Gibraltar - Rackcdn.com
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Gibraltar - Rackcdn.com
Gibraltar Global Investor’s Guide 2012 Inassociationwith milestone GRP Contents milestone GRP 8 4 EXPERT CONTRIBUTORS FOREWORDS 12 Fabian Picardo, Chief Minister of Gibraltar 13 Petar Stoyanov, President of the Center for Global Dialogue and Cooperation 52 GFIA - EU Directives Presenting Opportunities: Fund relocation to Gibraltar Interview with Adrian Hogg, Chairman, Gibraltar Funds & Investments Association 54 Expert Analysis - Regulatory Changes Improving Competitiveness: Experienced Investor Funds Regulations 2012 by James Lasry, Partner & Funds Team Leader, Hassans International Law Firm 56 Sovereign Trust - Trust and Company Management: International reach and depth of service Interview with Ian Le Breton, Managing Director, Sovereign Trust (Gibraltar) Limited 57 STM Group/STM Fidecs - The Rock Reaching Out: The EU and farther abroad Interview with Alan Kentish, Chief Financial Officer, STM Group/STM Fidecs GOVERNMENT 58 GBA - A Stable Sector in Rough Seas: Banking supporting Gibraltar’s growth Interview with Emma Perez, President, Gibraltar Bankers’ Association 18 Chief Minister’s Perspective - Dawn of a New Era: A fresh vision for Gibraltar’s future Interview with Fabian Picardo, Chief Minister of Gibraltar 60 RBS International/Natwest - Trends in the Banking Sector: Consolidation and steady growth Interview with Marvin Cartwright, Regional Head - Gibraltar & Corporate Banking, RBS International / NatWest 22 Minister’s Perspective - Sustainable Growth and Investment in People: Business success for social welfare Interview with Joe Bossano, Minister for Enterprise, Training and Employment 61 Lloyds TSB - Gibraltar as Base: Passporting Private Banking across the EU Interview with Marina Dominguez Steglich, Head of Private Banking, Lloyds TSB Private Banking Gibraltar and Mark Johnson, Country Manager, Lloyds TSB Bank Gibraltar FINANCIAL SERVICES 28 Minister’s Perspective - A World-Class Reputation and Best Practices: A small jurisdiction punching above its weight Interview with Gilbert Licudi, Minister for Education, Financial Services, Gaming, Telecommunications and Justice ONLINE GAMING 64 Expert Analysis - Carefully Managed Growth: Quality over quantity Interview with Peter Montegriffo, Team Leader & Partner, Hassans Law Firm 31 Industry Regulator - Efficiency and Effective Regulation: Maintaining Gibraltar’s reputation as a stable financial centre Interview with Marcus Killick, CEO of Gibraltar’s Financial Services Commission and David Parody, Deputy CEO of Gibraltar’s Financial Services Commission 66 GBGA - Regulation and Transparency to Build Trust: Online Gaming leaving nothing to chance Interview with John Anderson, Deputy Chairman, Gibraltar Betting & Gaming Association 34 Finance Centre - Gibraltar - EU Financial Services Centre: Reformed and Transformed Interview with James Tipping, Director, Gibraltar’s Finance Centre 68 Expert Analysis - New Momentum for a Successful European Online Gambling Market by Sigrid Ligné, Secretary General, European Gaming and Betting Association 36 Expert Analysis - Gibraltar as an Overall International Finance Centre by Michael Mainelli, Executive Chairman, Z/Yen Group and Mark Yeandle, Associate Director, Z/Yen Group 70 Victor Chandler - The Rock’s First Online Gaming Licensee: Good numbers in the books 15 years on Interview with Victor Chandler, Chairman, Victor Chandler International 40 Expert Analysis - A Look at Gibraltar’s Neighbours: Europe’s situation and the Rock’s position within it by Tim Harris, Chief Investment Officer - UK, Lloyds TSB Private Banking 72 ProSpreads - Straddling Finance and Gambling: A bet that’s paying off Interview with Simon Brown, Managing Director, ProSpreads 42 Expert Analysis - Boards as Modern Drivers for Change: The evolution of Gibraltar’s finance sector’s boards by Marcus Killick, CEO, Gibraltar’s Financial Services Commission TELECOMMUNICATIONS & IT 44 Expert Analysis - Gibraltar’s Insurance Industry: Yesterday, today and tomorrow by Chris Johnson, Chairman, Gibraltar Insurance Association & Director, Robus Group 76 Industry Regulator - Ensuring Compliance and Fair Play: Regulating the Telecoms sector Interview with Paul Canessa, Chief Executive, Gibraltar Regulatory Authority 48 Expert Analysis - The Use of Protected Cell Companies by Insurance Companies and Funds by Nigel Feetham, Partner, Hassans International Law Firm & Visiting Professor, Nottingham Law School, Nottingham Trent University 79 SES - On the Med and in the Skies: Going up and high-tech Interview with Harry Pallas, Senior Manager, SES Gibraltar 80 Gibtelecom - Telecoms Growing in Pace with the Economy: An all-round provider extending its reach Interview with Tim Bristow, CEO, Gibtelecom 49 Expert Analysis - International Transparency and Cooperation: Gibraltar’s 20 TIEAs by Ghuozi Foo, Secretariat Administrator, OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes 84 Sapphire Networks - From Back-up to Primary Provider: Keeping the Online Gaming sector connected Interview with Lawrence Isola, CEO, Sapphire Networks 50 R&Q Caledonian - On the Rock with Space to Grow: Based in Gibraltar, Insuring across Europe Interview with Penny Hudson, Managing Director, R&Q Caledonian Gibraltar Gibraltar 2012 5 Contents PORT SERVICES & SHIPPING 90 Minister’s Perspective-ExpandingthePortandIncreasingTouristFlow: LeveraginginfrastructureandGibraltar‘sattractions InterviewwithNeil Costa, Minister for Tourism, Public Transport & the Port 93 Port of Gibraltar -StayingAheadoftheTide: Aportleveragingitscompetitiveadvantages InterviewwithRoy Stanbrook, Captain of the Port & CEO of the Gibraltar Port Authority 98 Expert Analysis-Gibraltar’sKeyPositionasaMaritimeServiceCentre byTorben C. Skaanild, Secretary General, The Baltic and International Maritime Council (BIMCO) 101 Bland Group-HomegrownandVenturingOut: BorninGibraltarbutexpandinginternationally InterviewwithJames Gaggero, Chairman, Bland Group 102 East Gate Express -Land,AirandSea:Connectingallthefreightshippingdots InterviewwithColin Davis, Operations Director, East Gate Express TOURISM 106 Tourist Board-PrimeLocationandTop-notchAttractions: Atourismsectorreadyforinvestmentandgrowth InterviewwithNicky Guerrero, CEO, Gibraltar Tourist Board 110 Expert Analysis-GibraltarasaCruisePort:Punchingaboveitsweight byPeter Wild, Managing Director, G. P. Wild 113 MH Bland-WelcomingTouristsandShips: AlonghistoryoperatinginGibraltar’sportsofentry InterviewwithGeorge Gaggero, Deputy Chairman, MH Bland 114 Caleta Hotel-TheCaletaHotel:AGibraltarLandmark InterviewwithFranco Ostuni, General Manager, The Caleta Hotel 118 Event-led Tourism-HostingtheWorldofChess: Aglobaltournamentwithahigh-andrising-rank byAlice Mascarenhas, Features Editor, The Gibraltar Chronicle 120 Tourism Offerings-Gibraltar’sTourismHighlights:Lotstodiscover byKaren Lawson, Gibraltar Tourism Enthusiast & Author 124 BMI -BuildingonRock-solidFoundations:Agentsontheground,andhigher InterviewwithLouis Montegriffo, Director, BMI Group PROFESSIONAL SERVICES 6 128 Hassans-AttheCentreofGibraltar’sLegalEvolution: GrowinginandbeyondGibraltar InterviewwithJames Levy QC, Senior Partner, Hassans International Law Firm 130 Baker Tilly-UpholdingInternationalStandards: Awell-regulatedEuropeanjurisdictionforseriousinvestors InterviewwithJoe Pisharello, Chairman, Baker Tilly Gibraltar 132 PwC-ServingBusinessesOnandOfftheRock: Localknowledge,internationalnetwork InterviewwithColin Vaughan, Territory Senior Partner, PwC Gibraltar Global Investor’s Guide – Gibraltar 2012 Milestone GRP Editor: Country Director & Analyst: Project Manager: Design & Production: Contributing Sub-editor: Web Editor: Tim Penketh Florent Thevenin Amaliya Abbas Caspar Macke Darin Bielecki Juanjo Dominguez Published by Milestone GRP (UK) Ltd. 3rd Floor, 207 Regent Street, London, UK W1B 3HH Telephone: +44 20 7099 3790 Fax: +44 20 7043 9064 www.milestonegrp.co.uk Registered in the UK: #7792839 We would like to thank all those who assisted us throughout our project and with the production of this publication. Statistics sources are abbreviated as follows: GOG: Government of Gibraltar GRA: Gibraltar Regulatory Authority GSO: Gibraltar Statistics Office FSC: Gibraltar Financial Services Commission Contributors milestone GRP Mr Nigel Feetham Partner, Hassans International Law Firm & Visiting Professor, Nottingham Law School, Nottingham Trent University. Nigel Feetham was awarded a Masters degree in law with Distinction from Manchester’s Victoria University, was called to the Bar in 1993, and became a partner of Hassans International Law Firm in 1999. He is considered a market leader in Gibraltar on 'insurance passporting', the structuring of insurance companies, and Protected Cell Companies. He has set up innovative structures for insurance operations and advised the Government of Gibraltar on ways of implementing insurance related legislation. Nigel was recently appointed a Visiting Professor at Nottingham Law School, Nottingham Trent University. His publications include ‘Protected Cell Companies: A Guide to their Implementation and Use’,’A Guide to Insurance: Combining Governance, Compliance and Regulation’ and ‘Tax Arbitrage: The Trawling of the International Tax System’. Chairman, Gibraltar Insurance Association & Director, Robus Group Chris Johnson’s background is initially in the insurance company world, beginning his career in 1979 with Norwich Union in Norwich, and moving with them to Gibraltar in 1987. He has been a mainstay of the Gibraltar insurance industry for 25 years. He has been involved in broking (also in Spain) and insurance management, setting up and running Aon Insurance Managers’ Gibraltar office for four years. Following that he worked as an independent consultant and recently set up Robus, an insurance management and risk consultancy firm with offices in Gibraltar and Guernsey. Chris is a Chartered Insurer and an Associate of the Chartered Insurance Institute. Mr Guozhi Foo Mr Markus Killick Guozhi Foo is a tax consultant at the Global Forum Secretariat based at the Centre for Tax Policy and Administration in the OECD. During his time with the Global Forum, he has led and completed the peer reviews of several jurisdictions, including the Phase 1 peer review of Gibraltar in 2011. Prior to joining the Global Forum, he was the Head of the International Tax Unit at the Singapore Ministry of Finance. Over the last six years, he has worked on a wide range of domestic and international tax policy issues, including international tax cooperation and technical assistance. Markus Killick, LLb, Mphil, Fellow of the Securities Institute, took over as Chairman and Commissioner of Gibraltar’s Financial Services Commission in April 2003 and became its first Chief Executive following the introduction of the Financial Services Commission Act 2007. Mr Killick is an English barrister by training and is also a member of the New York State Bar. From 1998 until 2003 he was a Director in the International Regulatory Services Team of KPMG, based in the UK. He has also previously held positions as Deputy Chief Executive of the Isle of Man Financial Supervision Commission, and Head of Banking, Trusts and Investment Services at the Cayman Islands Monetary Authority. Secretariat Administrator, OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes Mr Tim Harris Chief Investment Officer - UK, Lloyds TSB Private Banking Tim Harris is based in London and works closely with Lloyds TSB’s Gibraltar team. Tim previously worked at JPMorgan in London, initially as European equity investment strategist for JPMorgan Securities and latterly as chief investment officer of the EMEA platform of the global private bank. Tim has 30 years experience in the industry and in his early career was an engineering and conglomerates equity analyst, working for Phillips & Drew, which was acquired by UBS, and latterly Nomura Research Institute. Tim holds an MA in Mathematics from Oxford University and an MSc in Finance & Economics from Queen Mary, University of London. He is a Chartered Fellow of the Chartered Institute of Securities & Investment and a holder of the ASIP, a recognised qualification of the CFA Institute. 8 Mr Chris Johnson ACII CEO, Gibraltar Financial Services Commission Mr James Lasry Partner & Funds Team Leader, Hassans International Law Firm James Lasry is a highly regarded practitioner who has been instrumental in setting up the majority of Gibraltar's funds, including the first experienced investor fund and the first protected cell company fund. He served as Chairman of the Gibraltar Funds & Investments Association for 2 years. James advised the Government of Gibraltar on its funds legislation and was involved in the drafting of the Financial Services (Experienced Investor Funds) Regulations 2005 and their subsequent amendments in 2012. He is fluent in English, French, Spanish and Hebrew and he read literature, music and law at John Hopkins and Bar-Ilan Universities. James is a member of the Israel Bar Association, the Law Society of England & Wales and the Gibraltar Bar. James also serves as chairman of the Gibraltar Philharmonic Society. Gibraltar 2012 9 Contributors milestone GRP Professor Michael Mainelli FCCA FCSI Mr Peter Wild Managing Director, G P Wild (International) Limited Executive Chairman, Z/Yen Group After a career as a research scientist and an accountancy firm partner, Michael Mainelli co-founded Z/Yen, the City of London’s leading commercial think-tank, to promote societal advance through better finance and technology. Z/Yen’s clients include numerous global financial institutions, technology firms and policy makers. Michael created the Global Financial Centres Index and the Global Intellectual Property Index. In 2005 Michael initiated Long Finance, addressing “when would we know our financial system is working?” Michael is Emeritus Professor of Commerce, Fellow & Trustee at Gresham College, non-executive director of AIM-listed Sirius Minerals, and a non-executive Director of the United Kingdom Accreditation Service overseeing UK laboratories and quality standards. In 2011 Nicholas Brealey published his third book, based on his Gresham College lecture series from 2005 to 2009, “The Price of Fish: A New Approach to Wicked Economics and Better Decisions”, co-authored with Ian Harris. Peter Wild holds a BSc degree with honours in Maritime Studies from the University of Wales. He is also a Fellow of the Chartered Institute of Marketing, a Member of the Chartered Institute of Logistics and Transport, a Member of the Nautical Institute, a Supporting Member of the London Maritime Arbitrators Association, a Liveryman of the Worshipful Company of Shipwrights and a Freeman of the City of London. Peter is a specialist in cruising and has written many papers and reports on the industry. G P Wild (International) Limited is a management, marketing and economic consultancy practice founded in 1985 to provide independent consultancy advice to clients in both the national and international market place. G P Wild specialises in marketing, management, business planning and strategic business