Jamaica wants to become the Caribbean’s next big investment magnet. Think about it and you’ll realise that’s not as unlikely as it might sound, says William Cash
IF THE LIKES of Panama, the Cayman Islands, St Kitts and the Turks and Caicos Islands can reinvent themselves as flourishing offshore tax havens, then why not Jamaica? This was the reason I was invited to Jamaica by its government to see how Kingston is attempting to turn around its tarnished image through the creation of an ambitious new International Financial Services Centre (IFSC) in the old port area of the capital (previously known as ‘Sin City’).
The idea is to turn the country, which already has a large financial-services and banking sector, into the new Liechtenstein of the Caribbean.
Exactly how the government was going to lure high-net-worths and major banks and law firms to choose Jamaica over, say, Bermuda (where crime is almost non-existent and people don’t bother locking their doors at night) was why I was invited to dinner on my second day in the country by Ed Bartlett, Jamaica’s charismatic and flamboyantly dressed minister for tourism.
I had already been waiting twenty minutes for the minister at a restaurant bar in Montego Bay when his PA called. ‘Very sorry, Mr Cash, but the minister has been unable to get a reservation tonight at the Sugar Mill restaurant. Could you please meet him instead at the Three Palms restaurant at Rose Hall? It’s not far away. So sorry.’
It’s always an encouraging sign of the state of a country’s economic prosperity when the minister of tourism cannot even get a table at one of Montego Bay’s best restaurants. Montego Bay, located on the north-west coast, is the new heartland not only of Jamaica’s high-end tourism industry, with luxury hotels and casinos being built there, but also of prime new real estate.
The minister is hoping this will attract the high-net-worth ‘tax-conscious rich’ to Jamaica, just as the country did before the war and until the early Sixties, when the likes of Ian Fleming, Noël Coward, Errol Flynn and a small army of millionaires and celebrities regarded Jamaica (in particular the Port Antonio coastline to the south of the island) as Mustique or St Barths is today.
For the Jamaican tourism minister to travel out to Montego Bay — a 3½-hour drive from Kingston — to have dinner with me is illustrative of just how serious Jamaica is taking this decision to turn itself into a new Caribbean financial-services capital.
Jamaica is really several different countries. On the one hand there is the beautiful tropical scenery, the dramatic coastlines, spectacular beaches and restaurants and the genuine friendliness of the people. On the Saturday of my visit I attended the final of the Jamaican Open at the Kingston Polo Club.
It was sponsored by the Scotia Private Client Group, a new wealth-management division (started up last October) of the Scotiabank Group — one of the oldest banks in Jamaica, with a history going back 120 years — specifically designed to target the needs of the new breed of HNW that the government is hoping to attract. In the official programme, much was made of links between the Kingston Polo Club and visiting English royalty, including the time Prince Charles played in Jamaica in 1966. This is precisely the sort of image that Jamaica is trying to present.
The darker side to Jamaica is the drug gangland ghettos around Kingston, and the resultant murder rate. Jamaicans are almost impossibly laid back and casual, and that includes an almost tragicomic attitude towards life and death.
MY DRIVE OUT to Montego Bay from Kingston perfectly illustrated the challenge that lies ahead for the Jamaican government. Throughout the journey, my driver insisted on texting his girlfriend and booking rides with another phone clamped to his ear while driving the car with two fingers on the wheel as we sped along a potholed wasteland of a highway, past endless shacks, goat runs, fried chicken and jerk pork stands and innumerable half-finished concrete buildings with exposed steel beams that had long since rusted.
When I asked the driver why there were so many half-completed buildings, he said: ‘Mainly drug people who have got busted,’ before adding: ‘We kill ourselves, never tourists or white business people. It’s not so much that life is cheap — more we like to take risks. We’re casual. Sometimes too casual.’
By the time we reached Montego Bay, the wasteland had become a palm tree-lined highway decorated with manicured lawns and huge gated entrances leading into luxurious golf courses and gated communities. We could easily have been in Florida (just 550 miles to the north). Montego Bay’s airport — called Sangster International Airport, named after the former Jamaican prime minister — is one of the recent success stories of Jamaica, after over US$200 million was spent to make it one of the sleekest and most modern in the Caribbean. The airport, which can handle 9 million passengers a year, is a gateway to the US, South America and Europe.
