Apologies for the lack of activity, I don't have a lot of time for posting so it will probably be light for the time being. In the interim, I recommend the following article entitled The Story of the Rise and Fall of the Cayman Islands.
October 2011 Archives
The Royal Gazette
10 October, 2011
At the risk of turning The Royal Gazette's page 4 into a game of ping pong between myself and columnist Walton Brown, his recent "Open Letter" to me in response to my column entitled "Immigration Policy Threatens Economic Recovery" brought to mind the old adage that "there are none so blind as those who will not see".
In his rebuttal Mr. Brown holds to his "view that the global recession has had a far greater negative impact on Bermuda's finances than any decision by government; this has been the case everywhere else and it defies logic to ignore this."
This however was not his original view which was that "It is without question that the global economic crisis has more significantly weakened our economy than anything done locally by this Government." Key words being "without question."
In reply I posed 6 logical questions, any of which at the bare minimum demonstrated that the issue is certainly is not without question, although judging by Mr. Brown's failure to address them, he is certainly without answers to them.
Additionally, this has not "been the case everywhere". Let's take Switzerland for example, which is also not coincidentally one of the beneficiaries of Bermuda's financial services jobs exodus, and has seen far less impact from the PLP's "global recession" mantra.
Switzerland briefly dipped into a slight recession in 2009 for 4 quarters, but quickly reversed and has seen GDP growth again in 2010 and 2011. The Swiss (re)insurance sector in particular is growing - unlike ours, which is contracting. Their growth is not coincidentally driven by jobs, capital and company inflows from Bermuda. It is noteworthy that Switzerland's immigration policy and attitude towards intellectual capital is the complete opposite of Bermuda's. Ireland's (re)insurance sector is one of the few bright spots in their troubled economy.
It is not unreasonable to conclude then that Bermuda could have been similarly largely insulated from the impact of the global recession had the PLP Government not destabilized the workforce of the companies which chose Bermuda as their homes prior to the introduction of term limits. Not to mention squandering the huge budget surpluses from the boom years they inherited. PLP policy has dramatically deepened our economic crisis.
Mr. Brown goes on to state that I could have "pointed out that during this same period reinsurance companies were increasingly concerned about the cost of doing business in Bermuda, the presence of a "soft" reinsurance market on premiums and the negative consequences for growth and pressure to re-domicile for tax reasons. You know this since you work in the field."
Here's what I do know from working in the field: Switzerland is no cheaper, and arguably more costly, a place to conduct business and live than Bermuda. Your workforce however is much more stable.
Secondly, the "soft" (re)insurance market has no bearing whatsoever on re-domiciling. Zero. If it did companies would be constantly re-domiciling. Soft markets have always existed, however during previous soft markets companies were re-domiciling to Bermuda not from it to participate in our growing market.
It does not matter whether your management sits in Switzerland, Ireland or Bermuda, the business you are competing for is offered to you at the same price and generates similar margins.
Thirdly, I did address "tax reasons" when I wrote the following:
"The lack of a US tax treaty with Bermuda certainly is one factor, but those of us in the local financial services industry watched from the inside as companies accelerated their Plan B's in direct response to the PLP's term limits policy, anti-International Business rhetoric and general unwelcoming tone."
With respect to term limits, Mr. Brown states that "the revised term limit policy was developed in tandem with extensive consultations with the leadership in your industry and others: the Association of Bermuda Insurers and Reinsurers, Association of Bermuda International companies, Business Bermuda and Bermuda First."
I suppose if you call being included in part of the conversation consultation, then yes. But if anyone thinks those organizations supported the outcome, other than that it was better than nothing, they also probably think that the cruise ship terminal came in on budget. This public silence is also affirmation that business leaders understand that it is not their place to 'dictate' policy to the Bermuda Government as Mr. Brown suggests, even policies that are obviously bad for Bermuda and Bermudians - like term limits.
Mr. Brown goes on to state that "there has been no public opposition to the new term limit policy from the leaders of the "intellectual capital" you speak of. In my frank discussions with two leaders of Class Four insurers and a major local service provider their categorical view is that the current term limit policy represents no impediment to their business. I am prepared to accept their politically neutral assessment."
Mr. Brown's suggestion that business leaders can publicly speak candidly, or privately to a PLP insider, can't be taken seriously. Not after his Government's extensive track record of hostility towards business leaders and/or non-Bermudians who publicly oppose PLP policy? Hence, the business leaders who do speak out do so anonymously.
Mr. Brown's core assertion is that Bermuda's current jobs and capital exodus is being used wrongly to attack the PLP for political gain and public policy has little bearing on Bermuda's deepening economic crisis; our situation could not have been foreseen and is driven by external forces.
I would direct Mr. Brown to a The Royal Gazette article entitled "Dublin to benefit from any exodus from Bermuda". This article cannot be dismissed as someone taking our current predicament and back fitting it into an economic political attack as he tries with mine.
