Beautiful island in the sun radiates business success
BERMUDA, a sub-tropical island archipelago
off the east coast of the US is successfully exploiting its mid- Atlantic location
as a centre for global financial services and high-value tourism. First settled
by the British in 1609, Bermuda soundly rejected independence from the Crown
in a 1995 referendum. Only 21 sq miles in area, it remains a self-governing
territory of the UK.
Tourism to Bermuda to escape North American winters became popular in Victorian times and the island now attracts some 360,000 visitors a year, but international business, especially reinsurance and offshore finance, today contributes over 60% of Bermuda’s economic output.
The ruling Progressive Labour Party is now led by 63-year-old Premier Hon Alexander Scott, following elections in mid-2003. “Our objective is to make sure we expand in a way that we bring most, if not all Bermudians, into the economy in a meaningful way,” says Scott. “To do this there should no longer be ‘them and us’. Bermuda has in the not-toodistant past had a history of segregation and it has been a divided society – divided between black and white, business and labour.”
That new unity of purpose, forged by the PLP’s re-election victory, faced a challenge in September when Hurricane Fabian, the strongest in 50 years, ripped through the island costing hotels 1,200 places, closing restaurants and disrupting the convention industry.
Hon Alexander Scott: Premier, Government of Bermuda
Premier Scott praises the positive reaction of Bermudians from
the ordinary folk who cleaned up the mess to the corporate citizen who offered
his private jet. “We declined many outside offers of help because we have
the self-sufficiency to rebound quickly,” he says. “The drawing
together will enable us to go from strength to strength both locally and on
the international stage.”
The Bermudian economy experienced a mild recession in 2001-02, paralleling the setbacks in the US, but recovery soon began and has been sustained this year. The economic growth target for 2003 is between 1% and 1.5%, but officials are now optimistic this will be exceeded. Scott is also hopeful about a revival in tourism, alongside the growth of international business on the island.
Scott says: “They used to say that if America sneezes, Bermuda catches a cold, so it is essential to make sure we remain the pace-setter when it comes to choices for the financial sector and we remain competitive. We have a regulatory culture here that is attractive. You know it is a safe operation if it is set up in Bermuda.”
As if to prove the point, there are now more than 12,500 foreign companies in Bermuda, many US-owned. A recent report from management consultants KPMG concluded that Bermuda’s legislative framework is compliant with international standards, giving evidence of the island’s commitment to the curbing of money laundering.
The importance of Bermuda to the global insurance and reinsurance industry was acknowledged when it was chosen as the venue for the biennial World Insurance Forum, which will again takes place in Bermuda from 6-9 June 2004.
Organiser Robin Spencer-Arscott says there was some scepticism initially about Bermuda but adds: “We get great support from all the companies on the island.
“Everyone looks forward to it and the speakers we attract are world-class.”
A paradise for discerning travellers
TOURISM to Bermuda, with its pink beaches,
emerald seas and manicured fairways – the country has more golf holes
per square metre than anywhere else – was once the lynchpin of the economy.
Yet the total number of hotel beds has declined in the past 15 years to 3,500 from around 12,000 and that was before Hurricane Fabian took out 1,200 beds. Around 80% of visitors come from the US, with the majority of the rest being from the UK and Canada, along with a small proportion from the rest of the world.
Despite the new emphasis on Bermuda as an international business centre, Premier Scott and his colleagues in government also aim to increase the number of visitors from 360,000 a year to over 500,000. Scott says there has been a suggestion that tourism will never be king again” in Bermuda, but he would not want to underestimate the potential, especially for the premium end of the market.
“To make it an enjoyable stay, you don’t want an island overpopulated with visitors so that one gets in the way of another,” he says. “We are selective and from an economic point of view the yield per tourist is higher than it was in the past. In terms of diversifying our product, we used to think of an on season/off-season, but there no such separation any more.”