There are several daily flights to London (currently BA business-class is flying in old first-class cabins) and New York and the airport also boasts probably the most luxurious private jet terminal in the Caribbean. ‘And we are currently building another private jet terminal inland,’ Ed Bartlett added. ‘We want to make getting in and out of Jamaica as easy as flying from London to Switzerland or Monaco.
JAMAICA IS WELL-POSITIONED to transform itself economically. As with much of Asia, most Caribbean countries were not heavily hit in 2008/9 by the global credit crunch. Jamaica’s financial sector was even better positioned than most, because reform and regulation were already in place as a result of the country’s own major banking crisis in the mid-Nineties, which resulted in the government taking over many banks (and seizing property and hotels that had been used as security) and various fraud prosecutions being brought against the owners of financial institutions who took advantage of lax regulation that allowed for almost anybody to get a licence to start up a bank or mortgage company.
The country now has financial regulation in place and is generally stable politically. As a result, despite the global recession and tourist numbers being hit, the country is benefiting from a luxury real-estate boom. In the south, a $50 million property and hotel development is just being finished by former Island Records owner and now Island Outpost Property entrepreneur Chris Blackwell at his Goldeneye resort (which houses the old villa of Ian Fleming, which Blackwell also owns), located in Oracabessa, St Mary. Reopening this October, the Goldeneye is a luxurious compound of private villas with private beaches and ‘spectacular tropical gardens’, which they hope will appeal to today’s island-hopping jet-set crowd who want something more intimate than the St Tropez atmosphere of St Barths.
Financed by the Development Bank of Jamaica (DBJ), and endorsed by PM Bruce Golding, the development has built eleven one- and two-bedroom classic ‘Caribbean cottages’ — a perfect romantic retreat for the HNW who needs a domiciled offshore address in Jamaica under its new HNW-friendly tax system — on Low Cay Beach, a 500ft-long crescent-shaped beach that belongs in a Bond novel. Designed by award-winning architect Ann Hodges, the luxury cottages range from $900,000 to $1.5 million.
But by far the most ambitious and impressive of all the new real-estate projects in Jamaica designed to appeal to the HNW is unquestionably the Palmyra, next to the Ritz-Carlton hotel in Montego Bay. It has been built by the legendary American property tycoon Bob Trotta, who made his fortune from timeshare apartments across the world. Trotta showed me around the vast luxury complex himself, and as we stood on the balcony of a (pre-sold) $3.5 million penthouse apartment looking out across the ocean, it felt as if we were looking around a luxury waterfront condo in South Beach, Miami.
It was only when I looked down from the high-rise balcony and saw a man with a wheelbarrow carving, with a spade, the name ‘Palmyra’ into the sandy beach beside the swimming pool below that I remembered I was in Jamaica. ‘It’s all about detail,’ said Trotta when I pointed to the letter carving in the sand. ‘I get him to carve the name in the sand every morning so it always looks perfect.’
Built in the British Colonial architectural style on sixteen acres of prime waterfront beach land property, the sprawling and stunning Palmyra boasts a private members’ club designed by Trotta himself (with pool tables, a Ralph Lauren-style bar and a library), a private spa created by Espa founder Susan Harmsworth and access to three of the Caribbean’s top golf courses. Prices for the condos start from around $450,000 and go up to $3.5 million for the penthouses and private villas.
TROTTA IS A big fan of Jamaica, where he lives for much of the year. He wears a chunky gold Bulgari watch, sharply pressed beige trousers and a black T-shirt. He is a perfect example of the sort of ultra-high-net-worth global business figure that Jamaica is now attracting and is also actively supporting Jamaica’s mission to reinvent itself, creating competition for other Caribbean offshore centres.
‘Why does Cayman have 10,000 registered banks and not Jamaica?’ Trotta said as we sat down for a coffee in the executive lounge area. ‘I am sure when the government changes the legislation to encourage banks to come here, you will see hundreds of financial institutions coming here.
‘There is a unique lifestyle to be enjoyed here; it’s romantic and such a delightful place to live,’ he adds. ‘This is a rich man’s resort. I’m a real-estate developer but I’m also — here — in the tourism business. You have to look at the numbers. You need to look at the airport “lift”. There are 300 direct flights a week into Montego Bay airport, making it one of the easiest in the world to get to from US cities east of the Mississippi. It was when I heard there was a Ritz-Carlton hotel next door that I first became interested in looking at this development.’
