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Until The Bahamas adjust aspect of its model or approach to delivering financial services it will be vulnerable to the vagaries of international (supra-national) agencies and developed countries seeking to destroy it as an offshore financial center. Until it become more responsive to the fact that competitive strategy must be influenced by local stakeholders, the potential economic value from the industry will consistently underperform.

In 2018 there was a great flurry of action as the EU included The Bahamas on its adverse listing. The end result was that the country was “quickly” removed from the listing, as had been foreshadowed by the Deputy Prime Minister. At the time the issue at play appeared to have been largely “administrative” in nature. This brought to an end another obvious close-call episode, which could have had detrimental consequences. Another attack on an important piece of the economic arrangement of the country!

Two years later and we are back at it again. The EU making it clear that the Bahamas will not exit its adverse listing this time until and unless it makes changes to its tax regime. Very colorful language was reported to have been used to describe the situation. According to the Attorney General, Carl Bethel, senior European Union officials and politicians have warned The Bahamas: "We won't take our foot off your neck until you implement a corporate income tax”. It was noted that there was "nothing The Bahamas can say or do" to alter the decision.

Whether we want to acknowledge it or not, there is no way of stopping the EU and others. They will keep coming after The Bahamas. We are all wise enough to understand the end game. For all the institutions which level attacks on The Bahamas and other jurisdictions, this is about repatriation of capital or opportunity to eliminate offshore jurisdictions as avenues for tax planning, thereby securing more taxes from its citizens. In the final analysis, the financial services industry and the economy will take a hit if the response to this initiative is not effective.

In 2003 the Internal Revenue Services (IRS) unveiled its Offshore Voluntary Compliance Initiative. Back then I wrote in a paper carried by The Tribune, “This programme, lauded by IRS personnel as sound tax administration, designed to root out tax evasion, carries with it some very serious implications for offshore jurisdictions. So much like the cleverly crafted Patriot Act, the initiative comes armed with the ability to catch the proverbial horse that has escaped while attempting to effectively lock the gate”. The underlying principle of that initiative continues to be seen. However, since then the game has changed, the subtleties are gone and we have now evolved to “in your face” discussions with admission of having foreign body parts fully planted on delicate parts of our anatomy, a symbolism which has certainly taken on great prominence in recent days.

This is certainly not a positive situation for The Bahamas. The upside though is that, seemingly, it is occurrences such as these that cause decisions, which should have been taken long ago, to get the appropriate attention. The country seems to always be able to extricate itself, all be it temporary, from the onslaught of these attacks. That though is only true when viewed from the discontinuation of whatever listing or action is being taken against the country. When viewed through the prism of the impact on the industry over the years every single one has had incrementally negative impact, the industry has contracted over the years.

This initiative could have the same effect with a deeper implication. It must be viewed against the backdrop of the current circumstances of the country. The Bahamas is grappling with a global financial crisis. The largest contributor to the economy, the tourism industry, has seen significant curtailment as a result of COVD-19. While tourism contributes more as a collective, the financial services industry provides higher paying employment, contributing approximately 27% to GDP. COVID-19 has shown how vulnerable the economy is. With uncertain ongoing impact on tourism, protection of other industries becomes paramount.

This new initiative takes on greater significance in light of a projected deficit of $1.3 billion and in the aftermath of a very destructive hurricane, the remediation of which is still at rudimentary stages. One thing which should not be lost on anyone is that the tax revenue space for the country has always been narrow and insufficient; the country runs significant deficit each year. There are questions therefore as to whether the current tax regime of the country is effective, is it serving the country well, and has the differential treatment between domestic and offshore segments of the economy adversely affected the country’s growth. The questions therefore are: should the Bahamas pursue a corporation tax regime which will address the EU concerns? And how will such a regime change be for the viability of the offshore industry?

There is a clear dilemma here and no one should pretend that this is easy for policy makers. There could not be a worst time for the country to be dealing with this issue. However, in my opinion, if the situation or circumstance is properly assessed, analyzed and solutions effectively executed, positive benefits could accrue, chief of which is a broadening of the country’s tax base. What is clear though is that failing to take serious and strategic action will place the country in an imperiled position. One thing which continues to become clearer is that The Bahamas has to take a deep and well considered, broad based look at the financial services industry and certainly a very clinical look at its tax regime. The way forward demands this. Left undone the attacks will keep coming with the eventual potential loss of critical mass.

