto, p. 68).

ï “digital technologies in every area of our economy which is an effective way to maximize revenue for businesses, small and large, reach a global market, improve delivery of services to the public and recover from disaster” (VIP 2019 Manifesto, p. 71); and ï “A better sea transportation system [for the] benefit [of] all residents and visitors alike” (VIP 2019 Manifesto, p. 69) Recovery of critical public infrastructure not only assists our residents to fully reclaim their living standards, but also better secures these standards in the future by facilitating inclusive, sustainable growth. Strong, sustainable infrastructure is also an important asset and tool necessary to confront risks to our business model and create more value-added substance. Figure 1: Recovery of Tourist Arrivals

250,000 200,000 150,000 100,000 50,000 0 Daytrippers Overnight Cruise

Sep-Oct 2016 2,767 32,583 55,251

Sep-Oct 2017 458 3,015 0

Sep-Oct 2018 1,902 17,143 22,475

Nov-Dec 2016 2,099 71,655 177,984

Table 1: Economic Growth Comparison Sources: Macro Fiscal Unit, Ministry of Finance; Economic Commission for Latin America and the Caribbean; International Monetary Fund

NAVIGATING THE RISKS TO OUR BUSINESS MODEL

Events over the last few years, including the disasters of 2017, have tested the buoyancy of our economy. The Territory’s economy has thus far been able to largely withstand negative external impacts (Table 1). Given the proliferation of harsher weather events and the growing unpredictability of global affairs however, we, like other small island states, must be nimble enough to navigate through rough waters while simultaneously recognising and readily taking advantage of opportunities as these arise. The ongoing push by political groupings in the United Kingdom (UK) for the Territory to implement public registers of beneficial ownership before these are the global standard poses some risk to the prosperity of our financial services industry. Negotiations with the UK are aimed at establishing where constitutional boundaries lie in control and management of this industry. Through passage and implementation of Economic Substance legislation, we have successfully avoided appearance on the European Union’s List of Noncooperative Jurisdictions for Tax Purposes. It is clear though, that the latest attacks on the Territory’s financial services industry will not be the last. As such, we must continue to promote an energised and refreshed economic model, resisting misguided international efforts to hamper business, while also working assiduously to enhance the necessary infrastructural, institutional and intellectual capacities to support proliferation of more substantive business. Despite constant international pressures and changing goal posts, the financial services sector has been resilient and continues to be impactful in the global financial arena. In 2018, with changes in fee structure, revenue from financial services reached record levels at $225 million which is more than 25% higher than the previously highest Central Government revenue ever raised from company transactions (Figure 2). Figure 2: Incorporations and Companies Revenue, 2013 - 2018

Statistics compiled by Central Statistics Office

300,000

88.7% of 2017

Continued engagement with private sector actors is critical. Many have already chosen to invest in the post-disaster future of the Territory while several others may be awaiting positive signs that rehabilitated infrastructure will support their potential investments and not hinder business growth, and that Government has created an enabling environment for further investment in the Territory. The new Government has affirmed its commitment to fostering private sector involvement in the economy: “We will have an administrative machinery that will not compete with the private sector, but is designed to promote, facilitate and support a vibrant private sector by utilising technology to reduce cost and increase efficiency” (VIP 2019 Manifesto, p. 74).

ï “increased use of renewable energy such as solar, wind and water as part of our energy mix” (VIP 2019 Manifesto, p.72);

Nov-Dec 2017 1,311 12,733 12,115

Nov-Dec 2018 2,339 48,226 139,111

Source: 2019 GoVI Budget in Brief, Ministry of Finance

300,000,000 225,000,000 150,000,000

17.9% of 2017

An aggressive public sector Capital Investment Programme (CIP) will assist in driving construction output, once private sector funded works slow down following a post-hurricane peak. This will also bridge the gap to full recovery of tourism and other sectors, heavily reliant on high-quality infrastructure. The CIP must focus on the rehabilitation, upgrade and improved resiliency of public infrastructure, including consistent, reliable supply of the basics of electricity and water, as these are prerequisites f or greater levels of investment.

This Plan is expected to set the foundation for some of the substantial infrastructure required in the Territory, including:

75.4% of 2016

To accelerate the pace of recovery, a strong, responsive public sector-led effort is required. Access to adequate financing, effective coordination between implementing agencies, including the purpose-built Recovery and Development Agency, (RDA) and continued engagement with the private sector will facilitate consistent, collaborative efforts in rehabilitating public infrastructure. To sustain recovery momentum and elevate this to longer term development, particular emphasis will need to be placed on building capacity within Central Government for all aspects of project management, from initiation and planning straight through to project closure, evaluation and reporting.

Further afield, the Manifesto commits to “a National Integrated Development Plan to set out a roadmap for the next 20 years of the Territory’s development. The Plan will integrate with the existing Recovery and Development Plan approved by the House of Assembly in 2018” (VIP 2019 Manifesto, p. 30).

10.4% of 2016

The rehabilitation of public infrastructure has been slow and has lagged behind the private sector, but momentum is expected to pick up as several projects move from the tedious but necessary planning stage to actual works on the ground. This anticipated quickened pace may still not however, be rapid enough to sustain a growing economy which needs to be supported by sound public infrastructure.

45.8% of 2016

The main risk to the Territory’s recovery is stasis: that is, that the recovery of public infrastructure continues at a slow pace or stalls amidst challenges related to agreeing priorities, securing financing, mobilising resources, and coordination and capacity constraints of implementing agencies.

In terms of specific infrastructural development, the VIP Manifesto outlines priorities of fixing and upgrading infrastructure and accelerating the recovery process. Specifically, the VIP Government has committed to: “repair and expand the national road network, water distribution, sewage collection, treatment and disposal, and maintenance and cleaning of our blocked drainage system to prevent flooding” (VIP 2019 Manifesto, p. 16). Where this is achieved over the next several years, upgraded infrastructure will facilitate economic growth.

3.8% of 2016

BREAKING THROUGH THE RISK OF A STALLED RECOVERY

Jan-Feb 2017 2,104 80,469 193,418

Jan-Feb 2018 2,295 23,593 23,431

75,000,000

Jan-Feb 2019 2,291 54,003 188,331

2013

2014

2015

2016

2017

2018

5.0 4.0 3.0 2.0 1.0 0 -1.0 -2.0 -3.0 -4.0 -5.0

Virgin Islands Caribbean Region Advanced Economies World

2017p -3.7 1.7 2.4 3.8

2018p 2.3 2.1 2.3 3.7

2019p 2.2 2.0 2.0 3.5

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A VIEW BEYOND THE HORIZON

Through its Manifesto, the new VIP Government has committed to facilitating growth of the financial services sector through amongst other initiatives, “[r]eviewing BVI legislation to ensure that the Territory maintains international compliance with standards of transparency and information exchange whilst not inhibiting growth of the industry’s potential […and] [e]mbracing and maximising new opportunities arising from the economic substance requirements for BVI entities. This includes encouraging companies to set up a more physical presence in the BVI which will create jobs, support other areas of the economy and create a more sustainable industry” (VIP 2019 Manifesto, p. 39).

promotion of a unique BVI cultural brand. Our focus will be growing the sector with an emphasis on marine, fishing, creative, medical, and heritage and sports tourism. We will maintain balance between development, the environment and social harmony” (VIP 2019 Manifesto, p. 32).

The tourism industry was stripped to its core on September 6th, 2017, reminding us how fragile and immensely vulnerable the industry is to impacts caused by climate change. The damage to both land and sea accommodation was catastrophic. Within a matter of twelve hours, an entire industry was almost wiped out. Notwithstanding the devastation, our enviable natural assets - our flora and fauna – returned, and our visitor arrival numbers are regaining strength (Figure 1).

Some of the specific policy initiatives to support this commitment include: “Appoint[ing] a senior tourism expert […]to facilitate the speedy recovery of the sector with particular focus on accelerating recovery of the accommodation sector and supporting the marine, cruise, culinary, activities and other sectors”; and “Establish[ing] financial incentives for the development of a green tourism economy (VIP 2019 Manifesto, p. 32).

The opportunity to develop a tourism industry in harmony with the environment, benefitting current and future generations and providing for diversification into ancillary industries with offerings distinct from our competitors, is at our doorstep. The new VIP Government has promised to “accelerate implementation of the National Sustainable Tourism Strategy to ensure the sector is managed in a sustainable manner” (VIP 2019 Manifesto, p. 32). At a minimum, this strategy should outline the policy framework for managing the tourism industry, provide for initiatives that can strengthen the tourism product, and provide guidance on building a sustainable tourism industry including provisions for product diversification and local capacity building and involvement. Some of these broad deliverables are highlighted in the VIP Manifesto: “develop policies and programs that are geared towards improving our overall tourism product which will facilitate high standards of service. […P]ursue creating new tourist attractions, value added services and

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In the interim, the new Government has also expressed its commitment to rebuilding the tourism industry: “Our first order of business is to get all of our tourism sectors back to full functionality. We will focus strong effort to accelerate the recovery of the accommodation sector as we support the sailing sector as it continues well into its recovery” (VIP 2019 Manifesto, p. 32).

Having faced the onslaught of the strongest storm in recorded Atlantic history and emerging from this with a buoyant economy, the people of the Virgin Islands are acutely aware that within every challenge lies opportunity. A good example of this is the requirement for companies registered in the Territory to establish economic substance in accordance with the Economic Substance legislation passed at the end of 2018. While this could mean a hit to transaction numbers and revenue in the short-term, it also suggests an opportunity for more substantive business which requires hiring additional personnel, renting premises, and relying on ancillary services – in other words, meeting this challenge presents an opportunity for enhanced local participation and increased economic activity. Even with public policy efforts to invest in infrastructure, promote tourism development, and encourage more substantive financial services business, political instability, climate change and volatility in global financial markets have created levels of uncertainty that may also pose risk to the Territory’s continued growth.

MANAGING THE RISK OF UNCERTAINTY

The International Monetary Fund (IMF) has downgraded its global economic growth outlook for this year, largely due to expected slowdowns in growth in advanced and emerging economies, given challenges and uncertainties surrounding Brexit, and ongoing trade disputes between the United States and China. The major source economies for the Virgin Islands are located in North America and Europe for tourism, and Asia for financial services. Our global interconnectedness suggests that our growth prospects may be dampened by slowed growth in our main source countries, and more pointedly, by prevailing global political uncertainties. Active public policy, including fiscal and development policy interventions, can assist in navigating global uncertainties. In the context of ever-changing circumstances, Governments need to be agile and responsive. For the Virgin Islands, much needed public infrastructural investments will provide fiscal stimulus to the economy in the short and mediumterm, boosting growth, and also encouraging private investments for longer-term sustainability. Fiscal policy which buffers against economic and environmental shocks will improve the Territory’s overall resilience. This must include greater efforts to ensure compliance with existing local tax and fee legislation, which broadens and diversifies our revenue base, as well as prioritising and ensuring value for money is attained in our expenditure. The VIP Government recognises this in its Manifesto, pledging to “[b]ring expenditures in line with revenues to ensure that the debt of the Territory remains in compliance with acceptable international standards and those agreed by Government” (VIP 2019 Manifesto, p. 28). Prudently managing our inflows and outflows simultaneously reduces our need for, while also facilitating increased access to financing for recovery and development. In concert with revenue and expenditure management, our fiscal policy goals must also focus on maintaining reserves and procuring adequate insurance coverage for public assets as sources of contingency funding and a cushion for shocks. Both the open nature of our economy’s two pillars, as well as the physical location of our Territory, present risks

of uncertainty. The passage of 2017’s storms revealed how our geographic nature which helps to power our economy and is integral to our identity as people of the Virgin Islands, also makes us particularly vulnerable to hazard impacts. The uncertainty of the quantum and intensity of natural disasters is a feature of the global climate change phenomenon, but also particularly relevant to us as a small island economy washed by the Caribbean Sea. We must ready ourselves not just for recovery, but crucially, for continuity. The new VIP Government has committed to improve disaster management by: “[p]roviding more resilient building codes and stronger and consistent enforcement; Building adequate weather resistant emergency shelters; Implementing Disaster Risk Insurance Management/Resilience Fund and establishing a disaster risk management committee to ensure we have an effective insurance risk strategy in place which will reduce the potential impacts on life, property, business and the environment; Enhancing environmental tools for mitigation measures; Using climate change adaptation measures and systems to reduce impact; Implementing a microcredit scheme to assist small businesses recovery; Providing direct public assistance for the most vulnerable and those at risk; and Improving emergency response on all islands, with particular attention to the sister islands” (VIP 2019 Manifesto, pp. 17-18). SECURING WELLBEING BY EFFECTIVELY MANAGING RISKS

Where public infrastructure is upgraded with increased momentum, the financial services sector achieves greater local substance and participation, the tourism sector receives the requisite level of investment, the Government puts in place the necessary institutional arrangements to facilitate economic growth, and the Territory is more resilient to environmental shocks, the Territory’s people will undoubtedly fare better. The new Government’s commitment to put people first portends a positive economic outlook, given that the significant risks of stasis in infrastructural recovery, continued threats to our financial services and tourism business models, and global political and economic uncertainty are effectively managed, to the benefit of the people and progress of the Virgin Islands. | BB

A VIEW BEYOND THE HORIZON

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A VIEW BEYOND THE HORIZON

0110001010101 0101010001011 1101010010111 0101011101010

JENNIFER A. POTTER

The Transformative Role Of FinTech At The Regulatory Level For the first time, the Commission has had to contemplate the balance of competence in technology, analytical skills and issue resolution as compared with policy development and traditional industry experience.

urrently, the most prominent and overused statement in financial services is “FinTech is transforming the industry.” It is difficult to think of a current change that isn’t linked to the prevalence of financial technology (FinTech). The Commission’s goals, consistent with those of other global regulators, are to encourage innovation and competition in the industry, without endangering confidence in the financial system, and protect our consumers. Financial services has always been served well by innovation. However, in the decade since

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the global financial crisis, the complexity and rapid deployment of FinTech solutions in the industry have been transformative. The most rapid changes are no doubt occurring in the private sector and are forcefully driven by the trifecta of client expectations, a need to reduce the cost of compliance and remaining competitive. This new landscape requires all industry stakeholders to embrace new beliefs, new behaviors and new commitment. This ‘future proofing’ or constant process of asking ourselves “what is next” in the BVI financial services industry calls for preparing for digital compromises and supervising for tomorrow. It’s a time where operational resilience is likely the best competitive advantage regardless of which stakeholder you are. Hundreds of new market participants, products and services are debuting as part of the new financial services ecosystem; mainly driven by FinTech. FinTech is concerned with delivering financial services in new ways, using new capabilities that reduce the costs associated with products and services and reflecting how customers desire to be serviced. The FinTech transformation envelopes all traditional financial services activities: wealth management, access to capital, lending, banking, payment systems and

remittances. It is born out of new delivery methods: e-money, digital banking, P2P lending, distributed ledger technology, digital assets, and cryptography. These are systemic shifts for the market and the regulator, illustrated by new business models and new risks and they all require differentiated supervisory responses and approaches. DATA IS THE NEW BATTLEGROUND

Cash used to be king. Today that crown belongs to data. Given the advancement of technology and the prevalence of FinTech in the industry, data is everywhere in massive quantities. Market participants and the Commission are concerned with new risks and challenges that continue to emerge concerning data. The Commission and the private sector are excited about the availability and potential of big data. Years of data collection and humongous investments in automation, have made mountains of raw data available for emerging applications in machine learning and artificial intelligence. Data gold mines are a huge responsibility. Phrases like data literacy, digital maturity and data privacy are now new parts of the supervisory lexicon and every stakeholder must do more than take notice as we

A VIEW BEYOND THE HORIZON

have seen how data can be misused. Data is critical to sound decision making and provides advice for strategy. It is a valuable commodity; infinite, durable and reusable. Nevertheless, the most prevalent risks now facing financial services firms are arguably those risks associated with the concentration of and reliance on technology and the massive amounts of data that are being accumulated around the world. Supervisors bear additional risks related to data security and privacy, given the rising integration of suptech (supervisory technology) and regtech (regulatory technology) solutions which facilitate more efficient data collection and analysis. These tools are essential for monitoring the activities and performance of industry firms; specifically where sophisticated algorithms are deployed. Machine learning and artificial intelligence supplement traditional methods for monitoring activity for early signals of breaches, compliance issues and misconduct. The need for extensive assessments to evaluate the effects of technology integration may make supervisors less popular. But the adequate analysis is necessary to avoid unintended consequences that have the potential to reduce confidence in the system and to threaten stability. Data security is a critical priority in the industry and a specific threat to the stability of the financial system. Safeguarding data is essential and challenging. To reduce data security risks, the Commission has begun focusing additional attention on critical systems infrastructure, including maintenance, improvement, connectivity/integration and evolution. REGULATORS ARE BEING PROACTIVE AND PROGRESSIVE

All industry stakeholders are grappling with data, technological advancements and cyber threats. An absolute requirement for industry growth is digitalisation and evolution of the supervisor itself. Supervisors are perennially kept awake at night debating the haunting, “where does supervision need to go?” Supervision has always been about anticipating the next big challenge while dealing with the unexpected. Striking this vital balance is impacted by the mind-boggling level of change taking place in the industry, locally and internationally. Industry firms are embracing new business models that represent vertical and horizontal shifts in business operations. Supervisors, with raised eyebrows, must then recalibrate supervisory views and regulatory approaches to ensure that the integrity of supervision is not compromised. These changes have a decisive influence on the conduct of effective supervision and provide additional challenges. The changes demand a re-evaluation of the supervisor’s remit and a consideration of focus on activities versus entities as a means of sharpening early warning signals. The Commission’s supervisory approach is being

sharpened to satisfactorily identify systemic risk areas, particularly those that are new and emerging, and to adequately monitor their potential to shock or stress the financial system. This calls for improved effort as outsourcing and vertical integration expands. Third party firms in areas like know-yourcustomer and cloud provider services have boldly entered the ecosystem the length and breadth of the industry value chain and at some juncture may find themselves within the supervisory framework. Scope creep in activities once conducted solely by supervised firms, leads to a Commission reevaluation and reassessment of the perimeter of regulated activity or functions. This is necessary as nontraditional firms perform increasingly critical roles including data management and storage. These industry shifts likewise dictate internal changes for the Commission. As a smart supervisor, the Commission is focused on improving internal structuring to support digitisation and developing the agility necessary to respond to digital transformation adequately. For the first time, the Commission has had to contemplate the balance of competence in technology, analytical skills and issue resolution as compared with policy development and traditional industry experience. To stimulate innovation and industry growth, supervisory roles must be made more attractive through purpose and determinedly agile work environments to appeal to top talent. To support the necessary, more progressive supervisory approaches, the Commission must continue to make significant investments in data and information infrastructure. Our suptech investments are being deployed and will transform how supervised firms interact with the Commission for the filing of prudential returns and financial statements and informing notifiable events. These are essential and urgent improvements to facilitate timely decision making, improved monitoring and risk assessments, especially in light of the increasing amounts of information collected from and on industry firms. INDUSTRY COLLABORATION IS AT THE HEART OF THE ECOSYSTEM

A true collaboration of all stakeholders is a necessary characteristic for ensuring the stability and growth of the financial services sector. Innovative tools like the Commission’s soon to be debuted, regulatory sandbox, provide additional measures to enable the supervisor and businesses to work together to spur development. It affords valuable opportunities to better understand and align the aims of new business models and market objectives. Traditional prudential concerns including enforcement, guidance and authorization are rivaled now by the rising, equally important concerns related to conduct and consumer protection and analytics. On both sides of the supervisory divide, leaders are concerned with increasing internal efficiency, reducing the

burdens of compliance and supervision and truly integrating innovation into the business culture to ensure sustainability. Innovation doesn’t thrive as a ‘pocket’ of excellence. Rather, it must permeate the Commission and the industry for the maximum benefit. Collaborative efforts like the Global Financial Innovation Network (GFIN) a united effort of regulators, opens formal avenues for some homogenisation and for working across jurisdictions. The rapid pace of industry expansion requires a proactive approach; one that is always assisted by collaboration. Regular and candid interaction between the supervisor and innovators in the industry will yield the best outcomes for consumers. These interactions will enable products to reach the market more quickly, foster better results for new firms being brought into the supervisory framework and allow the supervisor to become more comfortable with the benefits and risks being introduced to the financial system. The Commission is keen to assist new entrants with navigating the supervisory framework and processes. And to help the industry move swiftly to adopt digitisation in systemically important areas, like conducting customer due diligence and filing prudential returns. CONCLUSION

