There is more potential for the offshore banking sector to impact the growth of The Bahamian economy, but with the current monetary restrictions, the potential scope of this impact has been reduced said a financial expert.
Winston Cox, Deputy Secretary General of the Commonwealth Secretariat believes increased market access in the sector will create more jobs, contribute substantially to government revenue, and will have what he termed as other “immeasurable spin off benefits through the multiplier effect”.
One of the important benefits arising from increased offshore bank presence is the creation of jobs for domestic professionals,” Mr Cox said during a presentation at the Nassau Conference last week. “While offshore banks are generally not labour intensive, they have still proved to be an important source of employment for Bahamian professionals.”
Out of over 6,000 jobs available in the financial services sector in 2004, approximately 4,366 professionals were employed in the Bahamian banking sector Mr Cox pointed out.
“Offshore banks provided 1,114 of these jobs of which 80 per cent were held by Bahamian citizens,” he added.
There has been a decline in offshore bank employment over the last six years however due to a decline in the number of banks following the ‘know your customer rules’ legislation implemented in 2001.
Further, Mr Cox said that the level of revenue the government generates from the offshore sector is a measurable indicator of its contributions to the Bahamian economy.
Based on Central Bank statistics, “These bank charges have been historically set at a low and competitive level by the government of The Bahamas, demonstrated by the fact that over the financial years 1999/2000 – 2003/2004, government revenue from offshore centres has averaged around just 1.5 per cent,” said Mr Cox.
He said such a low contribution to government revenue from the sector leaves room for fee increases in the future. However, he advised that the government should not depend on the sector as a stable source of revenue which has the potential to be “erratic and risky”.
Mr Cox also said some of the spin-off effects included potential for increased productivity of domestic banks, as well as knowledge and technological transfers.
He did indicate however that these were more difficult to measure.
“The costs of hosting offshore banks currently remain low, though as a result of increased international pressure, regulatory costs may become significant in the future,” said Mr Cox.
By: BARRY WILLIAMS, The Nassau Guardian
