Recently in Economy Category

Interesting article in the New Yorker on NY Times Columnist and Economist Paul Krugman.

Consistent with my ongoing assertion that the PLP are Bermudians Republicans (essentially driven by dogma), I liked this quote:

"Some of my friends tell me that I should spend more time attacking right-wingers," he wrote in 1998. "The problem is finding things to say. Supply-siders never tire of proclaiming that taxes are the root of all evil, but reasonable people do get tired of explaining, over and over again, that they aren't."

This is how many in Bermuda feel when trying to debate pretty much anything with the PLP, whether it's immigration, the media, debt, overspending, independence or race for example.

Reasonable people who see the nuances of real world issues tire of trying to discuss rationally Bermuda politics with another side who relentlessly repeat canned slogans and engage in endless demagoguery.

If you're a masochist you've been listening to or following the budget debate.

I'm one of those. The outgoing Premier kicked it off in style:

Premier Ewart Brown yesterday launched a vociferous defence of his Government's financial record -- saying it had no choice other than to spend money for the good of the people.

Dr. Brown said the United Bermuda Party Government had left the Island in such a state 12 years ago, cash had to be directed toward fixing social problems such as absentee parents, crumbling infrastructure, ailing Government buildings, antiquated transport system and an out-of-date tourism model.

You see, fixing the low debt budget surplus expanding economy that the PLP inherited involved aggressively funding social programs, for example building a $70M school for $120M and a $35M cruise ship pier for $60M.

That's $75 million that could have been spent on actual social programs, or counter-cyclical spending, not stimulating the pockets of a couple of cronies and calling it social policy.

It takes some real effort and creativity to be this disingenuous with a straight face.

This is George Bushism, create your own reality Republicanism at it's best.

Judging by the PLP's back to form delusional statement on it's website as Vexed points out, the noise machine is back to form.

There's a few criticisms that you can level at Bob Richards as a politician, but being 'long on rhetoric short on substance' when it comes to budget replies isn't one of them. The core criticism of course is that he's too academic, too substantive and not communicating at a layman's level.

Again, classic Republicanism, the kind the Democrats always struggle to respond to in the same way the UBP always struggles to respond to complete and utter fiction.

You take the case being made against you, in this case that the Finance Minister's Budget is long on rhetoric and short on substance, and pin it on your opponent with the volume set at max.

The same way that the Republicans complained about media bias while getting very favourable almost cheerleading coverage heading into a war based on false pretenses, the PLP whines about media bias while their Cabinet Minister's radio station appointed Senator DJ plies their propaganda during the daily morning drive.

So the outgoing Premier can toss his Combined Opposition sloganeering around ad nauseum as has been the case the past few weeks, while his combined government media outlet can wax poetic about 'tilting at windmills' and the politics of fear (gasp - this from the architects of the PLP's election campaign of fear in 2007), but any rational observer who peruses the PLP's website wonders if the PLP actually believes their hype or thinks that the public is absolutely, completely incapable of separating pure unadulterated BS from fact.

Those are your two choices.

Bermuda is facing a serious economic contraction exacerbated by a decade of overspending which outpaced even a rapidly expanding economy and the Government's response is to deny any semblance of reality.

This is really, really worrying. We haven't even seen the slightest acknowledgment that things could have been done differently.

Things are most likely going to get worse before they get better. The party that has missed every revenue and spending projection wants you to believe that the guy who called the overheated economy and imminent recession doesn't know what he's talking about.

If you want to see which way the winds are blowing, have a read of Dale Butler, a PLP MP who sits in the marginal of all marginals and knows that he can't mindlessly spout party line BS, a guy who gets elected based on an image of bucking the party line and acknowledging reality.

So Budget Day arrived, and we got more of the same plus more, which is really quite depressing.

On the positive side, the document wasn't green, but the Finance Minister's outfit certainly was. We'll call it a push.

Otherwise a few things are notable as an early reaction.

Firstly, I was surprised at the lack of detail in the document, although I probably shouldn't be. This was classic Paula Cox: a whole lot of words and verbosity masking a lack of substance and seriousness.

Secondly, it seems that the PLP has become desperately out of touch. To say that Bermuda "cannot have a Reid Street-doing-fine mentality and a North Street that suffers" is true and makes for a nice sound bite.

The reality however is that neither Reid St. nor North St. are 'doing fine'. Retail is dying. Reid St and Front St for that matter are both shadows of their former selves, St. Georges is a ghost town. (It should be apparent that Government intends to starve St. George's until they perform their takeover.)

What was really amazing however was that after all the talk of 'austere' Government cutbacks, by the Government themselves, it was completely insincere as evidenced by a 9% current account increase.

The payroll tax increases will be hard for everyone to swallow, local and international business alike. In a time when international business is moving jobs out of Bermuda due to cost and hostile immigration policies, Government increases payroll tax by 2 percentage points (or a 14% increase) and raises the cap dramatically which will have a much bigger impact on the international business sector.

I'm never a big fan of tax increases, because unlike most things they go up but almost never down and it doesn't require Government to share in the pain.

Thirdly, every time Government justifies their over-spending and resulting borrowing as an investment in infrastructure an angel loses its wings. Stop it. It's cruel.

Unexplainable overspending on just two projects, Berkeley and the cruise ship pier, amount to almost $100M, the amount taxes were increased this year. That's real money now isn't it?

Ethical government spending would be an investment, putting tens of millions of dollars in the pockets of a couple of cronies is stimulative, but not for the general public or economy.

Fourthly, Bob Stewart is correct in today's Letters to the Editor that Government is deploying Enron-esque accounting gimmicks to hide hundreds of millions of dollars in debt. The hospital will be funded through a Public Private Partnership and the Causeway replacement is proposed to follow in that path. In both cases Government has chosen a more expensive method to finance Capital expenditures through off balance sheet tricks in an attempt to hide about half a billion dollars in debt.

This budget suggests that the PLP either lack the ideas or the realism to position Bermuda for a recovery and are simply continuing to defer the pain for future generations. This is deeply deeply irresponsible, the result of which is that instead of punching above our weight as we have prior to the PLP we're fighting with one hand tied behind our back.

The waste and abuse of the public purse of the past decade means that Bermuda is responding to the global recession from a position of weakness. The un-budgeted revenue surpluses of the past decade, fueled by two catastrophic events in the US, are gone, never to be recovered with nothing to show for it.

When Government could be deploying those hundreds of millions of dollars for counter cyclical spending they're reaching their hands into the pockets of every resident and business in Bermuda, further eroding the case for investing in Bermuda.

Someone once told me that a former Premier said in the 90s that "Bermuda can afford 5 years of a PLP Government but not more". That seems very prescient.

Say what you will about the UBP, but they understood the fundamental principle that you have to have a robust and sustainable economy to fund your social policy. The UBP were economic realists.

To call this the 2010 budget "The Road to Recovery" is delusional. "Road to Ruin" is more appropriate. If Bermuda turns this around it will be in spite of the PLP's economic policy, not because of it.

With a very important budget looming I've been thinking about what the individual parties can get out of it.

For the PLP, I don't expect much because they continue to deny reality and pretend that the economic woes and tourism are in a mess because of the global recession, rather than their squandering of opportunity and huge tax windfalls of the past decade. Politically they can't concede that just about everything the UBP forewarned has come to pass.

I hear that Paula Cox has been preparing people for a 'tough but fair' budget, but this is really a tale of what could have been.

On a personal level Paula Cox has been getting hammered, and rightly so, over the past few months in particular. if she aspires to the leadership of the country she'll be looking to regain some of the credibility that she has lost (although she remains somewhat of a Teflon politician).

In the UBP's case I think the challenge is summed up quite simply, but is harder to execute. The UBP need to not just be right, but be persuasive. All 3 of the UBP's Shadow Finance Ministers from Grant to Pat to Bob have been on the money year after year. But they're not persuading. Bob Richards has been devastatingly accurate in his predictions, but he's a tad academic.

Bob needs to tell a story, not teach. I've loved his replies, but they're overly academic. And he doesn't have to convince me or those like me. We get it.

The story to tell is what could have been, but also what can be.

The BDA need to accomplish a couple of things.

Firstly they need to articulate their economic vision and continue to build momentum on the heels of their well attended conference. In Parliament they don't have the kind of economic expertise the UBP do in Grant, Bob and Pat.

Which leads to my second point. I was surprised that the BDA did not prepare a more formal and distributable Throne Speech reply as the the official Opposition does. That was a missed opportunity to deliver a prepared speech and show some professionalism with a printed document, although Shawn Crockwell did deliver a good presentation.

If I were in the BDA I'd make sure they prepared their own Budget Reply document and deliver a formal reply. There's a lot of low hanging fruit in the way the PLP have mismanaged the economy and denied their role in putting Bermuda on the back foot, rather than responding from a position of economic strength.

It's critical that they step up now in Parliament and maximize every opportunity, particularly these big Parliamentary events. I thought they missed a great opportunity with the Throne Speech.

Denis Pitcher has a great post applying the concepts behind the book How the Mighty Fall and the 5 stages of decline.

STAGE 1: HUBRIS BORN OF SUCCESS
STAGE 2: UNDISCIPLINED PURSUIT OF MORE
STAGE 3: DENIAL OF RISK AND PERIL
STAGE 4: GRASPING FOR SALVATION
STAGE 5: CAPITULATION TO IRRELEVANCE OR DEATH

Without action - a repositioning and reinventing of Bermuda ...pronto - our economy will be in Stage 5 before we know it.

It's happened with tourism. In the words of T.S. Eliot:

This is the way the world ends
This is the way the world ends
This is the way the world ends
Not with a bang but a whimper.

Will complacency and denial do the same to our sole remaining economic pillar?

A couple of readers understand what Minister Burch is referring to when he talks about 5 year limits, with the RG's use of 'term limits' being technically incorrect when it should be 'work permits'.

The 5 year limit refers to the maximum period an individual's work permit can cover (vs. 1, 2 or 3 years) before it needs to be renewed. Most top execs are on (renewable) 5 year permits.

Nonetheless he's so caught up in policy bull$hit he confuses everyone with his
nonsensical and contradictory statements.

and

I read your article and think you're confusing term limits with the length of work permits. At present the longest work permit issued by the department has a five year term. When they expire they can be renewed subject to the usual restrictions.

Term limits are a separate question - that's the six/nine year bit.

What Burch is saying is that the department is considering issuing work permits with
longer terms than five years - that has no impact on term limts.

While the PLP and Minister Burch are talking about being flexible on term limits, since when was term limits five years? It has always been six. Always.

So when did they lop a whole year, 17% of a work permit limit, off the policy? Does the Government not even know what their signature policy is or did they amend it without telling anyone?

The truth is that term limits is nothing but window dressing anymore. It's a failure of a policy so patently obvious by the claim to override it so easily. But it's continued existence, even in name only, is so hostile to Bermuda's continuing success as a business domicile that the PLP are just as culpable as any foreign threat to our international business economy.

Term limits persists because the PLP can't reverse the policy without losing serious face and they'd rather continue to hurt the island than admit their policy was wrong from day one.

Something jumped out at me while reading that Government is looking to re-table the Internal Audit Bill, establishing a new internal Audit Department:

The Internal Audit Act will set up a new Internal Audit Department to provide an overview of the managing and cost of Government activities.

Dr. Brown introduced the bill on December 4, but made the rare move to "rise and report progress" -- effectively postponing the bill -- after the UBP and BDA said it didn't give enough independence to the overseeing team.

Yesterday, the Premier told this newspaper regarding the internal audit bill: "We have made a few amendments that should meet the favour of both sides of the House."

Two weeks ago The Finance Minister claimed that The Office of Internal Audit was part of the accountability framework.

In addition, there is an accountability framework that includes the office of the Accountant-General's Department, the Office of the Auditor-General, the Office of Internal Audit, and the Ministry of Finance HQ.

The Office of Internal Audit doesn't exist yet.

May I suggest that before the trade delegation to India leaves, the outgoing Premier and Minister of Travel takes a Cabinet delegation across the street to Pitts Bay Rd and Par-la-ville Rd - where Bermuda's bread is buttered - and address the self-inflicted wounds on our international business sector.

Prosperity, like charity, begins at home.

Warren Buffett famously wrote in his 2001 annual shareholders letter that "you only find out who is swimming naked when the tide goes out. "

Well, it's low tide and Ms. Cox and Dr. Brown are high and dry:

Auditor General's Consolidated Fund Chart

A delayed budget doesn't exactly inspire confidence.

A reader writes on Paula Cox's shocking oped from Wednesday:

"In addition, there is an accountability framework that includes the office of the Accountant-General's Department, the Office of the Auditor-General, the Office of Internal Audit, and the Ministry of Finance HQ."

Why does she even mention this, when this exact "accountability framework" has been raising red flags over the years only to be ignored and/or challenged by government under the guise of menace.

Two qualified audits as a starter. And the Ministry of Finance can't overrule bonehead directives coming from Cabinet and the Minister. They just have to try and make it work.

The Finance Minister is really really reaching to justify her poor stewardship of the country's finance.

Bob Richards has a good rebuttal today. He wasn't overly academic for a change.

Vexed has two good posts on Government's fiscal irresponsibility and poor attempts to justify the exploding debt against GDP, which are worth a read.

One additional point to bear in mind.

When Ms. Cox declares our debt as $679M (and counting but excluding the $200M guarantee on the Bank of Butterfield), she ignores the hospital redevelopment.

That project is an additional $315M of debt (budgeted, if past is prologue it will be multiples of that) hidden off the books through an accounting gimmick of Public Private Partnerships.

The role of Finance Minister has always held clout and prestige and that of a serious guardian of the public purse. Until today.

Paula Cox published a pre-budget oped setting the stage for a debt level that is clearly about to explode in the next budget and trying to deflect her role in the mess that the PLP have got Bermuda's finances into:

The Minister of Finance operates as a cog in the wheel. My role is to add value and to provide input on fiscal positions taken in various ministries. I can indicate support or objection. However the sponsoring minister(s) knows that I cannot overrule their request unless I have others who join with me to support and uphold my position.

Individual Ministers are 'finance directors' in their own right and have a responsibility to keep a keen eye on how their senior officials manage their budgets and projects.

Weak. Seriously weak.

Larry Burchall writes today something that I've been saying to people for the past few weeks:

A difficult year lies ahead. I do not believe that Bermuda, or any other country, is so well-protected that it can fritter away nine months of 2010 with a 'lame duck' Premier and a ruling party that is idling its brain and twiddling its political thumbs while waiting on the slow roll of its own constitutional calendar.

...

No one political group or one politician transcends this country. Bermuda needs a fresh start today, not a long wait until far-off October. Grow up. Change. Admit and undo the now obvious mistake and move on.

The person with the most to lose in the mess that the Bermuda Government's finances have become is Paula Cox.

I said previously, and I don't think many would dispute it, that Paula Cox was one of those rare politicians who few people spoke poorly of, and most had very high expectations of. She is seen as the heir apparent, but her credibility is taking a huge hit due to her performance as Finance Minister.

The overspending, the massive increases in debt, the poor budgeting, the systemic lack of financial discipline throughout Government, all flows through her.

I'm a little surprised that she's allowed herself to become the owner of the Premier's lavish, wasteful and uncontrolled spending, as highlighted by two successive qualified audits.

Her response on Friday was characteristically verbose and full of platitudes but can't be seen as particularly inspiring based on her lack of action since the last qualified audit, not to mention the years and years of warnings from the previous Auditor General.

The Finance Minister proclaimed on Friday that:

"It has to be said, quite simply, that when the an Auditor General speaks, Government listen and take heed.

But she did not listen not listen and take heed of the previous Auditor General. If she had we wouldn't have a second successive qualified audit. Instead the Finance Minister sat by while her colleagues savagely attacked Larry Dennis' credibility and continued with business as usual.

This didn't have to be her problem. She was perhaps the one individual who could have stepped up in the past couple of years, but particularly after the Uighur controversy, and said "Enough, I resign from Cabinet".

It's hard to see how Dr. Brown could have survived that. She had such popularity and cross-over appeal but that seems to be coupled with little backbone to stand up for what is right and has propped up the Premier.

I'm not sure if it's party loyalty, or an overly cautious approach, or just a lack of initiative, but the Finance Minister and Deputy Premier has never exerted herself or her authority in the party or the Government. She's preferred to coast along in anticipation of a coronation it seems if, and that's a big if, the Premier leaves in October as he promised in order to buy himself some time so that 'this too shall pass'.

That's not to say Ms. Cox won't become the next Premier, but her silence in the face of obvious problems with Government financial controls means that she owns this mess as much as her Premier.

It didn't have to be that way.

It's been 4 days since the new Auditor General submitted her qualified audit opinion to Parliament, and I've been waiting patiently for the Premier to do what he did last time; within 24 hours of Larry Dennis's qualified audit opinion on March 21st 2009 the Premier called for him to be fired and said the following:

"For more than two years, our Government has been calling for the Governor to request the resignation of Mr. Dennis. We think that he has politicised his post and he is decidedly anti-Government."

Acknowledging the Auditor General's August retirement, the Premier added: "He is determined to do damage to our Government on the way out. We do not mind being audited, but Mr. Dennis long ago diverted from the norm and really it does not deserve the respect of the Government."

....

Dr. Brown said the Auditor's special report was "a distressing example of an abuse of power, a manifestation of the politicisation of the high office in question and evidence of a clear intention on the part of the Auditor to inflict harm to the reputation of two ministers of this Government."

Does Ms. Jacobs Matthews opinion 'deserve the respect of the Government'? Is she decidedly 'anti-Government'? Is she 'abusing her power'? Did she 'politise high office'?

Oh, but before we consider that question, let's see what Dr. Brown had to say when Ms. Jacobs Matthews was appointed:

"I expect", declared Dr. Brown, "that Mrs. Jacobs-Matthews will be firm but fair; thorough but impartial; forceful but temperate and above all Mr. Speaker, focused squarely on the remit of her office".

Not a lot of room to maneuver here. So we're on plan B, blame the global economy for un-tendered projects, overspends and lack of supporting financial documentation.

Just to reiterate, the broadside against Mr. Dennis was delivered (via proxy) within 24 hours of the tabling of his qualified audit.

Surely the press should be asking the Premier whether his comments post Mr. Dennis' qualified audit apply to the new qualified audit from the new Auditor General, or whether he withdraws his previous attack on Mr. Dennis?

There's obviously an inconvenient issue here though that makes the previous excuses harder to apply to Ms. Jacobs Matthews; the previous attacks were all predicated on a multi-year campaign built around Mr. Dennis's pigmentation. That isn't really going to work so well against Ms. Matthews now is it.

They're in a bit of a predicament here. The 'it's because we're a black Government' defense has been used extensively over the past 10 years and the signature item in that defense just went kaboom.

Auditing is auditing. It's not particularly subjective as disciplines go. Numbers can be twisted to lie, but a rogue auditor will be quickly called out. Mr. Dennis never was. And the new Auditor just validated his opinion.

The ball is in the PLP's court to either remain consistent in their attacks on any Auditor General who qualifies their opinion, or make one big ole public apology to Mr. Dennis.

We all know that won't happen.

It goes without saying that at a publicly traded company, a qualified audit opinion would result in the immediate dismissal of the CEO and CFO. What will happen here now that the Government received a not surprising qualified audit opinion from the new Auditor General (who they will have a much harder time shrugging off as a number crunching racist as they did her predecessor)?

Time will tell.

While generally popular, it has to be said that Finance Minister Paula Cox has been a colossal disappointment. She has never put her stamp on the Ministry, largely letting things run. She has not taken a pro-active role in building surpluses during the good times to carry us through when the inevitable downturns come. Instead we got an absurd budgeted increase in government revenues for 09/10 during a massive economic contraction.

It is laughable, delusional, embarrassing frankly, for her to even mention the economic collapse while talking about the qualified audit opinion as she did yesterday. That is sheer desperation.

The recession had nothing to do with the cruise ship pier running almost double budget, or any over-spending. It has had an impact no doubt on government revenues. But revenue shortfalls don't cause qualified opinions. Lack of documentation, unaccounted cost over-runs, capital projects built for far more than their construction costs do, or fraud do.

The Finance Minister's role is not to simply cut the checks for Ministers who either can't, or don't want to control costs and enforce budgets. The Premier of course being the prime offender here with his favourite contractor, money pit Music Festival, Love Festival and the like.

A qualified opinion is not something that the Finance Minister should welcome and attempt to bury in her characteristic empty pages of cliche filled nothingness.

This is not a minor issue. This was not unforeseen. This is not about institutions needing better internal controls. It's about not facilitating a culture which has dismissed established and worldwide standards of best practices and accountability as some great white political conspiracy. I hate the word 'enabler', but in this case it is entirely appropriate. The Finance Minister has been enabling the systematic collapse of Bermuda Government financial controls.

This has been building for years, and perhaps many people thought they could just dismiss it and say it didn't matter because the Government was collecting surplus revenues due to two unexpected expansions of the economy. Things still appeared ok on the surface to those who didn't want to scratch that surface.

The overspending (to put it kindly) has seriously impaired Bermuda's ability to weather an economic storm. The Finance Minister has been negligent in building a culture of accountability in Government, and standing up to rogue Ministers who either turn a blind eye, or, to take the sinister view, encourage massive capital project budget overruns.

This has to stop. The Finance Minister needs to take responsibility and either commit to standing up for the people of Bermuda instead of shirking her responsibility, or admit that she's not up to the position.

People across the political and economic spectrum held Paula Cox in very high regard and had high expectations of her for many years. Those same people are now expressing a deep disappointment in her performance and wondering just who in the Government is up to the task of running the Government in the best interests of the public.

My perhaps cynical read of this article on amending the gambling laws (which I'm personally ambivalent about - it will neither save nor destroy Bermuda tourism), is that this legislation will be crafted so that a vote against gambling means Crown and Anchor will disappear from Cup Match. Now that would be an interesting tactic... and fun to watch unfold:

"We will table a Green Paper that will set out the research commissioned by the Task Force on Gaming. There will be some clear indications of what is not suitable for Bermuda and what, provided it is supported, Bermuda could have.

"Additionally, the Paper will recommend consolidation of all laws that touch on gaming of any kind into one piece of legislation. This will permit far greater certainty and clarity in the law.

"In my view, once we as a community are able to make an informed decision based on high quality, independent research, we can make a decision that represents what is best for all of us in Bermuda."

St. George's ferry service cancelled, overtime cutbacks in the Civil Service. Cue Simply Red:

These links will take you to the properly formatted documents released yesterday:

• Bermuda First Report
• Bermuda First Exhibits 3 Nov 2009.pdf

Two important and highly anticipated reports released on successive days. Yesterday was the report on young black males and today was the Bermuda First Report.

I've skimmed both but need to digest more.

My first reaction is that both support the arguments that serious commentators have been saying for some time but has been lost in all the shrill background noise (not unintentional):

• on race we won't see parity until we fix education in general and a horrendous dropout rate.
• on the economy the near term outlook is poor but doesn't have to be that way. The most important factors to ensure continued economic success and expansion is to eliminate the internal attacks on our sole economic pillar, put tourism in the hands of non-political professionals and be pro-active in the face of external threats to the financial services sector

None of these conclusions are particularly earth shattering or novel, but it is very helpful to have them presented by non-partisan groups/individuals and can hopefully allow the serious side of politics - policy making - to take precedence over the deeply un-serious campaigns of the past decade.

How quickly things can change.

I've said to a number of people that the PLP were very fortunate to have gone to the polls in December 2007, when the good times appeared to be rolling. That resulted in a shallow and un-serious campaign dominated by shrill tactics and demagoguery.

That wouldn't have played so well in December of 2008 during the economic crisis, or December 2009 with Bermuda's economy showing signs of pain.

