Bermuda

Bermuda

Bermuda is a British overseas territory in the North Atlantic Ocean. Located off the east coast of the United States, its nearest landmass is Cape Hatteras, North Carolina, about to the west-northwest. It is about south of Halifax, Nova Scotia, Canada, and northeast of Miami, Florida...

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

Tourism

Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...

 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

North America

North America is a continent wholly within the Northern Hemisphere and almost wholly within the Western Hemisphere. It is also considered a northern subcontinent of the Americas...

. The industrial sector is small, and agriculture

Agriculture

Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...

 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.

History

Bermuda has enjoyed steady economic prosperity since the end of World War II

World War II

World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...

, 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

Reinsurance

Reinsurance is insurance that is purchased by an insurance company from another insurance company as a means of risk management...

, for which it is now a world center) and tourism, with those two sectors accounting for more than 70% of the total balance of payments

Balance of payments

Balance of payments accounts are an accounting record of all monetary transactions between a country and the rest of the world.These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers...

 current account foreign exchange

Foreign exchange reserves

Foreign-exchange reserves in a strict sense are 'only' the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, Special Drawing Rights and International Monetary Fund reserve positions...

 receipts. However, the role of international business in the economy is expanding, whereas that of tourism is contracting.

International Finance Role

Bermuda is considered an offshore financial center, and it has a well-deserved reputation for the integrity of its financial regulatory system. A recent KPMG

KPMG

KPMG is one of the largest professional services networks in the world and one of the Big Four auditors, along with Deloitte, Ernst & Young and PwC. Its global headquarters is located in Amstelveen, Netherlands....

 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, giving evidence of Bermuda's commitment to the facilitation of money laundering and other financial crimes.

Aiming to meet or exceed international financial standards, the Bermuda Monetary Authority

Bermuda Monetary Authority

The Bermuda Monetary Authority is the financial regulatory agency for Bermuda.It is responsible for the licensing of companies proposing to carry on the business of deposit taking , insurance, trusts, investment funds, money service, and investment business in Bermuda; the issue and redemption of...

 (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

Financial services

Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are credit unions, banks, credit card companies, insurance companies, consumer finance companies,...

 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

September 11, 2001 attacks

The September 11 attacks The September 11 attacks The September 11 attacks (also referred to as September 11, September 11th or 9/119/11 is pronounced "nine eleven". The slash is not part of the pronunciation...

 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

Bacardi

Bacardi is a family-controlled spirits company, best known as a producer of rums, including Bacardi Superior and Bacardi 151. The company sells in excess of 200 million bottles per year in nearly 100 countries...

 Ltd., ACE Ltd.

ACE Ltd.

ACE Limited is the parent company of the ACE Group, a global provider of insurance products covering property and casualty, accident and health, reinsurance, travel, creditor, and life insurance. It also operates in the Lloyd's insurance market in London...

, Intelsat

Intelsat

Intelsat, Ltd. is a communications satellite services provider.Originally formed as International Telecommunications Satellite Organization , it was—from 1964 to 2001—an intergovernmental consortium owning and managing a constellation of communications satellites providing international broadcast...

 Ltd., XL Capital Ltd., Bunge

Bunge

Bunge may refer to:* Bunge Land, one of the New Siberian Islands* Bunge Limited, an agribusiness company* The unicameral National Assembly in the Tanzanian legislature* A modifiable avatar stat in GunBound- People with the surname Bunge :...

 Ltd., Jardine Matheson Holdings

Jardine Matheson Holdings

Jardine Matheson Holdings Limited often referred to as Jardines, is a multinational corporation incorporated in Bermuda and based in Hong Kong. While listed on the London Stock Exchange and the Singapore Exchange, the vast majority of Jardines shares are traded in Singapore...

 Ltd., Global Crossing

Global Crossing

Global Crossing Limited was a telecommunications company that provides computer networking services worldwide. It maintained a large backbone and offered transit and peering links, VPN, leased lines, audio and video conferencing, long distance telephone, managed services, dialup, colocation and...

 Ltd., Foster Wheeler Ltd., and Royall Lyme Bermuda Ltd. Some companies, however, are considering or planning a move to Ireland

Republic of Ireland

Ireland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...

 in search of "a more stable environment". These include Accenture

Accenture

Accenture plc is a global management consulting, technology services and outsourcing company headquartered in Dublin, Republic of Ireland. It is the largest consulting firm in the world and is a Fortune Global 500 company. As of September 2011, the company had more than 236,000 employees across...

, Covidien

Covidien

Covidien , formerly Tyco Healthcare, is a healthcare device and supply company, incorporated in Dublin, Ireland, although its corporate offices are located in Mansfield, Massachusetts. On June 29, 2007, Covidien became an independent publicly traded company after being spun off from Tyco...

