“We need foreign capital.”

Not all foreign capital is created equal. We need to be smart about how we get money into Bermuda. In order of the value of foreign capital:

1. Earned from global business and paid as salaries to Bermudians. The paycheques of Bermudian employees by definition come in from overseas and get put straight into Bermudian pockets – then those Bermudians go out and spend it, sending money zinging around Bermuda.

2. Earned from global business and paid as rent/expenses to Bermudians. All the service companies that do work for global business, all the rent payments to Bermudian landlords. Again, straight into the pockets of Bermudians and then around the economy – especially to the service companies.

3. Earned from global business and paid as salaries to non-Bermudians. A large fraction of these paycheques are immediately paid to Bermudians as rents, another fraction to Bermudian businesses in services, and purchases, and a smaller fraction goes with them when they leave.

The worst possible thing we could do is sell local land or companies to foreign businesses. For the most part these transactions tend to just put temporary money into the pockets of the Bermudian former owners at high valuations and then imply an endless stream of dividend payments out of Bermuda’s economy in perpetuity.

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One Response to ““We need foreign capital.””

  1. J Starling Says:

    To play devil’s advocate, you say: “The worst possible thing we could do is sell local land”. How do you feel about the reduction of land licensing fees for foreigners to purchase houses here?

    I also think that, while you’re correct about the input side, we can also do more to reduce the outflow of capital from Bermuda too, that is the ‘leakage’ of capital.

    I’m thinking here in terms of capital leaking out of Bermuda for fossil-fuel or other commodities.

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