Financial Services Consultative Forum Immigration Sub-Committee Report – Part 1

First Published: 2005-01-19

The following document was released to the press and is reproduced here with four minor changes. Links to the Bermuda and Cayman Government web sites have been added instead of the attachments and two other attachments are not included so the reference to the attachment has been removed.

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FINANCIAL SERVICES CONSULTATIVE FORUM IMMIGRATION SUB-COMMITTEE REPORT 23rd December 2003

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Committee Members: –

Cyndi Williams-Rahming* – Co-chairman

Felix Stubbs* – Co-chairman

Ian D. Fair*

Rick Lowe*

Judith Whitehead*

*Attending members

Terms of Reference

1. Consider and advise on the impact of the Bahamianisation immigration policy on the Financial Services industry;

2. Generally advise on the relationship between immigration policy and the development and expansion of the Financial Services industry;

3. Consider the role of foreign professional specialists in the offshore sector;

4. Consider and advise on the freedom of movement of labour within the hemisphere/region (i.e. FTAA/Caricom) as it relates specifically to the Financial Services industry;

5. Review the way and manner in which different Ministries and national agencies currently inter-relate when required to work together and make recommendations for minimizing red tape;

6. Benchmark current immigration policy against immigration policy in other International Financial Centres.

The Committee did not address item 4 as another sub-committee of the Financial Services Consultative Forum ("the Forum") is considering this matter.

The Committee considered the following: –

1. Information from interviews with various members of the Department of Immigration and a former senior member of the said Department.

2. Information from personal and telephone interviews with approximately 30 members of the Financial Services Sector in the Bahamas including Bankers, Attorneys, Accountants, Fund Administrators and Fund Managers. All interviews were conducted on the basis that the sources would not be identified.

3. Bermuda Government web site

4. Cayman Government web site

5. The responses to the Financial Services Survey prepared by the Immigration Sub-Committee of the Forum. Participants completed the Survey on the basis that the sources would not be identified.

The following expressions have the following meanings throughout this document;

BFSS; Bahamas Financial Services Sector

DOI; Department of Immigration of The Bahamas

FSP's Financial Service Providers

FSS; Financial Services Sector

INTERVIEWEES; Persons interviewed by the Immigration Sub-Committee other than members of the DOI.

Introduction

There is a natural and inevitable tension between the stated policy of the Government to develop the Bahamas as a blue chip international financial center providing a full range of financial services to the global community, and a protectionist immigration policy which is intended to restrict the employment of non Bahamians within the sector. It is entirely predictable that such an immigration policy has been and continues to be perceived by foreign businesses as inconsistent with global trends and the realities of conducting international commerce.

We are living in an era of globalisation, and the FSS thrives on cross border business development, networking, constant change and the development of new products and initiatives. It will be impossible for the Bahamas to remain a first tier jurisdiction in the international FSS if it does not significantly liberalise its immigration policies to allow organizations to attract key personnel and back office staff so that providers and professional advisors will be able to properly service their international business and respond rapidly to client demands. At this time, there are not sufficient Bahamians with the necessary expertise and experience to support the growth of the BFSS. We recognize that the Bahamas cannot and should not entirely eliminate its protection of Bahamian FSS employees, but it is vital that the government frame a policy that balances the sectors need for expatriate expertise with the interests of Bahamians in order to stimulate the growth of the entire sector to the benefit of all Bahamians.

Committee Findings

1. The Committee explored the concept of Bahamianisation as it relates to the policies of the DOI.

a. Interviewees generally described their understanding of the "Bahamianisation" policy in different terms, but agreed that its overriding objective was to ensure that, "a qualified Bahamian should be given preference for a job over a qualified non-Bahamian." Most Interviewees believed that the DOI is generally guided by that policy in its consideration of work permit applications. However, beyond this broad principle, they were unable to identify any specific guidelines or regulations that govern the implementation of the Bahamian Immigration policy as it relates to expatriate workers.

b. Interviewees said that they were cognizant of the need to employ qualified Bahamians when possible, and affirmed the view that it always made economic sense for them to do so as such persons provide a company with a more stable work force and vital local knowledge of the business environment and infrastructure.

c. Interviewees were extremely critical of the lack of a printed, readily available, comprehensive DOI policy statement. They observed that their organizations do not have a clear understanding of

(i) the categories of persons who can expect to be granted work permits;

(ii) the factors taken into consideration by the DOI;

(iii) the actual application process, i.e., the procedural steps that the applications go through and the timeline for the application procedure; or

(iv) the duration of the permits.

