Minister of economic development Dr. Grant Gibbons speaks to The Bermudian about the OBA’s plan to get Bermuda back on track
Just three months into its first term, the One Bermuda Alliance government has demonstrated that it means business. From granting a payroll tax exemption to both local and international companies for new Bermudian hires, to the disbanding of term limits, to the $4.2 million granted to the newly-formed Bermuda Business Development Corporation, the new government has been decisive in quickly establishing a business-friendly environment in Bermuda.
A major part of the OBA election platform was its Jobs and Economic Turnaround Plan, which promised to create 2,000 new jobs over the next five years. The party also vowed to tackle the inefficiencies of government with a disciplined approach to spending, and to restore confidence in Bermuda as a jurisdiction for the conduct of international business. The restoration of confidence is vital if Bermuda is to attract the external investment required to kick-start the economy and create jobs. Minister of Economic Development, Dr. E. Grant Gibbons, spoke to us about Government’s plan to get Bermuda back on track.
Having served in Cabinet as the Minister of Finance from 1995-98, you are one of the few OBA MPs who has served in Government. What advice, if any, do you have for your less experienced colleagues?
My colleagues are not inexperienced, even though Bob Richards and I are the only ones to have previously sat in Cabinet. I would refer them to the medical principle, ‘First, do no harm’. Over the years, I’ve also learned that trust and confidence must be earned, but are easily lost.
Was there anything to be learned from sitting in Opposition?
The first thing you learn in Opposition is patience. Having watched the former Government struggle over a number of years, I also learned that consultation is really important. For example, looking back over the whole education reform process, starting with the Hopkins Report in 2007, one of the reasons that education reform seemed to be ineffective was because there wasn’t sufficient consultation and communication with stakeholders – and that is vitally important in order to build trust and cooperation. As Opposition you may be part of the political process, but you are often more of a spectator than a player – so you can observe the mistakes other people make. In the political process, there are windows of opportunity and you need to understand when they are open and to use them wisely. Our Premier has said on many occasions that ‘we need to be decisive as a government’ because windows of opportunity aren’t open forever. You need to take advantage of them in order to make things happen for the benefit of Bermuda and its people.
The OBA’s main platform piece was its Jobs and Economic Turnaround Plan. How are those 2,000 jobs going to be created over the next five year?
Jobs are going to be created by job creators. From our perspective, the first thing you look to is the businesses and companies that are providing the jobs right now. If your current clients – that is, the companies and firms that are providing jobs – aren’t terribly happy about the environment they are working in or they don’t feel that Government is being helpful or they feel the environment is hostile, then you are unlikely to attract other companies here because people talk. So the first step we took was to listen very carefully with a view to doing what is necessary to create a more favourable environment for the job creators.
Is the term limit policy an example of that?
The international business community in Bermuda made it clear that it was difficult for them to be competitive with the existing term limit policy. Because international business is a service business, and involves intellectual capital, companies need to be able to hire very good people to make their organisations competitive. Term limits operated in a very negative way – one of my colleagues called them ‘job killers’. It didn’t take us very long to decide that the issue which the term limit policy was put in place to address – the expectation that expats could remain in Bermuda for as long as they liked – could be dealt with very easily without resorting to term limits. So we were able to come to a quick conclusion that term limits should be ended. At the same time, we also recognised that that decision had to be partnered with a stronger commitment to manage the work permit system in ways that clearly and effectively protected Bermudian rights and opportunities in the work place, as the system is supposed to do. So those decisions were among the first we made to try and improve the operating environment for companies here.
So, allowing international businesses to retain that ‘intellectual capital’ is key?
For knowledge-based industries – insurance, funds, trusts, for example – the protection of their intellectual capital is very, very important. We sometimes think that Bermuda is successful because of our tax advantages, or possibly because people are friendly here, or possibly because we are next to the east coast of the United States – and those factors are all part of the equation – but the most important part and what has made us successful is this critical mass of knowledge workers, this intellectual capital. What we have seen over the last 10 years is a decline in that critical mass of intellectual capital – and that affects both non-Bermudians and Bermudians. We have Bermudians working in senior positions in international business here, and they are part of that intellectual capital. It also affects Bermudians more broadly because, for every non-Bermudian here working in the international business sector, we find that at least two Bermudians are hired. So when there is a decline in knowledge-based capital, it puts Bermuda and our future at risk as a jurisdiction for international business, in addition to Bermudian job losses across the community.
