June 2011 Archives

International business in Bermuda today is where Bermuda tourism was in the early 80s, having peaked and at the beginning of a structural shift in operating model and under attack from hungrier global competitors.

1980 was the peak of tourism numbers.

2008 was the peak of international business.

30 years later Bermudians are wondering where all the tourists went. The PLP is stubbornly refusing to swallow their pride and outdated mindset and implement the kind of fundamental reform and modernization required to make Bermuda tourism relevant again while everyone is the industry is screaming for them to get their heads out of the pink sand.

I worry that in far less than 30 years Bermudians will be asking where all the (re)insurers went, while the PLP stubbornly refuses to swallow their pride and outdated mindset and implement the kind of fundamental reform and modernization required to make International Business relevant again that everyone in the industry is screaming for them to do.

Bermuda companies are now global companies, and in many cases no longer Bermuda companies (but Swiss and Irish). The tax issues are largely settled and companies are comfortable locating virtually any job outside of Bermuda, other than a small handful of mostly underwriting jobs. The old mindset that Bermuda Immigration can dictate who you hire and for how long is gone.


XL now has only 2 of their 11 top executives located in Bermuda. This is one of the two flagship Bermuda market companies. ACE did likewise years ago.

[XL CEO Mike McGavick] explained that, as a global company with offices in 27 countries, XL's senior management team was not all based in the same country, and never had been throughout his three years leading the company.

"We've probably been at a peak, in recent history, of senior executives being in Bermuda," Mr McGavick said. "Some of those people have been staged both out of other places and Bermuda.

"Will I be doing more up there? Sure. Are there others who are making changes for their own idiosyncratic reasons? Sure. But we've always been very flexible with where people live. All the time I've been here we've had a distributed senior management team and I expect we'll continue to."

Companies now choose which positions they locate in Bermuda. If Immigration says "No" then they move that position, and the affiliated supporting jobs, to a jurisdiction more welcoming. Term limits are kryptonite to Bermuda's international competitiveness and the long term death of international business in Bermuda.

The Swiss are actively using Immigration policy (ours and theirs) to attack Bermuda by recruiting companies and soliciting highly skilled, high earning positions to their cantons through tax holidays and individually negotiated tax rates.

It isn't cost. Switzerland is as expensive if not more than Bermuda.

It isn't economic stability. Ireland is in far worse financial shape than Bermuda.

It's convenience and attitude.

The PLP, or at least a few in the PLP know this, but will not do the right thing. Political face saving is paramount and will ensure Bermuda's international business industry goes the way of our tourism industry. That is not protecting jobs for Bermudians. It's exporting jobs.

Bermuda Immigration's role has fundamentally shifted. The days of employment protectionism are over and it now needs to act as a critical marketing arm for Bermuda as a financial centre.

Immigration policy should be geared towards retaining our existing intellectual capital, and attracting new international investment and expertise.

Paula Cox's debt means that banking on a global economic recovery to simply get us back to 2007 levels is not enough. We need to grow GDP and revenues to new highs in order to service her $100M Ministry of Debt - or dramatically cut spending (= massive public sector layoffs after a hoped for election win by the PLP).

As Bermuda companies have gone global, so have the jobs. As with tourism in the 80s, other countries are refining and improving the Bermuda model and doing it better.

If Immigration blocks or rejects a company from locating a job in Bermuda, with long term stability, they will simply look elsewhere.

They won't call the press. They won't kick and scream. They'll say "these guys just don't get it and won't get it", pack a few people on a jet and send them to somewhere that is happy to have them.

Just as the PLP reversed their policy limiting yacht stays to 21 days, they need to reverse their policy limiting jobs stays to 6 years. It's the same fundamental problem - taking your customer for granted and indicating that it's all on your terms.

Financial services companies, like tourists, have many options of where to go.

The fundamental challenges with international business today are the same as tourism: international competitiveness, a quality and constantly improving product, and ease of use.

Bermuda cannot afford to have the PLP do to international business what happened to tourism. The time to act is now, not in 30 years.

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Apologies for the quiet lately but I'm fighting off some disease that just won't go away.

But...I had a random thought today.

With the spreading of same sex marriages across North America, Europe and other countries, it's just a matter of time before Bermuda Immigration faces the question of a non-Bermudian worker coming to the island with a same sex spouse?

What are they going to do in that situation?

And what are they going to do if a Bermudian same sex couple go overseas and get married?

What happens to benefits? Pensions? Health insurance coverage etc?

Or a Bermudian/non-Bermudian same sex couple goes overseas and gets legally married.

Does the same sex spouse get status in 10 years?

We already know that the PLP Government is pro-discrimination for mixed status hetero-couples so in that case that discrimination will carry over.

But looking beyond that some interesting scenarios could play out.

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Wow. Zane Desilva uses an anti-semitic slur on the floor of Parliament - which he wisely withdrew when asked - and the Speaker of the House says it wasn't out of order?

