In the midst of the ongoing COVID-19 pandemic and resulting global economic downturn, the British Virgin Islands’ (BVI’s) financial services industry continues to thrive, retaining its global position as a leading International Financial Centre (IFC). With the exception of an initial downturn between March and May (2020), the financial services sector posted strong third and fourth quarter growth figures in transactional activity. By the close of 2020, BVI firms acted on over US$5 billion of global transactions, from Initial Public Offerings (IPOs) to complex debt restructurings, and revenue and incorporation numbers were only slightly below those of 2019. This positive growth trend has continued into the first quarter of 2021 with strong expectations that 2020’s numbers will be exceeded by the close of the year.
Legislative And Regulatory Ove…
The continued vibrance and elasticity of BVI’s Financial Services sector is largely attributable to its present and historical links to Chinese/East-South East Asian markets internationally and sound management of the pandemic locally. A large percentage of BVI business continues to emerge from the Asia-Pacific whose efficient regional management of the pandemic has allowed business to continue largely unimpeded in a “new normal” anti-COVID-19 format. The number of total cases and deaths (as of February 2021) in East & South East Asia (3 million+ cases) are only a fraction of those in North America and Europe (60 million+ cases). Twelve countries in Europe and North America have surpassed one million infections and 15,000 deaths, whereas India and Indonesia (the world’s 2nd & 4th largest populations) are the only Asian countries to surpass one million cases and 10,000 deaths (as of February 2021). As a result, significant activity in the real economies of Asia has continued, supported by government funded economic stimulus measures. Sound public health management has set a firm foundation for a strong regional economic recovery in 2021. Additionally, both China and Hong Kong’s financial markets have remained in an extended hyperactive phase throughout the pandemic, stemming from China-US trade-technology tensions and the vast investment opportunities China’s economic recovery presents investors in economically stagnant Europe, North America, and the Middle East. The cumulative result has been a sustained demand for financial services in a period of fluctuating global economic conditions. As a trusted and already regionally integrated international financial centre, the BVI is a direct beneficiary of the conditions for economic recovery in the Asia-Pacific.
The territory has aided in its own good fortunes by keeping the jurisdiction open for business throughout the pandemic via efficient and effective management of the crisis. By the close of February 2021, the territory had registered 153 total positive cases and 152 recovered cases, and a total suspension of in-office government services of less than one month throughout the duration of the pandemic. The jurisdiction has worked hard to maintain its reputation as consistent, efficient, and trustworthy in both certain and uncertain economic times. The BVI retains the confidence of the Asian markets and remains the Asia-Pacific’s offshore jurisdiction of choice for facilitating cross border trade and investment as the pandemic continues unabated.
Preparation For The Post-Pandemic Economic Order
While the financial services sector has fared comparatively well during the pandemic, with vaccine drives underway world-wide and the likely resumption of global economic growth in 2021, the jurisdiction is set to continue to thrive in post-pandemic conditions. Financial services are in the midst of a long-term technological transition to digital finance and Fintech; a process that began in the last decade unleashed by the 2008-09 global financial crisis.
The BVI is adapting to the evolving structure of its traditional markets and adopting the new digital implements necessary to stay on the cutting edge of international finance and to secure its leading position as an IFC in the post-pandemic financial order. Critical actions that can be pursued now towards this objective include both the pursuit of new markets and provision of new products or industry segments.
New High-Volume Markets
Having successfully serviced East & South East Asia for the past 35 years, the financial services sector will expand its presence in South Asia where the emerging Indian market leads regional growth in the region. Following in the footsteps of China’s spectacular 40 years of transformation, India continues its rapid economic development and will surpass Japan as the world’s third largest economy by 2030. India is undergoing a triangular transformation in terms of building fundamental infrastructure, rapid integration of online services, and digitisation of finance. The Indian market has yet to reach a maturation or saturation point in a developing eight trillion-dollar economy of 1.2 billion people. The BVI is uniquely positioned to engage the market as it has done successfully throughout the region. India is at a similar developmental phase as China in the early 1990s when the BVI expanded into East Asia. It is an insatiable market which holds the potential for an uninterrupted 30-year supply of corporate business for the financial services industry.
Second to India, the BVI must also scale up its presence in emerging Indonesia, South East Asia’s largest and Asia’s fifth largest economy. It is also presently undergoing an infrastructural transformation, broad IT integration, and digitisation of finance as the country develops and modernises. As a growing 3.3 trillion-dollar economy of 273.5 million inhabitants, Indonesia presents massive opportunities for the financial services industry over the next decade. Exponential growth over the present decade will provide a large enough market expansion for the BVI to capture a significant percentage of the market.
The Rise Of The International Fintech Financial Centre
International finance and financial services are evolving in the direction of digital finance and Fintech, a continuation from the previous decade. Asia leads the world in the transformation process utilising blockchain technologies and other implements, followed by North America and Europe. The BVI’s digitisation and Fintech regime has grown steadily between 2015 and 2020, inclusive of digital payments, crypto assets, and initial coin offerings. As Fintech has evolved and international and onshore regulatory frameworks have become more clearly defined, the opportunities for participation in the digital transformation process have increased.
The possibility now exists to transform the jurisdiction from a world leading International Financial Centre (IFC) to a premier International Fintech Financial Centre (IFFC), a one-stop-shop for the structuring, domiciling, and financing of Fintech business globally. The BVI has an existing base of resources, expertise, and legal and administrative structures to be able to provide a similar base of Fintech financial services as hubs in established markets. In addition, it is positioned to offer Fintech businesses worldwide the plethora of corporate, tax, and other offshore specific benefits that have attracted 800,000 companies to its shores over the last 35 years.
The morphing of the BVI from an IFC into an IFFC has low infrastructural and capital costs, requiring primarily the implementation of a forward looking comprehensive legislative and regulatory framework. The ability to transform is very much within the means of the jurisdiction which is already off to a good start in upgrading its digitisation related legislation and launching its Fintech Regulatory Sandbox in 2020.
Leading In The Whole Of Asia
The BVI’s existing integration into Asia-Pacific finance, an uneven global recovery centred on China and its neighbours, and the jurisdiction’s ability to stay open for business throughout the pandemic provided the conditions for its financial services sector to thrive throughout the crisis. As the pandemic recedes, the BVI is making the necessary adjustments to maintain and expand its global market share in global finance and financial services. In doing so, it will continue its path to growth as a leading international financial centre servicing the whole of Asia.