Bermuda at inflection point’
Bermuda’s place in the world today is less predictable than the geopolitical shifts taking place among the global order, and rising nationalism and populism overseas.
It is a paradoxical situation because, while the somewhat unsettling changes around the world, from the US to Europe and China, are viewed at a high level as predictable, their ultimate impact on Bermuda is much more of a guessing game.
That unpredictability is not necessarily a bad thing, but the island needs to make wise, strategic long-term decisions, while businesses here should increase resilience and be prepared to be held accountable by those beyond Bermuda’s shores.
The EU blacklist Bermuda is on, and economic substance requirements, were prominent considerations of Andrew Mantilia when he was asked by The Royal Gazette about where the island fits in today’s world.
“Bermuda is at an inflection point, where its size is both a liability and a strength. The way that Bermuda has grown is today dramatically under threat,” he said.
Mr Mantilia is KPMG’s global geopolitics leader, and is involved with the Eurasia Group Partnership. He he spoke about the key areas of change and risk around the world during a visit to the island.
He said the top risks are “bad seeds” being sowed that will cause problems in the future. Among them is the US withdrawing from its unofficial role as the world’s policeman; the rise of nationalism and populism movements; a lack of global alliance leadership, coupled with more bilateral negotiations focused on economics rather than peace and prosperity; and the changing balance of power between the US and China.
Explaining why those concerns matter in the greater scheme of things, Mr Mantilia said: “While the wheels are not going to come off this year in terms of the global order as we know it, we are making significant decisions that over the long-term are potentially going to set us up for less resilience for the next great recession, or September 11 terrorist attacks, where, generally speaking, the world came together.”
So where does this leave Bermuda?
Mr Mantilia said: “Regardless of the proposition Bermuda is pushing, it will continue to be lumped together with Cayman and British Virgin Islands, and UAE, who are viewed as small economic hubs where people go to do business and have holding companies, etc.
“That narrative is not set up well for people around the world who feel like they have been left behind and that a lot of the growth and wealth has gone to the elites.”
He said on top of this are the large technology companies under pressure in Europe for taking tax revenue away from the places where it is generated.
Mr Mantilia did not mention any names, but one example is Google, which moved $22.7 billion through a Dutch company to Bermuda in 2017. The tax strategy is legal, but has been criticised, particularly as the tech giant has only a post office box presence on the island.
According to Mr Mantilia, the island is at an inflection point because “if Bermuda is prepared to make strategic long-term decisions and focus on the high quality, skilled labour, the high quality of life here, business could potentially be focused on how Bermuda fits into the world.
“But right now, Bermuda unfortunately is lumped together [with others] with perhaps poor perceptions”.
For businesses, he said things like regulation and the pressure on companies focused on holding companies and tax efficiencies, are threats that are not going away and “will only increase”.
He suggested businesses make decisions to increase resilience and protect themselves and be prepared to be held accountable to regulations, perceptions, and to citizens, including those of other countries.
Mr Mantilia also recommended businesses don’t put all their eggs in one basket, but diversify across five or six regions and economic hubs.
When asked if the world was more unpredictable than it had been in the past, he said: “At a very high level it is very predictable. All the nationalist and populist movements that we are seeing weren’t created overnight. We may pick on a few individual politicians at any given time, but they did not create these movements, they were empowered by these grass roots movements — by people who felt they had been left behind.
“People are tired of all this economic growth making super-billionaires. They feel their income and jobs are more and more at risk, they see the cost of living go up, the cost of food go up, healthcare has not been improving — and at the same time they see the stock markets rising, and one can only predict that that is going to increase.”
However, he said unpredictability exists at smaller levels, an example being whether or not Bermuda is removed, on May 17, from the EU’s list of countries deemed to be noncooperative on tax matters.
“Those things are much more difficult to predict. What happens in the long-term future with countries and island nations, like Bermuda, is very difficult to predict,” Mr Mantilia said.
“But one can safely assume that the pressure and the spotlight is only going to increase.”
Mr Mantilia visited the island last week and was the guest speaker at the Bermuda Chamber of Commerce’s annual meeting.
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