While the UBP would almost certainly still not have won, I suspect voters would have given them a harder look; on the issues they were much, much more serious and substantive. The popular vote very well could have been closer and the UBP may have pulled another seat or two.

It's a shame that the UBP are so bad on the politics while the PLP are the complete inverse, giving complete primacy to the politics, leaving the policy as an afterthought or trying to catch up.

The optimal answer is somewhere in the middle - reality based politics grounded in achievable public policy.

Hopefully these reports can usher in an era of somber seriousness. Bermuda is indeed at a crossroads, one that we were approaching in the late 90s early 2000's but was delayed by the reinsurance boom post September 11th and Hurricanes Katrina, Rita and Wilma.

It's time to face the music.

Vexed and the Gazette pick up the UK's report on overseas territories which recommends we all adopt their bloated and anti-competitive tax model, even calling it 'best practice'.

Bermuda does not need "to wean their economies off credit crunch hit banking, insurance and funds services" as the report suggests.

Whatever economic strains Bermuda is currently under and at the leading edge of is not the fault of too narrow a tax base, but too broad and irresponsible Government spending under the PLP.

The surplus is gone, the debt ceiling is still relatively low but quickly rising and Dr. Brown continues to be enamored with pouring concrete and embarking on major capital projects with no master plan or articulated vision. It's the build it and they will come approach. No-one's coming but we're now building a huge mega-yacht marina in Dockyard (deny Corporation of Hamilton the revenues) for what is a very questionable proposition. Bermuda is not the best located place for a busy mega-yacht destination.

Bermuda's economy is in much better shape than the UK's because we have not adopted their 'best practice' tax and spend model. Our pain is all self-inflicted.

All those people who rolled their eyes about those of us complaining about the double-budget Berkeley, the exploding travel costs, the taxpayer funded economic black hole Music Festival among other things were short-sighted.

That $70M overspend from the Berkeley project would have come in handy now that Government's reliance on easy money has gone away and they're facing certain revenue shortfalls amid exploding spending.

The Future Care debacle is the canary in the coal mine. Bermuda can no longer afford public sector economic hubris.

The PLP' s problem with claiming all the economic and social negatives during their tenure are due to external factors is that it undercuts the claim that all the economic and social successes during your tenure were due to your management of the economy.

Bob Richards' problem is that while he's correct on the core economic issues that matter, I don't get the impression that he's persuasive with people who don't already get it.

"The Finance Minister and the Premier are blaming all of the problems in Bermuda on the external forces, which is quite deceptive -- yes, there are major factors outside of our control, but there are things which are within our control and that is a ball they have fumbled, so you just cannot blame it all on the global recession," he said.

"The Government has some control on the local economy and they have not used that wisely."

Mr. Richards said there were three main areas which Government needed to deal with -- international business, tourism and construction industries.

But there is some truth to the saying that you can lead a horse to water but can't force it to drink.

Connecticut, the home of Warren Buffett's General Reinsurance Corporation, has offered a 20 year $9M loan at 2% to the company to remain in the state, amid concern that the company would move to neighbouring Westchester County.

Read what the Connecticut Governor had to say and the importance she places on retaining jobs:

"Gen Re had to make a decision -- stay in Stamford or relocate to Westchester County, New York -- and we were not going to lose those dependable jobs," Rell said. "Smart, targeted loans and investments by the state will prevent" the loss of insurance-industry positions.

Compare and contrast that to any of the empty political rhetoric around the window dressing term limits policy (chasing away jobs) and the attitude from the Government that our insurance companies would never leave Bermuda.

Time to get creative. It's a competitive world out there. Complacency is no longer an option. Other governments are getting the picture.

And now even the regulators are leaving.

(Joke, just a joke).

For what it's worth, and I'm usually wrong on predictions, I don't see a lot of value calling an election during the Premier's address tonight. Sure there are some tactical benefits, but the upside seems limited - a two year extension and a slightly larger majority. Both seem relatively immaterial.

If it was called it would be purely tactical, but people often confuse tactics with strategy.

Dr. Brown is more of a strategist than a tactician. I suspect Dr. Brown is going to try and prepare people and position himself for an awful lot of grim economic news over the short term, with the Bermuda First report due out any day now.

No longer can the PLP ride the crest of the economy which the UBP left them. The wave has hit the beach.

The old ideologies no longer apply, and need to be re-assessed. Real leadership changes course when needed. 1960s dogma in a changing 2009 word isn't going to cut it anymore.

I suspect Dr. Brown knows that the Bermuda he governs is in a lot worse shape than the Bermuda he inherited. That doesn't make for a good legacy for a lame duck stepping down in October 2010 (in theory).

The Bermuda First website is now offline after a reader pointed out to me that the draft site was up last night.

The site looks quite promising from a design and function perspective, much more so than gov.bm which is an elaborate brochure.

There needs to be a non-partisan gatekeeper to keep the partisan attacks out of it however. Populating it with a laundry list of party propaganda isn't the way to go.

This was pitched as a non-partisan fact gathering exercise and it should remain that way.

Hopefully when it relaunches they will have stripped out the PLP attack pieces masquerading as opinion.

The much delayed Bermuda First report remains under wraps, but a draft website is up.

Design is very slick and is rigged for good social networking tools, but content is light as I presume this isn't ready for prime time.

Perhaps as a warning sign the Blog Other Viewpoints link includes a couple of extremely partisan verbatim entries from the PLP's hyper partisan blog including:

• Roban: Time to Reform Corporations
• Revealed: UBP Intended to Use No Confidence Motion to Seize Government

These use very partisan language, even going so far as accusing Kim Swan (co-chair) of lying. Nor should we see references to The PLP Government, it's the Bermuda Government, otherwise how on earth can the group be called "Bermuda First"?

Presumably the PLP guiding hand is laying the groundwork for the PR war when the report is released.

If this thing comes out of the gate with that kind of partisanship embedded in it then it's DOA as those blog entries have no place on the site (in other viewpoints or not) and run completely counter to the stated mission of bi-partisanship. The parties and politicians have their own websites to peddle their propaganda. These will pollute and dilute the Bermuda First initiative.

Let's hope that Don Kramer and the other non-political steering committee members stamp this out early.

PS. The domain is also registered by an Arizona based firm. I hope that's merely a domain name registration. There's plenty of Bermuda firms capable of running the website.

Obama's campaign today released a new ad tying John McCain to Bermuda and offshore tax breaks.

This is of course the flip side of the Bermuda love affair (myself included) with Obama's personal appeal.

On the bright side, Tourism can claim heavy free national cable tourism exposure.

A reader addresses the PLP's attempt to portray sarcastic lip service off as substantive economic policy:

What David Burt doesn't understand (or just doesn't want to acknowledge) is that, giving lip service to the notion that the worldwide economy is in a downturn, whilst telling people that they shouldn't worry about anything, because they are completely on top of the situation and know what they are doing, is utterly meaningless, particularly when it is plain to see that they are utterly clueless when it comes to matters economic.

Each of the quotes that he's used to assert that they've actually been making people aware of the economic downturn contains said 'lip service'. That's not presenting people with the economic facts, and taking decisive action, it's using the economic downturn for political gain, by falsely asserting that they're well-placed to deal with it.

For months they have shouted down and ridiculed anybody who expressed doubt about the economic outlook for Bermuda.

I don't think they're utterly clueless, I just think they are focused on the politics first and foremost and can't see the forest for the trees.

I also don't think they're using the global economic credit crisis for political gain other than the usual obsession with winning a 24 hour news cycle that doesn't exist in Bermuda. The language and tone they're trying to run away from on their website was simply a combination of ignorance and hubris on their part.

For all the complaints that I have about the UBP's lack of aggression in making their case and defending themselves from the constant smear campaign, they've got it right in focusing on realism, sober fact based critiques and policy positions.

David Burt is just ultra political and ultra partisan and his party has allowed him to freelance irresponsibly on their website with the most inappropriate tone for a party that wants to be taken seriously.

Remember, this is a party website that regularly publishes official Government statements before the Government website itself does - if ever.

They've obliterated the line between party and Government, and thus the snarky taunting by their Chairman, whether he tries to hide his ownership of the words or not, should prove to be a liability as the site appears to be as much speaking for the Government as the party.

The PLP have allowed an aspiring propagandist to populate their website with statement after statement that suggests a glib dismissal of substantive and intelligent economic critiques that turned out to be on the money (pardon the pun).

Being on the wrong side of a major economic crisis, and using serious discussion of it to score cheap political points tends not to endear yourself to the public.

That's why they're pushing back so hard against me calling them out on it.

But we shouldn't be surprised. The PLP practices crisis management: they allow situations to become a crisis and then respond firstly politically and secondly from a managerial perspective.

- Pembroke dump was allowed to have an unsafe buildup of agricultural material that eventually erupted in a massive uncontrolled fire.

- Berkeley was allowed to run 100% over budget, all the while denying there was a problem.

- Cedarbridge was neglected to the point of having to be closed due to mold infestation.

- Whitney was allowed to deteriorate to the point of closure before a sudden about face after the PLP attempted to use the situation to brute force the school out of the successful aided school model.

- They lied about tourism results for the better part of Ewart Brown's tenure as Minister to see the bottom eventually fall out and have to admit the truth.

- They refused to listen to concerns over term limits and their impact on Bermudian jobs and Bermuda's desirability as a jurisdiction to now be clearly preparing for an about face in a massive global economic slowdown.

It's quite sad actually.

Compare Ewart Brown and Paula Cox's non-specific platitudes of the past week to the substantive, specific assessments and explanations from their counterparts.

Bob Richards and Grant Gibbons are schooling them. Times like these call for serious managers. The PLP have offered nothing to suggest they are.

The idea that Government is 'monitoring' the situation is about right, because as Bob Richards explained in his explanation of a sound fiscal policy, Government has foregone counter-cyclical economic policies and really has little to no ability to stimulate the economy if/when needed.

Instead of being actors in this they're observers.

But Beyonce's coming. Sleep well.

Well, we're finally witnessing a change in tone from the Government on economic issues, after they've cried fearmongering at anyone who has raised concerns about the unrestrained growth in Government spending and debt since the PLP took the reigns in 1998.

Vexed as usual provides a sober take, but I would recommend everyone re-read Shadow Finance Minister Bob Richards' excellent and prescient analysis on the pending economic slowdown written a month ago.

The UBP have been warning for some time that Bermuda is going to be facing tough times and Government should prepare for it.

The response from David Burt at the PLP blog has been typically unhinged, head in the sand, sarcastic, shallow, substanceless partisan button pushing.

It's terribly indicative of the PLP's obsession with managing the next headline instead of sound public policy and their reliance of ridicule over reason.

13 Aug 2008:

Low and behold, a fearmongering opinion piece from one, Mr. Bob Richards appears in the pro-UBP daily.

...

Bob Richards, the UBP and the Royal Gazette have made careers out of smearing the PLP and our leaders. They've been fearmongering over our economy for a decade now and they've been proven wrong time and time again. The PLP government is ready to weather the international economic storm and you can bet on the fact that we'll prove them wrong once again.

14 Aug, 2008

No Beyonce. No Alicia Keys. No Bermuda Music Festival. That's the UBP's ridiculous plan to deal with an international economic downturn from which Bermuda's not immune. What's next UBP? A dance ban?

15 Aug, 2008:

Bob Richards and Pat Gordon Pamplin have egg all over their faces. Just a day after they engaged in a fearmongering attack over Bermuda's economy (an attack predicted by Premier Brown), Finance Minister Paula Cox announced some wonderful economic news:

19 Aug, 2008

The UBP and their friends love to run around screaming that the 'sky is falling' and that we're headed for economic doom - but, after ten years, your PLP government has more than proven that we can effectively manage Bermuda's economy.

Quick, someone get down to Horseshoe and pull Bob Richards' and Pat Gordon-Pamplin's heads out of the sand! Despite their dire predictions, Bermuda's IB sector continues to prosper even in a difficult international economic climate.

Get the picture? Stupid, substance-less political snarking, rather than a willingness to stop cherry picking minor events as major accomplishments and step back and take a realistic look at the developing macro economic picture.

While the PLP's spinner David Burt suggest that everyone should just put their faith in Dr. Brown and the steady hand of Paula Cox, the truth is that the economic snarking stopped at the end of August as XL's problems took centre stage, and you now have the Finance Minister finally admitting that Bermuda's economic numbers will have to be recast downwards.

Paula Cox's tenure as Finance Minister has been a terrible disappointment. It has not been a steady hand, it's been a heavy foot on the spending accelerator. As Bob Richards warned a month ago, and many times before, the PLP's spending has left them with very few levers to pull as Bermuda goes into a slowdown:

My good friend, economist Craig Simmons, recently stated on TV that government spending patterns SHOULD BE, “counter cyclical.” That is absolutely correct. This means that, when the economy is strong and government receipts are strong, government should restrict spending, otherwise it will overheat the economy causing inflation. During a recession, government should expand spending to take up the slack in the economy and provide jobs lost during the down turn. That’s how it should work.

In today’s Bermuda, the reality is somewhat different. This Government, under this Finance Minister and this Premier, has done the opposite: It has spent like a drunken sailor while the economy has been very strong, helping it to overheat. If next year the economy cools to the extent that there is a recession, how is government going to help the economy by providing counter cyclical stimulus?

As the economy cools, Government receipts will decline but the current account expenditures will remain largely constant because much of it is in salaries of civil servants. The current account will sink into a deficit position. To finance this, the Minister could increase taxes or fire civil servants but this would be at precisely the wrong time for such a move and would exacerbate the slowdown and increase job losses. Alternatively, they would have to increase the national debt, but this would likely be more expensive because it would be added to the debt that is already outstanding from previous overspending.

It would be helpful if PLP Chairman David Burt can drop the idiotic spin and get a little more serious for a change.

A less tone deaf, less partisan, more respectful and honest approach to what is going to be a difficult time for Bermuda is in order.

David Burt and his party need to rise above the politics for once, particularly now that Bermuda is looking at job losses and the financing for the Sonesta redevelopment disappeared with the Lehman bankruptcy.

Time to drop the childish tone on the PLP website and show that the PLP can be serious managers and take on board what are legitimate concerns and warnings from others rather than predictably dismiss them as fearmongering, haters or media bias.

This isn't a high school election, although that's the impression the PLP website leaves one with.

This is about the real lives of real Bermudians and Bermuda's Government hasn't positioned us well during a period of rapid growth driven by external circumstances (Sept. 11 and Hurricane Katrina).

We may be able to muddle through, but right now the Government is watching and waiting - reacting - because they don't have a lot of cards to play with massive spending and an increasing debt load.

Bi-partisanship isn't just the UBP supporting the PLP's agenda. It's the PLP acknowledging that others have a point and raise legitimate issues.

There's an Opinion piece in Friday's Bermuda Sun entitled "How the Cabinet Office jump-started my career", written by Cabinet Office intern Kenneth Minors which is worth addressing.

I'd suggest you read it in full here and then come back to my comments below if you're interested.

In short, Mr. Minors returned to Bermuda with a Masters degree at age 22 and was unsuccessful in finding employment in the private sector and was subsequently accepted as a Cabinet Office intern.

Before I get into the meat of this, I want to preface this by saying that this is not a political issue, despite the connection to the Cabinet Office, and the PLP's promotion of the article on their website on Friday.

It is precisely Government's role to fill in gaps in the private sector and a program like the Jump-Start program is absolutely worthwhile.

But, as I'll demonstrate below, the claim that the 'capitalistic system is corrupt' and the 'anger and disgust' that Mr. Minors now holds against the private sector is completely misplaced. The problem isn't the private sector discriminating or claiming they wanted experience over education which Mr. Minors had, the problem I would suggest is the degree he was holding.

When I read the piece I immediately thought that something didn't add up. Despite Mr. Minors not identifying the kind and level of position he was applying for, I found it odd that a 22 year old with an MBA would receive such a poor reception in the private sector as he says:

The truth is I was about to get a major wake-up call about how cruel and corrupt the capitalistic system in which I was forced to live can be.

A few weeks before I graduated, one of my business professors told me what to really expect. He said if your MBA is from Harvard, Yale, or Princeton (the Good Boys Network), you would start out at $100,000 a year with no experience. However, since my MBA was not from these schools he said I would be lucky to make $50,000 a year fresh out of school with no experience.

Well he was right. For a while I was looking in the private sector for a job.

Interview after interview I was told, "You have the education but not the experience, therefore, we can't hire you. You're overqualified." I started to get angry and disgusted at the private sector.

It turns out employers wanted experience first and education second. It was sad this was not stressed in my college and university education. I was misled over and over again by teachers who did not teach about the real world.

Literally seconds of googling answered the question.

The cruel and corrupt capitalistic system he should be attacking isn't Bermuda's, but the capitalistic owners of the for profit American Intercontinental University.

Here's the Wikipedia entry, well sourced and referenced, on American Intercontinental University:

AIU's parent company has grown rapidly and had become increasingly controversial. CEC has been investigated by the U.S. Departments of Justice and Education and the Securities and Exchange Commission. Allegations specific to AIU include reports that the school misrepresented its programs and classes, made a practice of admitting students who had not graduated from high school, and included in its enrollment numbers students who had never attended class.[1]

....

SACS placed the university on probation in December 2005.[3] AIU had come under scrutiny for its student recruiting practices. AIU is an open-enrollment institution, where nearly everyone who applies is admitted. AIU argues that these open standards help create educational opportunities for low-income and minority students who might not otherwise be able to attend college. Others, including current and former AIU employees, have countered that enrolling students who lack adequate preparation and qualification does not actually help them. One anonymous professor stated: "If you can breathe and walk, you can get into the school."[4] In 2006, SACS reported that AIU did not comply with eight of their Principles of Accreditation, including integrity, program content, and faculty.[5] On December 11, 2007, CEC announced that SACS has removed AIU's probation and that the university's accreditation remains in good standing.[3] However, an unresolved problem facing AIU is still current Quality Assurance Agency (QAA) in the United Kingdom's audit of the London campus, which concluded that it "identified fundamental concerns regarding the academic standards being achieved ... which included the identification of 'alarmingly low standards of student achievement'"[6]]. A further audit has been postponed. AIU London continues to be the only UK university to have failed a QAA audit. [8]

...

AIU continues to be dogged by issues relating to its quality assurance problems, including several class action suits against it and its parent company CEC. On March 19, 2008, Wargo & French filed the attached Complaint against American Intercontinental University and its parent company, Career Education Corporation (collectively "Defendants"). The Complaint alleges that Defendants defrauded current and former AIU students by advertising false employment rates for its graduates, failing to disclose to students that it was on the verge of losing accreditation, and falsely telling students that an AIU education was worth the significant financial investment. The Complaint is a putative class action, with the Plaintiff seeking to represent all other students of AIU who have been defrauded by AIU.

Read the footnoted story entitled "The student trap: As American InterContinental University fights to keep its accreditation, students on the Buckhead campus wonder if they've received the education they paid for"

Unfortunately for Mr. Minors, and I imagine through no malicious intent of his own, he is the holder of an MBA degree which is simply not credible.

The potential employers who were telling him that he was overqualified and lacked experience were being polite, not wanting to tell him what they really thought: his degree lacked legitimacy.

I'd never heard of AIU, so I can guarantee you that any employer would research the university, particularly for a 22 year old with an MBA, and have concluded that it was at best an inferior degree.

Again, this is not a criticism of Mr. Minors. He's the victim in this, but he is not a victim of Bermuda's private sector. His anger should be directed at AIU. I'd suggest he try and join the class action suit.

But it's a tale all too often told in Bermuda.

The private sector gets labeled as discriminatory when Bermudians are not being discriminating enough, selective enough in what schools they attend.

All universities are not created equal. Pick wisely.

Even among accredited, credible schools there is a lot of brand value to going to a Harvard, Yale, Princeton, Stanford, McGill, Oxford etc., even if you think there is a lot of mystique and not a lot of substance around that.

The professor who warned Mr. Minors in the last week of class that he wasn't going to be on equal footing with other university graduates should have told him that in the first week, not the last week.

I feel for Mr. Minors. I really do. The Jump-Start program will be invaluable for him over the coming years to build up experience which will prove more important than his MBA; the MBA from AIU is for all intents and purposes useless.

Bermuda's is a competitive job market with lots of people with degrees, BAs, MBAs, PhDs etc.. The Institution at the top of that piece of paper counts - a lot. It signals credibility, a proven history, a track record of producing well educated, highly trained, highly educated graduates.

This is an unfortunate story. But it's not the story Mr. Minors thinks it is. And I'd hope the Cabinet Office aren't validating his perception that he was unfairly treated by Bermuda's private sector.

His letter was intended to promote the Jump-Start program, but it is first and foremost a cautionary tale to all young Bermudians to pick your university wisely; research, research, research the schools well; don't discount name value; and please don't think that a degree is a degree is a degree.

Finally, I think it is important to raise this as a failing of the public education sector as well, which needs to do a far better job in helping students make better choices about post-secondary education (setting aside the problems with the education the public sector itself provides).

A lot of Bermudians are paying a lot of money for an education that is not recognised as in the top tiers, and in an employment market that is teaming with recent graduates with a lot of impressive education credentials, that's a problem.

Well, I said that I could be wrong on this term limits story when I speculated last night about the lack of rebuttal from the PLP, and it looks like I probably was.

I was chatting with someone today who is in close contact with the Government regularly but is not in the Government - and therefore is not one to ply me with political BS. The topic came around to term limits, and the Chamber head floating what Vexed called a 'trial ballon', and I was told that term limits aren't going anywhere.

Unfortunately the policy is here to stay because politically the PLP are too wedded to it, although there is some willingness on Government's part to improve it on the fringes with specific process and key employee exemption issues.

I then subsequently had it confirmed by a couple of other people as well, in no unequivocal terms that there is no change coming and they were surprised at the characterisation in the article as something the Government might be open to.

Apparently it was recently privately reaffirmed by the Premier, as the Gazette said a few months ago, that the PLP will not backtrack on - despite how counterproductive it is - for any number of reasons.

I'm genuinely surprised that there hasn't been any blow back from the PLP yet, but that is probably because Senator Burch is/was apparently off island and therefore out of reach to deliver one of his trademark smackdowns.

I anticipate some serious finger pointing because if you read Phil Barnett's comments in this light, it reads more like he's speaking about what he'd like to see - 'eternally optimistic', which got written up as if he was implying it was likely to happen, particularly with the "Term Limits Rethink" headline and the first paragraph.

I waited a day before posting on the article in Tuesday's Gazette, where Chamber of Commerce head Phil Barnett raised the out of the blue possibility of an end to term limits.

I waited because I wanted to see what the reaction was from the always quick to be outraged over everything PLP, in particular their website. I figured their were two possible reactions.

1) A self-righteous reassertion of the PLP as the only party which gives a damn about Bermudians and term limits are here to stay or;
2) Silence.

So far? Silence.

Not even a mention of the highly controversial topic on a website that lurches from posting on a daily basis Royal Gazette articles in their entirety because the coverage was favourable to simultaneously railing against the biased coverage they have to endure.

Which leads me to the conclusion that the PLP are ready to drop term limits, and Phil Barnett went out to telegraph the climb down, test the waters to see what the public reaction would be.

What is almost certainly happening is that the Chamber of Commerce is floating the idea of an end to the PLP's signature policy of term limits. He's easing people into it and giving the PLP some political cover for when they announce in the relatively near future that they are doing away with term limits.

Of course, they won't say that they're abandoning term limits. The reversal will be couched in a way to make it look like they're not backing down on what a Gazette editorial said back in May "is a policy on which the Progressive Labour Party government cannot backtrack".

Throwing out term limits is the right thing to do because it's a completely counter productive political prop posing as policy to promote Bermudians in the workplace.

In June 2007 Dr. Brown, while in the Caymans, grossly misrepresented the concerns over term limits as about process not substance.