Despite the dynamic ecosystem, competing priorities and evolving balance of risks, the ultimate objective is a sound financial system. One that offers the Territory continued, sustained economic development and benefits while understanding and harnessing the power of new technologies, data and the prominence of FinTech solutions. For the near term, FinTech is likely to be the most significant force propelling industry change and the Commission continues to act to influence transformation. The issues ahead of the industry are complex and developing. Implementing change provides both challenges and opportunities for growth and refinement. There is also the potential for entirely new lines of focus for industry expansion and enhancement. Technology is the universal enabler in this transformation of the financial services industry. Technology enables financial services firms to deliver products and services that the customer demands: delivering with transparency and value for money. Technology enables the desires of the supervisor: fewer conduct infractions, better risk management and improved prudential compliance. And, technology enables the desires of the financial services firm: a positive return on investment and reduced costs for regulatory compliance. This is the fourth industrial revolution; transforming the way we work and live. More change is coming to financial services and the industry’s stakeholders continue to lead with vigilance, integrity and accountability to ultimately balance innovation and stability in the financial system. | BB

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BRODRICK PENN

The Unprecedented Trio: The Catalyst For A BVI Renaissance

looting in the Capital Road Town, and a full breach of the prison facilities. As the eye of Hurricane Irma passed over Tortola, it destroyed the National Emergency Operations Centre, and its weather and warning systems and telecommunications, leaving the authorities and the population without any further emergency communication. This would prove to be challenging with more storms looming. The 2017 disasters also caused widespread damage to administration buildings across the Islands, impacting Government’s ability to deliver services. IMMEDIATE RESPONSE TO EARLY RECOVERY

THE IMPACT

Most BVIslanders grew up hearing stories and scant details of the 1924 hurricane that left the Islands in total ruin. Truth be told, hurricanes are not strange to the BVI. In as much as we claim God to be a Belonger who stretches out his omnipotent hands and steers the hurricanes north or south of our Islands, Virgin Islands has over every generation, experienced many storms, including some severe ones. September 2017 however, saw the strongest and most devastating storms to impact our Territory in its recorded history. In fact, Hurricanes Irma and Maria were two of the strongest and most intense storms in Atlantic history. They dealt the Islands a one two punch, the most devastating of which was BVI’s direct hit from Irma on September 6th, followed by Maria’s scathing two weeks later. These storms were preceded by widespread flooding throughout BVI in August, 2017.

Together these three weather events, dubbed the unprecedented trio, resulted in damages and losses to the Territory in the range of US$3 billion, nearly three times the Islands’ Gross Domestic Product (GDP). Beyond the economic and financial impact, our livelihoods, social cohesion, physical infrastructure and environment as well as our main business sectors suffered incalculable damage. In the aftermath of the storms, the level of physical destruction to the Islands was analogous to a war zone, differentiated only from the destruction of bullets and bombs, by the distinct footprint of the most callous of natural disasters. Trees of every size were uprooted and transformed into projectiles, those left standing were stripped to their bark – making a large percentage of the Territory’s vegetation nonexistent. Coastal roads and interior roads were eroded or blocked, and made impassable. Beyond roads, the disasters badly damaged the transportation infrastructure, such as sea ports and airports and rendered them inoperable. Poles were flattened, rendering the entire electrical distribution network unusable. Similar devastation occurred with the telecommunications systems as well as the water and sewerage networks, curtailing the delivery of basic utilities across the Territory. The trio did not spare any section of the BVI society. Over eighty percent of buildings and homes were damaged or uninhabitable. Social infrastructure, such as schools, clinics, post offices, fire and police stations emergency shelters, community centres, and churches were severely damaged and in some cases decimated. Financial services, the main pillar of local economy, managed to continue its operations with the activation of business continuity plans. However, tourism, the main source of employment, was heavily impacted, costing the Territory US 1.2 billion in damage and loss (ECLAC 2018). Both land and sea-based infrastructure, such as hotels, villas, and cottages, restaurants, docks and charter yachts were severely damaged. Significant security concerns developed, with widespread

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As with most natural disasters, rapid response and early recovery are extremely critical to ensuring that the disaster impact is not exacerbated. To this end, immediately after the storm, through its established disaster response systems, the Government provided emergency humanitarian assistance in the form of shelter, food, water, clothing, medical attention and hygiene items to most affected in the community. Along with the immediate humanitarian response, Government commenced early recovery efforts, focusing on a Territorywide cleanup to make roads passable, removal of debris and derelicts; securing lives; provision of food, shelter and essential supplies; restoration of necessary and critical public services, managing security concerns, and resumption of air and sea access to Territory. Government’s efforts were buttressed by the UK, particularly in security and law enforcement, the local and international private sector, Non-Governmental Organisations (NGOs), governments, and regional and international organisations. Through these collaborative efforts, including cash assistance to vulnerable households, setting up of temporary educational and healthcare facilities, emergency livelihood programs, etc. the Territory was brought to some level of functionality and normalcy that would allow recovery to be pursued in earnest. RECOVERY PLANNING

The unprecedented level of destruction necessitated a well thought out and fully articulated plan, setting out a comprehensive framework and plan for recovery. Therefore, in order to have a comprehensive and collaborative blue print to guide the recovery, the Government began developing the plan with inputs from Territory wide community consultations and stakeholder meetings. Invariably, because of the level of impact and destruction to the Territory, many

A VIEW BEYOND THE HORIZON

VISION PRIORITY SECTORS & SUB-SECTORS Cohesive & Empowered Society

Vibrant & Innovative Economy

Resilient Infrastructure

Nurtured & Sustainable Environment

Good Governance

Human & Social Services

Business & Economy

Infrastructure

Natural Resources & Climate Change

Governance

• Health Services • Waste & Debris Management • Social Protection • Housing • Education • Pride & Cultural Identity

• SMEs • Financial Services • Tourism • Agriculture

• Electricity • Roads • Water • Sewerage • Seaports • Airports • Buildings Physycal Planning & Land Development • ICT • Telecommunications

• Environment • Renewable Energy

• Public Service • Law & Order and National Security • Disaster Management

of the inputs into the recovery plans dictated the need to plan beyond short-term recovery and to look to develop the Territory into a more sustainable and resilient state in the longer term. The Recovery to Development Plan’s vision, therefore foresees that “the BVI will be a model for building stronger, smarter, greener and better, fostering a vibrant and innovative economy, cohesive and empowered society, nurtured and sustainable environment, resilient infrastructure, good governance and a high quality of life for all.” The vision is expected to be delivered through numerous projects, initiatives, and programmes; each of which correlate to various sectors and sub-sectors that have been identified as critical for the recovery and development of the Territory. INSTITUTIONAL FRAMEWORK FOR DELIVERING RECOVERY

Given the extensive damage caused by the disasters to the Territory, across all sectors, the Government from the outset recognised the need to have a collaborative approach to the recovery and development of the Territory, delivered through a robust institutional framework. In October 2017, the Cabinet appointed the Disaster Recovery Coordinating Committee (DRCC) to coordinate government’s recovery planning and implementation efforts; including drawing up plans, and assisting with the establishment of the Recovery and Development Agency (RDA). In April 2018, the House of Assembly established the RDA through the Virgin Islands Recovery and Development Agency Act 2018 to assist with implementing the RDP and to bring additional resources (technical expertise and funding) to help deliver the recovery in a transparent and efficient manner. The RDA has

been in operation since August 2018 and works closely with Ministries and other stakeholders in implementing priority projects assigned to it by the Government. The Government is leading the implementation of the Recovery to Development Plan through the Premier’s Office as lead Ministry, along with the other ministries and with support from the DRCC. Ministries, develop recovery policy and set the priorities for their respective sectors, as they also continue to implement recovery projects where such capacities exist. Implementation is also being strongly supported by the private sector, donors and charities and development partners. In addition to the Act, the legal and institutional framework is to be supported with regulations governing the RDA regarding its relationship with Government, capacity building obligations and procurement procedures, all of which, among other things, will ensure a BVI-led recovery that benefits the Territory. It is also supported by the use of a Recovery Trust which has been established to serve as the independent structure for the receiving and disbursing recovery monies. FUNDING THE RECOVERY

The best laid plans for any recovery to development, cannot be implemented without significant and sustained financing. In fact, it is one of the greatest impediments to countries’ redevelopment after natural disasters. It is also a specific and unique problem to small Island nations like BVI, with little financial negotiating prowess and who are “too rich” to receive any significant amount of international aid or donor funding. Thus far, there has been four main sources of funding for recovery. These are borrowed funds, local funds allocated in the budget, insurance proceeds and donated monies.

Borrowed funds for the recovery are Caribbean Development Bank’s Rehabilitation and Reconstruction Loan of $65 million, which is being used to execute a number of priority infrastructure projects; Immediate Response Loan of $2.5 million; and in part, CDB’s policy based loan of $50 million, which has primarily provided budgetary support. A number of government assets including the central administration complex received insurance proceeds, in the amount of approximately $41 million. Local funding has been committed to a number of projects; most notably $10 million has been seeded to the Recovery Trust Fund to implement early recovery projects across a number of sectors. There has been relatively strong support from the donor community, local and international, and the UK, particularly with the early response and humanitarian needs. In addition, various projects in the social sector mainly schools received significant funding for their rebuild from local donors. RECOVERY PROGRESS IN FOCUS

Eighteen months later, the BVI continues along the long and arduous journey of recovery. Although at times not fully appreciated by the residents whose lives have been considerably impacted, remarkable progress has been made across the spectrum of sectors. Viewing the Islands through lens on September 7, 2017 an objective lens of today, depicts a world of progress and renaissance. HUMAN AND SOCIAL SERVICES SECTOR

Schools Given the significant impacts on schools, with many completely destroyed or best case heavily damaged, it is laudable that 10 of the 14 primary schools have been rehabilitated, and three are in the process of being rebuilt, one of which is being totally reconstructed with private sector funding. Although remarkable progress was made by resuming classes in an alternative location within 6 weeks of the decimation of the Elmore Stoutt High School campus, (ESHS) limited progress has been made to rebuild the school’s campus. However, after considerable planning, contracts have been inked to repair the L-shaped building, a portion of the campus, for Fall 2019 school term. The

Bregado Flax secondary school in Virgin Gorda is being rehabilitated using Government and private sector funding. The Territory’s special needs learning centre is also expected to be totally rebuilt by December 2020. Rebuilding the ESHS campus with greater resiliency, incorporating green energy, enhanced technology, improved curriculum and other supporting campus services is expected to cost in the range of $30 million. This underscores the point that in order for students to be re-housed in an improved environment conducive to better, smarter, and safer learning, substantial financial resources will be necessary. Housing Significant damage to the housing stock occurred as a result of the hurricanes, with an estimated $572 million dollars in damage. Housing has seen a continuum of initiatives beginning with immediate response efforts focused on ensuring that displaced households and the most vulnerable of the population had access to adequate shelter and basic necessities at emergency and temporary shelters. This was further buttressed by home repairs with the assistance of UK, private organisations and NGOs targeting other vulnerable households. The key housing recovery programme, is Government’s own Housing Recovery Assistance Programme (HRAP) which consists of a combination of grants, loans and social housing assistance for the repair or reconstruction of damaged homes and rental properties for homeowners who qualify. The anticipated cost of the programme is approximately $40 million of which $15 million has already been made available by the Government. Thus far, the Ministry of Health and Welfare has received over 580 applications for varying levels of support and already more than 100 applicants have been approved and have received funding. The impact of the storms on housing has not only revealed physical vulnerability, but also financial vulnerability of its occupants. In this vein, BVI’s new paradigm as it relates to housing has already led to more resilient building practices and dictated the need for revised building standards. Equally important, it has also highlighted the need for adequate property insurance, new affordable insurance products and greater consumer protection and market regulation for banks and insurance companies.

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A VIEW BEYOND THE HORIZON

WASTE AND DEBRIS MANAGEMENT

Tens of thousands of tons of waste and debris have already been removed from the Islands and its immediate surroundings. Several initiatives to remove commercial and household debris, and derelict vehicles continue, which will cost multiples of tens of millions of dollars. However, the Islands are constrained in the efficacy of its debris and waste management in terms of the sheer magnitude, its uniqueness (hundreds of boats), limited land space, damaged and limited waste disposal mechanisms, and high financial costs. This presents a significant challenge for the Territory to rid itself of the remaining debris. Already works are underway to repair and rebuild the incinerator. More importantly, the Territory is using the challenges presented to further develop its comprehensive waste management strategy, including developing a new legal framework for waste management, its operations, litter, derelicts, payments and fees. A key focus is the collection and disposal practices of the Territory, including greening, recycling, waste reduction and landfill usage. HEALTH SERVICES AND FACILITIES

Fortunately, the health services sector has shown great resiliency in the aftermath of the storms. The Peebles Hospital building proved to be well built, and remained functional throughout the storms, even becoming the temporary home for the National Emergency Operations, a makeshift shelter and offices of the Ministry of Health and Social Development. Recovery in the sector has focused on repairs to the clinics, which have been completed. Some remedial repairs to the hospital are also being undertaken. Naturally, rebuild of the national emergency response systems was also identified as a priority for the Territory. Government has therefore commissioned a new state-of-the-art medical emergency response system. The challenges with the health sector infrastructure have given rise to consideration of moving away from the large number of clinics across the Territory to more centralised services, supported by a mobile services platform. The centralisation of services will require a paradigm shift in the provision of clinical services by districts, as well as substantial sums to develop the polyclinic infrastructure. BUSINESS AND THE ECONOMY

Tourism The Tourism sector which sustained significant damage has demonstrated great levels of resiliency and strong signs of recovery. Recovery in this sector is being led by the charter yachting industry which is aiming to quickly achieve its pre-Irma level sailing and capacity. It is expected that this will be fully achieved by the 2019/2020 winter season. Land-based tourism is slower to recover as a result of most of the larger properties not yet rebuilt or reopened. The planned reopening of Rosewood Little Dix Bay on Virgin Gorda this winter will be a great fillip for the overall land based accommodation

JULY 2019

sector. The room inventory in that sector is currently being provided by small properties, which were able to successfully rebuild, as well as by private villas. Cruise tourism has rebounded and save for other dynamics unrelated to the storms, the industry, is expected to be at pre-Irma calls and passenger numbers. Product development has been a priority for the BVI and its lead tourism actor, the BVI Tourist Board, and is leading the charge with this key element of the BVI’s tourism strategy. Already the Government has initiated the process of developing a new national tourism strategy to guide the long-term development of the sector. Financial Services Financial Services has shown remarkable resiliency in the aftermath of the storms. BVI’s investment in state-of-the-art technology (VIRRGIN) allowed, in the immediate aftermath of the storms, for company incorporations to continue virtually unabated. Moreover, the private sector industry has demonstrated strong commitment to remaining in BVI, with many of whom had temporarily relocated, now returned to full operations in BVI. Company numbers have remained strong and in 2018 BVI recorded its largest revenue from the sector as a result of fee increases. Notwithstanding, the industry is constrained by damages to commercial buildings, telecommunication infrastructure and a diminished social infrastructure and environment. More importantly, external threats to the industry such as the prospect of public registers, black listing, and the newly introduced economic substance requirements are potentially more fundamental impediments to the industry’s long-term sustainability. It is irrefutable that development and growth in our key economic sectors are inextricably linked to how well we develop the national infrastructure and our business and social services. Therefore, notwithstanding the encouraging rebound so far in these two critical economic sectors, their longterm sustainability is fully dependent on successful redevelopment in each of the supporting sectors. INFRASTRUCTURE

Electricity Having suffered a total loss to the electrical distribution network as a result of the storms, through the efforts of BVI Electricity and its regional and international partners, the Territory was able to have power restored to virtually 100% of communities in the Territory within 6 months. Although it came at significant costs, in excess of $20 million, it was a mammoth and successful undertaking that engenders BVI’s resiliency. Long-terms plans for the electricity network will focus on resiliency by placing most of the distribution network underground. These plans may very well be constrained by the significant costs, estimated to be in excess of $50 million. In the meantime, power generation using renewable energy sources is also a priority for the BVI. To this end, long-term development of the energy network

calls for harmonising our alternative energy strategy and plans and implementing key projects in the near term. Already legislative amendments have been made to allow for the production of alternative energy and feeding excess into the grid, and as well, the operational framework to ensure that this is done safely and successfully is being advanced. Roads The quality of the road infrastructure in BVI has never been of a standard befitting of BVI’s stature as a leading tourist destination and financial business jurisdiction. In the aftermath of the flood and storms, the poor conditions of our roads were exacerbated. The Government, as a matter of necessity implemented numerous temporary road repairs beginning as early as end of 2017, which included overlying, grading, filling, patching and drainage. Millions of dollars have been spent on the temporary road repairs thus far in order to make the roads drivable and facilitate our normal day to day transport. The long-term development of our road network is a daunting task. It is estimated that close to $100 million dollars would be required to build some 60 plus miles of primary roads and supporting infrastructure. This does not account for the dozens of miles of secondary and tertiary roads that must also be rebuilt. Rebuilding and developing the road network will involve building greater resilience into our road infrastructure by focusing on design, drainage, retaining structures, flood mitigation, coastal revetment methods and improving existing road construction standards and codes. The planning stage of this work commenced in early 2019 with the approval of a contract for design of the priority roads, coastal defenses and retaining structures in the Territory. It is expected thatas soon as the various designs are completed, construction will occur incrementally. Sewerage Sewerage remains a vexing issue for residents and a complex problem for the Government. Like other infrastructure, the sewerage systems were severely compromised as a result of Irma. Post Irma, repairs were undertaken to some aspects of the sewerage network and plants. However, full repairs are yet to be undertaken on the main plant. Maintenance of the network has also become challenging. Government has prioritised repairs to the main plant. The recently concluded assessment of the sewerage network has made recommendations for the completion of other critical zones in East End/ Long Look and Cane Garden Bay. In all cases, the Territory’s environment, health, and economy are at risk. Mitigating those risks is highly dependent on securing the significant funds needed to undertake an almost total rebuild of the Territory’s sewerage network in some areas. Ports Ports, the gateway to our Territory, are a critical component of the transportation network and a key contributor to the growth of our economy. In

A VIEW BEYOND THE HORIZON

the aftermath of the storms, rehabilitation or debris clearance works were undertaken at all the ports to make them operational. The airport, cargo port, the main sea ports in Road Town and Virgin Gorda, as well as the Cruise Pier are all fully functional. However, a number of significant port development projects that are necessary, have been identified as priorities and must be accelerated. This includes rebuild of the West End Ferry Terminal, rebuild of Jost Van Dyke Ferry Terminal, and extension and upgrade of the Cargo Port. THE ENVIRONMENT

Our environment facilitates not only the quality of life that makes BVI one of the most unique places to live, but it also innately beckons people to visit the BVI, making the Territory one of the most sought after vacation destinations globally. Recognising the value and importance of the environment to our livelihood and our economy, rehabilitation and protection have been identified as a priority for the Territory. To this end, significant work has been completed to rid our marine, near shore and terrestrial environment of hurricane debris. These have been completed through various initiatives, including several debris clearance programmes by Government, private sector, development organisations and individuals. Projects to replant our beaches, gardens and public spaces have also been successfully undertaken or are ongoing. BVI faces a unique challenge of ridding our waters of derelict vessels. The Government with the RDA are currently implementing a project to remove and dispose of more than 200 vessels from our anchorages and shores. The BVI has always prided itself as a regional leader in protecting our environment. Post hurricane, new policy initiatives that focus on protecting the environment and our vulnerable and endangered species are being advanced. GOVERNANCE

