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‘I’m hoping for a flat year in 2013. I can’t promise you growth’

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Richards: Bermuda was swimming naked when the economic tide went out

By Scott Neil

Bermuda was caught swimming naked when the economic tide went out in 2008, Finance Minister Bob Richards told conference delegates yesterday.

Speaking at the Capital G Private Wealth Conference, at the Fairmont Southampton, Mr Richards said a change in attitude to international business, government complacency and a build-up of red tape were factors in the Island’s economic slide over the past five years.

Acknowledging the previously held view that Bermuda for many decades enjoyed a “miracle economy”, seemingly able to avoid the turmoil of ups and downs in the global economy, Mr Richards said that came to an end five years ago when the world economy took a dive.

Mr Richards explained: “We found ourselves in a situation that we were not accustomed to.

“The miracle economy had become the norm for us, now all of a sudden we seem to be suffering the effects that the rest of the world are experiencing.

“A quote from a famous investor comes to mind, Warren Buffett said, ‘It’s only when the tide goes out that you find out who has been swimming naked’.

“The tide went out in 2008 and it was clear that Bermuda was swimming naked.”

Mr Richards continued: “The growth in the rest of the world had covered up our lack of clothing for a long time.

“At the turn of the millennium our economy went into overdrive and became overheated. People accepted that as the new norm, and it wasn’t.

“There was construction — everything was being built at the same time, our roads were choked, our schools were overcrowded. We had too much going for us.

“Costs rose, attitudes changed and government became complacent and thought their role was to keep new business out of Bermuda instead of inviting it in.

“The government took the view that we needed to keep intellectual capital out of Bermuda. When the tide went out, all those costs, all of those attitudes, all of the government red tape remained. All of a sudden Bermuda became incredibly uncompetitive.”

He said that was the reason the Island has now experienced four years of consecutive economic contraction.

And he warned it may still be a while before things visibly improve. He said: “I’m hoping for a flat year in 2013. I can’t promise you growth.”

In his allotted seven minutes of speaking time the Finance Minister said the new Government, which was elected to power last December, was working on initiatives to stimulate the economy and attract inward investment.

He said Government also acknowledged that something was wrong with Bermuda when it came to growing the economy and attracting business.

Mr Richards pointed out the Island’s insurance and reinsurance industry had coped well during the global economic downturn and had never really stopped growing but had stopped producing jobs in Bermuda.

“That told us there is nothing wrong with our industry, it is something wrong with us. We can’t blame what’s happening in Bermuda on the global economy.

“The global economy is starting to come back, Bermuda isn’t. It’s about us and it’s about our ability to compete,” said Mr Richards.

He added that when insurers and reinsurers were expanding their business elsewhere in the world, but not in Bermuda, “we knew it had to be about

us and the way

we do business in Bermuda, and it had to be about the red tape that had built up over decades, which we are now in the process of dismantling”.

He said Government was aggressively trying to attract inward investment into Bermuda.

He gave as an example the reduction in licence fees for foreigners who buy property in Bermuda, saying it was a small portion of Government’s effort to encourage inward investment.

During a question-and-answer session, Mr Richards also touched on the Island’s tourism sector.

He said hotel occupancy last year was in the 50 percentage range. “Hotels can’t make a profit if it is in the 50s,” he stated.

He said Bermuda needed to have profitable hotels so that it could attract investment capital.

With that in mind, Mr Richards said the Department of Tourism is sponsoring an investment conference on the Island aimed at showing potential hotel investors what Bermuda has to offer and “to ask them what does Bermuda need to do to make itself more attractive”.

Finance Minister Bob Richards speaks at the Capital G Private Wealth Conference panel discussion on the state of global economies and markets at the Fairmont Southampton yesterday.
Photo by Akil Simmons One Bermuda Alliance Finance Minister ET (Bob) Richards (right) takes part in a round-table discussion on the state of global economies and markets during the Capital G Private Wealth Conference, at the Fairmont Southampton yesterday with Caroline Foulger of Bermuda Business Development Corporation, Peter Hughes of APEX Fund Services and James Gibbons of Capital G Bank.

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Published April 12, 2013 at 9:00 am (Updated April 12, 2013 at 12:08 am)

‘I’m hoping for a flat year in 2013. I can’t promise you growth’

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