All the while the PLP got plenty of mileage out of the policy in multiple elections and in between, vilifying the UBP who (not wisely from a political perspective) spoke the truth and warned against the policy, as well as others such as myself.

There was a lot of chest thumping and 'see, we told you they don't care about Bermudians' bravado from the PLP over this policy - starting with then Labour Minister Terry Lister during the 2003 election, but it was always going to cause more problems than it would solve.

Not to mention the fact that while many Bermudians actually think that the policy had teeth, and meant that expats all got on a flight on the day after their 6 years were up, in practice things were very different.

In reality, the policy was full of holes (key employee), and with key employee exemptions, and presumably a campaign donation or two in the right direction, any non-Bermudian could have the 6 year limit waived and stay indefinitely.

So, while I'll be glad to see the policy go away as I suspect it's about to, that doesn't mean that the PLP shouldn't have to pay their penance for implementing a policy that has done nothing but ship Bermudian jobs to Dublin, Zurich, Halifax and elsewhere, while churning non-Bermudians with no appreciable impact to the Bermudianisation of the workforce.

While there were endless ways around it for many companies (usually the big international ones not the local ones), the policy has I believe done serious and long-lasting damage to Bermuda's attractiveness as a location to set up a meaningful physical presence for international companies.

So, while I could be wrong, I suspect term limits as we know it is about to disappear or undergo a radical reworking.

While that may be a good thing, it's probably too little too late as Bermuda's economy comes under global economic pressures after being subjected to unnecessary political ones for the past 6 years or so.

A reader seconds the reader comment in my previous post:

Excellent letter from one of your readers. He hit the nail on the head. You get the feeling that Govt. wants to consistently foist problems that should be dealt by Govt. right back on the shoulders of business. Shocking when you think of how bloated govt. is right now and how much tax payers dollars are wasted on it.

A reader seconds the reader comment in my previous post:

Excellent letter from one of your readers. He hit the nail on the head. You get the feeling that Govt. wants to consistently foist problems that should be dealt by Govt. right back on the shoulders of business. Shocking when you think of how bloated govt. is right now and how much tax payers dollars are wasted on it.

A reader weighs in on Burch's bitchin'.

The hustle truck is a great tool for easing people back into the working world who might be suffering any number of social ills, but not necessarily a sound recruiting pool for long term steady employees as many Bermudian-businesses need.

If there was a pool of 200 decent employees at arms reach of the Government and an equal (if not more) jobs that are hard to fill, then why can't Burch simply slot these workers into these voids? He works in IMMIGRATION!

Ask any restaurant owner, landscape company owner, construction business owner, hotel manager or retail store owner why this void exists and they will tell you- not many Bermudians are willing to do the hard blue collar jobs, especially young men. Government research has confirmed this. Problem is, most guys want just a quick "hustle." Show up to work for a week and disappear after pay day. Work a few days and quit without even giving notice. Leave the job for lunch and never come back. Unwilling to get dirty or to work in a position that they might have to serve another. Ask any one of these business owners or managers!

A foreigner is here JUST to work. They have less commitments like family and friends and are here to get ahead by sacrificing. They serve a purpose and a role in our economy. Not taking jobs from Bermudians, as perpetuated by many, but filling the gap where there aren't enough WILLING Bermudians. I am not saying us Bermudians are not CAPABLE, just not always willing. There are many shining examples of committed and hard working Bermudians. MANY, just not enough. There is no doubt we do have what it takes. However, if there were enough supply, there would be no need to spend all the time and money processing paperwork and struggling to find housing for a blue collar guest worker. It is a lot easier and less stressful to grind through this upfront to get a reliable employee than to go through many stressful incidents with several poor ones. Do the paperwork, find them a place to rest their heads (not easy), hook them up with a scooter and off they go.

It's part of our endless cycle - 1) a blue collar position becomes available - 2) not enough entry level Bermudian workers WILLING to fill - 3) eventually not enough to promote to a higher level position - 4) the need to now hire a blue collar and white collar foreign worker - 5) blue and white collar worker become efficient - 6) both positions vacated after six years - RETURN TO (1).

No wonder immigration is so busy. They have to pick up the slack from our poor education system and deteriorating family and social values that should be generating the SUFFICIENT* number of prepared Bermudians into the workforce.

*like I said - we have what it takes, but not a sufficient number of us that are demanded by our economy. This is entirely fixable. Immigration policy is just the band aid, we need a vaccine.

A classic political argument today with no foundation in reality:

"The assertion that every effort is made to employ Bermudians in this industry rings a little hollow when we can recruit over 200 people to work on the Hustle Truck."

Here's a suggestion for Sen. Burch: If he's so confident that the Hustle Truck crew make such great employees then hire them to process work permits and clear the backlog that those 10 poor overworked souls at Immigration are wading through.

It's stunning that a man who prides himself on being a straight talker can't take a little truth telling back at him. But that's the whole M.O. of this Government, they want to demagogue segments of the community and call press conferences with them as political props, but then demand that all dissent and any rebuttals be delivered behind closed doors.

At some point people have enough and you have to deal with the fallout of your ill-conceived poorly executed political decisions.

Isn't it time we dispensed with the BS and the posturing over all this? It's been going on for years now and Government is being completely unresponsive. The problem is that we're seeing the results of great politics but terrible public policy.

Firstly, term limits IS hurting Bermudian job opportunities.

As businesses are forced to end the employment of valued irreplacable-with-Bermudian-employees due to term limits they will send the individual, the Bermudian jobs associated with them, and the potential career paths for young Bermudians overseas. Quietly, but it's happening.

The problem for the local restaurant business and local businesses with no overseas operations? They have nowhere to send them, which is why you're seeing the local Chamber of Commerce being more vocal on this than the international companies who have options.

Secondly, the HUSTLE Truck program (which absolutely has a role to play and is a good program) is by definition aimed at people who have struggled to show up reliably for work and have behavioural issues.

The HUSTLE Truck program accommodates this, as they can decide on a day to day basis whether to go to work with the HUSTLE Truck. That may work for an ad-hoc Government program that doesn't have to make a return on its investment, but private businesses can't function like that.

The private sector needs reliable employees with no behavioural challenges. By Sen. Burch's own admission these workers present unique challenges as evidenced by the Payday Melee a few months ago.

Thirdly, Sen. Burch seems rather dismissive of blue collar workers, with his assertion that pot washers aren't key. They are if you're a restaurant which likes to serve food on clean plates. If you have no Bermudian applicants and don't want to have to churn through non-Bermudians to satisfy political demagoguery, the policy presents a legitimate business problem.

Fourthly, why is the PLP Government so disinterested in Bermudian business owners? They're Bermudian too aren't they?

Fifth, term limits do absolutely nothing other than churn expats, and add cost and lower productivity for businesses.

Contrary to the grumpy Senator's claim that he's protecting Bermudians, he's undercutting the very economy that will present them with attractive career paths down the road.

We have normal economic issues that present challenges without creating our own political ones to lump on top.

Sixth, if the bureaucracy is broken (or perhaps more accurately neglected), and can't keep pace with work permit applications, key employee applications etc., how is piling on whole new layers of bureaucracy such as housing licenses, spouse licences etc. a solution?

The PLP Government has broken the civil service through political interference, creating huge piles of unnecessary bureaucracy and not planning for their future bright ideas, yet the Minister wants to rage at those who actually have businesses to run which gainfully employee people creating jobs and oppotunities.

The problem here is that private businesses have to produce results or they'll go under; Government can just underperform and crawl along at a glacial pace, pawning off their inefficiencies onto the private sector, all while shouting down anyone who dare engage in public dialogue or dissent.

Seventh, the dirty little secret of term limits is that it's all about Independence, not protecting Bermudians' birthright or creating economic opportunities. The PLP don't want people for extended periods because they know that when they go for Independence again those residents present a problem.

That's before we point out that term limits are ensuring that our non-Bermudian workers feel a reduced motivation to get involved in the community. When you're made to feel so devalued and not particularly welcome (other than their dollar that is) you tend to exist in an expat enclave, which then becomes an argument used against them.

Even if the goal behind term limits was noble, it's a bad idea because of the age old law of unintended consequences.

Those of us who work in the private sector - where we aren't insulated from under-performance and don't have the luxury of simply raising taxes and mandating compliance - know that we are steadily eroding not just confidence in the island as a desirable platform to operate out of, but also are chasing away future career paths for our next generation.

Vexed makes some good points on the ACE re-domestication:

You may recall a little contra temps last year between the Minister of Finance (who *ahem* also works at ACE) with her boss ACE’s CEO over the quality of Bermuda’s regulatory efforts. He said inadequate. She said balderdash, we’re The Gold Standard™. He disagreed but realised that most of the world’s gold trades in Zurich, which is also host to a growing number of Bermuda insurers. Grüezi!

This change is inevitable - given the prestige held by ACE and the insurers’ herd mentality, I am sure others will soon follow. It is not necessarily a gloomy deal for Bermuda. But it means that Bermuda better act intelligently with our international taxpayers and employers, because their options get wider every day. And somehow we have to pay for our Government that spends money like a drunk hooker.

We don't have to kowtow to business interests, but we do need to recognise that we are just one jurisdiction of many, and one that is placing increased demands on our major companies while offering bureaucratic inertia and political demagoguery in return.

The announcement today that ACE intends to re-domesticate from the Cayman Islands to Switzerland, is a reputational win for Switzerland, a big loss for the Caymans, and (hopefully) a wake up call for Bermuda; we have become very complacent and arrogant when it comes to our financial services industry of late.

While the business reasons behind the move will become clear shortly, this event should demonstrate definitively to us all that with a proxy vote and a few legal documents, massive multi-national corporations can just up and move.

Those big buildings on Pitts Bay Rd? Rounding error on one quarter's earnings.

And when they leave, they take with them some of the prestige they loaned their former home, and that's much harder to earn than lose.

I also think this sentence is interesting for what it doesn't say:

ACE Limited will continue to maintain executive offices in Bermuda, and ACE Group Holdings will continue to maintain executive offices in New York.

What didn't it say? It didn't refer to Bermuda as its corporate headquarters.

ACE and XL have largely defined Bermuda as a business destination for some time. And while it might be a surprise to many that both were founded as Cayman Islands domiciled companies, I think it's safe to say they are seen - both here and abroad - and have functioned, as Bermuda companies, our flagship companies.

The language in that press release suggests that Bermuda is just another operating location for ACE now.

In the early 80s we thought that tourists were so fortunate to visit Bermuda that we could charge them a 15% gratuity for poor service. We all know what happened since then.

Why should the financial services be any different?

Will our complacent politicians take notice?

The perception of Bermuda, when looked at from the outside in - where the political noise is largely ignored in exchange for a dispassionate assessment based on competitiveness, attractiveness and integrity of the jurisdiction:

The greatest threat to established OFCs like Bermuda, the Bahamas, the British Virgin Islands, and the Cayman Islands is not the United States but competition amongst themselves and the threat posed by emerging financial centers like Dubai and Singapore, says Hewson.

"The OFC with the biggest bulls-eye on its proverbial chest at the moment is Bermuda," he adds. "There are signs that this phenomenally financially-successful island has peaked economically and will face a future of decline caused by rampant political corruption and the very real prospect of independence in the not-too-distant future.

"There are striking similarities between what is currently taking place in Bermuda and what took place in the Bahamas in the 1960s and 1970s, when corruption, independence, and a lack of concern for the needs of international businesses contributed to a wave of insurers moving to Bermuda and banks to the Cayman Islands."

....

"If Bermuda's corruption continues to worsen and the country goes independent, particularly if it is forced through by the government against the will of the people, as has been threatened, then it is only reasonable to expect an exodus of existing business and a slow-down of new business.

Right on cue, the insider traders who were handed the cement company start to get what they knew was coming.

No-one is surprised are they? I mean really?

This was a mugging in broad daylight, and as usual few spoke up against what was obviously a fix.

I see Jim's lawyering up, which could get interesting.

Any lawyers out there see any sort of a case? Can you sue for failure to negotiate in good faith?

It's almost comical if it weren't so corrupt.

A reader writes on income tax:

Christian, I think it's important to realize that Bermuda already has an income tax, albeit by another name. Payroll tax is income tax that only applies to earned income (salaries, bonuses, etc.) and does not apply to passive income (interest, dividends, etc.). At present it's levied at a modest rate and it's not progressive. That is the same rate applies to everyone. But it's still income tax. As a point in fact, prior to the introduction of payroll taxes, financial statements for captive insurers for example used to say there is no income tax in Bermuda. Now they say that there is no tax on corporate profits. A subtle but important difference. It's also worth noting that the exempt companies have an undertaking that says they will be free from tax until 2016. Given that one of the attractions of Bermuda is the lack of corporate income tax, I don't see this being changed.

I agree; but a tax on Total Income would be a major shift.

That's all your income (presumably both personal and corporate income tax), not just payroll tax as exists now. It's everything including rental income, interest, dividends, capital gains etc..

Corporate income tax would obviously be committing economic Hara-kiri as that's the sole reason our economy today exists.

But on a personal level it's not just a big bite out of people's wallets to fund future care, but also would cause yet another explosion in Government bureaucracy for an IRS equivalent that we'd have to pay for.

It would be a radical move, certainly. I think it's highly unlikely; but to float a tax on "Total Income" in an RFP is beyond careless if they're not actively considering it.

As Bermuda's budget continues to grow uncontrollably, and we all pay more and more for less and less, Vexed picks up on a warning sign at the end of the Future Care RFP - perhaps the biggest of the PLP's un-priced and unspecified election promises:

The particular revenue sources would be designed optimally for Bermuda’s economic structure and would include some mix of the following revenue sources:

o Employer contribution

o Employee contribution (persons age 20 to 64 inclusive)

o Total income- or wage-based tax

o Coordination of benefits

o Patient cost sharing

The "Total" in "Total income - or wage-based tax" is what gets my antennae up.

But the document is vague; they're making this up as they go along.

I caught most of Labour Minister David Burch's press conference on this evening's news where he addressed, among other things, the appallingly slow Department of Immigration.

The Minister suggested a couple of strategies to address the time it takes to process work permit applications:

1) Shutting down the Department for a month and just clearing the backlog.
2) Put on a night shift (already being done to a limited extent)

I have another suggestion, a very simple one that I think is also very fair:

1) Establish a realistic and appropriate period for Immigration to process a properly documented application, say 6 weeks.
2) If Immigration fails to process the permit in 6 weeks, the application is automatically approved.

Why should public sector inefficiency be inflicted on our private sector, making them less competitive and driving up their costs?

Here's PricewaterhouseCoopers' Budget Review.

Here's the pdf of the 2008 Budget, saved from the Government portal which is interminably slow.

2008 Budget Statement

Vexed's quick summary is here.

Shortly after the election, Ewart Brown told a BBC Caribbean reporter that "the economy of Bermuda in the private sector is probably 90 percent controlled by white Bermudians".

Really?

So....

If Bermuda's (Re)Insurance companies are capitalised at $129B as reported today, that can be no more than 10% of our economy according to Dr. Brown. (Because...our insurance industry is controlled by foreign investors - publicly traded, hedge funds and others - which are by definition not white Bermudians).

If we assume then that black Bermudians control nothing (makes the math easy and is what Dr. Brown would like to keep people believing - helps with the victim complex), then white Bermudians control $1.161 trillion dollars worth of capital.

That's a lot of tacky checkered golf pants and wool sweaters.

And if you believe that, I have 267 pristine acres of land in Southampton to sell you.

One can only conclude that at best the Premier is disingenuous or at worst uninformed about the economy he controls, or both. Either option isn't good.

The truth is that Bermuda's economy is 'probably 90% controlled' by foreign investors, not white Bermudians. Has been for a long time.

But it's politically expedient (and incredibly divisive) to lump white Bermudians and foreign money together...lots of people lap that kind of talk up because it allows their prejudices to go unchallenged.

The days of Front St. money are gone in case you hadn't noticed. Bermuda's old merchant class hold no economic or political clout, they've haven't for a long time. (Psst, don't tell that to the time warped Premier or his whole world view will crumble.)

But anyone who is going to be persuaded by facts already knows this. Because in the world according to Brown, reality has a well known anti-PLP bias.

A reader writes on Chapter 1493 of the Bermuda Cement Company saga, seems they took my advice (ahem) and extended this until after the election and into the new year:

The cement crisis is most revealing. A week ago the Government was boasting they will buy BCC and put in a caretaker. Today Wedco, the Government and BCC put out an announcement that BCC can continue for another month. So all this bravado about a new company taking over was BS - surprise.

I was catching up on the weekend news and just watched some of the press conference held by the Caretaker Government over the cement crisis.

They're obviously worried about how they're looking in this, judging by the effort put into the 12 page timeline they issued, parts of which are already being disputed by BCC.

I hold no brief for BCC, I just find it extremely distasteful and dangerous for Bermuda to have a Government - particularly a caretaker one - which has created a climate where investors wonder if there's good faith in their dealings with them. If you were looking to open a business in Bermuda, I think it's safe to say that you'd make sure you didn't have to rent from Government as part of that after this debacle. In fact, I think you'd make sure they had as little leverage over you as possible.

But what got my attention during the press conference was the heavy use of the term 'tenant' to describe the BCC.

While in this scenario WEDCO is the 'landlord' and BCC the 'tenant', the obvious intention behind repeatedly using the word 'tenant' was to imply that Government rents out to BCC a cement facility.

Now again, that's technically true, but it's not that simple.

BCC didn't get awarded a lease to run Government's cement plant, they leased an empty plot of land 4 decades ago and built it into the facility it is today.

While the current management may have inherited an ugly lease which deems the silos part of the land, good faith would dictate that unless a company has been engaging in predatory business practices that they aren't treated in such a way to drive them out of business when they've entirely financed the facilities being leased.

The idea that BCC holds a monopoly on cement in Bermuda is sheer nonsense. Anyone can import cement and anyone can build a new plant. Obviously they have an advantage in that their costs are paid off, but the fact that a business with apparently about $900,000 in annual revenue would have to take out a $15M loan over a max of their 20 year non-renewable lease to pay for a new facility is evidence that it wouldn't be a sensible business decision.

It's apparent from the shifting rationale about whether a new facility must be built 300 yards down the wharf (it's required in the BCC's lease but apparently not a new tenant) that the intent has been to try and close down the company so Government can hand the plant BCC built to new unidentified investors.

That's a very dangerous path for Bermuda to be going.

BCC runs by all accounts a profitable business, but not one that is gouging if you compare the cost of cement in Bermuda to the cost elsewhere. It's got both local and major overseas investors who will be seeing their investment devalued through Government intervention.

I'm not surprised then that BCC has indicated that they will not accept a hostile takeover attempt.

And, most importantly I think, this should have all been suspended anyway until after the election when a new Government could be in place and who could take a very different view on the forced liquidation of a private business.

The most prudent course would have been to issue an extension through the New Year, say 6 months, so that the election can run its course, the next Government and relevant Minister can be seated, and then this could get dealt with by a Government with some legitimacy, not one in Caretaker mode.

One of the rather cynical things about this whole cement crisis is Dr. Brown's posturing as the saviour rather than one of the instigators.

It's quite simple to see what was going on here as I said last night, which is an overt attempt to dismantle a long-standing Bermuda business so that they could achieve an idiotic yet symbolic point of showing who Bermuda's power brokers are, to borrow a phrase.

Yet, as usual, it's all built on a pack of lies:

The issue over cement supply reached a critical point in this country because a former government provided BCC with an environment that permitted it to hold the country at ransom – do business with us Bermuda or go without cement.

Now I know that facts are irrelevant in Brown's world, but the truth is different. The history of the BCC is quite simple as I discovered today.

About forty years ago, the Bermuda Government was desperately trying to attract industry and investment to the west end through Crown Lands (presumably now WEDCO).

As a result of this, some investors drew up a lease for a patch of undeveloped grassland which now is the site of the Bermuda Cement Company.

BCC then built their facilities on the site, from the ground up, including 3 silos. There is no legislated monopoly. They weren't given any protections. They just started producing cement which, from everything I've been told, is not expensive in Bermuda and is at a price that is low enough to not have invited competition (and fuels thousands of jobs).

Eventually BCC dismantled the metal silo as it was not profitable and the two cement ones remain today. While the silos are part of the land under the lease and are not technically BCC's, there is no reason to relocate them 300 yards down the dock, other than vengeance. Does anyone see high-end condos in Dockyard as a viable development?

Even Dr. Brown made clear himself that the terms of the lease demanded of BCC are different than what a new company could negotiate. Hence, even the most simple or partisan (or simple partisan) observer can see that the lease was designed to be unacceptable to force sale/liquidation.

As an example, do you think it is normal practice for a landlord (WEDCO in this case) to be able to demand in a lease that a tenant make 20% of their company public? Does that sound like something a landlord is within their rights to do?

And, from what I've learned today, this actually wasn't unacceptable to the BCC (although I understand that they were advised a couple of years ago that the company was too small to be listed anyway*). BCC has stated all along that the issue is the cost of building a new facility next door, dismantling the facility, and a short 20 year non-renewable term.

Bermuda's reputation as a safe and reputable place to invest your capital has been irreparably harmed by this debacle. Foreign and local investors will be wondering if their capital is safe from Government interference.

Just ask Cemex, a minority shareholder and Mexican conglomerate, which is about to see their investment devalued by a forced Government takeunder.

A few select insiders will win. Bermuda loses.

[* CORRECTION: The post originally said that BCC was informed by the BSX that they were too small to be listed. That is incorrect. This was advised by an advisory firm. The BSX has advised me that the BCC could have qualified for listing at the time.]

Government today made an offer to purchase the Bermuda Cement Company, in what is a clear case of nationalisation.

It took awhile but the plan was simple: Offer terms to a private business that no reasonable business could accept, and when they eventually walked, try and purchase it.

There are some serious procedural problems with this (ignoring all the other problems of this debacle), and I bounced this off a knowledgeable source who concurred:

1) Caretaker conventions would prohibit a major move such as this - in 3 weeks we could have a new Government who may not want to be in the business of selling cement (or any kind of business).

2) There was no provision in the Budget for this and it has not been sanctioned by Parliament. Any expenditure of this sort, if the offer were accepted (and that's a big if), would need to go to Parliament as a Supplementary Expenditure.

3) There is no Parliament once an election is called, so a Supplementary Expenditure is impossible.

This is not, in my view, a valid offer as it is a major breach of a number of areas of Government oversight and is a direct rebuke to Bermuda's Parliament and the people of Bermuda.

But interestingly, look what was listed in the Government notices last week:

23 Nov 07 Legal Notices 2 LEGAL NOTICE

The Companies Act 1981 ("the Act")

NOTICE IS HEREBY GIVEN that a Special General Meeting of CONSTRUCTION DESIGN & DEVELOPMENT LTD. will shortly be held for the purpose of passing a Resolution to change the name of the said Company to Island Cement Ltd.

CHRISTOPHER E. SWAN & CO.

Attorneys for the Applicant

The Gazette today highlighted an interesting angle in the story that the Premier is bringing in his own economist to cool down the economy, by pointing out that this encroaches on the territory of the Finance Minister, who only a few months ago maintained that the economy was not overheating.

The establishment of the rather grand sounding (which is all it's probably intended to be) Premier's Council of Economic Advisers also raises serious questions about the usurping of Finance into the Premier's office.

This development of an executive branch of Government is of course borrowed from the US, where the Premier seems to get most of his ideas, consultants which create his entourage, but it isn't a part of our system of Government and could create a real conflict between the Finance Minister and the Premier, if one doesn't already exist.

But all this reminded me that we already have a foreign consultant on the payroll, Dr. Andrew Brimmer. He's been an advisor to our current and past Finance Ministers, since at least 2001, and as recently as December 2006 was still on the payroll.

So is Dr. Brimmer still on the job? If so, why are we seeking additional advice from another consultant? Does Government not have confidence in him? What will another consultant add? And isn't it the Finance Minister's role to recommend and implement economic policies?

