Recently voted the 2016 IFC of the Year by Citywealth, Jersey is setting the standard for modern financial centres. Investors are attracted by its robust finance industry, which constantly embraces innovation to ensure it remains competitive across multiple disciplines. The European recently caught up with Chief Minister, Senator Ian Gorst to discuss Jersey’s FDI strategy and to find out why it appeals to high-net worth individuals.
Q: What makes Jersey’s financial sector attractive to foreign investors and how much foreign direct investment does the jurisdiction attract?
Ian Gorst: Investors find Jersey an attractive centre because of the strengths of its financial framework and the quality of the services it offers. These provide the platform for significant inflows of capital and also for the efficient distribution of that capital in many different countries across the globe, which, in turn, helps to stimulate economic development.
In concrete terms, Jersey has attracted more than $65bn and has distributed in excess of $75bn of foreign direct investment. Numbers like these show the strengths of Jersey’s finance industry in facilitating FDI,and also the extent of its contribution to the global economy. To break that down, of the $65.7bn of inbound FDI that was recorded in 2012, the main source was the UK (56.3% of the total), while FDI was also sourced from Ireland (14.6%) and Russia (7.8%), as well as India, France and South Africa.
Similarly, of the $75.8bn of outbound FDI distributed globally by Jersey in 2012, the UK again accounted for the largest share (44.8% of the total). The next biggest destinations were the Netherlands (10.3%) and Germany (7.9%), as well as Russia, Poland and Hungary.
I think what also appeals to foreign investors is the fact that Jersey has robust legislation for the creation of trusts and other asset and investment management and pooling vehicles.This makes the island attractive to individuals,businesses and institutions with cross-border asset portfolios.
Q: What is Jersey’s position on sustainable investment?
IG: Sustainable investment is something that my government takes very seriously and, withthe help of Jersey Finance Limited, we have recently been exploring the mutually beneficial opportunities that exist in Africa.
The most exciting piece of recent work in this area was the “Value to Africa” report, which was launched by Jersey Finance Limited and our own government’s ministers at Chatham House in London. This piece of work was commissioned to look at the role international financial centres could play in the growth of developing countries. The report, conducted by independent research organisation, Capital Economics, found that, while Africa is one of the fastest growing regions globally, to sustain that growth it needs to invest $85tn in infrastructure by 2040. This cannot be generated locally or through international aid,with the research paper estimating a shortfall of $11.4tn in investment, $6.1tn of which will need to come from outside the continent.
Building on these findings, we have a continuing work stream dedicated to identifying ways in which we can help the continent by acting as conduits for international investment. Equally, we have been representing our island in other sectors of business in Africa, such as mining – an area in which Jersey has a growing field of expertise. Our Assistant Chief Minister who is responsible for financial services and innovation, Senator Philip Ozouf, recently spoke at the Investing in African Mining Indaba conference in Cape Town, for example.
Q: In the area of trust and fiduciary services, what does Jersey offer its high-net worth clients?
IG: Investors and wealthy individuals use Jersey to place their funds because we have earned a reputation as a well-regulated jurisdiction of substance, with a sound, stable and mature government and judiciary. Our tax neutrality means that any investment will not incur additional taxation, while our physical, cultural and business links to the City of London ensure access to deep capital markets.
In more than five decades, Jersey has developed a breadth and depth to its trust business that competing jurisdictions find difficult to match. Particularly in a post-financial crisis era, wealthy individuals and their families are demanding increasingly complex and specialist guidance to help them steer a safe path, and Jersey firms are, in turn, embracing these new expectations.
For example, an ability to securely manage diverse family assets across borders has become a crucial part of family wealth management, and for this reason Jersey is increasingly seeing growth in serving the needs of families, particularly in emerging markets.
The fact that Jersey vehicles are widely used for cross-border investments in a wide range of jurisdictions is a comfort to family offices too. It gives them the reassurance that their families’ affairs are being managed and conducted in a professional, robust manner.
Q: How can innovation in new sectors assist Jersey’s finance industry?
IG: Adopting an innovative approach is a key factor in everything that we are doing, from running public services, to developing tech businesses and diversifying our finance industry.
We have now provided the funding and the infrastructure to foster the growth of digital and FinTech business in the island. As financial service providers face increasing international competition and devote greater resources to an ever-evolving regulatory and transparency agenda, digital KYC solutions are becoming an increasingly important decisive factor for investors.
The work that Jersey’s government is doing in this area, in partnership with Digital Jersey Limited, has the potential to revolutionise the client on- oarding process and provide a more robust framework for data management and regulatory reporting. For that reason, Jersey’s finance industry is working closely with the government and the regulator on the island’s FinTech proposition, particularly where there are clear opportunities to break new ground, such as positioning the jurisdiction as a cuttingedge KYC centre of excellence.
This year, we also hope to implement flexible, enabling regulations for virtual currencies. Regulation is a vital step in enabling innovation while also protecting the island from the money laundering and terrorist financing risks inherent in virtual currencies.
We are drawing up a Digital Policy Framework for Jersey, setting out our intentions and providing specific commitments from government. We want to see digitally driven efficiency in public services, a well connected island that benefits islanders and an innovative private sector driving growth and jobs.
Our e-government programme is aiming to reconfigure the delivery of public services around the customer, create a more efficient public sector and, in so doing, stimulate the local digital economy.
A review of our innovation performance has recommended ways to improve existing practices; and a review of Jersey’s competition framework has recommended how we can update our competition policies.
Q: What is Jersey’s position in the global move towards greater transparency in financial services?
IG: My government has led the way among international finance centres in the move towards greater levels of transparency and co-operation. Jersey has been commended by the UK Prime Minister for its efforts and also by the IMF and the OECD, which recently described Jersey as having done a “tremendous job” in contributing to the international tax agenda. We have signed up as an early adopter of the Common Reporting Standard, we already have a register of beneficial ownership which is available to law enforcement and tax agencies, and we have signed multiple tax agreements and memoranda of understanding with governments around the world.
Our finance industry is regulated by the Jersey Financial Services Commission (JFSC), which is committed to the highest global standards of regulation, while respecting client confidentiality.
We continue to welcome the global approach that is now central to most tax transparency initiatives. The growing international recognition of compliance with agreed standards supports Jersey’s continued success as an international finance centre.
We have signed 38 Tax Information Exchange Agreements and ten Double Tax Agreements, we are part of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, and Jersey is fully supportive of the Base Erosion and Profit Shifting programme, which helps governments protect their tax bases.
The results show Jersey is in a leading position on compliance with these standards. We can be confident that the strength of our practices will enhance our reputation, and as business flows to quality jurisdictions, so Jersey benefits.
We will continue to join initiatives that take a global approach to these international standards, and I have every confidence that this continued commitment will maintain our strong reputation. I was proud to see Jersey recently collect the 2016 IFC of the Year award from Citywealth – the fourth year in a row that we have earned the gold award – and I look forward to working towards many more similar accolades in the years to come.
Q: What requirements do citizens need to fulfil to relocate to Jersey?
IG: There are a number of ways in which you can relocate yourself and your business to Jersey. We have a specialist team at our government advisory service, Locate Jersey, who have a breadth of knowledge and experience in helping high-value residents move their lives and their livelihoods to the island.