This was published on July 18th, 2003, the eve of the implementation of term limits. One (again anonymous) observer predicted that "[t]his will not happen overnight...But if this continues, we will look around one day and see that they have all gone. Our houses will be worth nothing - huge mortgages and negative equity everywhere - no one to rent our apartments and we will have unemployment for the first time in living memory. It is a sobering thought."
Starting to feel familiar?
The facts are not as Mr. Brown declares, "an inconvenient truth" for me. I wish that were the case. This is Bermuda's current, but largely avoidable, truth.
Mr. Brown is, as they say, entitled to his own opinion. This is the editorial page after all. But he's not entitled to his own facts.
In case you're keeping track, the PLP's latest post on their site has flipped yet again back to saying that term limits was put in place to protect Bermudian jobs from evil, scheming bosses - at least for this week - not that it was to prevent long term residency claims which is what then Minister Burch definitively claimed it was designed for, categorically denying it as having anything to do with job creation or preservation for Bermudians.
One day it's about long term residency. The next about not letting expats steal jobs from Bermudians. Just pick one already will you.
These UBP/OBA economic policies would result in fewer jobs for Bermudians and put more of our land in the hands of foreigners.
Their commitment to end term limits for foreign workers would be nothing short of disastrous for the Bermudian worker. If implemented, employers at all skill levels would no longer be incentivized to hire Bermudians. So many of us have seen our resumes passed over not because of skill, but, because the bosses wanted their overseas man in the job. The OBA/UBP policy would mean more unemployed Bermudians and would cause many Bermudians to give up trying to even look for work.
The PLP act as if abolishing term limits would abolish the Department of Immigration. Removing term limits doesn't mean that jobs just get handed to non-Bermudians. They still would have to be advertised as normal and vetted by the Department of Immigration. That is unless the PLP don't believe that the Department of Immigration does its job properly.
And in case they haven't noticed, as our non-Bermudian workforce has declined, the Bermudian impact has been greater. Unemployment didn't exist in Bermuda before term limits, and right now there are few buyers for land in Bermuda - Bermudian or otherwise.
The PLP's reality bending alternative universe stuff continues to remind me of Stephen Colbert's concept of 'truthiness' and his comment that 'reality has a well-known liberal bias'.
In Bermuda's case it's that reality has a well-known anti-PLP bias.
It appears that as usual the PLP response to weakness is to go on the attack. In this case they are doubling down on term limits with an election coming. This is very dangerous for Bermuda. They appear willing to disparage the remaining job creators and investors who have stuck by Bermuda despite the PLP's hostilities. To escalate it further would be devastating.
Do they have no sense of responsibility, or would they rather sink the ship than make a change in course.
Saving face cannot be allowed to take precedence over saving Bermuda's economy.
I came through the airport today with a number of people excitedly awaiting a 35% duty hit on anything bought overseas. I wasn't totally surprised when it wasn't applied, and this evening a statement comes to confirm that the increase has been postponed until Nov. 4th, as well as just what qualifies as 'retail':
On the customs duty changes at the airport, given the time required to make system changes, including the changes to bank kiosks at the airport that are used for payment of customs duty, the recently announced changes to the customs duty on goods accompanying residents when they return from overseas trips will have effect from November 4, 2011."
Hmmm. November 4th you say? That also just happens to be the day Parliament reconvenes, which suggests that the 'system changes' line is a convenient cover for the fact that financial changes require an affirmative resolution from Parliament. I'll bet 35% of my next overseas purchase that a bill will be hastily presented to Parliament that day.
You see, the Finance Minister doesn't have the authority to change duty rates overnight, nor waive payroll tax, although it was suggested to me that with a little calendar sleight of hand she might have been able to pull a bit of a fast one to buy a couple of months head start.
I was discussing this with some people at the airport this morning, and it seems that someone might have pointed this out to the Premier.
All of this confirms one of my long term criticisms of the PLP: they don't have a plan. They really have no idea what to do, can't see what is coming and are just lurching from short term gimmick to short term gimmick.
Retail hasn't been in distress since the global recession, the PLP's favourite excuse for everything. Retail has been in trouble for a long time.
There are structural problems with retail in Bermuda that need addressing but have been amplified by the reduced population on the island, lower demand, rising Government costs etc.. Retail has been asking for duty relief, duty at the time of purchase etc. for years.
The problem Ms. Cox has is that she's loaded Bermuda up with so much debt that she can't give up too much on the revenue side for Government or she won't be able to service her 9 digit debt.
What Bermuda needs is a plan. Multiple plans actually: a retail plan, an international business plan, a tourism plan.
Investors and business owners need to know what the environment is going to look like for the next few years. They need stability not knee jerk overnight policy changes, even if they are temporarily in their favour (this time - previous payroll tax change was not).
Six month payroll tax holidays are fine, but they're stop gap measures not a plan.
It's time for the Premier to fire her Finance Minister.