In 2010 I wrote a paper entitled “Assessing the Strategic Approach to Growth and Development of The Bahamas Financial Services Industry”. Part of the opening statement taken from that paper reads as follows: “A careful assessment of various policy making and interest groups within the Bahamian Financial Services Industry (FSI) will reveal a real and overt aspiration to become or being seen as a leading International Financial Centre (IFC) jurisdiction. However, that same careful assessment would quickly reveal that there is no clearly articulated, comprehensive and cohesive vision, plan or strategy to achieve this noble objective”. Since that time the National development Plan was drafted but to date has not been “ratified”. While it makes an uncomfortable discussion in certain quarters, the truth is that there is a need to rethink comprehensively the underlying construct and arrangements of the industry.

The recent listing of The Bahamas, by the EU, brings a number of questions to mind. While in many instances the matter has been discussed, abstractly, as another occurrence to be addressed or survived, in my mind there are more fundamental issues at play which go to the heart of the well-being of the country and its economy. What is the strategic outlook for the financial services industry? How will it look after the fundamental shifts which may be needed to address this initiative? Is there a need for a definitive reengineering, reorganizing and restructuring of the FSI and what will that look like? Is the Bahamas serious about extending its growth as an OFC, in its strictest sense? Is the Bahamas value proposition at risk of diminishing? Can the Bahamas remain competitive? How can it be better structured to balance the need for diversification? If the Bahamas were to see significant loss wat would that mean for the country? How serious is the issue of corporate taxation to the resolution? Is there a national will to move in this direction?

The play book seems to be the same each time The Bahamas happens to find itself on another adverse listing. We do what is necessary to be removed. Unfortunately, in my opinion, the same scene is likely to play out forever and a day in the future unless there is a fundamental shift in the management of matters impacting the sector and a serious rethink of the approach to managing the industry, led from the policy level of the country. I admit that the delicate balancing required, and the dilemmas faced are real and therefore there is always the temptation to address the short-term issues only. However, it is only when looked at through long term lens that the proper perspective emerges. Again, I remind that the current matter is not typical but its occurrence, together with other past events, suggests and underline the need for a more defined and structured look at the industry and by extension the economy.

Remedial responses to these blacklisting initiatives demand a comprehensive and collaborative strategic outlook. There must be a view of how to protect the quality of the economic arrangement within the country, on a sustainable basis, for the benefit of the country and its citizens. The continued tactic of ad hoc responses is not sustainable as it plays to the aggressors’ objective. Each response erodes aspects of the industry and weakens the economy. The time has long passed for us to become proactive in charting the future of the FSI for the next ten, fifteen, twenty years. The time has come for the adoption of a real strategic approach in growing The Bahamas FSI. There is a clear argument to be made for a clearly evident, and nationally appreciated, strategic approach in the management of The Bahamas FSI. We will explore this is the following section.


The need for a strategic approach is not a difficult argument to make. What becomes challenging is becoming comfortable with the potential disruption which will necessarily be cause by changes. Strategically though an analysis of any potential outcome as a result of doing nothing ought to make the former situation more palatable. Additionally, there disruption to be cause is likely to be much more advantageous compared to what will inevitably result should there be no changes.

As a jurisdiction with no income tax, The Bahamas faces a myriad of problems including constant attacks from tax jurisdictions, for example USA, EU, and organizations such as the G-7, OECD, FATF and FSF, all formed to protect the interests of developed economies. With these pressures and the recognition that past approaches to the provision of financial services, especially in the offshore banking arena, are no longer viable, the country needs to become more proactive to changes and developments taking place globally. With greater demand for “more tax compliant” financial centers there needs to be an urgent and fundamental rethink of the country’s approach to developing, marketing and positioning itself as a financial center. There must be a clear strategic national consensus to the development of the financial services industry.

One critical element of this analysis is that over the years there is a general perception that government’s role as strategic planner and implementer may have had fundamental and negative impacts on the deployment of effective strategies. This is especially so in terms of timeliness and clarity. The result is that the strategic stance and growth of industry is effectively impeded due to lack of agility and clarity of intent, not at a disparate industry level but rather a unified national position.

The extent to which our current ad hoc approach is pronounced can be seen from a 2009 National Economic Summit (NES) report. It states in part, on page seven (7) of the report “The Bahamas does not have clear national goals and a strategic plan. Too much of what we do is done in an ad hoc way…. National aspirations should be clearly stated. In order to pursue any goal, it is necessary to first build national consensus in support of the goal. Secondly, employ high level policy analysis and planning to outline the ways and means of achieving the goal in the most cost-effective and efficient manner taking into account the relevant trade-offs that would have to be made in the economy.…We recommend that broad national goals and a strategic plan be formulated to be achieved in specific time limits, that is, short term, medium term and long term. The national goals and strategic plan should reflect the collective effort of persons throughout The Bahamas. Once done, policy makers should obtain strong commitment from those responsible for formulating, implementing, monitoring and measuring progress of the strategic plan. In turn, the policy makers should create the environment and make available the necessary resources needed for successful implementation.”