Government Buildings The recognition that continued delivery of government services was a critical component of the recovery, led to a functional public service within months of the storms, albeit, many of the government services continue to be delivered from less than optimal working conditions. Substantial work has been undertaken, including completion of projects in different service sectors, such as the Commercial Court and The House of Assembly, and a number of school buildings and clinics, as well as other social services buildings. In the wake of security concerns, law enforcement buildings were prioritised for repair and rebuild; some of which were advanced with the support of UK early recovery funding as well as local funding. For example, repairs to Her Majesty’s prison have been completed and police stations are at an advanced stage of repair, whilst other important law enforcement structures in Road Town, Virgin Gorda and Jost Van Dyke are currently under construction. In addition, a temporary structure has been built to house the Magistrate’s Court. Several projects are also underway, including

government administration on the sister islands of Jost Van Dyke and Virgin Gorda, as well as projects in emergency response and security and justice, such as Road Town Fire Station and Road Town Police Headquarters. The Central Administration Complex (CAC), as the main seat for delivering Government services to date, has had remedial works undertaken to make it functional for many departments. However, its full redevelopment is not yet complete. Currently, scoping and planning work are being done to redesign the complex to make it modern, efficient and functional. These works are being heavily influenced by the Government’s transformation process which is aimed at delivering good governance and ensuring a stronger, more resilient, and effective public service. Disaster Management Despite the significant damage suffered by the disaster management infrastructure, BVI through its National Emergency Operations Centre (NEOC) managed the disaster response well. The 2017 hurricanes underscored the importance of a comprehensive disaster management system, with early warning systems and emergency response infrastructure, a strong legal framework, policies and practices, all supported with adequate resources. To this end a number of projects and initiatives have been completed to rebuild the early warning systems and communication network and repairs of emergency shelters. In addition, several initiatives to strengthen capacities to effectively respond to and manage disasters, through trainings for public officers and community members, and establishment of emergency relief warehouses, systems are being implemented. The frontline of disaster management operations is its physical operations and work has accelerated quickly to rebuild a state-of-the-art, resilient building. Construction works are expected to commence in the early Summer and is scheduled to be completed by July 2020. Learning from the experience of the 2017 disasters, enactment of the Disaster Management Bill 2018, adoption of the fiveyear Comprehensive Disaster Management Strategy (2019-2023) and development of a Territorial Transportation Policy and Emergency Response Plan are also priorities of the Government. While BVI’s membership in the Caribbean Catastrophe Risk Insurance Facility (CCRIF) ensures immediate liquidity to meet emergency response needs in the event of future disasters, other policy initiatives

related to livelihoods, social protection, etc. to reduce vulnerability to disasters are being pursued by various Ministries. CONCLUSION

The magnitude of work undertaken thus far to deliver the recovery in BVI cannot be understated, and its full essence and comprehension cannot be fully captured in this exposition. Nor can the complexities and challenges that the Territory faces as we seek to sustain our recovery efforts and transition to our longer term development. It is imperative that BVIslanders, the public, private sector, donors and Government recognise and accept the reality that full recovery from this level of devastation requires commitment, collaboration, decisiveness and the allocation of significant resources. It is imperative that we quickly transition from recovery to longer term development, underpinned by a national development strategy and plan, developed through a collaborative and inclusive approach, with inputs from all segments of society on the vision, priorities, and actions that we wish to see for our Territory over the next several decades. It is also imperative that sustained and material amounts of funding are secured to effectively deliver on our national development programme. This is especially so in light of the fact that substantial donor funding from the international community has not materialised for BVI’s recovery. BVI therefore has to face the lesser of two damning alternatives -- borrow substantial funds underwritten by a UK guarantee and import its greater influence on our fiscal affairs and national development; or alternately, rebuild incrementally over a much longer period, using surplus recurrent funds. Lastly, it is imperative that we remember from whence we came in the aftermath of September 6 2017, and remain assured and motivated by our innate resiliency. The storms of 2017 will no doubt leave indelible tales of destruction and devastation for the future generations. And yet as in the aftermath of the 1924 hurricane, the Islands were rebuilt; they grew and developed. The late Summer of 2017 will forever be etched in the annals of Virgin Islands history for not only ushering in the most unprecedented weather events in our history of natural disasters, but perhaps it will also be remembered as the catalyst for a new Renaissance in the British Virgin Islands. | BB

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A VIEW BEYOND THE HORIZON Shaping the Conversation

RDA

THE MISSION: REBUILD THE BVI In five years’ time, what would you hope would be the legacy of the RDA?

Shaping the Conversation with

PAUL BAYLY

Paul Bayly, in collaboration with the government of the Virgin Islands, is building. Not just roads or bridges or electrical grids, but the territory as a whole. A native New Zealander and a veteran of recovery projects from the South Pacific to the Middle East, Mr. Bayly arrived in the territory last year to serve as chief executive officer of the newly-formed Recovery and Development Agency, created after Hurricane Irma.

JULY 2019

The role of the RDA is to spearhead the recovery and development of the territory. Clearly the demonstrable evidence of our having done that, will be in the quality of our infrastructure, quality of the schools, and the tourism experience that we offer. But our second role -- and this is not so well understood -- is actually capacity building, and for me, an equally, if not a more important legacy will be that we will have created jobs and new industries here in the BVI for our young people. We will have created opportunities for businesses to grow, prosper and thrive, that today may only be able to compete here in the BVI, but after five years may be at a stage where they go and win business not only in the region, but elsewhere in the world. And that whole other side of it will be, down the track, so much more important than just the rebuilding of roads and putting up of electricity and poles and burying underground cables, as important as that will be. It’s one thing to build, but you don’t get transformation unless you change the way people think and give them opportunities for education -- not just secondary but tertiary, and you must provide the opportunities for business and people to grow.

You’ve been here for the better part of a year. How do you sum up your experience? Firstly, I love the BVI. I enjoy the people. When you move to a new country, that’s why you come. I’ve lived in New Zealand eight years of the past 32. I’ve been all around the world. When I came here, I saw the devastation that happened, I thought ‘we can fix that.’ It just takes time and commitment and resources. But I saw a place with enormous opportunity. It’s a very lucky place. The quality of its environment, quality of its people. I’m very lucky to lead a very quality team here and a fair chunk of those are BVIslanders.

They are very gifted and educated, but what I see is a huge opportunity for us to do a big job to transform BVI into something that it is not currently. I’ll give you one explanation and it’s quite a topical one. Everyone talks about BVI as being a small island state, but I’m from a part of the world where we don’t talk about small island states; we talk about large ocean states. But here we’ve got this wonderful opportunity with our sea and the management for economic design, and that, if it was well-managed, would potentially be worth more than your financial services sector today.

Have you met the expectations you had when you signed on? By and large it’s about where I thought it would be. And we’ve got a really good opportunity with this new government to work closely with them, and we’re ready to support them. And I think they’re pretty committed to making things happen, once they get their agenda sorted out.

You helped Fiji’s recovery, a cyclone in that case. How do you compare and contrast the recovery efforts here with what you’ve done to date? Are there any lessons from that experience that you will bring here? I’ve been in a lot of places where we’ve handled a recovery--Middle East, East Timor--so it’s not just Fiji. There’s a lot of places I’ve been where we’ve had to do recovery efforts. The one thing I would say to people, and I say it to our team here, is you’ve got to agree what you’ve got to do and then you’ve got to do it and take it off the list. And then you do the next one and the next one and the next one, and in very short time you look back and you think, we’re actually starting to do some stuff. And for us as an implementation agency for the government, it’s really important we are hashing this out and we are communicating that to people so that they get a sense of progress. When progress comes, people get a sense

A VIEW BEYOND THE HORIZON Shaping the Conversation

of opportunity; with opportunity they get a sense of hope and then they get enthusiastic about it. So we have a very important role to try and give people that feeling of hope and opportunity, as the RDA is getting up and going we’re working very closely with our ministries. We are implementing the government’s agenda and charter and that’s why we have this process of signing a statement of requirement with them, between both the permanent secretary and ourselves, that says ‘you want this, this is what it looks like, this is how it will be done and this is how it will perform when it’s finished.’ And at that point, we then get on with implementation. We involve the ministries and the Ministry of Finance in those discussions, and the development of options and the agreement around the business case and the implementation phase. The only thing we don’t involve anyone else in is procurement. So we have our own procurement process, which is something that even I can’t influence, and a board member can’t influence it because, it’s like a black box.

You touched on this in your opening comments. How do you balance recovery and development in a small territory such as the BVI? It’s difficult to divorce them. While the front facing part of that might be recovery, it’s difficult to separate the two. How do you manage that? We go through quite a formal process. We define the problem. That’s defined in the statement of requirement. Now the statement of requirement doesn’t say, build a wall. To give you an example, the requirement for the AO Shirley [grounds], in addition to doing the track and rebuilding the stadium and putting in the toilets and stuff, was, we need to rebuild the wall. So the statement of requirement when we first started talking was about how we need to replace the concrete wall, but in actual fact, when you’re doing a statement of requirement, you’re saying, what is it you need? We were asked for something that’s high enough to stop people from peeking over during athletic meets, that it needed to be strong enough if a car went into it, that it needed to be robust enough, so that it would stand there for 20 years. There were a lot of requirements. When we looked to that, one of the options was to rebuild back the concrete wall, but

A. O. Shirley Recreation Grounds

It’s a massive task: over the next five years, the RDA is set to shepherd in an estimated $800 million in recovery programmes, using a combination of BVI government and United Kingdom money, loan funds, and private donations. They’ve started strong.

we had the option of building back in wood, building it back in steel, and then someone said, well why don’t we build it back in plastic and use recyclable plastics from the BVI? And when we did the options analysis, we realised that was going to be about $100,000 cheaper than the concrete wall option. So then when we were talking to all the stakeholders around that project and said, so here’s all the options -- and by the way, here’s one that people haven’t thought about. If we had that $100,000 we could actually do more around the toilets -- we could maybe look at that athletics building at the end that needs to be repaired; we could use that elsewhere. So we used the options analysis as our first step, but we also do a business case, which includes both the economic case, the environmental case, the social case and the financial case. So when we’re looking at roading, we can build a road quickly, but if we’re going to build any roads here first, we need to think about provision of footpaths, because of the numbers of cars on the road. We now need to think about street lighting, we now need to think about future proofing it for broadband and fibre optics. We’ve got to address the issue of resilience, and we’ve got to think about undergrounding the electricity, the water, fibre optics. Even if we don’t allow for that, we need to put ducts in so we can blow fibre optic in the future. So we’ve quickly moved from putting a road in properly, with its proper substrate and concrete edging, to now putting in a fully worked-up roading network. That’s developed. We’re using the options analysis and the business casing to make us think about it in terms of the recovery and

development aspects of a project. You do the options case first, because that will give you some certainty about costs. You can come up with options, but if they are triple the cost of some other options you might exclude them for further analysis.

What accomplishments or milestones to date are you most proud of? We’ve got a very talented team. We’re up to about 30 staff. A majority of those are BVIslanders. So I’m very pleased to be able to say we’re up and functioning. We’ve now got planning up and running. There are about 17 projects they’re planning for at the moment. We’ve gone and recruited a very experienced team in procurement, and the operations team are now delivering. We’ve got a fourth element, a fourth horse to race. It’s funding. We are actually making very good progress on our funding. When I talk about funding, for every dollar we get from government, we will need to raise at least $1 to $2 from the private sector. That could be in renewable energies; could be in telecommunications. But we’ve also got to raise significant chunks of grant funding, and that could come from a variety of sources. The UK government, for example, has given us $1.8 million towards projects, but we have commitments of over $12 million from the private sector, so we are having to work very hard about raising money. That’s in addition to what the government of the BVI has put in -- $10 million into a trust fund last year. So we’re making quite good progress on that. And I can talk to quite a few projects.

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A VIEW BEYOND THE HORIZON Shaping the Conversation

The next question was going to be about projects. Specifically high profile ones, such as the admin building on Jost van Dyke and Virgin Gorda, the derelict boats, the high school, the clinic, etc. Why don’t I give you a list of all the projects we’re working on and I’ll give you a monthly report and then you can pick out what you’d like to talk about.

Is there one of those projects though that you would say is most prominent from a visibility standpoint, long-term importance to the economy? They’re all important. We’re cleaning the admin building over on Virgin Gorda. From a personal perspective, that’s a real health issue. They’re decamping half the office out of the Vanterpool building, and we’ve gone ahead and cleaned it, and we’re dealing with all this mould. So that was probably the single biggest, most important project for the public sector, because of the health issue. But one I think that was really exciting for us all here in the BVI, and I think a lot of Caribbean countries and in the Pacific and elsewhere, is sports and cultural stuff. And we’re doing A.O. Shirley [Recreation Ground]. We’re under way to do the refurbishment of the basketball court in Virgin Gorda. And for me, I get really excited about our youth. And you think about the opportunities to

Under the previous government and now under the new Virgin Islands Party leadership elected in February, contracts have been signed to refit Elmore Stoutt High School, rebuild administration buildings on the sister islands, improve emergency communication and remove hundreds of derelict boats littering the territory. create new stars of sporting and cultural stars for the BVI, like young [Commonwealth Games gold medallist Kyron] McMaster, and the way that he’s a leader and people are trying to emulate him. So having this track up and running here -- which they needed because they need to get their times in, so they can get scholarships to go off, and if they’re not doing athletics then they’re doing basketball, and if they’re not doing that then they’re probably trying to be singers. And I think longer term, that’s what really gets me excited, is the young people. And I think, sure, there’s lots of other things I can point to, security and other things, but if you want me to get excited about something I can get very excited about them very quickly.

Suddenly recovery is a big task; tell us about how you go about prioritising the projects? I’m sure there’s a dialog; they come to you and say they want these things done. Is there a way to prioritise them? Priority is given to us government. So the [former premier Dr. D. Smith was] minister for

by the premier Orlando recovery,

and what they’ve done is give us an immediate list of 41 projects they say, get on. This was Phase One. This was last year. They said as you’re getting up and running, can you do these 41 projects as soon as possible? Those are the ones we’re rolling out now. But in addition, we’ve got lots of other projects we’ve got to do. The priority list has been determined by government, so we have an arrangement under the regulations that annually the minister responsible will write to the board of the RDA, and it’s called a letter of expectation. And he will lay out all the expectations around what they would like us to prioritise for this year. We responded to that letter last year and early this year, and said ‘thank you, minister, we’ve received and understood your letter of expectations. This is how we intend to give effect to the expectations.’ It’s called a letter of intent. We’ve submitted it back to the previous government, but of course, with the new government, we will be having those discussions because they should, quite rightly, give us their priorities. Now the important thing is this process is done annually, because we talk about programmes, not projects. We talk about programmes around each location, security or whatever it is, and under

those programmes will be a whole lot of projects. So we’re trying to fix that. The other thing is -- and this is why the priority list must come from government -- is working very closely with the Ministry of Finance. They will also give us for the next year our fiscal inflow. So they might say to us, you’ve only got $70 million to spend this year, because that’s what we assume we’re going to do. Out of that, the government will prioritise which programmes and which projects are most important to them. It might be that during the year the Ministry of Finance may say actually, we’ve got a little bit more money we can do a little bit more, and that’s where the interaction takes place.

But they set the priorities? Yes, and that’s delegated down through the ministries.

It is said that ‘Money’s the mother’s milk of politics.’ I am sure you’ve heard that. I’m sure it’s the same in recovery and the work that the RDA is doing here. The government stated that they were looking for an estimated $550 million-plus. What’s the status of trying to secure those funds? A portion was committed or agreed to be backed by the UK. What so far has happened with that funding? It might not be your direct bailiwick; it might be the Ministry of Finance, but just for the reader. The ongoing work relating to the 300 million pound guarantee--it’s just over 400 million USD--is between the government, in this case the Ministry of Finance, and the UK government. Those discussions are ongoing. What that loan guarantee will do when it’s in place is enable the government to refinance some of its existing debt, but also raise new debt for covering development, raising it at a much cheaper rate than they would be able to without the guarantee. So that will be very significant. It was reported in the paper that these discussions with the transferring of the Caribbean Development Bank loan, or some of it, from central [government] and

Vanterpool Building AKA Virgin Gorda Administration Building

JULY 2019

A VIEW BEYOND THE HORIZON Shaping the Conversation

Jost Van Dyke Government Administration Building

So that may have been the case before you got here, but it hasn’t impacted your ability to stand up to the agency? Not at all, and I have to say that what you’re talking about, I’ve seen no evidence of it, and it’s certainly not been a factor in any of our discussions.

Recovery is a task that includes a lot of people: certainly the RDA, the government, the private sector, the local financial community, they all need to work together if this is going to be effective. Do you have a philosophy that you use as touchstone to help you achieve that end goal? designating it to the RDA, is ongoing work, and we’ll know soon about the status of that, so there’s been a lot of work going into that transition. But the bulk of the funds will still be raised under the guarantee from the UK. And that’s a very significant saving to the BVI.

Will the infrastructure projects be the largest portion of the spend? By infrastructure I’m thinking roads, sewage, burying cables, and all those kinds of things. Is that a reasonable assumption? That’s reasonable, because they’re all bigticket items. There’s quite a lot in there around supporting the Ministry of Education in how do we get training colleges up and running; what new courses can we provide to support industries that may not exist today? Renewable energy is a good example of that. We start going down the path of renewable energy, we will need to start training, and we’ve got potential funding to train about up to 250 students in that new industry over the next few years. That’s quite exciting if that comes to pass, but we need to talk to the government to make sure they’re happy about that new initiative.

Speak to us a little bit about transparency, which is something you have repeatedly stressed in all of your activities. Why is it so critical and how do you think you’ve done so far in achieving this? The transparency issue is in the absence of information, people often put their own slant on things and sometimes it’s inaccurate. So we need to be very clear about what we’re doing and how we’re doing it, and we will be launching a new website, in fact I think I might even see it today, it’s very close, we’ve redesigned it all. You’ve looked at that website and we’re putting everything up there, but it’s pretty clunky that website and it doesn’t work very well and we want to use it for fundraising. So transparency has a number of issues and one is around making sure that people are clear about what you’re doing and they can see that there’s follow-through and accountability. We also need to be really transparent about what we’re

doing because we’re trying to get huge amounts of funding from people, NGOs, many of them are international. We’re lucky we’ve got some individuals here in the BVI who are very wealthy and are prepared to put money in, but even those people, they live here, they want to see how monies have been spent, whether we’re achieving value for money, and that’s the other very important drive for us, to be as open and as transparent as we can be. Now there are commercial stuff that we can’t talk about, but we are certainly getting into that space and we are trying to make it more transparent.

One of the early challenges with the RDA, in some ways before your time, was the perception in the community and by some politicians, is that the agency was put in place by the UK because it didn’t have confidence in the local government’s ability to collect and spend it in a transparent manner. What is your reaction or response to that, and has it impacted your work as you move the agency from idea into reality? You know it’s interesting, I’ve heard that. But when I came here, I was aware that the creation of the RDA was across all parties in the House of Assembly. So you know, both the [former] premier and the [former] leader of the opposition voted for the creation of the RDA. So all I know is it had cross-party support. As regards to the other stuff, maybe it’s true, maybe it’s not, I don’t know, but the most important thing for people to know is, it [was not] the creation of one party trying to push it in. No, it wasn’t. It was cross-party. Let me give you an idea of timelines. We are required to do a monthly report within 12 working days of month’s end. We are given five working days to send it to the minister -- the premier in this case. His office is given five days to question us on fact and address any issues, and then we must publish it within 10 days. So we must publish it under the regulations. The premier’s required to post it before the Cabinet, and he’s also required to place it before the House of Assembly. So you know, there’s a great deal of requirements for information on both us and everybody else built into the whole process.