development. It typically deals with marketing, management, economic, financial, infra-structural, operational and policy issues. Ms Sigrid Ligné Mr Mark Yeandle Sigrid Ligné started her career working for the Legal Service of the Council of the EU and the European Commission. She then moved to consultancy. Over the last fifteen years she has been responsible for several Brussels-based and pan-European advocacy and communications campaigns, advising a wide range of corporations and trade associations. She joined the European Gaming and Betting Association in March 2007 as Secretary General and spokesperson. The European Gaming and Betting Association is the industry body representing the leading online gaming and betting operators established, licensed and regulated within the EU. EGBA promotes the implementation of fair and competitive regulations for online gaming operators throughout Europe in line with EU law. Such regulations should be based on genuine public order and consumer protection concerns and be adapted to the crossborder nature of the online market. Mark Yeandle’s early career was in sales and marketing when he held senior marketing positions at companies including Liberty and Mulberry. Before joining Z/Yen, Mark was an interim manager specialising in company turnarounds. from which he developed strong project management skills. During his MBA at Cass Business School he specialised in corporate finance and marketing strategy and has a deep understanding of these areas. He joined Z/Yen in 2002, initially to run SpecialiZm, Z/Yen’s expert resourcing division. He has since been involved in several of Z/Yen’s core projects including the development of a client intelligence business; advising a new business on financing and human resourcing issues and assisting a training organisation to develop and deliver training in finance management. Mark has managed most of the data work and analytics for PropheZy applications. Secretary General, European Gaming and Betting Association (EGBA) Associate Director, Z/Yen Group Mr Torben C. Skaanild Secretary General, The Baltic and International Maritime Council (BIMCO) Torben C. Skaanild has had a long and very international career within the shipping industry, having held executive positions in Canada, The Philippines, Thailand and Hong Kong before returning to Denmark to join BIMCO in 1981 as Deputy Secretary General. In 1984 he was appointed Secretary General of BIMCO, and left in 1991 to join Dr. Helmut Sohmen and the World-Wide Shipping Group (now BW Group), Hong Kong as a Director. His non-executive positions include member of the IACS Board of Appeal and in 2011 he was elected as Chairman of the Executive Board of the World Maritime University. In 2008 Torben returned as Secretary General of BIMCO. BIMCO is the largest of the international shipping associations representing ship-owners controlling around 65 percent of the world’s tonnage and with members in more than 120 countries. 10 Gibraltar 2012 11 Forewords Gibraltar: Open for Business IamveryproudtointroduceyouasthenewlyelectedGSLP-LiberalChiefMinistertoGibraltar,itseconomyandeverythingithas toofferforeigninvestorsataveryexcitingtimeintheRock'shistory.Gibraltarhascomealongwayfromthedaysofdependence onUKdefencespending. Mymission,andthatofmyteam,isto continuetopushGibraltar’seconomicexpansionforwardthrough nationalgrowthandinternationalinvestment,whilemaintaininga keeneyeandearontheneedsanddemandsofallGibraltarians. Our new Government sets out to distinguish itself in a number ofways. Firstly, we will work to ensure economic progress directly translatesintotangiblebenefitsforallresidentsofGibraltar.Thisisthe bedrock of Gibraltar's long-term development and must ensure thatthepeopleofGibraltarhavequickandefficientaccesstothe services they require to give them a better quality of life: health, education,employmentandcarefortheelderlyallrankinghighly amongthese.Internationalinvestmentandtheeconomicgrowthit bringstoGibraltarsecuresthestate’scapabilitytoprovidethose essential services in an inextricably connected virtuous circle, whichstrengthensGibraltarasawhole,ensuringnotonlypresent day development but also the social infrastructure necessary to keepGibraltargrowingandimprovingforgenerationstocome. Secondly,ourGovernmentwillcontinuouslyseektoengagethe variousstakeholdersinGibraltartoensureprogressisundertakeninpartnership.Inthissense,Ihavecommittedmyadministrationtodynamic,collegiatedecision-makinginordertostreamline and facilitate international investors’ entry into Gibraltar. Once establishedinoureconomy,thesecompanies–aswellasthose alreadyhere-canexpectquickreactiontimesinrespectofany situationsorissuestheymightface,inordertoresolvematters andprogressthebusinessofdoingbusiness.Thisisnotonlya promiseIhavemadetoGibraltar’sbusinessworld,butalsotoits citizensasindividualsinourCitizensCharter. 12 milestone GRP Last,butcertainlynotleast,wewillproactivelyreachouttofurther integrate Gibraltar within the global economy and position ourselvesasanaturalgatewayforinvestmentintoandoutofEurope. My attendance, and that of my colleagues, at the Centre for Global Dialogue and Cooperation’s Annual General Meeting thisMayinViennaisoneofthemanystepswearetakinginthis direction,inordertokeepGibraltarpunchingaboveitsweightin the international arena. We look forward to meeting and workingwithPresidentStoyanov,theCGDC’sfoundersandmembers ofitshonoraryboard.Wealsovaluethisopportunitytopromote Gibraltarandallthebenefitsitoffersasawell-regulatedinvestmentdestinationwithinEurope,tothelargenumberofpoliticians andinternationalbusinesspeoplewhowillbeinattendance.Iam confident that increased interaction with Gibraltar and its businessesofferseveryoneoftheseindividuals,theircountriesand their companies considerable advantages and many opportunitiesforcooperationandinvestment. ItisinthiscontextthatthisMilestoneGRPGlobalInvestor’sGuide servestoshowcaseGibraltarasthecompliant,well-regulatedand sophisticatedjurisdictionitis.Oureconomypostedenviablefigures through the recent years of financial turmoil and I am very optimisticaboutthepotentialitholdsforthefuture,especiallyas signsofastrengtheningglobalrecoverycontinuetoemerge. IwelcomeeveryonetotakeacloserlookandfindoutwhatGibraltarreallyisallabout.Whenyouhavedoneso,ifthefitisright,to maketheRockyournextstrategicmove. At the very least, come and enjoy our stunning views and the sunshine! FabianPicardo ChiefMinisterofGibraltar The CGDC and Gibraltar: Social Development Through Economic Growth TheCenterforGlobalDialogueandCooperation-CGDCisarelativelyyoungorganizationthatwefoundedwithcolleagueswho share the same conviction, namely, that ethical values in businessandpoliticsareessentialforsustainableandstableglobal welfare. Through engagement work, and active participation in internationalforaandevents,wehavebeenabletodrawtogether a large and impressive number of acting and former heads ofstate,politicians,internationalbusinessleadersandmembers of civil society from around the world, including President Bill Clintonwhohasbecomeanardentsupporterofourvisionand mission,toanalyzethekeyissuesattheintersectionofbusiness andpoliticsthataffectglobalwelfaretoday. We also actively strive to make a change for a better future through various programmes, such as by enabling further educationforsixty-fivestudentsinwayofanMBAinPublicGovernance through a commitment in collaboration with the Clinton GlobalInitiative.Wearefullyawarethatthechallengesinvolved areimmenseandthattheresultsweseekwillrequireconcerted efforts and dedication on behalf of our many partners and all stakeholders.However,itisalsoourfirmbeliefthatachallenge mustberisentoandcultures–betheysocietal,businessorpoliticalones–mustadapt. I see many similarities between our organization and Gibraltar. Gibraltar has a new, young government in the form of Chief MinisterPicardoandhisteamofministers.Theirviewsarevery stronglyalignedwithoursinthattheystrivetoensureGibraltar’s social development, prosperity and sustainability. This is done through the encouragement of well-regulated business across a variety of established and thriving industries. These co-exist withinarelativelysmallyetinternationalcommunitywhosepersonalbreadthandoperationalreachstretchfarbeyondtheRock. Gibraltar has also risen up to challenges through international cooperation, transparency and a culture change of its own. It hasgonefrombeingseenasanoffshorefinancecentre,withthe usualconnotationspopularlyaffixedtosuchareas,topositioning itselfasanonshore,wellregulatedandinternationallycooperativefinancecentre.Goingbeyondthat,ithasalsoplayedtoits strengthsandattractednewbusinesstoitsshores,suchasthe OnlineGamingsector,toincreasetherobustnessanddiversificationofitseconomy.Gibraltar’sRockhaslongbeenahistorical symbolofsolidityandstability–anditisstillgettingstronger. IthereforestronglysupportthisMilestoneGRPGlobalInvestor’s Guide on Gibraltar. It provides in-depth insight into Gibraltar’s economy and highlights the opportunities Gibraltar offers foreigninvestorsacrossallofitsmainsectors.Iamalsodelighted to host Chief Minister Picardo and members of his Government at this year’s CGDC Annual General Meeting in Vienna, whereafocusontopicsrelatingtoEnergyandDemocracywill bediscussedbyourpanelofleadingexpertsandinternational delegates. As a vibrant society and thriving economy, with restrictednaturalresourcesandstrongdemocratictraditionsthat haveseentherecentelectionofthefirstnewChiefMinisterin15 years, I warmly welcome Chief Minister Picardo’s participation andinputduringtheevent.I,andtheentireCGDCcommunity, alsolookforwardtoworkingwithhimandhiscabinetmembers onissuesofimportanceinthefuture. PetarStoyanov FounderandPresident,CenterforGlobalDialogueand Cooperation-CGDC FormerPresidentofBulgaria(1997-2002) Gibraltar 2012 13 Gibraltar Government Government milestone GRP Revenue 400 Expenditure 350 300 250 £ (million) theirhomeandtomaketheirinvestmentsoverhereviable too.Muchofwhatwedoinrelationtothemistoprovide a legal framework where they want to do business; a tax frameworkwhichtheythinkisadvantageouscomparedto taxframeworkselsewhereand,mostimportantly,toprovide thesortofresponsiveGovernmentthatmakesGibraltara placewheretheyknowtheycandobusiness. 200 150 100 Milestone GRP - If there was one foreign investment project which you would like to see realized during your 4-year tenure, what would it be? 50 0 2002 2003 2004 Government Revenue & Expenditure 2005 2006 2007 2008 GovernmentRevenue&Expenditure 2009 2010 2011 2012 Source: GOG/GSO Chief Minister Picardo-Itisdifficulttoanswerthisquestion Dawn of a New Era A fresh vision for Gibraltar’s future Interview with The Honourable Fabian Picardo, Chief Minister of Gibraltar ChiefMinisterFabianPicardoholdsalawdegreefromOxfordUniversity,iscalledtothebarbothinGibraltarand theBritishVirginIslands,hasarespectedlegaltrackrecordspanninghumanrights,litigationandcommerciallaw, and has appeared before the United Nations and other international bodies. His latest achievement was being elected as the head of Gibraltar’s Government in December, 2011. Milestone GRP sat down with Chief Minister PicardotodiscusshisvisionforGibraltar’sdevelopmentandhisprioritiesforthenextfewyears.Amongtheseare streamlining the Government’s decision-making process to facilitate foreign investors’ entry and establishment, implementinganinvitinglegalandtaxationframework,andincreasingGibraltar’scompetitivenessasabasefor internationalcorporationstodobusinessin,andwith,Europe.Allthiswithacommitmenttohisbeliefthatsocial progressandeconomicgrowtharetwotightlyintertwinedandessentialstrandsinthefabricofGibraltariansociety. Milestone GRP - What major transformations can be expected from your newly elected administration? Chief Minister Fabian Picardo-Themostimportantchange willhavetodowithamoredynamicdecision-makingadministration.Duringourcampaignandintherun-uptothe elections, it became obvious to us that complaints often camefrominternationaloperatorswantingtodobusinessin Gibraltarandexperiencingalackofreactionfromthepreviousadministration.Lookingforward,therewillbeapositive andreactiveadministrationthatwillinteractwithinternationalinvestorswhoneeddecisionsfromGovernmentonany matterwhichaffectstheirpresenceinGibraltar;whetheritis regardingtheimmigrationstatusoftheiremployees,thetax status of the companies, those things will happen quickly andinfact,wewillstrivetomakeGibraltartheplacewhere youwillgetdecisionsthequickestinWesternEurope.We haveveryclearlysetoutcriteriaandwearesmallenough togetinformationinfrontofaMinister,oranotherdecisionmakerwhowillnotalwaysbeaMinister,veryquicklyandto getaananswerveryshortlythereafter.Wehavecreateda citizenscharterwhichentitlespeopletoresponsestocorrespondencewithin21daysofanacknowledgmentwhich 18 theywillreceive14daysaftersendingtheirletter.Hereyou canseethatwearefixingverytighttimelimitsfortheadministrationtooperatein.Ibelievethatinternationalinvestors requireandwillappreciatethatsortofspeedofreaction. Milestone GRP - Your social agenda is very clear in the GSLP Liberal manifesto; how will you reconcile this with economic priorities which businesses and investors may have? Chief Minister Picardo -Totellyouthetruth,asasocialist party,thereisonlyonepriority:thesocialissues.Ihavenot beenelectedtodoanythingotherthantomakesurethat the people of Gibraltar have the services they require, in particularinrelationtohealth,education,employmentand careoftheelderlytonameafew.Theseissuesarealways goingtobeapriorityforus.Whatweareveryalivetoisthe factthattheeconomicsthatmakethatpossibledependon Gibraltar being a place where international operators can dobusiness.Thereforeweseethosethingsasgoinghand in hand, together. So although we will prioritize our spending on social projects, we will also pay attention to the factorsthatallowinternationalinvestorstomakeGibraltar atthisstagebecauseIbelieveitisimportantthatIfirsttalk totherelevantplayersintheindustryhere.Idothinkthatwe canrevolutionizethesocialinfrastructureofGibraltarfrom theincomethatwecanderivefromadifferentapproachto the gaming industry, with the existing operators here and withveryfewchoiceoperatorsthatwemaywanttoattract toGibraltarinthefuture.Gibraltarwillalwaysbeagaming jurisdiction of quality, not of quantity; but if things go the wayIexpectthemtogo,thenaskmein4yearstimewhetherIhaverealizedtheprojectIthinkwecanrealize. Milestone GRP - So economics as a means to an end to transform Gibraltar and its infrastructure, and to deliver quality social services? Chief Minister Picardo-Absolutely.Economicsasameans ofdeliveringtothepeopleofGibraltartheservicesthatthey need; international business in order to deliver for GibraltarianstheGibraltarthattheydeserveandafriendlyhome forthosethatwanttodothesortsofbusinessthatarein keepingwiththeGibraltarthatwewanttoseeflourishand prosper. Milestone GRP - As the Chief Minister, you obviously have tools and institutions at your disposal to do so, such as the Finance Centre for instance. How will you use these tools in the future? Chief Minister Picardo -Wewillalwayslooktousetheleverswehavewiththekeyplayersinanygivenindustry,to ensurethatthosewhoarehereareabletoprosperandthat we attract people who might be interested in coming to Gibraltar. We will not