A Crisis in Hong Kong: A New IB Pillar in Bermuda
From "Suggestions to stimulate economic recovery for Bermudians once Shelter in Place ends"
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[Written 24-May-20]
TLDR; Build a Second Pillar of International Business in Bermuda by providing economic refugee status to Hong Kong business owners in Finance, Insurance, Trading and Logistics who relocate their headquarters to Bermuda to escape the ongoing constitutional crisis with Beijing.
1997 was a turning point: the United Kingdom finally decided to relinquish control of Hong Kong to China, but only under a specific set of rules and a 50 year timeline. Until 2047 Hong Kong was to be self-determined with its own systems of capitalism, currency, legal, legislative, human rights and other freedoms experienced in the Western democracies.
This is all about to change.
For over a year now news from around the world has picked up a constant stream of protests, and sometimes violent incidents between protesters and Beijing-backed police forces. More recently we've also seen pro-Beijing politicians use physical force to successfully take over democratic committee's in the legislative council. The Chinese Communist Party's intent is clear: Hong Kong is being forced to convert to communist state control nearly three decades early.
Whether you agree or disagree with the Chinese economic model it is clear the One Country, Two Systems solution is on its way out, and not in the favour of Hong Kong's free market or its citizens who are used to the freedoms, trading status and wealth that came with it. Follow any media outlet and you'll also see political and trade tensions rising between the Western world (particularly the US) and China on a weekly basis - this is likely to get worse before it gets better and I believe Hong Kong will become a proxy.
[News Update 27-May-20: "The U.S. has certified that Hong Kong is no longer politically autonomous from China, a move that could have far-reaching consequences on the special trading status the former British colony has with the U.S., Secretary of State Michael Pompeo said."]
What we do know is that Hong Kong pre-2019 had the second highest economic freedom score after Singapore (another city-state Bermuda has considered modeling after), along with one of the most prosperous international business sectors in the world. Total GDP in the $400 Billion range.
Bermuda, in contrast, is in a dire economic state with an even worse outlook thanks to a decade of decline and now the COVID-19 situation. A $4+ Billion total public & private debt is starting to hurt. What we need is an injection of outside capital not just in the short term, but in the medium and long term to improve economic sustainability. We need another Pillar of International Business.
Why is Hong Kong such a great option and what are the similarities?
- A few of the main industries that support Hong Kong's economy are: Finance, Insurance, Trading & Logistics - extremely complimentary to Bermuda's current IB infrastructure.
- Many of Bermuda's (re)insurers and law firms already have branches in Hong Kong, making the outreach and transition much more effective. We also have a history of re-domiciling companies from Hong Kong, starting in a similar period of uncertainty - Jardine Matheson was one of the first. This would also be a great way to grow our existing access to the massive East Asian markets and funds, where we're only now scratching the surface.
- Many Hong Kong companies are already listed on Bermuda's BSX.
- Those businesses who cannot operate under the future state-controlled CCP model will need to make contingency plans: many will be seeking options with a one-foot-out-the-door strategy in the short term. Bermuda is a perfect place for this headquarters reorganization, or simply a second office close to North America and Europe.
- The businesses being attracted will be exempt, and as with other exempt industries can be mandated to have a 20%+ Bermudian workforce. They will also be renting offices, apartments; buying houses, groceries, air conditioning etc.
- Hong Kong operates primarily under English Common Law (Bermuda does as well).
- Citizens of Hong Kong speak English (46% overall, but most in the international business arena), and the majority have been through some of the world's best educations systems. Bermuda could use a more diverse personal connection to Asian economies and this would certainly help.
- Cayman has already taken so much of our Asian legal business (majority which used to be ours) and have laid a foundation to increase their share - Bermuda needs to do the same.
- 315,000 Hong Kong citizens are already British National (Overseas) passport holders, and all of them were British Citizens as early as 1997.
- The UK is rumoured to be planning a similar offer. [Update 29-May-20: the UK is now formally considering offer extendable 12 month live/work visas and pathway to citizenship for up to 3 million HK residents]
- This is a great way to offer a moral and Human Rights-positive option for people who are arguably entering a time of personal and economic oppression. They will need the worlds support to continue their lives in a self-directed, pro-freedom and democratic system.
Hong Kong's economy is vast and Bermuda would only need to attract a very small number to start seeing the benefits.
Finally: it's a way out of our downward spiral. We don't have to give up full citizenship (12-month extendable permits / PRC if they relocate / invest / immediately hire Bermudians), it will increase our foreign capital trade, it will bring more jobs to Bermudians and it will vastly increase the tax revenue, local spend and transactions within Bermuda by having these people and companies here.
If this sounds like a good idea, we should also encourage local businesses to drive this growth by providing similar opportunities to the people who already live and work here, along with their overseas colleagues who will grow our existing IB industry at the same time.
UPDATE (27-May-20): - Here goes their autonomy/trade status:
"US Says Hong Kong Autonomy is Gone"
UPDATE (1-Jun-20): US considers welcoming Hong Kong people, entrepreneurs.
UPDATE (2-Jun-20): The UK has asked Australia, New Zealand, United States and Canada to consider offering residency to Hong Kong citizens to ease a major flight.