You spoke of restoring confidence in Bermuda as a jurisdiction. What can Government do?
We need to send a message that the government is open, approachable and predictable. We are not about capricious tax changes as we saw a couple of years ago from the previous government. In the long run, the government must build trust and confidence in Bermuda to attract what we need, which is people setting up successful businesses operations here, and attracting the external investment that has driven Bermuda’s economy and provided jobs for many, many generations. It began with the tourism sector and continued with the larger resorts and operations like Cable and Wireless, and now the international business sector – all bringing the external capital that is simply not available here. So we have to continue to maintain an environment that those businesses and that capital finds attractive.
The OBA platform also spoke of making Bermuda’s customers, whether they are business owners, guest workers, or tourists, feel more welcome. What can we do, and why is that important?
One of the first things that I did when I came to the Ministry of Economic Development was call a number of CEOs and other senior industry members, particularly in the insurance area. I said ‘We are delighted you are here, we value your business and please let us know what we need to do to make sure that your business continues and grows here’. Unless we communicate the message that we understand and appreciate the contribution international busine
ss makes, people may exercise other options. Many jurisdictions, from Switzerland, to the Cayman Islands to a number of states in the U.S., would be delighted to have the kind of business that we have here, whether it be in the funds area, the insurance area, or other sectors. We are small enough to reach out and say ‘We’re glad you’re here. Let us know what you need us to do to make Bermuda work for you’.
Is the next step to encourage those businesses to grow their presence in Bermuda?
Absolutely. Over the last five years, we have lost close to 5,000 jobs, both Bermudian and non-Bermudian jobs. When you work that out on an average salary basis, that’s more than $270 million annually that is not now going into salaries or being spent in Bermuda’s retail sector, or spent paying rents, or spent in the hospitality sector. That loss of 5,000 jobs has had a very real human and business impact. So we have asked our existing companies what we need to do as a country to get those jobs back, and what Government can do to facilitate that. Consequently, one of the initiatives you saw in the recent Government Budget was the payroll tax break for the hiring of Bermudians to newly-created jobs. That is one example of how we as a Government can facilitate the regaining of some of those lost jobs.
What role will the Economic Development Committee play?
One of the first things the Premier did was to set up this sub-committee of Cabinet. We recognised that government ministries and departments often work in isolation from each other so we set up the committee in order to cut some of the bureaucracy and red tape that organisations face when they want to do a project in Bermuda. Whether that project is a new resort hotel or a new energy scheme, or whatever the investment may be, they need consents and permissions from various government departments, and they need them quickly and efficiently. To facilitate that process, we have put together a working group of Ministers and senior civil servants to determine what the needs are for these projects – some of them have been sitting out there, frustrated, for years – so that consents are given in a parallel fashion. The aim is to avoid the situation where someone wants to set up a resort, has worked with the Ministry of Tourism on the project for six months only to learn that he needs a permission from the Ministry of Finance or under the Companies Act, or from Planning. That old process adds more time, more costs, fosters frustration and might prevent the project from moving ahead.
Are there projects out there now in the pipeline that will benefit from this new approach?
We are working through a number of projects now. Some of these are carryovers that were started, at least conceptually, under the previous government, and our job is to work very closely with the principals behind these proposals and get them moved forward. In many cases, they involve significant amounts of construction or investment, and with that come a range of jobs across a number of sectors – retail, construction, real estate. We want to facilitate that investment so that those jobs are created as quickly as possible.
What role will the Bermuda Business Development Corporation (BBDC) play?