be using our tools to make the lives ofthosedoingbusinessinGibraltarharderbutwewilluse themtomakeiteasierforpeoplewhowanttostayinGibraltarandforthosewhowanttoattractnewbusiness.So for example in terms of Financial services, whether it is a licensingregimeandthefeesthatareassociatedwiththat, oraregulatoryframework,wearealwaysgoingtoworkwith theindustrytoensurethatwearenotmakingGibraltaran expensive place to do business. And where regulation is needed,anditisessentialforittobeprovided,thatregulation should be top-notch, not just in terms of the legal frameworkbutalsointermsoftheabilityfortheregulator todeliveritwiththeresourcesnecessarytoprovideworldclassregulation. Milestone GRP - You have confirmed your attendance at the CGDC Annual General Meeting in Vienna in May this year. What is your approach towards international events and how will you decide which ones to attend? Chief Minister Picardo-Tobeveryhonest,itisaboutvalue for money. It must be something that is going to produce sufficient value for the taxpayer in Gibraltar, that it makes sensetoincurtheexpenseofmytravelandjustifymyabsencefromtheofficewhileIcouldbedoingsomethingelse. ThereforeIhaveidentifiedthatthisparticularconferenceis onethatIthinkwillproducevalueformoneyfortheGibraltartaxpayer,becauseIcanseethatitisthesortofplace whereGibraltarneedstobetocontinuetopunchaboveits weightintheinternationalcommunity. Milestone GRP - In the current global economic context, are there specific opportunities for Gibraltar, for instance with the BRICS countries and other rising global players? Chief Minister Picardo -IthinktherearebecauseGibraltar isfortunatetobewithintheEuropeanUniontradingblock, outsidetheCommonCustomstariffandoutsidetheShengen immigration rule but yet within the principle parts of theEUfreedomsofmovementwhicharefundamentaltodo businessinthispartoftheworld.WearealsoalowtaxjurisdictionsowhenaBRICScountrywantstosetafoothold inEurope,whygoanywhereotherthanGibraltar?Interms of the agility of the legal and administrative processes, in termsofthefiscalobligationsGibraltarimposescompared to those of other countries and in terms of the means of communicationavailablefromGibraltartotheworld,whether electronic communication or physical communication to London for instance, I think Gibraltar is actually one of thechoicejurisdictionsfortheworldtobelookingattodo businessinEurope.Andthesunshinesonmostdays. Milestone GRP - Please paint us a picture of Gibraltar the way you imagine it after your tenure. Chief Minister Picardo - Well, first of all, I don’t take for granted the fact that we will be re-elected because the peoplealwayshavetherighttodecide.So,after4yearsof GSLPLiberalGovernment,IthinkGibraltarwillbeamodern andvibrantcity.Itwillbemoreopentotheworldanditwill bemoreopentoitself;inotherwords,ourGovernmentwill have given back to people the information and the other aspectsofGovernmentthathavebeenkeptclosedtothem inamoreconventionalway,forsolong.SoIwouldseea modern, positive and open Gibraltar doing business with theworld. Gibraltar 2012 19 Government Government Revenue and Expenditure 2010-2012 REVENUE FORECAST OUTTURN 2010/11 £ (million) ESTIMATE 2011/12 £ (million) Income Tax 151.500 152.500 Duties, Taxes and Other Receipts 97.717 98.731 Gambling Fees, Taxes and Lottery 11.820 12.050 Rates and Rents 17.500 24.001 Departmental Fees and Receipts 93.548 96.830 Government Earnings 9.899 9.584 TOTAL RECURRENT REVENUE 381.984 393.696 Consolidated Fund Exceptional 5.755 – TOTAL REVENUE 387.739 393.696 ConsolidatedFundRevenueEstimates,2010-2012 EXPENDITURE FORECAST OUTTURN 2010/11 £ (million) ESTIMATE 2011/12 £ (million) Education & Training 151.500 152.500 Culture, Heritage, Sport and Leisure 97.717 98.731 Housing 11.820 12.050 Environment & Tourism 17.500 24.001 Family, Youth and Community Affairs 93.548 96.830 Enterprise, Development, Technologyand Transport 9.899 9.584 Health & Civil Protection 381.984 393.696 Administration 5.755 – Finance 387.739 393.696 Employment, Labour and Industrial Relations 3.521 1.073 Justice 14.597 14.928 Immigration and Civil Status 3.074 3.085 Parliament 1.309 1.511 Gibraltar Audit Office 0.654 0.777 Supplementary Provision – 7.000 Consolidated Fund Charges 54.802 55.586 TOTAL RECURRENT EXPENDITURE 353.714 372.185 Consolidated Fund Exceptional 3.119 – TOTAL EXPENDITURE 356.833 372.185 ConsolidatedFundExpenditureEstimates,2010-2012 20 Source:GOG/GSO Source:GOG/GSO Europa Point Government milestone GRP 25,000 150 20,000 125 Male Female 100 15,000 75 10,000 50 5,000 0 2000 25 0 2001 2002 2003 2004 Number of Employee Jobs NumberofEmployeeJobs 2005 2006 2007 2008 2009 Source:StatisticsOffice Source: 2010 GSO funding,asisthecasewithanyotherbankinGibraltar.We would not be operating a bank without applying the same standardsthatwerequireofanyotherbank.Butthereareno otherrequirements. Sustainable Growth and Investment in People Business success for social welfare Milestone GRP - How will the new administration reconcile priorities such as the need to develop the economy to attract new investors, and the desire to address social issues such as health, education, or the need for better infrastructure? Interview with The Honourable Joe Bossano, Minister for Enterprise, Training and Employment JosephJohnBossano is the former leader of the Gibraltar Socialist Labour Party. He was Chief Minister of Gibraltar fromMarch1988toMay1996.HeledtheOppositionintheGibraltarParliamentfromitsfoundingin1978until2011 whenhestooddownasleaderoftheGSLP,replacedbyFabianPicardo.MrBossanohasadegreeinEconomicsfrom theLondonSchoolofEconomics,aswellasadegreeinItalianfromtheUniversityofBirmingham.Inthe1960’s,he becamepartoftheUKtradeunionmovementasaseamanandwasamemberoftheLabourPartytheretoo.Following thevictoryinthe2011generalelections,hewasgivenMinisterialresponsibilityforEnterprise,TrainingandEmployment. HemetwithMilestoneGRPtodiscussthenewgovernment’sapproachtobusinessandsocialissues,andhowthose worldsarecloselyinterconnected. Milestone GRP - Gibraltar’s economy has fared very well through the recent years of financial difficulty. What growth figures do you expect going forward? Minister Joe Bossano - When we were previously in Governmentweachieved133%growthin8years.Theeconomygrewfrom156millionto356millionpounds,fromthe years 1987/1988 to 1996/1997. In our Government’s recent Manifestoweputaconservativetargetof5%growthinGDP. WeexpecttheGDPthisyeartobearound1.1or1.2billion. Thelastpublishedfigurewasjustbelowonebillion.Weaim atreaching1.7to1.8billionin2014/2015.Thisisindependentofwhatishappeningintheglobaleconomy.Ifyoucan provideasafehavenandareasonablereturnforinvestors, thenitbecomesaseller’smarket,withmorepeoplelooking forgrowth,thanpeopleabletoofferit. 22 Bank with all sorts of restrictions, such as a 2,000 pounds depositlimit.Therewasaneedtomodernisethevehicle,the products and the way the bank operated. At that time the bankhad2.5millionpoundsindepositsanditwasmaking 67,000 pounds of profit a year. As a result of those changesandmodernisations,by1996,ithadaround280million pounds in deposits, and was making 5.5 million pounds in profit.Thisyear,thedepositbaseisaround300millionand thetargetistodoublethisfigureevery12months. Milestone GRP - What areas have you identified as ripe for providing this growth? The bank now has a new investment vehicle. It its a tenyeardebentureissuedbythebank.Thedebenturepays2% interestrateinthefirstyear,andgoesupby1%eachyear forthefollowing10years.Soitisaten-yearbondissuedby theGibraltarSavingsBank,andallsavingsandinvestments areguaranteedbytheGovernmentwithoutanylimit.Soyou haveavehiclewhereyouhavethepotentialofanaverageof 6.5%interestperannumifyoukeepthemoneyinitforthe wholelifeofthedebenture. Minister Bossano-OneoftheareasIwouldliketoexpand, and I will be directly involved in expanding, is the Gibraltar SavingsBank.TheSavingsBankisaStateownedBankthat wassetupin1882,andithasbeentradingsincethen.When we came in 1988, it had been used as a Colonial Savings Thebankisabletooperateinothercurrencies,butitisnot something we are planning to do. The target is mainly the savingsmarketinGibraltar,butthereisnoresidentialrequirement.Likeanyotherentity,therequirementisthattheinvestormustgiveproofofthelegitimacyofthesourceofthe Minister Bossano -Theyarenotincompatiblepriorities.The moreweimprovethequalityandstandardofliving,theeasieritwillbetoattractinvestments,andviceversa,themore investments we attract, the more resources we will have to improve our quality of life. They are mutually beneficial objectives that feed on each other. You can create a virtuous circle.Successbringssuccess.AnexampleofthisisprovidedbytheGamingindustryinGibraltar.WhenthefirstGaming company was set up in Gibraltar, it was offered very generoustaxterms,alongwithaperiodofseveralyearsof exclusivity as they were the pioneers and predicted that it would be a successful sector. The Gaming sector now employsover2000people,almost25%oftheprivatesector.As Isaid,successbringssuccess. Milestone GRP - What challenges does Gibraltar’s size pose in terms of staffing and employment? 2003 2004 2005 2006 2007 2008 2009 2010 Source: Department of Education andEducation Training Source: Dep. of & Training StudentEnrolmentsatUKuniversities Student Enrolments at UK Universities Milestone GRP - What can the business world learn from Gibraltar? Minister Bossano -Firstofall,thatsmallisbeautiful.The lesson to be learned is that everything that is big is made up of many small parts. In Gibraltar there is no big business,thereisaverytinypartofmanydifferentbusinesses. They are here, though, because Gibraltar is more efficient andprofitablethanelsewhere.Theeconomyhastobeanalysedintermsofbeingmadeupoflotsoflittleeconomies. So if I was responsible for a bigger entity than the size of Gibraltar, I would be using the same philosophy but on a differentscale. Minister Bossano - One thing that must be understood is thatatownofoursizeinSpainorintheUK,wouldformjust apartofalargerentity,andthistownitselfwouldnoteven havethepowerorresponsibilitytosolveproblemslikethat ofemployment.Theonlythingwehavetobecarefulabout isthatthelevelofskillweproducetosatisfythedemandof theGamingcompaniesissonarrowthattheybecomenontransferableskills.Thegamingindustry,oranyother,should neverbecomesolargethatifitgoesweallgodownwithit. With regards to education, Gibraltar has got a very generous HigherEducationSystem,whichwasintroducedbytheSocialist Governmentin1988.Wearenowmakingitevenmoregenerous. Since1988anyschool-leaverwiththenecessaryqualifications toobtainanoffertoaplaceinauniversityintheUKorEurope, willhavehistravelexpenses,tuitionfeesandmaintenancepaid bytheStateforthewholeundergraduatecourse.Whatisnew thisyearisthatweareextendingittopost-graduatecourses. Supportingeducationiskeysinceourgeographicallocationand theintellectofourpeople,arethetwoonlyresourceswehave. Local Pride Gibraltar 2012 23 Introduction milestone GRP 33% Tourism 1050 950 17% Online gaming Notes: (i) Provisional Estimate (ii) Forecast £(million) 850 750 17% Shipping and Port Services 650 550 450 350 250 33% Financial Services 2001 2002 GDP 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: GSO Economybysector Source:FSC Male Shipbuilding Other Manufacture BAY OF GIBRALTAR 204 Electricity and Water Supply 299 Construction 2722 Wholesale and Retail Trade 2989 Hotels and Restaurants 1121 Transport and Communication 1228 Financial Intermediation 1848 Real Estate and Business Activities 2821 Public Administration and Defence 2031 Education 0 Female 230 896 Health and Social Work 1602 Other Services 2984 500 1000 1500 2000 2500 3000 note: Industry Classification follows the UK’s Standard Industrial Classification JobsbyIndustry Source: GSO 80+ 75-79 70-74 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 15-19 10-14 5-9 0-4 1,2 1,0 0,8 0,6 0,4 0,2 0,0 0,2 0,4 0,6 0,8 1,0 1,2 Population (in thousands) PopulationPyramid,2012 Source: U.S. Census Bureau, International DataBase TAXATION CORPORATION TAX KEY TAX POINTERS Aflat10%CorporateTaxrate cameintoeffecton1January2011forallcompanies.(Energyandutilityprovidersaresubjectto20%tax.) •NoInheritanceTaxorEstateDuty CompaniesaretaxedonprofitsaccruedinorderivedfromGibraltar (i.e.territorialbasisoftaxation). Gaming Tax: 1%ofrelevantincome(gamingyieldforremotecasinosandbetsplacedfor on-linebookmakers),cappedat£425,000withaminimumpayableof£85,000 Land Area Total: •NoCapitalGainsTax •NoVAT •MinimalStampDutyrates •NotaxonBankinterest •Notaxonlistedinvestmentincome INCOME TAX 6.5km² Individuals Enjoying Special Concession Choice of Personal Tax systems TaxpayerscanopttobetaxedunderanAllowanceBasedSystem orunderaGrossIncomeBasedSystem. Climate Mediterranean- mildwintersandwarmsummers (A)ALLOWANCEBASEDSYSTEM Taxable Income Bands Population 29,034(2012est.) Birth Rate 14.22births/1,000population (2012est.) Rate % Tax on band £ 0-£4,000 17 (reduced rate) £ 680 £ 4,001-£16,000 30 (standard rate) £ 3,600 Over £16,000 40 A) HighNetWorthIndividuals("Category2Individual") Onlythefirst£80,000(2010/11-£80,000)ofassessableincomeistaxable subjecttoaminimumtaxpayableof£22,000(2010/11-£22,000) andamaximumofapproximately£30,000(2010/11-£30,000). Conditionsonresidentialaccommodationandpreviousresidence/activitiesin Gibraltarapply.ACategory2individualcannot,ingeneral,engageinatrade, businessoremploymentinGibraltar. *Tax Allowances and Reliefs apply (B)GROSSINCOMEBASEDSYSTEM Population growth rate 0.265%(2012est.) Source: CIA World Factbook (a) The income bands and tax rates for income up to £25,000 are First £10,000 £10,001 - £17,000 6% 20% Balance 29% (b) The income bands and tax rates for income above £25,000 are Atlantic Ocean •NoWealthorGiftTaxes EUROPE ASIA Gibraltar Mediterranean Sea First £17,000 16% £17,001 - £25,000 19% £25.001 - £40,000 25% £40,001 - £105,000 28% £105,001 - £500,000 25% £500,001 - £700,000 18% £700,001 - £1m 10% Balance at 5% B)HighExecutivePossessingSpecialistSkills(HEPSS) ThetaxpayablebyaHEPSSislimitedtothefirst£120,000ofearnedincome. Therelevantskillsmustbedeemedtobeofexceptionaleconomicvalueto Gibraltar. HEPSSaretaxedundertheGrossIncomeBasedSystem. Conditionsonresidentialaccommodationandpreviousnon-residencyapply. All taxpayers will pay tax at an effective rate of less than 25% AFRICA Map by Eric Gaba 24 Gibraltar 2012 25 Financial Services Financial Services milestone GRP Wewillcontinuetoworkwithothercountriestodevelopagreementsandcooperation. Wehaveallnecessarymeasuresinplaceinrelationtoanti-moneylaunderingpracticesandlegislation.TheFinancialServices Commissionplaysacrucialroleinregulationandlicensing,independentlyfromtheGovernment.IthinkGibraltar,asaFinancial Services centre, can be very proud of the framework that notonlyallowscompaniestodobusinesscomfortablybutthat alsoprotectstheircustomersandthepeoplewhodobusiness withthem. A World-Class Reputation and Best Practices A small jurisdiction punching above its weight Interview with The Honourable Gilbert Licudi QC Minister for Education, Financial Services, Gaming, Telecommunications and Justice GilbertLicudiQCisabarristerbyprofessionhavingbeingcalledtotheBarinEngland&WalesandinGibraltarin1992.He haspractisedthroughouthiscareerwithHassansinGibraltar.HewasmadeapartnerofHassansInternationalLawFirmin 1998andwasappointedQueen’sCounselin2012.MrLicudihasbeenamemberoftheGibraltarSocialistLabourPartysince 1984.HefirststoodforelectionstotheGibraltarParliamentin2007winningaseatintheOppositionbenches.Between2007 and2011hewasShadowMinisterforEmployment,TransportandSportaswellasforEducation.Followingthevictoryinthe 2011generalelections,hewasgivenMinisterialresponsibilityforEducation,FinancialServices,Gaming,TelecommunicationsandJustice.HesatdownwithMilestoneGRPtodiscusshisviewsontherelationshipbetweenthepublicandprivate sectors,newopportunitiesinGibraltar'sFundssectorandtheimportanceofeducation. Milestone GRP - How was your portfolio brought together? Minister Gilbert Licudi -Itislargelybasedonmyprofessional backgroundandonmyroleasShadowMinisterforEducation whenwewereinOpposition.Inmy19yearsofpracticeasa lawyer,IgatheredsignificantknowledgeoftheJusticesystem; IspentmuchtimedealingwiththeFinancialServicessector, specificallyinrelationtotrustissuesandcompanieslicensed bytheFinancialServicesCommission;Ialsodealtwithsome ofthegamingoperators.ThisisaMinistrywithadiverseportfolioincluding5differentareasofresponsibility.Thenextfour years will certainly bring a number of challenges. I am very excited about the work we will be doing and the programme wehaveputtogetherforGibraltaranditspeople. TheGovernmentwillproduceandsteerpolicyandwewilllet therelevantofficialsdotheirwork.SoalthoughIhaveawide rangeofdepartmentsundermyportfolio,Ihaveanoversight fromapolicypointofviewandanumberofveryableprofessionals to implement the policies that are made at a political level. Milestone GRP - What does the private sector bring to its side of the table? 