Bermuda: ‘We can’t rely on international business alone for growth’

By added on 25/02/2015

Bermuda can no longer rely on growth in international business to boost the economy, Finance Minister Bob Richards said yesterday, reports Royal Gazette.

And Mr Richards added it was vital to boost tourism to stimulate the Island’s economy.

Mr Richards paid tribute to the role international business had played in the economy.

But he said: “I don’t believe the impetus for growth will come from international business like it has in the last decade. It’s got to come from somewhere else.

“We have to revitalise tourism in this country and we will do whatever it takes to get there.”

Mr Richards was speaking the Chamber of Commerce post-Budget breakfast, held at Pier 6 in Hamilton, sponsored by financial services firm PwC and moderated by PwC chief Arthur Wightman.

Mr Richards said that “somebody has to write big cheques” because an injection of capital was the best route to job creation — and that the money would have to come from overseas.

Mr Richards explained it was natural for Bermudians to think the Island was special and to love their home.

But he said: “These investors do not — they look at Bermuda as an investor, something which has to provide a rate of return.”

Mr Richards said a planned massive redevelopment of the Island’s airport was a major plank in Government strategy.

He told the audience of around 350 people that the proposed public private partnership development had “not attracted a great deal of positive publicity” and that people had “made up imaginary facts” about the proposal.

But Mr Richards said more information would be provided as the project progressed.

Mr Richards said that projects of around $930 million over the next three years would provide a boost for Bermuda.

He added that inward investment already confirmed “may not be enough and we are working on more inward investment.”

Mr Richards said: “We are certainly looking at sub-sectors of international business to encourage, to accelerate growth.

And he said that — although Government had only budgeted for 3.5 per cent in cuts, it was still hoped that the original five per cent could be achieved through initiatives like early retirement at 55 for public sector workers.

Mr Richards added: “There are a lot of ways we think we can save more money ... but I’m not in a position to put that in a Budget statement where it’s official. You can’t do that.”

He added that Government had tried to “spread the increase in taxes as broadly as the system allowed.”

And he added that the shrinking number of pupils in the school system meant “there seems to be room to cut expenses in education.”

Mr Richards said: “The education system gets a lot of money — even if the education budget is cut, it’s still well-funded, among the best in the world. The problems are not funding — it’s more systemic than that.”

He added and invitation to the International Monetary Fund’s Caribbean Regional Technical Assistance Centre to look at broadening the Island’s tax base did not necessarily mean the introduction of value added tax (VAT) — a tax on goods and services.

Mr Richards said: “They’re expert in a lot of things, not just VAT. We haven’t had a review of Bermuda’s taxes since the 1990s.

“In the 1990s, we did not have the same problems we have now, so it’s high time we got some people in who know what they’re doing. We have unique problems as small islands, so it’s important to have people with experience of small islands.”

And — in response to questions from the audience — he added that the 60/40 rule to guarantee majority Bermuda ownership of businesses “is hurting us overall.”

But he said: “Whether or not it should be abolished across the board is a much more difficult question.

“Just think where retail would be if we brought Walmart to Bermuda — they would be annihilated. It’s not simple -but we need to move towards more open markets.”

Mr Richards said a loosening off of the 60/40 rule had been “a mixed bag” with banks, but in telecommunications it had been “a success.”

Panellist Nathan Kowalski, chief financial officer of Anchor Management and a columnist for The Royal Gazette, added that there was a case that the 60/40 rule should be “potentially phased out in certain areas” to boost investment in some industries.

He said: “I think it could help in a lot of different areas — people won’t put in a dollar unless they can own that dollar.”