Clearly the draft national development plan was conducted with a view of driving the overall direction of the economy, creating a road map and vision. There are several strategies, noted in the draft document, which are targeted at the FSI and which analysis will show support of the main argument here. The general gist of the challenges identified speaks to the fact that a more strategic approach is needed. Taken from page 401, the national development plan proffers the following:

  • The Bahamas will become a leading global financial services center which is internationally connected, diversified and resilient. This formulated to address identified challenges such as Changing dynamics of the Financial Service sector, Economic diversification; and Rankings on the Global Financial Centers Index;

  • Improve the competitiveness of the IFS by ensuring that the best talent (human capital) and infrastructure (business and quality of life) is readily available to the sector. This addressing challenges of Contracting offshore financial sector as firms struggle under the international pressures; Need for revision of the policy environment to encourage innovation and skills development; Lack of linkages to the rest of the sector; and Education reforms to ensure that there is sufficient human capital to fuel the growth of the sector over time;

  • Position the prudent and responsive policy and regulatory environment of The Bahamas’ financial services sector as a key asset for the growth of the sector. This will address Regulatory overshadowing of the sector; Inconsistent approaches to policy development by regulatory institutions; and new product development;

  • Ensure that the international financial sector provides greater direct and indirect value added and employment through and increase in high quality business establishments, diversification of its products; innovation on the market; the creation of supporting clusters and stronger Bahamas brand recognition. This to address challenges of Bahamas brand identity is vague and misperceptions linger; Low value added from the current product mix; and Need to penetrate new markets.

When note is taken of the challenges listed above, the issues to be addressed by the strategies proposed, it becomes clear that a structured approach is needed as these are fundamental issues with deep implications for the jurisdiction. There are some obvious gaps highlighted, some of which became the topic of significant discussion recently on the occasion of the EU’s blacklisting. When the news emerged that the EU would place the Bahamas on it non-cooperative listing there was a clear sense of exasperation from the public followed by the usual outflowing of critique and analysis. There was the lashing out against the EU of having an agenda specifically for The Bahamas and more generally for offshore jurisdictions.

I make the argument though that until and unless we start to look at ways of taking full control of the strategic initiatives impacting the industry we are always going to be at a disadvantage. The industry demands active and proactive strategic planning, looking at the various options available to secure real advantage. This is an exercise which calls for the best committed minds available. My view is that at the heart of a strategic thrust The Bahamas must no longer be a jurisdiction which moves to the collective strategies of international corporates but rather become an attractive entity which offers a compelling value proposition from a position of strength which becomes the reason international corporates elect to offer their service from The Bahamas. The propositions of the national development plan may be a good place to start but what is most important is that it should be done with great urgency.

The Bahamian economy is essentially based on two major pillars, tourism and financial services with a very large concentration in tourism and tourism dependency on the US market. Notwithstanding the need for economic diversification, the FSI is a very viable candidate for development. It clearly has great potential for growth and for making a greater contribution to the overall economy. A 2007 study conducted by Oxford Economics discusses the economic contribution of the FSI to the Bahamian economy. According to the study “Financial services play a crucial role in supporting the Bahamian economy, both directly by providing highly rewarding employment opportunities for Bahamians, and indirectly by procuring from and providing vital services to other key sectors of the economy, such as tourism and real estate, and to individuals.”

Some highlights of the Oxford Economics findings were: “Approximately 27% of Bahamian GDP is directly or indirectly attributable to the FSI, making it the second most important industry in The Bahamas, after tourism”; “Financial services support around 22,000 jobs [based on anecdotal evidence there has been reductions here] in The Bahamas, over 13% of total employment”; and “ The job opportunities in the financial services sector are among the best-rewarded jobs available, attracting wages of B$48,000 in the banking sector and B$42,000 in the insurance sector - between 75% and 100% higher than the national average of B$24,000.”

We see that while contributing much less than tourism, in real terms, the financial service is clearly positioned to positively impact the wealth generation of the country. At twenty seven percent there is a clearly greater upside which can be garnered from the sector. National experience has shown the most significant investments in the tourism sector are FDI based and generally it is a capital-intensive sector. This reality tends to exclude deep domestic participation at the ownership level. The financial services sector on the other hand holds the potential for greater domestic participation given its greater reliance on expert skill and labour intensive leanings.

