Shaw resumes battle to make Jamaica an International Financial Centre

BY BALFORD HENRY Senior staff reporter balfordh@jamaicaobserver.com

Saturday, August 06, 2016

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Minister of Finance and the Public Service Audley Shaw says that the new international finance servicing bill he tabled in Parliament recently, will facilitate a climate of credibility and efficiency in the operations in Jamaica.

"This Bill is tabled to show that we are putting together all the features to give it the necessary instruments of credibility and efficiency," he told the
Jamaica Observer on Thursday.


Shaw was clarifying the issue of whether he had tabled the new Bill, "The International Corporate and Trust Services Providers Act", at this time because of indications that the major global environment was more accommodating of an international financial centre (IFC) in Jamaica.


Shaw had championed the idea of making Jamaica an IFC in his first term as Minister of Finance and the Public Service in the Jamaica Labour Party (JLP) administration of 2007/2011. However, there were indications that the then Opposition wasn’t sure about the feasibility of the idea.


Responding to concerns from Opposition member Ronald Thwaites, in the House of Representatives in 2009, on whether positioning Jamaica as an offshore centre while the US and Britain had indicated that they would discourage companies from using offshore facilities, Shaw denied that he envisaged an offshore banking operation.


"The concept of the IFC represents another innovative and pragmatic mechanism through which the Government will seek to unlock Jamaica’s potential, as a player in the global financial market," Shaw told Thwaites.


Governor of the Bank of Jamaica, Brian Wynter, also raised concerns in 2011, stating that IFC in Jamaica would pose "major potential dangers" to the country, if not properly regulated.


"Many IFC institutions are branches or subsidiaries of conglomerates whose structure pose a potential danger to financial stability," Wynter stated then.


"Opaque and complex financial structures and relationships of IFC institutions make the host country’s domestic financial sector vulnerable to contagion effects and pro-cyclicality in financial markets," he added.


He said that those risks were even greater in instances where the IFC has both a local and offshore centre, that are not subject to ‘effective cross-border consolidated supervision’.


He called for a ‘strict’ and ‘efficient mix’ of regulatory control in the establishment of an IFC in Jamaica to mitigate the potential risks to financial sector stability.


However, Wynter admitted that if the plan was successful, Jamaica would join the ranks of other IFC countries in the Caribbean including the Cayman Islands, the Bahamas, Barbados, countries of the Eastern Caribbean Currency Union (including Antigua and Barbuda, Dominica, St Lucia and St Kitts) and the British Virgin Islands.


He pointed out that IFCs were "an instinctive response for these tourism dependent countries ...to diversify their economies, as tourism proved to be an insufficient engine of growth".


Wynter pointed to the estimated 10 per cent growth in GDP the IFCs have contributed to the economies of Bahamas and Barbados, the 15 per cent of corporate taxes, 20 per cent of financial sector employment and 30 per cent of total foreign direct investment (FDI) it contributed to Ireland’s economy.


He said registration fees collected from IFC institutions in the Cayman Islands and BVI amounted to 15 per cent and 50 per cent of government revenues, respectively.


"In fact, there exists strong empirical evidence that indicates positive growth externalities from merely being in close geographical proximity to an IFC country," Wynter said.


The government cleared the way for the Jamaica International Financial Services Authority in February 2011, to develop Jamaica as a centre for international financial services in the Caribbean.


Shaw told
Sunday Finance Thursday that he is confident that the concerns raised in the House of Representatives, and by the BOJ Governor, are all addressed in the new Bill.


"This Bill provides the assurances to our partners that this is not a new tax haven, but another version of the BPOs — like an offshore office specialising in finance," he explained.


Shaw tabled his Bill at the last meeting of the House of Representatives on July 26, before the start of the current summer.


The following day he got what appeared to be collateral backing from Opposition spokesman on industry, investment and commerce, Anthony Hylton, at Mayberry Investment’s monthly forum at the Knutsford Court Hotel in New Kingston.


Hylton told the forum, which focused on projections for Jamaica’s post-Brexit economic fortunes, that an international financial services centre would have to play a "huge role" in the Jamaican economy.


He said that Jamaica has to recognise the global economic reconfiguration over the past two decades, and how the United Kingdom has strengthened its position and established itself as a global leader in financial and investment services over that period.


Shaw’s new Bill, the International Corporate and Trust Services Providers Act, says in its Memorandum of Objects and Reasons that the International Financial Services Authority (IFSA) will be responsible for regulation of IFC institutions in Jamaica.


The international corporate services include (a) providing to an international entity the services associated with the formation, management or administration of a company, partnership or other legal entity; (b) acting as a director, secretary or similar officer of an international entity; (c) the provision of a registered office, place of business or address for an international entity; and (d) serving as a nominee shareholder in an international entity.


International trust services include the services associated with the creation or administration of a trust and acting as a trustee in relation to a trust.


Among other things, the Bill aims to promote and maintain high standards of conduct, ethics and competence in the provision of international corporate services and international trust services, and seeks to ensure that international service providers adhere to modern, internationally acceptable standards of best practices.


It adds that, "Jamaica has highly trained accountants, attorneys-at-law and other professionals who can provide the required professional services for corporate and trust businesses at competitive rates."


It is anticipated that the provision of these services will create significant job opportunities for professionals and others.


 

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