Perhaps Dr. Brown should prescribe himself some meds; he appears to be schizophrenic.

One minute he’s issuing orders to mow down massive areas of green space to fill with concrete and add a massive amount of new jobs, cars, and foreign workers to the economy (both during and after construction), and the next he’s calling in someone to slow things down.

Is he really serious? We don't need an ‘internationally renowned' economist to cool down the island’s economy? We need some common sense. Why are we yet again looking overseas for advice? It doesn’t take yet another foreign expert to tell us what to do. We have more than enough expertise here.

What should be done. Mostly, just reduce Government’s size, waste and spending. There. I just saved the taxpayer $500,000 in consulting fees.

Firstly, when Government starts talking about manipulating the economy, I get scared. They can’t even build a school on budget, let alone cool off an economy.

And that’s the real point here. Arguably the biggest contributor to overheating in Bermuda’s economy is the Government and their wasteful ways.

Economist Craig Simmons pointed this out in today’s article:

Government spending is approximately 20 to 25 percent of gross domestic product (GDP), the value of final goods and services produced or consumed in a year. Decreases in Government spending are overdue. Discretionary and capital spending are obvious candidates for the largest budget cuts. The purpose of cutting capital spending is two-fold. Capital spending puts additional demand on an already overstretched construction industry. Postponing capital projects will free plumbers, electricians and masons to work in the private sector. In addition, money not spent becomes part of a surplus that can be used either against existing debt or applied to the building of an external reserve.

Contrary to the claims that the civil service would be reduced in size under the PLP Government in 1998, it has exploded in size – and I’m not just talking about the Department of Communications (where the number of employees has an inverse relationship to the amount of information communicated).

Since 2001 there has been an increase in 1,000 Government jobs.

That's:

1,000 new Government in 6 years or;
166 per year.
14 per month.
3 per week.
1 every other day.

That’s just the Government. For every job the Government creates, one non-Bermudian position is created elsewhere as we have no unemployment. And that’s before private sector growth is considered. (That also doesn’t include the Government consultant racket that is growing by the day.)

You’ve got Government approving any new major construction development (hotel or otherwise) that comes their way, particularly ones that violate existing planning laws, and has increased spending dramatically every year since 1998 – with no real improvement on delivery of services – rather than return the excess revenue and reduce the tax burden. There's no fiscal responsibility in the executing of taxpayer funded projects, just massive cost overruns, most notably at the almost 2 times cost Berkeley project.

What is this all about?

You don’t have to be an economist, and definitely not an 'internationally renowned' one to see what is overheating Bermuda’s economy.

The UBP (Bob Richards, Pat Gordon-Pamplin and Grant Gibbons in particular) have been singing this tune for years now. But it’s not increased interest rates and slowing down the housing market that should be the targets. It’s the waste, the corruption, the excess of Government that should be the starting point.

Reduce Government and you’ll have an almost immediate impact.

Government has become so bloated and self-indulgent, so full of excess wasteful spending, with a rubber stamp for anything that involves pouring concrete, that it simply boggles the mind that we’re now talking about bringing in an expert to cool things off.

Look in the mirror not overseas.

Unless of course, this is a back door for something else.

A reader who has "a very dim view of the role of politics in our micro society" - and needs to remain anonymous - writes about the reality of current public policy/politics on opportunities for Bermudians:

As a Bermudian heading up a few international businesses over many years, I have frequently been placed in a position of professional embarrassment in coordinating interfaces with our government - I remember attending a meeting almost 10 years ago with a new, but veteran Finance Minister to introduce the CEO of a one of the top 100 firms in the world, and the first question from the Minister was whether I supported a charity which his wife was involved with. My overseas colleagues assumed this was pay to play, but I honestly believe it was simply a stupid gaffe on the part of the Minister.

We have a few hundred years of a recurring theme in our history, on a global scale we are a tiny place with limited competent resources and the occasional remarkable talent, most of the competent are drawn to business where their efforts are well rewarded, sadly the competent are too infrequently drawn to politics and public office. We also have a tradition of failing to recognize the limitations of our gene puddle and to embrace the contributions of outsiders in our public policy and our business endeavours.

Bermudians representing an international business are in a tight spot, they have a duty to their international principals to actively monitor and fairly characterize the risks of doing business in Bermuda, and they hopefully have a patriotic duty to promote their jurisdiction. In addition, the international principals will probably recognize a marginal conflict of interest on the part of the Bermudian and evaluate their judgment with some skepticism. This creates a very awkward role for a Bermudian executive whenever public policy creates risks and uncertainty. To fulfill the duty to the company and maintain the confidence of the international principals, the Bermudian needs to be very candid about the risks. The company in turn helps the Bermudian save face and quietly executes a transition to another jurisdiction, rationalized and timed in such a way as to not create any ruckus that might further hamper the business left in Bermuda.

I've been part of this, and cannot speak about it as it would the breach confidentiality terms of a separation agreement. International principals simply lose confidence in their ability to direct the staffing and operations of the business that they created due to ill-conceived government intervention. They relocate their core operations to another location, they provide parachutes and consulting arrangements for the executives key to the transitioning functions, and declare the Bermudian staff redundant. They are perfectly entitled to do this, they created the business, they pinned down the intellectual capital to make it work and grow; if our jurisdictional conditions are right, employees at all levels can participate in their insight and success either by having solid and interesting work, or by taking advantage of a remarkable opportunity for personal growth. If conditions are not right, there are only crap jobs left behind;
uninteresting routine work, which does not require much skill or judgment to perform. Our public policy is creating an environment where Bermudians will have less opportunity to be exposed to valuable experience.

And forcing Sven to tutor Johnny is not only an unacceptable imposition on someone's business, it creates a culture of entitlement amongst us Bermudians. As a professional person, I find it demeaning to be considered for a role, purely because I am Bermudian - I want to work where my contribution and professional judgment adds value irrespective of my skin color or nationality and I take pride that I can compete in the business world and continually win for my employer and for myself. I have had to address this sense of entitlement of fellow Bermudian employees on a number of occasions, it is not pleasant and in my view it is significantly a function of an immigration policy which is self-defeating - it encourages us to take the low hanging fruit and not to stretch for the better stuff.

Bermudianization of key areas of public service are excellent examples of how a sense of entitlement diminishes performance of critical objectives; Public Education has failed to utilize competition and diversity within its workforce to improve the standards of teaching and administration, and prefers to set educational policy without embracing opportunities to access some of the best minds in the field.

I had sincerely hoped that the PLP would introduce important social change to Bermuda, but the opportunity was squandered from the outset in power plays, self aggrandizement and a lack of leadership from a remarkable talent. Jennifer Smith might have been the remarkable talent, but she succumbed to the vices of political office and was manipulated by an apparently vengeful party faithful. Dr. Brown is increasingly relying on vacuous rhetoric - I was appalled at the latest I heard on the ZBM interview with Al Seymour - that Bermudians will participate in the rebirth of the glorious days of tourism and will take up many of the part time roles in the new hotels - it seems pretty demeaning to Bermudians if he thinks our people should relish the idea of continuing to work multiple part time jobs in one of the lowest paying sectors of the economy. The issue of racial quotas in the work place is a similarly ill conceived idea - it effectively demeans every black Bermudian by creating an unnecessary and open question - did you get this job for your talent, your nationality or your race? Who wants to live with that?

The CaymanNetNews publishes an excellent editorial, citing the current situation in Bermuda as one they should not follow:

Indeed, the latest developments in Bermuda could sound the death knell for the island's financial sector and, in the normal course of events, the Cayman Islands ought to be the beneficiary, but that is now by no means a foregone conclusion. According to a recent article in Bermuda's Royal Gazette, businesses there may soon be forced to recruit and promote black Bermudians ahead of other candidates through newly-drafted "employment equity" laws.

The new legislation will reportedly require firms of 40 or more employees to set up policies to ensure black Bermudians achieve "a degree of representation in each occupational group in the employers' workforce that reflects their representation in the Bermuda labour force".

Not surprisingly, local business leaders claim that the proposals will encourage senior executives to leave the island, and this comes on top of existing concerns surrounding Bermuda's political climate and work permit problems, about which we have also written in recent weeks and months.

Indeed, we pointed out that, in a process that is already starting to take place in Cayman as well, Bermudians are facing job losses as a result of unforeseen and unintended consequences of that country's own six-year rollover policy.

International companies are now outsourcing jobs overseas because of difficulties associated with hiring foreign workers on limited-term work permits.

This will directly affect local people and their place in the workforce because, as companies increasingly seek to outsource overseas jobs that have previously been filled by expatriate employees on work permits, they will also outsource lower-level jobs that would ordinarily be filled by locals.

Such outsourcing will inevitably be followed by the businesses themselves leaving for more accommodating jurisdictions and one of those alternative destinations might have been the Cayman islands.

The Minister of Immigration today issued a statement to attempt to rebut the complaints that so many people have been having over the new law which puts Government into your marriage and your bank account.

I've been meaning to comment on this earlier, not the whole legislation as it's quite involved, but the general attitude that underlies this legislation.

Phil Barnett of the Chamber of Commerce summed it up best with his comment about people being surprised about the Government's definition of a Bermudian family:

"Based on strict interpretation of the Act, Bermudians might be surprised at the Government's definition of a Bermudian family. "If you believe you are a 'Bermudian' family (by contributing to the tax base, educating your Bermudian children and fully investing in Bermuda as your home country of domicile), the Act strictly interprets this not to be the case if your spouse is not Bermudian."You do not have the same rights as a 'Bermudian' family comprising of two Bermudian spouses."Therefore the question requires asking 'What is a Bermudian family' and why are only some being disenfranchised?

The Minister seems put out by this statement judging by his press release today.

There is no disputing that the Minister is saying that Government can decide how a married couple can invest their funds. I find that offensive and a slippery slope. There is a fundamental principle at stake of individual liberty here. Do we run our lives or does the Government?

It also means that as a Bermudian you lose rights once you marry a non-Bermudian.

Surely the appropriate way to deal with non-Bermudian property ownership is that if the marriage were to end before the non-Bermudian spouse acquired status, that the property would have to be sold, as the non-Bermudian couldn't hold their share of that property, rather than having Government interfering in your decision to purchase a property in the first place.

Why should a legitimately married couple, where one spouse is Bermudian and the other not, have less rights than a married couple of two Bermudians?

What business is it of any government to be in the personal finances of individuals or families, whether 100% Bermudian or not?

In fact, the starting point of this act is an assumption that Bermudians only marry foreigners for their money and that the non-Bermudians bring the assets to a relationship?

If the Bermudian spouse possessed all the assets and is the income earner while the non-Bermudian spouse doesn't work why should they not be allowed to invest their funds in Bermuda real estate like any other Bermudian.

The legislation is presuming that every marriage between a non-Bermudian and a Bermudian is a financial transaction.

Unless a marriage is one of convenience, which was dealt with a few years back legislatively if I recall, Government has no business whatsoever decreeing how a family can invest their funds. None. Zero.

Here's a question for you: If, as the Premier has proposed, non-Bermudians are prohibited from owning a car, does that mean that a Bermudian and non-Bermudian married couple now have to sell their vehicle?

This is a very slippery slope, and one that is bigger than just the issue of property ownership. It speaks to the role of Government and personal liberties and freedoms.

There is a fundamental principle here of how much you want the Government in your life and your wallet. I say not at all thanks.

A very important and succinct op-ed is in the RG today, written by a top executive here who puts the threat to our future prosperity that is Dr. Brown and his party's policies.

Money quote:

Despite the threat of changes to the American tax code, Bermuda’s insurance executives are more concerned with the threat to their companies posed by the prospective policies of Ewart Brown. Typically, “trial balloons” are floated by junior ministers or assistants to undersecretaries in a way that provides those at the top of the administration with plausible deniability. When the leader of a country (even one whose authority remains unconfirmed by an election), describes prospective policies, those policies are understood to reflect the intended course of the country, lacking only the needed details to become law. And these policies are deeply unsettling to those who operate in a constantly challenging global environment. While Bill Berkley lobbies Senate leaders for changes in tax law, Bermuda’s Premier describes the changes he plans to implement. Who can - with any confidence - say that Bermuda’s insurance leaders are worried about the wrong man? Who can say that external threats are more potent than those that are home-grown?

Not to mention the increasing funding of Dr. Brown's lifestyle that our businesses are apparently expected to support:

In a few short months, Dr. Brown (among other things) has proposed to prohibit some expatriate insurance executives from owning cars; “asked” that industry CEOs provide him and his ministers with free transport on corporate aircraft; “requested” major insurance companies to finance his pet music project; and, most recently, promised to attach a Bermudian to the work permit of every expatriate insurance executive. In short, Dr. Brown has threatened to increase, to a degree unrivalled by his predecessors, the costs and burdens of managing an insurance business from Bermuda. And, at the same time, the saga of the Bermuda Housing Corporation has been played out in Bermuda and in London, with Dr. Brown doing his best to obfuscate, delay and otherwise prevent the release of the details of his involvement.

A reader writes:

Goodwill Plus is a joke. Ewart knows that there are simply not enough Bermudians with suitable education and aspirations to replace all the Svens that are needed to drive Bermuda's international sector. And sorry, three years of tutelage will not catch up a young Bermudian to someone with decades of experience in a particular field.

His policy actually hurts Bermuda as he's announced that expats have no longterm career path here - it makes it very hard to recruit, even for areas where there are few interested Bermudians, such as the Police. The reality is that the big international insurers seem to get all the Svens they want. On the rare and erratic occasion that Immigration turns down Sven's renewal - it is more likely that his employer will transfer him to their growing offices in Dublin or Zurich than continue to play "find the peanut" with the Bermuda Government.

The Police is a good example. Not long ago the Government was lamenting that it's increasingly hard to recruit overseas Police Officers.

Duh.

They're offered non-renewable 5 year contracts if I recall. All the while Bermudians are turning away from the Police as a career as well.

The Government is really firing on all cylinders aren't they?

It's that law of unintended consequences; these policies, term limits, Goodwill Plus etc. are failing because they're designed to achieve a political goal, not an economic or social one.

And we're seeing the results of this as the self-professed party of Bermudianization is presiding over a boom of foreign job creation while Bermudians stagnate.

A reader writes on what the Premier is missing:

The Premier missed the point on this one in the sense that 'Johnny', if he has those credentials, will achieve his success over time but not in 3 years. The analogy would have been much better if Shaquille the apprentice electrician was working along with Vladimir from Poland who would show him what a day's work entailed, those are the people who need direction and training, much more than an educated student in the insurance industry. But of course Dr. Brown would have all young Bermudians believe that they deserve to be CEO of ACE.

There's so much to deal with in Dr. Brown's speech yesterday, that's it's sort of hard to know where to start.

But how's about here:

Over the past decade, the number of highly skilled job opportunities in the international business sector - like actuaries - has grown exponentially. However, the quality of student we produce in Bermuda has not risen to meet the demand.

Firstly, as any actuary would point out to you, statistically speaking, in a population of 40,000 work age Bermudians, we'll only produce 5-10 actuaries. That's just the way it is. I know that isn't the politically pandering thing to say, but it's just true.

Bermuda doesn't possess some superior gene pool that means that we can create a disproportionate number of actuaries, or people capable and desiring of heading up multi-billion dollar public corporations with all the stress and expectations and sacrifices that that brings.

The false expectations that are being created are very damaging. It's one thing to tell people that they will be educated to be able to go out and get a decent job if they work hard at it, it's another to pretend that in 3 short years after graduating college that you can gain all the experience necessary to take over any position in our economy.

International business, reinsurance and finance is a clubby business that is built more on experience, credibility, relationships and drive than having the right college degree. That's important, but if you're in the industry you see that certain individuals can bring hundreds of millions of dollars of investment or revenue to a company based on their name, reputation and contacts. That what the big salaries, stock grants and perks are compensating for.

That can't be transferred from Sven to Johnny in 3 years. And that's not to mention that Sven won't come to train Johnny if he knows that he has a 3 year dead end job.

The argument that the Premier presented is so shallow and intellectually dishonest it's hard to describe.

Story-time with Dr. Brown:

When international business comes to our Ministry of Immigration [Ed. Note: isn't it a Department?] looking for a work permit for Sven from Sweden, we will grant that permit but it will have conditions.

Attached to Sven's three year work permit will be young Johnny, a Bermudian who has just graduated from college with a degree in financial services and a hunger for success.

Of course Johnny doesn't have the kind of experience Sven does.

I understand.

But Goodwill Plus will compensate for Johnny's inexperience because in order to get the work permit the CEO has agreed to put a scheme in place that trains Johnny to take over Sven's job when the three-year term is up.

After three years, Sven goes back to Sweden and Johnny is on his way to a healthy career.

In this scenario the CEO is getting the highly skilled employee he wants, without compromising quality -- and the Government is getting its own people in position to enjoy hometown success.

Sounds great. But it isn't based in reality.

Regardless, we should expect the Premier to practice what he preaches in his growing private business interests (that's a topic to be discussed in more detail). Hence there is only one conclusion which can be drawn from this insightful fairytale:

Dr. Brown will prove out this concept by having a Johnny attached to every Boris at the stem cell clinic which's he's fronting...I mean operating...for the Russian businessmen, which in 3 short years will be 100% Bermudian operated.

Right?

Very interesting article in the Rocky Mountain News today.

It's not everyday that you find a connection to Bermuda out there, but the Aspen city council just turned down a request for the first new luxury hotel development in 20 years....because it wasn't sustainable.

How sensible. That decision didn't include have to consider overturning all sorts of long-standing environmental restrictions either from what I can tell.

But by a 3-2 vote, the council ruled that it would not approve new hotel rooms at any cost. At 175,000 square feet, the lodge would have been the second-biggest building in town.

Besides 80 hotel rooms, the project also would have included four residential condos at 4,000 square feet each and 21 fractional ownership suites.

The hotel also promised to rise to the standard and price point of the town's three flagship lodges: The Hotel Jerome, St. Regis and the five-star Little Nell.

"We cannot only court the high end, and that's what this project did," Aspen City Councilman Jack Johnson said. "This sort of project and this sort of economy we have is not sustainable."

In the past 30 years, Aspen has gone from a town that nearly elected Hunter S. Thompson as sheriff in 1970 to a place where private planes line the runway at the airport and the average single-family home costs nearly $6 million.

Although the local affordable-housing program is the envy of other mountain resorts, reasonable rental accommodations are still a rare find. Local employers, from existing hotels to the school district, still have a tough time finding and keeping employees.

With much of the work force living in communities down the valley, a traffic jam chokes the entrance to town every workday.

Mick Ireland, who has been Aspen's mayor since June, said he could not approve a project that would further stress the housing and traffic problems. While there is a need for more moderately priced lodging in Aspen, Ireland said the need for more $1,000-per-night rooms was nil.

"I think we have to think about scaling back our mission," Ireland said. "In the resort-community balance, I think we've lost our balance."

The similarities seem quite compelling. I'd say Aspen made the right call, and our guys blew it. But this was always a done deal, with the Premier and his Government acting as the developers' chief marketer, forgetting that they represent the public interest, not private ones.

The ongoing BHC leaked files scandal hits the Financial Times, with a slightly different angle than most of the previous coverage, with a double whammy of a headline: "Corruption claims taint island tax haven". Nice. The words "corruption" and "tax haven" in one headline for us:

A scandal over alleged corruption in Bermuda has triggered a colourful political and courtroom battle that has delighted tax haven rivals and highlighted the unusual legal relationship between Britain and its remaining overseas territories.

The top appeal court for about two dozen former and current British colonies - the judicial committee of the privy council in London - has imposed a gagging order that will prevent full reporting of the case for almost three months.

Some Bermudans claim the allegations, extending to home improvements by Ewart Brown, prime minister, pose a potential danger to the image of a tax haven that is a linchpin of the world insurance industry.

Grant Gibbons, former leader of the opposition United Bermuda Party, said a drawn-out case could cause reputational damage even though there was nothing wrong with the islands' regulation of offshore finance.

"What happens domestically can have an impact on your international business," he said.

A devastatingly accurate Letter to the Editor from the always interesting "SAM from Warwick" today.

Money quote:

The point I’m making, and what South Africa finally learned, is that black empowerment is important, but it has to go far beyond just an economic initiative to redress the wrongs of the past. It has to go far beyond selective redress to benefit just a few or select individuals. As a black man, I am discouraged that my Government is creating narrow-based economic opportunities and not broad-based growth opportunities for everyone. A more serious issue is that they are leaving fundamental inequalities intact, or just sidetracking the old and present white elite with a new black one.

The benefit white and some black people received due to white privilege and black elitist privilege in the past, was done and is history. We cannot change anything about the past and the pain associated, other than remember, learn from and respect it. Reparations will not help, but we as black people have to stop justifying the improper behaviour of our present Government ... because they were born black and now represent a black political party publicly, but privately represent a few black and white individuals economically.

Dr. Brown is busy misleading down in the Caymans with respects to term limits:

"He disclosed that there were more concerns about the paperwork and how the proposal would be administered than the concept."

Now that is far from a true statement, and Dr. Brown knows it:

Mr. Ezekiel told The Royal Gazette: “The impact will be in the businesses here in terms of them not being able to deliver the quality of product they have been delivering simply because they can’t attract the brightest.

“Then, as you go down the road, potential new entrants to the Bermuda market see what is happening with the companies that are here and it will persuade them to consider alternative domiciles, whereas in most cases at the moment Bermuda is the domicile of choice.

“We have always said the competition is ourselves. What we are doing is ensuring that we are the leader in the field and don’t create something that causes someone to say ‘maybe this is not for us’.”

and

“The term limits policy is having a big impact on our members, one in every two work permit holders leaves Bermuda within the first two years of employment. These people tend to include those staff members who contribute to the success of their business regardless of their position within the business — they work in the engine rooms of our businesses. These people can obtain jobs anywhere and sadly we have had feedback from our members of these strong employees leaving, this reduces efficiency and increases our costs.”

Mr. Everson warned: “In an economy growing as rapidly as Bermuda this leads to an increase in inflation. Our members have devoted an enormous amount of energy and time for dialogue with Government and other stakeholders to improve work force training, education and other related matters. “We have continued to impress upon Government the responsibility they have as the largest employer in Bermuda. “If they can improve the efficiency with which they utilise labour by five percent this would have a meaningful impact, this would lead to 300 fewer work permits, 300 fewer people needing accommodation and also reducing the cost of Government to the tax payer.”

Another reader provides some historical context (sorry for the appalling headline pun):

Doc also overlooks the fact that Dunkley's bought competing dairies (such as Pioneer), while other new entrants (such as Bermuda Creamery) could not gain sufficient traction in the small local market to make it viable.

Now I know nothing about milk, nor does it seem does Dr. Brown; he does know however that the facts are irrelevant when BS-ing something that has nothing to do with local monopolies into an excuse for his cronyism.

A reader writes in, reiterating the point raised by Michael Dunkley regarding The Prime Misleader's mis-characterisation of the Importation of Milk (Prohibition) Act:

When Papa Doc talks about Dunkley's Dairy having a competitive edge created by legislation introduced under UBP rule, he can only be referring to the legislation which prohibits people from importing fresh milk. The problem is, as he well knows, this legislation is designed to protect local dairy farmers, not local dairies. There is no restriction upon people opening up a dairy and, indeed, no anti-competitive practices emanating from Dunkley's Dairy to prevent new entrants into the market. Believe me, in many other markets around the world, the massive milk-supplying corporations would force retailers to sign punitive agreements to ensure that the retailers only stock milk from one supplier. If Bermuda did not have restrictions upon the impotation of fresh milk, the importation of huge quantities of milk from massive overseas suppliers would probably put local dairy farmers out of business within the year.