In terms of engagement with stakeholders, for me that’s really important. I think it’s one of the areas we need to improve on. I’m happy to see I’ve got a new communications manager starting on the first of April. Through funding at the CDB, we’re going to be appointing a community engagement officer, and with these sorts of jobs, you can never do too much of that. Our new guys are in the same business. You can never do too much. It’s an area where we can do a lot better on. We’ve been handicapped by it. We’ve signed a formal agreement, a MOU, between ourselves and the Government Human Resources Department, where we’re taking people on. They can be short or long term. It can be short term, where they come across to us to work on one of the ministry projects, or in the case of [Director of Planning] Neil Smith or [former Permanent Secretary of Communications & Works] Anthony McMaster, they’re here on three-year contracts. And the idea is that we’ll bring people in and work alongside us. We’ve got some international staff, so every one of them has got a local person working alongside them, and we’ll turn them over and do our support. But communication is how we deal with these stakeholders, and how you engage with your communities. Our method of engagement in communities is, we’re going to have to deal with derelict boats. We use the ministry to organise that, the premier’s office to do that because we don’t do policy and we keep out of politics. That’s where we’ve said to them, please we would like to organise a community meeting, could you arrange that.

We understand that prior to the departure of the previous government, you assumed responsibility for the development of the Terrance B. Lettsome International Airport project. Firstly, can you confirm that is the case and specifically what is your brief on this project and what will be your approach? We were asked to look at the business case relating to the project, and so without any preconditioning or any notion about what that might look like.

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A VIEW BEYOND THE HORIZON Shaping the Conversation

Special Debris Clearance Derelict Vehicles on Virgin Gorda

To look at an existing plan? To look at what could happen there. For example, there’s an issue about the runway, which we’re not dealing with in terms of upgrading the quality of the runway now. If you take economic substance, and you want to improve your transport network so people can fly in and do board meetings and fly out, you need to make it really easy for people to do that. Seamlessly. We can do that by improving the ferry service and improving the timelines -- putting a great frequency of service in. But with the airport, there’s a number of things you can do before you start reaching for the ‘extend the airport’ side of it. Dealing with airports, you need to have a customs area that maybe can handle more than 20 people in the immigration hall. We’ve all seen that little counter. [It’s about] physical space. The airport’s a rather large airport. You could look at putting in some high quality office space above the floor. They don’t even have to come into Road Town, but go upstairs into some high quality office space with good broadband, and hold their board meetings at the airport. And I know the airport’s thinking of all of these things; this is not new. Most airports you go to, you can go out the door and hire a rental car. Here, you’ve got to come into Road Town. So these are lots of things that could be done with the airport even before you start considering the runway extension. The runway extension is certainly something that in time will need to be looked at. Before we do any work on that, we’ll need to discuss that with the new government and make sure it’s

JULY 2019

in synch with their vision. And you know, there’s a lot of work we could do around ferries first, which you could do tomorrow before you even started thinking about spending significant amounts of money on studies and things like that.

Are you involved with the West End ferry terminal? The design for the ferry terminal is now being undertaken and being managed by the Ministry of Finance project office, so we can give you an update on that. We look at West End, and we’ve looked at it quite holistically, so we see there’s a number of things that need to be done at West End to truly make it a very desirable port of entry. It’s the second busiest port of entry between the USVI and BVI. When we have [the design] in hand and it’s fully costed, then we’ll go to procurement and probably at that stage, we’ll get involved. It just goes to show you what’s shaping our thinking here: recovery vs. development. So we’ve looked there and we’ve seen the basketball courts have now been cleaned up by Rotary. I think Mr. [Curt] Richardson and Blue Ocean have said he would like to support the development of that, but we say to him, ‘look, before you do that, we actually have to upgrade the seawall just behind the basketball court, down around that corner, because that’s slipping, and if we do any more work there, it’s just going to fall away into the sea.’ So we have to upgrade that and then he said he would be interested in putting some money in to support that. But if you look at that road network

bridge across to Frenchman’s Cay -- you probably don’t get down and look underneath that bridge, and it’s probably a good thing you don’t, because that bridge won’t support 60 tonne concrete trucks.

It won’t support anything. It’s very fragile, that bridge, so we need to replace that bridge. We need to deal with getting that ferry terminal up and running. We need to deal with the derelict boats. So we’ve got a package of work for the West End that we’re starting to look at. And by the way, we’d like to put fibre optic down into the area there, it’s such a glorious part of the island. If I had a choice I would live down there, I would work down there, I’d be delighted to, but you need to have fibre optic in there. So that’s how you start to look at the whole West End and say, we could start to do something really exciting with that area. Now the premier represents it so we’ll need to talk to him carefully about the community’s aspirations for the West End, but we see that as a real go-ahead.

A related question to that, and you mentioned a package of things that are specific to that district, are you looking at the other districts in a similar way? Yes.

So when a politician comes in, you can have a holistic approach to what you’re going to be doing? What we will be doing is what we think we can do, and then seek

the guidance from the government to say, ‘yeah we would like you to do that.’ And then we get on and implement that. But we’re trying to provide government with informed options so that they can say, ‘oh, we’d like a little bit more of that, a little bit less of that.’

What was your most challenging day on the job so far? There must be one day when you went and said, oh, it’s good to be home. Every day is really challenging here. Sometimes you feel like you’re prodding a beehive.

And sometimes I’m sure you are. A beehive that doesn’t want to move much. And, look, these jobs are never easy. It’s quite a challenging job, but it’s becoming easier. In August last year, there were still only four of us, by November there were six of us and now we’re 30 or thereabouts, including people on contracts and project managers. But you know, we’ve moved so quickly from zero to where we are now, and we’re trying to inculcate a culture of, what you say is what you do, and that you follow the guidelines, and that you are open and transparent. Everyone who’s here has had to sign an oath of confidentiality down at the High Court, and a list of all their personal things and conflicts of interest, so you know we’ve put a lot of processes in. It’s been a pretty busy period of time.

A VIEW BEYOND THE HORIZON Shaping the Conversation

Our final question is, what keeps you up at night?

Police Barracks on Virgin Gorda

The alternate of that is, what has been your proudest day on the job? I think it’s the people. I see a team now that’s starting to gel, and I think our relationship with the ministries is maturing quite nicely. You know, when you’re the new kid on the block, not everybody’s been a fan of the RDA, so we’ve had to deal with that. I don’t mind saying that we’ve talked internally about making sure there’s not an assumption of our professional arrogance. It’s very easy to make sure that when you’re bringing in a new team, especially when you’re bringing in a team of international people-clearly if we could find those sorts of people locally we would have recruited them. So we’ve brought in people who have particular skills and experience, but you know this is a very small place and I don’t mind saying that we have talked about the issue, that we don’t come across as ‘hey, step out of the way, RDA’s here.’ And we’ve even talked about it in our communications. In our early days we had ‘the RDA and the ministry.’ Now, it’s ‘the ministry and the RDA.’ If you notice the signs at AO Shirley, did you notice we put our logo right at the bottom? We did that very deliberately. Start with the lead ministry. Who are the partners, who is funding it? When’s it happening? Who is it being delivered by? You see, it’s the smallest things. Those are things we try to do quite deliberately. Our track record will talk for us, so that’s why

we’re really trying to roll these projects out smoothly with the ministries’ involvement, and we’re asking the ministries to be involved and wanting them to be involved in a meaningful way. So we have to be very mindful about the way we conduct ourselves and be respectful. If everyone else is late, it’s not an excuse for the RDA to be late. We should be here on time, because we’re here with the ministries, they’re our clients here, and through the community of the BVI, so that’s a really important point. It’s modesty, I guess.

It’s important because, one, for many reasons, the mission of the agency is terribly important. It’s a new one for the community, and the fact that there happens to be, as you said, quite a few skill sets that you wouldn’t find here, that you have to bring in from overseas. You know, there’s a group of us who are international, but we’re all on threeyear contracts. I fully expect that at the end of three years or even before, we’ll be thinning that international staff, including myself, and the next CEO for the RDA should be a BVIslander. And we’ve got people here with all the obvious talents to do it. At the moment, we’re getting it up and running, but we will finish our contracts here. We will have made this just another part of the BVI.

I’ve said to the chair and the board of the RDA: we’re making really good progress. I just said to the chairman of the board on Saturday: ‘here’s our business plan for the year, and we’re making really good progress.’ But what keeps me up at night is despite all our really good progress, we’re not going fast enough, because you never go fast enough. We liken it to a snake that’s had a big feed. We’ve got a lot of stuff in planning, and we’re still trying to get it through planning and procurement. We’re still on that hump in planning. It’s coming. I can see stuff coming through procurement and operations. Even this month we’ve got a few things popping up, and after a while it will be a smooth hump and it will be a fully worked-out system. But we’re digesting a big startup, and that’s what happens when you’ve been given 41 projects. You can’t just do them, you’ve got to plan them properly, you’ve to fully engage. So that’s what keeps me up at night: impatience, I guess.

You talk about the hump going through the planning process. Which project are you going to look back on that’s going to cause people to say, huh, that’s what the RDA was doing? Over the next few years, projects will span sectors from infrastructure, tourism, education, housing, security, good governance, and the environment. Believe it or not, the government -- and Mr. Bayly -- have even bigger plans than that.

I think when we clean up all these derelict boats. When we start cleaning them up, that will be the most visible thing, because any time someone flies into Trellis Bay--if I could clean up Trellis Bay tomorrow, I would.

When are you going to start that? We’ve got the tender going out for the collection of the boats probably next Monday. So I think that project, because it’s so obvious when you’re going around. We’ve got Nanny Cay doing a favour to the RDA and to the community, they’ve agreed to clean up Nanny Cay at their own cost. And they’re going to break the boats up down there at their site, and because there’s not a huge number of boats, we’re going to use it as kind of a test bed for us to see how we can do the smashing-up efficiently. And they’ll be subject to an environmental management plan that’s really developing, so we can see how do we do this in a way that’s environmentally sensitive, but also practical. We’ve just got to sign an MOU with them around that, and that’ll be down to them. | BB

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Tourism

STAY THE COURSE: TOP TIER SERVICE AND SUSTAINABILITY

DIGITAL NOMADS, ANYONE? Is every fish worth catching? By SHEA ALEXANDER

JULY 2019

Tourism

I recently happened upon a bizarre thread of tweets in which the author, an incensed biology teacher, outlined in horrendous detail, an experiment exposing her local sushi provider as wantonly having mislabeled fish. Her dramatic story-telling seemed much too theatrical for the high school laboratory findings, but somehow the modern phenomenon of the digital nomad presents a humorous, albeit thought provoking parallel. This is the digital nomad. Thirty-something, sitting cross-legged at a lake or perched atop a hammock; anything but a cityscape, a Google search for ‘digital nomad’ will produce hundreds of iterations of the above, alternating the idyllic landscapes and Zen poses. Self-described travel aficionados, the lifestyle of the digital nomad is an increasingly popular one. Young professionals, whose competence in 21st century service provision like web design and social media marketing affords them mobility, have begun an exodus. But, unlike the Israelites and every other group to whom the gravity of the expression ‘exodus’ has applied, this millennial movement is defined by perpetuity. Unbound by the spatial conventions of a dreary nine to five, thousands have embarked on a fascinating marriage of career and travel that leads them from one locale to the next.

So, why the fish metaphor? After the incalculable decimation that was Hurricane Irma, the British Virgin Islands has found every conversation of social, political or economic import undercut by a sharp declaration, ‘our economy needs diversification!’. Expanding the density and breadth of a market is a national imperative, but in the wake of political promises it is important not to romanticise the unforeseen. The acquisition of new sectors, would logically follow strengthening the twin pillars of finance and tourism that, like Atlas, have borne our horizons. Capturing an entirely new, growing niche of travellers is a glimmering opportunity to do just that. These MacBook toting, latte loving transients may be for us the fish that feeds the family. Or shall they be our white whale? MBO Partners, a corporate resource hub for the self-employed, published a research brief in 2018, citing 4.8 million Americans as selfdescribed digital nomads with a further 17 million aspiring to adopt this professional lifestyle. The appeal of self-employment, coupled with the perceived freedom to experience the planet in its fullness, has garnered the attention of 11% of the respondents who reported plans to enter this fluid market. An even more exciting numerical truth; of the digital nomads responding, one-fifth of them reported annual earnings in excess of $75,000, placing them quite squarely in an upper echelon of economic status. We’re now presented with what seems an opportunity too good to be true. There exist out there vibrant souls seeking adventure, tranquility and unparalleled scenery, the very essence of our marketing campaigns, with quite a bit of cash in hand. Without a doubt, the digital nomad represents a niche worth investigating. With their experience driven desire to explore, the digital nomad engages the economy across a plethora of avenues; a quick dark coffee at Lady Sarah’s Farms or Island Roots, an impromptu water taxi to and photoshoot at the enigmatic Conch Shell

Mounds or a dress shop at UMI for an event on the next stop of their odyssey. This diversity of engagement transcends their purchasing power, as self-employed individuals, this pocket of visitors can target our white sands at any time of year, veering away from our traditional dependence on the ‘tourist season’. The British Virgin Islands could potentially carve off a substantial share of these visitors with a strategic product development strategy, paired with complementary marketing schemes. Clever marketing is about understanding both the wider demographic and the individual. The travelling professional is not only a tourist waiting to be captured, but quite literally a travelling professional. Nomadic work tends to include a modernity of service offerings not entirely native or mainstream to the BVI thus representing a cornucopia of fresh ideas. By capitalising on the movement of skilled professionals through our jurisdiction, we may develop within our economy a mainstay of novel commerce. At the very least, integratory practices could produce an expertise triple down effect. Interestingly, many digital nomads are subscribed to the principle of volunteerism, an amalgamation of leisurely travel and destination charity. While we are far from needing fresh faced youth to cook us hot meals, an open imagination could foresee a plethora of opportunities for the emulation of modern nontangible products. It is critical that as we encounter revolutionary concepts for economic development we remember the fundamental principle of scarcity. In our case, natural resources are consumed as experiences. The British Virgin Islands must maintain interest in the less physically taxing trade of services if we are to preserve our finite beauty. Examining our current focus on the cruise ship passenger, we must guard against being lulled into the downsides to shopping wholesale, so to speak, for our tourists. Theoretically, the island of Virgin Gorda would be better served environmentally by

digital nomads who would self excurse and explore in smaller numbers more sites than just the overtrafficked Baths. Abandoning for a moment the perspective of tourism, this concept is rich as a venture with commercial ramifications. On the more general scale of the domestic market, digital nomads represent a refreshing take on imported labour that is antithetical to our norm. Instead of workers who represent a production cost but then spend a significant portion extra-nationally thus breaking a healthy financial cycle, we would have workers who are not paid by local entities but spend their money in our markets. Furthermore, the transience of digital nomads would constitute human capital that doesn’t pressure our subsidised public sector services. For the innovative entrepreneur the digital nomad is an opportunity. Contrary to the cross-legged adventurer depicted above, many travelling professionals require some semblance of an office environment. Any craftsman in the realm of the visual, architecture or video-editing for example, might prefer a large monitor which they naturally would be unable to carry. This, as well as individual cubicles, high speed internet and meeting rooms could all be functions of entrepreneurial support hubs that charge digital nomads to utilise their space. In principle this is not nearly as alien to our domestic landscape as it sounds. Harneys, among the largest private employers in the British Virgin Islands, is a member of what is termed the magic circle of law firms. Essentially it, and many other law and trust agencies, cater to patronage across the globe. It goes without saying that local clientele are not the bread and butter of many of the larger law firms in our Territory. Globalisation, hand in hand with technological strides, has torn down the physicality of trade. Here it stands an alluring picture of a niche market, unfamiliar and yet not so much so, and chock full of potential. So we swing our hooks, yes? Well…

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Tourism

In the wake of a politically charged nationalistic fervour at times bordering the absurd, one could be forgiven for fearing a public resentment of anything encouraging long stay ‘visitor workers’. Without the adequate implementation of public relations tactics, the entrance of digital nomads could be perceived as the importation of expatriate labour at a time when British Virgin Islanders are underemployed, despite over qualification. Arguing away specious presumptions brought on by societal tension might be relatively easy, after all we are talking about tourists. However, engaging the digital nomads as niche tourists does present an some conceivable challenges that aren’t as easily dismissible as contentious lore. The very benefit of their prolonged length of stay can become an issue. An oftentimes ignored danger of tourism is that it exposes the native populace to an influx of strangers who have no responsibility to demonstrate the mettle of their character. Sometimes, the cat in the bag could be a snarling beast. Instead of fluid integration, leading to capital enhancement, we may fall prey to the predatory wiles of xenophobia in any of its many chimeric faces. Miya Tokumitsu described the ‘do what you love’ career mantra as ‘elitism disguised as noble self-betterment’. Digital nomadism is perhaps the pinnacle of the ‘do what you love’ creed and Tokumitsu’s biting brevity intensely follows. One can hardly engage himself with a critique of this nature without falling down a rabbit hole of scrutinising the very precepts of capitalism, so let us digress. Several harsh realities may be confronted. Firstly, the Virgin Islands’ miniscule economy, populace and landmass would be swiftly consumed by the transformative distortion of gentrification, without adequate protective mechanisms of both the fiscal and psycho-social varieties. A common misconception in the British Virgin Islands surrounds what the average person’s pocket looks like. The exponentially swollen salaries of the financial services industry skew the gross domestic product per capita towards a higher mean. Similarly, the presence of high earning tourists who stay for long periods may incline price-setting

JULY 2019

powers to upcharge, taking the market to a point that is neither inclusive nor sustainable. Housing is a stark, relevant case of this but also an opportunity. Money matters aside, though they are wholly important, this slighter gentrification could be accompanied by attitudes of ignorance assaulting our arguably diluted culture. Despite an army of symbolic tokens, we lack a robust national identity, capable of self-preservation if buffeted by consistent offense. On the free market of the 21st century, what is an opportunity if it does not pose risk? The very nature of investment is that the potential is there to lose. So, if we want to engage this niche and produce for ourselves a brand spanking new golden goose, what are we to do? Seeking out one of the foremost minds guiding this sector, I reached out to the Director of Tourism, Mrs. Sharon Flax-Brutus, for an informal chat on the complexity of this market and our potential engagement with it. Synthesising her expertise and an overwhelming abundance of material, I am positive that digital nomads are a niche we could engage to our benefit with decisive action. Firstly, our focus would have to be levelled at creating an environment conducive to this sort of tourism, while preserving national interests. Looked at another way, there is not much difference between this visitor and our current visitors other than the potential length of stay for a digital nomad. The British Virgin Islands is plagued by poor telecommunications networks. Wireless network access that is more stable, more available, and free is a must if digital professionals are to consider us a viable workspace. There was an alarming difficulty noted in the media post Irma for volunteers to obtain documentation necessary. Our immigration and labour authorities would have to adapt to this unique form of working tourist. Simply put, do they tick the ‘business’ or the ‘leisure’ box on their forms? Or maybe we create a new box ‘businessleisure.’ Cost effective, long-term stay options such as AirBnB would need encouraging as well as the aforementioned idea of virtual work-spaces in the labour market.

