Islands Business - Business Intelligence

Compliance stifles small states' financial centres

A Commonwealth Secretariat study is saying that small countries like Vanuatu, Barbados and others such as Mauritius are finding compliance costs substantially outweighing any benefit to their reputation as international financial centres.

Port Vila... Vanuatu's capital. It is finding that compliance costs outweigh any benefit to its reputation as a financial centre.

Using Vanuatu, Barbados and Mauritius as case studies, the report, said, "In the three international finance centres under consideration, the costs of meeting new multilateral regulatory standards have exceeded the short-to-medium term benefits for both the public and private sectors."

The report entitled, "Developmental Implications of Anti-Money Laundering and Taxation Regulations" reveals that offshore centres have lost business in spite of improving their reputations by complying with standards drawn up by the Organisation for Economic Co-operation and Development (OECD) and the inter-governmental Financial Action Task Force (FATF).

According to the study, "increased public revenue of these three developing island jurisdictions has been diverted toward regulating their international financial services sectors.

"The majority of private firms and banks operating in international financial services sectors in these states have experienced a significant increase in compliance costs, in some cases sufficient to threaten their future business viability".

Richard Hay, co-chair of the International Committee of the Society of Trust and Estate Practitioners, commented that small countries' offshore centres are suffering from disproportionate compliance costs and are gaining little advantage from being good global citizens.

The OECD has said that, in return for compliance, small countries will be able to participate in global financial services on a 'level playing field', yet this is not happening. They are not getting the recognition their compliance merits.

"Indeed, small states are actually losing business to offshore centres in large countries that won't raise their own standards. For example, as the Financial Action Task Force (FATF) reported last July that virtually every US State still permits tax-free companies with secret ownership. The FATF revealed that US service providers have successfully lobbied against raising standards, while Delaware actively promotes itself as more secretive than the so-called offshore centres.

"If the efforts to raise standards are to succeed, these must apply evenly to large and small countries. Dominant countries, including those in the Commonwealth, must also share market access opportunities with those small states that meet higher standards." -From the Barbados Advocate

Fiji to Benefit from GSP extension

Fiji exports to the US will benefit greatly from the very recent decision of the US congress to extend the generalised system of preferences (GSP) by another two years with effect from January 1, 2007. The GSP programme exempts qualified exports from import duties in the US. Four of Fiji's principal exports to the States: Fiji water, fish, sugar and molasses, benefit from the GSP programme which was due to expire at the end of 2006. In terms of value, US$59.4 million or 35% of total US exports in 2005 benefited from GSP.

Grow more food: Cooks urged

Cook Islanders have been urged to grow more food to meet increased local demand due to the growth in tourism. A Cook Islands media said the call came in the Ministry of Agriculture's annual report, which was tabled in Parliament.

US$307m payout

The Nuclear Claims Tribunal has awarded more than US$307 million to a group of islanders dusted with fallout from America's biggest hydrogen bomb test in the Pacific, a Radio New Zealand International report said. But with the Majuro-based Tribunal's nuclear investment trust fund virtually exhausted, islanders from Utrik Atoll will not receive any of this compensation award unless the United States government does an about face and agrees to provide additional funds. The Tribunal's award for Utrik Atoll comes as islanders from Bikini and Enewetak atolls seek to convince a US Federal Court of Claims judge to hear their billion-dollar lawsuits despite a US Justice Department motion to dismiss the court cases. Bikini and Enewetak were the ground zeroes of 67 nuclear tests between 1946 and 1958.

VT280m for Vanuatu tourism school

The European Union (EU) has approved VT280 million for the consolidation of a new school of tourism at Vanuatu Institute of Technology (VIT). In discussions with the European Union Commission, the government of Vanuatu stressed the role of the productive sectors in the promotion of economic growth and the creation of employment, an essential component of a poverty reduction strategy. The Chargé d'affaires of EU in Vanuatu, Nicolas Berlanga Martinez says the opening of the school of tourism and hospitality in Port Vila in February is the main institutional response from the government to this challenge.

$F400m loss to Fiji tourism

Fiji's tourism association says the country stands to lose an estimated F$400 million (US$239 million) in foreign exchange as a result of the military takeover. Fiji Islands Hotel and Tourism Association's chief executive Mereani Korovavala said most hotels had a 17-20 percent drop in occupancy rate.

The loss of jobs has increased dramatically and more job losses are expected in the coming months, she said.

Habib bank no more

It's official...Bank South Pacific (BSP) has taken over the operations of Habib Bank in Suva, Fiji. Governor of Fiji's Reserve Bank Savenaca Narube said BSP's presence in his country should strengthen trade relations between the two countries and increase competition for banking services and products.

Japan helps Nauru with fuel bill

By Dionisia Tabureguci

Japan provided temporary relief to Nauru's import bills with a signing last month of US$846,968 in non-project grant aid.

It is a deal... Nauru's foreign and trade minister David Adeang signing a memorandum of undertanding with Japan's ambassador to Nauru, Masashi Namekawa.

Japan is among donor countries financially helping Nauru with its import bills following the island state's economic regression over the years as its Nauru Phosphate Royalties Trust (NPRT) succumbed to poor business management practices and bad investment decisions.

Since the gradual meltdown that followed, Nauru had been through a colourful period of comeback attempts, one of which saw it become a tax haven linked to the Russian mafia.

Now back on track with a steady government and a reform programme, Nauru depends, in a big way on historical partner Australia as well as Taiwan and Japan which help channel needed funds into the economy either directly or via aid packages.

In a quiet ceremony last month, Japan through its Suva-based embassy signed and exchanged notes with the Nauru Government which formalised Japan's non-project grant aid to Nauru for what it said would be the promotion of the island republic's economic reforms.

Said Masashi Namekawa, Japan's ambassador to Nauru: "In recent times, the Government of the Republic of Nauru has been facing difficulties in importing crucial products in its effort to promote economic and structural adjustment. In view of the difficulties faced, Nauru made a formal request to Japan to provide assistance.

"In realising Nauru's importance and the difficulties which Nauru's people and their government are facing, Japan decided to provide the assistance through its non project grant aid. This assistance is primarily targeted to ensure Nauru will be able to fund imports of mineral fuels and other necessary products for the promotion of economic and structural reforms without significant impact on government's current budgetary allocation for development of important sectors such as education and health."

Mindful of Nauru's history with its resources, Ambassador Namekawa said Japan hopes the funds would be used wisely to achieve targeted benefits.

"It is anticipated that as a result of this funding the Government of Nauru will be relieved of the pressure to procure necessary imports and hence, will be able to boost its efforts in the implementation of economic and structural reforms.

"With the grant, it is expected the Government of the Republic of Nauru could find the way to better adjust its economy to the changing international economic circumstances," he added.

For the Nauru Government, the assistance has been welcomed as a boon in difficult times.

"The agreement gives Nauru critical support in the provision of fuel and, given the state of our finances and the cost of fuel nowadays, it is especially valuable for us as we continue to restructure essential services," said Nauru's Minister of Foreign Affairs and Trade, David Adeang in an interview with ISLANDS BUSINESS.

Adeang said the assistance would help the country buy its fuel needs for the next two months. He stressed the cost of importing fuel has put undue pressure on an economy that is already trying to recover from past mismanagement of resources.

Once a phosphate powerhouse of the Pacific, Nauru fell into economic disrepair when its Nauru Phosphate Royalties Trust-created in 1968 to invest royalties received from the country's exports-staggered under mismanagement and drove the country to the brink of bankruptcy in 1999.