28 Gibraltar’s reputation is key to our continued development. Regulationforthepurposeofprotectionofcustomerswhodo businesswithentitiesinGibraltarisfundamental.WehavearobustregulatoryregimeinplaceandIthinkthisiswhattheIMF meansaboutthebestpracticesinGibraltar;thisisamodelthat isvisibletoall.WebelievethatGibraltarcanbeseenasabeaconofgoodpractice,particularlyintheFinancialServicesfield. Milestone GRP - You have identified the Funds industry as one where Gibraltar can attract more business. Through what means will you encourage this development? Minister Licudi - We have identified substantial potential for growthintheFundsmarketinGibraltar.Wewanttoworkwith professionalsintheindustrytomakeGibraltaroneoftheforemostjurisdictionsinEuropefortheestablishmentofFunds. TheExperiencedInvestorFundsRegulationswhichwerein place when we took office required that administrators of Gibraltar Funds had to be based in Gibraltar. We felt that this was an inhibiting factor which limited the number of fundadministratorsonecouldchoosefrom,inparticularfor very large funds requiring substantial organizations to administerthem. Minister Licudi - We have a wealth of talent in Gibraltar. We seethedevelopmentofGibraltarasapartnershipbetweenthe Governmentandtheprivatesector.Thepublicsectorprovides theinfrastructureandthelegislativeframeworkneededwhilst theprivatesectordrivestheeconomybyprovidingtheexpertise and the necessary investment for Gibraltar to thrive. We haveencouragedandwillcontinuetoencourageinitiativesand ideas which the private sector can bring to the Government. Whetheritisacaseofamendinglegislationorbringinginnew provisions, we want to hear what it is that the private sector believetheyneed.Clearly,therewillbepolicyinitiativeswhich willbedrivenbyGovernmentbutitisvitalthatwelistentothe professionalsintheprivatesector. Followingdiscussionswithprofessionalsintheindustry,we agreed that it was necessary to relax the rules so that largefundscouldusereputableandsubstantialadministrators based in jurisdictions of equivalent standing to Gibraltar. The new regulations will also allow Funds to re-domicile to Gibraltar yet continue to use their existing reputable administrator. This represents a significant advantage for Funds moving to the EU, particularly with the advent of the AlternativeInvestmentFundsManagersDirectivewhichisdueto be implemented by July 2013. The introduction of the new regulationsisanexampleoftheoperationofthepartnership between the public and private sectors which we want to promoteandencourage. Milestone GRP - The International Monetary Fund (IMF) has recently stated that Gibraltar is “at the forefront of best practices”. What does this mean in the Financial Services sector, for instance? Milestone GRP - What changes are planned for the Pension Schemes sub-sector? Minister Licudi -Gibraltarisalowtaxjurisdictionfullycompliantwithallinternationalstandardsoftransparencyandcooperation.WhenwecameintoofficeinDecember2011,Gibraltar hadsigned18TaxInformationExchangeAgreements,thefirst one with the United States in 2009. I have since signed two moreTIEAswithMaltaandSouthAfricabringingthetotalto20. Milestone GRP - Do you identify a particular challenge with promoting the development of the Online Gaming sector alongside the Financial Services industry, for instance in terms of reputational risk? Minister Licudi -Therearealwaysreputationalchallenges.That iswhyweneedtocontinuetobevigilantandadheretoand,if necessary,improveonourregulatorystandardswhetherinthe OnlineGamingIndustryoranyothersectorofGibraltar’seconomy.Wemustalwayskeepaneyeonreputationalriskandthe issues that could have an impact on our reputation. Over the years,GibraltarhasbuiltagoodreputationintheFinancialServicessectorandintheOnlineGamingsector.Thefactthatwe haveattractedmajoroperatorsandwehavebecomealeading jurisdictionintheworldsuggeststhatthereisaregimeinplace whichpeoplecanfeelcomfortablewith. ReputationalriskinOnlineGamingcanbemanagedbycontinuingaselectiveandcautiousapproachtolicensingwithapproval giventoonlyhighqualityoperators.Wehavebuiltanexcellent reputationasoneoftheworld’sforemostjurisdictionsinOnline Gaming.Gibraltarisabrandnamewhichisrecognisedthroughouttheworldandweexpecttokeepattractingleadingoperatorswhowanttobenefitfromthenumerousadvantageswhich Gibraltarhastooffer. Milestone GRP - What do you forecast for 2012 and 2013 in terms of Gibraltar’s GDP and other key indicators? Minister Licudi -Therehasbeenafinancialcrisisthathashit manycountries,butGibraltarhasbeenabletocopeverywell andmaintainpositiveeconomicgrowthasaresultofGibraltar's sizeandourabilitytoadapt.Wehavenodoubtthattheresilience of the Gibraltar economy and the new measures we are implementingtoattractnewbusinessforGibraltarwillcontinue to create economic growth and generate the kind of revenue thatGibraltarneedsinordertomeetitssocialprogrammesand objectives, in particular in education, housing, social services andemployment. Milestone GRP - Is inflation a concern in Gibraltar? Minister Licudi -Thereisalwaystheneedtokeepaneyeon inflationbutwedonotseethisbeingaproblemforthefuture. Milestone GRP - What approach are you implementing for Gibraltar in terms of Education? Minister Licudi -Thereareanumberofinitiativesthatweare taking with regards to Education. We have always recognized 4,0 3,5 3,0 Minister Licudi -WebelievethatwecanattracttoGibraltara numberofQROPS(QualifyingRecognizedOverseasPension Schemes). We are looking at amendments to legislation in ordertobeabletoattractpensionschemesthatareestablishedoutsideGibraltar.Thisshouldgeneratenewbusiness for Gibraltar. We believe that we can create a competitive frameworkwhichwillmakeGibraltaranattractivejurisdiction forQROPStransfers. % 2,5 2,0 1,5 1,0 0,5 2001 Inflation 2002 Inflation 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: GSO Source:StatisticsOffice Gibraltar 2012 29 Financial Services that Gibraltar enjoys a very high standard of Education but it couldbefurtherimproved.Thereisaneedtoengagemoreprofessionalswithinthe Education system and we are embarking onaprogrammewherethenumberofteacherswillbeincreased by14%bythenextacademicyear.Thiswillprovidenewskills forpupilstobenefitfrom.Itwillalsoprovideemploymentfora significantnumberofqualifiedteachers. We are also embarking on a wider educational programme throughtheestablishmentofdegree-basedcoursesthatwillbe offered in Gibraltar both for local students and with a view to attracting international students. We are working towards the establishmentofaUniversityofGibraltar.Wearealreadyindiscussionswithinternationallyrecognisedinstitutionswithwhich weexpecttobeabletodevelopapartnershipforourUniversity project. Wealsobelievethatitisfundamentaltoencourageourstudents to pursue further education beyond the curriculum offered by ourschools.WealreadyofferGovernmentscholarshipswhich paytuitionfeesandprovidemaintenancegrantsforallstudents whoenrolonanundergraduatedegreeprogramme.Wewillbe extending the scholarships this year on a mandatory basis to all students who wish to pursue postgraduate studies as well asthosewhowanttostayinGibraltarbutundertakeacourse milestone GRP throughdistancelearning.TheGovernmentattachesmuchimportancetoinvestinginthefutureofouryoungsters. Milestone GRP - You have confirmed your attendance at the Centre for Global Dialogue and Cooperation’s (CGDC) AGM in May 2012. What would be your message to the audience of the CGDC meeting in Vienna this year, which includes Heads of State, leading international business people and opinionshapers in a variety of fields? Minister Licudi - Our message is simple; Gibraltar is a small jurisdiction but one which is an important player in the world market. It is a jurisdiction that punches much higher than its weightintheFinancialServicesandOnlineGamingsectorsand wearerecognizedassuch. WewillbeexpandingGibraltar’sbusinessbaseandwilldevelopnewproductswhichwillproducegrowthforthosecurrently operatinginGibraltarandwillalsoattractnewoperators. Gibraltar benefits from being part of the EU with access to a marketofover500millionpeople.Itslocation,accesstotheEU market,statutoryandregulatoryregime,communicationsinfrastructureandprofessionalresourcesavailablemakeGibraltara veryattractivejurisdictionfromwhichtodobusiness. Efficiency and Effective Regulation Maintaining Gibraltar’s reputation as a stable financial centre Interview with Mr Marcus Killick, Chief Executive Officer of Gibraltar’s Financial Services Commission and Mr David Parody, Deputy Chief Executive Officer of Gibraltar’s Financial Services Commission PriortohiscurrentappointmentasthefirstCEOofGibraltar’sFinancialServicesCommission,MarcusKillickhasheldpositionssuchasDirectorintheInternationalRegulatoryServicesTeamofKPMGUK,theHeadofBanking,TrustsandInvestment ServicesattheCaymanIslandsMonetaryAuthority,andtheDeputyChiefExecutiveoftheIsleofManFinancialSupervision Commission.HeistrainedasanEnglishbarristerandisalsocalledtotheBaroftheStateofNewYork.FSCDeputyChief ExecutiveOfficerDavidParodyhasover17yearsexperienceasaregulatorandhaspreviouslyservedastheCommission’s HeadofBankingSupervision.HisexpertiseinITwasinstrumentalindesigningtheFSC’srisk-basedmethodologyusedto supervisealltypesoffinancialservicesprovidersinGibraltar.MilestoneGRPmetwiththepairtodiscussGibraltar’sresilience throughthefinancialturmoilaffectingEurope,theFSC’sroleinmaintainingGibraltar’sreputationandstrongpositionasafinancecenter,andareasofopportunityfornewproductsandinternationalsynergieswithGibraltar’sfinancialservicesindustry. Milestone GRP - In light of the current events unfolding in the Eurozone, please tell us about Gibraltar’s unique position within the EU and the impact this has had on the development of the financial sector? Mr Marcus Killick -Gibraltarhasauniquepositionwithinthe EuropeanUnion,andindeedithassufferedfarlessthanmany otherjurisdictionswithintheEU.Infact,wehavecontinuedto growasajurisdiction,theFinanceCentrehascontinuedtodevelopandnewbusinesseshavebeencomingdownhere.The absence of social problems, unemployment and other issues thatexistinmanyotherEUcountrieshasprovedattractive.We have been mindful of the problems being suffered by Greece, Spain,PortugalandIreland.AstheEuropeanUnionisoneeconomiccommunity,whataffectsonejurisdiction,inevitablyhas animpactonotherstoagreaterorlesserextent.Nonetheless, because of our position we have a broadly spread economy, covering not only financial services, but also online gaming, tourismandshipping.Wehavecertainelementsthatarefairly robustagainsteconomicdownturns. Looking at our area, the Financial Services environment, we have only recently developed a Funds industry. There was no industryofanyrealsubstanceuntil2007whennewlegislation 30 andregulationwasbroughtintoencourageexperiencedinvestorfunds.Sincethattimewehaveseenagrowthinthenumber ofadministratorsandfunds.That,inturn,isrepresentingagood basisfromwhichwecanbuildontheintroductionoftheAlternativeInvestmentFundManagersDirective.AlsootherEuropean directivesmakeitmoreattractivebeingwithintheEUthanbeing externalfromitbuttryingtosellservicesinsidetheEU.Wehave alreadyseeninterestfromfundsre-domicilingfromplaceslike theCaymanIslandstoGibraltar. Wealsohavedevelopedsectorssuchasinsuranceforinstance. Theattractionforbusinessescominghereisnotonlyduetothe lowertaxregimebutalsobecauseofthepooloftalentavailable. Wedofeelthatourstrengthisamixtureofabenignclimateboth intermsofeconomicenvironmentandweatheritself.Gibraltar has always been seen as an entrepreneurial jurisdiction wherepeopleareinterestedindoingbusiness,withamuchlower level of bureaucracy than in other EU countries. At the same timeboththisGovernmentandthepreviousonehavebeenvery firminprotectingGibraltar’sreputation.Thisisajurisdictionof 30,000people.Wecannotphysicallytakeonlargevolumesof employment in financial services businesses. We always find thattherearebusinessesthatmaywishtocomeherebutthey arenotattractivetousbecausewearenotpreparedtoputour Gibraltar 2012 31 Financial Services milestone GRP reputation at risk. Occasionally problems occur obviously. But theGovernment,theRegulatorandtheIndustryarekeentodefendwhathastakenyearsforthisjurisdictiontoattain;thatis, goodqualityfinancialservicesdelivery. Milestone GRP - Is there an example to be taken from Gibraltar’s performance through the global financial crisis? Mr Killick -Insearchingforsolutionstothecurrentcrisesone shouldnotoverlookthesimplesolutions.Itisadangerthatall onedoesistoplaceanewregulationovertheexistingone.This strategymaynotprovetobesuccessful.Ibelievethatthereare somesimplefundamentalsolutionsthatifacceptedandimplementedwouldnotonlyassistwiththecurrentissuesbutalsogo alongwaytopreventthefutureones. Theirsimplicitymakesthemunattractivetosome,butactually theirsimplicityofconceptdoesnotmeanitissimpletoimplement.Alotwentwrongattheboardlevelofmanyorganizations becausetheydidnotunderstandwhattheywererunning,and the risks of running it in the way they were doing it. A board leadsanorganizationgivingstrategicdirections.Ifitcannotunderstandthestrategiesofitsownorganization,itcannotleadit. Iftheboardsdidtheirjobproperly,manyissuescouldberesolved.Iftheboardledthecultureandbehaviourtherewouldnot bebadsellingbehaviourlowerdown. Iftheboardpreachesandpractisesgoodethicalbehaviourthat translatesintotheorganization’sactions.Ifitisonlyinterested intheprofitinanindividualdivision,thatdivisionwilltrytomaximizeitsprofitswhetherintheshorttermornot.Inturn,itwill takerisksthattheboardisnotawareof.Therefore,anethically well-runboardwillsolvemanyofthecurrentproblemsandpreventfutureones. Milestone GRP - In terms of the sheer size involved and resources required, is there a challenge