Included in my 2010 paper is a surveyed comment secured from a player in the sector. It reads as follows: “One of the main problems with The Bahamas' Financial Services Industry is the apparent lack of a strategic vision and plan. Questions such as: Where is the industry going? How are we getting there? Is that the direction we should be going in? Are we moving in that direction because we plan to, or are we responding to internal or external promptings [?] need to be addressed”? This comment underlines a perception that there is a lack of cohesive planning and that the Bahamas FSI is one which consistently reacts to pressures, both internal and external, rather than charting a define course to secure a desired future outcome. It is often difficult to connect the dots looking forward; however, a glance backwards can be very instructive. The past is not always a precise predictor, but it provides evidence of patterns, habits, responses and behaviors that may portend the future. Importantly it allows analysis of actions tied to results and therefore provide a baseline for making future adjustments.


To date The Bahamas main appeal has been the fact that it is a jurisdiction with a “light touch” taxation regime for international entities. This is, however, changing rapidly and there has been incremental but sustained pressure being brought to bear which is undermining the singular attraction as a no or low tax jurisdiction. Looking back, we will see that The Bahamas was blacklisted by the FATF in 2000. Subsequently, around 2010, identified by the OECD as being a non-cooperative jurisdiction and carried a further label of being a tax haven. Significant pressure was being placed on the country by supranational agencies. A declaration from the G-20 Summit held in London, England, April 2009, declared in part, that “The era of banking secrecy is over”. Back then the G-20 was demanding that all countries adopt the international standard for information exchange as outlined in the UN Model Tax Convention and signaled their readiness “to take agreed action against those jurisdictions which do not meet international standards in relation to tax transparency.”

For The Bahamas, that state of affairs pointed to significant future challenges and which could effectively erode and could eventually eliminate the most compelling rationale for doing business here and hence the attractiveness of the country as an OFC. The 2018 action by the EU brought forcefully to the forefront that the risk of erosion was real and will not go away. In response to the EU blacklisting there were arguments being floated at the highest level of governance of the industry on corporate taxation. There were clear overtures that corporation tax was definitely to be a no-go area. In 2020 the “foot on your neck” initiative looms large. So too does the “nothing you can do” response.

The one thing that is true about these ongoing initiatives is that, over time, they have become more effective and more efficient. They effectively force jurisdictions to paint themselves into a corner ultimately eroding options. This is aided by slowness of response and concurrent escalation of aggressive demands by the external entity. The way to get ahead of this is to seek to control the floor to any extent possible. Again, this becomes easier seen over the long term. Limited by consideration of now and electorate reaction will always result in a suboptimal response. This is a response which solves the issue for a moment, a response that comes with a price but little or no incremental gain, a response which protects the pie and plays to a narrative which suggests that compared to the alternative of losing it all this is a good outcome.

All things considered; The Bahamas faces some important issues which goes to the very survival of the industry. The issue here is simply this, until and unless there is a comprehensive analysis and assessments, taking into account not just the immediate issues before us but also considering all the linkages, interlinkages, potential spill-overs, cluster impact etc., there will be no clear understanding of where the industry truly stands nor a clear view of its potential future direction and gains.

While we tend to discuss matters in abstract and as disparate considerations, consider this. Back when The Bahamas made its “service only” offer under the EU Economic Partnership Agreement (EPA) it was called “into question” by the EU as possibly not going far enough. The EU was then on the prowl. The pressures back then from the G-20/OECD with their call for tax transparency, were fundamental game changing events. At the time we concluded that the changes that would be required to overcome the challenges would be very fundamental. Whatever they would eventually result in would have significant influence on the continued existence of the offshore aspect of the FSI. We now see this to be the exact case as while the focus has shifted from the OECD it must be noted that the EU’s latest initiatives are inextricably linked to the OECD harmful taxation initiatives. All have become part and parcel of the same effort and that is to repatriate tax revenue which they claim is rightly due to their various jurisdictions.

There is no indication that these efforts will relent. This makes the argument unequivocal. The way in which the financial services sector is organized and positioned will continue to face pressure to change. In the absence of careful, forward looking and strategic planning, there are clear risks of the industry being seriously “damaged”. It must be accepted that in this process there will be disruptions, however, we must not cower at the idea of being disruptive at the risk of putting at detriment an entire sector and a significant, approximately one-third portion of the economy. Accept the fact there will be ongoing challenges and become comfortable with the idea that The Bahamas will, until a more defined approach is taken, be significantly susceptible to the vagaries of the demands and designs of the developed and most influential economies of the world. Marcus Aurelius stated that the ‘obstacle is the way’. This is true but defining the obstacle is critical. In this instance the obstacle is not simply overcoming the EU or any other supranational demands, the obstacle must be seen as the eroding ability to maintain a vibrant economy and the eventual impact that losing the FSI would have on the standard of living of the country.