Minister of Tourism, Telecommunications and E-Commerce the Hon Renee Webb is tackling both the supply and demand side of the market. She agrees that Bermuda is not in the mass tourism business. “Compared to other islands, Bermuda would definitely be considered an expensive destination, but that depends on your station in life. We position ourselves to attract high-networth 35 to 55-y e a r - o l d travellers.”
C h a r l e s Gosling, President of the Bermuda Chamber of Commerce, is also keen to lay out the welcome mat. He says: “Bermuda is an island in the middle of the Atlantic that’s pretty easy to get to. You have a number of flights each day to the island, which are all pre-cleared here. You have particularly good hotels and European-style hospitals and restaurants, and you couldn’t ask for anything nicer.”
The government has tried to encourage the existing hotels to invest in their own infrastructure. In 2000, Parliament approved the Hotel Concessions Act, which gives a tax holiday to hoteliers who invest in their properties. “This has been very successful,” says Webb, pointing to the investment already made by the Fairmont Group in two leading hotels, the Fairmont Southampton and the Fairmont Hamilton.
The Minister says that all the hotels, large and small, are taking advantage of the tax holidays defined in the Act and can also benefit from tax breaks for training Bermudians to work in the industry.
She adds: “We are training Bermudians to ensure they join the hotel industry, but also so they stay in the hotel industry and make it a career.”
Undeveloped sites such as the Club Med property at St George are also in the Minister’s sights. “Club Med is one example of a site that has been cleared for far too long,” she says. “We have shortlisted two groups and will be identifying one of them soon that will definitely take over that property.”
Potential also exists for investors at Morgan’s Point, a development that was part of a former US Air Base. “We still have opportunities that might be available for investors interested in Bermuda,” she says. “We try to be as welcoming as possible. The most important thing is that everyone gets on board to improve the tourism product.”
In working to develop Bermuda as a brand, the government is returning to the medium of television advertising and examining the potential for e-tourism. Michael de Couto, from the Department of Tourism, says different campaigns have been worked up for the US, UK and European markets. He says: “The key to the campaign is Bermuda shorts – a garment that is completely unique to Bermuda and expresses our identity. The image we want to project reflects the type of sophisticated and affluent people we want to attract.”
Hon Renee Webb: Minister of Tourism, Telecommunications and E-Commerce
However, the government is not marketing Bermuda as a destination
in isolation from the rest of the community. Webb says: "Bermuda is very
much about public-private sector collaboration, so for tourism we have the Bermuda
Alliance for Tourism and that will involve all stakeholders.” These include
hoteliers, government officials, the Chamber of Commerce, the Bermuda International
Business Association (BIBA), the cruise ship industry and the airlines.
The Bermuda model for collaboration has been copied elsewhere. Webb says: “Even though some of these entities are actually competitors, we sit around the table and look at Bermuda from a holistic standpoint. The public-private initiatives we have undertaken have been amazing.”
Hurricane Fabian tested the teamwork between different sectors of the tourism industry to the full, but all the stakeholders came on board quickly.
Officials met with the hoteliers, hotel managers and in some cases the owners, to work out ways of putting the tourism infrastructure back onstream quickly. “We thought it was extremely important to send out the message that Bermuda is alive, well and kicking. Even though we are down we are not out,” says Webb.
The devastation would have been much worse if the same hurricane had hit parts of the US and the Caribbean where they use wooden structures for housing instead of concrete and Bermuda stone.
The Minister particularly praised those hotels including Sonesta Beach, where staff have been kept on rather than made redundant, so as to help in the reconstruction and be ready for reopening.
Government draws up roadmap for e-business
BERMUDA was the second jurisdiction after
Singapore to establish a regulatory framework for e-business, with its Electronic
Transactions Act in 1999. The Hon Renee Webb was the first minister in the world
to have e-commerce in her portfolio.
The government has now produced a National E-Business Plan covering the next 20 years. It has prepared a Green Paper setting out an IT roadmap for society as a whole, starting with the public sector.