for Gibraltar to adapt 350 to the volume of international regulation that is being implemented at the EU level? Milestone GRP - How autonomous is the Financial Services Commission? Mr Killick -EveryjurisdictionintheEUischallengedwiththe sheer volume of directives and regulations emanating from Brussels.Therearealsointernationalinitiativescomingfromthe International Organization of Securities Commissions and the International Association of Insurance Supervisors as well for instance;thesearehittingnotonlytheindustrybutalsoregulatorsthemselves. Mr Killick -TheCommissionisawhollyindependentorganization.Wearenotonlyindependentofthegovernment;weareindependentoftheIndustryitself.Wearenotconnectedwithany other regulatory body; we are not subservient. We are a competentauthorityintheEUinourownright.Beingindependent doesnotmeanwedonothavestakeholders.Ourstakeholders includetheGovernment,theindustry,theregulatorycommunity worldwide,andwearealsoaccountable. AttheFSC,weareanumberinthemid40’sintermsofmanpower.Thisimpliesthatourteamhastobemorebroadlyspreadin termsoftheircompetencies.Wecannothaveanindividualora teamexclusivelydedicatedtoapplyingthecapitalrequirements directivestotheinsuranceside,forexample.Nevertheless,we dohaveasystembywhichwehavethecapabilitytomakesure thatthenecessarydirectivesandregulationsareimplemented appropriatelyandinthecorrecttimescale.Weobviouslywork verycloselywiththenewgovernmentandtheFinanceCentre itself.Wehaveaprocesstomakesuredirectivesaretransposed in time. We have also developed Centres of Excellence within thisorganization,whereanindividualdevelopsaparticularspecialism. Weworkandcollaboratewithourfellowregulators,suchastheFinancialServicesAuthorityintheUK,tomakesurethatourresourcesareplacedwheretheyaremosteffective.Itisnotourroleto reinventthewheel,thereforesomeworkcanbedonebytheFinancialServicesAuthorityorbyothersandthenwecanadaptthings tosuittheparticularcontextofGibraltar.Wedonothavethesame levelofinputintheformationofdirectives;wesimplydonothave theresourceswithregardstothat.However,wheretherearethings thatsignificantlyimpactGibraltar,wedomakeourrepresentation. EverycountrywithintheEUstruggleswithwhatBrusselsisproducing.Oursizeasaregulatormaybeslightlydifferentifcompared withotherjurisdictions,whichjustmeanswehavetofightsmarter. Auditors Banks Insurance Companies Insurance Inter-mediaries Investment Firms Insurance Managers Money Services Business Company Managers / Professional Trustees Occupational Retirement Schemes Indeedwehaveastatutethatrequiresthatweareindependently reviewedeveryfewyears;wealso,asmembersofanumberof internationalorganizations,aresubjecttoreviewsbythem.We arealsosubjecttoreviewsbytheInternationalMonetaryFund (IMF)onanoccasionalbasisaswell,themostrecentonebeing 4 or 5 years ago, from which Gibraltar got a very high rating intermsofitscompliancewithinternationalregulatoryrequirements. So we are wholly independent but we are accountable bothnationallyandinternationally,andweareveryawareofthe needsofourstakeholders. Milestone GRP - What new financial products are being developed in Gibraltar? Mr Killick -TheCommissionasaregulatordoesnotgenerally takeaprimeroleinthedevelopmentofnewservices.Wearein aprivilegedpositionfromwherewecanseewhatdevelopments aregoingoninotherjurisdictions.Wearekeenlyconcernedto ensurethatGibraltarcontinuestodevelopaneffectivefinancial servicessectorthatmeetstheneedsoftheinternationalcommunity.Aswellasthefunds,thereisaprojectrelatingtoShariah-compliant products. There is also the possibility of developingmultilateraltradingplatforms;therearedevelopmentsin termsoftheinsuranceindustry,andtheAlternativeInvestments FundManagersDirective.Wearealsolookingatotherpotential marketingorconsumer-ledopportunities. To date, Gibraltar has been very EU and predominantly UKfocused.Butthereisnoreasonthatthesetofskillsandbusinessesthathavebeendevelopedcannotbepushedintoother jurisdictions.WefacilitateallthefinancialservicesindustryplayersthatwishtotaketheirproductsandservicesintootherEU jurisdictions or in jurisdictions outside the EU. We do this not by marketing it, but by playing an assistance role, by making surethatthereputationofGibraltarissuchthatthosecountries welcomeGibraltar’sserviceproviders.Wealsodoitbytalking directlytotheregulatorsoftheotherjurisdictionthemselvesso thattheycanbereassuredthatwhattheyareallowingintheir jurisdictioniswellregulatedandsupervised,hencethatthereis propercooperationbetweenourselvesandtheotherregulators. 300 250 200 150 50 2001 2002 FSCRegulatedEntries 2003 FSC Regulated Entries 32 Ontheotherhand,weareawareoftheroleoftheIndustry.We needthemtoensurethatwearenotbureaucraticwhereitisnot needed,donotinhibitthesenseofgrowthandqualitygrowthof thesector.IftheregulatordoesnotknowtheIndustryandvice versa, there is simply conflict. This is what we mean by partnership:collaborationratherthanconfrontation.Sometimesyou needtotakeenforcementactionandwehaveneverhesitatedto doso.Lastyear,forexample,wetookactioningettingaGBP 6.5millionorderagainstafirmanditsdirectors.Wealsodida number of enforcement operations together with the Gibraltar Policeinrespectofunlicensedbureauxdechange.Wearereadytotakeactionwhenitisnecessary,butweregarditasalast resource. Milestone GRP - What are the strengths and weaknesses, the opportunities and threats of the Gibraltar financial services sector at the moment? Mr David Parody - Our first strength is the entrepreneurship shownbyourIndustry,theabilitytohitnichemarketswithniche products very quickly. Our second strength is the ability to reactveryquicklytomarketforcesasregulatorsorgovernmentin termsofimplementinglegislation. Withregardstoopportunities,Gibraltarhashugeopportunities to tap into the European market; there are many opportunities thatwehavetoexploitmore.Moreover,givenoursmallsize,it does not take much to make an impact on our economy. Our size can present a weakness too, in the sense that we are a smalljurisdictionwhosemembershipwithintheEUisdrivenby theUK‘smembership.Thismeansthatoccasionallyourability to raise our interests independently is restrained. This is not a faultofthegovernmentoranyoneelsebutratherareflectionof thefactthatweareajurisdictionofjust30,000people.Thisis whythegovernmentisdoingthisoutreachatmakingsurethat we are communicating with our colleagues within Europe and elsewhere.Whatwecannotdobystampingourfeet,wedoitby quietpersuasion. Withregardstothreats,thebehaviourofSpainalwayspresents a threat to Gibraltar, but it also presents opportunities. Spain shouldseeGibraltarasthenaturalinternationalFinanceCentre oftheIberianPeninsula.WhattheChannelIslandsdoforLondon,forinstanceintermsofmaterialbenefitsofplacingfunds, wecoulddoitforMadridiftheSpanishrealizedtheopportunitieswecouldpresentthemandnotjusttheotherwayaround. Milestone GRP - How do you see the role of the FSC as a partner of the industry rather than simply as a regulator? 100 0 provedmoresuccessful.Thisdoesnotmeanthattheregulator has a soft touch. There is a lot of confusion as regards to the waystoenterintoapartnershipwhereyouhavethesameobjectivesandthatofbeingsubservienttotheindustry.Thepartnershipisoneofequals.TheIndustryknowswhatourroleis,thatis tokeepthegamecleanandcompetent. 2004 2005 2006 2007 2008 2009 2010 2011 Source: FSC Mr Killick -Webelievethatherehasbeentoomuchofa‘them andus’attitudebetweenregulatorsandtheindustry.Thatisa global phenomenon, particularly at times of economic stress, whereregulatorshavecomedownveryharshlyontheindustry. Ratherthanconflict,amorecollaborativeapproachwouldhave Gibraltar 2012 33 Financial Services milestone GRP like Gibraltar to become a centre for the establishment of the hedge funds operations themselves, which is of course licensableunderEUregulations.Wewouldliketoseethealternative investment management side emulate the path we saw in the insurancesectorintermsofgrowthandcriticalmass. Milestone GRP - What features does Gibraltar offer investors from the financial sector looking for a European base for their operations? Gibraltar - EU Financial Services Centre Reformed and Transformed Interview with Mr James Tipping, Finance Centre Director, Government of Gibraltar James Tipping has been the Director of Gibraltar’s Finance Centre since September 1999. He is responsible for strategic planningincludinginputintotheGovernment’sresponsetothevariousinternationalinitiatives,productdevelopment,andliaisonwiththeprivatesectorandtheregulatoronbehalfofGovernment.Jamespreviouslyworkedfor14yearsininternational investmentbankinginLondon,NewYorkandLatinAmerica.HecommencedhiscareeratSamuelMontagu,laterbecoming aDirectoroftheGlobalEmergingMarketsDivisionatWestMerchant,theinvestment-bankingarmofWestDeutscheLandesBank.HesatdownwithMilestoneGRPtodiscussthereformandtransitionGibraltar’sfinanceindustryhasbeenthrough,and theopportunitiesforinvestmentarisingfromthem. Milestone GRP - What impact have the reforms of the last 15 years and increased global integration in general had on Gibraltar’s economic growth and diversification? from predominantly low added value private client work to muchmoresophisticatedcorporateactivity.Theprivateclient sidealsoevolvedtomuchhighervaluebusiness. Mr James Tipping -Ithinkthatourtransitionfromaso-called ‘tax-haven’toalow-taxinternationalfinancecentrereallybegantowardstheendofthe1990’s.Atthetime,therewasan international consensus, especially amongst large countries, thatwhatwasperceivedasthepredatorynatureoftaxhavens had to change. This went far beyond the small jurisdictions andinvolvedgreaterinternationalcooperationandamassive stepintermsofexchangeofinformationfortaxpurposesfor example.Itwasthensignalledthatthemodel,whichhadbeen appliedtomanycountriesfordecades,wherebyacountryin whichaperson’sassetsweredepositedhadnointerestinknowingifthesepeopleowedtaxesintheirhomestates,hadto change. To take a concrete example on the corporate side, the insurancebusinesshasevolvedtremendouslysince2001orso.At thetime,Gibraltarwasfairlyinsignificantinthesectorandwe hadabout15companiesoperatinghere.Today,wehavemore than100,ifyouincludetheonesthatareincellstructures,and of course all are licensed by the regulator, whether they are retailorcaptiveinsurancebusinesses.Onthemotorinsurance side,about10%oftheUK’svehiclesareinsuredbyGibraltar insurance companies. This gives you an idea of the size and strengthofasub-sectorthatisnottax-sensitiveanddoesnot relyonsecrecy,eventhoughwehaveneverhadsecrecyhere. Gibraltarrecognizedthisearlyonandembracedamassivediversificationstrategy,notjustwithintheeconomyasawhole, butalsowithinfinancialservicesaswell.Soifwelookback15 yearsorso,thesectorwasnotverysophisticatedandinvolved fairlylowvalue-addedwork.Withtherealizationthatthebusinessmodelwasgoingtobeforcedtochangeduetoincreased international cooperation and the signing of Tax Information Exchange Agreements (TIEA) for instance, there was a move 34 Thiswholeprocessofreform,includingGibraltar’swhitelisting by the G-20, culminated in the implementation of the uniform taxregimeinJanuarylastyear.Thegoodthingisthatwehave had a reasonably long period of time to adapt from the longheldbusinessmodelthatwasaroundpreviously.Ofcourse,this createsalotofopportunities;indeedmanycountriesfindithard tomoveformthemodeltheyappliedinthepast.ButGibraltar’s transformation has encouraged diversification, particularly in theFinancialServicessector.Fundsandassetmanagementare areasthatwewouldliketoseedevelopquiteheavily.Wewould Mr Tipping - I think Gibraltar has the right set of characteristics to attract more investment management; in fact, Gibraltar ismarketedintermsofitspackageratherthanaparticularaspect.Taxissetatalevelthatismeanttobereasonableforboth the tax-payer and the Government; indeed, we are within the EU single market and regulate accordingly which comes at a costofcourse.ButbecausewearepartoftheEU,companies operatingfromGibraltarhaveaccesstoamarketof500million people. Asforhedgefundsandinvestmentmanagement,ourreputation iskeybecauseinvestorswilllooknofurtheriftheycannotdo theirduediligenceandtickthatboxfirst.Thenregulationisthe secondmostimportantaspect.Infact,itisasinequanonprerequisiteasthetypeofinvestorsGibraltarwantstoattractare big-ticketinvestorswhoarelookingforhighlevelsofregulation, ratherthaneasyorquickopportunities.Thisisthemodernway anditillustratesGibraltar’stransitionquitewell,especiallyifyou considerthatprivateinvestors15yearsagowerelookingforthe opposite,astheywouldhaveelsewheretoo.Otherfactorsplay aroletooofcourse;forinstancethelevelofpersonaltaxation whichisbenignhere,especiallyifyoucompareitwiththeUK. LifestylealsoplaysanimportantroleandGibraltaroffersalot; our climate is very pleasant and the hinterland gives easy accesstoSpainandMorocco. TheseareimportantadvantagesinanindustrysuchasHedge Fundsthatdoesnotrelyonlocation;andofcourse,ourdirect connectiontoLondonisagreatadvantagetoo.Frankly,ifyou putallofthistogether,Ithinkitisveryhardtofindsomewhere else within Europe that ticks all of those boxes, especially for anindustrysuchasfundsandinvestmentmanagement.Andto berealistic,givenGibraltar’sownrestrictionintermsofspace, thisisagoodindustrytodevelop,asitisnothumanresourceintensive.Itmakesmorepracticalsensetoattractbusinesses, which will bring their intellectual capital, spending power and develop organically. Of course, being inside the EU is a great advantage too when it starts to build walls for these types of activities;peoplewillwanttobeinsidethesewallsandGibraltar isverywellpositionedtocapitalizeonitsassets. Milestone GRP - What does the Finance Centre have to offer BRICS countries and other emerging economies in this context? Mr Tipping - We offer a gateway to the European Union. The regulation hurdle is tough, as we want to ensure applicants knowwhattheyaredoingandareofthehighestquality.Buta Gibraltarlicensedentity,suchasabankoraninsurancecompanyforexample,hasaccesstotheentireEUmarketautomatically;bypassportingitsserviceswithasimplenotification,a company can access this market or even set up branches in differentcountries.Forinstance, aGibraltar-licensed bankhas establisheda branchinLondon, passportedfromGibraltarundertheCommonMarketframework.Soifafirmislookingtodo businesswithintheEUanddoesnotalreadyhaveabase,then Gibraltarisaveryrealalternativefromwhichtospringboardinto Europe. In the Insurance sector for example, I think this makessense.Moreover,we recently signeda TIEAwithoneofthe BRICScountries(TIEAsignedwithSouthAfricaon 2 February 2012)andseveralmoreareonthecards. Milestone GRP - To what extent would you say the Gibraltar model could inspire other nations around the world? Mr Tipping -Gibraltarcametotherealizationthattheworldhad changed quite early. This was true across the board, from the Government to the regulator and private sector. That realization andtheresultingneedforactionwerecleartothevastmajority oftheindustryinGibraltar.Thereareothercountriesaroundthe world that have only woken up to that realization after years of denialandthisisaterribleshockforthem.Gibraltarsignedupto the OECD principles of information exchange and transparency in February 2002. Even though we did not do anything about it foranumberofyears,changewasonitswayandtherewasno reversingtheprocess.Ideallysmallplacesareabletoadjustvery