The following recommendations are outlined in three specific segments. The first are big picture positions, which seek to create a basis for thinking and operating way into the future. It addresses matters which, if properly contemplated and implemented create a situation which has continuity. Continuity is very important because of the political interplay with the industry. Parties generally think within five-year cycles while the interest of the industry ought to be considered over longer horizons.

The second section focuses on impacting the value proposition, seeks to bring focus to areas which when addressed will improve the market perception of what it gets for the value it gives up. These are areas which are value creating and go fundamentally to the efficiency and effectiveness with which The Bahamas will be able to deliver to an ever increasingly sophisticated and discerning market and positively impact its value proposition.

The final section deals with product development, calls for the focus on a specific class of products or the way in which product development is approached in The Bahamas. It seeks to underline the need to a total rethink of product development and how the market is made aware of new products. It seeks to apply corporate strategy in securing some element of surprise to the market while looking at the entire industry machinery and building it in a manner which enables it to deliver products, or adjustment to products, which are not easily duplicated by other jurisdictions in a very short time.


As the Bahamas seek to grow and develop its financial services industry (FSI) there are certain fundamental changes which need to be addressed. To date, based on research and analysis of the country’s performance across a range of areas, it is clear that individual corporate strategy is the major engine behind any impetus within the industry. The argument being proposed here is not that strategy ought not to be the concern of companies. This is in fact the case. However, there is a larger issue of how the location (country) of the companies influences strategic activities and how the cumulative outcome of such strategies influences the competitiveness of the location (country). This appears to be one of the main areas of weakness for The Bahamas. It seems that a more cohesive approach to addressing the country’s competitiveness, as it relates to financial services, is needed.

In his book, The Competitive Advantage of Nations, Michael Porter stated the following: “A firm’s home nation shapes where and how it is likely to succeed in global competition”. It follows therefore that the likelihood of success is based on factors within a nation which will determine whether companies will locate there. Porter argues that “within an industry, a nation’s circumstances also favour competing in particular industry segments and with certain competitive strategies”. The Bahamas cannot be considered home for most offshore companies, but this is where the opportunity exists. For growth to be realized where the potential for headquartering emerges and almost substantially present, the country must be seen to have clear advantages. Thinking in this direction can separate us from the rest of the region all of which are pursuing the same “me too” strategies.

Extending this argument, the country’s advantages of the industry construct, facilitates, or limits the range of successful strategies which can be employed. Industry arrangements exert strong influences on corporate strategies and therefore provide a basis for driving competitiveness relative to competitor nations. By extension, the country through national or industry leadership have significant influence in framing the competitiveness of that industry and signaling the direction of corporate strategies. Implemented effectively these strategies lead to greater productivity, enhance wealth creations and the potential of sustainable competitive advantage. The Bahamas financial services industry must be looked at in this light if it is to secure long-term growth and development. Against this backdrop I offer the following suggestions:

  • Financial Centre Vision - A unified team of professionals from the Association of International Bank and Trusts, the Clearing Banks Association, The Bahamas International Stock Exchange, related industries (legal, real estate, accounting, maritime etc.), in conjunction with the government representatives, representatives of all major political parties should be created and task with articulating a clear and sufficient long term (must exceed a single government cycle) vision for achieving the status of advancing beyond being just an offshore financial center to one that takes on more characteristics of a full international financial center. The discourse and vision development should be facilitated by a comprehensive study of economic data and information relative to the industry. The vision should be developed within the context of a national outlook and should be clear in signaling intent and direction for the benefit of the industry and country. The vision should clearly define the strategic goals. These strategic goals should be based on competitive analyses. The Bahamas should end up with a clearly expressed vision for the FSI.

  • Strategic Goals - Assess and determine the areas in which The Bahamas wishes to focus its competitive efforts. Once areas are agreed they should be effectively communicated to the industry in very clear, understandable and measurable terms. In developing the strategic objectives, The Bahamas must seek to position itself to be seen as a leader in the select areas of competing. This is critical as a perception of being a laggard, works adversely with respect to being recognized as a globally competitive financial center. The Bahamas has significant strength in the areas of private banking, wealth management and trust services. Relative to competitor nations there are weaknesses which should be addressed in setting strategic goals. For example certain strategic goals can be articulated as follows: Leader in private Banking, Wealth Management and Trust Services; Expand overall asset under management to $B in five years; Increase hedge fund business by x% and surpass Cayman as leader within x years; Capture 10% of the regional insurance and captive insurance market; Become the number one city to live within the Caribbean and the capital (Nassau) being one of the top 5 attractive cities in the Americas; Number one stock exchange in terms of market capitalization and diversity of listings within the Caribbean.