“One of the things you need to do, if you are holding yourself up as an e-Business destination is to lead by example,” says Webb. “If the government doesn’t have any e-Business procedures internally then it’s hard to be taken seriously.” Among the new priorities is to promote Bermuda on the internet. “We are looking at how to market Bermuda from an e-tourism point of view,” says Webb.
All Bermuda’s legislation is now accessible online. Taxes can be filed online and social security and customer service forms can be completed securely on the web. The next phase, which has already started, is to move transport onto the internet in the next 18 months. “You’ll be able to register your bike or your motor car,” says Webb.
To provide clear guidance to commerce, the government has applied an ethical framework to the booming e-business community. It has outlawed any online businesses whose transactions are illegal under the island’s existing criminal code.
Webb says: “For example, gambling and pornography are illegal in Bermuda, so we decided not to allow those online sites in. Now, clearly we can’t stop people accessing porn or gaming sites in the privacy of their own homes, but we are not going to allow gambling or pornography sites to operate out of Bermuda. The other thing we banned was the trafficking of weapons.”
In rejecting potential revenue from such business, Bermuda was keen to uphold its reputation. Webb says: “Bermuda has always thought of itself as the Rolls-Royce of offshore financial centres, so we tend to be very conservative in how we approach these things.” By eschewing the market for cheaper types of financial services, Bermuda has committed itself to a slow but steady path of development.
For Cable&Wireless new areas of e-business such as service continuity have grown exponentially, especially after 11 September. Eddie Saints, general manager of C&W recalls: “A lot of businesses had no alternative location, so right away businesses looked for service continuity plans. We were able to provide for the changing needs of our market and deliver leadership. That’s the difference between us and the competition.”
C&W’s e-business portfolio spans a whole range of activities including service continuity, a data centre and managed services. The company offers a onestop shop for its customers. “We are probably the centre of excellence worldwide in our group for e-business, along with Bahrain,” says Saints. “Bermuda’s image is highly regarded and respected around the world and we didn’t just get there by luck.” Saints believes the government was right to introduce competition to bolster e-business and is pleased the Green Paper recognises the importance of sustainable balanced competition.
C&W recently signed a threeyear agreement with Bermuda’s biggest bank, Bank of Bermuda, a world-class provider for private banking, trusts and mutual funds, to increase its voice and data capacity. “The bank pushes us every day of the week and that’s great,” says Saints. “It’s our biggest client here, and probably one of the most prestigious clients for C&W worldwide.”
C&W’s work for Bank of Bermuda, recently involved in a proposed takeover by HSBC, involves data centre, managed hosting and integrated solutions. “These things are as complex as you will find anywhere in the world,” says Saints. “We are doing them from our small island in the middle of the Atlantic.”
Competition triggers growth in telecoms
GM Eddie Saints and the C&W satellite dish at their teleport facility in Devonshire, Bermuda
BERMUDA has enjoyed international telecommunications
for 113 years when Cable & Wireless introduced the telegraph. New services
arrived more rapidly after C&W ceased to be the sole provider in the late
1990s, in line with the government’s aspirations to create a major centre
for international business.
“There was no real competition until 1997 when the second international carrier, TBI, came onstream,” says the Hon Renee Webb, Minister of Tourism, Telecommunications and E-commerce.
The government expanded the sector with seven ISPs as data carriers and three mobile phone networks. The Bermuda Telephone Company provides pretty much all of the access to local customers, according to BTC president Francis Mussenden.
The new diversified structure withstood Hurricane Fabian with flying colours. “Our telecoms infrastructure is robust enough to withstand a hurricane of the dimensions of Fabian,” says Webb. “Disaster recovery is very much a reality in Bermuda and anyone thinking of locating here should know that services were up and running again very quickly.”
Nigel Hickson, e-commerce consultant, says the government’s skill has been demonstrated in the way competition has been managed. “We have avoided increasing the number of providers so much that some might find it difficult to survive,” he says. His point is underlined by the Minister who states that no more licences are being granted for the time being. C&W has continued to innovate despite the arrival of competition in the past six years. Eddie Saints, general manager of C&W in Bermuda says: “We are not just a telecoms carrier, we are a full solutions and integration provider with a heavy focus on IT. Most telecoms carriers provide data and voice services and internet. We also provide service continuity, disaster recovery, computer centre, data hosting services and hosted managed services.”
