Hong Kong turmoil spells Bermuda opportunity - Royal Gazette

Jonathan Kent, Business Editor

Published Jun 10, 2020 at 8:00 am (Updated Jun 10, 2020 at 8:03 am)

Standing their ground: pro-democracy demonstrators march to mark the first anniversary of a mass rally against the now-withdrawn extradition bill in Hong Kong yesterday (Photograph by Kin Cheung/AP)
Opportunity knocks: Roland Andy Burrows

Turmoil in Hong Kong could spell economic opportunity for Bermuda’s international business sector.

The island and other financial centres are set to compete for capital, businesses and wealthy individuals in the event of an exodus from Asia’s leading financial centre.

Legislation tabled last week in the House of Assembly, aimed at allowing lawyers to more effectively promote Bermuda overseas, will help in the battle for Asian business, legal sources said.

Yesterday marked the first anniversary of rolling protests in Hong Kong, where citizens are objecting to moves by China to increasingly impose its will on its special administrative region.

Beijing’s intent to introduce a national-security law in Hong Kong has inspired a further wave of protests, as the “one country, two systems” deal agreed when Britain signed over the territory to China in 1997 appears to be unravelling. The agreement, designed to preserve Hong Kong’s freedoms and economic vibrancy, is supposed to last until 2047.

Beijing’s encroachments prompted Michael Pompeo, the US Secretary of State, to say Hong Kong was no longer considered politically autonomous from China and its special trading status with the US was under threat.

Expectations of a mass departure prompted Britain to make a one-year visa offer to about three million Hong Kongers, while Australia has also made welcoming signs to those who flee the Chinese clampdown.

Roland Andy Burrows, chief executive officer of the Bermuda Business Development Agency, sees the opportunity and said there are already strong existing relationships between the two jurisdictions.

“Times are clearly changing and this is causing some uncertainty in the Hong Kong market,” Mr Burrows said. “Bermuda has a long and successful trading history with Hong Kong, and other Asian markets, and there are a large number of public and private Bermuda companies operating in Asia.

“As an internationally respected jurisdiction that sets the highest standards, Bermuda is the ideal domicile not only for Asian business but for all businesses operating globally. This is due to our political stability, the predictability of our common law legal system, with our highest court of appeal being the UK Privy Council, the ability to transact in US dollars and our proximity to the UK, the US and Canada.

“There really is no other market like Bermuda in terms of our capital efficiency and global access to the world’s markets via full Solvency II full equivalence and mutual recognition with the US.”

Bermuda-incorporated companies represent nearly a quarter of listed entities on the Hong Kong Stock Exchange and about 7.3 per cent of the exchange’s total market capitalisation, according to the HKEX Fact Book 2018. Bermuda’s 474 listings outnumber even China and Hong Kong itself, and trail only the 956 issuers from the Cayman Islands.

Sources in the legal industry say many of the Bermuda listings date back to the 1980s and 1990s, when Bermuda was the dominant overseas jurisdiction on the Hong Kong exchange, a mantle held today by Cayman.

The Bermuda Bar Amendment Act 2020, which was tabled in the House of Assembly last Friday, will help to address one of the root causes of the decline, one legal source said.

The Act will allow Bermuda international law firms with lawyers based in key overseas jurisdictions to advise clients and prospective clients on Bermuda law and the island’s corporate structures much more easily than at present.

“Hong Kong and Singapore have been flooded with lawyers who are promoting Cayman and the British Virgin Islands and Bermuda has not kept up,” a local legal industry source, who did not want to give his name, said.

“The proposed amendment would mean that international firms can hire lawyers and get them registered as foreign associates who can sell and promote Bermuda law.”

The amendment would help to get Bermuda back on the Asian business radar, the source added.

Connor Burns, a Bermudian mechanical engineer and successful entrepreneur, argued in an op-ed in The Royal Gazette that the island could “build a second pillar of international business in Bermuda by providing economic refugee status to Hong Kong business owners in finance, insurance, trading and logistics who relocate their headquarters to Bermuda to escape the ongoing constitutional crisis with Beijing”.

He suggested that many in Hong Kong would be adopting a one-foot-out-the-door strategy, and that “Bermuda is a perfect place for this headquarters reorganisation, or simply a second office close to North America and Europe”.

Newcomer businesses from Hong Kong would be exempt companies and could be mandated to have at least a 20 per cent Bermudian workforce, Mr Burns proposed, adding that the economy would also benefit from their consumption of goods and services.

Mr Burns has also shared his views with the Bermuda Government public forum for ideas to stimulate the economy.

William Pollett posted another Hong Kong-related idea on the forum, specifically related to high net worth individuals.

He suggests creating “PRC2” status for wealthy individuals with a pathway to British Overseas Territories citizenship.

Mr Pollett said criteria for applicants to meet could include investing a minimum amount, for example $10 million, in Bermuda dollar government bonds, paying a $250,000-a-year tax to keep PRC2 status, obtaining a permanent address on the island and residing in Bermuda for at least 30 days per year.

Mr Pollett adds in his post: “Target wealthy Hong Kong citizens in addition to other wealthy displaced groups globally looking for stable residency.

“Encourage local firms to target applicants with raft of wealth management services in addition to real estate, et cetera. These wealthy people will not take local jobs but will create them, while stimulating the property market and spending money in the local economy.”

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