quicklyandbeflexible. Moreover,manyfinancialservicesfirmsarelivinginarelativelyhostileenvironment,andanenvironmentwherethepoliticsofenvy rule,whichisverytryingforthem.Here,theGovernmentis100% behindthedevelopmentofFinancialServicesandwantsrealinvestmentinthesector.GibraltarianswanttheirchildrentostudyfinanceandbeinvolvedinthesectorwhichisaverypositiveframeworkemanatingfromthepopulationaswellastheGovernment. Thisisnotsomethingyouwillfindeverywhereatthemoment. From Gibraltar Throughout Europe: Passporting Explained PassportingoffinancialservicesisaEuropeanUnionmechanismwhichallowsforfirmsauthorisedtoprovidefinancialservicesinonejurisdictiontoprovidetheminanotherwithouttheneedforauthorisationinthissecondjurisdiction.Thisitcando byestablishingabranchorprovidingcross-borderservices.Inordertodothisthefirmisrequiredtonotifyitshomemember statesupervisoryauthoritythatitwishestoprovidetheseservicesinanamedjurisdiction. FirmswhoareauthorisedbytheFinancialServicesCommissionhavetherighttopassporttheir,banking,investmentsand insuranceservicesthroughouttheEuropeanUnion&EuropeanEconomicArea.GibraltarisincorporatedintotheEuropean UnionbyvirtueoftheUnitedKingdom’smembership.UnderArticle299(4)oftheTreatyofRome–whichestablishedtheEuropeanCommunity–theprovisionsoftheTreatyofRomeareappliedthroughouttheEuropeanTerritoriesforwhoseexternal relationsaMemberStateisresponsible. Source:GibraltarFinancialServicesCommission Gibraltar 2012 35 Financial Services milestone GRP Gibraltar as an Overall International Finance Centre by Professor Michael Mainelli FCCA FCSI, Executive Chairman, Z/Yen Group Global and Mr Mark Yeandle, Associate Director, Z/Yen Group Z/Yen Group conducts considerable research into the competitiveness of financial centres. The output of this research is the Global Financial Centres Index (GFCI). The GFCI rates and ranks 77 financial centres in various categories, drawing on instrumental factors and financial centre assessments from an online questionnaire survey. Broad & deep Relatively broad Relatively deep Emerging Global leaders Global diversified Global specialists Global contenders Chicago Amstersam Beijing Luxembourg Frankfurt Dublin Hong Kong Seoul London Shanghai New York Singapore Moscow Paris Tokyo Toronto Zurich Transnational The GFCI Method Instrumental factors: Many factors combine to make a financial centre competitive. These factors can be grouped into five over-arching ‘areas of competitiveness’: People, Business Environment, Infrastructure, Market Access and General Competitiveness. Evidence of a centre’s performance in these areas is drawn from a range of external measures. For example, evidence about a fair and just business environment is drawn from a corruption perception index and an opacity index. 80 factors have been used in GFCI 11. Financial centre assessments: GFCI uses responses to an ongoing online questionnaire completed by international financial services professionals. Respondents are asked to rate those centres with which they are familiar and to answer a number of questions relating to their perceptions of competitiveness. Overall, 26,853 financial centre assessments from 1,778 financial services professionals were used to compute GFCI 11, with older assessments discounted according to age. Established Transnational Transnational Diversified Transnational Specialists Copenhagen Boston Athens Bahain Geneva Istanbul Dubai British Virgin Islands Madrid Kuala Lumpur Edinburgh Cayman Islands Montreal Washington DC Glasgow Gibraltar Mumbai Guernsey Sydney Qatar Isle of Man Vancouver Shenzhen Jersey Munich Local What distinguishes the GFCI methodology is that, rather than being based on the research team weighting instrumental factors or just taking respondents’ raw assessments, GFCI uses a statistical approach where the financial centre assessments have been used to produce the instrumental factor weightings. The Global Financial Centres Index 2011 The top ten financial centres in GFCI 11 are: Transnational Contenders Established Players Local Diversified Local Specialists Evolving Centres Brussels Bangkok Abu Dhabi Buenos Aires Calgary Warsaw Bahamas Jakarta Helsinki Budapest Johannesburg Lisbon Hamilton Manila Melbourne Malta Mauritius Mexico City Monaco Osaka Milan Oslo Taipei Prague Reykjavik Wellington Rome Rio de Janeiro San Francisco Riyadh Sao Paulo St Petersburg Stockholm Tallinn Vienna Centre GFCI 11 Rank GFCI 11 Rating GFCI 10 Rank GFCI 10 Rating CHANGES Rank CHANGES Rating London 1 781 1 774 – 7 New York 2 772 2 773 – -1 Hong Kong 3 754 3 770 – -16 Singapore 4 729 4 735 – -6 Tokyo 5 693 6 695 1 -2 Zurich 6 689 8 686 2 3 Chicago 7 688 7 692 – -4 Shanghai 8 687 5 724 -3 -37 Seoul 9 686 11 679 2 7 Toronto 10 685 10 680 – 5 Global Financial Centres’ Profiles and Ratings (GFCI, 2011) With increased information over time, the GFCI profiles centres in terms of their links with other centres, as well as the extent and quality of the services that they offer. The 77 global financial centres are each assigned a profile on the basis of a set of rules for three measures or ‘axes’: ‘Connectivity’ this represents how well known a centre is around the world and how connected it is to other financial centres; ‘Diversity’ the breadth of industry sectors that flourish in a financial centre; ‘Speciality’ the quality and depth of certain industry sectors in a centre. 36 Global Financial Centres’ Profiles and Ratings (GFCI, 2011) The nine ‘Global Leaders’ (in the top left of the table above) have both broad and deep financial services activities and are connected with many other financial centres. Amsterdam, Dublin, Seoul, Shanghai and Singapore are ‘Global Diversified’ centres as they are equally well connected but do not exhibit sufficient depth in different activities to be considered ‘Global Leaders’. Similarly, Beijing is a ‘Global Specialist’, it does not have a sufficiently broad range of financial services activities to be a ‘Global Leader’. Gibraltar In the table above, Gibraltar, along with other offshore centres, is profiled as a ‘Transnational Contender’ – well known internationally but with insufficient depth and breadth of financial services to be a world leader. Offshore? Onshore? What is ‘offshore’? Many of the world’s smaller states or territories have sought to become successful financial centres by using their constitutional independence to develop legislation, regulation and tax vehicles that attract non-resident business. Many have used their comparative advantage to create world-class expertise in international financial services. There are also a number of states that are relatively small, independent and although not geographically ‘offshore’, exhibit several of the key competitive advantages of island states. For example, Geneva, Zurich, Luxembourg and even places such as Hong Kong are viewed as ‘offshore’ centres by many who deal with them. Whatever the definition, the most enduring offshore centres offer ways of transacting essential but complex wholesale finance transactions. Arguably, there are about 15 financial centres that fall into GFCI’s ‘offshore’ category, seven of which are within the ‘Transnational Contenders’ profile. These centres often specialise in wealth management, asset management, fund management and specialist insurance. The top ten of these in GFCI 11 are: GFCI 11 rank GFCI 11 rating GFCI 10 rank GFCI 10 rating Change in rank Change in rating Jersey 21 652 21 650 – 2 Guernsey 31 639 31 635 – 4 Cayman Islands 40 628 46 610 7 18 9 Hamliton 43 625 41 616 -2 Isle of Man 44 624 40 617 -4 7 British Virgin Islands 45 623 45 611 – 12 10 Monaco 60 593 59 583 -1 Gibraltar 63 587 58 584 -5 3 Mauritius 66 578 68 571 2 7 Malta 72 568 70 568 -2 – Bahamas 75 550 72 545 -3 5 Gibraltar 2012 37 Financial Services milestone GRP Offshore centres have suffered significant reputational damage in the past four years. In GFCI 10 several of these centres were beginning to recover and this trend has continued in GFCI 11. Gibraltar, along with Jersey, Guernsey, the Cayman Islands, the British Virgin Islands, the Isle of Man and Mauritius, has made gains in the ratings. This recovery in relative popularity has increased as more financial professionals come to appreciate the utility of the offshore centres. Global popularity has risen but how do offshore centres see themselves? Top offshore centres achieve higher than average assessments from other offshore centres, but inter-offshore trade is hardly a way to grow business: Offshore centres need to extend both breadth and depth, which in turn will move them towards a GFCI profile of ‘Established Transnational’. Paradoxically, the best way to be an offshore centre may be to behave like a better onshore centre, promoting long-term finance and regulatory simplicity. Attacks on the offshore centres will not disappear, particularly with the protests sweeping the world complaining about the perceived excesses of global finance. One of the offshore centres’ persistent problems is the inability to promote the positive messages of their work to the general population. Knowledgeable and sophisticated clients are happy to continue using these centres but few ordinary people understand their value. External Assessments of Jersey External Assessments of Jersey It is argued that financial flows through offshore centres increase the rate of GDP growth and employment in larger economies. However, the offshore world is linked to the state of the global markets, so transactional work will slow down as international markets slow. There are other challenges on the horizon too: Middle East / Africa (1,3%) Latin America (0,2%) North America (4,2%) • international regulators are sometimes accused in some quarters of bullying the offshore centres and international regulators are still focused on the activities of offshore centres – can these centres be over-regulated? Asia / Pacific (6,2%) Offshore (57,7%) Europe (30,3%) -150 -100 -50 0 50 100 150 External Assessments of Gibraltar External Assessments of Gibraltar The GFCI questionnaire asks respondents to name the single regulatory change that would improve a financial centre’s competitiveness. Although a large number of possible changes were named, the two mentioned most often were a reduction in personal taxation and increased predictability of the regulatory environment. The GFCI questionnaire also asks respondents how financial centres can best signal their long-term commitment to financial services. Again, stability of regulation and taxation are seen as the best signals although lack of corruption is also seen as crucial. Similarly, a centre with a lower average assessment than the GFCI 11 rating indicates that respondents’ perceptions of that centre are less favourable than the quantitative measures alone would suggest – a reputational disadvantage. The centres with the highest reputational advantage include Singapore (+34), Shanghai (+34) and Toronto (+27). The centres with the largest reputational disadvantages are Athens (-115) and Tallinn (-110). It is clear that Gibraltar performs well in many of the areas that financial professionals think are important. Tax rates are competitive, regulation is stable and of a good standard and infrastructure is as good as, or better than, most other centres in its category. What must Gibraltar do to boost its position in the GFCI? Gibraltar has a reputational disadvantage of -54. Therefore, reputation is clearly a big issue for Gibraltar as it suffers from a stronger reputational disadvantage than other centres in its class. To be precise, Gibraltar’s low reputational score does not necessarily mean that the quality of its services and infrastructure are any less than a center with similar ratings, but that it is perceived as such by respondents. In the GFCI model, one way to look at reputation is to examine the difference between the average assessment given to a centre and its overall rating (the average assessment adjusted to reflect the instrumental factors). If a centre has a higher average assessment than the GFCI 11 rating this indicates that respondents’ perceptions of a centre are more favourable than the quantitative measures alone would suggest. This may be due to strong marketing or general awareness. Policy makers in financial centres have to decide whether to prioritise the fundamental development of a centre’s competitiveness or to bolster the reputation of the centre. This prioritization will change over time. Our research suggests that Gibraltar offers a stable regulatory environment, respectable infrastructure and a skilled professional base, but that currently Gibraltar needs to address the issue of reputation as a priority in order to be seen as a more competitive financial centre. • the World Bank is showing increased scrutiny of the use of corporate vehicles to conceal misuse of funds – will this impact on offshore business? • the EU crisis – will investors start a flight to safety and use offshore funds more and if so which centres will they choose? Middle East / Africa (1,6%) Latin America (0,3%) Gibraltar Gibraltar is a British Overseas Territory and a self-governing and self-financing parliamentary democracy within the European Union. Gibraltar is a separate legal jurisdiction and its Parliament is solely responsible for the enactment of all domestic laws and for the transposition of European Union directives. North America (1,9%) Asia / Pacific (4,3%) Offshore (65,4%) Europe (26,6%) -150 -50 50 150 250 350 450 Top offshore centres have tried to attract long-term finance and regulatory simplicity, rather than competing solely on tax mitigation and secrecy. Clever offshore centres that enable longer-term financial planning with ‘Long Finance’ structures (structures that can endure for a generation or two) benefit from avoiding the capriciousness of larger nations’ domestic agendas. A large nation can change tax rules at short notice. Well-regarded offshore centres have achieved a reputation for stability in their tax rules and remember that financial professionals hate surprises. Z/Yen’s offshore work indicates that the leading centres have identified several sub-strategies to support ‘long finance’ strategies: • stronger promotion and showing that larger nations do have shortcomings with long-term planning and capricious regulatory change; • tackling long-term skills shortages with better training of indigenous populations rather than relying on imported skills; improving power, transportation and communications infrastructure; • subsidizing and hosting high profile conferences and events, simplifying visa and work permit processes; • increasing service levels both for those entering the centre and long-term residents; 38 As a British Overseas Territory, Gibraltar matches UK standards in financial services regulation. Most of the banks established in Gibraltar are branches of major UK, European or US banks. Much of the banking activity in Gibraltar is directed to asset management for high-net-worth individuals, partially because Gibraltar has actively tried to attract such people with special tax regimes. Gibraltar’s financial services sector contributes approximately 30% to the GDP of Gibraltar. Gibraltar’s financial services are showing growth in several