An earnest recommendation would be strengthening our tourism product to include a greater appreciation of culture and heritage. This would address a duality of issues; both bolstering local pride and national identity and acclimating long-term visitors, and diversifying our product offering to appeal to the experience appreciative digital nomad. Having created a product capable of sustaining interest, the development of marketing strategies would be priority. Within the observable framework of our current promotional procedures, there is much synergy with the alcove of tourism in question. Execution would have to shift slightly to account for longer stays and higher affluence. This means telling a story deeper than our conventional ‘sun, sand and sea’. After natural beauty becomes commonplace, our marketing would have to illustrate the unfathomable depth of experiences to be discovered; the shopping, food, history and people. To some extent, we may find ourselves requiring marketing that offers a more sophisticated appeal to the region of these travellers of the higher income, another opportunity. Following the rising trend of digital nomadism, I feel entirely confident that we will adapt to this niche. But, we must do so swiftly and decisively as our competition is ever vigilant. Good business, as tourism should be, is epitomised by an exhibition of innovation and agility. Yet by adapting strategic, tailored development and marketing initiatives we may take it a step further and appeal to professionals to take this plunge into work and travel with us as their favourite sandy office. If good business is responding to the trend, then the best business would be shaping the market; appealing to the would be nomads behind their desks, calling them with our siren song of a workspace that looks anything but. As I sit here typing this article, thousands of miles away from the ebb and flow of aquamarine ocean and golden coast, I can assure you I am tempted to take my own MacBook up and make the journey. After all, the Premier in his first budget address recently announced a tourism objective of 5000 beds within the next 5 years. Digital nomads, anyone? | BB

Tourism

ONE OF NATURE’S LAST LITTLE SECRETS

Anegada conch piles have long history By CLAIRE L. SHEFCHIK Photography By: BVI TOURIST BOARD

JULY 2019

n Anegada, a few feet beyond Kelwyn “Kelly” Faulker Lindsay’s boat, loaded with five American guests, rises a series of pink hills like jagged sand dunes, towering a dozen feet above their heads and sloping down to the sea. These piles of empty shells — rough and grainy on the outside, shiny and smooth on the inside — are a landmark that appeared on VI navigational charts as far back as the 1600s. But up until a few years ago, when Mr. Faulkner Lindsay launched Kelly’s Land and Sea Tours, they were — like most of the east side of the island, far from the beach bars of Cow Wreck and Loblolly Bay — inaccessible to most visitors.

Tourism

Centuries-old mounds Mr. Faulkner believes the mounds go back even further, to the time when the island’s indigenous tribes began harvesting conch. “They’ve been carbon dated to be over 400 years old,” he says. Still, few know they exist. Many of the BVI Tourist Board’s “little secrets” are anything but secret these days, but the conchs are different. The big charter catamarans that dominate the VI tourism industry rarely come here. Before last year’s introduction of the Anegada Express ferry, lack of daily boat service to and from Tortola also kept the island off the radar of many land-based tourists. It’s only been tour operators like Mr. Faulkner Lindsay — who was raised partly in Florida, but has deep roots on the island — with the right boat and the right local knowledge, who can share this place with visitors. So far, it’s been a hit. “Sure, you’re on vacation,” he says. “But here, you can feel like you’re on vacation.” For generations, he explains, fishermen would dive the seabeds, removing the creatures’ innards the same way Mr. Faulkner Lindsay just did. They would toss the empty shells down into the bed, around 30 to 40 feet below. Ironically, he explains, it’s this massive conch graveyard that has helped ensure the population’s survival.

according to the guide. Although Key West bills itself as the “Conch Republic,” conch harvesting has been illegal there since 1975. A recent report from The Bahamas stated that the population there could collapse in 15 years if current fishing practices continue. Here, some of the catch gets exported abroad in small quantities. On Anegada, buyers tend to form closer connections with their suppliers. One restaurateur from Miami has been buying Anegada conch for decades. “He owned two restaurants and he came here for vacation,” Mr. Faulkner Lindsay explains. “He linked up with a fisherman to buy 500 pounds.” The sheer size of the reef on the ocean side of Anegada gives conch and lobster plenty of room to hide. “Unless the [human] population grows, we’re never going to take up too much space,” Mr. Faulkner says. Nature’s secrets The boat speeds along over the shallow water. Once again, all is quiet on the reef. One guest suggests the piles belong in National Geographic. Mr. Faulkner Lindsay is sceptical. Or rather, his neighbours are. “A lot of Anegadians didn’t want anyone to see this place,” he explains.

“The ones that are alive will start to move away” from empty shells, he says. “So to keep everything there, we put all the shells in one place.” As the older shells sunk into the sand, newer shells were tossed on top, keeping the height level. The piles gradually evolved into one of the world’s most serene and beautiful garbage dumps. But it also gives life.

But as a Virgin Islander who was raised abroad, Mr. Faulkner Lindsay has a different perspective: He’s an insider with outside ideas. Anegadians, he explains — his own relatives among them — are only starting to come around to the idea of inviting visitors to this part of the island. He still has to do a fair amount of persuading.

“It acts as a nursery and a reef,” Mr. Faulkner Lindsay says, explaining that schools of nurse sharks, stingrays and turtles frequent the area.

But, he says, “I’ve always been an entrepreneur.” He’s only 27. Growing up in Florida, he imported sneakers from China and sold them to his classmates. He later worked as a nursing assistant and as an auto-CAD designer before moving to Anegada in 2012, where he helped his uncle fish, gathering the knowledge he would need before saving up for a boat. His first vessel was destroyed in Irma. “My customers started a GoFundMe, helped me replace it,” he says.

Conch population A handful of Anegada fishermen provide most of the seafood for the sister island’s restaurants, according to Mr. Faulkner Lindsay. Their small numbers, and the careful approach they take to fishing, ensure the populations remain stable, he explains. “We can still sustain the restaurants and keep the conch alive,” he says. Even just a few more boats out trolling could upset the ecosystem as it has in other parts of the Caribbean,

Big plans Throughout the trip, Mr. Faulkner Lindsay and his guests have plunged into the water surrounding the reef, searching

for conch. Back at the mounds, he pries open a conch and hands the squishy innards to a guest, tossing the empty shell on top of its departed relatives. Back on shore, he’ll herd the tourists back on a bus for the land portion of their tour of the beaches on Anegada’s north side. At the end, they’ll get to enjoy eating the fresh conch they found.

“You won’t find anything like this anywhere in the world.”

Mr. Faulkner Lindsay is no longer the only one running these tours, but he welcomes the competition. He can talk about his plans all day, though he doesn’t believe in the conventional kind of development, with resorts, chain restaurants or cruise ships. There’s too much of his grandfather Kenneth Faulkner — a member of the “Anegada Fishermen’s Hall of Fame” — in him. “I’m all about the future of Anegada,” he says. “Preserving its natural, pristine, untouched-by-man type of vibe.” Skimming across the water, back to his base, he points out a larger boat he’s refurbishing, planning to eventually use it for larger group tours. “Anegada is all about activity,” he says. “I want to be the activity king.” Mr. Faulkner Lindsay, despite the naysayers, says he’s proud to have opened up another sector for drawing visitors to his island. “Before, everywhere was a restaurant, bar or taxi,” he says. “You weren’t hearing anything else.” Still, he doesn’t want to see his island overrun like other areas of the territory, crawling with boats. “It’s all about how you grow,” he said. “You won’t find anything like this anywhere in the world.” | BB

BUSINESSBVI.COM

Tourism

A Tourism Renaissance in CGB, JVD and Brewers By CLAIRE L. SHEFCHIK

oday, much of the BVI looks very different to a visitor seeing it for the first time since before September 2017, when Hurricane Irma changed the landscape irrevocably. But in District Two, which includes Cane Garden Bay, Brewers Bay, the sister island of Jost van Dyke, and surrounding areas, it’s not only about a new look, but a whole new attitude. The bars of Cane Garden Bay—long one of the territory’s most popular beaches—were in splinters after the hurricane. Having long relied on cruise ship passengers to keep things humming, it was a tough blow when Disney and Norwegian kept their ships away for nearly a year. But starting last year, a combination of forces—public funding, private ingenuity, and community spirit—came together to give the district the facelift it needed to start welcoming back visitors - cruise, land based and yachters —some of whom were likely astonished with what they saw. Back in August, government and community leaders rolled out a $1.7 million list of planned projects. That included turning the graveyard wall into a colourful mural, building and repainting new vendor stalls, fixing bathrooms, repairing the Brewers Bay roads and repairing signage to help visitors find their way around. Volunteer organisations like All Hands and Hearts united with community members and the Royal Air Force personnel to help patch up and beautify some of the buildings that had been abandoned since the storm. And the district is looking markedly greener, due to the coconut palms from the new BVI Tourist Board initiative Seeds of Love. “The tourists are coming back and are genuinely impressed with how far we have come along, “ said Valerie Rhymer, owner of Myett’s Garden Inn, which in December underwent a transformation of its own, partnering with Pussers—purported inventor of the painkiller cocktail—to operate the restaurant side of the business. “Pussers was looking for a new location and Myett’s was looking for a management company to assist with the rebuilding and management. So it has worked out very well for both companies. Our guests are excited to see the two well known brands working together as a team and coming together to offer the best of both that we have to offer. But she noted that every business—from the brand-new Quitos Inn to the 400-year-old Callwood Rum Distillery, one of the area’s most popular attractions—had their own challenges to overcome. “It’s nice to see the addition of Quitos new hotel coming soon, the roads being paved, the rum distillery up, the sea wall being repaired, Bobby’s supermarket fully stocked and the gas station operating. We have all the conveniences back again.”

JULY 2019

Tourism

Bishop John Cline, the resident who spearheaded some of the community efforts, was thinking big, saying in August that his ultimate goal would be to turn CGB into “a modern village.” “This is a community initiative because we recognise that government can’t do everything, and we as the residents and business owners in the district and village must take on some personal responsibilities,” he said. In January last, former Premier and Minister of Tourism, Dr. Orlando Smith announced that the district would be part of the comprehensive $12 million plan enacted by the BVI Tourist Board, projecting that for the 2018-2019 tourism season, he expected to see 200 cruise calls and more than 580,000 passengers, roughly 82 percent of the pre-storm numbers. And although For CGB, the big day came in August, when Disney Cruise Line returned to the BVI, busing many of its 4,000 passengers a day over the hill from Road Town. “Our guests are asking for these enhancements and for us to maintain our luxury designation,” Dr. Smith said. “We have to meet the demands of our visitors.” In the near future, there are more changes to come for CGB. A $1.6 million sewerage project announced in January is scheduled to be completed in the next year. For now, though, “the beach and waters have been cleaned and are just as beautiful as before the storms,” said Ms. Rhymer. “ There are a few [businesses] that have not rebuilt yet and they are missed...but I’m sure in time they will be built back again.”

New events As cruise ship passengers return to CGB, they are also becoming a familiar site just across the channel in Jost van Dyke. Long a must-stop itinerary for charterers, JVD is also courting a new type of tourist, with small boutique cruise ships— including Seabourn, Silversea, Star Clippers, Crystal and Windstar— now making the legendary beach bars of White Bay and Great Harbour, many of them nearly completely rebuilt, a regular part of their itinerary, along with the hundreds of charter boats that moor there each day. “Our micro-economy has basically come back,” Foxy’s General Manager Thomas Warner. Although charters have a smaller fleet, they’re “booked solid,” he said. Now, businesses are turning to events to shore up the remaining visitors and do what the island does best–party. “We had to ask ourselves, how do we re-monetise the economy?” asked Mr. Warner, who helped Foxy’s operate as a community kitchen for volunteers and residents after the hurricane. Once back to normal, he decided that events would be a great way to kickstart growth. Now, each full moon, he can be found pouring out mushroom shots to revellers donning pirate eyepatches or Mardi Gras beads, depending on that month’s theme. Over in CGB, which has struggled to find an enduring large-scale event, Paradise Club found success with Lost in Paradise, a three-night showcase for DJs from five different countries. That bar, which fought to come back from near-obliteration after Irma, is already expanding, according to owner Ron Cline, adding cabanas and a second bar in time for the event. According to Mr. Warner, JVD, served as an example for how to cope with disaster. He also credited top-notch PR from the BVI Tourist Board. “They were the first ones to take a video of Foxy saying ‘come on back,’” he said, and although there’s still more work to do to get JVD back to where it was, “we never forgot about our number one priority: tourism. I’m very proud to be a part of it.” | BB

BUSINESSBVI.COM

Tourism

There is great anticipation in the BVI and the marketplace about the reopening of Rosewood Little Dix Bay this Fall. How will the new Rosewood Little Dix Bay contrast with the property when it closed in 2016 for extensive renovations? Rosewood Little Dix Bay’s renovation signifies the property’s most substantial beautification project since it was founded by Laurance S. Rockefeller over 50 years ago. As a result, all aspects of the resort will be significantly enhanced to provide an unparalleled luxury experience in the BVIs.

What will be the leading new services and features added to the property? Upon reopening, the property will feature completely redesigned guest rooms and suites, reconceptualized dining venues and enhanced public spaces and landscaping.

Did the hurricane create any Irma Opportunity for any new ideas? Yes, the tragic arrival of Hurricane Irma came in the late stages of Rosewood Little Dix Bay’s restoration, giving us an opportunity to reevaluate our original renovation plans.

From all indications the rebuild at Little Dix will be substantial, what do you see as the range of the spend? The budget for this project is not being disclosed at this time.

I read somewhere that you started your hospitality career in the laundry room, what would you say to a young Virgin Gordian who walks into Rosewood Little Dix Bay as an employee for the first time this fall, about a potential career in the hospitality sector?

Shaping the Conversation with

RADHA ARORA

When New World acquired Rosewood in 2011, it had only 20 properties; today it has 27 with 21 properties in its development pipeline. Rosewood maintains it will bring a “sense of place” and a “bespoke sensibility” to each property. Critical to this vision is that each hotel must be not just a facility for travellers but a gathering place for locals. The key to maintaining these standards is managing the pipeline to a few hotel openings a year. This gives the company time to ensure each hotel accurately reflects its location, infusing that location into the property. Later this year Rosewood Little Dix Bay will reopen after an extended closure from 2016 for an extensive renovation which was completely upended and extended by the hurricanes of 2017. In May Business BVI sat down with Radha Arora, President of Rosewood Hotels and Resorts for an in-depth discussion, not only about the relaunch of Rosewood Little Dix Bay, but also a look at key trends shaping the global luxury travel segment, his leadership style and what advice he would offer a young Virgin Gordian who walks into Rosewood Little Dix Bay as an employee for the first time this Fall, about a career in the global hospitality sector.

JULY 2019

It is a great time to enter the hospitality business as consumers of all ages – from millennials to baby boomers – increasingly look to spend their disposable income on experiences, rather than material goods. My best advice to those starting out in the industry is to start on-the-ground in the hotel and work every single position at least once if you can. It is hugely beneficial to have sound, on-theground hotel experience before taking an executive position in the hospitality industry, and there is truly no better way to understand the industry, the employees and the hotel guest.

How do you define luxury in 2019? It is an interesting time in the luxury hospitality industry as the definition of luxury itself has changed, shifting away from ideas of traditional pampering and towards value and truly local experiences. Where generations of the past preferred over-the-top extravagance, today’s travelers are looking for authentic immersions that help them discover the unique culture and character of a destination.

What would you identify as the three leading global trends for the luxury traveler that as a destination the British Virgin Islands must pay attention to? The deepest and most significant movement of the moment is the desire not just for meaningful moments, but actual transformation through travel. True luxury today, in hospitality, is about creating an environment ripe for life change, to the degree the individual wants to pursue it. At Rosewood, we take great care to provide modern travellers with the authentic and transformative

SHAPING THE CONVERSATION

Of course, it is also impossible to talk about today’s hospitality landscape without mentioning health and wellness. As our lives become more hectic and ‘plugged in,’ travellers are increasingly focused on wellness – physical, emotional and spiritual. We aim to incorporate wellness programming at our properties in new and exciting ways that simultaneously reflect the destination’s location, culture and heritage. Finally, the evolution of technology and how consumers incorporate it into their day to day lives has brought about major changes within our industry. At Rosewood, we have been thoughtful and deliberate in trying to find the best ways to integrate these many technological advancements and preferences into our operations in a way that enhances the guest experience, rather than distracting from it.

What is the essence of the Rosewood brand? Rosewood’s guiding philosophy since its inception has been A Sense of Place®. Simply put, this means the culture and heritage of a destination informs the experience offered at each property. This is a notion that I have always found really captivating, and I am thrilled to be a part of providing guests with the opportunity to discover new cultures in a way in which only Rosewood can.

How would you describe your legacy to date at Rosewood, eight years into your journey? Over the past eight years, there has been many significant milestones and defining moments for Rosewood Hotels & Resorts – from relaunching the brand in 2013 to opening our first hotel in Asia, Rosewood Beijing, and our first new hotel in Europe, Rosewood London. 2017 in particular, was really the beginning of our current phase of development. With our incredible base of iconic and important properties in the Americas, we continued our global expansion with four new openings that increased our network by 25%, establishing a true global footprint in the process. This was also the year that we launched two innovative brand programs: Asaya, a new wellness concept that offers

a more holistic and personalised approach to wellness; and Rosewood Explorers, a reinvented kids club that aims to combine fun with teaching our younger guests about new cultures and communities. And though it’s only May, 2019 has and will continue to flaunt a number of highlights, including the monumental launch of Rosewood Hong Kong, the fullest and most complete expression of our CEO Sonia Cheng’s vision for the brand, and the upcoming reopening of the beloved Rosewood Little Dix Bay! Together, all of these milestones have transformed Rosewood into a truly global brand leader in the ultra-luxury hospitality space.

Rosewood Followers are a driving force for the brand’s growth. Do you see this helping to introduce more Asians to your Caribbean resort properties? The phrase “relationship hospitality” is something we talk about a lot at Rosewood. We feel that true hospitality is found in the strong and caring relationships we build with our guests, our communities and our associates, and this translates to a genuinely warm and sincere style of service. It is this thoughtful and bespoke approach, in tandem with our guiding Sense of Place philosophy – which allows us to deliver one-of-a-kind hotels, resorts and experiences that are truly different and authentic and really set us apart from others in the space – that keeps Rosewood top of mind for today’s travellers and keeps them coming back year after year. As we enter into new markets and introduce new audiences to the Rosewood brand, we hope to continue to captivate today’s consumers with the extraordinary travel experiences that only Rosewood can provide.

Are you looking to expand your resort presence in the Caribbean beyond your current footprint? Absolutely! In the last year we opened Rosewood Baha Mar in The Bahamas and looking ahead, in addition to the exciting reopening of Rosewood Little Dix Bay, we’re looking forward to debuting Rosewood Half Moon Bay Antigua in 2022. As a brand, we’re continually focused on expanding into global capitals and resort destinations alike and on bringing Rosewood’s Sense of Place philosophy to distinct destinations worldwide.

“

TRUE LUXURY TODAY, IN HOSPITALITY, IS ABOUT CREATING AN ENVIRONMENT RIPE FOR LIFE CHANGE, TO THE DEGREE THE INDIVIDUAL WANTS TO PURSUE IT.

“

experiences they are looking for, in order to exquisitely satisfy this desire.

Rosewood has seen strong growth over the last several years with some 27 properties in 15 countries and plans to add 21 more hotels and resorts, mostly in Asia and Europe. Do you have an optimum size you are striving for? We are always looking to create new opportunities for our guests to experience travel in a meaningful way, that enables them to truly connect with new cultures and destinations around the world. However, we’re not focused solely on expanding our footprint, but on continuously evolving. Beyond the opening of new hotels and the signing of new deals, what is important is growing the recognition of the Rosewood brand as one that represents a differentiated approach to luxury hospitality – a more modern and progressive hotel experience that reflects the way we travel today. As such, even with our recent growth and upcoming pipeline, we take great care to look at each project with a very custom and bespoke approach (and not to follow a cookie cutter formula) so that we can give the new age of luxury travellers what they are looking for: something unique and thoughtful.

Last week, the IMF downgraded its projection for global economic growth this year, referencing slowing growth in just about all of the major industrialised countries. Are you concerned about the brand’s future growth over the near term? I am a strong believer in the benefits of travel, and I do believe that people today will continue to prioritise travel. Not only is there an increasing amount of young professionals who view travel as a right and use their disposable income on travel experiences, but further, for many of today’s global citizens, the notion of

social connectedness – having a meaningful life and doing meaningful things with and for people – is what really matters and travel provides that. Travel has a great responsibility these days, especially in these tumultuous times.

