Speech of FSC Chief Executive at AGM of the Insurer’s Association of Mauritius

I wish you all a very good afternoon!

At the outset, allow me to express my sincere appreciation for the honour that I have been given to address this distinguished audience for the Annual General Meeting of the Insurer’s Association.

The insurance sector in Mauritius has performed relatively well over the past years – with gross premium received for Long Term insurance business over MUR 13 billion (2012 - MUR 13.9 billion, compared to 2011 – MUR 13.0 billion) and over MUR 6 billion for General Insurance Business (2012 – MUR 6.18 billion compared to 2011 – MUR 6.25 billion); and total assets of MUR 92.6 billion and MUR 12.4 billion in 2012 compared to MUR84.2billion and MUR11.7billion in 2011 for companies in the long term insurance business and the general insurance business respectively.

We have, over the years, worked together on several issues affecting the sector. Last year (2013), we have observed that on average 52% of motor claims and 15% of non-motor claims were settled under one month following the flash floods of 30th March and that an average of 44% of total motor claims and 65% of total non-motor claims were recoverable from reinsurers.

On this note, allow me to seize this opportunity to commend the industry for having acted promptly to take the necessary measures in dealing with the settlement of claims following last year’s flash floods. But, efficient settlement should not be on an exceptional basis, however consistent throughout the year, notwithstanding, of course the due diligent verification as well as collaboration with other agencies like MVIAC/NTA to prevent abuse and misdemeanours.

Market Conduct: Insurers Leading the Way

Ladies and gentlemen,

We have regular interactions with industry partners and we will continue to do so and even improve on it, not only when drafting new sets of laws and regulations.

Financial services sector is one in which effective and efficient regulation is critical to consumer welfare, to businesses and to the economy as a whole. It is vital to ensure that consumers are well-informed about the products they are purchasing and that the businesses are treating the consumers fairly. In 2006, the FSC introduced guidelines for complaints handling by insurers to encourage insurers to adopt enhanced procedures in relation to consumer complaints. These guidelines set the minimum criteria which the FSC expects to find in an insurer’s complaints handling mechanism.

The effective implementation of the guidelines by insurers have reduced the number of complaints received at the FSC and it may be said that insurers are leading the way in this area, as changes in legislation last year brought a similar approach to the banking sector and today, banks are implementing the same model of mechanism for their complaints handling. This is also one of the models that jurisdictions in the region are looking to bring improvement to their financial services sector.

Last month, we launched a consultation exercise to seek the views and comments of the industry and the public on the Insurance (Insurance Agents) Rules and the Insurance (Insurance Salespersons) Rules.

The guidelines on advertising and marketing of financial products for our licensees, an initiative started last year, will also be issued shortly. We would like to place on record the collaboration we received from the Insurers’ Association in this matter.

Development of competency standards

As you are aware, the FSC is working on the development of competency standards for the financial services sector. The standards development process, as in many cases, was initiated with the insurance sector, and has now been extended to the licensees in the Securities Industry. The objective for the insurance sector is to develop competency standards for insurance intermediaries. These standards are expected to create an environment which will instill public confidence in the insurance products and will boost consumers’ interest in these products.

We have considered the comments received from interested parties on the October 2013 consultation paper on the proposed competency standards for salespersons, agents and brokers - the insurance intermediaries. This week, we issued our report detailing responses to the comments and proposals. The Commission has invited further comments on these proposals to be submitted by 11th April. We expect to hear from you very soon!

Corporate Governance

For the future development of the Mauritius International Financial Centre (IFC), we cannot ignore the pressures to harmonise the practices in Corporate Governance internationally. Good Corporate Governance for the insurance sector is of paramount importance to maintain its relationship with policyholders and sustain long term performances for the industry.

As insurers are custodian of policyholders’ money / assets, we remind you of the importance of full compliance with all corporate governance standards.

Risk Management

There is no need for me to draw your attention on the importance of risk management – for this is your forte - assessing and measuring the impact of past and potential future events. Such events potentially impact both the asset and liability sides of the insurer's balance sheet (statement of financial position), income and cash flows.

We all know that the insurance regulatory framework provides for insurers to put in place effective systems and functions to address the key risks it faces as well as regulatory obligations to ensure that these are adequate for the nature, scale, and complexity of its business. This overall responsibility of developing and executing such a comprehensive and robust system of risk management lies with the insurer’s board and management.

However, we have noticed during our previous on-going off-site and on-site monitoring exercises that some insurers are only perfunctory in terms of the disclosure requirements of the Code of Corporate Governance. This leads us to now question the ‘comply or explain’ basis for the financial services sector, for insurers in particular. Where, in substance, insurance companies probably lead in risk management, many of the annual reports are mere boiler plate legalistic disclosures which do not do justice to the sector.

Ladies and gentlemen

Allow me to share with you some of the other developments, which the FSC as regulator for the insurance sector has to address.

Capital Adequacy

A sound solvency regime is essential to the supervision of insurance companies, and regulatory capital requirements are a fundamental part of a solvency regime. Insurers face uncertainty both as underwriters of risk and as business enterprises. In addressing this uncertainty, the insurer’s capital is a shock absorber against losses. Having sufficient capital is critical for an insurer’s ability to meet its obligations to policyholders and creditors and to finance future growth in its business.

A solvency regime should also establish requirements for the adequacy and appropriateness of the capital resources used to meet the regulatory capital requirements. This includes the determination of the amount of capital available for solvency purposes and criteria for assessing the suitability and quality of elements of capital for inclusion in capital resources for solvency purposes.

Stress Testing Issues

In the pursuit of our objective to adopt a modern risk-based approach to supervision, we will continue to review and reinforce our supervisory tools. We’ll review our solvency models, and subsequently, the stress test the parameters therein and update them accordingly, if needed. We rely on your usual cooperation to build a sound risk management culture and look for frank and fair discussions.

IAIS Principles

To maintain the reputation of the Mauritius IFC, we need to demonstrate compliance with standards set by international standard‐setting organisations like the International Association of Insurers’ Association (the ‘IAIS’). The FSC is committed to implement IAIS Core principles. Mauritius is highly rated in terms of international best practices, and is also well positioned amongst African countries, as shown by the latest SADC peer review assessment.

However, there are two issues which still need to be addressed - urgently: Enterprise Risk Management and Group Wide Supervision. The improvement of group-wide supervision of financial groups will enhance financial stability of group members. Enterprise Risk Management is a fairly new requirement from the IAIS (but not so new in terms of Corporate Governance). The supervisory regime establishes enterprise risk management requirements for solvency purposes that require insurers to address all relevant and material risks. In the course of this year, the FSC will embark on the implementation of Good Enterprise Risk Management guidelines and as for Group Wide supervision, this is being discussed at the level of the Financial Stability Board Regional Consultative Committee for Sub-Saharan Africa FSB-RCG (SSA) – BoM, FSC and MOFED represent Mauritius on the FSB-RCG (SSA).