For example, there is a general view that managerial staff will usually be granted work permits, but uncertainty about the duration of such permits and the likelihood of the same being renewed. Some Interviewees spoke of a maximum "5 year rule" while others provided examples of managerial staff requesting permits of 2 or 3-year duration and "being turned down" and given 1 year permits without explanation.

d. Interviewees observed as follows;

(i) organizations that move to the Bahamas almost always require work permits for their management team and certain key personnel, i.e. senior management, relationship managers, senior trust personnel, information technology personnel, persons designated to deal with headquarters due to language/procedural requirements, persons with a knowledge and history of the company and or Group, etc.

(ii) any DOI policy that would require key personnel to be replaced by Bahamian personnel trained over a fixed period of time, or which places a limit on the total length of time for which key personnel will be granted permits, would be regarded as a serious deterrent to organizations with long term business plans in the Bahamas.

The fact that there is uncertainty in these areas has contributed to a guarded approach by existing BFSP's to expansion and future business growth in The Bahamas.

e. Interviewees expressed concern that in certain cases the DOI personnel do not have sufficient qualifications or understanding of the BFSS to properly assess work permit applications and applications by Bahamians applying for the same job. They commented that hiring expatriates is an expensive undertaking for any company, and that they would not "go through the aggravation" and the expense of requesting permits unless it was a considered need. They advised that in addition to the expense of moving expatriate employees to the Bahamas, they always have to be concerned about the additional expense involved in the event that such employee does not assimilate into the organization/country.

Interviewees stated that they wish to have a close working relationship with the DOI and they understand and accept that they must explain/justify any work permit applications. They stated however that they found it difficult to achieve this mutually beneficial relationship because DOI personnel do not have a clear understanding of their corporate needs, operational requirements or a solid understanding of the FSS. This is particularly relevant when persons within the DOI recommend a Bahamian candidate over a selected expatriate proposed employee. The Interviewees observed that a "qualified applicant" involves more than academic qualifications, and includes exposure to international business environments, knowledge of the particular company culture and the cultures of the client base, and an ability to "fit" into the organization.

f. FSP's stated that in dealing with the DOI they often confront an attitude which gives the impression that the DOI is doing the applicants "a favour" in granting permits, as opposed to recognizing the importance and value of the FSS to the Bahamas. Concern was expressed that notwithstanding the wish to hire further expatriates to facilitate growth/expansion, there appears to be a view that requesting work permits for persons who are not regarded as holding key management positions is not acceptable, and that any such additional work permit applications will result in a negative backlash against existing permit holders and offend a "quota". Interviewees referred to a "quota" system which places a restriction on the number of work permits, and while there appeared to be widespread knowledge of such a system, there was no evidence that persons within the FSS actually knew the details of the so called " quota" system, or whether such a system in fact exists.

g. Interviewees expressed the need for a clearly articulated Immigration policy that bears the hallmarks of a working relationship between the sector and the DOI. Interviewees acknowledged the necessary balancing act between an immigration policy that actively promotes opportunities for Bahamians, and one which recognizes the need to attract and maintain a necessary level of expatriate expertise. Such a policy should not be negatively framed in terms of preventing expatriates from "taking" Bahamian jobs, but in the positive terms of facilitating foreign expertise to grow the entire BFSS and to increase training and job opportunities for Bahamians both locally and internationally.

h. There was significant criticism of the fact that the legal profession in the Bahamas is internationally regarded as closed to foreigners as a result of DOI policy. They observed that in their view there are not sufficient numbers of attorneys in The Bahamas experienced in financial sector products that can respond in a timely manner to the fast paced demands of the industry. In addition, they also observed that the closed nature of the profession has lead to a lack of sophistication and experience at the Bahamas Bar in key growth areas of the FSS.

The Bahamian legal profession was unfavorably compared with the local accountancy firms that have successfully integrated foreign expertise into their firms. Interviewees noted that such integration has provided the accounting firms with both additional manpower and reciprocal training opportunities for Bahamians within the global profession. The profession is also unfavorably compared with lawyers in two major island competitors of the Bahamas; Cayman and Bermuda. Both of those islands have immigration policies that permit local law firms to hire foreign lawyers. In Cayman, this has had the effect of enabling the island to eclipse the Bahamas (and many other jurisdictions) in the capital markets industry, while Bermuda has taken advantage of foreign expertise to develop a sophisticated insurance/offshore finance industry.

