“Sovereignty is a word that is used often but it has really no specific meaning. Sovereignty today is nominal. Any number of countries that are sovereign are sovereign only nominally and relatively.” — Zbigniew Brzezinski
The Bahamas government recently introduced several pieces of legislation in Parliament that will further seriously, if not irreparably, erode our offshore financial services sector. These legislative initiatives represent yet another assault by the Organisation for Economic Cooperation and Development (OECD) on our sovereignty and our offshore financial sector. It also significantly affects the domestic sector. But we are not alone in this full-court press by the OECD to bring offshore financial centers to their knees.
The recent compendium of legislation is a continuation of a theme that began in 2000, when our financial services legislation was radically altered, primarily because of OECD threats to blacklist us if we did not kowtow to its wishes. We acquiesced to all of its demands and bought ourselves a little more time.
However, our time is up, and it is time to pay the OECD piper. This legislation which they “directed” us to enact will further erode the second most important, decades-old, historically robust pillar of our economy: financial services, with particular emphasis on the offshore sector, although as indicated the domestic sector will also suffer collateral damage.
Therefore, this week we would like to Consider this… Have we surrendered our sovereignty in the face of threats by the OECD and the European Union (EU) to blacklist us if we do not submit to their dictates to amend our financial laws?
I have been out of the country for this entire week and therefore have not been able to gauge the public reaction to these bills. However, part one of this series prompted a very lively “discussion” with two seasoned, prominent Bahamian professionals whose opinions I deeply respect. The discussion encompassed a barrage of email exchanges about the government’s capitulation to the OECD and, more specifically, what The Bahamas could or should have done to obviate the impending further decline of our vital offshore financial sector.
In light of that healthy discussion, I thought that a synopsis of those exchanges would aptly describe the conundrum which now faces us.
We have lost our sovereignty
Let’s not kid ourselves. If we have not completely lost our sovereignty, which I submit we have, it has been so significantly impaired, almost to the point where it is no longer recognizable. Just as the United States government literally dictated many of the changes that we made to our legislative regime in 2000, we should not be surprised if the recent pieces of legislation were literally dictated to our government by the OECD bureaucrats in Brussels. As one of the respondents to last week’s column noted: “So much for our sovereignty indeed!”
The same respondent perceptively observed: “Here’s the problem: If you say to the OECD or the EU, ‘Let’s talk it over’, they’ll say, ‘Fine. Have a good day.’ But what will come next is blacklisting. No ifs, ands or buts about that. And if you’re blacklisted, two things will happen.
“First, you will lose all your A-list and B-list banks and trust companies in the twinkling of an eye. They call it ‘de-risking’. Fact is, the parents of these financial institutions simply can’t afford, reputationally, to be operating in a black-listed ‘rogue’ country. If they pull out, there goes your middle class, or what’s left of it.
“The second thing that will happen is infinitely more devastating — for everybody. We will lose our correspondent banking relationships across the board, which, very simply put, means we would not be able to send or receive funds via wire transfer or conduct simple international banking transactions. Even the Central Bank’s own correspondent banking relationships would be under extreme threat.
“If that happens — and there is near universal agreement that it would be an inevitable consequence of blacklisting — we’d be dead in the water. Commerce and our international payments system would grind to a halt. We — businesses, individuals, the whole country — would be cut off from any credible source of foreign funding. Or what we would have to pay for it would be so extortionately expensive as to simply not be sustainable.
“And let’s be clear: any government that causes the foregoing to happen, all in the name of standing tall and standing up for our sovereignty, would be thrown out of office overnight. But who would even want to govern then? The economy would collapse, and the country would be engulfed in chaos. Political stability would be a certain casualty as well.”
What are our options?
One of the respondents asked and answered the question: “So, with such a prospect facing us if we don’t capitulate, what really are our options? Appeal to the U.S. for protection or intervention? That would get you a good laugh in Washington.”
Another respondent noted that there seems to be little to no strategic effort made by our government to engage influential or powerful Americans who could assist us. But the real question is, would they? And even if they were prepared to help, what would we ask them to do? “To get the EU and the OECD to ease up on us? That would never happen.”
Not if the neo-colonizers want to maintain the façade of a “level playing field”. Besides, they would argue: “All the other tax havens, including the British and Dutch dependencies, Singapore, Panama and even Israel, must bend, but not The Bahamas? The Bahamas will get a pass because Trump asked the EU to be nice to us? Not likely. Besides, the last person the EU is listening to nowadays is Trump.” So that is not an option.
“So what other options are there? Enlist the support of our CARICOM colleagues? That would draw an even bigger laugh. The Bahamas has been told repeatedly that we have some nerve asking for support for our economy when we, to this day, have still not signed on to the CARICOM Single Market — and have no intention of ever doing so because of the free movement of labor problem.
“Go to the United Nations or Organization of American States? That would draw the biggest laugh of all. Those are just talk shops. Besides, they really don’t think we have the ‘moral high ground’ on this one.
“The real problem is that we have no leverage. None! None that counts anyway. Even Panama with its big canal couldn’t leverage that into being left alone by the economic aggressors in Brussels.
“The old one about the United States not wanting to have an economic basket case right next door if our economy collapses, is and has always been seen as an opportunistic joke-argument. After living with Cuba and Haiti and all the associated immigration problems all these years, the U.S. views The Bahamas with its considerably smaller population as perfectly manageable. No one in Washington is going to lose any sleep over the prospect of The Bahamas becoming a failed state.
“So, the inflexible position of the OECD and EU is that they are not open to bilateral negotiations with any offshore financial center. Instead, there is a list of demands that all countries must, without exception, comply with if they want to avoid being blacklisted. The choice is theirs.
“So, when all is said and done, I really don’t think there is a thing we can do — or could have done before — to stave off the compendium of bills. It’s simply the price we have to pay if we want to stay off the blacklist, which we must do at all costs, for the reasons stated.
“In the final analysis, I really don’t think the government has much of a choice. Either we cave in or we crumble.”
The most illuminating take-away from these exchanges, which was comprised of eight, single-line pages of commentary by the three parties regarding this issue, is that Bahamians must come to terms with the harsh reality that we have indeed lost our sovereignty to the thugs in Brussels. We have replaced the colonizers in London with neo-colonizers in Brussels.
The most pressing issue of the day and the greatest challenge of all for this generation who desire a future in the financial services sector — if there is a future — is: how do we convert this setback into a comeback? How do we embrace the opportunities to sustain and grow this sector, despite the calculated, deliberate attempts of the OECD to undermine and ultimately destroy any competitive advantages of all offshore financial sectors?
The very existence of our second largest industry will heavily depend on how we answer the elemental implications that challenge the existential sustainability of this sector. This time, the wrong answers will surely see the final and irrevocable demise of our formerly vibrant and successful financial sector.
• Philip C. Galanis is the managing partner of HLB Galanis and Co., Chartered Accountants, Forensic & Litigation Support Services. He served 15 years in Parliament. Please send your comments to email@example.com.