Transparency and public financial management

According to Standard & Poor’s, you have a prosperous economy with a favorable asset position, a well-developed tourism sector, and a steadily spending GDP [gross domestic product]. This positive outlook is based on the expectation of the successful implementation of recent measures designed to modernize the public sector and strengthen governance. This, coupled with productive growth of 3 percent, will constitute gradual reduction in debt over the next few years. How committed has your administration been to financial stability while increasing transparency and accountability?

Let me put it this way: we think the Turks and Caicos Islands is going to be held up as an example for the rest of the Caribbean in terms of transparency and public financial management, and I’m very proud of what we’ve been able to achieve. The government is very committed to maintaining a strong and transparent oversight of the financial sector, the public finance management function of government. We’re committed to the production of a surplus budget on an annual basis; we’ve done that for the last three years and, with trajectory in the medium term, we will continue to do so. That progress has been accomplished by the rationalization of the revenue system and we’ll continue to work on that to ensure that we reduce the burden of taxation while still growing the economy. That’s where we are.

After four years, you’ve turned deficits into surpluses. That’s a big accomplishment…

Most Caribbean countries have structural deficit problems and we hopefully have surmounted those and in the foreseeable future will continue on a path of surplus budgets rather than structural deficits.

You signed up to the OECD’s [Organization for Economic Cooperation and Development] Multilateral Convention on Mutual Assistance in Tax Matters, and the IMF [International Monetary Fund] congratulated the work done by your Financial Services Commission. They say you have made notable progress, but that more work is needed to modernize legislation and improve oversight. How do you compare with other destinations in the region as an offshore financial-services provider? Do you believe there is room for growth in the financial-services sector?

The government has recently formed the International Finances Services working group to look at the production of new cutting-edge legislation and also the promotion of the financial-services industry. Of course, many of our competitors in the industry have carved out niches in different sectors or subsectors. Some of them are known for their banking, some are known for their insurance sector, and some are known for other sectors. Turks and Caicos Islands, as a financial-services jurisdiction, is not in the same category as the Cayman Islands or Bermuda or the Bahamas for that matter. What we are now doing is seeing what we can do to grow our sector, while remaining compliant.

We have signed up to every major protocol that relates to the transparency of the industry, keeping it clean and transparent. We’ve spent a lot of time, money, and effort on regulations and we now want to focus more attention on promoting the industry by implementing new legislation. It’s an extremely competitive area, and it’s not going to be easy to find new legislation in this environment. There’s a false notion in some OECD countries that every overseas financial-services center is up to no good, and out to undermine their tax structure. We want to make it clear that is not the business we’re in; we’re not a tax haven. We are a jurisdiction playing a focal role in financing commerce and making it easy for people to do business. We want to focus on the ease of doing business while maintaining strong transparent legislation. We’re located in a very admirable position in the world from a strategic point of view. We believe we can play a focal role in financial trade between South America, the Caribbean, and the rest of the European Union, and we need to find a way to leverage that position.

The Strategic Policy and Planning Department announced this month that imports for the first half of the year increased by 8.5 percent, and this results in a worsening of the overall trade balance by more than 10.4 percent. However, the increase in imports may also reflect the uptick in activity taking place in your economy, showing that Turks and Caicos consumers are buying and developing more. As a mainly importing nation, how are you trying to improve that balance?

As a small island nation, we are never going to improve that position with regard to physical trade. There are also invisibles like tourism and the statistics have to be read in their context. Turks and Caicos is not a material-producing nation; we’re not exporting oil or bauxite or any commodity. We export a lot of fish and a few other bits and bobs, so we will always have an imbalance in trade if you measure it strictly on physical movement of commodities. You have to look at the invisible trade between nations, including tourism and any element of financial services. If you want to take the total, then you will have to take a look at that 8 percent increase in imports and know that is going directly into construction that will have a significant impact on the provision of additional rooms to accommodate visitors. At the moment, we have a demand for additional room capacity in our tourism sector, a new trend in villa development. In the last two years, we’ve seen between twenty-five to fifty new villas in construction, and all of them in excess of $1.5 million dollars. That’s a reflection of what’s happening in the tourism sector.

You have been involved in property sales for thirty-five years. The real-estate market is one of the main promoters of economic growth, along with tourism and financial services, and is also a main source of investment. How is the real-estate sector benefitting lesser-developed islands? What message would you like to give to potential property investors?