Health Minister Zane DeSilva raised a point of order, pointing out Mr Richards had also said rent prices are falling, and accusing the Shadow Minister of "Jewing down".

Mr DeSilva withdrew that comment at the request of Mr Richards, who said it was offensive to Jews; Speaker Stanley Lowe accepted the withdrawal but said he didn't think the remark was out of order.

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It is always amazing to me that the PLP issues very guarded statements in response to allegations of Government corruption (one of the few statements which doesn't appeared on their website by the way) but goes all out to condemn those who call for an all out response to it in order to restore Bermuda's name. John Barritt:

"These are extremely serious allegations, made under oath in Supreme Court before the Chief Justice of Bermuda. They raise questions about the conduct of the Government of Bermuda that must be answered.

"Until the allegations are addressed, Bermuda's international reputation will suffer and we will endure another episode where the integrity of Bermuda's political leaders is open to question."

It takes a lifetime to build up a reputation, but seconds to destroy it.

Calling for a investigation to get to the bottom of corruption allegations at the highest levels of the Bermuda Government - in a measured way as OBA leader John Barritt did - doesn't harm Bermuda's reputation overseas, quite the opposite.

Corruption happens in every country around the world.

What shows your character and values is how you respond to it, not how you respond to those who want to root it out.

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No-one predicted this bombshell from the Emerald Financial court case:

Exclusive: Ewart Brown wanted share of company's business, court told

This is not the first time anyone will have heard a claim such as this. These stories have been the talk of Bermuda for a decade. But this allegation was public, substantive and under oath - which adds serious weight to it. Not to mention that the issue was introduced by the Prosecution not the Defence - and that there is nothing for the defendants to gain by making this claim.

The corruption allegation came out as a peripheral issue.

Not surprisingly the response was vintage Brown - go on offense.

Unfortunately he shot an air ball, with the old faithful attempted media injunction. This one ironically failed based on the precedent from his own earlier failed media injunctions.

On to Plan B:

Dr Brown issued a statement after the hearing, saying of Mr Bolden's allegations: "This outrageous accusation is a total fabrication."

He condemned Mr Bolden for bringing his wife Wanda Brown's name into it and said: "This will result in a separate legal response."

Mr Pettingill said Dr Brown planned to mount a private prosecution against Mr Bolden, alleging he had committed perjury.

This is the first time that the kind of rumours that have consumed the island have been aired not just in the court of public opinion, but a court of law - lending them a real sense of credibility and surely opening the door for others to come forward.

I suspect that the primary audience for a perjury 'private prosecution' warning against Mr. Bolden is a shot across the bow for anyone else that might be considering telling their story publicly.

Mr. Bolden's claim is out there and can't be taken back. A lawsuit won't change much.

Defamation cases are famously difficult to bring and often end badly. But if this opens the Anthony Weiner like floodgates, as these things so often do, then who knows where it could lead.

Note that his prior defamation suit remains farcically un-acted upon four years later - as I can personally attest.

I struggle to see this ending up in the perilous world of proving defamation in court. The former Premier would have to testify, and be cross examined. There's no telling where that leads. Not gonna happen.

A court of law isn't Parliament, where you can defame people at will while hiding behind Parliamentary privilege.

Just ask Mr. Archer.

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Even better than the iPad version?

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Pretty funny that the PLP is now as UBP as the UBP and mirrors the UBP with a former opposition leader each. http://t.co/va6BuP1

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The short article today entitled "OECD plans could be death penalty for Bermuda" raises an issue that I'm surprised hasn't been raised locally in any meaningful way.

The PLP proudly boast about the number of Tax Information Exhange Agreements that Paula Cox has signed as if the total signed are equal to points on a scoreboard, and how we're doing everything and anything asked for under the European Solvency II regime, as evidence of the PLP's fiscal prowess.

While these are complex issues that help certain aspects of our international business (large global (re)insurers in particular), they are also hugely damaging to other areas of international business (non-class 4 (re)insurers, capitives for example).

The Premier and Finance Minister continually claims her total capitulation on these fronts as huge accomplishments.

But they are really house-keeping and issues that should be negotiated down to do as little damage as possible while achieving the minimal level of compliance.

The main intent of the OECD and European regulators is to try and help their uncompetitive failing financial centres by rendering Bermuda and others less competitive, not some altruistic campaign for global financial transparency.

Simply being led around by European bureaucrats, doing their bidding, as the Premier and Bermuda Monetary Authority look from the outside to be, is a gift these bloated uncompetitive high tax jurisdiction surely can't believe keeps on giving.

The TIEA's signed are overwhelmingly one sided and aren't doing Bermuda any favours. Simply racking up as many as you can as quickly as you can is an abdication of your duty to protect and further Bermuda's competitiveness.

Signing these TIEAs, and doing what the EU says we should do, does not constitute an economic vision for Bermuda. It is, as Mr. Mitchell from the Cato Institute says:

"Basically ...the death penalty for Bermuda and other jurisdictions," he said.

