GUYANA: An offshore financial centre?

By Andrea Simone Proctor, LL.M Banking and Finance

GEORGETOWN, Guyana, September 6, 2010 - Somewhere in the heart of sunny Georgetown Guyana, there are murmurings about developing Guyana into an Offshore Financial Centre (“OFC”), with a focus on Offshore Banking. OFCs provide low or no tax jurisdictions, along with excellent commercial and corporate services to non-resident companies and individuals. Residents of an OFC typically experience a higher standard of living.

No one would argue that Guyana needs a sound and sustainable plan to attract capital, resources and investment to its shores. However, ideas of such magnitude should not be embraced or indeed dismissed without in-depth analysis.

The Guyanese experience

All Guyanese know that it is the careful preparation that makes any meal a success.

Guyana’s reputation as a stable political, social and economic destination will have to be carefully and firmly established before it could succeed as an OFC.

Despite the reports that Guyana has experienced moderate economic growth in recent years, it must project an image of sustained development and economic maturity before foreign banks and businesses will seriously consider migrating to its soils. The nation will at the very least, need to make a greater effort to restore basic humanities, provide reliable utilities, manage its waste collection and disposal, and do what it takes to remove itself from certain “Watch Lists” and a variety of other coloured lists.

Genuine buy-in from, and consultation with, all major political parties, relevant industry bodies and stakeholders, and a willingness to progress such a proposal at a national, unified, level will be essential. Even with the greatest political will, this is not going to be a 4 year project.

What’s the Attraction?

OFCs are either artificially created or evolve where there is already conducive infrastructure. International businesses migrate to OFCs to reap the benefits. In doing so, some of the wealth is filtered into the local economy through increased local employment, construction and community involvement.

Guyana is not currently equipped to provide the required services efficiently or effectively, nor does it have the legal and other infrastructure to offer advantages to international businesses. Implementing the basic framework and developing a cohesive “offshoring” landscape would first be necessary.

The smell of good Guyanese cooking will always attract attention, but the food and service will have to be exemplary for the punters to come back!

The Basics

With models of OFCs existing close to home, there is no need to reinvent the wheel. They can provide a starting point. These include The Commonwealth of the Bahamas, Cayman Islands, and Barbados. At a minimum, there will be need for specific laws and/or to make enhanced provisions for:

• the conduct, licensing and supervision of international banking business in and from Guyana.

• a new tax regime for the qualifying businesses;

• an enhanced corporate governance;

• confidentiality; and

• a cohesive regulatory and compliance regime that would meet international standards.

To complement this, an efficient commercial court system, and a robust financial crime investigation and enforcement body, are the “bare necessity”.

Thought should also be given to the current immigration rules and administration in place to deal with employment and migration issues that will accompany the arrival of foreign businesses. Many OFCs require local advertisements and proof that jobs cannot be filled by local talent before a work-permits are granted to non-residents.

“Guyana must project an image of sustained development and economic maturity before foreign banks and businesses will seriously consider migrating to its soils”.--Andrea Proctor

These developments must be concurrent. Enactment of new legislation should be accompanied by relevant ancillary amendments, e.g., those that ensure that agencies such as the Finance Intelligence Unit, Central Bank of Guyana, the Revenue Authority and Securities Commission etc., are able and obliged to share information and work closely with each other.

Checks should also be made to see whether there are any provisions tucked away in any existing international agreements or MOUs, which may restrict the giving of preferential treatment or other advantage to any foreign person.

If the murmurs turn to actions which then experience piecemeal or protracted implementation, (as was the fate of the recently enacted Anti Money Laundering and Countering the Financing legislation), the project will be off to a bad start.

Conflicts and Priorities

Guyana will be required to subscribe to agreed international standards of behaviour and actively demonstrate co-operation with regional, international and supra national agencies. As an OFC, Guyana would be subject to unprecedented levels of international scrutiny. Is Guyana ready for all that?

A vast amount of housekeeping will be required to prepare for welcoming foreign businesses to Guyana, and this should never be to the detriment of Guyanese.

Perhaps the investment made to transform Guyana into an offshore financial centre will be worth it in the long run, as some of the very things which create a stable, welcoming environment for foreign businesses will draw more Guyanese home.

The opinions expressed in this commentary are solely those of Andrea Proctor. Andrea Proctor is an Attorney at Law and an Associate of the Chartered Institute of Securities and Investments in the UK.