IFRS 4 (Phase II)

In June 2013, the International Accounting Standards Board (IASB) issued a revised Exposure Draft of its proposals for a new insurance contracts financial reporting standard. The Exposure Draft has been developed to improve the transparency of the effects of insurance contracts on an entity’s financial position and financial performance and to reduce diversity in the accounting for insurance contracts. At present, we do not have a comprehensive standard (International Financial Reporting Standards (IFRS) which deals with the accounting for insurance contracts. As a result, there are substantial differences in the accounting policies used by different companies to account for insurance contracts. The IASB is committed to issuing a Standard on insurance contracts, and expects to finalise a Standard for insurance contracts after reviewing the responses to this Exposure Draft. Insurers will have to adapt to these changes. Since our Companies Act 2001, we have no choice in adopting IFRS or not. It is better to that we start the discussion right away. Many of your Finance Directors, CFOs and accountants who worked in the insurance sector at the end of the last millennium will remember the accounting standard debate which led to IFRS4.

Financial Inclusion – Accessibility of Products/Services

On another note, I would like to draw your attention on financial inclusion and broadening access to financial services which have gained importance over the years, and today ranks amongst the priorities on the agenda of international standard-setting bodies and regulators around the world.

Enhanced access to financial services helps reduce poverty and improves social and economic development. For financial inclusion to be a success, improved access to financial services is a must. The Commission is fully participating in the Finscope survey initiated by the Ministry of Finance and Economic Development. Through this survey, we hope to get a holistic perspective of the financial services sector and thus be able to establish a micro insurance regulatory framework which will improve access to formal insurance services to the low income population.

Collaborative approach with the industry

The growth of the financial services sector depends largely on the role played by its main stakeholders. In order to develop new products and services, the collaboration of operators is crucial. The FSC has, over the years, maintained a collaborative approach with the insurance industry because we firmly believe that cooperation and on-going consultation with operators are vital for the development of the sector.

Many of the new laws, regulation and rules would not have been done in such a seamless manner without the collaboration of experts in the insurance sector and your association. To name a few, the Private Pension Schemes Act 2012, the draft insurance compensation fund regulations 2013 and the New reporting rules for long term insurance companies.

Ladies and Gentleman,

Captive Insurance

Captive Insurance is not new in Mauritius, though not that popular being mainly in the form of PCCs and SPVs. Worldwide, it is one of the fastest growing areas in the insurance sector with above 5,000 captives created since 1970. Many companies are turning towards the creation of a captive to self-insure their risks and avoid extra cost that insurers charged.

Again, like all things in finance, it is a question of balancing risk and return (in this case reduced costs as return). You should not view Captive insurance as taking away business from Insurers, but instead consider the opportunities that having such legislation may bring to professional risk management experts, which insurers are.

As our Jurisdiction need to develop the financial services sector to create more employment for our young people, we cannot ignore the increasing number of Captive insurers domiciled in the world and the FSC aims to position Mauritius as a Captive domicile of choice. While allowing this type of captive to continue to develop, the main objective is to attract more first party insurance captives from corporations or multinational groups from African and the Indian Ocean region. Starting with Pure Captives will allow our jurisdiction to build experience as a captive domicile before considering enlarging in a second stage the scope to allow for Third-Party Captives.

In addition, the objective of the new legislation on Captives will bring international best practice to the current framework for the regulation and supervision of captive insurance business. We have submitted our proposed draft bill to the Ministry / our policy makers to take it forward and to fruition and I am sure you will learn more about it in the coming weeks.

Conclusion

In 2013, financial and insurance activities accounted for 10.1% of GDP, and have witnessed a growth rate of 5.4 %. The insurance sector is an important contributor to the overall financial services sector which today, is a vital pillar of our economy. Such growth and resilience to the financial crisis should not lead to complacency and short-termism in our strategy; cutting margins to get bigger market share is also not the way forward if we want to build a sound insurance sector and protect policy holders. We must sustain growth of the sector through the deepening and increasing of the value of our services.

As for the FSC, smarter regulation remains a critical aspect for a sound financial sector, which is safer and more stable for investors and policy holders. The FSC will continue to forge a robust regulatory framework with the right balance between regulation and business development. And we rely on the ongoing collaboration of all our stakeholders to uphold the financial services sector.

May I take this opportunity to congratulate the outgoing Executive Committee for a year of achievements, meeting the various challenges faced in 2013 and wish the incoming one all the best.

Thank you for your kind attention.

Clairette Ah-Hen

27th March 2014

Appleby (Isle of Man) LLC v The Isle of Man Law Society (LSA13/0002)

One of the world’s leading offshore law firms has been knocked back by a judge quoting Karl Marx, after seeking a waiver from the Isle of Man Law Society’s indemnity insurance requirements.

Visitor decision - Appleby (Isle of Man) LLC v The Isle of Man Law Society (LSA13/0002)

ACCA: Multinational corporations, stateless income and tax havens

The corporate income tax system is not broken. It is true that some multinational corporations do not pay as much tax in their host economies as their consumers and voters in those economies might expect. Yet this does not necessarily imply any wrongdoing on the part of those corporations. As Kleinbard makes clear, multinational corporations are fully compliant with the law of the land in those economies where they operate and the governments of those economies have been unwilling to change the international income tax norms and tax architecture. 

It is in this environment that fiscal illusion can be deployed to increase the tax burden on corporations. Yet there is no evidence to support the view that the revenue already collected by corporate income tax has declined in recent decades. There is no evidence to support the view that the corporate income tax base has been eroded in recent years. There is no evidence to support the view that a decline in corporate tax revenue has contributed to current budget deficits. If anything it is clear that expenditure decisions, not decreased revenue, has contributed to these deficits. 

Nonetheless, the stateless income doctrine may be used as a catalyst for re-writing the corporate income tax system. In the same way that an old tax is a good tax, so an old tax system is likely to be a good tax system. If one were the accept Kleinbard’s argument at face value, then governments would need to modify substantially how corporate income tax works and various norms underpinning international double taxation agreements in order to redefine stateless income as being sourced in either the UK or the US (or indeed in any other economy). 