C&W offers service continuity centres that enable them to maintain services in the event of an emergency at their main site. Saints says: “My boardroom belongs to one of our larger insurance companies. With one phone call from them it changes its profile with ports for telephones and Wide Area Network and PC connections. It’s part of the uniqueness we provide to meet the changing needs of our market.”
Prudence is the key to AA rating
PRUDENT financial management and a reputation
for high regulatory standards are the hallmarks of Bermuda’s custodianship
of its offshore financial centre. The Hon Minister of Finance Eugene Cox presides
over a sound economy that can weather a major hurricane without resorting to
The 2003 public borrowing requirement of $78m will remain unchanged, even after meeting the costs associated with restoration and recovery. Indeed, following Hurricane Fabian, Standard & Poor’s awarded Bermuda an AA credit rating.
“I think that is very significant,” says Cox. “We want to make sure money is spent in a way that shows good management in sectors like education and health. "We are a small country and we have to make our dollars go as far as they can.” Cox is submitting key public services to a based budgeting exercise to ensure efficiencies are achieved.
Hon Eugene Cox: Minister
The insurance and reinsurance industry is thriving, with some
$12bn in new capital since the 11 September terrorist attacks. Premium income
in 2002 was more than 300% higher than 2001, according to Wayne Brown, Assistant
Institutionally, Bermuda enjoys considerable prestige. The Bermuda Stock Exchange (BSX) is fully modernised with an electronic trading system similar to the London Stock Exchange. Greg Wojchiechowski, CEO at the BSX, says: “We are the first offshore full member of the World Federation of Exchanges. We are also recognised by the US SEC as a designated Offshore Securities Market and approved by the London Stock Exchange. We enjoy an open dialogue with the UK FSA and meet Japanese and Asian regulations. As Bermuda is part of the UK, the BSX is an OECD member exchange.”
Bermuda is also a jurisdiction where regulatory change is drafted carefully and with proper consultation. Munro Sutherland of the Bermuda Monetary Authority is working on the timetable for implementation of the Investment Business Act 2003. “It may take a little longer than in some jurisdictions, as we have to go through a very detailed process of consultation with the different groups affected,” he says. “The industry understands it is critically important they interact with us at an early stage.”
Premier Scott sums up the pro-business profile of the current government. “While we will work with the financial sector from a regulatory point of view, we will legislate to make it more user-friendly. That will keep us competitive.”
His enthusiasm is shared by Charles Gosling, President of the Bermuda Chamber of Commerce, who points out that for employees in the financial services sector Bermuda is a great place to work. “It’s relatively crime-free. We have the same legal system as the UK, the same accounting system as Canada, and well-established banks with a secure parliamentary system.”
Bacardi gives Bermuda a tonic
BACARDI, a global manufacturer and distributor
of alcoholic beverages headquartered in Bermuda, is the world’s fourth
largest spirits company, with net revenues of more than $3bn and subsidiary
companies in more than 50 countries.
Founded in 1862 in Santiago de Cuba by Don Facundo Bacardi, the company has operated in Bermuda since 1962. Bacardi developed his signature Carta Blanca rum in Cuba, differentiating it from the other rough and fiery traditional rums by its lightness and refined taste. With Bacardi soon a favourite in Cuba, and among US visitors, the company developed a strong Caribbean presence, marred only by confiscation of its assets following the 1960 Cuban revolution. Driven into exile, the Bacardi family chose Bermuda as a base for Bacardi International to develop exports in Europe, the Asia Pacific and other markets.
Javier Ferran, CEO of Bacardi, says: “Bermuda was a natural choice geographically – lying between the US and Europe – and politically and economically. It offered a sound infrastructure and a very stable political system. This was of paramount importance to the company after our experience in Cuba. The currency is linked to the US dollar, providing monetary stability. Culturally, the flavour of the island is not dissimilar to Cuba.”
