Wednesday, July 10, 2002
Bermuda reinvents itself and stays prosperous
LOOKING AHEAD by Wally Dobelis
Bermuda is a laboratory in government, a test case that provides practical lessons in survival not only for all the other island-nations but also for big entities, such as New York, in economics, education and unity despite diversity. Some cynic recently announced the downfall of integration (also assimilation) because there is no money in it. Surprise, Bermuda thrives on it.
A British colony that persistently rejects independence, with a two party system, it was colonized when Lord Somers' relief expedition to Virginia foundered on its rocky shores, in 1611. The event was the source for Shakespeare's Tempest. Bermuda's reefs remained a death-trap for Atlantic shipping through the centuries. Its 1620 Parliament is the world's third oldest, after Iceland and England. Self-rule came a lot later, in 196x. The African slave-based agricultural economy shifted during the American Civil War, when the Dockyards at the West End of the islands became the blockade runners' port of call for gun smuggling and illegal cotton shipments to Europe.
When this source of trade petered out, post-Civil-War Bermuda, with its year-round flourishing agriculture, became the source of New York's winter vegetables. Bermudians proudly call themselves "onions," after the tasty local product (it is white, not red), still a staple in the islands' diet. After that trade flattened down at the end of 19th Century, with the development of Florida's agriculture, tourism became the emphasis. Mark Twain waxed enthusiastic about the lush greenness and the clean white buildings (Bermudians seem to be born with a paintbrush in hand, to keep the very essential ridged white roofs clean, protecting their rain-based water supply), and fast steamships brought tourists with funds.
To save the Bermudian population from the onslaught of the world citizens who would love nothing better than to settle down and enjoy the treasures of the tropics, acquisition of property by foreigners was made difficult. Only about 270 houses, with a minimum value of about $2.5 million each, and condos priced well over $500K can be bought by foreigners, with a hefty 22% surtax. Work permits are granted to foreigners only if they are requisitioned by an employer, as possessors of special skills, and foreigners' jobs are posted annually, for bidding by the natives. Bermuda citizenship is nearly impossible to acquire. It becomes available if you marry a native and remain married for 10 years to the same person, meanwhile maintaining residence. There are legal limits for citizenship granted to kids born of such marriages.
Despite the protection, the cost of living for the natives is immense. The GDP per capita is $30K, a touch below that of the US, but a one-bedroom apartment rents for $1,500 a month, food costs appear about time and a half those of the US. Most local people in the hospitality line (hotel employees, cabbies) hold two or three jobs, with the spouse also working. Tourism has slipped to the 3rd most important industry.
What is first? Well, the Bermudan ingenuity has created an alternative, international finance, due to the absence of taxation. . Decades ago Bermuda became a tax-free financial haven. Banking and insurance, particularly reinsurance, are the main areas. Bermudians stay out of the hospitality trade, and send their sons to New York to study at St. John's and other schools that teach insurance. ("If my son wanted to follow me in the hotel trade, I'd rather take him out in the back yard and trash him," is an oft-quoted line.) Consequently, hotels are run by neat clean-cut European and US college-bred youngsters, in Bermuda for a short while, working at cheap rates and taking the joys of the ocean, the scenery and fraternizing with the tourists as part of the compensation, before going back home to settle down, with fond memories. Those working in our hotel survive by sharing quarters in a group condo owned by the hotel.
The accountants and insurance people are paid well (comparable government jobs, the only ones advertised with salary ranges, are in the $80K to $100K range) but they work hard, riding to their offices on motor scooters, a transportation staple. Native Bermudians seem born in the saddle, and groups of bike people, gathered to chat, head to head, are a common sight. Car-bike accidents are common, the 100cc bikes can really hurt the tinny cars. Tourists ride less powerful rentals, 50cc, a big lure for the venturesome.
Manual trades are also well-paid. The large-type job advertisements in the Royal Gazette (no classifieds) are equally big for CEOs, financial and insurance executives, gardeners and hotel people, and qualifications are exacting. Landscaping is dominated by the Portuguese settlers from the Azores, on the other side of the Atlantic Ocean, who settled in Bermuda to garden and work in the fields of the farm owners, excellent laborers who would work without taking a siesta. Their descendants are still attached to horticulture. "If you want to know the name of that tree, ask a Portuguese," I was told in downtown Hamilton, in the store area where Reed Street joins Queens Street, when no one was able to identify the beauteous orange-blossomed scarlet cordia.
What about the ethics of a tax haven? Well, the US is the biggest, with protective laws that have brought in $5 Trillion of foreign investments (Switzerland is second with $2 Tr, and Cayman Islands are third, just under $1 Tr.). Should tax havens be eliminated? We objected strenuously when EU tried to pass a Savings Tax Directive, to have US collect their taxes. After all, the US 1990s boomtown prosperity was heavily due to these foreign funds. But, how about drug funds and other illegal gains, and terrorist support? Well, most legitimate tax havens, like Bermuda, have treaties with the US. The Organization for Economic Cooperation and Development (OECD) tracks the money launderers. The G7 have a Financial Activities Tax Force (FATF) that had identified 19 overt launderers (now down to 15), and tries to cure them, by the level of compliance with its 40 points of cooperation.. In the Caribbean there are the bad boys Nevis and Domenica ( the Caymans and Barbados have complied). In Western Europe there's only Liechtenstein, and in the Pacific the obstreperous Nauru (the land of 10,000 people who had mined thin island down, from a phosphate mountain to a hole in the ground, then put its poor gains into banking and became a Russian Mafiya satellite, laundering $70Billion worth of rubles.) Some other launderers are Cook Islands (New Zealand's funds escape route), Marshalls, the Nine, and the Baltics, in the former USSR zone.
