Dr Denzil L Douglas, St Kitts & Nevis Prime Minister

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 locally.

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.

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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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