Participants noted that the Bahamas is not only competing with island jurisdictions, but also with London, Paris, Switzerland, Singapore Hong Kong and other jurisdictions, which, we were told, have liberal immigration policies with regard to foreign professional assistance to their respective FSS's. Further, it was observed that a greater depth of professional and other FSS expertise in the Bahamas would have the effect of giving clients a higher level of comfort with this country and this in itself would act as a magnet for new business. The fact that the Bahamas is apparently regarded by many as not having a sufficiently large pool of attorneys with expertise, depth and experience in certain cutting edge FSS products and related issues has contributed to both the fact and the impression that the Bahamas is "behind the competition" in key areas. It should be noted that these comments were not made in the context of a general discussion of the competence of the members of the Bahamas Bar, but simply to make the point that no country (and especially a small country such as the Bahamas) has within its nationals, an adequate number of professional advisors to fully service all of its needs with regard to a major industry.

i. A number of Interviewees stated that, in their experience, Bahamian employees, in many cases, are reluctant or unwilling to go abroad to pursue further training and to take advantage of the travel and job advancement opportunities available to them by virtue of their employment in multi-national organizations.

j. The Bahamas does not have sufficient numbers of skilled Bahamians to meet the needs of a growing FSS. Interviewees advised that prior to the retrenchment of the BFSS in 2000, the local employment market had reached a saturation level and there were not enough qualified Bahamians to fill the available jobs in the sector. Interviewees opined that there are still not sufficient qualified Bahamians to meet the expected growth of the sector and that in addition to the need to attract expatriate experts and innovators to grow the sector there are current urgent needs for compliance officers, trust accounting professionals, trust managers, and fund administrators. Interviewees advised that a significant liberalization of the immigration policy, which would enable them to employ qualified "backroom" staff, would also provide a much needed injection of manpower and expertise into the sector.

DOI procedure.

2. a. While all Interviewees acknowledged the existence of people within the DOI who were helpful in assisting them with work permit applications, the DOI inefficiency and poor attitude dominated every discussion and interview with both expatriate and Bahamians FSP's.

Interviewees complained that the telephone at the DOI headquarters on Hawkins Hill, New Providence either;

i rings busy for long periods of time;

ii rings unanswered;

iii if and when the telephone is answered, calls are transferred to departments where the phone also rings unanswered, or is busy, and that the calls often do not return to the operator;

iv Interviewees complained that unless they could speak to the particular person with whom they had a good working relationship, the responses were generally unhelpful and the standard reply was that "the matter was still under consideration", "the Board had not met", or "the Board had met but the matter was not on the agenda".

Apparently, work permit applications are usually only considered at meetings of the Immigration Board where both the Minister of Immigration and the Director of Immigration are in attendance. Interviewees were critical of this practice, and DOI personnel agreed that it does create delays in processing such applications. Applicants are aware that historically there have been periods of several months when the Board has not met due to other Ministerial commitments creating a backlog of unprocessed applications.

(b) See paragraph 1 (c) above re. the lack of DOI written policy.

(c) Interviewees wanted the ability to get initial work permits for key personnel for up to 5 years in duration with the confidence that, in the absence of extenuating circumstances, such permits would be renewed. They reported requesting 2 and 3-year permits, but receiving permits for a shorter time period without explanation, causing concern and uncertainty for both the applicant and the corporate sponsor. Interviewees felt that a policy that would enable long term work permit holders to apply for Permanent Residency status after an established time period would encourage long term business vision for the industry, and bring continuity and maturity to the BFSS.

(d) Interviewees regarded Short Term work permits as a vital tool for the industry. They have the need to bring to the Bahamas office personnel and other advisors on short notice for short periods of time, and for multiple entries. They require such applications to be processed rapidly.

In addition, Interviewees suggested the introduction of an "electronic pass" that would enable, for example, businesspersons attending meetings, internal auditors etc. to enter the Bahamas with ease, fast tracking them through Immigration at the airport. This would eliminate the oft-reported embarrassment to businesspersons who enter the country for business in circumstances that would not require them to have a work permit, but who undergo questioning at the airport by DOI personnel who are probing for a breach of local immigration laws.