  • Industry Cluster - The industry cluster shows the core of the industry with supporting segments and institutions. The implementation of a vision to advance beyond being just an offshore financial center must be approached from the perspective of optimizing and enhancement of the industry cluster. Assessment of the industry cluster for The Bahamas financial services industry will highlight various positives and negatives of the industry when looked at in terms of the determinants of competitiveness. By focusing on these models and seeking to correct weaknesses and enhance strengths, policy makers can influence competitiveness. Government will play the active role as facilitators of the industry with efforts driven by the private sector/industry organizations. Strategies employed by the various companies within the industry will then likely to play to the industry strengths thereby furthering the thrust toward the stated vision. This approach ignores individual companies and focus on broad base actions designed to achieve a predetermined outcome.


Regional or similar sized competitor jurisdictions essentially have the same value proposition as The Bahamas. What becomes clear relatively quickly is that there are marked differences in how each do the same thing, the extent to which it is done and the value it communicates to investors. Their tax, regulatory and legislative regime operates on similar principles. The implementation within each of these categories is usually the differentiating points.

According to a paper by the Securities Industry Association “Many diverse factors contribute to the creation of a long-lived and reputable world-class financial center. They reflect some combination of at least four important features: 1) a stable and open political and economic regime; 2) fair, transparent, efficient and reasonable legal regulatory tax regime; 3) a skilled labour force and flexible labour regime; and 4) high quality physical infrastructure.” Clearly a number of these are present in the Bahamas but to create a major strategic shift all must be comprehensively looked at.

Therefore, beyond the creating of a big vision and tinkering of strategic arrangements, there are necessary and practical matters which must be addressed. These factors impact the value proposition of the financial center and become fundamental to it being long-lived, reputable and world-class. This section of the recommendation tackles this reality.

  • Legal and Professional Services Sector The Bahamas should consider how it can open up the legal and professional services sectors to competition. To create greater vibrancy, international practices need to be allowed to create physical presence in The Bahamas, providing services on a competitive basis with local practitioners. While there is some level of competition in other professional areas, the legal sector is generally closed to foreign practices. Any ambition of advancing beyond what currently exist will require a careful look in this direction. Against the backdrop today of an economy struggling, the leading industry limping, it is imperative that all productive capacities and avenues are leveraged for the benefit of the country. The legal sector represents an important part of the financial services cluster and can provide significant market access, for example, especially in the area of fund management. A continued closed approach in this sector will continue to exert negative influences on the development of the financial service industry.

  • The Taxation Regime The Bahamas should set up a task force, of local participants with support from tax experts to study and make recommendations on the future taxation regime which The Bahamas will employ. The terms of reference should be to recommend the best approach having studied the full range of options available. The objective is to implement a regime which facilitates government recurring obligations; provides for capital and infrastructural development; and allows the country to effectively manage fiscal deficit and government debt, without harming the attractiveness of the jurisdiction. The recent EU demands could create some urgency here. In my opinion, there are limited options and therefore a full study should be taken with the eventual solution being informed by same. There is a clear recognition that this issue is a politically sensitive and emotive issue for the country. However, the assessment must be done within the context of the continued viability of the current arrangement and the extent to which the future development of the Bahamian economy will be impacted. Propose changes must seek to address the fact that government revenues have shown evidence of shrinking and the fact that a topflight financial service requires the existence of a well-functioning economy where fiscal deficits are controlled, and the performance of the economy is healthy over time. The method of taxation should keep in mind the need for The Bahamas to remain competitive as a jurisdiction and should not erode its value proposition. I am aware of work which was at least started in this area but not sure what is or if there is in fact any definitive conclusions. Those studies must now be completed, and the national discourse initiated with a view of determining how a decision will impact the economy. It is possible that the answers already exist. Therefore, if the “foot on neck” threat is real, the space for maneuvering is limited and what must be focused on, is how to best implement a direct taxation system without harming the local economy. I will return to this in a subsequent paper.

