The Tribune

By NEIL HARTNELL

Tribune Business Editor

KPMG International's global head yesterday urged the Bahamas to forge "strong" bilateral investment treaty relationships with countries now targeted by global money managers, adding that it was "critical" for this nation to "demonstrate its sophistication" to the world.

Michael Andrew, in Nassau to attend a conference of the global accounting firm's so-called 'offshore' centre group, told Tribune Business the Bahamas was well-positioned to "benefit enormously" as an international financial centre from current global trends.

And KPMG International's global chairman added that the Bahamas was also a "nice fit" for the global direction China intended to take, having proven itself to Beijing already through the $2.6 billion Baha Mar project and Airport Gateway road enhancement, both of which are being financed by the state-owned Export-Import Bank of China.

Mr Andrew said further opportunities for the Bahamas would likely emerge once Beijing opened up its banking system, with this nation well-placed to act as a 'launching pad' for a variety of Chinese financial instruments to be placed in global financial markets.

Praising this nation for tackling major infrastructure needs, an area suffering globally from a lack of investment, Mr Andrew said the Bahamas had obtained a major competitive advantage by avoiding any "black mark against its name" when it came to the G-20/OECD-led tax transparency initiative.

Noting that the Bahamas had been "a little bit ahead" of the pack when it came to complying with evolving global financial services standards, Mr Andrew told Tribune Business: "Now, the challenge for the Bahamas is to make that known.

"This is not a sleepy Caribbean country. This is genuinely a sophisticated financial centre. It's important for the world to understand it's not a beach and golf course here, and that it has a strong judicial, regulatory and political system."

The KPMG International chair added: "I'm not sure the Bahamas is well understood outside the Bahamas. When you get here, you realise the integrity, the corporate governance reforms that have been put in place. The Bahamas has the capability to benefit enormously as an offshore centre."

Mr Andrew urged the Bahamas to "really target markets investors are looking for", naming Mexico and Brazil, in particular. The latter has been heavily targeted by the Bahamas Financial Services Board (BFSB) in recent years for promotional tours, with this nation focusing heavily on Latin America as a source market for new tourism and financial services business.

Referring to the two nations he had named, Mr Andrew told Tribune Business: "These are two countries where the Bahamas should have great opportunities to build inbound, outbound investment flows."

The Bahamas, with its strategic location and favourable tax/investment regime, has long been viewed as an ideal 'pass through' jurisdiction for investment funds flowing into other Western Hemisphere economies. Yet it has arguably failed to fully exploit this potential, the idea of striking bilateral investment treaties with other nations having been talked about since at least the 2002-2007 Christie-led PLP administration, but not really acted upon.

While seemingly backing the Bahamas' strategic focus on Latin America, Mr Andrew yesterday implied that it - and its fellow Caribbean nations - needed to develop fully-fledged relationships with emerging economies that were 'flavour of the month' for international investors.

"I think they have to have strong bilateral relationships with the key countries global investors have an interest in," Mr Andrew said, adding that the Bahamas had to be "conversant" with the investment flows and money managers directing them.

Global investors were looking to diversify risk concentration away from Europe and the US, Mr Andrew, hence the attractions of the likes of Brazil. International capital, he added, was looking for new products and markets "all the time".

Yet again, though, the KPMG International global chair warned that the Bahamas' marketing was crucial. "How you demonstrate the sophistication of countries like the Bahamas to the international community is critical," Mr Andrew told Tribune Business.

"It's a very competitive market out there, and you have to find your niche. Investment patterns are changing, which is good news for the Bahamas."

The continued opening-up of China's financial system would provide further "great opportunities" for the Bahamas, with this nation acting as a potential springboard for Chinese financial instruments to be launched into global markets, then traded, cleared and settled.

The Bahamas, Mr Andrew added, was "one of the few countries in this world that has demonstrated the ability to work with China in a consistent fashion".

Surprised at the already-high level of Chinese investment in the Bahamian economy, he said: "You're a very nice fit in terms of where they want to go as an economy. The fact they're already working in the Bahamas is a huge plus."

Chinese banks were poised to fill the "vacuum" left by European financial institutions, Mr Andrew added, with a secondary issue being "to what extent the Bahamas becomes a destination for Chinese tourists".

Baha Mar is already seeking to exploit its Chinese links on this score, and Mr Andrew told Tribune Business that Chinese tourists were the "fastest growing segment" of the market. They were known as high spenders, who rarely left resorts, preferring amenities such as gambling and entertainment.

"It's just the distance and getting them here efficiently," said the Hong Kong-based Mr Andrew. "It's not easy getting out of China. You need visas."

The correct travel documents and systems needed to be in place, he added, but the economic rewards for the Bahamas could be enormous - especially if this nation was able to attract the type of gamblers who frequented Macau.

"If you attract the big Chinese high rollers, it will drive the economy very quickly. These guys are serious players," Mr Andrew told Tribune Business.

With international investors seeking jurisdictions with high corporate governance and regulatory standards, Mr Andrew said the reforms implemented by the Bahamas to meet the OECD/G-20's tax information demands "could be a competitive advantage".

"All of a sudden it's a huge demand for small island states to comply with and meet these global standards," he explained. But if you hit those benchmarks you have a huge competitive advantage over those who can't, as you're more likely to attract significant investment.

"At the moment, I don't see a black mark against the Bahamas' name, unlike what the US is doing to Switzerland and other Caribbean nations. Those who kept relatively clean reputations are going to attract fund flows.

The KPMG Global head said he had been "impressed" by the Bahamas' infrastructure investment programme, especially the "size and scale" of the $409.5 million Lynden Pindling International Airport (LPIA) redevelopment.

He added that persons "can't helped but be impressed" when they viewed the various projects, plus the "sophistication" of a resort such as Atlantis.

Mr Andrew, though, noted that "lifting education standards" was going to be "critical" for services-based economies such as the Bahamas. But he added: "I think the Bahamas is on the right track in tackling all these priorities."