The question that needs to be answered is this: ‘What would be the consequences of expanding the definition of source for corporate income tax purposes?’ At present ‘stateless’ income is not stateless at all, it is simply not UK- or US-source income. Stateless income is not some form of economic rent, as Kleinbard would have us believe. Rent can be taxed with impunity. To the extent that stateless income is really a return on the development and ownership of intellectual property, then increasing taxation will have allocative efficiency consequences. At the same time it would also adversely affect the Irish and Dutch tax bases. It is known, however, that multinational corporations add value to both their home economies and their host economies. Tax havens add value by allowing multinationals to reduce their tax liabilities while increasing their investments in high-tax economies. An increase in their tax burdens would reduce those levels of investment, leading to reduced employment opportunities, reduced consumption and reduced innovation. 

It is not clear that tampering with the tried and tested norms of corporate income tax to (possibly) generate more corporate income tax revenue while reducing the corporate income tax collected in foreign economies, and possibly reducing investment at home, employment at home and consumption at home, is good policy.

Multinational corporations, stateless income and tax havens

Labuan IBFC Midshore Review: Issue No 2014/03/003, Mar 1 – Mar 15

The latest issue of Labuan IBFC’s Midshore Review is out now. This edition includes the following stories:

• Singapore Inland Revenue Authority Issues New Guides on Tax Treatment of Limited Partnerships Dated 1 March 2014 
• Cayman’s Financial Services Businesses Weigh In On Beneficial Ownership Registry Plan 
• Securities Commission to Step Up Capabilities for Islamic Fund, Wealth Management 
• Malaysia to Have 33% More Ultra-Rich By 2023 

Midshore Review is an online newsletter that looks at the news from the past two weeks and analyses them to reveal emerging industry trends related to the growth and development of financial centres around the world and more specifically, Labuan IBFC.

OECD Release of discussion draft on Action 1 (Tax Challenges of the Digital Economy) of the BEPS Action Plan

Public comments are invited on a discussion draft on the Tax Challenges of the Digital Economy.

In July 2013, the OECD published its Action Plan on Base Erosion and Profit Shifting. The Action Plan identifies 15 actions to address BEPS in a comprehensive manner and sets deadlines to implement these actions. Action 1 reads as follows:

Action 1

Address the tax challenges of the digital economy

Identify the main difficulties that the digital economy poses for the application of existing international tax rules and develop detailed options to address these difficulties, taking a holistic approach and considering both direct and indirect taxation. Issues to be examined include, but are not limited to, the ability of a company to have a significant digital presence in the economy of another country without being liable to taxation due to the lack of nexus under current international rules, the attribution of value created from the generation of marketable location-relevant data through the use of digital products and services, the characterisation of income derived from new business models, the application of related source rules, and how to ensure the effective collection of VAT/GST with respect to the cross-border supply of digital goods and services. Such work will require a thorough analysis of the various business models in this sector.

The Action Plan also provided that “[t]he OECD’s work on the different items of the Action Plan will continue to include a transparent and inclusive consultation process” and that all stakeholders such as business (in particular BIAC), non-governmental organisations, think tanks, and academia would be consulted.

As part of that consultation process, interested parties are invited to send comments on this discussion draft, which includes the preliminary results of the work carried out in relation to Action 1 of the BEPS Action Plan.

Comments on this discussion draft should be submitted electronically (in Word format) before 5.00pm on 14 April (no extension will be granted) to CTP.BEPS@oecd.org.

It is the policy of the OECD to publish all responses (including the names of responders) on the OECD website.

Please note that the draft proposals set out in this document do not represent the consensus views of either the Committee on Fiscal Affairs or its subsidiary bodies but rather are intended to provide stakeholders with substantive proposals for analysis and comment.

OECD’s Gurría welcomes international progress towards automatic exchange of information

OECD Secretary-General Angel Gurría has welcomed moves by more than 40 countries – reinforced  by EU leaders  - to commit to a detailed timetable to step up the fight against tax evasion.

The European Council last week called on a number of European states to join a group of “early adopter” countries committed to the new single global standard for the automatic exchange of information between tax authorities, developed by the OECD. The early adopters this week publicly announced their commitment to implement the new standard on the basis of ambitious, specific and co-ordinated timelines. At the same time, Austria and Luxembourg dropped their objections to revision of the EU Savings Directive, thereby paving the way for its adoption today.

Mr Gurría said: “The commitment by so many countries and jurisdictions to implement the OECD’s Global Standard on the basis of a specific and ambitious timetable is good news for everyone who wants to see a fair and transparent international tax system. The rapidity with which the new norms are being developed and agreed shows that the political momentum for reform is now overwhelming.

And he added: “Adopting the new global standard is not just a question of establishing co-operation between states, it is also about restoring the trust of citizens in government.”

The standard obliges countries and jurisdictions to exchange information obtained from their banks and financial institutions automatically on an annual basis.

G20 governments have mandated the OECD-hosted Global Forum on Transparency and Exchange of Information for Tax Purposes to monitor and review implementation of the standard. 

The OECD is expected to deliver a detailed Commentary on the new standard, as well as technical solutions to implement the actual information exchanges, during a meeting of G20 finance ministers in September 2014.

Evolution of the global information exchange landscape to form heart of Jersey Finance Annual Private Client Conference

Global developments in the information exchange arena, together with evolution within wealth management strategies, and structures in growth markets around the world are set to form the focus of the Jersey Finance Annual Private Client Conference in London this year.

Taking place on Tuesday 13th May at 8 Northumberland Avenue, the first London venue to have Musion 3D hologramming technology, the conference, entitled ‘A World of Opportunity’, will feature a number of keynote speakers, including Stephanie Flanders (Chief Market Strategist for the UK and Europe for JP Morgan Asset Management), and panel debates surrounding current issues affecting wealth management professionals. 

As well as sessions on the international transparency agenda, future trends and opportunities for private client practitioners will also be examined. In the fifth anniversary of the launch of the Jersey Foundation, the changing use of trust and wealth management structures in emerging and growth markets will also come under the microscope, including a discussion on philanthropy and the role of International Finance Centres (IFCs).

One of the keynote speakers, Stephanie Flanders will also be a panel moderator. Stephanie was previously an editor and presenter for the BBC on television and radio, an FT columnist and reporter for the New York Times. The award winning journalist also wrote speeches and advised the US Treasury Secretary in the Clinton administration. 

Richard Hay, Tax Partner and Head of the private banking practice at Stikeman Elliot, will also give a keynote speech. The Co-Chairman for the London-based international committee for STEP will explore the changing landscape for transparency and information exchange, analysing the impact of the ever increasing volume of data flowing across border, the various information exchange models, and the UK’s recent agreements with the Crown Dependencies. 

Geoff Cook, CEO, Jersey Finance, who will provide an introduction at the event, said:

“The global private wealth management landscape is evolving at a fast pace, driven by the emergence of new regional markets alongside an increasing political focus on transparency, information exchange and tax policy. I am delighted that such an impressive line-up of speakers and panellists join us for our event this year, to debate issues pertinent to private client practitioners, cut through some of the noise and uncertainties and provide a clearer picture of where the global private client sector is heading.