Standing on the first tee of the famous White Witch golf course opposite the Palmyra the next morning, I looked at the first hole — and the ocean behind — and began to see what Trotta was talking about. Behind me was my ‘caddy concierge’, a local girl in a yellow uniform and white sneakers who ran the whole way round behind the buggy, solely to advise on distance to the hole, or (invariably) to find the ball when it landed in the rough. Dotted around the White Witch course were villas selling for around $4 million; after every few holes, another buggy drove up to us and sold us cold drinks and snacks — a sort of mobile minibar. I felt like I was in Bermuda or the Fiji islands.
WHY, I ASKED the minister over dinner, would any HNWs want to choose Jamaica as a place to park their assets and cash when they could choose nearby Cayman, which does not have income tax, capital-gains tax or inheritance tax and has one of the lowest crime rates in the world?
Bartlett’s answer that ‘most of Jamaica is as safe as Switzerland for tourists and business travellers’ came as a surprise to me, but after nearly a week travelling around without any security problems at all, I came to understand his point of view. ‘The trouble is the media always only focus on the gangland problems of Kingston and they don’t realise that the rest of Jamaica actually has a lower crime rate than Antigua or Barbados. There is hardly any crime towards tourists or white people.’
This is a fair comment. The minister added that legislation currently being passed would allow HNWs to open offshore bank accounts in Jamaica for the first time so that they can get all the tax benefits currently offered by the likes of the Cayman Islands and the British Virgin Islands. ‘We’re also going to make it much easier to register large boats and super-yachts here in Jamaica for the first time,’ he added. Again, this seems designed to take business away from Jamaica’s great rival and neighbour, the Cayman Islands.
Jamaica might just be fortunate with its timing. With the stolen client list banking scandals that have now caused onerous tax treaties to be established between countries like the UK and Liechtenstein, many tax-conscious HNWs are now actively seeking new offshore opportunities, especially if the country also offers residential and lifestyle attractions.
Americans in particular are finding it almost impossible to open bank accounts with many Swiss banks who simply do not want the worry of the American tax authorities demanding to see their client lists. The new EU-led regime of Tax Terror on HNWs has created a competitive new environment for offshore players emerging, with Singapore and even Western Samoa now being favoured by the super-rich today over Switzerland and Monte Carlo.
Making Jamaica a centre for offshore banking and HNW bank accounts could very well work as a strategy. Jamaica has a much better (and better-developed) onshore banking infrastructure than probably anywhere else in the Caribbean, boasting its own stock exchange and hundreds of financial-services firms.
The key, as the government has been sensible enough to acknowledge, is creating a niche offshore financial centre opportunity that offers something different from — and better value than — what is already available to the tax-conscious HNW, bank or corporation. The truth is that for too many years Jamaica has let the opportunity to compete as an offshore centre go to waste because the country has been too preoccupied with its internal political and economic problems, most of them connected to drug trafficking and the way that historically the government has been afraid, or unable, to control the drug lords because of the power they held over local politicians.
ONE PROBLEM THAT needs fixing is that Jamaica does not have a good track record with the interests of entrepreneurs and HNWs. The new plans to create a financial centre and encourage banks and HNWs to come to Jamaica is a complete reversal of the historic position of the government. In the 1970s, the Jamaican economy became so weakened — partly as a result of foreign currency exchange controls introduced after independence in 1962 — that nobody could own foreign currency without permission.
As a result the Jamaican dollar lost 99 per cent of its value and hard-working Jamaicans, or HNW expats living in the country, were forced to resort to dramatic methods to prevent their hard-earned cash becoming almost worthless.
As Charles Adams, a Caribbean tax historian, relates in his study of the Jamaican economy, things got so bad in the Seventies and Eighties that — rather like in Italy, where HNWs and industrialists all moved their money to Switzerland or Liechtenstein for fear of it being seized or frozen by the government — small, single-engine Cessna planes loaded up with fat bundles of Jamaican dollars could be seen on a daily basis (they were known locally as ‘The Jamaican Shuttle’) flying to the Cayman Islands.