We will talk about the marvelous pink beaches of Bermuda next time.
Bermuda is a laboratory in government, a test case that provides practical lessons in survival not only for all the other island-nations but also for big entities, such as New York, in economics, education and unity despite diversity. Some cynic recently announced the downfall of integration (also assimilation) because there is no money in it. Surprise, Bermuda thrives on it.
A British colony that persistently rejects independence, with a two party system, it was colonized when Lord Somers' relief expedition to Virginia foundered on its rocky shores, in 1611. The event was the source for Shakespeare's Tempest. Bermuda's reefs remained a death-trap for Atlantic shipping through the centuries. Its 1620 Parliament is the world's third oldest, after Iceland and England. Self-rule came a lot later, in 196x. The African slave-based agricultural economy shifted during the American Civil War, when the Dockyards at the West End of the islands became the blockade runners' port of call for gun smuggling and illegal cotton shipments to Europe.
When this source of trade petered out, post-Civil-War Bermuda, with its year-round flourishing agriculture, became the source of New York's winter vegetables. Bermudians proudly call themselves "onions," after the tasty local product (it is white, not red), still a staple in the islands' diet. After that trade flattened down at the end of 19th Century, with the development of Florida's agriculture, tourism became the emphasis. Mark Twain waxed enthusiastic about the lush greenness and the clean white buildings (Bermudians seem to be born with a paintbrush in hand, to keep the very essential ridged white roofs clean, protecting their rain-based water supply), and fast steamships brought tourists with funds.
To save the Bermudian population from the onslaught of the world citizens who would love nothing better than to settle down and enjoy the treasures of the tropics, acquisition of property by foreigners was made difficult. Only about 270 houses, with a minimum value of about $2.5 million each, and condos priced well over $500K can be bought by foreigners, with a hefty 22% surtax. Work permits are granted to foreigners only if they are requisitioned by an employer, as possessors of special skills, and foreigners' jobs are posted annually, for bidding by the natives. Bermuda citizenship is nearly impossible to acquire. It becomes available if you marry a native and remain married for 10 years to the same person, meanwhile maintaining residence. There are legal limits for citizenship granted to kids born of such marriages.
Despite the protection, the cost of living for the natives is immense. The GDP per capita is $30K, a touch below that of the US, but a one-bedroom apartment rents for $1,500 a month, food costs appear about time and a half those of the US. Most local people in the hospitality line (hotel employees, cabbies) hold two or three jobs, with the spouse also working. Tourism has slipped to the 3rd most important industry.
What is first? Well, the Bermudan ingenuity has created an alternative, international finance, due to the absence of taxation. . Decades ago Bermuda became a tax-free financial haven. Banking and insurance, particularly reinsurance, are the main areas. Bermudians stay out of the hospitality trade, and send their sons to New York to study at St. John's and other schools that teach insurance. ("If my son wanted to follow me in the hotel trade, I'd rather take him out in the back yard and trash him," is an oft-quoted line.) Consequently, hotels are run by neat clean-cut European and US college-bred youngsters, in Bermuda for a short while, working at cheap rates and taking the joys of the ocean, the scenery and fraternizing with the tourists as part of the compensation, before going back home to settle down, with fond memories. Those working in our hotel survive by sharing quarters in a group condo owned by the hotel.
The accountants and insurance people are paid well (comparable government jobs, the only ones advertised with salary ranges, are in the $80K to $100K range) but they work hard, riding to their offices on motor scooters, a transportation staple. Native Bermudians seem born in the saddle, and groups of bike people, gathered to chat, head to head, are a common sight. Car-bike accidents are common, the 100cc bikes can really hurt the tinny cars. Tourists ride less powerful rentals, 50cc, a big lure for the venturesome.
Manual trades are also well-paid. The large-type job advertisements in the Royal Gazette (no classifieds) are equally big for CEOs, financial and insurance executives, gardeners and hotel people, and qualifications are exacting. Landscaping is dominated by the Portuguese settlers from the Azores, on the other side of the Atlantic Ocean, who settled in Bermuda to garden and work in the fields of the farm owners, excellent laborers who would work without taking a siesta. Their descendants are still attached to horticulture. "If you want to know the name of that tree, ask a Portuguese," I was told in downtown Hamilton, in the store area where Reed Street joins Queens Street, when no one was able to identify the beauteous orange-blossomed scarlet cordia.
What about the ethics of a tax haven? Well, the US is the biggest, with protective laws that have brought in $5 Trillion of foreign investments (Switzerland is second with $2 Tr, and Cayman Islands are third, just under $1 Tr.). Should tax havens be eliminated? We objected strenuously when EU tried to pass a Savings Tax Directive, to have US collect their taxes. After all, the US 1990s boomtown prosperity was heavily due to these foreign funds. But, how about drug funds and other illegal gains, and terrorist support? Well, most legitimate tax havens, like Bermuda, have treaties with the US. The Organization for Economic Cooperation and Development (OECD) tracks the money launderers. The G7 have a Financial Activities Tax Force (FATF) that had identified 19 overt launderers (now down to 15), and tries to cure them, by the level of compliance with its 40 points of cooperation.. In the Caribbean there are the bad boys Nevis and Domenica ( the Caymans and Barbados have complied). In Western Europe there's only Liechtenstein, and in the Pacific the obstreperous Nauru (the land of 10,000 people who had mined thin island down, from a phosphate mountain to a hole in the ground, then put its poor gains into banking and became a Russian Mafiya satellite, laundering $70Billion worth of rubles.) Some other launderers are Cook Islands (New Zealand's funds escape route), Marshalls, the Nine, and the Baltics, in the former USSR zone.
We will talk about the marvelous pink beaches of Bermuda next time.
# posted by Wally Dobelis @ 10:43 AM 
