Diversification could cure our addiction to IB

There was a time when men were kind

When their voices were soft

And their words inviting

There was a time when love was blind

And the world was a song

And the song was exciting

There was a time

Then it all went wrong

— Les Miserables

Previously we discussed the impending economic challenges that Bermuda is now facing: Outside forces that neither politics nor business can avert from happening.

For lack of a better phrase, we allowed Bermuda to become “Addicted to IB” and you know what happens to addicts. They do anything to maintain their fix. It is time to detox, Bermuda. Otherwise our dependant addiction to IB will surely kill us. 

The PLP 2012 election platform contained the beginning stages of Plan D. That being Diversification of Bermuda’s economy. 

Reaganomics

At a recent budget breakfast, when asked about diversification of the Bermudian economy, Finance Minister Bob Richards stated the OBA philosophy is that Bermuda is an undiversified economy because we do what we are “good at”. He dismissed the ratings agencies’ views that Bermuda needed to diversify its economy and said that the OBA would focus on IB’s financial sector and investment management in particular. 

He seemed to be banking on insurance linked securities (ILS) being the economic saviour to enliven our financial IB sector. It sounded like a return to the days of trickle-down economics aka “Reaganomics 101 meets Thatcherism 101”. Mr Richards  linked this to more house sales to international buyers and construction sector growth as a result.

‘We are only 22 square miles’

There has always been a demand from international buyers for Bermuda’s limited land mass. So it follows that these buyers are not necessarily linked to IB. They merely wish to invest in our 22-square-mile rock. A rock which should not sell its heritage and hopes of future generations of Bermudians down the river of OBA dreams called “De Nile”.

At a time when many Bermudians are financially unable to access the housing market, the OBA have decided to make it easier to sell our children’s future homes, to overseas buyers. 

We see no way in which this can ever be considered a benefit to the wider Bermudian population. It can only really benefit the owners selling that property. Hence the rich get richer while the poor get poorer. And so the old Bermuda Company has returned to power to make its majority shareholders ultra rich.

Eyes wide shut

These options steer us away from Plan D. So let us set the record straight and be aware, with eyes open, of the direction that the OBA is proposing for us.

The OBA says that insurance is growing globally, so the decline of insurance in Bermuda must be “home grown” by the PLP and term limit legislation. Yet as you now know, the challenges facing IB that were mentioned in previous articles have essentially been because of external global factors which would not impact global growth, but has caused IB in Bermuda to falter.

The biggest impact has come from outsourcing, which has meant a significant reduction in the number of Bermudians and international workers employed in an administrative or back office capacity for our insurance sector.

This has been compounded by Bermuda’s hospitality sector continuing to decline. Our leisure based tourism cannot compete with the price driven package holidays, being offered in less expensive countries. Example: a hotel room is $300 per night here. Compare that with $100 per night, food all inclusive in the Caribbean. Do the maths.

Eyes wide open

The PLP saw the direction IB and the economy were heading in. Hence we started Plan D, putting in place policies to diversify our economy. Hence giving Bermudians the opportunity to expand into new sectors.

There are essentially only two ways for Bermudians to conduct business internationally and to bring in foreign revenues that we need to grow. That is for people to bring it in by plane or for it to be conducted through our globally connected telecommunications infrastructure. 

It was and remains clear, that for Bermudians to continue to be successful in international business, across all sectors, we need to start the diversification with the telecommunications and travel sectors.

Fellow Bermudians, like you, I love our 22 square miles, without apology. We must work together to reinvent new paths forward for all to participate in equally. No longer can one class have all, whilst the others beg for survival. Next week I will go into more detail about Plan D. 

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