"Whether they get to their final goal in five, 10 or 15 years depends on how much each jurisdiction fights it."

So far there has been no fight in the Cox Government or Finance Ministry, just capitulation.

I'm surprised the Opposition haven't seized more on this, although it is a bit of a wonky topic. But if broached correctly it is an important topic to a community pretty plugged into international business issues who get the need to continue to innovate and increase our competitive edge, not just become some watered down has-been international finance centre; a shadow of our former self.

If this were sports, and Paula Cox were the coach of a basketball team for example, the other coach would be screaming that her players were all too fit, tall and accurate shooters.

Her response?

She'd be canceling practice, feeding them donuts before every game and benching her stars for the 4th quarter and claiming victory.

When I read press releases such as the last two from the PLP entitled "PLP Government Implementing Global Financial Standards" and today's gushing "Bermuda: Our Star is Shining on the International Stage" that are so devoid of substance and understanding of what created Bermuda's economic miracle, it's shocking. And scary.

Bermuda succeeded because we were different; a good place to do business.

All this foreign driven regulation and anti-competitive political pressure is designed to turn that on its head.

Stop boasting about the TIEAs and Bermuda's compliance with old world financial jurisdictions and start articulating the vision to grow Bermuda's economy and sharpen our focus.

So far it's clear that Paula Cox and her colleagues don't have a clue how to stop Bermuda's economic contraction and are completely banking on a global economic recovery to bail them out.

But the real challenge for Bermuda is not just stopping the bleeding, but getting back the competitive edge that the PLP blew.

Today's Bermuda Sun article presents a huge opportunity for the OBA to go right at the PLP's cluelessness:

The economy is another potential problem area for the PLP but party activists believe people will accept that Bermuda's problem is part of a wider global picture and will trust the PLP to protect Bermudian jobs.

If Bermuda's problems are part of a wider global picture, why then, are Bermuda's companies moving to Ireland - which has far greater economic problems than Bermuda (for now)? That claim doesn't hold up to the least amount of scrutiny. The PLP haven't protected jobs but chased them away.

Why would you trust the party that presided over unprecedented job losses, and continues to now in education and at public golf courses, with protecting jobs? It's a ridiculous assertion.

But the PLP have to say it, because the alternative is to acknowledge that their dogma is diametrically opposed to Bermuda's economic and social well being. The PLP's policies are incompatible with economic prosperity and the social progress and safety net that funds.

The PLP insider said:

"Everything the Opposition wants to do is connected with money and business. However many times they want to change their name it is still the Barritts, the Dunkleys and the Gibbons's.

"How can you fight price rises in the supermarkets when you profit from those price rises? How can you complain about insurance costs for seniors when you own an insurance company?

"When push comes to shove, who do people think will look out for them? The PLP or the Oppostion?"

Not a bad way to redirect from Paula Cox's horrendous economy, one characterised by previously unknown issues to Bermuda like unemployment and foreclosures.

The Opposition, who are conspicuously silent since they launched and missing a huge opportunity to make a strong first impression, should quickly reframe it for what it is.

Everything the Opposition wants to do is about jobs and prosperity for all Bermudians. It's been done before and it can be done again. Just not by the PLP.

That's the connection more and more Bermudians are making. Ask those 30 paraprofessionals just laid off due to Paula Cox and her colleagues' economic mismanagement.

The OBA should be labeling this as "Paula Cox's recession", or "The PLP recession". And "Paula Cox's lay offs" for example. The language is quite simple.

Make the connection for people in a way they can relate to.

And, most importantly, prior to the election. The OBA should be reminding people of what the PLP's last election campaign claimed and did.

They claimed with an admirable poker face that: crime was declining, tourism was up and the economy was bullet-proof.

What are Bermudians experiencing daily? The PLP unwinding their own policies quietly (the latest being the 90 day yacht stay policy), crime continuing to spiral out of control, and the PLP's policy rollbacks a tacit admission that they cannot afford their own election promises.

If they lied to the electorate last time, why should the electorate believe any of their claims, promises and demagoguery this time?

The OBA have to plant that seed now. Today. Not in 2 months in the height of an election campaign when people's buttons are being pushed relentlessly and fear-mongering is in full effect.

We've just witnessed independence raised. There's no way the PLP want to run on Independence as an election issue. No way. It's a colossal loser.

So why raise it then?

Independence is a convenient stalking horse to introduce race during the soft launch of the election period of course. Independence will be quickly dropped, but the racial button pushing will persist.

We've done this dance before. The OBA have to remind the public of what went down in 2007, and what happened in its wake, so that they recognize it for what it is as it unfolds again according to the script.

Then of course it looks contrived and insincere, which of course it is.

As that connection is made they should then ask the voters if they want 5 more years like the last 5; a half decade which ushered in economic and social pain previously unheard of in Bermuda, and overseen by a party too proud and/or blind to stop and reverse it?

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