Here's the full article, reported on by the Gazette last week, from Advisen FPN addressing the positive impact foreign jurisdictions are expecting from the PLP's misguided obsession with term limits.

There a few minor inaccuracies in the article, but they're irrelevant to the key issue - which is that perception is reality - and the perception is that Bermuda has become hostile to expatriate workers and are making ourselves undesirable as a business centre.

The exit will be a trickle, not a mass exodus, but it's already happening, companies are looking for options, hedging their bets:

The message is clear. Bermuda's loss can be Ireland's gain. In the last few years, many financial services companies (especially insurance and reinsurance firms) have opened offices in Dublin. In 2006, XL Capital, the world's fourth-largest reinsurance company, which has its corporate headquarters in Bermuda, established a new European reinsurance holding company in Dublin - XL Re Europe - which is now its head office for reinsurance business in Europe. It is also speculated that many companies would leave Bermuda if things get out of hand.

Crofts explains, "The large employers (eg XL) are being very diplomatic and publicly saying that if the Bermudians want independence then that is entirely their choice, and of course they (the employers) would remain on the island... but somehow I doubt this."

An added boost from Ireland's point of view is that the Government has already adopted the European Reinsurance Directive. This is a further incentive for Bermuda-based companies looking to relocate to Ireland.

You've got to love this.

The Bermuda Sun publishes what can be called the term limits edition today, with a number of articles from a variety of perspectives.

My take on term limits is unchanged and has been confirmed by the latest news: The PLP know this is a stupid idea but have invested so much into it that they need to be seen to be enforcing it while in reality they've gutted it of any teeth through an elaborate series of exemptions. They should just really retract the whole thing because it's so idiotic and suicidal to our economy rather than pretend they're enforcing a policy while in reality backing away from it entirely; but that would be responsible.

I'm going to be focusing on term limits much more in the coming days and weeks, but I couldn't help but chuckle at the Sun's interview with an anonymous Pakistani accountant entitled "It could be a lot worse":

Before coming to Bermuda, he lived and worked in Saudi Arabia and Bahrain.

"My experience [in Bermuda] is better compared to other countries I have lived in," he said. "In Saudi Arabia, your passport is [surrendered] to your sponsor, your employer, which ensures that you don't run away with the company's money.

"The exceptions to this rule are American and British nationals, or 'key' employees," he said.

Bahrain and Saudi Arabia! Both countries are monarchies - aka dictatorships. In Bahrain, political parties are outlawed and both countries are run under Islamic law.

Bermuda under the PLP is better than a theological dictatorship. Good to see that we're aiming high.

If Bermuda isn't in the Caribbean, as Dr. Brown repeatedly yelled across the floor of Parliament at the UBP's Cole Simons when he was discussing Bermuda's poor tourism results relative to our Caribbean competitors in Parliament on Friday, why do we want to be part of a regional Caribbean Cat Fund?

I'd suggest that a) our $1.5M contribution to the Fund could buy a much more economical Bermuda specific cover from some of our companies and b) we're going to pay out far more after Caribbean storms that we're likely to get back over time and c) why are we promoting state solutions when our economy is based on providing this in the open market?

There's an adverse selection issue at play for Bermuda in a Caribbean pool. Bermuda's premium is 100% diversifying for the Caribbean, the diversification benefit to Bermuda is far far less. This proposal is too concentrated in the Caribbean to be of much benefit to Bermuda. I can completely understand why including Bermuda is attractive to the islands in the Caribbean. Bermuda, on the other hand...

Has the Government explored private market solutions for us available just down the street?

This seems to have more to do with profiling in the region than any real economic value to Bermuda.

A reader of my generation calls it like he sees it...he couldn't be more right:

Honestly. I think that our government is past the point of embarrassing themselves. I have never seen such a bunch of self righteous individuals. On many levels, this Island cannot sustain itself without international business. It filters into every facet of the economy. Yet they antagonize the very hands that feed us!! I hate to admit this is the case, but we are more dependent on International business then our dear old queen.

Now they are waving the racism card again (perhaps to win the next election) and not attending to this Bermuda’s most basic needs.

1) An increasing number of students are not graduating from high school.
2) The hospital is falling apart (and has been for quite sometime…..but I suppose an oversized high school in Pembroke is more important then healthcare).
3) In the face of a world that is “catching on” to reinsurance, it is not considering what to do when they eventually catch up. Tourism?? - Lower rates on Jet Blue and brand new, Ritzy hotels are great…but not if Bermuda continues to offer LIMITED activities at RIDICULOUS prices.

This list could get a lot bigger if I don’t stop now.

Then there are complaints about Bermudians not getting positions in upper management. I am sorry, but while this is a good cause, they need to be more realistic and stop trying to influence voters.

There are individuals in management that have had mastery over this industry for many years. Moving up takes time and if we put our mind to it, we will eventually fill those positions. Just consider the fact that some, if not all of these positions take a bit of polish when you represent a company globally. Training cannot transform the brightest employee into a CEO overnight. We must pay our dues.

Don’t get me wrong, perhaps there are many Bermudians who have been overlooked for management positions, but there are quite a number who are making the move which is due to their companies making the effort to promote Bermudians. Sure there are managers making a killing here…..that’s the nature of the business. After all, haven’t our Government MP’s benefited from being members of the ruling party?

Both Government parties need an infusion of new blood….younger, educated Bermudians who will put the Island before their own personal goals and truly understand how business works on this island now. It is growing and evolving, and I am beginning to think that the rest of the world will leave us behind if we keep spinning our wheels with all this tit for tat nonsense.

Business Week Online has the backstory of the infiltration of KPMG Bermuda by a Washington private intelligence firm working on the IPOC Fund that the Bermuda Government is now trying to wind up.

What I want to know is how this corporate spy got a work permit?

Soon, Enright was handing over confidential audit documents, including transcripts of interviews KPMG had conducted in the IPOC investigation, according to court documents on file in the British Virgin Islands and the source familiar with the events. Day picked out a rock in a field along Enright's 20-minute daily commute from his home in Elbow Beach and placed a plastic container under the rock, creating what spies call a dead drop site. At appointed times, Enright slipped new material into the container, which Day later retrieved. On one occasion, Enright left documents in the storage compartment of his moped, which he parked at his home. Enright had told Diligence employees where he hid the keys to the moped. When Enright left for a trip, Day collected the papers, according to the person familiar with the situation.

As mentioned in today's Royal Gazette Editorial, yesterday's budget contained a very threatening section towards international business, accusing the business community of not doing enough for black Bermudians.

For the Finance Minister to talk of profiteering, lack of good faith and lack of sincerity by our businesses is highly inflammatory. It's arguably uncharacteristic of Paula Cox, but very characteristic of the divide and conquer, race and class warfare tactics being utilised by Doc. Hollywood.

The ultimate insult from this attack of course is that this PLP Government has not even remotely upheld its end of the social contract, neglecting housing, education and social services for example for close to a decade while they lavish taxpayer perks on themselves.

This Government literally allowed the largest high school on the island to rot from the inside out with a toxic mould infestation, while producing abysmal graduation rates and test scores, yet expects international business to promote a poorly educated populous to the most senior of positions.

Clearly they have absolutely no understanding of what it takes to run a successful business. Businesses are not charities. The many millions of dollars that they (and we) pay each year in taxes are intended to fund social services, not Ministerial travel and houses.

These not-so-veiled threats will further un-nerve an already wary business community, which is now crystal clear that work permits can and will be revoked for completely inappropriate reasons - with no due process whatsoever - and that they will demagogue those who are doing far more for Bermuda than the sanctimonious Government Ms. Cox represented so poorly yesterday.

There are still many who have unmet needs. Our CURE statistics are nothing to be proud of. The advancement of Bermudians in the upper echelons of the private sector work-place, the advancement of black Bermudians in particular, is inadequate at best.

Mr. Speaker, those to whom much is given, much is expected. Bermuda is a goldmine for many from a business perspective. Yet a select few who come here to do business by their actions or inaction, tarnish our reputation and cause us harm. They think that it will be business as usual. Not so.

Mr. Speaker, we have a reputation to protect and to safeguard and we will do so wherever it may lead.

Some believe they can profiteer at our expense. Not so.

Mr. Speaker, as a new Government we believed in the sincerity of those who said that they wanted to treat people fairly – with equity, regardless of race, colour and creed.

Some were not being truthful. Indeed, their business practices and hiring practices demonstrated their lack of good faith and good will.

They were not doing good.

Mr. Speaker, as a Government we have provided every opportunity to employers and business to do the right thing. This Government provided an enabling framework so that businesses could flourish. We listened. We dialogued. We heard the challenges of doing business. We heard about the costs of doing business in Bermuda. We know, only
too well, of the need for Bermuda to remain competitive as a jurisdiction and to provide an effective and efficient regulatory framework.

Mr. Speaker, although we do not regulate the costs of professional services and service providers, in those areas within our remit, we did seek to do much to lower the costs of doing business by our tax policies and duty relief. In large measure, there have been
no appreciable tax increases. We relied on our Islands’ flourishing economy and the dynamic economic growth to increase the tax yield. This occurred.

Mr. Speaker, we thank all those who continue to work so tirelessly in the public and private sector to make Bermuda more competitive and a premier jurisdiction. Yet despite all that was done by the Government to foster a more level playing-field for business and business owners, not everyone has done all that they could do to assist and to provide
meaningful opportunities for Bermudians to develop in their careers.

So, we must do more to win the hearts and minds of all of Bermuda so they realise the need to provide the necessary tools and training to help those most in need. Those who follow the Government’s lead, by showing a willingness to work with, for and to the betterment of the people of Bermuda must be acknowledged and encouraged by tangible incentives.

The 2007 Budget Statement (or Bermuda National Budget for the independence zealots) can be found here.

Bermuda's Permanent Secretary for Immigration and Labour, Robert Horton, was in the Cayman's a couple of weeks ago and spoke on a local radio show about Bermuda's term limits policy:

Although the Cayman Islands and Bermuda have rollover policies for expatriate workers in place, the Permanent Secretary for the Bermuda Ministry of Labour and Immigration, Robert K. Horton, stated on a local radio talk show, that Bermuda’s policy is not about preserving jobs for native Bermudians.

Speaking on Cayman Crosstalk on Rooster 101.9 FM a fortnight ago, he said the policy was intended to control Bermuda’s population, because there is a shortage of land problem and there was nowhere else to build except up.

We can go through this over and over, but what does churning non-Bermudian positions have to do with keeping the population down? Government is simply issuing a new permit to fill the post but to a different person. Population control? Nonsense. Preventing future claims on Bermuda citizenship? Maybe. Pandering to a xenophobic political wing? Yep.

Mr. Horton delivers another zinger:

“The issue is enormously controversial at the time the new government came to power,” said Mr Horton.

But he was careful to note that once it enunciated there was general consensus and agreement and that it had a social respect and a healing effect.

“It doesn’t mean there aren’t strong opinions on each side of the argument. But there is general acceptance,” he added.

General acceptance? Social respect and a healing effect?

Who's Mr. Horton kidding? The policy is by no means generally accepted and I'd be interested to know what it has healed, other than relations between Bermuda's anti-foreigner nationalists and the PLP, a relationship which was becoming strained due to an explosion in foreign workers since 1998 when the PLP came to power.

The current Labour Minister says it's about citizenship, former Labour Minister Terry Lister said at the last election that it was about Bermudianisation and now says it's about racism. Make up your minds.

Mr. Horton's efforts to make Bermuda's policy sound reasonable and uncontroversial are admirable, but they're not based in reality.

Cayman Net News follows up with an editorial.

The Cayman's rollover (aka Term Limits) policy has been in effect for weeks...and already all hell has broken loose with the major law firms requesting a mass exemption.

The outcome? Public anger and a Government that doesn't know what to do.

Surpised? Hardly.

The “new and improved” immigration term-limits provision, aka rollover, has only been on the statue books for barely a matter of weeks before the first, and on the face of it intractable problem for the government has appeared in the shape of a request for special exemption treatment from the major law firms here.

As a result of this wholly predictable event, the administration now has to steer a course between the economic Charybdis of the financial sector, represented on this occasion by the multi-million dollar law firms, and the political Scylla of its electoral powerbase, to whom it has been busily pandering over the last several months, completely oblivious to the warnings of dire economic and unintended consequences.

In other words, in modern parlance, it finds itself between a rock and a hard place. That the government would find itself in such a position was inevitable, and obvious to everyone except apparently those that find themselves thus caught.

So let me get this straight:

...the Government wants to remove the 60/40 ownership rule in the telecommunication industry - allowing 100% foreign ownership of ISPs, phone, cable companies etc. and likely killing the small local firms, but removed the ability of Bermudians to sell their qualifying high-end homes to non-Bermudians.

Talk about cognitive dissonance.

Here's an idea: forget telecommunications.

How's about we invite foreign banks in to provide mortgages (I know, they can't secure the loan as foreign businesses can't own property - HSBC/Bank of Bermuda excluded)? Maybe then we'll see the end of extortionate 8-plus percent mortgages, putting home ownership within reach of a few more Bermudians.

An example:

The standard retail 30 year mortgage rate here is around 8.25%, while in the US it's running around 5.75% for a 30 year mortgage (and the banks are borrowing at the same rate).

On a 30 year $1,000,000 mortgage that's a difference of about $1,600 a month. That helps.

UBP Senator Bob Richards, someone who really needs to be in the House of Assembly and is for my money one of our best economic and political minds (I believe Premier and/or Finance Minister material), delivers the goods today in a Royal Gazette OpEd on the perils of overheating the economy.

Money quote:

"Fortunately, the insurance cycle is not closely correlated with the overall economic cycle and the underlying tone of the offshore insurance/reinsurance market appears to be quite solid and of course this augers well for Bermuda."

"The critical economic issues facing Bermuda for 2007 are also internal. For many months I have been like a voice crying out in the wilderness on the issue of overheating of our economy. Simply put, the Bermuda Government has sat on its hands and let our economy overheat, particularly in the construction sector. This has resulted in, on the one hand, a bonanza in payroll taxes for Government coffers to finance their spending excesses, but, on the other hand, it has had a disastrous impact for the ordinary Bermudian family, the very same people the Government claims to represent."

This is territory the UBP feel confident on. The latest Premier may very well be overplaying his tired "Minister who delivers" moniker, scaring off voters with his signaling to every and any developer that they can pour concrete at will all over the island and he'll make sure planning regulations aren't an obstacle.

There are environmental as well as economic concerns at play here.

And while Bob focuses on the proposed (but not yet funded, I hear) 'avalanche of hotel development', we can't forget that Government intends to spend probably a billion dollars on a new hospital and probably 100 million on the causeway.

There is simply no way that the island can sustain (either economically or environmentally) that much simultaneous construction.

Just no way.

I was interested to read that Bermuda had hired a DC lobbyist (and that's what he is, Ms. Cox's over the top protests should have confirmed as much, as does Mr. Slater's own website bio header of "Public Policy and Lobbying, Homeland Security, Defense, and Technology Transfer") to represent Bermuda on areas such as 'taxation and security'.

I'm not opposed to increasing our presence in Washington, in fact I'm all for it, even if it entails using that quintessentially American creepy crawly creature known as a lobbyist, where a whole industry has been created around who you know.

But speaking of who you know, I'm a little confused. Why did we hire someone to represent us on 'taxation and security', whose impressive credentials are singularly focused on transportation?

Former U.S. Secretary of Transportation Rodney E. Slater helps clients integrate their interests in the overall vision for the transportation system of the 21st Century—a vision he set as transportation secretary to promote a safer, more efficient, environmentally sound and sustainable worldwide transportation infrastructure. Mr. Slater also helps state and local government clients address the vexing challenge of closing the gap between transportation demand and capacity by employing public/private strategies and innovative financing solutions. Mr. Slater's practice focuses on many of the policy and transportation objectives that were set under his leadership, including aviation competition and congestion mitigation, maritime initiatives, high-speed rail corridor development, and overall transportation safety and funding. He continues to embrace the framework he established as secretary for making transportation decisions that called for more open, collaborative and flexible decision making across the transportation enterprise here and abroad.

Call me cynical, but could it be that Mr. Slater's appointment is as much about his DC contacts as it is about his credentials as a a Howard Graduate - as is Dr. Brown. A little googling turns up a meeting between Dr. Brown and Mr. Slater in October 2000 in their respective capacities as Transport Minister and Secretary of Transportation.

The Premier and Mr. Slater are not strangers to each other.

And while we're on the topic, here's another Howard connection for you: The foreign event organiser of Dr. Brown's Presidential Inauguration, er I mean Premier's Gala Weekend, is the wife of the Vice-President of University Advancement at Howard University (aka Fundraising), Mr. Virgil Ecton.

Last week CaymanNetNews reprinted (with my permission) the Royal Gazette column I wrote 2 weeks ago on term limits entitled "Govt. must admit its term limit policy is a mistake".

They have followed up with an editorial today entitled 'The "C" Word', reiterating the problems with term limits, known in the Caymans as 'rollover'.

I've had some exchanges with people in the Caymans subsequent to my column's publication, and it would seem that few people are willing to speak out against the policy for fear of getting on the Immigration Department's bad side, but that employers are widely concerned about the effect this will have.

Sound familiar?

A reader, and local business owner, writes in on the mechanics of the term limit exemption process:

In a letter dated 10 February 06 the Department of Immigration contacted all companies that have been issued work permits seeking to clarify policy W8 of the Ministry of Labour, Home Affairs and Public Safety with regard to Measures to Inhibit Long-Term Residency. At that time employers were invited to submit applications seeking exemption from the six year term limit for any “key employee” per criteria as set out in Appendix C (of the same letter) which detailed those positions and job categories that were eligible for a waiver of term limits.

To date and to the best of my knowledge government has still not finalised their response as evidenced by the absence of any correspondence from the Department of Immigration regarding this matter. As an employer who has submitted an application for one of our “key positions” together with a half dozen more for a number of our clients, I’m cautiously optimistic that we may actually hear something soon, maybe in time for Christmas.

What I find so annoying regarding the foregoing, however, isn’t so much the waiting game (which we are unfortunately so used to by now from a government department which clearly does not attempt to balance the interests of business owners and taxpayers (especially Bermudian ones!) with those of the community) but the recent remarks made by various PLP spokespersons who attempt to reprimand the local and international business community for not properly anticipating or planning for this term limit issue. If anyone is to be blamed for this debacle it is, without a doubt, the illogical, inefficient and growing behemoth of bureaucracy that has enveloped our government and civil service over the last +8 years.

Given the foregoing, however, I was surprised to learn (through a second hand source, mind you) that one of the largest (non-Bermudian owned) local employers of many work permit holders has in fact already received a written reply from the Department of Immigration confirming key employee status. What gives? Why are many locally owned and operated organistions still waiting to hear from government regarding the status of our applications? Is it because we can’t afford a seat at the PLP gala next year? Or perhaps we don’t have relatives in the right places?

I'm hearing more and more of this complaint from smaller and local businesses that they are treated like second class citizens when it comes to immigration policies.

The big international companies will feel the love, and get their exemptions, while the local companies fear they'll be used as the poster children for term limits.

A reader writes in on term limits from a different perspective:

My wife... and I have visited Bermuda almost every year since 1985. We have some wonderful friends on the island and consider Bermuda our "home away from home." Knowing BDA like we do, I feel qualified to offer an opinion about the immigration discussion.

Bermuda is struggling with an issue not uncommon to the US. In the US, congress is attempting to control the influx of illegal immigrants, primarily from Mexico. The problem in the US is not jobs because the immigrants are taking jobs that Americans don't want. The Mexican nationals and other immigrants actually come to the US to get these jobs that in their own country would be great jobs. The problem in the US is that these people expect and demand every social service offered to American taxpayers. These people are payed in cash, most of which is exported back to their homeland to support their families. So, not only do these people not pay taxes, they ship US cash out of the country. Why would the Mexican government want to stop this employment opportunity and influx of US currency?

In Bermuda, it's not about taxes, social services or really even jobs. To me, it's about controlling citizenship, property ownership and protecting the Bermudian culture. The jobs that non-Bermudians are recruited for are not jobs that Bermudians are qualified for or even want. Furthermore, the companies hiring foreigners have to pay much more to get those jobs done than if they could find a Bermudian to do them. The foreign workers bring their culture with them, and they fall in love with Bermuda, and then they are forced to leave.

America is great because of the mixture of talents and culture from all over the world that has become America. Every country and culture in the world is a piece of America. Bermuda, of course, needs to preserve its nature and essence, but Bermuda also needs to open her arms to the talents and treasures of the world to achieve HER greatness. Bermuda needs to welcome visiting professionals, as they will become ambassadors in the future, and while in Bermuda, they will contribute greatly to what makes Bermuda so very special in the world.

I completely agree with the final paragraph in particular. We do need to open our arms to the world and welcome visiting professionals. It has, and will continue, to benefit us all and make Bermuda a better place.

The Royal Gazette
Opinion (29 Nov. 2006)

Here’s a topical piece of trivia for you: What’s the difference between one non-Bermudian or two non-Bermudians filling a job over 12 years? Answer: A few votes.

There’s little else that can be read into the PLP Government’s stubborn persistence in pursuing the dangerously counter-productive work permit term limits policy; a policy that is a month away from triggering a mass exodus of non-Bermudian workers who will be replaced by…a mass influx of non-Bermudian workers.

That’s very sensible public policy indeed.

The only beneficiaries of this revolving door of non-Bermudians might be the moving companies, the airlines, and Premier Brown, who will classify a few more air arrivals as tourists.

It’s time for Cabinet to make a long overdue announcement. It’s time to admit the obvious: the work permit term limits policy was a 2003 election stunt that has run awry and can now be shelved. Except of course that we’re almost certainly facing a spring election, meaning we’re in a period when reality is irrelevant and the Government will act irrationally.

The refusal to change course on term limits is our equivalent of George Bush’s refusal to admit that his Iraq policy was failing, because that would amount to a pre-election admission that it’s failing…even though everyone knew it was failing.

Election or no election, the time has come for the Premier to announce that the policy was a mistake, that term limits won’t work, that they were never going to work and that sending experienced professionals to mentor young Dubliners or Cayman Islanders instead of Bermudians is economic suicide.

The policy itself admits that. Shortly after the 2003 election was resolved, the PLP Government announced that the ‘key employees’ of ‘good corporate citizens’ would be excluded; an admission that the policy was counterproductive, ill-advised and a cynical attempt to grab a few votes.

The irony of this policy is that it isn’t the non-Bermudians who we should subject to term limits; it’s the politicians who are implementing them who should be. Bermuda is led – in the loose sense of the word ‘led’ – by a collection of politicians well past their ‘sell by’ date; 1960’s thinking in the 21st century isn’t serving us well.

Not once in the past few years has the Government articulated what this policy will achieve, or has achieved, other than a sound bite or two that the PLP is the party of Bermudianisation; the facts notwithstanding.

The facts are that the eight year tenure of the PLP has been characterised by a reduction in the number of jobs held by Bermudians and a corresponding increase in the number of jobs for non-Bermudians. Those are the facts.

Inconvenient I know. But true.

The ratio of Bermudian to non-Bermudian jobs has worsened during the PLP’s tenure; the realization of which no doubt triggered the term limit window dressing to desperately shore up support.

In the past week we’ve heard the PLP Government espouse two disturbing positions: foreigners bad (term limits), foreign money good (Premier’s Gala Weekend); two myopic stances which are damaging both our economy and our reputation.

Let’s get real. Can we really call ourselves the friendliest place in the world when we greet our tourists and foreign workers with: “Welcome to Bermuda, when are you leaving?”

This pervasive attitude feeds into one of the most common of the many complaints we level at non-Bermudians: they’re insular; they don’t truly immerse themselves in our culture; they just come to work, work, work.

