Economy of Bermuda
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Bermuda, a British Overseas Territory, enjoys one of the highest per capita incomes in the world, having successfully exploited its location by providing financial services for international firms and luxury tourist facilities for 360,000 visitors annually. The tourist industry, which accounts for an estimated 28% of GDP, attracts 84% of its business from North America. The industrial sector is small, and agriculture is now severely limited by a lack of suitable land. About 80% of food is imported. International business contributes over 60% of Bermuda's economic output; a failed independence vote in late 1995 can be partially attributed to Bermudian fears of scaring away foreign firms. Government economic priorities are the further strengthening of the tourist and international financial sectors.
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Bermuda has enjoyed steady economic prosperity since the end of World War II, although the island has experienced recessions, including during the early 1990s, when the contraction of the economy led to a population reduction of 2,000 people (as many long-term residents found their work permits were not renewed), and a mild recession in 2001–02, both paralleling recessions in the United States. Its economy is based primarily upon international business (especially re-insurance, for which it is now a world centre) and tourism, with those two sectors accounting for more than 70% of the total balance of payments current account foreign exchange receipts. However, the role of international business in the economy is expanding, whereas that of tourism is contracting.
As of 2012, Bermuda has a GDP (PPP) of US$4.5 billion, with a real growth rate of 4.6% and a per-capita PPP of US$69,900. 0.7% of the GDP consists of agriculture, 7% of industry, and 92.3% of services (2012 est.). For the 2004-05 fiscal year, the government had revenues of US$738 million and expenditures of US$665 million.
19% of the population is below the poverty line as of 2000. The inflation rate (consumer prices, as of 2005) is 2.8%. 19% of the total labour force of 38,360 is in clerical occupations, 22% services, 3% labourers, 17% professional and technical, 15% administrative and managerial, 19% sales, and 3% agriculture and fishing; there is an unemployment rate of 2.1% as of 2004.
As of 2006, Bermuda's exports (mostly reexports of pharmaceuticals) are valued at $783 million; export partners include Spain (13.8%), Germany (11.7%), Switzerland (8.8%), Denmark (6.6%), and the UK (6%). As of 2007, imports (of clothing, fuels, machinery and transport equipment, construction materials, chemicals, food, and live animals) are valued at $1.162 billion; import partners include South Korea (36.4%), the US (15.7%), Germany (13.2%) and Italy (11.8%). Bermuda has an external debt of $160 million as of 2000. Bermuda's currency is the Bermudian dollar, which is fixed as equal in value to the US dollar.
International Finance Role
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Bermuda is considered an offshore financial centre, and it has a well-deserved reputation for the integrity of its financial regulatory system. An outdated (October 2000) KPMG report titled "Review of Financial Regulation in the Caribbean Overseas Territories and Bermuda" states that the island's legislative framework is not compliant with international standards, which has led critics to falsely conclude that Bermuda is committed to the facilitation of money laundering and other financial crimes. The Bermuda Government has signed tax transparency and compliance agreements with the US.
Aiming to meet or exceed international financial standards, the Bermuda Monetary Authority (BMA) has taken a clear decision to be opaque about its duties and responsibilities. For example, in response to the KPMG October 2000 report on the UK's Caribbean overseas territories, Bermuda enacted the Trust (Regulation of Trust Business) Act 2001. The legislation provides for the transfer of the finance minister's responsibilities to the independent BMA, with respect to granting and revoking trust company licenses. It also requires all individuals or companies operating trust companies to have a license unless they are exempt. Previously, only trust companies needed a license. Additionally, the legislation gives the BMA more comprehensive intervention powers. It will be able to request more detailed documentation and, in the event of a problem, restrict a trust operator's license. Information will be kept confidential, except in the event of a criminal investigation.
Comprehensive new legislation will be introduced in the upcoming parliamentary session to further streamline the incorporation process, facilitate registration of foreign names and address conflicts in law for registered securities, again consistent with the KPMG report. Amendments are being proposed to the BMA (Collective Investment Scheme Classification) Regulations 1998, part of a strategic plan for the development of financial services in Bermuda. It is a mark of Bermuda's commitment that each financial sector is seen to be in line with international standards.
The effects of the September 11, 2001 attacks against the United States have had both positive and negative ramifications for Bermuda. On the positive side, a number of new re-insurance companies have located on the island, contributing to an already robust international business sector. On the negative side, Bermuda's already weakening tourism industry has been hard hit as American tourists have chosen not to travel.
There are more than 12,500 foreign companies in Bermuda, many US-owned. They are an important source of foreign exchange for the island. International companies spent €800 million (US$967 million) in Bermuda in 2000. Total income, including secondary effects, was €1.06 billion (US$1.3 billion).
The growing importance of international business is reflected in its increased share of GDP, which grew from 12.6% in 1996 to 13.8% in 2000. In 2000, international companies directly employed 3,224 Bermudians and non-Bermudians. International companies directly and indirectly support 9,450 jobs in Bermuda and strongly influence a further 4,670.
There are many large international companies based in Bermuda. Prominent examples include Bacardi Ltd., Bunge Limited, Jardine Matheson Holdings Ltd., Global Crossing Ltd. and Royall Lyme Bermuda Ltd. Some companies, however, are considering or planning a move to Ireland in search of "a more stable environment". These include Willis Group.