“With a focus on quality and stability, and regulatory and legislative standards that surpass many other countries and jurisdictions, Jersey has an increasingly important role to play in the long-term future of the international private client sector.”

The FSC Mauritius is consulting stakeholders on competency standards

In July 2013, the Financial Services Commission, Mauritius (“FSC Mauritius”) announced the development of competency standards, as part of its “Fair Market Conduct Programme”. The FSC Mauritius is establishing the minimum competence for specific licensees dealing with consumers and investors. This will help in ensuring that consumers and investors can expect professional conduct from the intermediaries that they deal with.

In considering whether a person is fit and proper under section 20 of the Financial Services Act 2007, the FSC Mauritius may inter alia, have regard to the following criteria:

1. financial standing;
2. relevant education, qualifications and experience;
3. ability to perform the relevant functions properly, efficiently, honestly and fairly; and
4. reputation, character, financial integrity and reliability.

Competence forms part of the fit and proper requirements and it is assessed with regard to the person’s education, qualifications together with relevant experience. Through the competency standards, the FSC Mauritius is formalising the minimum professional knowledge and skills which specific licensees need to have. The FSC Mauritius also intends to align the competency standards in the Mauritian financial industry with international standards and international best practices through this initiative.

A phased approach has been adopted for the development of the competency standards for the different sectors in the financial industry.

Insurance

In October 2013, the FSC Mauritius issued a consultation paper on the proposed competency standards for insurance intermediaries. The FSC Mauritius has considered the comments received from interested parties and is issuing a report on the comments together with its responses and proposals.

The FSC Mauritius is inviting further comments on the proposals to be submitted by 11 April 2014.

Securities/Capital Markets

The FSC Mauritius is issuing consultation papers on the proposed competency standards for securities and capital market intermediaries.

The FSC Mauritius is inviting comments on the proposed competency standards to be submitted by 30 April 2014.

FSC issues Consultative papers on Competency Standards for Securities and Capital Markets Intermediaries

In considering whether a person is fit and proper under section 20 of the Financial Services Act 2007, the Financial Services Commission (the “FSC Mauritius”) may inter alia, have regard to the following criteria:

• financial standing;
• relevant education, qualifications and experience;
• ability to perform the relevant functions properly, efficiently, honestly and fairly; and
• reputation, character, financial integrity and reliability.

Competence forms part of the fit and proper requirements and it is assessed with regard to the person’s education, qualifications together with relevant experience.

The FSC Mauritius is working on the development of competency standards to establish an adequate level of competency in the financial sector workforce. The competency standards will be developed for specific licensees dealing with consumers and investors, which involve the provision of advice and intermediaries services in connection with financial services.

This work has been initiated after taking into consideration the following issues:

• Complaints have been received from the general public on mis-selling of financial services.
• With the growing complexity of financial services, there is the need for the financial service workforce to be more competent.
• A competent financial sector workforce is also essential to position Mauritius as an international financial centre of good repute.

A competency standard is the minimum professional knowledge and skills which the licensee must meet in order to be licensed/authorised/approved/registered, and must continue to meet in order to maintain their licence/authorisation/approval/registration.

The objectives of the competency standards are:

• To ensure fair treatment of consumers of financial services;
• To ensure sound conduct of business in the financial services sector;
• To instill confidence in the financial services sector and encourage better consumer participation;
• To establish standards in order to preserve and maintain the good repute of Mauritius as an international financial centre.

The competency standards will apply to:

• a licensed person;
• in the case of licensed corporations, they may apply to authorised/ approved/ registered persons and/or the direct supervisors responsible for managing or overseeing the activities of authorised/ approved/ registered persons.

Covering Note
Consultative Paper - Investment Dealer
Consultative Paper - Investment Adviser
Consultative Paper - CIS Manager 

Guernsey: Commerce & Employment releases Financial Sector Strategy

The Financial Services strategy, which sets out a strategy for the future of Guernsey's financial services industry, has today been released by the Commerce and Employment Department.

In developing the strategy the Department has undertaken comprehensive consultation and achieved feedback from a variety of sources including financial services businesses, the Guernsey Financial Services Commission, Guernsey Finance and various other interested parties. Commerce and Employment has also worked with and through Policy Council's Fiscal and Economic Policy Group (FEPG).

Deputy Kevin Stewart, Minister for Commerce and Employment said:

"The financial services industry is a significant part of Guernsey's economy and it is absolutely essential that we do what we can to protect and enhance the industry. The strategy sets out the way forward to ensure that Guernsey remains a top tier international finance centre and provides the different sectors which make up the local financial services industry with certainty and guidance going forward."

The financial services strategy will be an evolving document that will be updated in response to ongoing changes within local, national and international business environments and proactive work being undertaken. The strategy will also be used as a working document for implementation and to benchmark progress and delivery within set timeframes. The Finance sector strategy is a core and integral part of the Department's recently launched Strategic Framework for Guernsey's Economic Development.

The document sets out the challenge to continue the success of the financial services industry and focuses on:

1. The overall strategy for the future to ensure continued success within the financial services industry
2. Sector specific strategies including the Banking, Fiduciary, Investment Funds and Insurance sectors
3. A review of Governance and reporting. The aim is to ensure that Government is working and communicating effectively as possible and to facilitate a professional, reputable and competitive business environment for Industry. This is vital to meet the demands and complexities of financial services, its evolution, diversification and development.

Hong Kong: Consultation on introducing new open-ended fund company structure

The Government launched a three-month public consultation on introducing a new open-ended fund company (OFC) structure to expand Hong Kong's legal structure for investment fund vehicles. 

"In view of the international trend where the corporate fund structure has become a more popular fund structure, the proposed additional OFC option will provide market participants with more flexibility in establishing and operating funds in Hong Kong," a government spokesman said. 

The spokesman pointed out, "We hope this would attract more mutual funds and private funds to domicile in Hong Kong." 

Noting that the Financial Secretary announced in the 2013-14 Budget that Hong Kong would provide the relevant legal and regulatory frameworks to strengthen its position as a premier international asset management centre, the spokesman said that the consultation launched today will seek views from the public and the financial services industry on the policy and legal frameworks for OFCs. 

Currently, an open-ended investment fund may be established under the laws of Hong Kong in the form of a unit trust but not in corporate form due to various restrictions on capital reduction under the Companies Ordinance. 

As an open-ended investment fund needs the flexibility to vary its capital in order to meet investor applications and redemptions, the current legal regime for companies does not enable such funds to be established in corporate form. 