The cash was picked up in Jamaica and flown the 250 miles to where the money was converted to other currencies. ‘This exodus was so extensive that the banks in Jamaica ran out of currency and had to make frantic calls to their sister banks in the Cayman Islands to return the currency,’ observed Adams. ‘I think you could call the Jamaica Shuttle justifiable money laundering.’
‘Money laundering’ is now exactly what the Jamaican government is anxious not to be seen as encouraging in any way. The problem is that while Jamaica was tearing itself apart, the Cayman Islands (and it should be remembered that when Jamaica was a British colony, it was the Crown dependency of Jamaica and the Cayman Islands) were quietly and discreetly creating a near-monopoly on being the offshore centre of choice to the American and European hedge-fund industry.
There are some people who think this has led to an opportunity for Jamaica to step forward now. The Cayman Islands are very small and still remain very much a niche player in the offshore world; Jamaica has much more financial scale.
The Cayman authorities — like those in Bermuda — are so keen not to remain on any OECD blacklist that, contrary to popular opinion, they now have extensive tax treaties in place and will co-operate with the sharing of tax and financial information if they are approached by any country with an enquiry, about tax or other financial probe. It is certainly not the case that Cayman is the best place for old-fashioned Swiss-style anonymous banking. In addition, to set up a corporation or trust is far from cheap.
TALKING TO FINANCIAL officials in Jamaica, one gets the feeling that the opportunity the government sees for Jamaica as an offshore centre is a little different. ‘The IFC has been conceptualised to operate in a profoundly different manner, owing to its fundamentally different nature and character,’ Audley Shaw, Jamaica’s finance minister, said. ‘The centre will serve as an outlet facilitating offshore offices and services, in addition to the outsourcing of different aspects of financial services.’
Another factor Shaw singled out that was likely to appeal to HNWs and financial institutions thinking of using Jamaica as an offshore financial centre is that — despite political independence — Queen Elizabeth II remains the official head of state, with the country’s final Court of Appeal still being the Privy Council in the UK. So there is a tradition of rule of law in place. In the last resort, any legal case can be settled in London.
In June 2009, $100 million was put aside in the Jamaican budget to establish the IFC. In May this year, Karl Samuda, the minister of industry, investment and commerce, announced that the country was pushing ahead with its plans and that the financial-services sector was a priority for development. The bill promoting the new financial measures seeking to lure HNW business to Jamaica would be passed early in the 2010/11 fiscal year.
Interestingly, the minister also confirmed that there would be a comprehensive review of all existing double taxation treaties. Samuda said the government would be looking at whether they need to be renegotiated to make the proposition of the new financial centre more attractive.
‘Renegotiated’ here sounds like an excuse for Jamaica possibly positioning itself on the ‘grey’ list — where Panama sits — relating to offshore transparency that the Organisation for Economic Co-operation and Development notoriously published at the time of the G20 summit in London, with a promise to clamp down on offending tax havens. The OECD argued that tax havens were essentially a licensed form of financial fraud, sloshing around with laundered money, tax evaders and criminals and that the 21st century had no place for such business.
The truth is there will always be certain HNWs who prefer to have less transparency than more, and if the Caymans, Bermuda and the like are determined to implement their tax treaties, then there will always be a market for those who prefer to put their clients’ interests and privacy first.
IT IS AN ambitious plan, but optimism — and being laid back — is at the heart of the Jamaican psyche. As I drove around the country, from coast to coast, I kept seeing huge adverts repeating the national catchphrase ‘Jamaica — no problem’. Even when I arrived at the White Witch golf club, the fact that I had no golf kit with me was certainly not an issue. ‘No Clubs, No Shirt, No Shoes, No Problem,’ a sign stated in the pro shop.
Shortly after I returned to London, Jamaica’s reputation hit a low point with the police’s bloody assault on the Kingston gangland ‘hood’ of Tivoli Gardens, where Christopher ‘Dudus’ Coke was holed up trying to resist extradition to the US, where he faced drug-dealing and weapons charges. His eventual arrest and extradition send out exactly the right message to the world — that Jamaica is cleaning up its act and that its economy does not have to rely on money laundering and drug trafficking to survive.
BA operates flights twice a week from London Gatwick to Kingston and Montego Bay; a Club World flight is £1,502.
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Illustration by Anna-Louise Felstead