Tourism is Bermuda's second most important industry. That it is an industry in trouble is evident from the statistical comparison. In 1996, Bermuda welcomed 571,700 visitors to the island. By 2000, that figure has dropped to 538,059 visitors, and further decreased to 454,444 visitors in 2001. Bed nights sold declined from over 2.4 million in 1995 to 1.9 million in 2001. Visitors contributed an estimated €390 million (US$475 million) to the economy in 1996, but that figure declined to €355 million (US$431 million) in 2000. Direct employment in the tourism industry (5,700 jobs in 2000) and related industry is dropping in tandem with declining visitor numbers.
Total filled jobs in 2000 were 38,017, but preliminary estimates for 2001 reveal a 1.1% decline in employment. Nevertheless, unemployment remains in the 4% range, and many Bermudians hold more than one job. In 2000, about 25% of workers were union members. There are three primary unions in Bermuda: the blue-collar Bermuda Industrial Union, Bermuda's largest labour organisation; the professional Bermuda Public Services Union, with a steadily increasing membership; and the Bermuda Union of Teachers.
Organised labour enjoys a high profile in Bermuda. Union action, however, was moderate in recent years. The average days lost per worker involved have dropped from a high of 65 in 1991 to a low of 0.8 in 1999. Although still active, unions have tempered their demands, partly as a result of new labour legislation and partly in recognition that Bermuda's economy, in line with that of the United States, entered a recessionary phase in 2001. The island's tourism industry, in which many Bermudians have historically been employed, continues to experience tough times, made even worse by 11 September. Past industrial action in the tourism sector hurt that industry, which was already suffering a chronic downturn without the additional blow of tourist displeasure and displacement due to work stoppages.
Bermuda has little in the way of exports or manufacturing, and almost all manufactured goods and foodstuffs must be imported. The value of imports continues to rise, up from €454 million (US$551 million) in 1994 to €587 million (US$712 million) in 1999. The U.S. is Bermuda's primary trading partner; from a value of €330 million (US$400 million) in 1994, U.S. imports expanded to €440 million (US$533 million) in 2000. The United Kingdom, Canada, and the Caribbean countries (mainly the Netherlands Antilles) also are important trading partners. Exports from Bermuda, including imports into the small free port, which are subsequently re-exported, increased from €28 million (US$35 million) in 1993 to almost €42 million (US$51 million) in 1999.
Duty on imports is a major source of revenue for the Government of Bermuda. In fiscal year 1998–99, the government obtained slightly more than $166 million, or about 30% of its revenue base from imports. Heavy importation duties are reflected in retail prices. Even though import duties are high, wages have kept up with the cost of living, and poverty—by U.S. standards—appears to be practically nonexistent. Although Bermuda imposes no income, sales, or profit taxes, it does levy a real estate tax and a payroll tax.
Bermuda is home to immigrants from other countries. Although the census information for 2000 is not yet available, 1991 census data reveal that UK immigrants constituted 30.6% of the immigrant population; U.S., 19.9%; Canada, 10.5%; and Portugal and the Azores, 13.5%. Of the total 1991 population, about 73% were born in Bermuda and 27% were foreign-born.
A major Bermuda industry of the 1920s was the export of early vegetables and flowers to New York. Bermuda had three crops per year. The Bermuda Botanic Gardens (now with 38 acres) had been established in 1898.
In 1922 complete, concise and clear acts dealing with agriculture were placed on the Bermuda statute book; inspection of produce was initiated; and seed testing began. Local seedsmen were registered in 1923. Mr McCallan, the Agricultural Director reorganised the Agricultural Exhibition for 1923. Seed potatoes were gradually improved after much investigation with US experts. A local farmers' market started in 1923. For a year in 1921–23, Professor H H Whetzel of Cornell University advised remedies for the cash crop diseases of potato blight, onion thrips, celery leaf spot, lily Botritis, melon mildew etc. He suggested that the colony should appoint a full-time plant pathologist.
Lawrence Ogilvie was the plant pathologist from September 1923 to April 1928. He introduced regulations in 1924 governing the control of local diseases and pests, and the import of plants – so vital for an island. Import embargoes applied for banana plants, lily bulbs, sweet poatoes, citrus fruits from the West Indies, and certain Irish potatoes. In 1924 a concrete fumigation chamber was built to fumigate infected imports. Good crops of celery were achieved in the 1920s. Citrus cultivation was affected by the Mediterranean fruit fly and only really developed in 1944.
The early Easter Lily exports to New York — vital financially to Bermuda – became badly diseased from the late 19th century to the mid-1920s. Lawrence Ogilvie saved the industry by identifying the problem as a virus (not aphid damage as previously thought) and instituting controls in the fields and packing houses. There was a marked improvement by 1927 when he inspected 204 fields of lilies. The lily export trade continued to flourish until the 1940s when the Japanese captured much of the market.
- Seaver, F. J.; Waterston, J. M. (1946). "Contributions to the Mycoflora of Bermuda: IV". Mycologia. 38 (2): 180. doi:10.2307/3755060. ISSN 0027-5514. JSTOR 3755060.
- October 1968 Monthly Bulletin of the Bermuda Department of Agriculture and Fisheries article by Lawrence Ogilvie