In as much as Jamaica is an attractive destination for foreign direct investment, the Government is moving ahead with plans to strengthen the legislative framework to enhance the country’s prospects as an international financial services centre (IFSC) by the end of the year.
An IFSC caters to customers outside the jurisdiction of a domestic economy dealing with flows of finance, financial products and services across borders. According to the Jamaica International Financial Services Authority (JIFSA), an IFSC focuses on providing an array of business development services to “support very diverse ventures” including investments, product development and the creation of new industries.
Other services rendered in an IFSC include company registration and administration, trust/trustee and directorship services, and services relating to cross border transactions such as drafting contracts and calculating net asset values for mutual funds.
In response to an enquiry from the Jamaica Observer, JIFSA noted that “Jamaica has an existing ecosystem that is mature enough to support a sophisticated financial services industry.”
Among the components it lists as necessary for a strong ecosystem to support and IFSC are: legislation, talented workforce, a robust education system that goes up to tertiary-level certification, banks with international presence and reputation, professionals such as lawyers and accountants, and an independent legal system that is linked to an international arbitration centre such as the British Privy Council or Caribbean Court of Justice.
“Jamaica has several embassies and consulates with which to further develop relationships incorporating financial services,” JIFSA also pointed out.
In terms of banking and finance, Jamaica’s history as a market for Canadian banks, such as Scotiabank, Canadian Imperial Bank of Commerce and Royal Bank of Canada, has facilitated the development of a robust regulatory financial system which works in its favour to attract investment. But while anti-money laundering and counterterrorist financing legislation are in place, JIFSA said that the regulatory framework will still need further updating to meet other international standards.
So far, the regulatory body has been instrumental in the passing of four laws to enhance Jamaica’s favourability as an IFSC — Partnership (General) Act, Partnership (Limited) Act, The Trusts Act, and The Trust and Corporate Services Provider Act.
“We have two more pieces of legislation,” Minister of Industry, Investment and Commerce Senator Aubyn Hill told Business Observer in a recent interview.
“One has already gone through to Parliament. The other one is being completed and we expect to have all of that completed by the end of the year,” he continued.
When asked to identify the two outstanding legislations, he noted that the Limited Liability Companies Bill is now awaiting the approval of Parliament while the Segregated Accounts Companies Bill was in the draft phase. The latter, he explained, would protect parent and/or holding companies from assuming the debt of their subsidiary operations.
JIFSA highlighted that the passage of the two legislations will facilitate the “next phase of marketing the jurisdiction as a financial services centre”.
For Hill, the legislative changes will not only redound to Jamaica attracting investments but is also in keeping with the recommendations of the Organisation for Economic Co-operation and Development (OECD) on best practices in financial services. One of the recommendations the OECD makes to countries like Jamaica aspiring to become an IFSC is investing in training and employing their own citizens.
In this regard, the minister explained that, “We are now making sure that we are training Jamaicans to participate in the local financial services sector because many of them are working in the financial services sectors in the Caribbean and we’re happy for that, but we want that business to come to Jamaica and we expect that to happen this year.”
In the same vein, JIFSA, which holds the responsibility of marketing and promoting the island as a jurisdiction for international financial and business services, will embark on “sensitising the local landscape about the opportunities provided by the legislation[s] to make it easier to do business…and identifying business opportunities for locals to provide financial services and support.
“For example, one of the pieces of legislation is the Trust and Corporate Services Providers Act which allows licensed entities to provide trust and corporate services. This is an opportunity for locals. We would be interested in having service providers with offices in multiple jurisdictions setting up shop in Jamaica [while] bringing their expertise and clients,” JIFSA further outlined.
While an IFSC provides an array of services to include venture capital investment, private equity, mutual funds, business process outsourcing, insurance, e-gaming and company registrations, JIFSA said there are opportunities for Jamaica to carve out its niche in areas such as infrastructure financing, financial technologies and digital assets.
This has been a long-held view of Don Wehby who served as a minister without portfolio in the Ministry of Finance and the Public Service between 2007 and 2011. Back then, when JIFSA was in its infancy, he proposed that transforming Jamaica into an IFSC would promote growth and facilitate a business-friendly environment. Doing so, he said, would result in job creation, increased government revenue, real estate development, diversification of Jamaica’s economic base and enhancing Jamaica’s presence in the international finance market.
“Over the years, we have witnessed our Caribbean neighbours take advantage of these lucrative business opportunities. The most well-known offshore centres are Bermuda, The Bahamas, the Cayman Islands and the British Virgin Islands. Barbados and Antigua & Barbuda have also successfully tapped the international finance market and have enjoyed a great deal of economic development from it,” he wrote in an op-ed titled ‘Positioning Jamaica as an International Financial Services Centre’.
“With Trinidad & Tobago also ushering in plans to obtain IFSC status, it is no surprise that some would anticipate a crowding of the Caribbean international finance market. For this reason, it is absolutely essential that our endeavours be focused and specialised, exploiting specific market niches and harnessing our competitive advantage. Trinidad and Tobago, for instance, is seeking synergies with its energy sector and Bermuda has established itself as a major player in the insurance market,” he continued.
Given Jamaica’s prominence in entertainment and sport, Wehby argued then that Jamaica could explore attracting sports figures and entertainers from across the world to engage in financial planning here. This, he said, would be facilitated by the country’s cadre of professionals including chartered accountants, lawyers, and corporate secretaries.
He added that there are synergies that Jamaica can explore as both an IFSC and a global logistics hub, pointing out that the country’s history of a stable democracy, strong regulatory framework, proximity to the United States, and telecommunications infrastructure also work in its favour.
“Additionally, we could develop an international ship registry within the concept of an international shipping centre — a ‘one-stop’ shop’. This is an area with great potential for job creation. It would also build on and integrate achievements made by Jamaica’s shipping industry thus far in the areas of cruise shipping, container transhipment and production of quality seafarers,” Wehby stated.
On this note, JIFSA indicated to Business Observer that one of the overlaps between an IFSC and logistics hub is vessel registration and administration.