Video: Population, 60/40 & Economic Growth
Do we need a higher population and should we lift the 60/40 rule to spur economic growth?
Those were two of the topics discussed as Bermuda College Economics Senior Lecturer Craig Simmons, Chamber of Commerce President John Wight, and former Business Bermuda CEO Cheryl Packwood recently sat down with Bernews for a panel discussion for the upcoming 2018/19 budget.
In speaking about the recession, Mr. Wight said that what happened, essentially, is that we lost thousands of people.
“We lost people that were paying into the tax system, we lost people that were renting Bermudians’ homes, eating in Bermudian owned restaurants, and this to me is the biggest issue we have to deal with,” he said.
“So while it is important to broaden the tax base in Bermuda and have less dependence on payroll tax and import duties, I really believe that we have to have a discussion about having more people in Bermuda pay into our tax base. And from that, you then ask yourself, what’s the value proposition to bring businesses here, and how do we make it easier for people to want to come to Bermuda?
“I think if our current population of 62,000 people, and we expect that without adding more people to our economy, that we’re going to be able to get ourselves out of the debt situation that we’re in….I think our heads are in the sand.”
Cheryl Packwood added, “It’s all about math. It’s purely math.”
8-minute extract from the live stream showing part of the discussion on 60/40 and population:
Craig Simmons said, “The chicken and egg is that you do, in order for the economy to grow, you need more people. So it goes without saying that you’re going to need to bring people in. I think the PLP use the term ‘balanced work permit and residential policies.’
“Getting people in from the outside, hopefully attracting more Bermudians back home, and then finding other ways for people to come here and invest in our economy – so now we’ve moved into the 60/40.
“Is the 60/40, has its day passed?” asked Mr Simmons, referencing the 60/40 rule which which generally requires local companies to be at least 60% Bermudian owned.
Mr. Simmons said, “What was the original intention of 60/40 and what is the role of it today? It’s my understanding that it was a way for the oligarchy to protect its interest.”
Host Jeremy Deacon noted that the Premier referred to that also, as during the recent Pre-Budget Town Hall Premier Burt said, “The 60/40 rule was not put in place to protect small business. It was put in place to protect the oligarchy.”
Mr. Simmons added, “But if you’re going to abolish 60/40, you’ve also got to look at, what are some of the downsides? This economist at the JFK School at Harvard, Danny Roderick, talks about how globalization, as you become more deeply embedded in the global economy, that that sort of exacerbates social cleavages.
“So I can’t help but wonder, so if we abolish the 60/40 rule, that means capital coming in to Bermuda, people that we’ve never seen before starting up businesses, what are some of the unintended consequences of having people that are obviously foreign running businesses on Front Street, on Reid Street, the political shifts that accompany that, and the inequality that may follow? We’ve got to get used to the change.”
Ms. Packwood said, “But on the other hand, we’ve had a massive flight of capital due to the 60/40 rule, because it is impossible for foreign businesses to reinvest whatever they’ve made back into the country, unless you’ve had special legislation passed, special bill passed, that allows you to keep your profits, reinvest…”
“All of that money, even the exempt companies, the insurance companies, it’s going all back offshore,” she added.
Mr. Simmons said, “I think we need to have some conversations with the people of Bermuda. It’s not enough to say, well we are going to abolish or we’re going to relax the 60/40 rule. There are some unintended possibilities.
“We saw a lot of push back with the airport, but yet, we’re talking about, the Premier’s mentioned an infrastructure fund, which is a nice way of saying public/private partnerships.
“Well, the airport was a little idea. If we’re going to in fact rely on outsiders to fund our infrastructure, are Bermudians ready for that? Do they understand what it means to have someone owning your infrastructure?”
On the 60/40, Mr. Wight said, ”I absolutely am in favour of the discussion initially being had, like what are the risks, what are the opportunities, but my view is that in 2018, it has to be done away with in a measured basis.
“I just don’t think that we have the luxury of being able to say that we want to protect local businesses the way that we could have before the recession hit.
“So I think it did, for better or worse, it protected local business for a long, long time, but in 2018, I really think we have to have a serious discussion about doing away with it and encouraging foreign capital to come to the island.”
“To say that we don’t want to change, but we want things to improve, is simply not going to happen,” Mr Wight added.
One hour video of the full panel discussion
Speaking on encouraging more people to live on the island, Ms. Packwood said, “I think it’s scary to people because it can fundamentally change the culture of the island, how we perceive ourselves, who we are, what we look like, all of that changes once you get a major influx of people into the island.
“However, there’s no question, if we don’t increase our population dramatically, we can’t grow our economy,” she said.
“I think we also, and we’ve been talking about the 60/40 rule, abolishing it, for years. Decades. So I don’t know that it has to be that measured anymore. We’ve done a ton of studies, there’s a lot of reports written about it. The BMA has studied this inside and out, the law firms have studied it and written reports.