To complement the existing unit trust structure, it is proposed that the new OFC will be an open-ended collective investment scheme structured in corporate form with limited liability and variable share capital, aiming to serve as an investment fund vehicle via which investments will be managed for the benefit of its shareholders.

Under the proposed OFC regime, the new OFC vehicle will be established under the Securities and Futures Ordinance (SFO) and be regulated and supervised by the Securities and Futures Commission (SFC).

The enabling provisions will be provided in the SFO to facilitate the making of a separate piece of OFC subsidiary legislation governing the detailed regulation of these new vehicles.

The SFO and the OFC subsidiary legislation will set out the full scheme of the OFC and cover matters relating to the creation and regulation of OFCs.

To supplement the SFO and the OFC subsidiary legislation, the more detailed requirements relating to OFCs and their operation, subject to further public consultation, will be set out in a separate OFC Code to be issued under the SFO.

Under the proposal, the OFC itself will be a pure legal vehicle for investment and therefore will not be required to be licensed as a licensed corporation under the SFO.

However, as an investment fund vehicle, the day-to-day management and

investment functions of the OFC must be delegated to an investment manager licensed or registered with the SFC to carry out Type 9 regulated activity on asset management.

The OFC will have to be registered with the SFC under the new legislation, and if the shares of the OFC are to be offered to the public, it must also be authorised by the SFC under the SFO in line with the existing arrangement adopted for investment fund offerings in Hong Kong.

Since OFCs are set up as an investment fund vehicle, the SFC will be the primary regulator for OFCs under the SFO.

The Companies Registry will be responsible for the incorporation and relevant statutory corporate filings of OFCs.

The Companies Registry will also maintain a register for OFCs and provide the public with services to access the OFC information that it holds.

The existing profits tax exemption to public funds will apply to publicly offered OFCs. For privately offered OFCs, profits tax exemption will be available under the existing regime for offshore funds with the central management and control located outside Hong Kong. 

The Government will consider carefully the exemption or the extent of exemption that should be applied to privately offered OFCs with the central management and control located onshore having regard to possible read-across implications. 

The consultation paper can be downloaded from the Financial Services and the Treasury Bureau (FSTB) website at

www.fstb.gov.hk/fsb/ppr/consult/doc/ofc_e.pdf 

Members of the public and the industry are welcome to send their written comments on or before June 19, 2014, by mail to Consultation on OFC, Financial Services Branch, FSTB, 24/F, Central Government Offices, 2 Tim Mei Avenue, Tamar, Hong Kong, or by fax to 2294 0460, or by email to ofc@fstb.gov.hk 

"We will analyse the views and comments received in order to further develop the detailed proposals," the spokesman added.

Singapore: Successful Launch of New Electronic Funds Transfer Service, “FAST”

The Association of Banks in Singapore (ABS) is pleased to announce the successful launch of FAST (Fast And Secure Transfers), the new electronic funds transfer service, on 17 March 2014. More than 33,000 transactions valued at S$64 million were processed on the first two days of operation.

The FAST service is operating smoothly and public feedback on FAST has been very positive.

Most banks allow the transfer of funds via FAST between customer savings and current accounts only. They do not provide for the transfer of funds between other types of accounts via FAST currently. For FAST transfers involving accounts other than savings and current accounts, bank customers can check the bank’s website or contact them on the availability of such a service before transferring the funds.

Bank customers can also refer to the ABS website at http://www.abs.org.sg/FAST.php for more information on the types of accounts that they can transfer funds to and from via FAST.

FAST is currently offered by 14 banks - ANZ Bank, CIMB Bank, Citibank, DBS Bank/POSB, Deutsche Bank, Far Eastern Bank, HSBC, Maybank, OCBC Bank, RHB Bank, The Royal Bank of Scotland, Standard Chartered Bank, Sumitomo Mitsui Banking Corporation and United Overseas Bank.

Mauritius: Rising stars head to Culinary Festival Bernard Loiseau 2014

The rising culinary stars of Constance Hotels and Resorts have been battling it out in kitchens across the Indian Ocean in order to make it to the prestigious Culinary Festival Bernard Loiseau.

The festival, held at Constance Belle Mare Plage from 31 March to 7 April, gives the island chefs the opportunity to cook alongside some of the leading Michelin-starred chefs of the world.

Competition has been fierce as young, inspired chefs seize the opportunity to compete for a chance to represent their hotel or resort in a festival which celebrates culinary passion, and inspires innovation and the sharing of expertise.

The road to Culinary Festival Bernard Louiseau

To qualify the chefs have gone through several rounds of internal competitions with only the winner moving on to the next stage.

Challenges have included a written stage where the chef must describe why they want to be entered into the competition and practical stages including creating dishes following a recipe from classic French cuisine and creating their own dishes from a mystery box of ingredients under timed conditions.

The chefs who have made it through have proved not only their culinary skills but their passion and dedication to creating innovative and inspiring food.

The chefs

The island chefs who have made it through to the final in Mauritius are:

Sasha Dinnoo – Constance Le Prince Maurice, Mauritius

Sasha started as a trainee at Le Prince Maurice and has worked her way up through the kitchen. She qualified for the final stage of the competition last year and loved the experience so much she’s come back for more, although this year she’s more determined than ever to win.

Emmanuel Fortuno – Constance Belle Mare Plage, Mauritius

Emmanuel loves cooking and is constantly striving for perfection, slowly and methodically improving his skills. It is this dedication and hard work which has taken him through the qualifying stages of this competition and into the Culinary Festival.

Sandy Sokalingum – Constance Lémuria, Seychelles

Mauritian born Sandy doesn’t let being a new father distract him from his passion for cooking or his determination to get to the final. Currently a chef de Partie at The Sea Horse, he describes himself as ‘in love’ with cooking.

Dammika Sarath – Constance Halaveli, Maldives

Used to working under pressure, Dammika brings a sense of serene and calm to the kitchen when he works. He loves everything to do with food and is proud to be part of the prestigious Festival.

Dinushan Patabadage – Constance Moofushi, Maldives

Always keen to learn new dishes and try new techniques, Dinushan is a very creative chef and is excited by the learning experience offered by competing in the Culinary Festival. Both passionate and ambitious, he is keen to put everything he has into the event.

Yogessen Ramen – Constance Ephélia, Seychelles

A chef at Ephélia, Yogessen is passionate about food and keen to add to his expanding skillset with techniques and advice acquired from the Michelin-starred chef he is paired with.

Navasana Spa Opens at Outrigger Mauritius

The Navasana Spa is now open at the Outrigger Mauritius Resort and Spa. The spa opened on 19 March and features 13 treatment cabins in a 1,800 sqm luxury retreat within the resort’s garden.

