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The Gallery

Benefits of IFCs Crucially, the report explained how IFCs can help overcome barriers to investment in developing countries by providing secure jurisdictions -which aren’t always readily available -- for dispute resolution and collateral arrangements. Foreign direct investment and emerging-market funds were responsible for 75 percent of new business entities in the BVI, largely between greater China and developing countries. Between 2007 and 2014, 41 percent of BVI-domiciled entities were involved in FDI, and 16 percent were involved in EMF activity.

The value of IFCs to developing countries

A new report is showing that international finance centres (IFCs) like the British Virgin Islands solidified their contribution to global value between 2007 and 2014, facilitating an additional $1.6 trillion of financing to developing countries. The report, titled “International financial centres and development finance,” by Dr. Judith Tyson at the Overseas Development Institute, found that international finance galvanised through IFCs boosted developing countries’ gross domestic product by $400 billion and tax revenues by $100 billion during that period. Many of these were couched in areas crucial to economic growth, like infrastructure and financial services. “International finance centres play a crucial role in funnelling much needed investment to developing countries,” said Dr. Tyson, by providing “the investment needed to create jobs, build critical infrastructure and drive economic development in some of the world’s poorest nations.” Thirty percent of all international investment stock is channelled through IFCs, which, as of 2012, totalled more than $6.5 trillion. In fact, the report found that nations would have missed out on over a billion dollars of incremental financing over the last decade if it were not for IFCs.

Dr. Tyson said the report highlights the benefits of IFCs that have too often been neglected, especially amid the barrage of new regulations coming from the United Kingdom and the European Union, intended to crack down on perceived illicit activity. “The danger of the current reform process is that, in their zeal, the various authorities will throw the proverbial baby out with the bathwater,” said Dr. Tyson, “impairing the development community’s ability to deliver one of its most important policy goals — the mobilisation of private finance for development while having a negligible effect on corruption and tax evasion in developing countries.”

Case studies To gauge the real-world impact of IFCs, the report looked no further than Norfund, a development agency formed by the government of Norway to provide aid to poorer countries, and that Simon Gray, head of business development and marketing for BVI Finance, called “a cautionary tale for those who think that multilateral development banks and [direct foreign investors] should not use IFCs.” Norfund was for a long time regarded as one of the best governed agencies of its kind in the world. However, it stopped channelling funds through IFCs in 2009 as a result of political pressure. Norfund made no new investments in sub-Saharan Africa in 2010 and 2011, and halted pipeline deals in agriculture and small-enterprise because they couldn’t be restructured. “Obviously the politicians thought this was probably a good idea but there was a consequence to the ordinary people in those countries,” Mr. Gray said.

Profile for Business BVI

Business BVI July 2019  

The theme for the July 2019 edition is ‘A View Beyond the Horizon’, which is intended to reflect where the territory is post 2017, while at...

Business BVI July 2019  

The theme for the July 2019 edition is ‘A View Beyond the Horizon’, which is intended to reflect where the territory is post 2017, while at...

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