Craig Simmons says a portion of pension funds and other savings should provide investment capital for local businesses
Would you risk a little less cashback on your savings – if it could increase the number and diversity of locally-owned businesses?
That’s a question lingering behind Economist Craig Simmons’ proposition – that a portion of Bermudians’ savings should be invested locally.
Citing the need to promote small and medium size business, and even to finance Government debt, Mr Simmons says we need to stop sending local capital overseas.
“In any given year, Bermuda residents save in excess of $3 billion”, Mr Simmons told Bermuda Broadcasting.
“The problem is that just about all of that capital goes overseas to finance the growth of Microsoft, of NVIDEA, of overseas enterprises.”
“[A] difficult decision needs to be made, requiring Bermuda pension funds, insurance companies, local insurance companies to keep a portion of their savings, $3 billion, on island so that we can funnel that toward small and medium sized enterprises.”
Up until the early 1990s, there was a limit on the amount of money Bermudians could invest overseas, plus a local 10% tax on those investments.
Mr Simmons is not suggesting a tax on savings, but he does say the loss of the Overseas Investment Tax meant there was less incentive to keep money on island.
“As a result”, he says, “all the money, including that which is in my pension fund, ends up in going into someone else’s pot to grow someone else’s economy.”
“What I’m suggesting is that Bermuda produces, or has enough savings, to finance its debt. I don’t understand why the $3.2 billion in debt is all denominated in foreign currency.”
Government debt is almost entirely made-up of borrowing from the international capital markets, save $50 million in local financing that was repaid from the Sinking Fund in 2023.
Mr Simmons says, “one suggestion would be for more of our Bermuda government debt to be denominated in Bermuda dollars, given that Bermuda is flush with savings.”
Mr Simmons also cites large Bermuda companies that are now-foreign owned…
“Digicel and Cellular One, and even BELCO… Bermuda companies that are no longer owned by Bermudians.”
“It’s not because we don’t have the money to own them… We seem to prefer to own overseas companies.”
“Why aren’t Bermuda residents interested in investing in their own economy? That’s a good question to put to your viewers.”
Mr Simmons is not suggesting that all of the local savings and pension fund monies, possibly invested in overseas stock markets, should instead be invested in Bermuda.
He says, “I’m not in any way, shape or form suggesting that all of those moneys be prevented from going overseas, but a portion.”
“That doesn’t seem to be unreasonable – to sit down with pension funds, sit down with insurance companies and have this negotiation, because it’s in our mutual interest to have some of those monies kept on the island. But again, it’s about convincing people of the efficacy of that kind of move.”
Gary Foster Skelton asked Mr Simmons how one might expect an investor to potentially risk a lower rate of return, without it seeming punitive.
Mr Simmons responded, “if you have a garden and you want it to produce crops, you need to put fertilizer, put stuff back into the garden so that you get another crop… I would argue that we Bermudians have not been doing that.”
“We have not been putting enough resources back into our economy… ensuring that the infrastructure of Bermuda is what it needs to be to grow our economy.”
“I would argue the same logic would apply with respect to the private sector. The private sector needs infrastructure. We seem to be totally reliant on the rest of the world for our capital.”