The Outrigger Mauritius Resort and Spa is a luxury 181-key absolute beachfront property on the south coast of Mauritius owned by Outrigger Hotels and Resorts. The resort opened on 30 January.

The Navasana Spa uses the French product, “TERRAKE” known for its spa concepts inspired by four elemental forces that made the birth of the world possible: Earth, water, plant life, and air and light.

Within the spa, six cabins are reserved for water treatments: hydro-massages, invigorating jet showers, and balneotherapy. Facilities include a hydro massage corridor, sauna, hammam, and a Jacuzzi. The seven other cabins are dedicated to Shiatsu, facial, manicure and pedicure, and a wide variety of massages from around the world. There is also a VIP double cabin with private bathtub, shower, and garden.

As well as large relaxation rooms with sumptuous armchairs, guests can use the private solarium with its secluded pool with a breathtaking view of the lagoon and hills, which adjoin the resort.

“All the signature treatments that discerning guests look for in a modern deluxe spa are available at our Navasana Spa,” said Frederic Chretien, general manager of the resort. “Complete relaxation at the spa is an extension of the complete hospitality approach that Outrigger offers throughout the hotel.”

African Central Bank Officials Participate in the IMF's Africa Training Institute (ATI) Course on Monetary Policy Analysis

Central bank officials from English-speaking African countries took part in an advanced course on key elements of the Forecasting and Policy Analysis System (FPAS) as it is used at leading central banks around the world. This course is part of the IMF’s efforts to assist sub-Saharan African (SSA) countries to modernize monetary policy. The event was jointly organized by the ATI and the IMF's Institute for Capacity Development (ICD). The course was facilitated by a team of IMF and ATI experts.

The course started with a review of modern monetary policy making, emphasizing its forward-looking character. Participants learned about new forecasting techniques and applied them to country studies, including in the context of a macroeconomic model. The participants also presented their macroeconomic forecasts and policy recommendation to a mock monetary policy committee.

During the final session of the seminar, Mr. Rundheersing Bheenick, Governor of the Bank of Mauritius, spoke about Mauritius’s experience with monetary policymaking since the establishment of the Monetary Policy Committee in April 2007.  Commenting on modeling, Governor Bheenick stated that “models provide estimates of what is not observable and guide policymakers in their discussions, … but modeling needs to be more rigorous.”  In this context, he emphasized the importance of developing the home-grown capacity in inflation modeling and analysis and in tailoring models to the specificities of countries.

At the conclusion of the seminar, Mr. Bulir (ICD, Course Director) indicated that the course strengthened the capacity of the participants (who are also recipients of IMF’s technical assistance) in the area of quantitative monetary analysis. Mr. Kramarenko (ATI Director) added that the IMF and its regional technical assistance centers will continue to provide extensive follow-up technical assistance and training on modeling and forecasting, which is an essential element of the on-going modernization of monetary policy frameworks in SSA. To promote peer-to-peer learning and provide continued distance support, the ATI and ICD have launched an online FPAS Community of Practice for the current course participants and their colleagues.

Thirty-one central bank officials attended from 14 sub-Saharan countries: Angola, Botswana, The Gambia, Ghana, Kenya, Malawi, Mauritius, Mozambique, Nigeria, Rwanda, Seychelles, Tanzania, Uganda, and Zambia.

Save Our Monkeys returns to the island of Mauritius to promote non-animal alternatives in research

This week representatives from the BUAV, including our scientific advisor Dr. Jarrod Bailey, are in Mauritius to hold a series of meetings and events.

A Pre-Clinical Research Bill, a bill which will promote the use of animals - in particular primates - in experiments, is due to be presented to the Mauritius Parliament in the new Parliamentary session.

The BUAV is holding a series of meetings to discuss the scientific criticism of the use of primates and other animals in research while raising awareness of the non-animal alternative methods that are available.

On Friday 21st March, the BUAV, in collaboration with the Department of History and Political Science of the University of Mauritius, will be holding a presentation by Dr Jarrod Bailey entitled: ‘A critique of the use of non-human primates and other animals in research’.

Save Our Monkeys would like to invite our supporters in Mauritius to attend this event:

Where: University of Mauritius, Lecture Theatre 2, The New Academic Complex of the University

When: Friday 21st March 2014, 3.00pm

OECD Release of discussion draft on Action 6 (Prevent Treaty Abuse) of the BEPS Action Plan

Public comments are invited on a discussion draft that includes the proposals produced with respect to Action 6 (Prevent Treaty Abuse) of the BEPS Action Plan.

In July 2013, the OECD published its Action Plan on Base Erosion and Profit Shifting. The Action Plan identifies 15 actions to address BEPS in a comprehensive manner and sets deadlines to implement these actions.

The Action Plan identifies treaty abuse, and in particular treaty shopping, as one of the most important sources of BEPS concerns. Action 6 (Prevent Treaty Abuse) reads as follows:

Action 6

Prevent treaty abuse

Develop model treaty provisions and recommendations regarding the design of domestic rules to prevent the granting of treaty benefits in inappropriate circumstances. Work will also be done to clarify that tax treaties are not intended to be used to generate double non-taxation and to identify the tax policy considerations that, in general, countries should consider before deciding to enter into a tax treaty with another country. The work will be co-ordinated with the work on hybrids.

The Action Plan also provided that “[t]he OECD’s work on the different items of the Action Plan will continue to include a transparent and inclusive consultation process” and that all stakeholders such as business (in particular BIAC), non-governmental organisations, think tanks, and academia would be consulted.

As part of that consultation process, interested parties are invited to send comments on this discussion draft, which includes the preliminary results of the work carried out in the three different areas identified in Action 6:

A. Develop model treaty provisions and recommendations regarding the design of domestic rules to prevent the granting of treaty benefits in inappropriate circumstances.

B. Clarify that tax treaties are not intended to be used to generate double non-taxation.

C. Identify the tax policy considerations that, in general, countries should consider before deciding to enter into a tax treaty with another country.

These comments should be sent on 9 April 2014 at the latest (no extension will be granted). The comments received by that date will be examined by the Focus Group at a meeting that will be held on the following week.

The draft proposals set out in this document do not represent the consensus views of either the Committee on Fiscal Affairs or its subsidiary bodies but rather are intended to provide stakeholders with substantive proposals for analysis and comment.

Comments on this discussion draft should be sent electronically (in Word format) by email to taxtreaties@oecd.org and should be addressed to:

Tax Treaties, Transfer Pricing and Financial Transactions Division

OECD/CTPA

It is the policy of the OECD to publish all responses (including the names of responders) on the OECD website.

After Seven Years New York Knocks London From The Top Of The Global Financial Centres Index

Today the Z/Yen Group publishes the fifteenth Global Financial Centres Index (GFCI 15), sponsored by the Qatar Financial Centre Authority. The full report is available here.