How would you describe your leadership style? I make my expectations very clear with my team, so they always know exactly what I want. However, once I’ve established the expectation, I try to take a step back and let the individual hotels and team members execute, as I think micromanaging impedes creativity and growth. I am also a strong believer in trusting your intuition, and while that sometimes puts me in uncomfortable territory, it has also brought be great success and it has helped bring success for many members of the Rosewood family as well.

How do you manage your very hectic travel schedule, while managing a global operation and ensuring quality family time? I do spend a considerable amount of time traveling, so I love to bring my family and friends with me whenever I can! We’ve also had several amazing holidays at Rosewood Little Dix Bay over the years, so I’m looking forward to furthering that tradition when the property reopens this fall.

What are you currently reading? I’m currently re-reading First, Break All The Rules by Gallup, which is a book that I keep on constant rotation as it provides strong insight into what sets apart great managers across all industries and how to keep employees motivated. I use this book often as a guide to not only identify top management within our organisation, and as a reminder to continue to cultivate my team’s strengths and help them rise to the next level both professionally and personally.

What keeps you up at night? I constantly think about how we can differentiate ourselves not only within the hospitality industry, but more broadly as a leader within the lifestyle and luxury sector. My hope is that Rosewood is synonymous not only within ultra-luxury travel, but as a global trendsetter that is constantly evolving and sparking the joy of a life well lived. | BB

BUSINESSBVI.COM

Real Estate

Batu Villa by The Baths

THE PROPERT Y SP OTLIGHT, YOUR MOVE

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Real Estate

The Outlook for Real Estate The residential market in the post-Irma era

By Edward Childs

ednesday 6 September 2017 was not an ordinary day for the BVI. The events, and their aftermath, will forever be etched in the memory of

those who experienced Hurricane Irma first hand and those overseas who

watched from a distance. In the months that have passed since “Irma” visited

our shores, the islands and people of the British Virgin Islands have demonstrated

a resilience that was, at first, hard to imagine. From the initial relief operation, to the

clearing up of the debris that covered the islands, the British Virgin Islands have emerged

once again as a strong tourist destination, offering land and water-based activities that only

a year ago were in the process of rebuilding. There remains much work to do, clearing up the

last of the debris and fixing the damaged infrastructure, but for now residents of the territory can

look forward to a brighter future.

This devastating Category 5 hurricane passed through the northern Caribbean from 5 to 8 September before hitting Florida as a Category 4 hurricane, although by this time the intensity had lessened, and the impacts were less severe. Hurricane Irma reached its peak intensity on 6 September, the day the eye sliced through the British Virgin Islands. Sustained wind speeds reached 185 mph with gusts up to 220 mph. Twisters within the hurricane caused additional damage, and the minimum pressure fell to 914 hPa (27.0 inHg). This somewhat analytical description of the hurricane belies its intensity, the likes of which few people in the world have experienced. We were fortunate that the storm passed over the BVI during the day and also that the hurricane force winds did not extend out by many miles. Still, the destruction wrought in the hour before and after the eye passed over the BVI, resulted in an estimated $3.2bn worth of damage, countless homes and businesses being damaged or destroyed and the displacement of much of the population.

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Real Estate

Financial Services Recovery

he BVI’s twin pillars of the economy, tourism and international finance, were both impacted by Irma, albeit in markedly different ways. Many firms operating in the financial sector evacuated their employees from the BVI either just before Irma, or in the days and weeks after. With many offices in the BVI severely damaged or destroyed, satellite offices were quickly established in other jurisdictions such as Grand Cayman, Jersey and Aruba so that company incorporations, and financial sector business, could continue uninterrupted. Within the jurisdiction, companies quickly relocated to temporary locations with many firms sharing space, allowing a reduced operation in the BVI to continue. The office rental sector was very active throughout 2018 as companies sought temporary or alternative office locations, with the office rental market settling down at the start of 2019 to more normal levels of activity. While the financial sector in the BVI has shown itself to be resilient to the impacts of Hurricane Irma, a range of policy decisions from the UK, EU and the US affecting the operation of international finance jurisdictions remain a challenge for financial services in the BVI.

Tourism Recovery

n contrast, the BVI’s tourism industry was devastated by Hurricane Irma with the sector still in recovery. Prior to Hurricane Irma, overnight visitors in the BVI reached a record high of 407,764 in 2016. In the immediate aftermath of the storm, airlift was restricted to emergency and evacuation services and, with much of the accommodation damaged or destroyed, very few tourists arrived in the BVI for several months. The annual average count of overnight visitors declined from 413,704 in August 2017 to 142,691 in August 2018, before increasing again, reaching 222,722 by February 2019 as shown on Chart 1. The Government estimated that the number of available hotel rooms (including villas) fell from 2,700 prior to Irma to just 336 rooms as at 1 March 2018. While many villa properties are now available to rent for the 2018/19 high season, most of the major resorts in the BVI remain closed. These include Bitter End Yacht Club (86 rooms) which has now been demolished, Biras Creek Resort (33 rooms) which has been closed since 2015, Little Dix Bay (100 rooms) which is due to reopen at the end of 2019, Peter Island Resort (52 rooms) with no announced reopening date, and Long Bay Resort (56 rooms) which was destroyed but is now under new ownership with rebuilding plans in hand. With so many resorts requiring substantial investment, the long term recovery of the hotel sector remains a work in progress. The BVI villa rental market, like the yachting industry, has been able to recover far more quickly than the resort sector, with individual home owners able to repair their properties once insurance claims have been resolved. While many owners undertook repairs through the first six to nine months of 2018, most villa owners were able to commence rental operations by the 2018/19 high season. The villa rental market has therefore been a vital component of the BVI’s tourism offering, particularly while the major resorts remain closed. Guests staying in rental property will typically rent cars, provision for a week, frequent local bars and restaurants and take day trips, ensuring that many of the service businesses which suffered significantly last year, are also able to be back up and running. The indications are positive for a strong 2019/20 high season. British Virgin Islands: Annual Overnight and Cruiseship Visitors 2006 - Feb 2019 (12 month moving average)

CHART 1 710,000

ANNUAL VISITORS

608,571 507,143 405,714 304,286 202,857

Overnight visitors Cruiseship

101,429 0

2007

2009

2011

2013

2015

Source: Central Statistics Office, Govt of the Virgin Islands, Compiled by Smiths Gore BVI Limited

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2017

2019

While the land-based tourism sector will take further months to fully recover, the yachting industry has demonstrated remarkable resilience and is primarily responsible for the significant increase in over-night visitors to the BVI post Irma. Many of the bareboat charter companies were operating close to full capacity by the end of 2018 and were expecting strong charter bookings in the 2018/19 high season. This trend should continue to improve into next season. The ability of the charter companies to quickly reorganise following a major hurricane, and the resulting positive impact in maintaining over-night tourist arrivals, must be recognised by the Government. A unique attribute of the yachting sector is its economic contribution to the sister islands of Anegada, Jost Van Dyke, Cooper Island, Norman Island and Virgin Gorda without which many of those islands would be struggling economically post the hurricanes. Fortunately, the converse is true and they are doing very well as the sector rebounds. This is clearly another benefit of a diversified overnight accommodation sector. However, there are concerns that the private crewed charter sector of the yachting industry has seen a reduction in the number of crewed yachts based in the BVI. This is partly due to the impacts of Irma, where some owners have decided not to replace damaged vessels, but also the continued impacts from the relaxation of the “six pack” legislation in the USVI in 2015 which has made St Thomas a more competitive home base for crewed charter yachts. Crewed yachts can just as easily access the Spanish Virgins of Vieques and Culebra from their St Thomas base, rather than sail east to the BVI where cruising permit fees increased in August 2017. Crewed yachts based in the BVI contribute significantly to local businesses through provisioning, maintenance and fueling prior to charter and to local bars and restaurants during charter and their continued use of the BVI as a base should be encouraged. At a time when the Government is looking to increase hotel rooms in the BVI, supporting the crewed charter industry will do much to increase the supply of luxury accommodations in the Territory. Chart 1 also shows the return of cruise ships to the BVI with cruise operators delaying their return until they were satisfied that the BVI had sufficiently recovered as a destination to again be attractive to their passengers. The first of the larger vessels returned in August 2018 and the 2018/19 high season has seen a number of cruise lines return to the BVI. The Cyril B. Romney, Tortola Pier Park suffered modest damage and was repaired following Irma with many of the retail outlets continuing to operate. Cruise ship passengers peaked at 700,000 arrivals in 2016, falling to 200,000 arrivals in 2018. However, there is a steep upwards trend in cruise ship arrivals and the cruise ship industry is projected to be back to pre-Irma arrivals next season.

Real Estate

Batu Villa by The Baths

Public Sector Recovery

o date, much of the recovery in the BVI has been led by the private sector, which was able to rebuild once insurance claims were settled. The Government has been slower to respond, because of the extent of the damage suffered by public institutions, particularly administrative buildings, schools and community centres, and to infrastructure including roads. A Disaster Recovery Coordinating Committee (DRCC) was established to co-ordinate recovery activities in the BVI and to prepare the way for the establishment of the BVI Recovery and Development Agency (â&#x20AC;&#x153;RDAâ&#x20AC;?). On 23 April 2018, the Government passed the Virgin Islands Recovery and Development Agency Act, 2018 establishing the RDA to spearhead the recovery in the BVI. The mission statement of the RDA (https://bvirecovery.vg/) is : Working with the Government of the Virgin Islands, the Recovery and Development Agency will raise investment to implement the recovery and development of the Virgin Islands, delivering value for money and developing national capacity, in order to realise the vision of the Recovery and Development Plan. This vision is for the BVI to become a model for building stronger, smarter, greener and better, fostering a vibrant and innovative economy, cohesive and empowered society, nurtured and sustainable environment, resilient infrastructure, good governance and a high quality of life for all. With a staff already in excess of thirty full and part time personnel, the RDA has a slate of projects in the planning, procurement and operations phase. These range from repairs to the Virgin Gorda police barracks (operational phase) to the removal of derelict boats (procurement phase). There are also plans for the West End Area Programme, which includes the rehabilitation of the West End ferry terminal, and the BVI Green Energy Plan which aims to transition the BVI to a lower cost, more resilient, green energy supply.

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The Real Estate Market

Chart 3 reviews the post Irma market for homes sales showing sales volume, number of sales per quarter and the median sale price. The data shows that while the number of sales increased in the months after Irma, the median sales price fell, reflecting the market focus on damaged property. The two sales that closed in Q4 2017, shortly after Irma, were already in contract before the storm where the purchasers still opted to close. One of those sales was a house priced at $1.6M which resulted in the high mean sales price for Q4 2017 of $890,000. By Q1 2019, the median sale price had dropped to $300,000.

n the aftermath of Irma, there were fears that the real estate market in the BVI would suffer as a result of damage to so many homes. In practice, Irma has been a catalyst for the real estate market, providing investors with opportunities to acquire hurricane damaged properties as many owners opted to divest of their investment rather than rebuild. More importantly, many BV Islanders decided to invest in the market taking advantage of the opportunity to acquire real estate they had previously not been able to afford. With so much destruction, the insurance companies were overwhelmed by the number of claims they had to process while for many people claiming insurance, problems of under-insurance became apparent. While most claims were settled by mid to late 2018, the delay in securing settlements, or agreeing settlements that were less than the cost of the damage due to under-insurance, have impacted property owners’ choices in deciding whether or not to rebuild. For many owners, particularly those living overseas who were unable to secure a reliable contractor or those without the wherewithal financially to rebuild, the only choice has been to sell their property “as is”. Faced with continued deterioration of their properties, owners of damaged property, priced for a quick exit which created a competitive market mainly in the $200,000 - $700,000 price range.

Between Q4 2017 and Q1 2019, a total of 71 properties had been sold at a total sales volume of $43M, averaging $605,000 per sale. Of these sales, approximately 60% were below $500,000 in value.

$1.00

$20.00 Median sale price ($M)

$0.80 2

No. sales per quarter

$15.00

$0.60 $10.00 $0.40

14 12

$5.00

$0.20 4

$0.00

201 7

201 8

2019

Source: BVI Land Registry. Compiled by Smiths Gore (BVI) Limited

The renewed vigour in the residential market for “as is” property as a result of Irma and continued sales at Oil Nut Bay and Mosquito Island, has resulted in total sales volumes in Q2-Q4 2018 and Q1 2019 exceeding three of the quarterly periods in 2016 and the first three quarters of 2017 (with the exception of Q4 2018 which was slightly lower than Q1 2017).

As shown in Chart 4, the post Irma market has been dominated by local purchasers keen to acquire property at discounted values due to hurricane damaged condition. While there have been fewer foreign investors in the market, delays in closing due to the land holding licence system could indicate increased foreign investment in the coming months.

BVI Real Estate Market: Total Volume of Recorded Transactions 2016-2019 (US$M)

Post-Irma BVI Home Sales (Sep 2017 Mar 2019) Number of Sales to Belongers and Non-Belongers

2017

Source: BVI Land Registry: Compiled by Smiths Gore BVI Limited

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Belonger

201 8

7 5 3

Non-belongr

23.1443

13.9984

19.7393

19.1667

11.6538

13.4931

15.1972

9.0915 Q3

201 6

6.0346

4.2544

10.4771

12.9717

40.717

CHART 4

201 9

1 Q4

201 7

201 8

Source: BVI Land Registry. Compiled by Smiths Gore (BVI) Limited

2019

TOTAL SALES VOLUME ($M)

MEDIAN SALE PRICE ($M)

Total sales volume ($M)

Chart 2 shows that the property market has remained active post Irma, even in the last quarter of 2017 when much of the commercial activity in the BVI had ground to a halt. The table shows the total sales volume for all types of property (land, houses and other property) by quarter between September 2016 and the first quarter of 2019. Total sales volume (expressed in US Dollars) in 2018 and 2019 has been boosted by land and property sales at Oil Nut Bay (3 sales in 2018 & Q1 2019) and Moskito Island (2 sales in 2018). Both developments were pro-active with their respective post Irma clean up and repairs to ensure they were functional in the shortest time possible. As a result, Oil Nut Bay was open to home owners by Christmas 2017 and the general public by Easter 2018. At Mosquito Island, all home owners who had commenced construction prior to Irma confirmed they were proceeding with their respective projects.

CHART 2

Post-Irma BVI Home Sales (Sep 2017 Mar 2019) Sales Volume, Number of Sales and Median Sale Price

CHART 3

Real Estate

Alfresco Pool View

The price distribution of home sales post Irma by price range is shown in Chart 5 where the dominance of sales under $500,000 is clearly reflected and represents 60% of the total number of sales. In contrast, there have only been ten sales over $1.0M representing 14% of the total number of sales. The first quarter of 2019 had four sales over $1.0M (with one of the sales in excess of $3.0M). Overall, this quarter indicated a total of 22 property sales closing, the strongest quarter for property sales post Irma.

Post-Irma BVI Home Sales (Sep 2017 Mar 2019) Number of Home Sales by Price Range

CHART 5

Post-Irma BVI Home Sales (Sep 2017 Mar 2019) Number of Sale by Location

CHART 6

<$0.5M

Finally, Chart 6 breaks down the sales post Irma between the Virgin Gorda and Tortola markets. As can be expected, the sales are dominated by the Tortola market where there is a larger inventory of houses and pool of investors.

18 Tortola

$0.5M-$1.0M

Virgin Gorda

$1.0M-$1.5M $1.5M-$2.0M

>$3.0M

1 Q4

7 3 1

1 Q2

2018

Source: BVI Land Registry. Compiled by Smiths Gore (BVI) Limited

5 3

201 7

6 2

201 9

201 7

201 8

2019

Source: BVI Land Registry. Compiled by Smiths Gore (BVI) Limited

There are signs that the market for â&#x20AC;&#x153;as isâ&#x20AC;? property is beginning to slow as the majority of owners looking to exit their investments have already made a move to do so. However, owners of damaged property in higher price ranges, especially over $1.5M have found it more difficult to exit, with many properties still available for sale. Even before Irma, there were far fewer purchasers for property in the higher price bands and vendors have continued to find it difficult to gain traction despite the substantial discounting on price as a result of hurricane damage. Looking forward to the remainder of 2019, the signs remain positive for continued activity in the BVI property market. The next few months should signal whether or not the market has moved away from concentrating on the sale of damaged property to a more normal market, trading homes which were either not damaged or have been repaired. At the same time, the impacts of the wider global economy need to be watched as worldwide, economic growth is slowing, having peaked in 2017. The US economy, initially boosted by tax cuts from the Trump administration, is also facing a slow-down in growth as continued uncertainty from trade wars impacts the manufacturing sector. However, the US economy projections remain ahead of those in Europe with a slower growth rate forecast for the Euro sector.

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Golden Pavillion Pool Deck

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Real Estate

Irma Lessons

s Irmaâ&#x20AC;&#x2122;s arrival on 6 September 2017 turns from months to years, the lessons from this catastrophic hurricane need to be reflected in stronger building codes, improved planning and a better understanding of insurance. For those who could afford it, or who had adequate insurance coverage, the necessity of rebuilding stronger and more resilient homes was clear, but not all have had the means to do so. Government and insurance companies each need to take a lead, to ensure that, should the BVI be impacted again by another Category 5 hurricane, buildings will be better constructed to withstand the impacts of a major storm. In time, people will look back at the lessons learned from Irma, whether in terms of its physical intensity, how the government responded and what help came from the international community or perhaps the psychological impacts on those who experienced Irma first hand. For sure, many will wonder how, with all that destruction, so few lives were lost on 6 September. For now, we continue to rebuild, determined to see the British Virgin Islands emerge from a significant natural catastrophe to become a country where resilience, vision and hope will shape the future. | BB

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BVI FAST FACTS

Image courtesy of BVI Tourist Board

By Patlian Johnson

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Business BVI Guides

Location

Government

AREA

CAPITAL

COORDINATES

TIME ZONE

57.08 mi2

Road Town

18*30’N 64*30’W

Atlantic Standard Time

The BVI is a self-governing overseas Territory of the United Kingdom, with the Queen as the Head of State, represented locally by the Governor. The Governor is responsible for external affairs, defence and internal security, the Public Service and administration of the Courts. The ministerial system of government is led by an elected Premier, a Cabinet of Ministers and the House of Assembly. The Cabinet consists of the Premier, four other Ministers and Attorney General as an ex officio member. The Cabinet is responsible for formulating and implementing policy. The House of Assembly consists of 13 elected members, of which nine are tied to electoral districts and four “at large” seats.

Tortola, where the main airport and the capital Road Town are located is the largest island. Other main islands include Virgin Gorda, Anegada, and Jost Van Dyke which can be accessed from Tortola by ferry, private boat and airplane (with the exception of Jost Van Dyke). There are two main ways to get to the British Virgin Islands. The first is to fly directly to The Terence B. Lettsome International Airport on Tortola (daily flights from Puerto Rico and other Caribbean Islands). The second is to fly to Cyril E. King airport in St. Thomas in the US Virgin Islands (with direct connections from the mainland United States) and then take the ferry to Tortola. There are other connections from North America and Europe via regional and local airlines out of St. Maarten, Antigua and Barbados.

Geography and Climate

TEMPERATURE (Average)

HIGHEST POINT

RAINFALL (Average annual)

28*C / 82*F

Mt. Sage (1,709 ft ASL)

43 in/1,105mm

The British Virgin Islands, comprising of around 60 islands with the exception of Anegada which is flat and composed of limestone and coral, most of the islands are volcanic in origin and have a hilly, rugged terrain. The highest point is Mount Sage at 521 metres (1,709 ft) above sea level located on Tortola.

