Dr Denzil L Douglas, St Kitts & Nevis Prime Minister, outlines
his government's strategy for the stable development of the finance sector
How do you assess the
current state of the financial sector?
The financial sector is stable. It boasts an array of sound
and respectable international and local financial institutions, and benefits
from a well-educated workforce, high productivity and efficiency and the
use of advanced technology.
How important is the financial sector to the economy as a whole?
Traditionally, the economy has been based on agriculture, mainly sugar and
cotton for export. In recent times, tourism has become the major foreign
exchange earner. Over the years, the financial sector has supported these
activities, but my government has recently adopted a policy of marketing
financial services worldwide with a view to making the finance sector an
important source of income in its own right. Already, on Nevis offshore
financial services contribute significantly to overall revenue and, on St
Kitts, the financial sector is likely to take off with the introduction
of appropriate legislation and enhancement of our capacity for the conduct
and regulation of international financial transactions.
What does St Kitts & Nevis offer as a banking sector that other
Caribbean islands do not?
St Kitts & Nevis has proceeded cautiously in establishing a banking centre.
We have had the advantage of examining other centres in the region and beyond,
and to fashion a system which will offer their best features. In this regard,
the regulations which we plan to introduce over the next few months will
result in flexibility, while at the same time minimising the risk of fraud
and money laundering. We expect that our system will be distinguishable
for its high standing and excellent image.
Of course, St Kitts & Nevis will also offer a variety of tax advantages
to those registering in our jurisdiction. In particular, bodies registered
in St Kitts & Nevis, but carrying on business exclusively outside of the
islands, will not be taxed. We also intend to provide tax relief in respect
of the dividend income earned overseas by companies registered and operating
What are your plans to expand the financial sector?
My government is about to introduce legislation that will provide for a
variety of international financial services. This will be accompanied by
a major promotion exercise that will seek to substantially increase company
registrations and attract international business transactions. Further,
we will fully computerise the registration process and bolster the capacity
of the Office of the Registrar of Corporate Affairs so that companies can
be formed within a relatively short period. We expect that these innovations
will result in significant expansion in St Kitts & Nevis' financial sector.
St Kitts is co-operating with the other Eastern Caribbean countries through
the Eastern Caribbean Central Bank to create a regional capital market and
an integrated financial system. As part of this exercise, plans are afoot
to establish various region-wide financial institutions, including the Eastern
Caribbean Home Mortgage Bank, the Eastern Caribbean Stock Exchange, the
Eastern Caribbean Unit Trust and the Eastern Caribbean Enterprise Fund.
The Home Mortgage is already established, with its headquarters in St Kitts
and with funding from a variety of sources, including the International
Finance Corporation. The other regional financial institutions are also
expected to establish their headquarters in St Kitts & Nevis, which should
boost our efforts to expand the financial sector.
Do you see any changes to the regulatory system
in the near future?
My government has drafted legislation - 'The Regulated Business Act' - which
is being circulated among professionals in St Kitts & Nevis before being
presented to parliament. The act, once passed, will provide for the regulation
of financial services, trust company management and other regulated businesses.
It will also establish a Financial Supervision Committee, which will play
the lead role in the supervision and regulation of businesses. The Committee
will be broad-based, in that it will include representatives from various
sectors of the financial community and other public and private entities.
What do you see as the major growth areas in the financial sector
in coming years?
Over the next few years, my government proposes to target International
Business Corporations, Trusts and Limited Partnerships as sources for greater
financial sector growth. Indeed, we will shortly introduce legislation that
will make specific provisions for the registration, operation and regulation
of these bodies. Moreover, by year-end, we intend to introduce legislation
in respect of Limited Liability Companies, non-domestic banks and insurance
companies. We believe that, with extensive promotion, generous tax advantages
and the maintenance of an efficient, clean and well-respected financial
system, we will be able to achieve considerable growth in all of these areas.
What are the biggest potential obstacles to St Kitts & Nevis' future
success as a financial centre?
The international economic and financial climate is changing rapidly and,
in virtually every area of economic activity, competition is increasingly
intense. This has been facilitated by the process of globalisation and by
the technological revolution in telecommunications and computing. We feel,
however, that increased competition is not an insurmountable obstacle: in
international finance, the size of a country is definitely not as important
a competitive advantage as it is in manufacturing, for example. Hence we
intend to continue to upgrade the skills of our people through a vigorously
implemented programme of human resource development, and to use the new
technologies to their best advantage.
Are you optimistic for the future of the St Kitts & Nevis finance industry?
St Kitts & Nevis has many advantages to offer: a stable, peaceful and
democratic society with a well-educated workforce, beautiful natural surroundings
and a congenial atmosphere.
We also have good prospects for continued macroeconomic stability and enhanced
economic growth. Our currency, the Eastern Caribbean Dollar, has been pegged
to the US dollar, and has remained unchanged at EC$2.70 to the US dollar
since the 1970s. Moreover, the Eastern Caribbean Dollar is easily convertible,
and we are engaged in removing even the remnants of exchange controls.
We believe that these advantages will ensure that the creative blend of
strategies that we are in the process of introducing to promote the development
of our financial centre will yield the desired results.
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©Kensington Publications 1996