A summary of the main stories is below and more details are available in the full report:

New York, London, Hong Kong and Singapore remain the top four global financial centres. New York is now the leading centre although its lead against London is insignificant - two points on a scale of 1,000. London being overtaken by New York in the index is mainly due to London falling (it is the largest faller in the top 50 centres).

The 'big four' global financial centres are being chase. It is easy to focus on New York, London, Hong Kong and Singapore but others are catching up and now close behind. Three years ago (in GFCI 9) the difference between first and tenth was 117 points. The top ten centres are now within 75 points of each other.

The leading Asian Centres pull away from the weaker. There is a 'shakeout' in Asia, the leading centres - such as Hong Kong, Singapore, Tokyo, Seoul and Shenzhen are doing significantly better than the weaker centres (e.g. Kuala Lumpur, Manila, Jakarta and Mumbai).

Middle East centres continue to rise in the index. Qatar remains the leading Middle Eastern Centre just ahead of Dubai. Riyadh is up 16 places, Bahrain is up 12 places and Abu Dhabi is up 10 places.

Financial centres in Europe are still in turmoil. 23 of the 27 European centres in the GFCI declined by rank. Significant falls include Copenhagen, Edinburgh, Dublin, Madrid, Lisbon, and Rome. Athens in last place (83rd) is now 82 points adrift of Reykjavik, second to last.

Offshore centres struggle with reputation and regulation. All except Gibraltar and the British Virgin Islands decline in the ranks.

There are three new entrants to the GFCI, Busan, Almaty and Casablanca.

Mark Yeandle, Associate Director of the Z/Yen Group and the author of the GFCI said "London sees the largest fall in the top 50 centres. This seems to be based on a number of factors including fears of regulatory creep, uncertainty over Europe, the perception that London might be becoming less welcoming to foreigners and perceived levels of market maniputation."

Global Financial Centres Index 15 (Spring 2014)

GFCI 15 provides profiles, rating and rankings for 83 financial centres, drawing on two separate sources of data - instrumental factors (external indices) and responses to an online survey. 103 factors have been used in GFCI 15, of which 52 have been updated since GFCI 14 and 1 is new. GFCI 15 uses 25,441 financial centre assessments completed by 3.246 financial services professionals. New York, London, Hong Kong and Singapore remain the top four global financial centres. New York is now the leading centre although its lead against London is insignificant - two points on a scale of 1,000. London being overtaken by New York in the index is mainly due to London falling (it is the largest faller in the top 50 centres). The ‘big four’ global financial centres are being chased. The top ten centres are now within 75 points of each other.

Offshore Pilot Quarterly (March 2014, Volume 17 Number 1)

Vulgar Thoughts and Sweating Horses

Samuel Taylor Coleridge’s essay, “On the Vulgar Errors Respecting Taxes and Taxation”, published in 1809, saw the national debt as the engine of economic growth, describing it as “the reservoir and works”. In 2014 taxation has become central to government finances whilst economic growth has become a challenge, in some instances, from which Hercules would flee. As a schoolboy I was only concerned with vulgar fractions and I had yet to experience the vulgar errors of taxes which have reflected badly on offshore financial centres.

Crowe Clark Whitehill, an accounting firm in the United Kingdom, has considered how “cultural issues” affect the attitude to tax planning. This month I chaired a conference in Panama and my particular talk was about culture – no, not the corporate kind, but that which is very important when business takes place between different countries and to which the UK accounting firm referred: the culture of countries. Although we may all be human beings, our cultures shape our view of the world; ask any Ugandan or Uruguayan.

Coleridge was also a philosopher and he applied his thoughts to the matter of taxes from which convictions about them would evolve, in the same way as our own do, such that the approach to tax planning – and what is acceptable – varies not only between the different cultures, but even individuals of the same nationality because, of course, the inner man has his own moral compass. It’s all a question, then, of how we look at things: that brings up the subject of sandwiches and shipping containers and to which I will return.

The United States of America’s government has seen its own credibility severely tested in recent times in relation to taxes. The country is a house divided over its Foreign Account Tax Compliance Act which has put the two main political parties (Republican and Democrat) at loggerheads with each other. This, of course, is aside from the enormous impact it has had on both domestic and international financial services institutions as well as US tax payers.

The US Information Reporting Program Advisory Committee has now, in fact, recommended to the Internal Revenue Service that it delays the implementation of FATCA until the beginning of 2015 in order to not only help taxpayers adjust to the new procedures, but to allow withholding agents to do the same. IRPAC argues that “substantial work remains to be done and can only be undertaken after final and comprehensive guidance is issued”.

The Republicans worry that the legislation has significantly increased government’s intrusion into the financial affairs of Americans who live and work abroad. It is said that there are 7.6 million Americans living outside the US. The party feels privacy is critical to the preservation of other fundamental rights and, certainly, my quip several years ago that the Statue of Liberty was offshore because it was where privacy could be found has been turned on its head by FATCA. As Anton Chekhov said: “You would marvel if, owing to strange events of some sorts, frogs and lizards suddenly grew on apple and orange trees instead of fruit, or if roses began to smell like a sweating horse…” Perhaps Americans now need a Statute of Liberty.

By some estimates the cost to each foreign financial institution of stature will average US$100 million. US Republican Senator Rand Paul and 3 other senators argue that FATCA falls far short of ending tax evasion and has produced in its wake a number of unanticipated destructive consequences. They have introduced a bill to restore privacy to their countrymen living in foreign countries and which has been referred to the Senate Finance Committee of which Rand Paul is a member. A Republican president launched the War on Terror by invading Afghanistan; now the same party is launching another offensive: the War on Error; from Afghanistan to Fatcanistan?

The president of Republicans Overseas, an organisation for Americans living abroad, argues that FATCA is not inevitable if sufficient support and momentum can be gained. This would be very bad news for the legion of professional advisers representing several disciplines involved in FATCA, a piece of legislation which was described by one professional commentator as the gift that keeps on giving and at the same time by some bankers as standing for “Fear and Total Confusion Act”. Meanwhile, the Republican National Committee on 24th January passed its Resolution to Repeal FATCA in terms of which it is resolved, inter alia, that “The Republican National Committee urges the IRS to cease causing the negative impact on the United States and its citizens overseas, and on the global financial system, in an attempt to vindicate FATCA’s misguided approach to tax enforcement”.

Even if FATCA eventually comes into law, the action taken by the Republican Party might still delay its implementation; and as America, rather than the UK, now rules the waves, and waives the rules when it chooses to, you can be certain that very little real thought went into its impact on the laws of other countries. Its disclosure provisions, for example, are illegal in some jurisdictions, so the co-operation of foreign governments is key; Canada has already displayed its reluctance to comply to US demands.