(e) (i) Interviewees advised that work permit applications took an average of 4 months to be processed, and that there were a number of instances where key permits were not granted for 6 to 9 months. In the interim, there was rarely any helpful communication from the DOI without persistent telephone calls and requests from the applicant. Further, Interviewees expressed frustration with the time that it takes for the certificate of vacancy to be issued by Department of Labour and advised that it often took months to receive the certificate, files were often lost and communication was inefficient.

(ii) Interviewees observed that, on enquiry, DOI employees also did not appear to know when the Immigration Board would deal with applications, and were often unable to give advice on the time that permits would take to process.

(iii) Interviewees advised that the length of time that the process takes combined with the lack of transparency in the application procedure has had a negative effect in that it has created the perception that the Bahamas does not welcome or value expatriate participation in the sector. Bahamian attorneys, accountants and financial advisors, who are expected by their clients to understand local DOI policy and custom, expressed the same frustration.

(iv) Interviewees advised that the delays and uncertainty make it extremely difficult for organizations to hire qualified expatriate persons as good job candidates are unwilling to wait months before they know whether they will be moving to the Bahamas, relocating families, finding housing, schools, etc.

f. Interviewees observed that they frequently send work to other jurisdictions rather than subjecting potential hires to the uncertainty of the DOI application process or jeopardize existing work permits for key personnel. They further advised that the frustration and uncertainty of the Immigration policy and process has had an inhibiting effect on their plans for growth in The Bahamas. Interviewees advised that they do not regularly develop new FSS products in the Bahamas, as they do not have the confidence that they will be able to obtain work permits for the necessary foreign expertise to fully manage the same. In addition they advise that there is not sufficient depth in the local professional community to assist them in the development of new innovative products. Interviewees commented that FSP's in Bermuda and Cayman are not affected by similar limitations.

g. That Interviewees were aware that applications for work permits were periodically subject to delays due to complaints made to the DOI by Bahamians and specifically Bahamian employees of the company which is making the application. They advised of instances in which senior management learned through informal means that a complaint had been made to the DOI in connection with a work permit applicant, but was not given any details or formal notification of the nature of the complaint by the DOI, or the fact that such complaint was delaying the application.

h. Interviewees advised that, on occasion, DOI personnel telephoned an organization and spoke to employees about a work permit holder or applicant without informing senior management, creating a lack of comfort within management and raising concerns about an abuse of process by a government agency in an industry that is particularly sensitive about privacy and confidentiality issues.

i. Interviewees advised that, on occasion, DOI personnel conducted on-site visits without prior consultation with senior management. Such incidents have had the effect of undermining employer/employee relationships in the applicant organization, and have contributed to the view that the DOI is subject to arbitrary influences.

k. Interviewees reported additional delays up to several weeks after work permit applications had been approved by the Immigration Board before the permits were issued. Notifications were sent by mail when telephone/facsimile/e-mail would have been appropriate in a time sensitive industry. Participants observed that in many cases by the time that they received the approval letter, the deadline for responding had expired.

l Interviewees recommended that the work permit Application forms be reviewed as some of the questions are confusing, difficult to answer and irrelevant; for example, applicants have difficulty in producing all educational certificates and queried whether only relevant educational qualifications should be produced. Applicants however found the issue of the application format to be insignificant compared to the difficulties that they were experiencing with the application process as set forth above.

3. Interviewees complained that the promotion of the Bahamas as a jurisdiction specializing in the wealth management industry is at odds with the DOI's treatment of persons applying for Permanent Residence (both economic and non-economic) and Annual Residence. All Interviewees complained about the considerable length of time that Permanent Residence and Annual Residence applications take to process. Applicants spoke of a minimum of 9 to 12 months and often longer, and the frustration caused by the lack of communication and transparency in the approval process. Applicants for Economic Permanent Residence are particularly affronted by the delays as Residency applications have been generally preceded by other delays pursuant to the International Persons Landholding Act, 1993. Applicants for residency are generally high net worth individuals who also need work permits for household staff, boat captains, personal assistants etc. and the DOI procedure and delays are a source of irritation and frustration and reflect poorly on the Bahamas.

Continued…

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