After 10 years, the British Virgin Islands (BVI) still ranks as the number one offshore jurisdiction, according to the VISTRA 2030 report, maintaining its ranking since the first study which was launched in 2010.
VISTRA 2030 – Unlocking opportunity for the decade ahead - highlights key trends in the global financial services industry, with insight on offshore financial centres like the BVI. Of 17 jurisdictions listed, the BVI ranks fifth in perceived importance, and outranks other offshore jurisdictions. Singapore, a midshore jurisdiction, ranks number one overall.
According to VISTRA 2030, the British Virgin Islands’ most valued attributes are its stability, expertise, flexibility and ability to offer global reach, which the report states accounts for the BVI’s “enduring stickiness”.
The report states that the BVI and some other offshore jurisdictions continue to “add significant value for clients, so it is no surprise that they are defying the doubters who have predicted their demise”.
“Clients value the BVI’s modern and flexible legal structure too. It facilitates the formation of cross-border entities and guarantees strong shareholder protections that promote co-investing - protections that are not always available in other jurisdictions.”
The report also named the BVI as a neutral intermediary where clients can “swiftly set up new BVI structures that are globally recognised and accepted for international business”. This trend is especially significant to clients from emerging markets which may find it easier to use intermediary structures.
It was noted that these types of structures enable economic stability and offer monetary benefits, such as is the case in Asia, where 75 percent of Hong Kong’s Seng Index “consists of companies with direct linkages to the BVI”.
One legal head of a corporate services firm opined that the offshore centres that continue to thrive are the Crown Dependencies and Overseas Territories are “expert in serving specialist needs and can provide more flexibility than the bigger financial centres”.
While respondents expect a shift towards midshore and onshore centres, the report states: “the decline of offshore has consistently been overstated over the past decade”. It also credits the BVI as being “extremely resilient” and remains “near the top of the global rankings ever since the study began.”
The report also expands on the industry’s transition from having clear distinctions between off-shore, midshore and onshore jurisdictions, to a more globalised and integrated industry, with more “sophisticated” financial centres. One such example noted was the survey findings that showed asset protection and facilitating foreign direct investment or FDI are now the key drivers for using corporate vehicles. Additionally, jurisdictions with more robust legislation are becoming more attractive.
As centres re being tasked to implement public registers of beneficial ownership information by the European Union, respondents have varying opinions on the implementation’s infringement on privacy. The survey indicates 18 percent and 39 percent of respondents strongly agree, or somewhat agree, respectively, that public registers are in breach of privacy rights.
While only 20 percent of the industry leaders surveyed believe that public registers of beneficial ownership information will “prevail”, 60 percent prefer a regulated system where information is made available to the relevant authorities as required.
China has seen an increase in aggregate billionaire wealth; growing from $981 billion to $1.2 trillion in 2020. Interesting to note are China’s perceived dominance in client origination, and industry leaders’ thoughts on the pandemic’s impact on the country, as “hindering its aim for economic supremacy”. China currently ranks second globally for the size of its economy.
The report states: “Unlike the global financial crisis of 2008, the coronavirus shock is purely exogenous, so a systemic financial crisis might not be inevitable”. However, the industry is divided on the evolving trends in a “post-Covid-19” world and the “new normal”.
“It’s increasingly clear that COVID-19 has exacerbated some pre-existing challenges, such as geo-political tensions, and created wholly new ones: recession and heavily indebted governments.”.
While it highlights projections from the United Nations Conference on Trade and Development (UNCTAD) which expect global FDI flows to contract by 30 to 40 percent during 2020/21, results from the VISTRA 2030 survey indicate only seven percent of professionals think economic activity will “dampen” for more than 12 months.
On top of the uncertainty caused by COVID-19, many professionals are challenged with the “heightened complexity of conducting international business”, further indicated by the drop from 61 percent to now 32 percent of respondents who are confident doing so.
On a positive note, it is opined that the crisis may create new opportunities for corporate service providers: “Restructuring, refinancing, and disputes work will be in high demand”.
The report concludes: “Complexity looms large, but opportunities exist, even amid the turmoil of the current environment; whether it’s responding to financial pressures, refocusing on new investments and growth initiatives, or adapting to new operating models”.
The 26-page VISTRA 2030 report highlights findings from a survey of 620 industry leaders along with 20 in-depth interviews. To read the full report, go to www.vistra.com/vistra2030.