  • Infrastructure and Cost of Doing Business - Generally the infrastructure of The Bahamas can be considered reasonable but needs further improvement and development. The cost of doing business in The Bahamas tends to be high but it holds an advantage of location, currency value and population size over the regional jurisdictions. Reducing the cost, operating from the Bahamas will increase its advantage and positions it to be more attractive to investors. In this regard attention must be placed on BPL as a means of reducing the cost of energy. The recent thrust to privatize and liberalize the telecom industry is paying dividend. The same approach may be required for other utilities. Physical infrastructure such as airports, seaports, roads, attractions and office spaces must continue to form part of the focus of the principals of the financial services industry. The project underway with the port in Nassau and discussion around redevelopment of Bay Street should be seen as important linkages with the financial services industry. The general environment within which a financial center exists must be of a consistently high standard.

  • Educational Strategies for Financial Skills - The government must immediately move to establish a long-term strategy for addressing educational training with direct impact on the financial services industry. The long fore-shadowed creation of a chair at UB for financial services studies should be initiated and developed with a sense of urgency. While UB will be the point of output for the industry there must be clear linkages to the secondary level of the educational system. Defined strategies must be employed to secure more finance/banking inclined students flowing into the tertiary system. As a matter of national policy, the Ministries of Financial Services and Education should work out annual plans for skill development geared at the financial services industry. Efforts toward specialized studies emanating from UB should be assessed by these two ministries on a collaborative basis. Skills development should not be limited to formal educational pursuits. Through public /private partnerships creative means of expanding the knowledge base should be explored and implemented. Areas such as mentorship, secondments, tour of duties can be addressed at policy levels. Inducements for employers to train should be actively enforced within the immigration regime. The government should also consider creating means for incentivizing long term training programs. The ever-changing nature and complexity of financial services demands that studies in the areas such as financial engineering and risk management become more central to the skill set being prepared for in the industry. These areas, as examples, represent viable options for offshoring for major international financial organizations. The development of educational standards must necessarily be looked from an economy wide perspective and as a strategic imperative for economic development. However, to be impactful for the financial sector there must be dedicated policy makers looking out for the interest of the industry in this regard.

  • Capital Markets and Stock Exchange - The approach to capital market development needs to become more focused and holistic. All government securities should be immediately listed on BISX. Initiatives to increase education and understanding, within the general population, on how capital markets and investing work must be immediately employed. Both BISX and industry regulators should be mandated to provide this kind of information for general public consumption. The embedded actions of the investing public are now “buy and hold” which fails to fuel the market. Consideration must be given to the need to further liberalize the exchange control regime to eliminate the restrictive influences it has on the capital market and the flow of capital into and out of the country. This is recognized as an area requiring very delicate and careful balancing. While immediate dismantling is not be an option there should be a clear signal as to the extent to which the government wishes to go with a reasonable timetable supported by a practical plan which does not harm the country’s competitiveness. The importance of the recommended approach speaks for itself. When we consider some of our competitors in the region it will show that all have better performing stock exchanges and relatively more vibrant capital market than The Bahamas. Wider review of leading financial centers shows that none exists without viable stock exchanges or capital market. These are imperative to the development of a competitive financial center. The Bahamas must therefore radically adjust its approach of not paying enough attention to the development of the stock exchange, especially the international side of the operation. Monetary or fiscal policies which work adversely against the free flow of capital must continue to receive attention and adjusted in a way which benefit the economy in general; facilitates growth in the financial services industry; without imperiling the current exchange regime. Immigration - The immigration department in concert with principals of the financial services industry should undertake a review of the current immigration policy with a view of determining whether it is conducive to the long-term planning development of companies and the industry in general. Any created policy should establish clear and concise service level agreements (not binding but like social contracts) between the industry and the department. I wish to reiterate the need for clear requirements for training, understudying and skill development with proper enforcement.


As indicated before, compared to certain competitors, The Bahamas shows certain strengths and weaknesses. In looking at the way forward these areas must be addressed. The main issue to be considered here is the extent to which The Bahamas can leverage its current strong points and adjust its approach to product development and marketing to create advantages for the industry.