, Ingersoll-Rand, Tyco Electronics

Tyco Electronics

TE Connectivity, Ltd., previously known as Tyco Electronics, Ltd., and formerly a segment of Tyco International, is a leading global provider of engineered electronic components, network solutions, undersea telecommunication systems, and specialty products for customers in more than 150 countries...

 and 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 labor organization; the professional Bermuda Public Services Union, with a steadily increasing membership; and the Bermuda Union of Teachers.
Organized labor 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 labor 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

Free port

A free port or free zone , sometimes also called a bonded area is a port, port area or other area with relaxed jurisdiction with respect to the country of location...

, 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.

In February 1970, Bermuda converted from its former currency, the Bermudian pound, to a decimal currency, the Bermuda dollar

Bermuda dollar

The dollar is the currency of Bermuda. It is normally abbreviated with the dollar sign $ or, alternatively, BD$ to distinguish it from other dollar-denominated currencies. It is subdivided into 100 cents...

, pegged to the U.S. dollar.

Agriculture

A major Bermuda industry of the 1920s was the export of early vegetables and flowers to New York

New York

New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...

. Bermuda had three crops per year. The Bermuda Botanic Gardens

Bermuda Botanical Gardens

Bermuda Botanical Gardens features of flowers, shrubs, and trees. The Botanical Gardens are located in Paget Parish, Bermuda a short drive from downtown Hamilton....

 (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

Cornell University

Cornell University is an Ivy League university located in Ithaca, New York, United States. It is a private land-grant university, receiving annual funding from the State of New York for certain educational missions...

 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

Lawrence Ogilvie

Lawrence Ogilvie was a Scottish plant pathologist.Ogilvie was a UK expert on the diseases of commercially-grown vegetables and wheat from the 1930s to the 1960s....

 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

Lilium longiflorum

Lilium longiflorum, often called the Easter lily or November lily, is a plant native to the Ryukyu Islands and Taiwan. It is a stem rooting lily, growing up to 1 m high. It bears a number of trumpet shaped, white, fragrant, and outward facing flowers.-Cultivation:A variety of it, L. longiflorum var...

 exports to New York

New York

New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...

 — vital financially to Bermuda — became badly diseased from the late 19th century to the mid 1920s. Lawrence Ogilvie

Lawrence Ogilvie

Lawrence Ogilvie was a Scottish plant pathologist.Ogilvie was a UK expert on the diseases of commercially-grown vegetables and wheat from the 1930s to the 1960s....

 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.

Statistics

GDP – purchasing power parity:
US$4.5 billion (2004 est.)

GDP – real growth rate:
4.6% (2004 est.)

GDP – per capita:
purchasing power parity – US$69,900 (2004 est.)

GDP – composition by sector:

agriculture:
1%

industry:
10%

services:
89% (2002 est.)

Population below poverty line:
19% (2000)

Household income or consumption by percentage share:

lowest 10%:
NA%

highest 10%:
NA%

Inflation rate (consumer prices):
2.8% (November 2005)

Labor force:
38,360 (2004)

Labor force – by occupation:
clerical 19%, services 22%, laborers 3%, professional and technical 17%, administrative and managerial 15%, sales 19%, agriculture and fishing 3% (2004 est.)

Unemployment rate:
2.1% (2004 est.)

Budget:

revenues:
US$738 million

expenditures:
US$665 million (FY04/05)

Industries:
international business, tourism, light manufacturing

Industrial production growth rate:
NA%

Electricity – production:
675.6 million kWh (2007)

Electricity – production by source:

fossil fuel:
100%

hydro:
0%

nuclear:
0%

other:
0% (1998)

Electricity – consumption:
619.8 million kWh (2007)

Electricity – exports:
0 kWh (2007)

Electricity – imports:
0 kWh (2007)

Agriculture – products:
bananas, vegetables, citrus, flowers, dairy products, honey

Exports:
$783 million (2006)

Exports – commodities:
reexports of pharmaceuticals

Exports – partners:
Spain 13.8%, Germany 11.7%, Switzerland 8.8%, Denmark 6.6%, UK 6% (2007)

Imports:
$1.162 billion (2007)

Imports – commodities:
clothing, fuels, machinery and transport equipment, construction materials, chemicals, food and live animals

Imports – partners:
South Korea 36.4%, US 15.7%, Germany 13.2%, Italy 11.8% (2007)

Debt – external:
$160 million (FY99/00)

Economic aid – recipient:
$NA

Currency:
1 Bermudian dollar (Bd$) = 100 cents

Exchange rates:

• Bermudian dollar (Bd$) per US$1 – 1.0000 (fixed rate pegged to the US dollar)

Fiscal year:
1 April – 31 March