Nanci is all grown up
In the 1970s, Bermuda’s tourism industry provided 80 per cent of all our foreign exchange. We then transitioned in the 1990s to the complete opposite, where international business and financial services now provide almost 90 per cent of all foreign exchange. Bermuda was, and is, 100 per cent reliant on this steady inflow of foreign exchange. Bermuda’s future is tied to maintaining a business model that can attract and sell intellectual or business services to the rest of the world. While tourism is a valued “sidekick” — certainly for Bermudian employment in the hospitality sector — international business and financial services are our gross domestic product’s bread and butter.
Way back in 2011, the late, great Larry Burchall wrote about the importance of international business and said: “Keeping IB, and keeping it successful, means ensuring that IB is treated as a customer, not an irritant. Keeping IB means that we let go of the dream of resurrecting tourism to its 1981 heyday and honestly set about the task of making Bermuda a successful business platform that has a strong, land-based, air-arriving tourism adjunct.”
A lot has happened to Bermuda and the global economy since Mr Burchall wrote that op-ed. Financial technology has advanced and digital banking, blockchain and artificial intelligence are some of the prevailing trends. The present administration's courting of the fintech industry has resulted in the arrival of a number of new international financial services companies on our shores over the past few years. This in turn, has resulted in the necessary formation of Jewel (digital) Bank, the first new Bermuda bank in 20 years.
We are told that Jewel is set to open soon and will service the gradually increasing number of Bermudian and international fintech companies, providing them with the latest banking technology to move money for themselves or their clients. Hopefully, our regulators are focusing a laserlike scrutiny on this industry, so as to avoid a repeat of the recent collapse of the cryptocurrency exchange FTX. As we can all see, clearly international business/financial services continue to keep us afloat in 2023.
Another economic-related transition that has occurred in Bermuda over the past two decades is the dramatic change in our population demographics. If you scan through the past 20 years of political xenophobia and its not-so-subtle, negative treatment of foreign workers and then calculate: 1, the silent but steady emigration of Bermudians; 2, our declining birthrate; and 3, the rise in the ageing population, what you are left with is a drastically shrunken workforce, which is one of our main economic drivers.
This is exactly the position we are in now and here is some history to illustrate this: according to the Department of Statistics, Bermuda had a peak employment of 40,213 filled jobs in 2008. (Our debt then was a mere $277 million!). In 2012, filled jobs dropped to 35,443. (Our debt, $1.47 billion). Job numbers in 2017 totalled 33,653. (Our debt, $2.5 billion). Latest statistics show that in 2021, we had 31,316 filled jobs and our debt was about $3.35 billion. That is an overall loss of 8,897 jobs since the 2008 peak number. Our national debt skyrocketed and our employment numbers plummeted.
Bermuda’s population demographic concerns are clearly explained in the recent government report entitled Addressing the Challenge of the Ageing Population in Bermuda. It is predicted that we need 8,418 extra workers to replenish the depleted workforce; this to be achieved over the next five years. This is because of our historical low birthrates, our rising numbers of seniors/retirees and continuing emigration. Without a substantial rise in the workforce, it will directly affect Bermuda’s ability to maintain sustainable economic growth. The report stated that our declining and ageing population in the coming years raises critical concerns about GDP, employment, healthcare, retirement benefits and social support services. The report's conclusion: “Bermuda is facing a demographic crisis that requires strong, decisive leadership and urgent action to be taken.”
Of course, what this really boils down to is that we are now really, really broke. While our debt is hovering around $3.35 billion, unfunded liabilities are estimated to be an additional $1.5 billion to $1.7 billion. They include: Public Sector Superannuation Fund, the Ministers and Members Legislature Pension Fund, Government Employees Health Insurance Fund and Bermuda’s Contributory Pension Fund. (Estimators project that the BCPF will be exhausted 25 years from now.)
The Government’s sovereign guarantees also add to our indebtedness. Our high debt-service costs continue to hamper the Government's ability to spend on infrastructure projects. For example, there is no money for the replacement of our ageing bridges and the Tynes Bay Incinerator. The Government has curtailed some essential public services and long-overdue government employee pay raises are now on the bargaining table. The Government desperately needs more money flowing into social programmes and the only answer is to beef up the working population to pay into those programmes.
So let us all welcome international business, the ever-evolving financial services sectors and the foreign workers they require because this sector pays most of the Government’s bills. So, in that context, immigration reform should be a top priority for this administration. We must continue to court tourism because we need the Bermudian hospitality jobs which come with it. We must sensibly expand the resident working population for more government revenue/economic activity. We must balance the budget and have a clear goal to begin reducing our massive debt, so we don’t completely implode.
Do you remember Nanci the Spider? That’s the name Mr Burchall used — way back when — for the non-negotiable interest costs and sinking fund contributions that have to be paid or met to service Bermuda’s national debt. In 2004, Nanci was $11.4 million and 1.5 per cent of revenue. At present, our annual debt-service cost (Nanci) is $132.8 million and about 13 per cent of our revenue.
Nanci has matured and still sits high and mighty as our overlord, larger than life and her “interests” always come first. She looks down on us, her faithful servants, all the while knowing that this relationship will be profitable for her for a very long time.
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