“It had a place in the 1960s,” Ms Packwood said. “In 2018, it doesn’t have a place anymore in a global economy, all it is doing is stifling our economy.”
The video above was extracted from the live video of Bernews panel discussion where the trio discussed the upcoming 2018/19 budget, which is set to be delivered this Friday [Feb 16].You can watch the full video here, an extract on the discussion on the national debt here, and view all our coverage of the 2018/19 Budget here.
Read More About
Category: All, News, Politics, Videos
“We saw a lot of push back with the airport, but yet, we’re talking about, the Premier’s mentioned an infrastructure fund, which is a nice way of saying public/private partnerships.
“Well, the airport was a little idea. If we’re going to in fact rely on outsiders to fund our infrastructure, are Bermudians ready for that? Do they understand what it means to have someone owning your infrastructure?”
Completely agree Mr. Simmons. I was astounded to see no backlash towards this contact entered into by the PLP. Not too sure people understand that the PLP literally has outsourced our infrastructure.
Not saying it is a bad deal, just flabbergasted that the vehement opposition towards the Airport wasn’t extended to this deal.
Basically you hit the nail on the head with your comment “Not to sure people understand that the PLP literally has outsourced our infrastructure.”
Airport was a good deal. Opposition was because of “who” came up with it. Those who objected didn’t understand then and don’t appear to now.
EXACTLY! Because the “rent a crowd” don’t want anybody but the PLP ‘mis-spending’ their money!
You asked for it you got it Burt
Res pop increase will only work if it’s an increase of white collar guest workers and a decrease of blue collar guest workers. The amount that leaves through remittances from blue collar guest workers surpasses what’s invested in island.
And if you think it’s only white collar guest workers who invest their money into the local economy, I’ve got a bridge to sell you …
I don’t think that only white collar workers invest in the local economy. Of course, they do but not as much as white collar workers do. White collar workers have more spending power and can still save to bring home at the same time. Remittances out of Bermuda yearly is in the millions. Bermuda can’t be a charity when the debt is so high. Having blue collar guest workers undercuts the wages on lower end jobs and does not help put money into blue collar local’s pockets.
An abolition of the 60/40 rule would almost certainly lead to foreign ownership of Belco, Marketplace Keytech (Telco, One Communication)and a number of other important businesses in Bermuda. is that what we really want?
Whatever the origins of the 60/40 rule may be (and it does not matter for economic purposes), it has protected Court Street and North Street as much as it has protected Front Street and Reid Street.
Has it protected the consumer…on front street and court street??
Certainly I agree that we have to do whatever we can to bring more people to the island to contribute the the economy. With an aging population, the situation is only going to get worse. How we do that is the tough part. Many ideas have been researched but we are still looking.
However, I do not agree with a wholesale removal of the 60/40 rule. It has already been removed for companies who apply to have it removed under a 114B license but I have to ask if the HSBC experiment worked given the significant job losses that have occurred in that company alone in the past 10 years. Sure some of those jobs may have been lost anyway but I am not sure the sale has worked to the benefit of Bermuda. When the Chairman, CEO and other Executives do not live in Bermuda, all they will be interested in is quarterly results. They could careless about the community they operate in and when they need to cut costs, they will do so to reach a goal.
Other large companies continue to benefit from local pricing to their customers but have moved jobs to other cheaper jurisdictions therefore are not contributing back into the economy as they should. These include the two largest banks and at least 1 law firm. I can’t do my banking (loans, mortgages) elsewhere but they can move jobs anywhere.
Bottom line is that the 60/40 rule should be discussed but any removal must be carefully considered.
My recollection (which may be wrong, although I don’t think so) is that the 60/40 rule actually had its origins in British exchange-control/capital-control policies, rather than in ‘protecting the oligarchy’ locally, and that originally the requirement was that at least 60% of a company had to be British-owned, not necessarily Bermudian-owned.
The fact that in the old days companies were all created by means of individual Private Acts of the Legislature would of course have given a certain amount of local political control over who was allowed to establish companies here in any event (although not, initially, over any subsequent sales of the shares; but that was later covered by the exchange-control-related Beneficial Ownership rules from (I think) the early 1940s onwards.
Meanwhile, from 1931 there was the ‘Non-Resident Businesses Act’, which prohibited non-residents from doing business in Bermuda.
So we basically need a pathway to status for people leaving the island. Sort of like….ummmm idk…..something the oba was trying to do? But clearly a lot of Bermudians are ignorant to the global realities. We live in an era of globalization, where different cultures and different people interact. Gone are the days where people would remain in their country of origin. My fellow Bermudians need to wake up or they will be left behind without a hope of catching up
PLP Pathways coming soon for all “their friends & family”
Companies are abstractions – legal fictions if you will. They could not possibly know who owns them because they are not people.
The 60/40 rule is a nonsense and should be ended.
im just saying be very careful with this one im just saying though