I got involved in real estate in December 1979. Property owners are attracted by the ability they have to move around a country. Right now, the government is in a very strong position in that our GDP-to-debt ratio is extremely low. The debt-service level is less than 10 percent of government revenue and we are negotiating the guarantee we had with the UK for the loan facilitated in 2011, which is about to expire in February 2016. We will soon have very little residual balance left on that debt, so that puts us in a strong position to invest in the country. We are currently looking at massive investments in infrastructure, an all-new transportation program including air, sea, and road transportation. We are looking for institutional help to undertake an economic-impact assessment for a spine-road link through the islands, which would take a lot of development pressure off. A road link will make it very easy for people to look at real-estate purchasing opportunities in North Caicos, South Caicos, or some of the other islands. It is that accessibility that will bring the cost of construction down because now you can go to North Caicos and buy a piece of land for 50 percent cheaper than you can buy it elsewhere, but unless you intend to sit on the investment, there is still the question of construction and getting materials brought over to North Caicos. We’re looking at ports, roads, an airport, improvements; the whole transportation sector looks to benefit from the free cash flow that the government will be generating as the economy grows. This is in addition to the investment we will be getting from our partners, like the Caribbean Development Bank. I expect to see investment in the next five years somewhere close to half a billion U.S. dollars in new infrastructure investment from various sources.

Readers of Foreign Policy are constantly looking for new opportunities to invest. Turks and Caicos has many advantages: an English-speaking population, proximity to the United States, a dollar-based currency, no income or real-estate taxes, or corporate excise taxes, and in 2012 your government created the Turks and Caicos Investment Policy to facilitate the effectiveness of doing business. You are currently establishing the new Invest Turks and Caicos Agency (Invest TCI). In your opinion, how successful has the new Turks and Caicos Investment Policy been? How will Invest TCI play a role in facilitating greater investment?

There is a lot of emphasis placed in the world on the ease of doing business. The Turks and Caicos Islands is not included in the World Bank index because it’s a UK overseas territory. We know the ease of doing business is an important factor and that people and businesses are attracted to where the hassle level is low. We want to remove entry barriers, yet still do all of the necessary due diligence so we can avoid fraud or other bad elements penetrating the economy. We’re in the middle of a new business-transformation strategy to simplify the immigration, business licensing, and investment processes. A key performance index is related to how much time it will take to turn around a vacation to work permit, or a business license, and to move to an e-government platform so that most of what we now stand in line for, we can sit at our kitchen tables and get done. That’s the approach that we’re taking. Invest TCI will be focal to making business and investment easier by providing investors with a one-stop shop. They will hold your hand and take you through all the processes, so that no time is wasted. It has the impact of joining up government and reducing the entry barrier. I believe strongly in supply-side economics, so if you reduce the entry barrier to business, it will be more attractive for business.

Regarding your relationship with the United States, although you are a British Overseas Territory, your currency is the U.S. dollar, mainly because your main trading partner, and main source of tourists, is the United States. How have you benefited from this situation? What other assets do you offer to investors?

Of course, the U.S. currency is the reserve currency, so they can’t really stop anyone from using it. The dollar is the currency of the islands and there are good things that go along with that. Having the U.S. dollar is just easier and that has acted in our favor. We also have the proximity to the United States. Also of importance is our relationship with the UK, because we have a system operating under English Common Law, which is very easy to understand. People know what their rights are—the rule of law is very strong here—and if one could look at the incident of the recent suspension of the constitution here, as much as it was a negative experience for Turks and Caicos, it sent a message to the rest of the world that the rule of law is upheld here. The rule of law, the U.S. dollar, and our relationship with the UK and for that matter with Europe are to me the strong pillars of our economic success. Those relationships are more important than transactions and important to inculcate, work on, and maintain. We also have a strong relationship with Canada, and I believe there’s an ongoing effort to strengthen that relationship. We are in a very admirable position again with our location and one of the things we’re looking at is to be a regional hub for air transportation. Every plane that flies from the United States to the eastern Caribbean flies over here. If I go to Barbados for a conference, I have to fly to Miami. There is the highest per capita number of airlines coming into Turks and Caicos than anywhere else in the region.

You have dedicated years of service to the development of the Turks and Caicos Islands and its people. Your work in government has earned you the title of Most Excellent Order of the British Empire, OBE. What have been your most gratifying accomplishments? What have been your biggest challenges?

I believe in institution building because they don’t have life limits, so to speak. I have been involved in building a number of institutions on these islands. My biggest accomplishments have been that this is the second time I’ve had to work hard to rescue the economy. In the early ‘90s, we inherited an economy that was on the edge of bankruptcy, and I’ve done the same thing this time. Since 2012, we’ve been very successful in reestablishing a strong economic base and growth. To me, those would rank high on what I consider to be legacy issues. Generally speaking, I’m happy to be associated with a number of key public institutions that have been put in place to empower people and protect the vulnerable. Those are my greatest accomplishments.

Thank you for meeting with us, Minister Misick.