Wendy Warren examines why the Bahamas is the financial centre of choice for Asian investors.
Opposite Ends of The World
On the surface, The Islands of The Bahamas and Asia are as different as they are geographically distant. A relatively young independent country – recently celebrating its 41st anniversary of independence - The Bahamas enjoys a long history of over 285 years as a parliamentary democracy. With a population of just over 377,000 spread across an archipelago made up of ‘700 islands, rocks and cays’ over 100,000 square miles, The Bahamas sits strategically at the gateway of the Americas – just off the coast of North America and a short distance from the tip of South America.
There is also a stark contrast between the two countries in economic terms. With a GDP of US$8.1 billion, the size of The Bahamas’ economy is less than one-onethousandth of China’s US$9.1 trillion, but the former enjoys a per capita income almost three times higher according to most recent data from the World Bank.
A History of Economic Ties
The Bahamas has decades long history of direct political, economic ties with China.
It was one of the first Caribbean countries to support China’s right to Taiwan, when it publicly switched support during a visit by former Prime Minister Hubert Ingraham in 1997. This was followed in 1999 by the appointment of Sir Arthur Foulkes – who went on to become a Governor General of The Bahamas - as the first Non-Resident Ambassador to China.
Outside the political sphere, The Bahamas and China have a long history of economic ties. In 1995 China-based conglomerate Hutchison Whampoa Ltd (HWL) established a 50-50 partnership with the Grand Bahama Development Company to develop the Freeport Container Port – the largest transhipment facility in the region.
Commencing operations in 1997, Freeport Container Port sits approximately 100 miles from the port of Miami, Florida and has a capacity to handle 1.5 million TEUs per year. It is the deepest container terminal in the region and is a major container transhipment hub. HWL’s investment in The Bahamas has continued over the years and it remains a 50-50 partner in the Port Group, the primary owner and operator of major infrastructure on the island of Grand Bahama including the Freeport Container Port and the Grand Bahamas International Airport.
China’s investment in The Bahamas has continued apace in recent years with the financing and construction of the US$3.6 billion Baha Mar Resort in Nassau by China State Construction and Engineering (CSCE). Baha Mar represents the single largest hotel development in the Caribbean and, when completed, will employ over 8,000.
CSCE has continued to demonstrate its interest in The Bahamas with the recent acquisition of the historic British Colonial Hilton hotel in downtown Nassau. The British Colonial, which originally opened in 1923, is a landmark property at the centre of the country’s economic district and sits on a site that was once occupied by the Old Fort of Nassau, the protection point for western Nassau Harbour in the early 19th century.
China’s Families and Entrepreneurial Pursuits
The economic phenomenon that is China: the country saw the creation of 40,000 new millionaires in 2013 according to a study by the Hurun Research Institute.
The study revealed that 55 per cent of these millionaires are defined as ‘private business owners’, one in five are senior executives at large companies and 15 per cent are listed as ‘real-estate investors’.
It is for this group to discover what individuals, families and entrepreneurs from The Americas and Europe have discovered over the past 80 years: that The Bahamas provides a uniquely attractive proposition for wealth management as well as providing the location for business and senior business personnel.
Amongst financial centres in the Caribbean, The Bahamas delivers more choice in financial services providers. This is due to the longstanding and confirmed commitment by each political party to providing an environment buttressed by confidence in the legal system through an independent judiciary and modern legal framework: relevant services and product offering; and robust regulation.
Further, it welcomes the presence of business owners from around the world, both to live and manage their international business affairs. Many of the substantial families have established family offices as well as the international holding companies.
Some of these families wish to engage in the business and educational systems of the major economies in the West but do not want to be double taxed or taxed on their personal wealth after they return to their home country. Taking up residence and owning a property for personal and business purposes in The Bahamas is not only easy but there are also many available options. Residence can be secured on an annual as well as permanent basis.
Investors from Latin America to Europe are seeking to manage risk through the use of legal structures and market exposure to a well-balanced mix of currencies and geographies. They find The Bahamas to be a tax neutral and competitive jurisdiction. Its history is one that demonstrates that at all times it is friendly to capital.
Of particular interest is the Private Trust Company that affords individuals with significant wealth the ability to engage siblings and next generation family members along with family and corporate advisors in the trust administration of family wealth. Further, the private trust company is provides an ideal structure for operating assets and real estate owned for personal and business purposes. Both The Bahamas trust and foundation laws provide a combination of advantages that is worthy of research and consideration.
In addition to the use of the private investment companies and investment funds, steps can be taken to benefit from regulatory oversight including operating as an investment manager, broker dealer or financial and corporate services provider. We are confident that as entrepreneurs and families travel the path from China to The Bahamas, they will find a location fit for the purpose of international business and finance.
Wendy Warren is the Founder and Managing Director of Caystone Group. Prior to establishing Caystone, Ms. Warren spent 11 years as CEO and Executive Director of the Bahamas Financial Services Board (BFSB), a financial sector body that works closely with government, regulators and private industry to ensure The Bahamas provides global clients with best-in-class financial services. Following her time with BFSB, in 2012 Ms. Warren established Caystone, an operational family office focused on full corporate and fund administration services. She is also a director and founder of Onyx Partners Ltd., an independent, international fiduciary company. Ms. Warren has worked in a variety of roles in the fund administration, wealth management and audit fields including 8 years co-leading the establishment and operation of a leading investment funds administrator. She has worked with families and family businesses for over 30 years and her knowledge of the financial services business and community is broad, augmented by a deep understanding of The Bahamas and its legislative framework. Ms. Warren has served as a director on various boards and committees including Bahamasair Holdings, Bahamas Electricity Corporation, Bahamas Trade Commission, the Financial Services Consultative Forum and the Bahamas Association of Mutual Fund Administrators. Ms. Warren, a Chartered Accountant, holds a bachelor’s degree in Accounting from the University of Waterloo, Canada and has completed postgraduate studies in Corporate Governance at the Kellogg School of Management (Northwestern University). She is an Anti-Money Laundering Certified Associate (AMLCA) and completed the STEP Professional Postgraduate Diploma in Private Wealth Advising.