What do we expect? What would you do if you were told that you can’t stay here for more than 6 years – whether a local successor exists or not – because your presence is both the cause and solution of our problems. The Government has even gone so far as to blame the rush-hour traffic problem on non-Bermudians, with our at least two-car-Premier suggesting that foreign workers shouldn’t own one.

This hostile environment exacerbates ‘expatness’; a phenomenon where the more we demonize and scapegoat foreign workers the more they withdraw from the greater Bermudian community and maximize the economic benefit of their legislated short stay in Bermuda.

Term limits are bad. They fail to increase opportunity for Bermudians, but do increase the cost and operating burden on our businesses, which will look for more welcoming homes.

There’s no two ways about it. Government must step back and admit that it was a mistake.

This is absolutely critical to ensure the continued success of Bermuda’s prosperous but tenuous economy; the continued professional and technical education and training of Bermudians; and to prevent our Government from redirecting some of the most talented individuals in their fields to other jurisdictions, where they’ll ply their trade, share their knowledge and threaten Bermuda’s dominance in insurance and reinsurance.

Economic complacency isn’t unprecedented in Bermuda; we went through this twenty years ago and never recovered. Back then it was tourism’s success which we took for granted; now it’s international business.

Let’s not repeat history.

I have a column to be published in tomorrow's Royal Gazette, on the issue of work permit term limits, calling for the policy to be withdrawn.

Today's evening news broadcasts carried a speech delivered by David Ezekiel of the Association of Bermuda International Companies suggesting that the Government may be looking to do just that.

Mr. Ezekiel claimed that the policy is solely geared towards preventing future claims on residency/Bermudian status, by long term residents and that Labour Minister Derrick Burgess has asked for alternatives to term limits that would achieve the same purpose.

That's obvious and has been discussed before; simply have work permit holders sign a waiver relinquishing any claim to permanent residency or citizenship. It's that easy.

But the policy was designed to do more than prevent citizenship claims; it was implemented to also try and show the PLP Government as pro-Bermudian before an election and shore up flagging support in the face of a growing foreign work force under their tenure.

So I'm optimistic that the policy may go away, but I'm realistic enough to know that the politics of that are messy for the PLP who have hitched their wagon to it in a big way.

Frankly the key employee and good corporate citizenship exemptions are so broad and subjective that the policy is completely meaningless anyway. Regardless, the term limit policy has managed to make Bermuda a less attractive place to do business, for both local and international companies and that perception will be hard to turn around.

From the department of better-look-like-I'm-doing-something, new Labour Minister courageously ensures that all Bermudians can aspire to be pizza delivery men/women.

Bold new moves on the labour/empowerment front indeed. Thank God we have visionary leadership like this.

Is this really the best the PLP can do in the face of a widening wage/jobs gap between Bermudians and non-Bermudians.

Maybe HSBC could find a use for the Trimingham's site after all?

An article from the Scotsman suggests that the banking giant is threatening to leave Britain over it's cumbersome tax regime.

"The bank, which reviews the position of it headquarters every three years, said Britain was no longer an attractive place to be in terms of tax - raising the possibility that it could take its business elsewhere."

I stumbled across a story from the AP, that the Government has signed (presumably) a contract for a desalination plant at Tynes Bay.

Does this ring any bells for anyone? I don't really recall this as being on the table, but it could have slipped under the radar screen:

Bottled water producer Consolidated Water Co. Ltd. said Monday the Bermuda government wants it to build and operate the Tynes Bay desalination plant on the north coast of the island.

The project includes a 600,000 gallon per day seawater desalination plant, a full standby electrical power plant and 1.27 miles of main water delivery pipelines.

Under terms of the contract, Consolidated's affiliate, Consolidated Water (Bermuda) Ltd., will be required to build and commission the plant and pipeline within 12 months and to operate the plant for at least a year after commissioning.

Today's Washington Post has a guest Op-Ed by Daniel Mitchell of The Heritage Foundation, calling for the repeal of the recent US expat tax enacted by Congress.

UPDATE: A point of clarification. The article was not just calling for a repeal of the recent reduction in tax exemptions (ie. a tax increase) for US expats, but ceasing to tax US expats on their non-US income at all.

And it begins.

Everyone wants their cut of the taxpayer gravy-train.

Any doubts that the PLP Government are engaging in a direct attack on the Auditor General's office should be put to rest with the revelations of the past few days.

With VSB news reporting last night, and the Royal Gazette today, David Burch engaged in a serious abuse of power by using his 48 hour stint as acting Finance Minister to engage in cowardly attempts at intimidation with the threat of an audit. (Not that Mr. Dennis seemed intimidated, hell he's been asking for this for years apparently.)

The combination of the unannounced move conducted by Sen. Burch's Ministry (let's get real, nothing happens in the civil service at 4PM on a Friday without being pre-planned...) to insufficient and inadequately prepared office space with the threat of an audit by an Acting Minister is not just politics; it's a direct assualt on government oversight, and the rule of law.

Bermuda's credibility is diminishing rapidly.

Sen. Burch should be immediately fired and removed from Cabinet, the Premier should issue a contrite apology for his rogue Minister, and the Auditor should be provided with adequate accomodation to perform his duty.

If space is at such a premium, perhaps the auditor should relocate to the recently renovated but uninhabited offical Premier's residence, Clifton.

A little food for thought on the appalling revelation by the Auditor General that the Government's financials are in an appalling, irreparable state of $800M unaudited.

- $800M is one years total expenditure by the Bermuda Government

- Finance Minister Paula Cox tried to brush off the Auditor's concerns because "His function requires him to focus on the exceptions".

Precisely. Those quangos who filed audited financials were the exception -- only 10 of 37 complied with this most basic requirement.

- The Premier, in posturing for his trip to Washington DC told reporters that "We guard jealously our reputation for fiscal prudence" -- only days before the release of the Auditors Report revealing little regard for fiscal standards.

Download the 2006/2007 Budget Statement here.

Much like the budget itself, the pdf file is rather bloated, and takes a while to download.

Even the Government's own laywer, Mr. Willie Bourne (a fantastic guy and a great neighbour) has no idea what Labour and Home Affairs Minister Randy Horton's rationale was in amending the real estate policy which abruptly denied Bermudians the ability to sell their qualifying properties to international buyers:

"Mr. Bourne admitted there was “no statement” of the rationale behind the Minister amending the long-standing existing policy in the way that he did..."

The longer this goes on the clearer it becomes that changing the policy was little more than a knee jerk reaction intended to deflect criticism that Government wasn't acting on the housing problem.

VSB news reported tonight that, a year to the day, Government's real estate policy change, which blindsided every Bermudian, will be challenged in the Supreme Court.

The plaintiffs, a Mr. and Mrs. Marshall, are challenging the policy change preventing them from selling their qualifying Tuckers Town property to a foreign buyer - reportedly one Oprah Winfrey.

The Marshalls have apparently indicated a willingness to take this all the way to the Privy Council and are represented by one of the best, former Attorney General Saul Froomkin [Note: I'm biased because Saul's a good friend...but he's still one of the best).

It seems to be all the rage lately to take the position that there are no significant differences between Bermuda's two political parties, and that the voters aren't really given any choice at the polls.

While it may be true that there are less philosophical differences between the UBP and PLP of today, as both have moved to the political centre, difference do exist.

I've been meaning to write about one of the most significant for the past several weeks, but a virus (human not computer) and mechanical problems intervened. So I was pleased today to see UBP Senator Bob Richard's Op-Ed in the Royal Gazette entitled 'Bermuda needs a tax cut'.

This is an area where there are huge differences between the UBP and PLP. Simply put, the PLP as a Government believe that your money is theirs, while the UBP believe that it is in fact yours. Therein lies the fundamental differences between the parties; the UBP is fiscally conservative, the PLP are classic tax and spenders.

'The economy has done well under us' battle cry from the PLP rings hollow. The PLP Government have had no positive impact on Bermuda's finances or fiscal policy during their 7 plus years in office. None. The've simply allowed the UBP's economic policies to run, while living off the backs of a robust economy driven by two expansions of the international business sector post September 11 and Hurricane Katrina.

These expansions have generated excess tax revenue which has largely obscured their lack of fiscal restraint. As Sen. Richards suggests in today's column, when Government overcollects they should return this excess revenue not hold it up as fiscal prudence.

By not returning it they are implementing a tax increase.

The UBP's Grant Gibbons has been making this case for the past month, although too much like an accountant, until an interview with the Mid Ocean News on January 13th when I think he did a great job in bringing it down to everyday language.

I hope that today's article was the next step in a targeted plan to highlight what is a crucial difference between the UBP and PLP. Bermuda's strong financial position is entirely, entirely, a product of the United Bermuda Party and remains the key ideological differentiator between the parties.

The Royal Gazette
Opinion (30 Nov. 2005)

Architectural design is an inherently subjective thing; what’s attractive to one is hideous to another. You can test that statement by trying to find a consensus on whether the ACE or XL buildings are more aesthetically pleasing. This is why the response to HSBC’s Front St. glass tower has been so surprising.

Remarkably, the bank has achieved something unprecedented in Bermuda, they’ve identified an issue that virtually everyone can agree on (other than opposition to Independence that is): The feedback to the proposed HSBC building on the former Trimingham’s site is ugly, or ‘Ogly’ as we prefer to say.

Let’s be thankful then that something positive might arise from HSBC’s redevelopment of the historic site; but let’s also be realistic.

Objecting to the development because it is ugly is an exercise in futility; there are lots of ugly buildings in town. And whether or not you believe that we need a glass palace towering over the charm of our flagging retail district, something other than a quaint department store will be built. The only question is scale.

But before we can decide what can be done to rein this in, it’s important to understand how we arrived at this point, and what the respective responsibilities of the public, Government and HSBC are.

If we’re honest with ourselves, the writing has been on the wall for some time, ever since Cabinet approved the sell off of Bermuda’s landmark retail real estate space to a foreign corporation – notwithstanding Finance Minister Paula Cox’s rather disingenuous assurance that the Bank of Bermuda is a local company, despite its 100% ownership by HSBC.

Conversely HSBC didn’t do itself any favours by pitching such a massive development – and a potential turning point in Front St. development – as a selfless act of corporate benevolence; this is primarily in Bermudians’ best interests we were told, shortly before the CEO of the "world’s local bank" rather presumptively told locals what our capital city should look like.

What is needed in this process, one that is going to act as a benchmark for future Front St. development, is for all the parties to this process – and that’s everyone – to be honest about whose interests they are representing, and then represent them honestly.

Whether they’ll admit it or not, HSBC’s sole responsibility is to maximise their shareholders’ return. And that’s exactly what it should be. All this noise about how much the bank cares about Bermuda is just a distraction.

The decision to buy the Bank of Bermuda was an economic one, as were the decisions to take over the Trimingham’s site and its subsequent redevelopment. Sure, they’ve made some concessions along the way, but those were designed to facilitate the goal of maximizing the return on that real estate.

HSBC is a shrewd operator, more so than most international conglomerates. Modern corporations are well aware that building and maintaining an image in the community as a ‘good corporate citizen’ can be good for business, but it isn’t because they’re benevolent, it’s because they want to make more money.

Then there’s the Government. The current leadership have displayed a penchant for rolling over to the banking giant; whether it be approving the buyout of the Bank of Bermuda or the subsequent takeover of the Trimingham’s site; two acts which required explicit Cabinet level approval.

But that’s water under Flatts bridge. We are where we are. The question before us now is where do we go from here? And the answer to that rests entirely with us. We have the power to put the brakes on this project and ensure a satisfactory resolution for both Bermudians and the bank.

What is clear from the fast-track planning request by HSBC is that they are looking for the fastest path to Ministerial approval by sidestepping the usual bureaucratic channels, aware that the proposal will almost certainly be rejected as is.

And that brings us to our responsibility as Bermudians. The Minister, the Government and the Opposition, need to know that they are expected to prevent this unsightly blot on the Bermudian landscape or suffer the political consequences. But both political parties have been suspiciously quiet to this point, at least publicly. John Barritt’s comments during the Throne Speech are the only ones I’ve heard from anyone thus far.

As a last resort, there is one surefire way to get HSBC’s attention, particularly as they’re so enthusiastically playing the role of caring corporate entity. If enough customers feel strongly that the Bank is over-reaching and not acting in the best interests of the community, you can take your business elsewhere.

Then they’ll sit up and notice.

Tourist Minister Dr. Brown is quoted extensively in this Carib World Radio article giving indications that Bermuda is looking to expand it's role in Caricom:

Dr. Brown, a physician, said that Bermuda believed it was important for the country to work closer with Caribbean nations, especially as Caricom states moves closer to the launching of the Caribbean Single Market and Economy.

"I think there is a role for Bermuda in the Single Market and Economy but it is yet to be figured out," he said. "The Bermuda economy is different from most of the other economies but that doesn't mean we cannot work together in some way. Bermuda is an Associate member (of Caricom) and we have been very cautious in terms of what commitments we make inside of Caricom, but I can tell you that it's inevitable that over a period of time we will have to find ways to cooperate and to help each other, whether it is the Single Market and Economy and how we play in that, it is up to speculation at this time."

Dr. Brown hedges somewhat in his comments, but he seems to be suggesting that we're on our way to much closer intergration with Caricom, even perhaps the single market and economy which brings with it a single currency and free movement of labour.

This is a very worrying development. And why is it that we don't hear about these things at home first? The Premier, and now his Deputy, have a habit of running their mouths overseas and clamming up locally.

And wouldn't it be useful for the Minister of Tourism and Transport to understand geography:

"It is very important for us as people from the Caribbean and the U.S. to come together like this and as often as we can," added Dr. Brown, who is also Bermuda's Minister of Tourism and Transport.

What's a few thousand miles of open ocean among friends? Does the PLP suffer such an identity crisis that they feel the need to pretend Bermuda is in the Caribbean?

No wonder most people don't have a clue about Bermuda. We keep telling them to fly to the wrong place.

With the WEDCO/Bermuda Cement Company saga well into its second year, I thought rather than rehash the whole saga I'd just point back to some posts I did in March of 2004 here, here, here, here and here.

This move by WEDCO amounts to nothing more than a defacto nationalisation of a private business, notwithstanding the 2 year lease to Mexican conglomerate Cemex, which WEDCO will rue in short order when they realize they're out of their depth.

Here's the unedited text of yesterday's press statement from the Association of Bermuda International Companies (ABIC) and the Association of Insurers and Reinsurers (ABIR), in response to the release of the BIC report.

Their 3 submissions - only one of which made it into the report (ABIC's and the 2nd ABIR document clearly laying out historical precedent for referendum were excluded) - are linked at the end:

ABIC and ABIR Reiterate Position Statements on Independence

"Hamilton, Bermuda. September 28, 2005

"In light of the recently released Bermuda Independence Commission ("BIC") report, the Association of Bermuda International Companies ("ABIC") and the Association of Bermuda Insurers and Reinsurers ("ABIR") today reiterated their concerns surrounding the issue of independence. ABIC and ABIR stressed that the concerns outlined in their written submissions on the topic remain unchanged, adding that some of the statements contained in the BIC report and the media do not fully reflect the positions of these organizations. ABIC and ABIR´s written submissions dated October 22, 2004 (ABIC), June 18, 2004 (ABIR), and February 7, 2005 (ABIR) are attached to this press release.

"ABIC and ABIR stated that they view Bermuda as one of the preferred jurisdictions in the world in which to do business. They commented that Bermuda’s attractiveness is based on a number of important features, including the Island’s historically stable social and political structure; its participation in the United Kingdom’s legal system, framework, customs and traditions with which international business partners are comfortable; and the total mix of economic costs and benefits of doing business on the Island.

"ABIC and ABIR stated that the current debate regarding dramatic and irrevocable changes to these critical features of Bermuda’s political, legal, social and business environment raises important issues for the international business community.

"ABIC and ABIR’s primary concerns, as summarized in their written submissions, include:

"• To ensure a stable and democratic outcome, ABIC and ABIR strongly support the use of a referendum on the question of independence. Their written submissions include information regarding the long history of referendum use to determine questions of sovereignty. They would also support an accelerated timetable for such a referendum in order to end the uncertainty associated with this discussion.
"• Any alteration in the Bermuda market’s relationship with the commercial law, legal apparatus, appellate process and continued common law development of the United Kingdom legal system, with which international business partners are comfortable – and/or the risk of intersection with other judiciary systems less central to the international financial services sector – could impair Bermuda’s international business.
"• The materially increased costs of independence will result in higher taxation and other costs for companies, employees, and business partners, at a time when other dynamics already threaten the cost competitiveness of doing business in Bermuda.
"• Concern over the issues of nationalities and passports, and the prospect of Bermudians losing UK citizenship and the right to live and work in the EU, where many of our members have overseas operations.
"• Concern over the prospect of significant and potentially adverse changes, via newly defined and uncertain processes, to the regulatory regime in which we currently operate, and which has served Bermuda well.
"• Concern that membership in CARICOM would be negative for Bermuda and the Bermuda business community. Joining CARICOM would be costly, and none of the resulting economic ties would materially benefit Bermuda’s international business sector, for which the US and Europe are the largest markets.
"• Concern on sustaining the real value of the Bermuda dollar.
"• ABIC and ABIR’s written submissions point out that the decision to go independent is irrevocable.

"ABIC and ABIR clarified that this press release and the written submissions referred to above are the only materials which should be attributed to these organizations, until such written materials are updated or supplemented by them. Additional copies of these submissions are available, free of charge, as follows:

"With respect to the ABIC submission:
ABIC
P. O. Box HM 655
Hamilton HM CX
Telephone (441) 295-8932
Fax (441) 292-5779

"With respect to the ABIR submissions:
ABIR
XL House
One Bermudiana Road
Hamilton HM11
Telephone: (441) 294 7221
Fax: (441) 296 4207

"Attachments:
ABIC´s Submission
ABIR´s Submission 1
ABIR´s Submission 2"

I don't have much to add to UBP Senator Bob Richards' excellent Opinion piece in yesterday's Royal Gazette, except to say that I bet it gave the PLP some serious heartburn.

What I would like to say though is that for me it represents the best of the UBP and why I support them and think they're the best political choice.

Why do I say that? Because Sen. Richards hit the right balance between analysing data, identifying the problem, pointing out the failures of the current administration and offering some avenues for addressing the issue through effective public policy.

The contrast with the PLP's approach, which is to throw out whatever idea pops into their heads for short term political gain before analysing the underlying data and trends, is stark.

Sen. Richards did himself, the community and the UBP a great service with his piece yesterday. If the Government have any sense they'll take his advice.

Bermuda, as a legitimate financial market is under attack, both directly and indirectly.

U.S. insurance industry scandals are turning the attention of regulators and Congress to the islands of Bermuda -- home to 1,600 insurers, or one for every 40 residents of the isolated UK territory.

We have an incredibly successful economy, currently totally reliant on international business, yet it is also incredibly fragile.

So what are we doing?

Screwing around with an independence campaign that can only further the interests of the political elite. Really wise.

From Reuters:

163-year-old Bermuda department store to close

HAMILTON, Bermuda (Reuters) - Bermuda's oldest and best-known department store, in business since 1842, is closing and taking around 220 jobs with it.

Trimingham Brothers, which has seven stores across the British mid-Atlantic territory, blamed a decline in tourist spending, residents shopping overseas and rising business costs for the decision.

Its tourist landmark store on Front Street in Hamilton is being bought by Bank of Bermuda, a unit of global banking giant HSBC Holdings Plc, for an unspecified redevelopment.

The decision to close in July comes after a buy-out of retail rival Smith's last year failed to increase profits.

Former perfume department assistant buyer Ronnie Chameau, who worked for the company for more than 30 years, said she broke down in tears when she heard the announcement on Tuesday.

"It's a real family to me and they were so good to me. I loved my Trimingham's."

After some extensive digging last night and this morning it seems like the rumour that a 60/40 request was denied by Government is almost certainly not the case as it was not requested. It also seems unlikely that there is much truth in the Federated Department stores takeover rumour.

But, the hypocrisy of giving away the real estate to a foreign corporation, HSBC, is astounding after the recent chest-beating about the land policy change.

A number of people have emailed me with a similar comment, namely that denying a 60/40 exemption for Trimingham's (if that occurred) has the result of moving prime Bermudian real estate into the lap of a foreign corporation (HSBC). Unless of course HSBC has a local subsidiary for their real estate portfolio, which could very well be the case.

Would this be preferable to allowing a majority stake and securing the Bermudian jobs and other economic benefits? It's a good question and one the PLP will no doubt have to answer.

I suspect this will get taken up in Parliament tomorrow, most likely on the Motion to Adjourn, after the Budget debate concludes for the day. The budget schedule concludes at 6:30 if you're interested in listening in on AM 1230.

It's now confirmed that Triminghams/Smiths is winding up their operations after 163 years in business. The staff have been informed and the Bank of Bermuda will acquire the building for redevelopment.

This is a sad day for Bermuda, on so many levels, and speaks to the challenges that we face and that all is not well in our economy.

Bermuda without Triminghams. Imagine that.

Well it looks like I wasn't too far off really in all cases, they might be forced to close because Government won't waive the 60/40 rule so that Federated (one of their US suppliers) can acquire a majority stake. From a reader after an annoucement by Triminghams:

"Latest on the Trimingham's hotline: they have been trying to restructure by an acquisition of a majority stake/total buyout by their American supplier, Federated. They have been to Government to get a waiver of the 60/40 rule, but Government has refused. There will be a meeting of all staff upstairs in No.1 shed this evening: Trimingham's were not expecting the news to leak out as fast as it did and, obviously, they have staff on their hands who are climbing the walls trying to find out what's going on. So, they will be spilling the beans this evening. Not sure whether the announcement will involve closure or ongoing attempts to restructure. Problem is: apparently, Federated is only intrested in majority stake."

Well, from a little well-informed feedback that I've received it seems that closure, not an acquisition is the most likely outcome for Triminghams.

If this is indeed the case the consequences will be huge. Hundreds of people will be out of work, not to mention the death of a Bermudian institution.

This can't be good, and whatever government can do to assist the workers and try and mitigate the consequences of this, they should. This will have severe economic, tourism, jobs and confidence implications.

I haven't yet read today's RG who could be all over this story, so I'm going blind on this but:

I've heard from several pretty reliable sources that Triminghams's, Bermuda's flagship retail franchise, is in serious financial trouble. It seems that they're either in the process of being sold to a non-Bermudian corporation, or the other alternative would be to shut their doors.

I caught the tail-end of a VSB evening news report last night that hinted that a major announcement is imminent, and that Cabinet has discussed the issue. I'm speculating here but if Cabinet have been involved I've got to wonder if they're considering waving the 60/40 ownership rule to allow a non-Bermudian corporation to buy them out.

If this indeed is true, the implications will be far-reaching. We'll surely see layoffs, lost tax revenue and a loss of what little confidence remains in retail among others. Just imagine if you were a tourist and came to a Bermuda without Triminghams. Triminghams isn't just a store, it's the heart of our local retail industry and a long-standing tourist 'destination' of sorts.

Perhaps one of the first signs that things weren't going well was last year's on-off-on deal to acquire Smith's as well as this story in Friday's Bermuda Sun. It seemed odd that Trimingham's would not respond to questions about whether they would open for Sunday shopping.

The question might just be will they be open at all?

We'll have to watch this develop.

During the 2004 US Presidential election, we constantly heard about the threat that a President John Kerry would be to Bermuda - due to his focus on offshore jurisdictions and tax havens (for lack of a better term).

But I always thought that was a very simplistic look at it. Democrats tend to be wedded to a complicated income tax system which they wanted to make more complicated to deal with places like Bermuda. Although they clearly didn't understand the Bermuda market. And the more complicated a tax code is the more attractive somewhere with a simple sensible one becomes.

I didn't subscribe entirely to that that view, because I've always believed that the biggest threat to Bermuda's international business sector is a simplified and consumption based system of taxation, similar to ours, and exactly what Republicans and Bush want.