different sectors - insurance, reinsurance, fund management and investment services. There is no stock exchange in Gibraltar and it has not been as widely used for corporate financial holding purposes as some other jurisdictions, so that corporate financial services are not as well developed as private services. The Gibraltar Financial Services Commission regulates investment business in Gibraltar and is organized by industry groups, with separate divisions for insurance, fiduciary services, banking and investment services. What must Gibraltar do to become more competitive? GFCI respondents are financial services professionals from all over the globe. They say that the most important areas of competitiveness are now (in order) personal and corporate tax levels, the stability and predictability of regulation, the quality and availability of staff and general economic conditions. Gibraltar 2012 39 Financial Services milestone GRP A Look at Gibraltar’s Neighbours Europe’s situation and the Rock’s position within it by Mr Tim Harris, Chief Investment Officer for the UK, Lloyds TSB Private Banking Policysolutionstothefinancialcrisisof2008-9includedanexplosioninpublicsectordebtacrossmanycountries,asgovernments across the world bailed out their respective banking systems to differingdegrees.Unencumberedbythelegacyofhighlocaldebt levels,manylessdamagedeconomieswithinthedevelopingworld areexpandingatattractiverates.However,thedevelopedworldin generalmustmanagegrowthinitiativesalongsidehighpublicdebt burdens,whichmustbeseentobemanageabletoretaintheconfidence of markets. For example, we have already seen both the USandFrancelosetheirAAAdebtratings,accordingtothemajor creditratingagencies. GibraltarfindsherselfsittingclosetoamostheterogeneousEuropeaneconomy.ThecontrastbetweenGibraltar’sstronggrowth andexternalaccountbalancesandhernearneighboursisquite stark. Despite the commonality of monetary policy across the currency union that is the Euro Area, the financial crisis of 20089hasleftverydifferentlegaciesfromnorthtosouth,andeastto west. While we expect Germany and the UK to avoid recession in 2012-13, such a call is looking a close run in France and we expectSpain,PortugalandItalytoseetheirrespectiveeconomies contractthroughthecurrentyear.Inextremis,weexpectthecrisisriddenGreekeconomytocontractby5%thisyear,whichwould effectivelyreduceitsGDPto20%belowpre-crisislevels.Withan austerity programme underway to lower budget deficits, it is difficulttoargueforgrowthonanyreasonabletimehorizonthere. The more challenged countries in the Euro Area (Greece, Portugal, Ireland, Spain and Italy) face two challenges. They need to regain competitiveness and correct large public-sector deficits anddebts.Addressingthese‘twinimbalances’withinamonetary unionconfrontsa‘Catch22’scenario:dealingwithoneimbalance islikelytoexacerbatetheother.Withinasinglecurrencyuniona countrydoesnothavetheoptionofdevaluingitslocalcurrencyin ordertoreflateitswayoutoftrouble.Regainingcompetitiveness relies largely on running lower inflation than the Euro Area averagetoadjusttherealinternalexchangerate.Butstrongernominal GDP growth is also needed to address fiscal problems and put public debt on a sustainable path. The low inflation required to regaincompetitivenesswillexacerbatefiscaldifficulties.Thus,we donotexpecttoseelowerthanaverageinflationandhigherthan averagegrowthinanyoftheabovecountriesthisyear. Impactondept-to-GDPin2020 Impact on dept-to-GDP in 2020 from fromweaker-than-base-casegrowth weaker-than-basee-case growth 12 Weaker* potential growth raises debt-toGDP by 5-10 percentage points by 2020 10 8 % 6 4 2 0 POR ITA IRE GRC FRA ESP GER Source: Goldman Sachs Source: Goldman Sachs. * weaker is relative to the IMF base-case for Portugal, Ireland, Greece, Italy, France and Spain (1% pa for Portugal, 0.5% pa for the other countries) 40 The point of balancing debt reduction against GDP growth is made within the chart below. An econometric analysis by GoldmanSachsmodelstheimpactthata1%perannumreductionin GDP growth in Portugal and 0.5% per annum reduction across other European countries might have on public debt levels by 2020. This highlights how governments have to balance fiscal prudenceagainstthelossofgrowth.Manydevelopedcountries have yet to regain the level of economic output of 2007, which wouldimplyapermanentlossofgrowthpotentialacrossthedevelopedworldeconomies. These issues resonate with Gibraltar’s closest neighbours. The Spanish government has recently defined its own austerity budget,whichaimstoreducetheannualdeficitfrom11.2%ofGDP in2009to5.3%thisyearand3.5%by2015.Thatshoulddeliver stabilityintheeyesofthemoneymarkets,whichisthecriticalobjective,givenSpain‘sneedtorefinancepublicsectordebtatless thanpenalrates.10-yearSpanishbondyieldsof5.8%compare with similar maturity debt yields of 1.8% in Germany and 2.9% in France. Without the confidence of public markets, the burden ofdebtservicingbecomeseverheavierinaself-fulfillingfashion. Austerityshowsmarketsthatacountrycanmanageitstotaldebt requirements,buttheconsequenceofapublicsectorsqueezeon investmentintandemwithprobablehighertaxandexciseincome meanthataneconomyisdrivingbelowitsgrowthpotential.Thus, we expect Spain to remain in recession through the middle of 2012,withacontractionof1.5%forthefullyearlikely.Theprospectsforrecoveryin2013dependnotonlyuponastrongimplementationoftheausterityplan,providingastablebaseforfuture investment, but also upon the world economy picking up. Given that a mature economy, such as Spain, relies heavily upon consumption and hence consumer confidence for growth, we must lookforanupturninbusinessbehaviourtomanifestitselfinlabour markets, where official rates of unemployment are at Euro Area highsofmorethan23%. FearsofdebtcontagionplacePortugalunderclosemarketscrutiny.Ithasoneofthehigheststocksofpublicdebtintheregionat wellover90%ofGDP.Lackofgrowthandunresolvedmacroeconomicimbalancescastdoubtsoverthissovereign’ssolvencyand theviabilityofitsadjustmentprogramme.Regainingcompetitivenessisadauntingtask,especiallyasboththepublicandprivate sectorsaredeleveraging.WhilethePortuguesegovernmenthas agoodtrackrecordofimplementationtodateundertheEU-IMF supportprogramme,webelievethatlowproductivityanddeeprootedstructuralproblemsareunlikelytoberesolvedby2013-14. PublicdebtthuslooksunlikelytoustostabilizebythetimePortugalisduetoreturntothemarketsforrefinancinginthesecond halfof2013.SinceIMFinvolvementrequires12-monthahead-of- fundingassurances,EuroAreacountriesmayneedtodecideby mid-2012 whether to commit additional financial resources. The EuroAreahasissuedstrongrhetoricinsupportofPortugaland concern about potential contagion to other peripherals reduces the likelihood of Portuguese private sector write-offs in 2012. However,Portugalretainsapropensitytoupsetglobalinvestors throughthisyear. Gibraltar’s largest trading partner, the UK, also continues on its course of managed austerity. The government has been unable to reducethepublicsectornetborrowingrequirementinrealtermsover thelasttwoyears.With£200billionbudgetedforsocialprotection spendingoutofatotalbudgetof£683billionin2012-13,itisclear thatreducingthisnumberiscriticaltobalancingthebooks.Thatdependsupongrowthandthegovernment’staxandinvestmentpoliciesremainpragmaticallyfocussedonattractinginwardinvestment. For example, following the latest cuts in headline corporation tax ratesto22%by2014,theUKsupportsoneofthelowestsuchrates inthedevelopedworld.Nonetheless,weexpecttheUKeconomyto stagger along at a 1% growth rate for some time. The good news hereisthat,alongsideGermany,theUKhasoneofthemostopen economiesinEurope.TheUSisrunningata2%growthrateinan election year, when we would not expect too many austerity measures,andAsianeconomiesareaveraging5-6%growthrates.These factorsshouldhelpbothofthesekeyEuropeaneconomies. In summary, the nationalisation of private sector debts has bestowedalegacyuponEuropethatwilltakeaneconomicgeneration toresolve.Somecountriesareadjustingbetterthanothers.However,thefactthattheEuroArearetainsjustfourAAAratedcountries tellsitsownstory.Weforeseemuchgraftaheadfromhere. Howdoesthisaffectlocaleconomicperformance?Spainandthe UKarebyadistancethetwolargesttradingpartnersofGibraltar, representing 89.4% of imports of all non petroleum goods from EuropeanUnioncountriesin2010.Onabroaderscale,theUKand Spainrepresented41.3%ofsuchimportsfromallcountries.However, Gibraltar imported nearly 2.9 times more than it physically exportedin2010byvalue.Thus,itisprotectedtoadegreefrom thedirectimpactofsoftdemandacrosskeytradingpartners.As theeconomiccrisishasengulfedEurope,Gibraltarisbroadening its trading ties; while European trading partners exported 16.7% lessbyvaluetoGibraltarin2010,ontheotherhandimportsfrom allothercountriesroseby25.1%. Gibraltarachievedanestimated6%GDPgrowthin2011andthe government expects to increase economic growth in 2012 and throughoutitsfour-yeartermofoffice.ThekeydrivertoGibraltar’s economyistheservicesector,whichhasbeengrowingatarapid rate,evenasexportactivityhasflattened.Thereseemslittlesignof aslowdownintourismandotherservicesectorsarefindingGibraltar an attractive place to do business. Financial services already accountfor30%ofGibraltar’sGDP,andaccordingtotheMinister incharge,Hon.Licudi,“whilstthisfigureisnotsettorise,thecake can get bigger and Gibraltar can have a bigger slice”. The currentdevelopmentoftheglobalOnlineGamingmarketcouldalso benefitGibraltar’sownindustry,whichalreadyhoststheindustry’s leadingoperatorsandrepresentsabout20%oftheeconomy.Such specialisationhasprovedaprotectionfromthecoldwindsblowing acrossEuropeandwebelievethatGibraltarremainswellplacedto attract foreign direct investment, which is the basis of continued domesticgrowth. The Rock of Gibraltar with Spain in the background. Gibraltar 2012 41 Financial Services milestone GRP Boards as Modern Drivers for Change The evolution of Gibraltar’s finance sector’s boards by Mr Marcus Killick, CEO, Gibraltar Financial Services Commission One of the most difficult jobs as a regulator is dealing with the volume of hate letters every day. However, I have got a routine and have normally finished writing them by lunchtime. Indeed, over the past few years, regulators have moved from quiet anonymity into the spotlight of public anger, alongside politicians, bankers and anyone in the financial world with the temerity to earn a bonus. Individual blame is irrelevant; we are collectively accountable. This is not the first financial crisis, “Fat cat” bankers have been blamed in the past, and the edifice of modern regulation is built upon the shattered ruins of previous regulatory structures. So we stop banks from lending, pile on more rules and restrictions, and epitomise Einstein’s definition of insanity: “doing the same thing time and time again, and expecting different results”. Let me put to you a different model. It is based on the beliefs that more regulation is not necessarily better, that more complicated financial products are not made less risky by more complicated regulation, that consumers are entitled to make bad investment decisions if they do so in knowledge of the risks they are taking, that light touch regulation is not inferior to heavy handed regulations. Let me call it the Gibraltar approach. Firstly, let me be clear, as part of the EU we are constrained in what we can do. We cannot choose to ignore the plethora of directives and regulations emanating from Brussels. We must, and do, comply with international standards. We hold the reputation of our jurisdiction dearly. Our approach is not some fundamentalist libertarian experiment. It is based upon the basic premise that, where possible, the simpler we keep things, the less likely they are to fail. Let me take as an example corporate governance. Corporate governance is, in essence, the way in which a company is directed, administered and controlled. All companies have a form of governance, whether they recognise it or not. It may not be very good but it does exist. It was the failure of such governance that, to me, represented the primal cause of our recent crises. Not the regulatory structure and not the appalling lending decisions by some banks. These were merely visible symptoms of the underlying malaise. Financial institutions, regulators and governments simply failed to properly understand and mitigate the risks they were faced with. To be exact, in the case of financial institutions, their boards failed. I have never met Fred Goodwin or the others, but I suspect they would still have preferred to have been in control of their empires. I am sure Fred liked being a knight and took pride in being Scottish Businessman of the Year so many times. I am convinced Chuck Prince (former CEO of Citigroup) regrets his, “as long as the music is playing, you’ve got to get up and dance” comment regarding subprime lending. These were not evil masterminds set out to destroy western capitalism. They were not criminals, despite a desire by some to make them such. Their failure was in the way they ran their companies, a failure that had catastrophic consequences. 