  • Insurance/Reinsurance/Captives - Through BFSB, create a working group, being representative of the industry makeup and including domestic insurers, to study and assess how The Bahamas will jumpstarts re-entering the Reinsurance/Captivate Market. With a defined deadline the group will develop strategies with a view to attracting reinsurer and captives to establish a physical presence in The Bahamas. Relevant recommendation will be past to the government to facilitate the requisite infrastructure and legislative support. Government should commit to implementing accepted recommendations within six months. The group should be supported by paid experts with extensive experience in the field of reinsurance and captives in financial centers. Clear product development strategies should be created and implemented. Concessions should be considered to attract a core “start-up” group of investors in this area of the country. Any existing company in this line of business would be afforded similar concessions. An aggressive training program to create exposure to a critical mass of the local workforce should be undertaken. Here I am arguing for a facilitative industry strategy, as opposed to company driven, on the basis of the long-term gain which could accrue to country. Both as a product and because of the potential impact captive can have on the capital market, this is one area which the Bahamas should place significant attention. The types of businesses which captive and reinsurance introduce to a jurisdiction, create significant reputational capital. Leveraging its leadership position in private banking and wealth management is a natural extension to the industry and represents one which can provide a “quantum leap” in extending the wealth creation of the industry as well as further diversifying the country’s offerings. The overall productivity of the industry is important to the sustainability of a financial center. It is therefore incumbent on leadership to seek out areas where there can be substantial growth and exploit them. The expanded market will positively influence macro-economic variables which will in turn position the country to be viewed more favourably in terms of its range of products, economic performance and opportunities for wealth creation.

  • Wealth Management, Private Banking, Trust - The Bahamas main areas of strength are in wealth management, private banking and trust. Analysis shows that while The Bahamas maintains a leadership position in these areas of the offshore financial services arena it is not generally seen as a leader and lags in some of the more lucrative segments of that arena. Consequently, The Bahamas must leverage its position in these three areas to create impetuous and traction. This segment of the industry, supported by the regulatory machinery and BFSB could initiate creative means of developing new products and taking them to market on a proactive basis, not just in response to changes. The idea is to gain market leadership in areas which places competitors at a disadvantage, even for a short time. The longer-term impact is its emergence as an innovator, thereby creating reputational capital. Government support can be harnessed through the creation of legislation which creates the ability to add flexibility to products. For example, the ability to exempt products from certain targeted jurisdictions or not requiring re-domiciling are examples of incremental innovation which can be applied to current products.

  • Product development and Market Leadership - research shows that there are a number of products adapted to The Bahamas which were readily available in a number of other jurisdictions. The process which led to these products coming to fruition in The Bahamas is deemed inefficient. There are lengthy deliberations on the need for this product (effectively lobbying government); agreement and consensus preceded another long period of getting through the legislative process before eventually being able to launch these products. Against that backdrop the industry through government and BFSB should doggedly pursue means and create the machinery for innovation to take place more efficiently. The Bahamas must not be a laggard in the arena, belatedly adopting products which have been around for many years. While recognizing the first to market may not always be an advantage, as it seeks to enhance its reputation, the Bahamas must emerge as a jurisdiction which consistently creates new products for the marketplace. This enhances reputation and the innovation process should increase the depth of localized knowledge. As recommended, with respect to changes needed to the regulatory regime, creative means need to be found, thereby reducing the need to go back through the entire legislative process for every new product. This situation results in the industry being “legislation-pushed”. The legislative process by nature is slow and cumbersome and very public. It therefore potentially erodes any significant strategic or competitive advantage which could be secured for the jurisdiction. A more efficient process could create, at a minimum a quicker means of getting to market and on a more idealistic level market changing moves which creates an advantage over competitors.


There will be always be room for arguing the specific recommendations made above or the way I have framed the discussion. The extent to which implementation would be needed, if these were agreeable to policy makers, is likely to vary from the ways they are given here. This is because there is always a lack of readily available public information, which would allow one to be very clinical in assessing what exists and what does not. For this reason, we have left some statements very broad, depending on the underlying essence to carry the message where there may be any divergence from the realities.

What is beyond question is that there is a clear need for growth in the economy and the financial services industry provides a huge opportunity to secure same. What is beyond questioning is that a more defined approach to the development of the FSI will be the best way of securing this growth. It is also true that in the face of the EU threat the country will have to figure ways of addressing its tax regime. Any disruption or fall out from such a move can be counter balanced through economic growth. The findings of the national development plan; the findings on which our arguments are made, our paper completed in 2010; and the continued attacks against the country evidence the need for and the value of taking approach argued in this paper.

The FSI holds the potential for delivering greater value to the Bahamian economy. Against the realities of weak economic growth, a global financial crisis and the impending fall out, and a narrowing tax base, this should therefore provide the motivation to focus on creating of a new value adding paradigm. This paradigm must be centered on strategic, long term thinking, engineered to secure a redefining of the Bahamas financial services industry, an industry which will advance the county beyond being just an ordinary offshore financial center to one that takes on more characteristics of a full international financial center. As part of the recovery plan, the FSI must receive once and for all a full diagnosis with a view of extracting optimal value. For a resilient future the recovery must start today. The future of the industry and the country is dependent on bold, urgent, strategic and decisive but well considered actions.

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