It’s not just a question of working with current projects and proposals, but also of going out and looking for new ones. Part of our election platform was to set up a Hospitality Summit to invite some of the major, blue-chip developers to have another look at Bermuda and get an understanding from them of what is required in order to make Bemuda a development destination of choice. We have a very similar process going on with the BBDC. We had a number of agencies and groups out there working previously – including Business Bermuda, the Insurance Development Council, BIMA, and then trust and other groups. The concept behind the BBDC is to consolidate those various groups so that there is more of a focus in terms of the consistency of the message and a central point to both market and promote Bermuda. The most important part of this is what we refer to as a ‘Public Private Partnership’. We recognise that Government isn’t necessarily the source of good ideas and ways to develop new business – that’s really the preserve of business. Consequently, on a board with 13 people, we have just one Government representative. The other positions are held by representatives of different segments of the international business sector. We also have participation from some of the legal, accounting and banking organisations in Bermuda – the service providers. The concept is for business and government to work together to determine how best to promote and market Bermuda so there is a consistent and effective message, but also to look at ways to make Bermuda more competitive and to look at areas where we might be able to diversify our product or create new opportunities as either offshoots of existing businesses or new product lines entirely. Part of that is also making sure our business legislation is up to date, and that is this Ministry’s responsibility, particularly when it comes to legislation like the Companies Act.
Where does an enhanced education system fit into all of this?
We have talked about creating ladders of opportunity for Bermudians because if we are successful in attracting new investment, and getting job creators to provide more jobs, we want to be sure that we have Bermudians with the appropriate skills and training to take advantage of those opportunities. The public education system is a very important part of our overall plan. It fits very much into the Premier’s concept, which he has spoken of frequently, and that is ‘leaving no one behind’. We must ensure that our public education system is doing the best possible job it can. We have made a number of suggestions about how we can build a more responsive and supportive education system, including putting more emphasis at the pre-school level, introducing an integrated technical curriculum beginning at middle school so that children and parents see that they have options, and improving the quality of teaching. There is an old saying that if you want to make education work for you, it’s very simple – you get the best teachers, you get the best out of them, and you step in quickly when children fall behind to help them catch up. That is going to drive quite a bit of our direction going forward. We are already talking about making sure that our standards of teacher recruitment are higher, and we are looking to do a much better job when it comes to professional development to improve the experience and the teaching skills of current teachers. We are also looking at extending the school day to give more time for catch-up sessions, but also for important areas like sports, music, and the arts, which will broaden our children’s education base.
Realistically, how long will it take to right the ship?
While we are optimistic, we are also realistic. We were handed a very difficult situation with respect to Government debt and probably more importantly, the huge burden that those interest payments are having in terms of the funds that we have available for re-investment in areas such as education, health care, and tourism marketing, among others. Our election platform set out a two-track plan – responsible growth combined with disciplined financial management. We are putting some discipline back into government spending – and, more importantly, setting out a plan to remove inefficiency and reduce government spending over the next few years so that we can start to tackle the enormous debt burden out there and pull back from those very high interest payments. Pretty soon, the debt burden will be the largest ‘Ministry’ we have, and that will simply be debt service. That obviously is not helping to either grow jobs or provide the kind of support services we need. The oth
er part of the two-track approach is growth. If we get efficiency and discipline back into government, and we get growth and the creation of jobs from new investment, that will get us moving in a good direction reasonably quickly. But it will not happen overnight. There is a reason we said we would create 2,000 jobs over five years, because some of it will depend on how successful we are at getting discipline back into the system. But it will also depend upon how attractive we are as well as what happens in the external world in terms of the global economy. We are hoping to see progress in the next couple of years, but it is a little early to say exactly when we will see the real change.
Is there anything you would like to add?
Government clearly can’t do this alone. We need everyone’s involvement in understanding the issues that we are facing, and where we need to go, and a commitment that all of us will be involved in making it successful. It will take a lot of communication, a lot of discussion and a real willingness on the part of Bermudians to have a good sense about the future. And it will take a lot of hard work to make it happen. Whether it’s working with international business or with visitors who come here, Bermudians are the most important part of this project going forward.