I maintain that Republicans, despite their more free trade business friendly bent, would pose a bigger threat to Bermuda through a rewrite of the US tax code.

And today, Federal Reserve Chairman Alan Greenspan said exactly that in Congressional testimony.

Granted this will take time to implement, and Greenspan pointed out the complicated transitional issues, but a simplified consumption based tax system would almost certainly move our reinsurance industry back on-shore (or off-shore to us).

Because as oblivious and invincible as we might feel, all we have to offer at the end of the day is a sensible system of taxation that happens to be advantageous for writing high severity low frequency insurance products, which is the foundation of our economy. The other financial products play around the fringes.

We'd do well to watch this closely. And if you thought the Social Security battle in the US is going to get ugly, removing income tax would be the mother of all left vs right battles.

The UBP has posted the 2005 Budget Reply on their website, or you can download it from here.

Dr. Gibbons is delivering it now.

2005 Budget can be found here or here, but not on the Government website

Typical.

The 2005 Budget does not appear to have been posted on the Government portal yet, although the Finance Minister has finished delivering it in Parliament. But I'll keep a watch out.

The most memorable items I heard that will no doubt get most attention are the changes to payroll tax and Sunday shopping. But without a hard copy to parse through it's tough to say too much.

Considering we spent $1M to redevelop that site I must say it is not much more than an overpriced brochure. It has a long way to go, as does the consistency of content updating, before we get close to receiving value for money or real information transfer.

RG Opinion (15 Feb. 2005)

Politicking by class warfare

If you’re going to pull the pin and roll out a grenade, the correct etiquette is to at least shout “Fire in the hole”.

Instead, the PLP Government whispered “Policy Statement and Notes for the Acquisition of Residential Property by Non-Bermudians”, hoping to distract us from the coming explosion with boredom. Then, in an act of supremely strong leadership, Cabinet thrust a civil servant out on point to absorb the shrapnel, while the politicians ran for cover.

And while the majority of ink over the coming weeks, months and potentially years, will most likely be devoted to the relative wisdom of the PLP’s attempt at market manipulation, it’s worth setting the policy itself aside briefly and focusing on the potential fallout from the way this major policy change was implemented.

The old adage that if you say something often enough people will start to believe it, is very appropriate in the New Bermuda. And what are we told the most often? We’re told that this is a Government that listens and consults.

Reasonable people would then expect that a move such as this, that stands to be hugely controversial with widespread and far-reaching social and economic implications, would be more than deserving of this much-heralded but rarely witnessed consultation. Nope.

How’s about gambling? Of course we’d receive widespread consultation on this most contentious of issues, particularly when all the polls suggest that we’re split right down the middle. Nope. Just a press conference to say Government has decided on our behalf.

But it’s not always this way. We are being ‘consulted’ on independence for example, the issue almost all of us don’t want. Evidently, because the overwhelming majority of the population don’t want something that the Government are salivating for, we’re in need of some consultation (translation: re-programming) on the subject.

An issue however, like drastically altering the dynamics of the real-estate market and the value of thousands of people’s most significant investment however, is worthy of only a press conference to announce the done deal.

Government by press conference. How quaint.

So what’s up with this consistently inconsistent approach to consultation from the PLP? The answer lies in the excuse we inevitably hear after poor consultation or unpopular initiatives. The word is ‘leadership’.

After the votes are counted and the victor crowned, the PLP Government feel entitled to make unilateral declarations on any issue, whether part of the campaign or not, or whether the administration exists as a result of a swiftly executed coup only minutes after the election.

When a Government without a mandate undertakes this type of social engineering and wealth redistribution, something you might recall the Premier recently vehemently denying he was about to engage in, the consequences can’t be predicted.

Mandate-less Governments that don’t consult are by no means providing leadership, they’re a destabilizing threat. This is why the events which culminated in the formation of the Alex Scott administration should necessitate an even greater – not reduced – level of consultation. But we’re seeing nothing of the sort.

Most reasonable people are aware that you can’t just rock the foundation of the Bermuda real estate market and walk away unconcerned.

But there’s a pattern here. We’ve been through this politically motivated meddling before. Last week’s events are strikingly similar to another act of non-consultative heavy-handedness.

In July of 2003, shortly before the election, the Government rolled out the work permit term limits grenade – yet another politically motivated policy initiative with potentially destabilizing effects.

In that case, then Labour Minister Terry Lister proudly declared that all non-Bermudians would be sent packing after 6 years (with the nice ones allowed to stay for an additional 3). And it might just have worked, judging by the 70 or so votes which decided the election island-wide.

But what occurred shortly after the election results were in – and Jennifer Smith’s colleagues demonstrated that they had her back, by stabbing her in it – is more revealing. The new Minister discreetly put the pin back in the grenade, and gutted the term limits policy of any real teeth. The election was over and the policy had served its purpose. Now there’s leadership.

So with the Premier’s poll numbers rapidly plunging to Jennifer Smith-like levels, we’re witnessing more dangerous politicking through class warfare. Because this isn’t about housing, it’s about politics (and taxes).

But unlike the term limit turn-around, which was easily revoked, this latest unilateral action isn’t. We’ll be feeling these shockwaves for a long time, and not just in the real estate market.

Governments can’t, without preparing the stake-holders, fundamentally affect capital markets overnight without undermining the confidence and stability of every sector of our economy. Serious doubts will have been created in our continued desirability as a business jurisdiction. No longer can investors be assured that their money can be put to work free from undue political interference.

While any one move alone might not be enough to tip the boat, the cumulative effect of term-limits, an unpopular independence initiative and now this real estate policy could be severe.

Our economy exists solely because of a well-deserved reputation as an attractive and stable destination for capital investments. The moment the PLP Government decided to devalue real-estate prices overnight – without advance warning or consultation – it generated significant doubt and instability.

That’s not leadership.

It felt like more than just a coincidence to see the story in today's RG about counterfeit money.

I think I'm becoming clairvoyant. Yesterday I bookmarked this piece on Slate, as something to link through to over here. The article discusses the move in a number of jurisdictions away from paper and towards plastic money.

Surely with such a small circulation of notes, Bermuda could easily implement this. This would improve the durability and security limitations of our current paper currency as well as achieve cost benefits.

and the complete draft legislation ...

Ahh, the efficiency of a Blackberry!

Straight from Parliament, courtesy of Shadow Minister for Race Relations and Economic Empowerment David Dodwell, comes a summary of what their sample legislation entails:

The Economic Empowerment Bill 2004

What does the bill do?

- Creates an Office of Economic Empowerment within the Ministry of Finance

- Commits government to a 2-year plan to allocate 20% of government’s spending on goods and services among small businesses.

- Establishes a Small Business Procurement Programme

- Facilitates the training of small businesses on how to bid for government contracts

- Requires businesses that receive over $5 million in government contracts participate in a Government sponsored small business mentoring program

- Broadens opportunity, by limiting an approved small business to $750,000 per year of government business unless no other businesses or individuals tender for the goods or services required by government.

What does the bill do? Part 2

- Provides for the facilitation of financing by local banking institutions for small businesses that have acquired government contracts

- Provides for the brokering of venture financial capital for small businesses that have acquired government contracts

What will the Office of Economic Empowerment do?

- Promote access to finance for the economic empowerment of all Bermudians

- Increase the broad-based and effective participation of all Bermudians in the economy of Bermuda

- Establish a national policy on economic empowerment so as to promote economic unity, promote equal opportunity and fair access to Government contracts

- Establish a small business mentoring programme

- Establish a tendering seminar programme for small businesses seeking approval

- Promote investment programmes that lead to broad-based and meaningful participation in the economy by all Bermudians

What will the Office of Economic Empowerment do? Part 2

- Provide annual updates to Parliament on the work of the Office and the progress of the Small Business Procurement Programme

What is the Small Business Procurement Programme?

- Outlines the goods and services that Government can procure from small business for that fiscal year.

- A strategy to expand the number of small businesses awarded government contracts

Why has the UBP created this bill?

- To address the fact that certain individuals have been excluded from economic opportunity in Bermuda

- We believe that it is critical that all Bermudians have the opportunity to be active participants in the economy irrespective of race

- We believe that a national policy on economic empowerment will promote economic unity, promote equal opportunity and fair access to Government contracts

I've been observing a rather heated, to put it nicely, thread over at A Limey in Bermuda that seems to have largely drawn to a close. It got pretty exhausting at the end with a couple of commenters posting some pretty hateful and ignorant white supremacist type stuff but somewhere in there was a reasonably productive debate that got off track.

The post essentially tries to draw a line between ProActive's problems at the Berkeley site and the idea that the credibility of all black people has been hurt as a result. I pretty much agree with Phil's position, but wanted to address a few things from the perspective of the political system and the parties, that hasn't been touched on yet.

The whole thing started because the UBP's Patricia Gordon Pamlin said that as a result of this project no one in their right mind would consider black contractors for a large project, and then the PLP's Wayne Perinchief said that the Government was now 'trying to save the credibility of black people.' Two similar sentiments, one on the negative side, one delivered a little more positively - but essentially the same criticism.

Just to reiterate, it is incorrect to say that Pro Active's failure by extension indicts all blacks, but it isn't a surprise that it's cropped up. To some extent, the PLP themselves have created this connection as a political tool - and a smart one at that.

At the last election, one of the major themes delivered on the doorstep by PLP canvassers was, 'If you don't vote us back in you're saying that black people can't manage'. The flip side of this argument, as someone pointed out to me, is 'if you vote us out you're saying that only white people can run the country'. The PLP have used this argument quite shrewdly in an attempt to prevent defection among some swing voters and quash concern over their performance in their first term.

Whether it worked or not I don't know, but I do know that it was used. I disagree with the sentiment in both the Pro Active scenario or the scenario of the PLP's re-election, but to deny that tactic was used would be dishonest.

Additionally, one of the other things that was expressed to me by a black Bermudian was that the black community put a lot of pressure and expectations on each other to succeed. Perhaps the best example is when young black men and women go off to higher education. Many in the black community will tell them that they're going 'for all of us, so don't screw it up". There's even an NAACP commercial on heavy rotation in Bermuda that expresses this with a young man going off to college and his father wanting him to wear a tie. It's quite a powerful ad. In many ways, Pro Active might have carried some of this burden of expectation, one I can sort of understand. This individual felt that while both Ms. Gordon Pamplin and Mr. Perinchief's comments were misguided, he knows where they coming from, and many in the black community probably could too.

On to the topic of black economic empowerment, or maybe just economic empowerment. An important aspect has been largely lost in the discussion of the Government and Pro Active's performance:

Government have been completely inconsistent, evasive and downright schizophrenic on whether the Berkeley contract was awarded on the basis of empowerment.

The Premier, when W&E Minister, wanted to have it both ways - as he did recently in his rambling and ineffective press conference. Mr. Scott was waffling in the face of criticism about the PLP's treatment of a black firm, and responded by saying there were other examples of contracts awarded that were successful (Dellwood I think was one example), but ended his comments with "who just happened to be black". Well which one is it? The PLP seem to want both sides of the issue when it suits them.

You can't have a policy of economic empowerment, or black empowerment, or of anything if you aren't sure what you've done and can't decide if you did it or not. In today's RG Ashfield De Vent goes down the same road. He picks up a line used by the Premier before the last election:

"Mr. DeVent said he understood Pro-Active had come up with the most responsive tender at the time.

"They were chosen on merit.""

I ask again which one is it? The contractor thinks it was awarded as part of a broader, albeit undefined, policy of empowerment. Julian Hall said as much in his press conference:

"He added that Cabinet Ministers had spoken out about a desire for a policy of black economic empowerment. But Government had not delivered the degree of flexibility and support that Pro-Active had been led to expect, as a small company without the substantial capital resources."

That's my biggest complaint with the PLP's claim to be supporting black businesses and following a course of empowerment. Where's the policy? Where's the support to achieve success? This is something I've written about in my RG column. In the absence of a policy it's just favouritism. Or is that the point?

A policy statement is limiting. It means all-comers can apply and it clearly sets out who qualifies, what the expectations are and what support Government will give. Selection is based on a clear set of guidelines and the process would be open and easily justified. Even if people disagreed with the methodology it would be laid out and the Government could say this is why we did what we did. Instead there is nothing but the word of the Government and a completely inconsistent approach to this, one the Government aren't even sure they're doing themselves.

I support this approach, and in fact the UBP, in the run-up to the 2003 election, proposed establishing an Office of Economic Empowerment to do just that. Obviously, they lost so it didn't happen - which is a shame because that proposal was a good one as was the housing plan - but what the PLP are doing is not economic empowerment. It's political opportunism, pure and simple.

If the Berkeley contract was truly a case of economic empowerment then Government would have announced that the contract was going to be awarded on this basis, or with this as a consideration, BEFORE the tendering process began - not after.

What happened here was that Pro Active was awarded the contract and the PLP pointed to it and said "Look. Empowerment". Well, not really. What about all the other small black contractors who might have wanted to put together a consortium, or their own new firm and bid? How were they empowered by this? Recently in a RG Letter to the Editor (not online) Dr. Eva Hodgson made a very incisive point when she stated that (I'm paraphrasing) "the PLP hierarchy is not all black people". Absolutely, but they'd like you to think that because they and their hand picked few are doing well that all blacks have been empwered. Absolutely not. It's just a new elite that is being created. A new 40 Thieves for the new millenium.

What seemed to occur was that the Government put word out to a few selected individuals that they'd win the contract if they put together a firm - even with a substantially higher bid - and called it empowerment afterwards. That's favouritism, cronyism in my eyes, not empowerment.

It didn't work in any case but economic empowerment couldn't have been hurt in this case because this was anything but. What was hurt I believe was the PLP's ability to go down this murky road again. I can't see the public standing for it...if we're aware it's happening that is.

Could the US IRS be helping or hurting us? An issue which could impact Bermuda's (re)insurance industry has re-emerged after not materialising in 2003.

The U.S. Senate recently passed a bill (Senate Finance Bill [S. 1627] "Jumpstart Our Business Strength Act" or "JOBS Act") on May 11, 2004 which includes a provision to limit the Foreign Housing exclusion under section 911 of the Internal Revenue Code (section 454 of the Bill is the relevant clause I think) . Under current tax law a qualified individual may exclude up to $80,000 of foreign earned compensation and a certain amount of their foreign housing cost from income.

The new US Senate proposal would restrict the combined foreign earned income exclusion and foreign housing exclusion to a maximum of $80,000 in total for tax years beginning after December 31, 2003.

Bear in mind that this is a Senate Bill at this point and would have to be reconciled with a House Bill and signed by the President. Considering the House is Republican controlled there's a strong likelihood that any final bill would be different than the current Senate version and this provision may be removed.

What this would mean is that US taxpayers claiming the full $80,000 foreign earned income exclusion (most reinsurance execs) for 2004 onwards won't be able to deduct their housing costs. For those of us who live blissfully free of income tax nightmares this can be translated to mean a drastically higher effective taxable income for individuals working in Bermuda who receive a housing allowance (some as large as $15,000/month and up).

My take is that there are a couple of potential outcomes if this were to occur.

1) Bermuda becomes a less desirable place to work and our companies can't hire the best staff unless they do item 2 below.
2) Operating in Bermuda could become even more expensive as the salaries of US employees would have to be grossed up to mitigate the personal income tax hit they'll take, flowing through to higher expenses for the employer.
3) US employees and the big companies here will develop a sudden vested interest in not paying crazy housing allowances, bringing down rents somewhat. This might provide some relief but will also take dollars out of the pockets of those Bermudian landlords who are making a mint off of $12,000 and $15,000 a month rental incomes.

I don't think Bermudians should see this a potential silver bullet to the housing crisis because a supply and demand problem remains from restricted available land and a thriving international business sector. But clearly a lot of employees don't negotiate their rents as hard as they would if it were their own money. Now that their employer and their own bottom lines could be affected the allowances may be reigned in somewhat.

I'm sure we'll see this develop as the House Bill (House Ways and Means Bill [H.R. 2896] "American Jobs Creation Act of 2003 or "AJC Act") makes it way through the process.

This comment from a reader in response to the GPS post is very interesting:

"I think that there could be a good constitutional argument here for the taxi drivers. Essentially, government is trying to force them to do business with BCDC, which may be in violation of their right of association and dissassociation under the constitution. Potentially, they have a stronger argument in this regard than BTC, who employed the same argument when government forced them to interconnect with Quantum Communications. BTC ultimately lost that case, but it went all the way to the Privy Council and the taxis may...have a stronger argument."

The ZBM evening news tonight ran interviews with a number of taxi drivers regarding the GPS system.

The segment confirmed for me how difficult of a job negotiating with the taxi industry is. They're a fragmented group with no definable leadership and no one individual to speak on their behalf. Combine that with the bad blood between the two sides and this now seems to be simply a battle of wills.

I don't say this as a condemnation of the taxi industry. Their decentralised structure makes sense when you consider the nature of the taxi business in Bermuda. Almost every cab is operated as a private business. Unlike many cities there aren't companies that own cars and hire drivers. Trying to implement a central dispatch system under our framework will be a tough sell. But it doesn't have to be.

If we're looking for a better way to approach this issue I'd suggest the following:

1) This whole ongoing saga with the Transport Minister and the taxi industry could be largely circumvented by making the GPS dispatch system voluntary.

The one common theme between all the drivers is that they don't think a GPS system will make them more profitable. To the contrary they say, it will cost them money and they resent that, particularly being forced to support the chosen company of the Minister.

So why the hard line on mandatory implemetation of GPS? If some want it and some don't then make it optional, no big deal. If it makes the drivers who are using it more money than the others I'm sure it will get picked up by the other drivers. Problem solved. If the Bermuda Central Dispatch Company is a private enterprise them let them provide a service at a price the drivers are willing to pay.

2) If the Minister is allowing only one dispatch company then it is essential that the company's ownership information be completely, and I mean completely, open.

BCDC is hoping to operate under an unusual setup, a protected monopoly with forced participation through legislation. The insistence on mandatory implementation with BCDC is only raising suspicions among drivers and owners that something is fishy. They don't want to be forced to support a specific company, particularly an unknown entity.

So the following questions, and more, need answering.

Who are the shareholders? What is their relationship to the PLP, if there is one? How was the Bermuda Central Dispatch Company selected? Were others considered? If there were others why were they not successful? What happens if BCDC doesn't perform up to par? Who governs BCDC? What is BCDC's commitment to the drivers and owners?

Only with satisfactory answers to those questions, and a voluntary system, can the drivers' suspicions be allayed and this process moved forward beyond this impasse.

But both sides are going to have to swallow their pride and concede some ground before this goes anywhere.

Ok, I've just had it confirmed that the quote in my last post was not a misquote!

I have no idea what the Premier was thinking or actually meant to say. Surely he doesn't think that there are only 100 actuaries worldwide!

First he thinks he's the Head of State and now he thinks there's only 100 actuaries worldwide.

That type of statement brings to mind the now infamous Bushisms of the rather inarticulate US President.

I'll be keeping my eyes and ears open to see if a "Scottism" archive is warranted.

I sincerely hope that this is a misquote:

"Twenty of the world�s 100 or so actuaries are in Bermuda," (Premier Alex Scott speaking at the 2004 RIMS Conference)

Bermuda has far more than 20 actuaries (7 Bermudian I believe) alone, probably closer to 100, and there are thousands worldwide.

Someone screwed up...

Hey, that was my idea!

I wondered aloud to a friend (who'd better not be doing this without me...just kidding) about 8 months ago why no-one had done this in Bermuda. We assumed it was because of the distance a casino boat would have to travel to reach international waters or something along those lines.

What this latest gambling initiative suggests is that we should probably just accept that entrepreneurs will always find a way around the law, and regulate and tax the gambling industry. At least that way we can pay for all the problems that Government are inevitably going to be called on to address.

Currently, we must be the only place in the world with gambling that doesn't collect a cent in tax from it!

Check out this article picked up by the Pondblogger.

Seems the gambling inititative may be further along than we might think. If this agreement turns out to be true it will be interesting to see who gets implicated in this. Backroom negotiations over an issue like gambling are ill-advised. Without the community on board this will be relegated to the political football arena.

Look for this to blow up in the local press shortly.

Earlier this week Brian Darby on VSB carried some unattributed comments from a senior executive at one of the major international companies. This individual was highlighting the current difficulties of operating out of Bermuda. The tone of the discussion was not positive and raised some serious concerns about the cost and challenges our businesses face.

While I don't have a transcript of the comments, he or she raised the following issues as problematic and getting worse (in no particular order):

- Work Permit difficulties (relaxing in Key employee speculated to be in response to complaints by the industry)
- Key Employee restrictions
- poorly motivated Bermudian employees
- housing costs
- constant bashing of international companies in the press and Parliament for political gain
- on the subject of Independence the individual said: "Don't get me started". Could they have been any more clear than that?

The individual prefaced these comments saying that the positive reason (there's only one really) for operating out of Bermuda (favourable tax environment) remain and is compelling, but that companies are quietly downsizing their Bermuda presence and that this will continue.

Now, I'll start by congratulating VSB and Bryan Darby in particular for getting this story, albeit unattributed and not doing what VSB is notorious for - reading from one of the local papers with very little acknowledgement of the print media as having done the report. VSB is on the money with this story and we'd do well to take notice.

As a follow-up story Labour Minister Randy Horton was quoted as dismissing the criticism and saying that this isn't the feedback he gets from the business community. Bermuda is an attractive place to operate out of he maintained.

Mr. Horton, while saying what I'd expect, would be wise not to dismiss the concerns of this individual. I imagine Bryan Darby was hanging out with someone at a cocktail party and after a few drinks things loosened up and as always, the truth starts to come out.

I'd also suggest that the industry would be better served in telling Mr. Horton the truth and not softening their message when dealing with him in person, which I'm sure is what is going on. Dancing around the issues serves no purpose. When speaking on the record or at public events, neither the Minister nor the business community are going to be quite as blunt as they will at a cocktail party but this does no-one any good.

Bermuda is, as has been pointed out a lot lately, a "one trick pony". The two pillars of our economy are down to one. Tourism isn't the major contributor to our economy that it once was and we've become overly dependent, both in terms of jobs and revenue, on international business to drive us.

So, what is our response as Bermudians and Bermudian policy makers to this dependence? Attack it and make it much harder for them to operate. Sound familiar? Hmmm, how do we think we killed tourism? We did that quite successfully with multiple strikes and protesting new hotel developments for political points (David Allen leading a march down South Shore anyone?).

We have to remove our economic drivers from the political domain.

We as Bermudians have a bad habit of thinking that people will always come here to do business and we can put whatever restrictions and hassle we want on them without impact. We also thought that tourists would always come here.

Well, as someone who works in the Reinsurance industry, I can attest to the fact that many of the companies here are quietly moving their jobs to other more hospitable and hungry places. Dublin, the Caymans, other islands, back to the US and London are becoming more attractive every day to the leaders of these companies. These countries want our jobs and the associated economic benefit. The tax advantage remains, but until our politicians set the tone for the community to follow I worry that we're on a downward spiral.

Yes the companies will continue to set up here for the time being but if we're shipping the professional jobs to other areas we are doing a number of very damaging things for our island:

1) The jobs that will move won't be the CEOs and CFO's and underwriters but the entry level professional jobs that put you on a track to those positions. Who'll suffer from that? Bermudians who will find they can't work their way into the industry and thus will never reach the positions they aspire to.

2) At the same time we're making other areas better competitors by forcing out smart employees who could be mentoring our young Bermudians. Instead they're training up young Dubliners while our Bermudians get offered jobs as receptionists and personal assistants.

3) The tax advantage is a major boost to Bermuda but if the expenses get too high, coupled with the reality that an organisation can't get the people they want to produce a profit, they'll go elsewhere. Remember the tax benefit is no good if you're not making money and it takes good employees to do that. At the minimum they'll reduce the presence here to a holding company level and use accounting to get the benefit.