In 1992, the shareholders decided to merge all their worldwide interests into one holding company, Bacardi Limited, based in Bermuda. They had been under five separate companies, including the operations in the US, Puerto Rica, Mexico and the Bahamas. With this extra financial muscle Bacardi acquired Martini & Rossi, doubling the size of the enterprise and providing synergies in portfolio and geographic fit. Ferran says: “While Bacardi’s core business was in North America, Martini had a European focus and allowed Bacardi to have its own distribution network in that part of the world. Brands in the liqueur, vodka, whisky and other categories came with this acquisition.”
Since then, Bacardi has continued to grow both organically and through acquisition. In 1998, Bacardi acquired Dewar’s Scotch Whisky and Bombay Gin and, more recently, Cazadores Tequila. In the new product area, the flavoured rums, Bacardi Limon and Bacardi O, and in the lowproof sector, Bacardi Breezers and Rigo, have added value and diversity to the portfolio.
BIBA promotion begins with colouring books
THE Bermuda International Business Association (BIBA)
believes in starting with the early years. It markets international business
not only to decision-makers in the world’s capitals, but also to the next
“We go to primary schools with colouring books that explain everything about international business,” says Deborah Middleton, CEO at BIBA. “That is how seriously we take it. Starting with primary, we then go onto the middle schools and challenge them to a youth debate about the pros and cons of international business.”
While Bermuda is recognised as one of the top three global centres for insurance and reinsurance, BIBA is keen to demonstrate that Bermuda offers much more than insurance skill sets. “We have been around for a long time compared to other jurisdictions,” says Middleton. “We have a well-developed business infrastructure with people in place and a workforce that can support very sophisticated transactions.”
BIBA chief Deborah Middleton
The Bermuda message is being noticed thanks to the professionalism
of BIBA and its engagement with key government agencies, including the Ministry
of Finance and the Bermuda Monetary Authority.
“The biggest problem for us is putting to bed some misconceptions,” says Middleton. “First of all we are not in the Caribbean and second we are not a tax haven. After working at it for 40 years we still battle against those two prejudices.” Bermuda also has a clean bill of health as far as the international blacklists of non-compliant jurisdictions on money laundering and funding for terrorism are concerned.
Indeed BIBA is showcasing the island’s capacity for hedge fund work and securitisation through a promotional tour to London this month. Later, BIBA will attend the MAR/Hedge International Conference on Hedge Fund Investments in Miami, which has relocated to Florida from Bermuda because of Hurricane Fabian.
Losing the 2003 MAR/Hedge conference was a setback, since Bermuda is targeting conventions of 1,000-plus delegates. It has recently won the mandate for the biennial meeting of ALARYS, an organisation of risk managers from across Latin America, which is meeting in Bermuda in September 2004 for the first time outside Latin America.
Middleton says: “This prestigious conference is precisely the type of event we wish to encourage to the island. It benefits our tourism industry, allowing us to showcase the beauty of Bermuda, as well as enabling the delegates to see first-hand the infrastructure that makes us a world-class insurance centre.”
BIBA is the first point of contact for foreign investors and businesses coming to Bermuda. Jeff Conyers, BIBA chairman, says: “Typically, when people come to Bermuda we can point them in the right direction. They either need a law firm or an accountant and we know the people they need to meet.”
Not only is BIBA able to promote the skills available on the island from marketing to IT and facilities management, but it loses no opportunity to talk about the relaxed lifestyle. “It’s very easy to do business here,” says Middleton. “There is sophistication here. We have the Bermuda Festival and the Jazz Festival. People don’t feel they are coming to some cultural backwater.”
Yet BIBA also has more work to do educating Bermudan society to accept the change from a tourism-oriented economy to one focused on business. BIBA’s advocacy of the opportunities for Bermudan citizens extends to a major commitment to training programmes, starting with workshops where people can go with their CVs. “We take our international business very seriously,” says Middleton. “I don’t know any other countries that do so to this extent.”