WEDNESDAY, JUNE 27: Bermuda has to do a better job of thinking globally if it is to remain competitive.
This from two leading business figures, Peter Everson and Cheryl Packwood.
Mr Everson, owner of PE Consultants Limited, co-chair of the Chamber of Commerce Economics Committee and former CEO of Schroders (Bermuda), said the island is in the throes of both cyclical and structural changes.
It is illustrated by the movement of JP Morgan’s business to the US.
Mr Everson said: “If everything leaves Bermuda and goes back to the States, it’s a setback for Bermuda.
“The Government is trying to bring new business here, but the most important thing is to keep all the current business because it’s always difficult and expensive to find new business.”
Mr Everson said like all firms, JPM have to look at the bottom line and what is going to provide the company with the biggest profit margins.
‘This [example] essentially underlines that Bermuda is in global competition to try to retain jobs here, let alone bring new jobs in. Bermuda has to be globally competitive to win.”
His views are echoed in part by Ms Packwood, who says we must not only hold on to what we do well, but to reinvent the way we do things.
Mr Everson said keeping jobs in Bermuda is both a Government and a private sector responsibility, with businesses responsible for their own cost structures and government responsible for infrastructure costs. He pointed out that all governments are finding it difficult to provide a high level of service to the taxpayer and keep the level of taxes low enough for them to be acceptable.
“That’s a difficult judgment call and all politicians have to juggle that.
“The problem in Bermuda is the costs of Government have increased through payroll tax and health costs. The costs advantage Bermuda had over the US 15 years ago is gone.”
He said this is borne out by businesses moving to the US or Canada from the island.
Government Senator David Burt complained recently about businesses who remain on island but outsource jobs to other parts of the world, at the expense of local jobs,
But Mr Everson said this needed to happen to help some businesses remain competitive on a global level: “We have reliable data communications globally and companies can move jobs to places where labour costs are lower or there is a bigger volume of business.”
He said the accounting function does not have to be done in Bermuda as “the books are in electronic form and can be done anywhere on the planet. The actual accounting staff can be in Manila, Guatemala, Halifax or any number of spots.
“That is where the world has changed and Bermuda’s business is changing, but we have to figure out how we can compete and provide services from Bermuda that the clients want to buy that make a profit for Bermuda.
“To be competitive, we have to be lean and mean on our own cost basis, then figure out what services we can sell to customers that they value highly enough that they’ll pay us for it.”
Ms Packwood, CEO of Business Bermuda, said while things are may have hit a bump in the road, she doesn’t see it as all doom and gloom: “If we take lessons from other countries, they have very much focused on what they do best. What we do best is insurance, reinsurance and captives.”
She agrees with Mr Everson that the Bermuda model has worked for years, “but in this changing and more competitive environment that we’re in today, we need to think differently than how we’ve thought.
“We need to look at all our legislation and look at the needs of the rest of the world in terms of the business sector.
“We can change regulations and legislation for the sake of change, but if it’s not going to do any good or bring in any business or stifle business, then there’s no point in making those changes.”
She said it was key to think beyond our 21 square miles: “We need to look at ourselves in the global context.”
She added that too often, Bermuda gets caught up with things that don’t actually have to do with bringing business to Bermuda, like being nice.
“Yes, we want to be nice, but business doesn’t want nice, they want efficiency; they want certainty; they want cost effectiveness.”
On Bermuda’s tax structure, she said: “Ours is lower than what’s going on in the US or Europe. What makes it expensive is the cost of doing business here.
“If it’s going to be costly to do business here, then we have to provide value for that cost. Right now we’re not providing that value for cost, which is why we’re seeing someone like JP Morgan and other companies leaving.
“The insurance and reinsurance sector is seeing that value for cost for doing business here but other sectors are not seeing that cost for value.”
She said hedge fund administrators may move their business back to the US or Canada even though taxes may be higher because its cheaper to rent office space and hire staff then Bermuda.
“There’s nothing they are getting out of Bermuda.”
Ms Packwood added: “We need to look at ourselves — things such as how high we build buildings or land reclamation. All of these issues that are stifling us as an island is what is going to stop us from growing and being successful.
“We need to think bigger and beyond 21 square miles. We need to look at what’s really going to attract people and business to our island. What is going to make people want to come here over going anywhere else in the world?
“If we stay at sea level and the land mass that is there, we are only going to be just so successful, if not lose what we have.”
She said businesses can locate anywhere in the world so we have to make Bermuda a more attractive jurisdiction than the Bahamas or Switzerland or anywhere else. “We need to come up with a real strategy. It’s not about building four hotels, it’s what is going to bring those people here to put them in those four hotels.”