Sparta to Sputniks

The former US president Bill Clinton in a speech at Yale University eleven years ago said that as long as Americans thought that they would always be number one, they should continue to act unilaterally. However, he went on to say, that if they believed instead that they should be creating a world with rules and partnerships and habits of behaviour that they themselves would like to live in once the US is no longer the military, political, economic super power, then unilateral thinking was a very bad idea. History has illustrated this time and time again and empires of the past (the UK celebrated its final Empire Day in 1958) are quickly forgotten. It has been left to poets, such as Percy Bysshe Shelley, to provide commentary through imagery on matters we may fail, or refuse, to see:

"My name is Ozymandias, King of Kings:

Look on my works, ye mighty, and despair!"

Nothing beside remains. Round the decay

Of that colossal wreck, boundless and bare,

The lone and level sands stretch far away”.

Let me return to another analogy between Afghanistan at the beginning of this century and FATCA (besides unanticipated destructive consequences): in both cases, at the initial planning stage, insufficient thought went into the costs, the complications and the repercussions; “you are either with us or against us” became the creed and which, incidentally, was first voiced by a Russophobe British official in the 1830s, and not President George W. Bush. Certainly, Herodotus, the ancient Greek historian, who wrote about ancient Greece’s most important century (which was around 440 BC) tells a tale that puts one on guard against the uncertainty of fortune and the certainty that hubris is succeeded by nemesis.

The UK invaded Afghanistan (1839-1842) because of fears of a Russian takeover of the country and which inspired Rudyard Kipling to coin the term “Great Game” which is now being bandied about to describe the 21st century invasion, which, personally, I prefer to label “Great Shame”. Before the 1839 war a British intelligence chief warned: “There is nothing more to be dreaded… than the overweening confidence with which we are too often accustomed to regard the excellence of our own institutions, and the anxiety that we display to introduce them in new and untried soils”. This was so with the Soviets in the late 1970s and the West, led by the US, in 2001.

What is clear is that throughout history rising powers challenge existing ones, as Athens in the 5th century BC threatened Sparta and Germany did the same in Europe in the 20th century. The Greek historian and Athenian general, Thucydides, lived in classical Athens which was then the centre of civilisation (philosophy, history, drama and democracy) and whose development alarmed Sparta, the established power on the Peloponnese. There followed threat and counter-threat, competition and, eventually, confrontation. Thirty years of war followed and both were destroyed; as Thucydides put it, “It was the rise of Athens and the fear that this inspired in Sparta that made war inevitable”.

The US before the first world war – having assumed the UK’s former mantle of power and using it just as imperiously – liberated Cuba, threatened Britain and Germany with war to compel them to accept its position on disputes in Venezuela and Canada, and backed the insurrection that created the state of Panama which gave the US concessions to build a canal; an attempt was even made to overthrow the government of Mexico which at that time was supported by Britain and financed by London bankers.

Harvard University’s Commission on American National Interests says this about China: “a diva of such proportions cannot enter the stage without effect”. It is sobering, indeed, to see how fast that rise has been. This is a state whose gross domestic product was once smaller than Spain’s and has since become the world’s second-largest economy.

We have seen an arms race all too often before and will the growing military might of China spur the US on, just like Russia’s surprise Sputnik launch in 1957 stunned Washington and started a race into space? In 11 of 15 cases since 1500 where a rising power emerged to challenge a ruling power, war was the end result. Although we live in enlightened times where wars have been regional rather than global (often David’s sling has had no stone when confronting Goliath), a clash between two leading powers this century would be potentially damaging in the extreme for countries on the sidelines. Japan should not, for example, be the cat’s paw which draws the US too deeply into current disputes with China over the Senkaku Islands in the East China Sea. For six decades the US has ruled the waves in Chinese waters without hindrance, but that is changing.

Ships and Sandwiches

We hear the comment that China should be “more like us” from politicians in Washington and for me those words echo through the Khyber Pass in Afghanistan. It returns me to the issue of culture and the differences between us that we must understand – as I have frequently written and spoken about, especially in the case of Latin America. The US refusal to engage with Cuba is such a case, where Fidel Castro has shown that not only is no man an island, but, eventually, no island is a man.

But Cuba, in the global geopolitical scheme of things, is of little significance. The West’s dialogue needs to occur with China where the cultural differences go well beyond the belief that, unlike in Western minds, the number 13 is considered lucky. It was also Rudyard Kipling who observed a century ago that Asia is not going to be civilised after the methods of the West because there is too much Asia (it is the world’s largest continent) and she is too old. Should China have the biggest economy by the early 2020s and if its GDP per head were to reach half of US levels, its economy would be as big as those of the US and the European Union combined.

In 2012 about 500 million Asians were middle class and by 2020 that number might grow to 1.75 billion. India had no mobile phones in 1990 but by 2010 there were 752 million. Old Asia is indeed coming back to life, like India’s ancient Nalanda university (500 AD to about 1200 AD), which is rising from the ruins of the ancient Buddhist institution that was destroyed in the 1190s; it was an ancient centre of learning long before Oxford, Cambridge and Europe’s oldest university, Bologna, were founded. Its revival is spearheaded by China, Singapore, Japan and Thailand.

Robert Louis Stevenson wrote in his novel “Treasure Island” that maps are “an inexhaustible fund of interest for any man with eyes to see and two pence worth of imagination to understand with”. A glance at a world map will show that Africa (the second largest continent) is large enough to contain at least China, Western Europe, India and the US. It’s a big world out there and China is Africa’s biggest trading partner (trade last year surpassed US$200 billion).

Imagination and eyes went against conventional wisdom which had suggested that the solution for shipping in the mid-1980s was speed and so the answer appeared to be faster ships. Unfortunately, the result was more ships waiting in the harbour, playing havoc with cost economics. But it was the ports, not the ocean, where the solution lay. If ships could load and unload quicker, the turnaround of ships would be faster. Along came the container. Similarly, bread and meat for centuries have been English staples, but the fourth Earl of Sandwich in the 18th century – to feed (you may say) his gambling habit – put meat between two slices of bread so that he could eat while gambling.

What will the map of the future look like? It is to be hoped that the belief expressed by John Stuart Mill, the 19th century English philosopher and political economist, will be a theme picked up by more people in this century: “There is always need of persons not only to discover new truths, and point out when what were once truths are true no longer, but also to commence new practices, and set the example of more enlightened conduct…” Bill Clinton, and perhaps some former Yale graduates, would understand.

Offshore Pilot Quarterly has been published since 1997 by Trust Services, S. A. and is written by Derek Sambrook