Legal System

The BVI has an independent legal and judicial system, based on a combination of English Common Law and local statutes, orders and civil procedure rules. Lower level disputes and petty crimes are resolved in the Magistrates’ Court. More serious matters are dealt with in the Supreme Court (officially known as the Eastern Caribbean Supreme Court, of which the BVI is a member state). Appeals from the Supreme Court lie to the Eastern Caribbean Court of Appeal and the final appeal lies to the Privy Council. The British Virgin Islands hosts the Commercial Court of the East Caribbean Supreme Court which serves the expanding needs of commercial litigation in the Territory and the Eastern Caribbean. The commercial court hears 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 cross-border commercial and insolvency matters. The BVI is now a centre for the resolution of domestic and international disputes. The British Virgin Islands’ Arbitration Act 2013 came into force on October 1st, 2014, making provisions for a modern arbitration centre. The BVI International Arbitration Centre provides neutral, efficient and reliable dispute resolution services. The state of the art facilities offers a variety rooms for hearings and meetings, video and audio conferencing, interpretation and translation services and concierge services.

The Territory has a tropical climate, with year round trade winds and average temperatures of about 28°C. Rainfall averages about 1,105 mm (43 in) per year with the wettest months on average September to November and the driest months on average are February and March. The islands are in the hurricane belt, with the season running from June to November, usually peaking in August, September, and October.

Hurricane Irma

Society

POPULATION (2017)

EMPLOYED PERSONS (2016)

MINIMUM WAGE

31,196

21,182

$6 per hour

Population and Labour Force

On September 6th, 2017, the British Virgin Islands was hit by the strongest hurricane to date in the Atlantic region. The Category 5 hurricane, with sustained winds of 185 miles per hour and gusts of up to 255 miles per hour caused catastrophic damage to the islands. The Territory’s infrastructure was severely damaged, therefore in the immediate aftermath, electricity, water, and communication services were were severely hindered. The hurricanes caused varying levels of damage to most of the educational and health facilities, post offices, and fire and police stations. the financial services sector was in a position to continue operations almost immediately from outside the Territory. However, the tourism sector did not fare as well. Major destruction was recoded for hotels, villas, restaurants, and yachting inventory. In the two years post-disaster, significant progress has been made in rebuilding the Territory. The Government is in the process of implementing its Recovery to Development Plan which has included major repairs to the road, telecommunications and electricity networks, social services infrastructure such as schools, health facilities, and emergency shelters. Government services have been restored, businesses have rebuilt, and major hotels are reopening.

The population of the British Virgin Islands is estimated at over 30,000 residents. The majority of persons are of Afro-Caribbean decent. Minority ethnicities include Caucasians, East Indians, Middle Eastern, and Asian. The major force driving population growth has been immigration mainly to meet the shortage in local labour supply. Approximately 68 percent of the employed are foreigners thus accounting for a diverse and varied labour force. The Government sector is the major employer followed by the tourism industry, the financial services sector and the construction sector. There has been an increased demand for labour in the construction sector as the country rebuilds post hurricane Irma. Labour relations in the BVI are governed by the Labour Code, 2010. This comprehensive piece of legislation provides for the framework for the settlement of disputes, health and welfare in the work place, basic conditions of employment including pay, overtime, vacation and sick leave, benefits including the requirement retirement benefits. It also sets out the requirements for foreigner employment under the work permit regime. Social Security is a compulsory insurance plan to which employers, employees, selfemployed and voluntary contributors contribute. Benefits are paid out when certain contingencies arise including: sickness; maternity; and employment injury. An age benefit is paid out from 65 once the minimum contributions have been made (10 years). Trade unions are virtually non-existent and work days lost through industrial action are very infrequent. The government has set a minimum wage of $6 per hour.

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Economy

2019 Public Holidays New Year’s Day

Tuesday, 1st January

Anniversary of H. Lavity Stoutt’s Birthday

Monday, 4th March

Commonwealth Day

Monday, 11th March

Good Friday

Friday, 19th April

Easter Monday

Monday, 22nd April

Queen’s Birthday

Friday, 7th June

Whit Monday

Monday, 10th June

Territory Day

Monday, 1st July

Festival Monday

Monday, 5th August

Festival Tuesday

Tuesday, 6th August

Festival Wednesday

Wednesday, 7th August

St. Ursula’s Day

Monday, 21st October

Christmas Day

Wednesday, 25th December

Boxing Day

Thursday, 26th December

MAIN INDUSTRIES

TOURIST ARRIVALS*

ACTIVE COMPANIES*

408,972

402,907

Tourism and Financial Services

GDP GROWTH

INFLATION

US$ 1.1 billion 2.1

CURRENCY

US Dollar

Source: Central Statistics Office, Macro Fiscal Unit and Financial Services Commission *2018 estimates

The British Virgin Islands, a series of small islands and cays located a few miles east of the US Virgin Islands and about 95 km (59 miles) east of Puerto Rico. It is part of the Leeward Islands in the Lesser Antilles. The North Atlantic Ocean lies to the east of the islands, and the Caribbean Sea lies to the west. Tortola, where the main airport and the capital Road Town are located is the largest island. Other main islands include Virgin Gorda, Anegada, and Jost Van Dyke which can be accessed from Tortola by ferry, private boat and airplane (with the exception of Jost Van Dyke). There are two main ways to get to the British Virgin Islands. The first is to fly directly to The Terence B. Lettsome International Airport on Tortola (daily flights from Puerto Rico and other Caribbean Islands). The second is to fly to Cyril E. King airport in St. Thomas in the US Virgin Islands (with direct connections from the mainland United States) and then take the ferry to Tortola. There are other connections from North America and Europe via regional and local airlines out of St. Maarten, Antigua and Barbados.

Education

MAJOR SECTORS Tourism At A Glance

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 and the Education Act, 2004 regulates all aspects of the Territory’s education system, including Early Childhood Education.

Tourist Arrivals 2016 - 2018 (estimates)

Source: Central Statistics Office Overnight Excursionist (Cruiseship and Day Trippers)

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. Through affiliations with other tertiary institutions, HLSCC also offers degree and master’s programmes in various disciplines. The College also offers specialty courses based on the needs of the labour market.

716,616 421,503 407,764

2016

334,315 2017

216,660 193,312 2018

Tourism

Health

Currently, primary health care is provided by Peebles Hospital and community health centres/clinics on Tortola and the outer islands – Virgin Gorda, Anegada and Jost Van Dyke. Access to full treatment at the Dr. D. Orlando Smith Hospital from the sister islands can also be achieved when required via helicopter or ferry evacuation. The ‘new’ Peebles Hospital the now Dr. D. Orlando Smith Hospital which opened at the end of 2014 is a state of the art facility, which offers apart from emergency care, haemodialysis, medical imaging, physiotherapy and laboratory services. Additional medical services such as specialty treatments in dermatology, orthopaedics, plastic surgery, chiropractic care and dentistry are 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 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 Dr. D. Orlando Smith Hospital and the recruitment and training of health care professionals. The contributory National Health Insurance (NHI) Scheme provides universal affordable health care to all BVI residents.

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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 Anegada Lobster Festival in November, 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 have given the BVI the title of the ‘sailing capital of the world’. Other water sports, such as scuba diving, snorkelling, windsurfing, kite boarding, paddle boarding and kayaking are also extremely popular. The BVI is also a popular port of call for major cruiseships. The Tortola Pier Park (renamed the Cyril B. Romney Tortola Pier Park) facility opened in 2016 can accommodate larger cruiseships and the landside development includes shops (international brands and local treasures), restaurants and entertainment. The Government and private sector continue to rebuild and upgrade tourist attractions and infrastructure post Hurricane Irma. Tourist arrival numbers are expected to pre-2017 levels as the industry rebounds and all the major hotels have reopened and new rooms are added to the inventory. Other infrastructural developments expected in the near future include upgrades to the Terence B. Lettsome International Airport and various ports of entry throughout the BVI.

Business BVI Guides

Financial Services

Financial Services At A Glance Incorporations

Source: BVI Financial Services Commission

Incorporations (cummulative active)

Incorporations (annual)

100,000

200,000

Incorporations (annual)

300,000

400,000

Incorporations (cummulative active)

2018

37,415

402,907

2017

32,493

389,459

2016

31,769

416,784

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 â&#x20AC;&#x201C; BVI Business Company Act, 2004) first unveiled 30 years ago 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 and promotion of the products and services of the financial services sector is conducted by the BVI Finance (formerly the International Finance Centre)

FINANCIAL SERVICES

2017

2018

Trust (general) Class I, II & III

109

100

Trust (restricted)

Company Managers

Money Services/Financing Business

Captive Insurance

111

Domestic Insurance

Insurance Managers

Banking and Fiduciary Banking (general and restricted)

Insurance

Mutual Funds (active) Professional

1007

955

Private

340

329

Public

Foreign

Incubator

Approved

Insolvency Practitioners Source: BVI Financial Services Commission

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. The BVI London Office and the BVI Asia House in Hong Kong were commissioned to establish a presence in Europe and Asia, to take advantage of economic opportunities not limited to financial services and tourism. The Financial Services Implementation Unit (FSIU), was established late 2015, to put into effect the recommendations of a report outlining a strategic plan to chart the future of the financial services industry with the goal of securing the future of the industry. The recommendations centre on attracting value-added services, labour and immigration reform, strengthening business development and attracting investment in infrastructure.

Business Companies The BVI is one of the largest centres for the incorporation of business companies, with around 1 million companies incorporated since the enactment of the International Business Companies (IBC) Act in 1984. Over 400,000 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 â&#x20AC;&#x201C; the BVI Business Companies Act, 2004 which replaced the IBC Act repealed on January 1st, 2007. The core features of the IBC Act, which made it a success, remain along with improvements to ensure the longevity of the Virgin Islandâ&#x20AC;&#x2122;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. Effective January 2018, the incorporation fee and annual fee payable to maintain a standard company authorised to issue up to 50,000 shares increased from US$350 to US$450, and for a company authorised to issue more than 50,000 shares, from US$1,100 to US$1,200.

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Insurance (Captive)

Banking

Other Developments Financial Services

The BVI captive insurance market is one of the fastest growing and largest in the world 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. 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. More recently the Insurance (Amendment) Act and Regulations 2015 provide greater flexibility for captive insurers with the introduction of two new categories for captive licences.

The Virgin Islands is characterised as a conservative banking jurisdiction. At the end of 2018 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), the National Bank of the Virgin Islands and the Bank of Asia. The banking sector is regulated by the Financial Services Commission under the Banking and Trust Companies Act, 1990 and subsequent amendments.

Economic Substance Requirement

Investment Business The BVI is one of the premier jurisdictions for fund domiciliation and is now is regulated by the Securities and Investment Business Act (SIBA) and Regulations which came into force on 17th May, 2010 replacing the Mutual Funds Act 1996 (as amended 1997). 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. SIBA also provides a framework for dealing with insider trading and market abuses. The BVI continues to update its regulatory regime to meet the needs of stakeholders. The Approved Managers Regime came into force at the end of 2012 and creates a new regulatory environment for fund managers by reducing the regulatory burden under SIBA. The SIBA (Amendment), 2012 facilitates the new regulations for the Approved Managers Regime. The FSC has created two new regulated fund categories – incubator fund and approved funds. They were created in order to provide more flexibility to smaller and start-up financial services businesses. Under the new fund categories, managers and principals of smaller, open-ended funds may be approved to conduct business within a lighter regulatory framework. The Securities and Investment Business (Incubator and Approved Funds) Regulations 2015 come into force on 1 June 2015.

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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.

Trust Management Trust Management forms a major component of financial services activity in the Virgin Islands. 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 is 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.

The British Virgin Islands passed the Economic Substance (Companies and Limited Partnerships) Act, 2018, which addresses the European Union’s concerns about entities in financial services jurisdictions like the BVI over their ability to demonstrate “economic substance”. It came into force January 1, 2019. The Act outlines which entities need to comply and what are their obligations. Entities that conduct ‘relevant activities’1 and ‘core income-generating activities’2 are subject to the ‘economic substance’ requirements. Relevant activities include: Banking business; Insurance business; Shipping business; Fund management business; Finance and leasing business; Headquarters business; Holding business; Intellectual property business; and Distribution and Service Centre Business. Section 8 of the Act identifies further economic substance requirements. The Act also introduces additional reporting obligations to ascertain ongoing compliance. The BVI International Tax Authority (ITA) is the ‘competent authority’ under the Act and is responsible for enforcing the economic substance requirements. Entities must be able to show that they have an adequate level of employees and expenditure in the BVI and appropriate physical offices or premises for the core income generating activity. On April 23, 2019, the ITA published a draft Economic Substance Code. This contains rules on how the economic substance requirements may be met and guidance on the interpretation of the legislation and the manner in which the ITA will carry out its obligations and is a supplement to the Economic Substance (Companies and Limited Partnerships) Act, 2018. 1

Section 6, The British Virgin Islands passed the Economic Substance (Companies and Limited Partnerships) Act, 2018 Section 7, The British Virgin Islands passed the Economic Substance (Companies and Limited Partnerships) Act, 2018

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. 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 A Tax Information Exchange Agreements (TIEAs) is a bilateral agreement that has been negotiated and signed between two countries to establish a formal regime for the exchange of information relating to civil and criminal tax matters. The purpose of 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 28 TIEA’s. The BVI has agreements with Ireland, the Netherlands, Curacao, St. Maarten, Aruba, the United States, the United Kingdom, Australia, New Zealand, France, the Faroe Islands, Greenland, China, India, Germany, Poland, Portugal, the Czech Republic, Guernsey, Isle of Man, Canada, Japan and South Korea and the Nordic group of countries Sweden, Norway, Finland, Denmark and Iceland. The International Tax Authority (ITA), established under the Ministry of Finance, is the Competent Authority in respect of all matters relating to Tax Information exchange. It ensures that the BVI effectively exchanges tax information with other countries under the laws of the Virgin Islands and the relevant TIEAs.

Business BVI Guides

Government Listings Government Ministries and Departments Central Administrative Complex Road Town Tortola British Virgin Islands Website: www.bvi.gov.vg Premier’s Office Tel: (284) 468-2152 Fax: (284) 468-3294 E-mail: premieroffice@gov.vg Ministry of Finance Tel: (284) 468-2144 Fax: (284) 468-3299 Email: finance@gov.vg Ministry of Health and Social Development Tel: (284) 468-2174/2282 Fax: (284) 468-4412 E-mail: ministryofhealth@gov.vg Ministry of Transportation, Works and Utilities Tel: (284) 468-2183 Fax: (284) 468-3090 Email: mcw@gov.vg Ministry of Natural Resources, Labour and Immigration Tel: (284) 468-2147 Fax: (284) 468-3321 Email: nrl@gov.vg Ministry of Education, Culture, Youth affairs, Fisheries and Agriculture Tel: (284) 468-2151 Fax: (284) 468-3343 Email: mec@gov.vg Immigration Department 2nd Floor RJT Edifice Building Wickham’s Cay 1, Tortola Tel: (284) 468-4700 Fax: (284) 468-4729 E-mail: immigrationinfo@gov.vg Labour Department 2nd Floor, Ashley Ritter Building Road Town, Tortola Tel: (284) 468-4707/4780 Fax: (284) 468-2570 E-mail: labour@gov.vg

Statutory Bodies/Associated Agencies

Image courtesy of BVI Tourist Board

Real Estate Buying and Selling Property in the BVI Foreigners planning to purchase property in the British Virgin Islands, require a NonBelonger Land Holding License. Agreements to purchase property are therefore made contingent upon such a license being obtained by the purchaser. Application for a NonBelonger 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 fees (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 on the same terms. | BB

Financial Investigations Agency Ritter House Wickhams Cay II Road Town, Tortola Tel: (284) 494-1335 Fax: (284) 494-1435 E-mail: info@fiabvi.vg Website: www.fiabvi.org BVI Finance Cutlass Tower, 4th Floor Road Town, Tortola Tel: (284) 852-1957 E-mail: info@bvifinance.vg Website: www.bvifinance.vg BVI Tourist Board 3rd Floor, Eureka Geneva Building Road Town, Tortola Tel: (284) 494-3134 Fax: (284) 494-3866 E-mail: info@bvitourism.com Website: www.bvitourism.com The BVI Commercial Court Old Banco Popular Building Main Street Road Town, Tortola Tel: (284) 468-2724 Fax: (284) 468-2729 cdecsc@gov.vg

Financial Services Commission Pasea Estate Road Town, Tortola Tel: (284) 494-1335 Fax: (284) 494-1435 E-mail: webmaster@bvifsc.vg Website: www.bvifsc.vg Telecommunications Regulatory Commission 27 Fish lock Road LM Business Centre 3rd Floor Road Town, Tortola Tel: (284) 468-4165 Fax: (284) 494-6786 E-mail: contract@trc.vg Website: www.trc.vg Virgin Islands Shipping Registry 2nd Floor RG Hodge Plaza (Old Traffic Building) Road Town, Tortola Tel: (284) 468-9646 Fax: (284) 468-2913 E-mail: vishipping.gov.vg Website: www.vishipping.gov.vg BVI International Arbitration Centre Ritter House Wickhams Cay II Road Town, Tortola Tel: (284) 340-9002 E-mail: info@bviiac.org Website: www.bviiac.org Government Overseas Offices BVI London Office 15 Upper Grosvernor Street London WIK 7PJ United Kingdom Tel: + 44 207 355 9570 BVI House Asia Suite 5106, 51/F., Central Plaza, 18 Harbour Road, Wanchai, Hong Kong Tel: (852) 3468 8533 Fax: (852) 3107 0019 BVI Tourism Offices New York 1 West 34th Street Suite 302 New York, NY 10001 Tel: 800-835-8530 / 212-563-3117 Fax: 212-563-2263 E-mail: info@bvitourism.com Los Angeles 6601 Center Drive Suite 500 Los Angeles, CA 90045 Tel: 213-304-2993 United Kingdom 15 Upper Grosvenor St. London W1K 7PJ Tel: + 44-207-355-9585 Fax: + 44-207-355-9587 E-mail: info@bvi.org.uk

Emergency Numbers Police, Fire & Ambulance Virgin Islands Search and Rescue BVI Electricity Corporation Fire and Rescue Hospital Police Headquarters Water and Sewage

999 / 911 / 112 767 / 499-0911 494-3911/3912 468-4267/4268 852-7500 494-3822 468-5766/5901

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.

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fter the hurricane Irma, with staff scattered around the globe, then-managing partner Kerry Anderson called on Vanessa King—a 17-year veteran of the firm who had stayed in Tortola—to hold “things” together. It was a role that the Jamaicanborn attorney, volunteer, and mother stepped into with quiet resolve, and it was no surprise when, in February 2018, she was named the firm’s second female managing partner. Announcing the move, Mr. Anderson praised his colleague’s “yeoman’s service” to the firm, declaring that Ms. King would “undoubtedly set us on a new trajectory.” Now, as the BVI financial services sector faces existential threats from abroad, this storm-tested leader speaks to Business BVI about that trajectory and, also, how the territory must outfit itself with an exoskeleton of the latest graphene to face whichever winds blow next.