4) If number 3 takes place we'll become what the US accuse of us being - simply a tax shelter moving around dollars rather than a thriving industry providing valuable services from our shores. Then we'll get hit really hard as John Kerry has promised.

There are obvious other drawbacks that I could mention but I'm highlighting the Bermudian trait of killing the goose that laid the golden egg and then wondering where it all suddenly went. Like tourism it won't be sudden but one day everyone will wake up and realise that we've done it again!

One of my common criticisms of the PLP Government has been a lack of planning and vision in their policy making. This government is reactive and willing to use anything for short term political gain. Unfortunately short term political gain soon turns into long term economic damage.

The key employee restriction is a prime example of a policy put in place for electioneering purposes but that has many more far reaching implications.

I always knew it was a hollow policy and that Lister put it in place to drum up a few votes (and Grant Gibbons sadly took the bait). The PLP needed something to point to as an example of protecting Bermudian jobs, when in fact it does the exact opposite by driving them to other places (look at ACE's recent layoffs and the Bank of Bermuda moving their IT department to Scotland several years ago). As soon as the 2003 election was a done deal the PLP predictably backed away from this ill-advised policy, although it remains in place. Both the Premier and Randy Horton have indicated it will be applied much more loosely. What a surprise! They won't be needing it for another 5 years when it will either be resurrected or something else hastily thrown together in its place.

It's not only electioneering however. It also speaks to a fundamental lack of understanding in the PLP of how to run a businesses and how the industry functions here.

Apart from a few exceptions, PLP Parliamentarians are completely ignorant of the nuances and requirements of running a business, let alone a major international corporation. At it's core this stems from their labour background. Most in the PLP see employees as simply performing a set of predefined and easily repeatable tasks. Employees perform functions that anyone can be retrained to do and changing employees has no discernable impact on a business.

Well, that works in the PLP labour blue collar world to a certain extent but it is kryptonite to our financial services industry. Serious and valuable employees, the kind we want our Bermudians to be, bring revenue to the table when they are hired in this business. Reinsurance, insurance and the broker industry are relationship driven. Multi-million dollar accounts follow the individuals more than they do the company.

So if you decide that the 6 years for Employee A are up and force them out (to pointlessly replace them with another foreigner) they'll take their $100 Million dollars of premium with them to a competitor. That's the fundamental distinction. Employees bring revenue with them and take it when they leave.

This is why the key employee policy undermines the ability to run a succcessful business in Bermuda. Rather than lose the employee the company may shift them to Dublin, or not have them here at all. That only hurts Bermudians.

Our immigration policies don't acknowledge that and as a result are fundamentally threatening the profitability of our international companies.

I don't sense an interest in understanding how the industry works from our Government and I certainly don't see any signs that the exploitation of our international businesses for political gain will stop anytime soon. The PLP have presented no vision or long range planning as to how to keep Bermuda at the forefront of this industry.

In fact, using our only economic engine as a political whipping boy has created an envrionment of hostility and distrust towards an industry which gives back to Bermuda an incredible amount (that they really don't have to).

Unless we're prepared for the idea of Bermuda with no international companies and an anemic tourism industry, things have to change.

To a certain extent it may be too late. The decline may have already started.

Just what does Wedco, the PLP Government and W&E Minister Ashfield De Vent think they are putting out to tender?

Mr. De Vent stated to the Bermuda Sun that "The job will go out to tender as does every government contract". What job? What is being tendered?

This type of statement only confirms my suspicions that BCC's operations are being nationalised. Bacardi can relate to this type of behaviour after the PLP's buddy Mr. Castro began acting hostile towards them and they fled to...Bermuda of all places.

It seems the cultural agreement between the PLP and Cuba involves anti-business communist tactics of state takeovers of profitable businesses for their cronies.

Let's clear up what the Wedco/BCC relationship is:

BCC rents land from Wedco. They happen to operate a cement plant on this land. They could be running any type of business as long as the landlord approved and it was legal. BCC, by their own account, do not "have a government contract or license giving exclusive rights to import or distribute cement in Bermuda". Bierman's bring in their own and Gorhams sell it as well by the bag. The difference is that BCC decided to build a plant to sell it in larger quantities for larger pours.

(The statement that we own the plant is open to much more dispute I would think. At the end of the day we'd need to see the lease between Wedco and BCC to know what happens to the plant, at least the silos and permanent structures, but I've been made to understand that it is most likely that anything built by BCC would be considered part of the land and revert to Wedco - as the Bermuda Sun article suggests. Movable equipment I would imagine wouldn't revert to the landlord.)

However, that's a little off track because at the end of the day Wedco is effectively saying that:

"We believe the plant, as part of the land, reverts to us on termination of the lease, so we'll jack up the rent to force out the current tenant and terminate the lease, nationalise the plant as Wedco property and have the Bermuda Government enter the cement business, rather than acting simply as a landlord."

I wonder if the new tenant will be required to pay the same rent as had been demanded of BCC? Somehow I doubt it.

Sounds like nationalisation to me and something that would rank Bermuda among the likes of Cuba, Venezuala and yes, even Zimbabwe.

I've tracked down a sample of some Political Risk Insurance wordings relating to Expropriation, Selective Discrimination and Forced Divestiture which all appear to be potentially applicable in the BCC case.

It's time for the Premier to publicly rebuke the statement of Derrick Burgess and Wedco and assure BCC and all Bermudians that the PLP government will not be involved in these types of practices.

I'll restate my earlier comments that what the PLP are doing here is a very bad thing for Bermuda.

"Expropriation

so as to cause the Permanent cessation of all or part of the Foreign Enterprise�s activities."

In an earlier post I speculated that applying the expropriation cover might be a stretch for the BCC case. After sleeping on that and learning a little more I think it's not a stretch at all and probably could apply.

Jim Butterfield commented recently that BCC took over an empty plot of land in Dockyard 40 years ago and has since developed it into a modern cement processing facility. So the physical plant could be considered assets of BCC. Originally I had been working off the assumption that BCC were renting the facilities, but it doesn't appear to be that simple.

For further insight read this comment that I just received:

"...if, as expected, BCC loses the lease for the Dockyard facility, [BCC] is likely to be in for a big shock: any fixed equipment or apparatus is likely to be deemed �landlord�s fixtures�, meaning that BCC will not be able to legally remove them from the premises and will not be able to charge WEDCO or the new tenants for them. Once affixed to the premises, they effectively become the property of the landlord, regardless of who paid for them and installed them. Unless there�s a specific provision in the lease indicating that the fixtures remain the property of BCC (unlikely)".

I hope BCC vacates the premises with a wrecking ball behind them.

The Bermuda Sun this morning quotes BCC President Jim Butterfield as stating that they should change the name of the company from Bermuda Cement Company to Zimbabwe Cement Company...nice one Jim.

The ramifications of this shouldn't be underestimated by Bermudians.

BCC has Cemex, the international cement conglomerate, as a significant shareholder. If our Finance Minister wants to entice major international corporations to do business here, as she stated she did when discussing the HSBC acquisition, she'd do well to put a stop to the behaviour by Wedco and her Cabinet colleagues.

The following quote rings completely hollow when compared to the PLP's actions with BCC:

"Finance Minister Paula Cox yesterday called the sale of the Bank of Bermuda to multinational banking giant HSBC Plc a 'watershed event in our continuing efforts to develop our country as a world class capital market'."

Cemex does business all over the world and is a major international player. Business people talk and I'm sure they'll let spread the word that Bermuda has become hostile towards business, and that the current Government is looking to appropriate their assets.

Bermuda's business leaders are talking and have taken notice of this fiasco. Potential foreign investors will be next.

I wonder how potentially interested developers of Morgan's Point, or the old Club Med site in St. George's feels right now as they consider whether to invest their millions under a PLP administration?

In a post on the brewing Bermuda Cement Company scandal I mentioned that some of our businesses might want to consider purchasing political risk. A few people have asked me just what political risk insurance is.

The easiest way is to point you to the Sovereign Risk Insurance Ltd. website for some help. Go to the "Products" section of their website (a hyper link won't work due to use of frames) where they describe some of the cover they provide.

Many of you may be familiar with Sovereign who are a Bermuda company formed as a 50-50 partnership between ACE and XL to provide political risk insurance in emerging markets. Sadly, Bermuda's PLP Government seem to want to move us backwards from a premier economy to an emerging market classification with their anti-business practices through Wedco.

Perhaps a member of our intrepid press core might want to ask Sovereign if the BCC scenario would qualify.

I think BCC could probably have used the expropriation cover as described below (emphasis mine):

"Expropriation:

"Non-Honoring of Investment Agreements (also called Breach of Contract) may be added to the Expropriation Coverage to cover the failure of the arbitral process in conjunction with the dispute resolution provisions of fundamental investment agreements to which the host government is a party. "

Maybe a stretch but Derrick Burgess's outburst can't be comforting to anyone conducting business in Bermuda.

As discussed in the last post, Derrick Burgess spilled the beans about the PLP's nefarious intentions with the cement contract during Parliament Friday night. This is the second time he has opened his mouth and said something his colleagues probably weren't ready to address. (The first was during the runup to the election when he let the cat out of the bag regarding the pending Bank of Bermuda acquisition by HSBC which was before Cabinet).

Why does Mr. Burgess, a back-bencher, seem to have such a knowledge of Cabinet proceedings and what is his involvement in these issues? As head of the island's largest union, he has an inherent conflict.

I've never been sure who he is representing, his constituents in the union or his electoral constituency?

Michael Dunkley certainly has a way of drawing out the PLP during Motions to Adjourn on shady dealings that they would prefer to keep under the radar screen. The looming Bermuda Cement Company (BCC) controversy is no different and looks set to become the next Berkeley scandal.

Phil Wells is concerned about who Derrick Burgess is talking about when he says 'our people'. Most people will assume that he's talking about black Bermudians, but that isn't the case.

When the PLP talk about 'our people' they mean PLP cronies not black Bermudians. Black Bermudians as a whole haven't got a thing out of the PLP since 1998 other than lip service. However, a few individuals and businesses closely aligned with the PLP have done very well - under the political disguise of taking care of 'our people'.

The problem with the PLP's claims to be empowering the black community economically is that they are actually doing the exact opposite. Successive PLP administrations have chosen to allocate Government projects with no overriding policy, guidelines or framework. I challenge anyone to show me what document people can look at and say "Ok, so I might qualify, this is how I apply, this is when I can expect to hear if I was successful and if I wasn't this is why".

They are not empowering businesses. Quite the contrary they are creating an economic dependence on the PLP through contract allocation.

What happens is the PLP say we've given, or in Derrick Burgess's case - are about to give, this Government contract to Firm ABC and that is empowering 'our people'. In reality it is intended to ensure that Bermudians suck up to the PLP hoping to stay in favour and be the beneficiaries of Cabinet 'benevolence' with taxpayer funds.

The PLP have no desire to set up a policy or a department to deal with these issues because if that were the case individuals/businesses would be chosen in an ethical manner - those who most deserve get the contract not those who suit the PLP's political purposes.

Any government could achieve a policy of economic empowerment through an expansion of the economy. This however would require some forethought and even-handedness, so it is much easier to taketh away - as BCC seems about to find out.

I completely support the concept of economically empowering those who have historically suffered economic disadvantage, although I hate the term 'affirmative action'. Race however, is a pretty blunt tool to achieve this. I'd suggest that we establish a department to manage this and a transparent policy which anyone can look at and see whether they are eligible or not. Politicians have to be removed from this process to minimise the potential for corruption and cronyism. Only them will we see those with real economic need benefitting.

It's a fact that black Bermudians have been economically disadvantaged. Any policy built around economic conditions would achieve the result of empowering the black community, as well as those of other races and ethnicities who are equally deserving.

As it stands now the concept is being used to ensure that individuals and businesses are indentured to the PLP and link their economic fortunes to the PLP's success at the polls.

This has to stop as it is sending a chill down the spines of the whole Bermuda business community.

Political risk insurance anyone?

Dr. Ewart Brown has led off the budget debate and seems a little sensitive to the UBP's reply. He hasn't said one thing about his Government's budget, he's just attacking the UBP's reply. But I guess that's expected because there isn't much meat in the 2004 budget.

In response to the suggestion to 'outsource' housing to the UBP he complained that the "UBP or their equivalent, has had the whole enchilada for over 300 years" and the people of Bermuda have said that they weren't good enough. Hmmm, we'll be into race if they get really backed to the wall I'm sure but housing didn't reach crisis levels until the mid-90's and has got exponentially worse under the PLP's administration.

Maybe there's more than one 'Weapon of Mass Deception' on the Government benches.

The pondblogger picked up this story in the Sun Herald about a Bermuda contingent studying the Biloxi casinos.

The Sun Herald: 'Bermuda officials study Biloxi casinos', Feb. 27th, 2004

Why haven't we heard anything about this trip locally? More worringly, where does the reporter get his information that "a decision is expected this year by the Bermudan Parliament on whether to legalize gambling"?

Look for the local press to pick up on this shortly.

The UBP's Budget reply is available online. It's a good read and caused quite a few groans in the House while it was being read.

My favourite line was the reference to Alex Scott as a 'Weapon of Mass Deception'. How true!

The following is the complete text of the 2004 Budget as delivered by Finance Minister the Hon. Paula A. Cox:

To His Honour the Speaker and Members of the Honourable House of Assembly

Mr. Speaker,

As the first female Finance Minister for the Government of Bermuda, I have an awesome task. I may be creating a precedent on the one hand as a woman Finance Minister and then there is the dual responsibility of following in the footsteps of a man who is said to have had many of the attributes for a perfect Minister of Finance.

I am honoured to press forward on the path of prudent stewardship of the public purse that was so ably mapped by my predecessor and father, the Progressive Labour Party's first Minister of Finance, the late Hon. C. Eugene Cox, CBE, JP, MP. So I acknowledge the responsibility and distinction of presenting the sixth successive Annual Budget from the Progressive Labour Party Government and should therefore like to salute and acknowledge the efforts of the former Minister of Finance.

Mr. Speaker, this next term of Government has a great starting point: a firm foundation from which to continue our work.

Mr. Speaker, in the midst of many challenges, both international and domestic, Government is committed to the on-going transition and transformation to the 'New Bermuda'. The Budget for 2004/05 further strengthens the economic and financial foundation and simultaneously provides a catalyst for action in further advancing the social policy agenda in the 'New Bermuda'.

Mr. Speaker, Government's objective is to provide an enabling environment for businesses, stable levels of growth and employment, a proper system of governance and equity for the people of Bermuda.

Budget 2004/05 is about building a Bermuda that is strong economically and that is sensitive to the needs of the people. It is about building a Bermuda that recognises the importance of focusing on the domestic social agenda, while at the same time we continue with robust sustained economic diplomacy and remain vigilant in protecting Bermuda's position as a premier financial services jurisdiction. We will not take our eyes off the ball. We must protect the home hearth in terms of our social policy agenda so that Bermuda is truly regarded as a 'Mecca' where we promote policies geared to equity and justice for all, without fear or favour and without adopting an exclusionary approach.

Mr. Speaker, it is critical that as a country we grow and develop our economy and provide social safety-net protections to our citizens. This way, we promote greater overall financial and therefore social stability - these are critical public policy issues for the future. This way, we build confidence and trust based on a philosophy and policy of economic and social equity. It is our intent to maintain Bermuda's economic stability through sound economic management.

Our objective is to deliver a sound economy, where there are continued stable levels of growth, to promote investment in education and training for our people, to foster an enabling environment for business and entrepreneurs, to tackle the complex issues of providing affordable housing, to address the needs of our youth and our seniors, to promote a climate where those who work in our hospitality and tourism sector have a renewed sense of enthusiasm and commitment, to continue to build on the strong foundation and to see a Bermuda that is dynamic, responsive, able to compete in a global environment and fair to all.

Mr. Speaker, we want to do what we can to promote enterprise, efficiency, innovation and skills in all of our people. We may not all have equal talents but we should all have an equal opportunity to develop our talents.

A few weeks ago, the Premier of Bermuda, the Hon. W. Alexander Scott, JP, MP in a speech to the Rotary Club of Bermuda spoke passionately and unabashedly of Government's focus and vision. He stated and I quote: "We must strategise to create a 'New Bermuda' where the 'haves' continue to have and the 'have nots' have more. Given the proliferation of the social issues in Bermudian society today, there is a need more than ever to address these issues collectively. The focus of the Government should now be on the social agenda addressing the negative elements in society to improve the overall quality of life for all Bermudians."

So it is noteworthy that at this stage I announce some specific initiatives that underscore the Premier's and this Government's commitment to further advancing the country's social policy agenda.

Mr. Speaker, you will be aware that as part of the negotiations with the US Government, the Bermuda Government received a lump sum payment from the US Government as part of the termination of the US Base Lands Agreement. There was consideration paid of some US $11 million. Of that sum, a charge of US $3 million has already been made for repairs to Longbird Bridge. The remaining balance of US $8 million is currently in the Consolidated Fund.

Mr. Speaker, I note that these monies received from the United States Government were to be used for whatever purposes the Government of Bermuda so determined.

Hmmm. The Bermuda Sun is reporting that the Premier, Finance Minister and BIBA are off to NY to do a press tour and belatedly try and protect Bermuda's image from the negative onslaught of the past several years. The idea of Alex Scott attempting his brand of spin in the US media doesn't make me feel too good.

Why NY? Wall Street gets it, that's why they keep using Bermuda and other countries to do business, it's Washington where the problem is. Trying to change people's minds at the NY Times, CNBC etc. isn't really a productive use of time without a first effort in Washington. They don't legislate - they just report the hype coming from the politicians. We should be building relationships first and doing the press tour second. What will the Premier say when a reporter asks what presence we have in Washington to protect our reputation as a financial centre?

I'd much prefer the Government to drop their love affair and profiling with Cuba and Caricom and make their way over to Washington where they can make personal contacts and build relationships with the policy makers.

This PLP Government under Alex Scott has so far proven adept at talk and not much else. This Premier is completely averse to getting into the details and producing results. If Alex Scott were serious about representing Bermuda he'd start making some appointments on Capital Hill and leave the press alone for awhile until he has something substantial to report.

I wanted to elaborate a little on my previous post about the PLP Government's apparent lack of concern representing Bermuda's interests to US politicians. (I also should declare that I work in the International Business sector and have perhaps an increased awareness of the potential impact to this sector of our economy.)

We should be concerned not just at the legislative threat, which is real, but at the Premier's dismisive comments on the topic. Alex Scott is a substance-less Premier, proven out by his lifelong history of spin over substantive comments, and his regular public quoting of polling numbers (he quoted them again last night on ZBM). While Mr. Scott may lack the knowledge of the international business sector to respond appropriately, he should at least acknowledge the seriousness of the threat rather than wave it off as 'campaiging'.

As I've said previously, the 'Bermuda Loophole' isn't really our bread and butter business, so why do I think we should be so concerned at Sen. Kerry's comments?

Sen. Kerry's statements were a tactic to gain votes, Mr. Scott was right about that, but they also have a long term negative impact on our reputation as a business jurisdiction. When you couple a legislative change to prevent re-domestications, with a damaged international reputation and a lack of presence in Washington by our representatives, I believe that you have a danger brewing for Bermuda's economic prospects. But it's not too late to address these attacks.

While we continue to allow US politicians to besmirch Bermuda's name we must recognise that their tactic is as much to intimidate companies into either re-locating back to the US, or to prevent clients doing business with Bermuda based companies (see the Calpers pension funds) and more worringly to prevent new startups incorporating at all in Bermuda. These are the major threats that most concern me.

The US tax code is unlikely to change any time soon, although John Kerry's pledge to close the loophole within 500 days of gaining office boxes him in somewhat on that. (I imagine Premier Scott would have dismissed that as well. The PLP promised to have a plan to turn around tourism in 100 days after taking office in 1998 and here we are 5 years later with no plan and sinking air arrival numbers.)

Bermuda is a reputable business jurisdiction. We've worked long and hard to establish ourselves as a desirable location to operate out of, so much so that many publicly traded companies are now based here.

So why has our influence in Washington waned under the PLP?

Simple. While the PLP were sucking up to Castro and cozying up with Caricom, our relationship with the US started to deteriorate. The recent public criticism by the US consul over the Cuba relationship should have been an obvious enough sign. Dr. Ewart Brown publicly insulting the US President's intelligence wasn't much help either, nor is the fascination with being a big fish in a small pond with Caricom (an organisation constantly at battle with the US over economic issues).

It's long past time for the PLP to start representing our interests to the economic powers with whom our fates are tied, not profiling and wining and dining with Caricom and Cuba.

Now I'm really worried! This article in Friday's Mid Ocean should scare the hell out of all Bermudians.

Why should it concern them? Not only because US Presidential candidates are attacking Bermuda, that's been building for a few years now and has picked up the pace after the September 11 attacks, but because Premier Scott doesn't have a clue - or an interest apparently, in addressing this properly. Dismissing this as only campaigning is incredibly na�ve and negligent in representing Bermuda's interests.

The fact that Bermuda has become the poster child for the appalling behaviour of US regulated and publicly traded companies is particularly distasteful when you consider how valuable the Bermuda market is to the US, and worldwide economy. Bermuda has in fact been the saviour of the US insurance industry many times over (see this Bermudian Business cover story for some additional background):

- In the 80�s ACE and XL were formed in the Caymans (and subsequently Bermuda) to fill an enormous gap in the excess liability market.

- When Hurricane Andrew devastated the insurance industry in 1992, the Bermuda market responded, providing critical insurance cover to US insurers, US homeowners and other US businesses.

- After September 11, Bermuda responded within weeks to the most serious insurance crisis in history and replaced the capacity quickly with the most rapid capital raising ever. In fact, Ace and XL - Bermuda's two flagship companies, quickly paid their share of the World Trade Center claims, in full, while other reinsurers are yet to pay - pending the outcome of litigation.

- Again, post-September 11, the US economy was on the verge of a crisis due to a lack of terrorism insurance. Who responded? Bermudian companies provided billions of dollars of protection to many industries including the airline, real estate and life insurance sectors among others. Without this cover many American businesses could not have continued to operate due to the terrorist threat. When the Terrorism Reinsurance and Insurance Act (TRIA) expires in a year (or potentially two) it will likely be Bermudian companies who again will provide the creative solutions to the problem of terrorism insurance.

In fact, the �corporate inversion� issue that garners the most attention is a side bar to the success of Bermuda as a financial centre, though you wouldn�t know that through the media hype. Relatively few companies have in fact re-domesticated to Bermuda, although the pace has increased in the past few years due to a struggling US economy. The real bread and butter of our international business economy comes from Bermuda companies who have never existed in the US, and can�t be subject to US taxation whether the Bermuda loophole is closed or not.

So while US politicians, both Democratic and Republican, continue to use Bermuda as the whipping boy to drum up votes, what does our Premier have to say? "Remember now, he's campaigning".

That�s what should worry us all!

Yes John Kerry is campaigning, but these 4 words are quite revealing. While the PLP and Premier Scott in particular may not mean one word they say when they are campaigning, many other politicians do. The threat to Bermuda (and other jurisdictions) is real - and building. Unless we want our insurance industry to go the way of the tourism industry (whose success we took for granted as guaranteed), the PLP Government better get moving on this threat now.

Who would you rather have representing your case in the US? Alex Scott, who dismissed this as just politics, or someone like Dr. Gibbons who in the same article provided a solid, thoughtful and persuasive argument in Bermuda�s defense? I know who I'd want in front of American legislators on our behalf?

The threat to our industry and economy is real. Our Government had better figure this our sooner rather than later.

Premier Scott would do well to pay attention to one of the most threatening issue facing the livelihoods of all Bermudians, and he�d better get moving on it now before it�s too late.