The
unit of currency is the Bermuda dollar (referred
to here as BMD) which has parity against the
US dollar; the US dollar is also accepted.
Under the Exchange Control Act 1972 and the
Exchange Control Regulations 1973, certain
exchange controls apply to Bermudian citizens
and to 'local' companies. There are no capital
or exchange controls applying to non-residents
or to the various forms of offshore entity
(exempt or permit companies or partnerships)
which are free to import and export funds
in all currencies. There are no taxes that
apply to such transfers, and there is no withholding
tax on interest, dividend or royalty payments.
The
Bermudan economy has been highly successful,
with tourism and international business being
the two main sources of revenue. Over 400,000
tourists visit the island annually, mostly
from North America. There is a minor industrial
sector and agriculture is minimal because
of the lack of suitable land for crops. Consequently
about 80% of Bermuda's food needs are imported.
Bermuda's
GDP in 2004 was over USD4.5 billion, giving
a GDP per head of more than USD69,900. GDP
growth in 2004 rose to 4.6%.
Unemployment
was 2.1% in 2004, and inflation in November
2005 was 2.8%; an average house at the time
of writing cost almost $1m.
In
October, 2005, Standard & Poor's Ratings
Services affirmed its 'AA' long-term and 'A-1+'
short-term sovereign credit ratings on Bermuda,
reflecting the country's record of prudent
economic management. The outlook on the ratings
remains stable.
"Bermuda
benefits from many years of good economic
management, based upon policies consistent
with its fixed exchange rate," observed
Standard & Poor's credit analyst Lisa
M. Schineller.
"The
fixed exchange rate, favorable macroeconomic
policy mix, and well regarded tax and regulatory
regimes will continue to attract the international
business sector — particularly insurance
— thus ensuring its continuance as the
main engine of economic growth in Bermuda,"
she added.
According
to Ms. Schineller, the government has the
fiscal and external flexibility to absorb
a budgeted expansion in spending.
"As
a net general government creditor, Bermuda
can afford to increase spending in a cautious
and prudent manner," she explained.
S&P
said that Bermuda remains a global leader
in the reinsurance segment and this has helped
offset a secular decline in tourism.
"Sound
policy and a favorable, stable investment
climate are expected to support growth despite
increased discussion about establishing independence
from the UK," noted Ms. Schineller.
"The
politically controversial debate that has
already begun is expected to intensify in
the run-up to the next general election due
by 2008," she concluded.
The
effects of 11 September 2001 have had both
positive and negative ramifications for Bermuda.
On the positive side, a number of new reinsurance
companies have located on the island, contributing
to the expansion of an already robust international
business sector. On the negative side, Bermuda's
tourism industry - which derives over 80%
of its visitors from the US - was severely
hit as American tourists chose not to travel,
although it has rebounded somewhat in recent
years.
The
development of Bermuda's thriving financial
sector began in the 1950's. The Government's
selective attitude to incoming business, and
particularly its - until recently - exclusion
of foreign banks, created and maintains an
excellent reputation for the island. A wide
variety of financial services are represented,
with the captive insurance sector being the
world leader; fund and trust management are
also prominent. Supervision of the financial
sector is in the hands of the Bermuda Monetary
Authority, an independent agency which inherited
regulatory and supervisory powers from the
Government under The Banks And Deposit Companies
Act 1999, which was implemented in 2000.
Figures
released by the government of Bermuda showed
that the number of business incorporations
on the island continued to increase during
the first nine months of 2005, albeit at a
slower pace than seen during the previous
year. According to the government's Bulletin
of Statistics, a total of 1,001 new incorporations
were registered during the first three quarters
of 2005. This compared to a figure of 1,020
incorporations during the same period in 2004.
The
new incorporations during 2005 meant that
the total number of firms registered in Bermuda
stood at 16,808 as at September 30, an increase
of 413 since the end of the third quarter
of 2004.
While
local company registrations were up 2.2% year-on-year
at the end of the third quarter 2005, exempted
company formations were down by 5.3% over
the year to the end of September.
However,
exempted companies continued to make up the
largest proportion of registered Bermudan
companies, totalling 12,517 at the end of
September of that year. Meanwhile, there were
3,045 local companies, 632 exempted partnerships,
592 non-resident entities, and 20 non-resident
insurance companies registered at the end
of the third quarter.
By
the end of 2007, there were 13,688 external
companies, 841 exempted parternships, 486
overseas companies, 68 overseas parternships,
20 non-resident insurance companies and 3,376
local companies on the register.
The
Bermuda Stock Exchange was opened in 1973.
The total market capitalization of the BSX
as at 31 December 2007 (excluding fund listings)
stood at over $350 billion of which approximately
BMD2.7 billion represented the domestic market.
As
at 31 December 2007, 543 issuers were listed
on the BSX, 115 more than at the same stage
in 2006. Some quite sophisticated international
e-broking services are developing around the
Exchange.