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First we want to congratulate you on assuming the management position at O’Neal Webster and doing so right after the passage of the storms. As we understand it, you’re the second female to have taken over the firm’s leadership position. How is it going and was it the proverbial baptism by fire given the circumstances? It’s going well, thank you. So, the back story is that the managing partner position in our firm is on a four-year rotation. Eight years ago, it was “my turn,” but many important client relationships rested with me and the idea of splitting my focus to take on administrative duties seemed like a bad decision at the time. I enjoy working with clients and practicing law. When the next four-year rotation came up, our managing partner, Kerry Anderson, was doing a great job and, to me, making a change was unnecessary. Then, of course, Irma came along and changed everything. We sent most of our BVI lawyers off island to continue serving clients. Some went to London and others went elsewhere, including our managing partner, who went with his family to New York. I stayed in Tortola with one other partner and some staff members with instructions to steady the ship. Again, no one could have imagined the level of destruction that occurred and the recovery efforts that would be required of us. My transition to managing partner evolved out of those efforts. Being the one on the ground I had to deal with the logistics that follow a disaster – such as dealing with what was left of our office and finding new office space, getting lines of communications open, making sure our team members and their families were OK. But what struck me in the middle of the chaos, was the freedom I had, out of necessity, to make critical decisions without having to consult on details and the opportunity to really leave my stamp on the firm. That aspect of the recovery process shifted my perspective on the role. As a partnership, in January 2018, when we were charting the way forward, my partners said, “Vanessa, you’re doing the job, just continue.” Their confidence was extremely important to me, during and after Irma, and here I am, today, managing O’Neal Webster, leading our strategic plan and still serving my clients. So, yes, I’d say, things are going well.

How did you grapple with what must have been a great amount of uncertainty about the future at the time you made the decision to take over the firm? The uncertainty became an opportunity to change and recreate many aspects of the firm. The storms created a different mindset among the partners which allowed managing the firm to be a little more flexible and fluid. Staying on island after the storms had a silver lining - on two fronts. For one, I was able to work closely with the Government and BVI Finance in the aftermath, which gave us, as a firm, a lot of knowledge about what was going on and where things might be headed. We were involved in discussions regarding not only immediate needs but also our financial services industry in recovery. This was a big help. On the second front, as a practical matter, once we found office space for our firm and knew we could function, my frame of mind changed from recovery to growth. Being on island allowed me to get over the whole recovery mindset, quickly. I decided that we needed to move on and grow, so I created an operations team to deal with recovery, which came off my platform and allowed me to focus on our medium to long term vision, such as the New York office.

You found a strategic partner. Was it easier in some ways having that resource to lean on? We have used a strategic consultant before but having this resource following the mayhem created by the hurricanes was significant. It was a huge advantage for me as a new managing partner, and ultimately for the firm as a whole. Planning is only as effective as its execution, so, unless you have somebody keeping you accountable, it is easy to get caught up in other distractions and there were many. Our strategic partner helped me create an eight-point plan, complete with weekly meetings to keep me accountable and a map of delegation. I don’t believe I must do everything. I feel strongly that tasks should be delegated to an appropriate team which eliminates wasted motion and keeps me focused on the eight points of our strategic plan. Those are the two most important takeaways in having a strategic partner to lean on. I regularly monitor progress and we adjust as necessary.

You and your partners feel strongly about the fact that O’Neal Webster is a local firm; your DNA is local, homegrown. But you’re operating in a very competitive global space. How was that thinking tested after the hurricane when a lot of the international partners had affiliations overseas where it would be easy to say well, go ahead, go there? You are right, we are very proud to be a local firm and this is seen in the way we do business, our involvement in the community, and in our marketing material. A BVI firm is who we are so the hurricanes hit us hard on many levels but especially on a human level. Thankfully, we didn’t lose any team or family members to Irma’s path. On the business side, what I learned is that everything comes down to how you are structured. For example, I’m very active in the Green space and our firm has been involved with Green VI since before its inception. We take our role in creating a greener, cleaner BVI very seriously and as a firm, in 2016, we adopted a set of practices to reduce our waste and stress on the environment. So, before Irma, we were well on our way to becoming as paperless an office as possible. We had very few current paper files and were in the process of scanning in all of our archived files, had all documents in the cloud, and had our servers backed up to three sites, which included off island sites as part of our disaster contingency plan. Everything we would need for business continuation was backed up and that greatly increased our ability to get to work quickly— within a week—in the wake of Irma and Maria. Many of the other law firms have a more expansive footprint which worked well after the hurricane for them and by extension the BVI, as they were able to carry on work from wherever they had offices.

I’m sure there were difficult moments managing the firm after the hurricane, needless to say. Was there a previous experience in your life that you kind of found yourself harking back to that kept you grounded? That’s a good question. At that time, during and after Irma, I worked off of adrenaline. I went through Gilbert in Jamaica, but

Gilbert was nothing. This was Gilbert’s big, bad brother. I don’t think that there is anything I’ve experienced that really compares. I think what kept me grounded is that this is my home, the home of my family, and the home of many of my staff members, which is my extended family. The O’Neal Webster family, as we call ourselves, is an amazing group. They looked out for me and they knew I was looking out for them, and I believe they knew it was more than simply for the sake of the business – well, they have said as much in our many post Irma celebrations! I knew that we had no choice but to make it work and that in itself is a reality check. But no, I can’t think of a similar experience.

So 18 months later what keeps you up at night? I am a sound sleeper and a very early riser so nothing really keeps me up at night. But there are things that weigh heavily on me. The general direction of the country, for one. Being in the private sector, we take our lead from the government and BVI businesses need to know where the government is going, philosophically and legislatively. We are often not given enough direction and that can be worrying. The pace and focus of the recovery efforts worries me as a business owner and as a parent. I think that would be true for most residents. The state of the high school and which is still operating on a half-day schedule weighs heavily on me. I worry that this will have a profound effect in the long run. What will come of their opportunities in light of the lack of consistency? I think about that a lot.

I’m assuming that financial services count for a large portion of the services the firm offers. The BVI continues to face considerable headwinds. What do you see as the three top challenges facing the jurisdiction? The constant moving of the goal post, a phrase used over and over but still very true. The uneven playing field becoming more and more uneven with the EU substance requirements and the UK’s demand for registers of beneficial owners. The immediate challenges come from the EU with the requirement for economic substance on the

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On the future of BVI financial services sector...

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IN ORDER TO REALLY BRING OUR GAME TO THE NEXT LEVEL, WE NEED SUPPORTING SYSTEMS – GOOD INFRASTRUCTURE AND IMMIGRATION AND LABOUR POLICIES THAT ARE BUSINESS AND INVESTOR FRIENDLY AND RELIABLE, WORLD CLASS INTERNET SERVICES.

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ground and the constant threat to blacklist the jurisdiction, which is now, after much effort and work, on the grey list. The requirement for companies to have economic substance will soon be a requirement of not only the EU but other international organisations. So the question is, are we ready for this challenge and is there opportunity in it? Increasing economic substance is a multi-party endeavour with significant hurdles. Simple issues like office space; because of the events of the last two years we do not have enough office space for current business then how do we create space for new businesses? Do we have the infrastructure to support more on-the-ground enterprises? We know we don’t have adequate hotels, housing, transportation, or communications infrastructure and that access is an issue. I had a client who wasn’t investing in a significant project in the BVI because his jet can’t land here. He said it’s not convenient for him. He’s not going to land in St. Thomas and come across. Seems extreme but it’s real. Perhaps a bigger question is how will government facilitate the growth and development that is needed; are they prepared to make the necessary improvements? It has to be government led because it requires decisions and actions that are beyond the purview of the private sector.

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Do you find that there is a strategy on the government’s part in terms of where the substance will come from? Will they bring in a leading consultancy firm as a strategic partner like they did with McKinsey? I believe the substance will come over time once we open our doors and properly provide avenues for the efficient set up of new investments. The key is creating the environment to allow for substance to be on the ground. The McKinsey report gave us a roadmap and a plan for many of the issues that are currently great concerns for inward investment. Kedrick Malone and his team at the Financial Services Implementation Unit did a lot of work in moving the plan forward. You don’t have to start from scratch, improvements have been identified, a plan is there, it just needs to be implemented. When I speak with my colleagues at different firms, we acknowledge that we all have clients who are willing to comply with economic substance, who are willing to come in on the ground, but they just don’t know what to do with things being what they are. As a service provider, it’s difficult to offer reliable counsel because there is no certainty and a lot has to be improved for us to become more business friendly. So, it’s a holistic picture that needs to be addressed, which is challenging, but we need to increase the urgency or the consequences will be serious.

Does the absence of such a holistic approach create the possibility of missing this opportunity? Definitely. Again, I was speaking to someone this past weekend who said they wanted to set up here, but because of the uncertainty that surrounds our infrastructure, immigration, and labour policies they have decided to set up in Jersey. Jersey has been working on economic substance for years. They have substance on the ground. We have fallen behind.

You’re right, even prior to McKinsey there was a live discussion that Substance was the next level of involvement for the financial services sector, and then the McKinsey study came along and confirmed it. But it only got going once the EU did what they did. That’s right, if we had taken a proactive path when the issue first surfaced, we would be so far along the road. Now, we are forced to take steps that may seem severe and even impossible, but critical, because we are way behind the curve.

If you could wave a magic wand, what would be the evolution path of BVI financial services sector in the next 3-5 years to ensure the sector would still be vibrant a decade from now? Diversification. Diversification in its true sense. There is so much more to the business of financial services than what we are currently doing and can do in the BVI. For example, offering clients a wide spectrum of services that would then spin off additional and varied legal work and the need for more substantial accounting services. You wonder why services such as corporate director services are not more significant in our offerings as it is in other jurisdictions. We have done exceptionally well at our core business which is the incorporating business, and that’s no small feat, but perhaps it also resulted in us becoming satisfied, content, and a bit complacent, which unfortunately is not fertile ground for growth. It’s a different world now and in order to not just survive but to thrive we need to diversify and not just go for the low hanging fruit. But again in order to really bring our game to the next level, we need supporting systems – good infrastructure and immigration and labour policies that are business and investor friendly and reliable, world class internet services. The fact is that meetings nowadays don’t take place in one

The Decider

Do you see government in that sense being a lead facilitator, creating the environment and then standing back and letting business do what they do best?

On the role of the government...

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THE GOVERNMENT NEEDS TO HEAR AND BE AWARE OF THE TOUGH ISSUES WHICH THE PRIVATE SECTOR HAS TO DEAL WITH AND IN TURN LOOK TO THE PRIVATE SECTOR FOR ADVICE ON ISSUES OF GOVERNMENT THAT AFFECT INDUSTRY AND THE ECONOMY, GENERALLY.

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room, despite what the EU is telling us! People participate remotely from different parts of the world. International business is conducted using tools and services that all run on the internet. True diversification has to be supported by systems and policies that allow business and enterprise to thrive. If I could wave that magic wand, I’d create a modern, reliable ecosystem, then step back and let good things happen and, fortunately, it doesn’t require a magic wand.

Yes. Of course, government should be a facilitator, an enabler for businesses to thrive by creating an environment in which it can flourish.

Do you have a sense at a global level where the sector is heading and what are the key driving forces that are shaping it, and how do you think the BVI is aligned with those trends? I think the financial services sector is already changing and will continue to change in significant ways. It changes according to the needs and demands of international business and private wealth and then it changes in another direction to fit in to the requirements of international initiatives and organisations such as FATF and OECD. These factors result in the industry being one which is constantly evolving. Do I think the BVI will have a role? Yes, but we must adapt and change what we do and the way we do business. Using an offshore company to hold property in London was yesterday’s industry. We see offshore companies being used in more nontraditional ways and in complex structures for the movement of capital and the preservation of wealth. BVI has played a significant role in that space and will continue to, but we need to refine our services, fine tune our focus, and deliver on our potential.

Do you think our leaders understand the broad sector in terms of where it is and how we can benefit from it? Speaking generally, I am not sure if they do but it would be fantastic if they did as the industry is crucial to our economy. There needs to be a true partnership and consistent open dialogue between the Government and the private sector on many aspects of the industry – on policy, legislation, new areas of growth, obstacles to growth etc. The Government needs to hear and be aware of the tough issues which the private sector has to deal with and in turn look to the private sector for advice on issues of government that affect industry and the economy, generally. Who best to advise on the industry than the practitioners. We live it every day. I appreciate that the Government is often balancing many interests, some of which may conflict with the needs of the private sector. Often, tough decisions have to be made which are not always in favour of the industry, but such issues need to be discussed and reasons for decisions need to be known.

Is FinTech one of those things that the BVI must quickly adopt if we want to stay relevant? We should have been in that space a long time ago and for some time it seemed like we were going to be a front runner in the region. We were talking a good talk and seemed to have things in place. We didn’t act quickly enough and now many are doing it and unfortunately we haven’t moved very far.

How do you reconcile the fact that a substantial portion of our business comes from Asia but a lot of our challenges in the sector come from Europe? I think it saves us in a way because if most of our business came from Europe we’d be in a very difficult position now. Having a substantial part of our business outside of Europe is an advantage, because the Chinese, who know and are comfortable with our product, are not as concerned with the EU demands as would be the case if the clientele were mainly Europeans. The EU’s current efforts to over regulate us are a significant hindrance. Our challenges from Europe have a lot to do with our relationship with the UK, which works for us and against us. On one hand, our relationship is a good marketing tool because being an OT provides many with the security of a stable economy and government. On the other hand, it makes us vulnerable and open to over-regulation and EU and UK interference. But speaking of Asia, perhaps a bigger threat to our business is the offshore/onshore model that is growing in Hong Kong. Hong Kong has taken on a business model that is similar to ours and it begs the question of why would a Chinese client come all the way to the BVI if Hong Kong is offering the same services? It’s right there, “across the Bay.” A similar threat comes from the US. They always had Delaware but now Nevada and other states are jumping on the offshore/onshore wagon. And as we have seen, the US is not concerned with the EU and other international initiatives and can afford to simply ignore them. That’s a very powerful advantage for States entering the space.

Do you think it is time for McKinsey 2.0 or do we have the luxury to just try and implement all those things from the first study before we begin to look at the next tier? McKinsey was an excellent report. It covered many foundational areas, such as immigration, labour, and infrastructure, which we already knew needed attention, and unfortunately, those areas still need to be addressed. In the meantime, we should be looking forward, so this is where a McKinsey 2.0 would be helpful, but as a refined less general study. For example, I’ve always thought that we should have a free zone area for financial services that allows for investment and diversification and provides certain benefits. That would be huge, especially now. A study on how this would work and impact the economy would be great. But to be honest and at the risk of sounding cynical, a study is just a study and nothing more. And then where do you go? We’ve completed so many studies and produced numerous reports without taking action. Execution is key. We need to reel in our focus on certain sectors, make a plan, and work that plan.

The firm seems to be in the market for talent. Is this part of your wider strategy to grow the firm? Yes, acquiring and developing talent in certain areas is part of our wider strategy. In our efforts, we identified areas of potential growth and we are focusing on developing these. The offshore sector has a predictable path for firms which we have not necessarily followed, rather we’ve chosen to create our own path and build on our strengths. Litigation and dispute resolution is an area where we’ve always been strong, so we are adding more resources to this area. For years, we had two queen’s counsels, and our current department is led by a queen’s counsel. Likewise, our private client and local practices, which include trusts, estates, real estate, and tourism development, are other areas where we’ve proven our strength. Our attorneys are at the forefront of the trust industry and we have worked for most of the major resorts, banks, utilities, and statutory bodies for years. You could say that’s

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an important part of us, being a local firm. We’ve reorganised our property and business department, creating a whole new platform to efficiently service that line and attract senior talent to support it.

Our expansion into New York, a major global financial centre, is also part of building on our strengths. Our funds department has a solid reputation and has always played a big role in our practice. Our funds practices has seen consistent growth primarily in the New York Tri-State area. Also, we have several longstanding relationships with US and global professional services firms in the region, so having a presence there made good sense. It’s working well and we’ve recently added staff to that office. We’re making steady strides and are really excited about our future.

What would you say has been your most challenging day on the job? Nothing has been as challenging as trying to find my staff after Irma, and I wasn’t officially on the job then. Prior to Irma we established a WhatsApp chat group that we used for different things, mainly social stuff. Of course, cellular and wireless connectivity was disrupted, which made finding our team members extremely difficult, and on a personal level extremely stressful. Next came arranging evacuations for our people, flying whole families off the island after the storm. One of our partners, who was overseas during the storms, assisted greatly with the logistics of this. To say post Irma was a challenging day on the job, would be an understatement. It was truly intense; not just for me, but for all the staff. We recognised this and brought in a counselor to assist the entire staff in dealing with the trauma of the hurricanes.

Similarly, what would be your proudest moment to date? I am not sure I have a proudest moment but I am proud of the team at OW. I am proud of the work that we do in the community, which as a policy we tend not to advertise. I am proud to be able to lead my team in what I think are challenging but exciting times, and I am proud that they appreciate the job that I am doing and my management style – well, so they have said!

How would you describe your leadership style? Essentially, I’d say I have open door leadership style, but after that, I’d describe my approach as very pragmatic and inclusive. First, I don’t believe in meetings for meetings’ sake and I don’t support long meetings. I encourage collaborative but decisive action. A meeting agenda is presented and at the end everyone knows the vision and mission and what action

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THERE ARE MANY FACTORS THAT CONTRIBUTE TO THE LACK OF WOMEN IN LEADERSHIP BUT IN MY OPINION ONE IMPORTANT FACTOR IS THE LACK OF MENTORING. I BELIEVE ACCOMPLISHED WOMEN HAVE A RESPONSIBILITY TO PASS ALONG THEIR STORIES AND ENCOURAGE WOMEN COMING UP IN THE RANKS.

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Why [the move to] New York? Why not Hong Kong, Shanghai, Singapore or Dubai?

On the lack of women leaders in BVI...

belongs to them. I strongly believe that everybody needs to buy into whatever is on the table. When people are part of the decision process they have a better grasp of the firm’s direction and take ownership of their part. So, when we make teams to develop ideas, we include someone from each department: a paralegal, associate, secretary, administrator, marketer, and lawyer. That ensures that we work as a firm and row in the same direction. That’s why it is important for all our staff to be involved in our strategic planning. Before our last planning retreat, our facilitator came in, met with the staff for two days, and listened to their ideas. When he came back with the plan, he shared that plan with the staff and as it evolves I try to keep them engaged through staff meetings, email updates, and just general lunch room chatter.

What are you currently reading? I tend to read non-fiction. I’ve been trying to read Michelle Obama’s new book, Becoming, for the longest time. Normally I’m an avid reader, but for some reason I’m struggling with this one. I was invited to participate on a panel to discuss aspects of the book and women’s issues in general. It was a great discussion, it was honest and sincere. I’m not sure I’ll ever finish the book, but being a panel member exposed me to other perspectives which I appreciated.

Globally, particularly in the US, women are clearly stepping up to the plate. You look at the Democrats, there’s no shortage of competent women who are moving up. Similarly, here, women have always played a very pivotal role. It’s not the same, but there seems to be finally here a movement in that regard. How do you see that evolving? Women in leadership is evolving in the Virgin Islands. Financial services, in particular, is very much a boys’ club. I sit on committees where I’m the only woman. There are many factors that contribute to the lack of women in leadership but in my opinion one important factor is the lack of mentoring. Even if it’s

not formal mentoring, I believe accomplished women have a responsibility to pass along their stories and encourage women coming up in the ranks. I was never mentored, but [former BVI Finance Interim Executive Director] Lorna Smith and I are close, and she was always someone who gave me advice and criticism whether I wanted it or not, good or bad. Growing as a professional, gaining confidence, and honing your skillsets is best accomplished with a guide. The path is smoother and missteps can be avoided. Men create these relationships in different ways, they may meet on the football field, play a game, create a kind of bond in which they exchange ideas, encourage each other etc. But many women, although they do meet over sports or other social activities, tend not to have the time to make the most of such relationships. The fact, whether we like it or not, is that, often, women are juggling a million different responsibilities that compete for the little free time they have. This is not knocking men, it’s just what it is. It’s difficult. But, somebody who’s been through it can tell a young woman how they handled such things and even influence their decisions to make a difference. We started having a “ladies” dinner night for our office. Not a lunch, because a lunch is too rushed. And one of the things that I would say to our group is to make sure your life is full. Yes, you’re in a career but you need to live life. Okay, I’m impressed that you’re here until ten o’clock at night, but what else? You don’t want to burn out at 40 and have regrets because you haven’t achieved certain dreams or desires in other areas of your life. That’s something I try to pass on. | BB

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