42 Yet this failure occurred at a time when the importance of corporate governance was already well known. Requirements, whether rule based (Sarbanes-Oxley) or principle based (The UK Combined Code), were already well established. Listed companies had Audit Committee, Risk Committees, Nomination Committees, etc. The separation of the roles of Chairman and Chief Executive had been accepted as the norm. The importance of the role of Non Executive Directors (NEDs) was understood. Yet, for all this, governance still failed. Why? What was not understood by the industry or its regulators was that these were merely structures; their effectiveness wholly dependent upon the behavior of the board itself. If the board did not behave correctly then the protection the structures could have provided became a veneer. What use is a risk committee if those on it don’t understand the risks being taken? What good is separating the Chairman and Chief Executive when one is weaker than the other and does not properly fulfill its separate role? What good are NEDs that do not constructively challenge the Executive? My belief is that our regulatory approach should be to regard boardroom behavior as one of the keys to our assessment of those we license. It is not a difficult concept, does not require reams of regulations (indeed, behavior cannot be dictated by regulation) and it does not need a heavy hand. However, it is cultural in nature and is, initially, uncomfortable for many. is merely one of the factors; nationality and industry background are others. Yet it must be based upon skill and what the individual brings as a person, not because they will make up the numbers. In Gibraltar we have that capability. Whilst small in size we have a highly diverse culture. Similarly we are not solely reliant on one economic sector so we can cross-fertilise talent between areas so giving us diversity. By way of example, the former Government Financial and Development Secretary has become a highly successful CEO of the leading local telecommunications company and a NED of one of the large gaming companies. Similarly, the number of senior females in the finance sector continues to grow. Within the Financial Services Commission itself approximately half the senior employees are female. Such diversity is based on talent, not quotas. Another area we are working with the industry on is the transition process of small owner-managed businesses as they grow and have to change their corporate governance structures to ensure they remain fit for purpose. Some successful small firms struggle, as it requires the existing management to accept the limitations of its present structure. Sometimes it is our presence and focus on this that helps difficult but beneficial changes to be made. We do not believe it is our role to run the businesses we license but rather to understand the business and ensure it is run well. Some regulators blur the two; this is dangerous and presents risks for the future. In respect of the role of NEDs, the importance given in the Gibraltar supervisory structure to “authorised directors” of Expe- rienced Investor Funds, has helped raised the profile of this role generally. Given the importance we place on board behaviour, the NED plays a key role. We wholly endorse the Institute of Directors’ view of an NED; namely that their role is to provide a creative contribution to the board by providing objective criticism and are appointed to bring the following to the board: • Independence • Impartiality • Special knowledge • Wide experience • Personal qualities Someone once said that NEDs should be treated like fridges; “fill them with food and drink and hope they keep quiet”. To me this role, so long undervalued and under utilised, has come of age. They have become the eyes and ears of the stakeholders’ interests and, as regulator; we are one of those stakeholders. Financial services do not operate in a vacuum. There have to be regulations and supervision. The public expects the institutions in which they place their trust to be safe. To date, the history of regulation has been patchy. Having been involved in regulation for 25 years and a regulator in a number of jurisdictions for over 15 of those, I accept my share of the blame. Yet I do believe there is a way we can avoid Einstein’s definition. Get the organisation culture right, get the boardroom behaviour right and the rest will follow. However, I may be being too simple for the current trend. Anyway, back to my hate mail. The process has to be one of changing the culture of organisations so that bad board behaviour is regarded as unacceptable. Bullying on the board is no more acceptable than in the workplace. NEDs who fail to properly fulfill their role should be no more immune than employees who fail to do their job. Boards should assess themselves and be assessed just as members of staff are. Board meetings should not be comfortable places for the Executive but they should be constructive places. Historically regulators have given inadequate consideration to board behaviour in corporate governance. It is, however, now rising in profile. For example, Sir David Walker’s report on the governance of banks and other financial institutions, published in November 2009, states: “Boards and board behaviour cannot be regulated or managed through organisational structures and controls alone; rather behaviour is developed over time as a result of responding to existing and anticipated situations” There is also the issue of boardroom diversity. There has been much written on the small percentage of female directors. There have been targets set and some have proposed minimum quotas. I find the last proposal patronising and repellent, but the need for boardroom diversity (and not just along gender lines) compelling. This is not because I see the boardroom as a battleground for social justice but rather many board failures stem from “group think”, where too many people from too similar backgrounds share a common world view and therefore wholly fail to think outside the box. Diversity of talent and approach helps prevent this. Gender Gibraltar 2012 43 Financial Services milestone GRP Insurance Companies by Type Gibraltar’s Insurance Industry Yesterday, today and tomorrow by Mr Chris Johnson, Chairman, Gibraltar Insurance Association & Director, Robus Group Gibraltar has been a home to insurance companies for over 40 years, however it is only in the last ten years or so that the impact of becoming part of the European Single Market has been felt. At the beginning of 2012, Gibraltar boasted 65 insurance entities, the main component being non-life insurers. 9% Life 68% Non-Life 23% Captives those relating to insurance were no exception, giving rise to a great opportunity for the insurance sector. By 1998, Gibraltar had enacted all the necessary European Directives and had put in place a regulatory framework that had allowed the UK Foreign and Commonwealth Office to declare that Gibraltar’s regulatory body was a “competent authority” within Europe, and therefore able to license insurance operators to passport into the rest of the European Economic Area. This means that an insurance company which has its head office in Gibraltar, and is licensed by the Gibraltar Financial Services Commission, can insure risks in another EEA territory (the “host state”), without the need to apply for a licence in that territory. Hidden in these figures are some 40 cells active in Protected Cell Companies, meaning Gibraltar has well over 100 insurance company clients, in addition to 28 insurance intermediaries and 7 insurance managers. Gibraltar now accounts for some 10% of the UK motor insurance market, a bigger percentage than Lloyd’s of London, traditionally a major player in that area. So how has Gibraltar grown over the years, and what has driven this success story? In the very early part of the 21st century, Gibraltar had not yet established itself on the European scene, and insurance companies numbered only around a dozen. However, the hardening market in 2001 and the passing of Gibraltar’s own Protected Cell Companies Act in the same year sparked off interest in Gibraltar, which the practitioners on the Rock at the time, who had been working hard to gain name awareness for Gibraltar, were able to convert into hard business. But why would the investors in an insurance company want to set up in Gibraltar, as opposed to elsewhere? There are a few reasons. Gibraltar is therefore now a “low tax rate” environment, as opposed to a tax-free zone, which is in keeping with its positioning as a mainstream, reputable onshore domicile. The Regulatory Advantage Gibraltar’s Financial Services Commission (FSC) was established on 16 January 1991, in response to an ever more demanding supervisory world. Since then it has played a substantial and vital part in the development of the Rock’s insurance industry. We’re here to help One of the things most visitors first notice on coming to Gibraltar (apart from the fact that a road crosses the airport runway) is the can-do attitude espoused by the business classes here. Over the next few years, the rate of entry of insurers into Gibraltar was rapid and, whilst the initial flood has slowed to a steady trickle, the domicile is still growing, driven by a number of factors. The European Key The key to Gibraltar’s success has undoubtedly been opening the doorway to the European Single Market for Insurance. Gibraltar is part of the EU by dint of being a dependent territory of the United Kingdom, with derogations only from the common customs tariff, VAT rules and the Common Agricultural Policy (there being no agriculture on the Rock). In everything else Gibraltar is obliged to transpose all EU Directives, and 44 In other EU territories, regulatory bodies are faced with a large number of regulated entities and have to consider carefully how to apply their resources to supervise those entities in the most efficient way possible. This often leads to a formulaic approach to the regulatory process, especially the assessment of capital levels and the application of rules. Gibraltar’s FSC is no exception in that it has to ensure its regulatory processes are efficient and that levels of capital within insurers are sufficient to meet EU minima at the very least, and usually higher to reflect the risk presented by each enterprise. However, working in a much smaller market enables the FSC’s Non-life Captives 60 13 13 40 30 14 30 14 33 17 16 15 40 41 42 6 6 6 2010 2011 18 16 50 37 37 4 24 10 20 10 10 6 16 10 0 1 2 2 2 3 3 3 2001 2002 2003 2004 2005 2006 2007 Insurance Companies by Type 2008 2009 Source: FSC Gibraltar has been a finance centre for over 40 years, has repositioned itself to fit in with an ever-changing regulatory and compliance world, and is home to a number of business professionals who are ideally suited to provide services to insurance entities. The new regulatory regime of Solvency II will have a frictional cost impact on Gibraltar insurers, as in all European territories. However, the FSC is in the process of boosting its resources to handle the increased complexity of regulation and the principles of regulatory dialogue and accessibility will remain one of Gibraltar’s differentiating features. Under Services, the insurer simply underwrites the risk crossborder, either dealing directly with the customer or via an intermediary in the host state. He may employ third-party firms for administration and claims handling, especially if volumes of individual customers are expected to be high, and he will be taxed in the home state i.e. Gibraltar. Establishment provides that an insurer may establish a branch in the host state where it wishes to write business. The branch is fully responsible for transacting the business which the insurer underwrites, would have sufficient infrastructure of its own to do so and would pay taxes on the profits derived from that business. Life 70 Gibraltar insurers find that it is much easier for them to have a dialogue with the FSC than it would be with their counterpart in one of the main European territories, and the FSC is keen to maintain contact at a practical level with its licensees, with application of risk measurement techniques and a planned programme of onsite visits. This accessibility and availability to discuss matters rather than the formulaic application of rules have meant Gibraltar is perceived as a business-friendly domicile, without diluting the consumer protection embodied in a firm regulatory regime. The T Word For the first few years of its growth as an insurance domicile, Gibraltar had the benefit of (potentially) a zero tax rate. This was surprisingly not that much of a driver for a number of corporate investors, who would in any case be taxed under increasingly sophisticated Controlled Foreign Corporation tax nets, but there were some who were able to derive a tax advantage. In recent years, EU and OECD tax philosophy has focused on the “harmful tax competition” supposedly represented by territories having zero-rate schemes, and Gibraltar consequently passed in 2010 an all-new Income Tax Act, under which the headline rate of tax is now 10%. This is still competitive with a number of European domiciles and the effective rate can be even lower with the application of tax breaks, such as exemption of investment income, which are available specifically to insurance companies. The insurer can do this under the EU concept of either Freedom of Establishment or Freedom of Services. According to the most recent financial information available (2010), Gibraltar’s insurers were writing £2.5bn of Gross Premiums, with assets held of some £6.4bn. approach to be much more accessible and its application of the same rules more tailor-made for the circumstances of each licensee. As the insurance sector has grown, insurance managers and companies have built up a pool of trained and experienced staff, and the industry organisations, such as the Gibraltar Insurance Association and latterly the Gibraltar Insurance Institute, have played a significant role in educating the wider infrastructure of lawyers, accountants and other professionals about what is needed to nurture and grow the industry in Gibraltar. Telecommunications have benefited from the demands of the gaming sector, and insurance reaps the benefit, along with other technology support and support services. What Else? Gibraltar has its own statutes and legal system, based on the familiar system of English law. It is a Sterling territory (currency is GBP); the official language is English, though many employees are bi-lingual in English and Spanish. It has easy access from the UK and other European centres, with a recently built airport signalling its Government’s intention to attract flights from all around Europe, and a land border with the European mainland. And after school? When the working day is done, it’s nice to know relaxation is at hand, and with premier golf courses, excellent restaurants and five star hotels all within easy reach, plus 300 days of sunshine a year, could there be a better place to domicile an insurance operation than Gibraltar? Companies by type No of authorisations Gross Premiums (£ million) Net Premiums (£ million) Total Assets (£ million) Life 6 216 205 1,010 Non-Life 41 1,824 1,100 3,473 Captives 16 498 336 1,933 Reinsurers 0 0 0 0 Total 63 2,539 1,642 6,416 Insurance Companies, 2010 Source: FSC Gibraltar 2012 45 Financial Services milestone GRP The Use of Protected Cell Companies by Insurance Companies and Funds by Nigel Feetham, Partner, Hassans International Law Firm & Visiting Professor, Nottingham Law School, Nottingham Trent University The PCC Evolution The proliferation of protected cell company (PCC) legislation – a fairly recent creation in offshore jurisdictions including Gibraltar, Bermuda, the Cayman Islands, Guernsey and in the ‘onshore jurisdictions’ of various US States – has been vital to the international recognition of the protected cell regime. Although most commonly utilised as a captive insurance company, the legal structure has also been used for collective investment schemes, and in other areas such as ‘repackaging’ (and structured finance transactions). The idea of one corporate entity representing a number of different economic interests is nothing new, and it is not the case that such companies can only operate under a legislative regime for protected cell companies. While the concept of a statutory regime for such companies may be relatively new, the basic mechanics by which they perform their function have been widely used by the banking, insurance and fund sectors for many years. In the insurance and umbrella funds sector, cell-type structures were a feature in the market long before PCC legislation was ever introduced. Such structures rely on contractual arrangements between the various participants. It is therefore common to refer to them as contractual cell companies. In truth, contractual cell companies and PCCs within the statutory regime can (and do) coexist side by side. The objective of cell-segregation can, therefore, be achieved through common law contractual principles without the need for legislation, as it had for many years before the PCC came onto the scene. Despite the common ignorance today of what a PCC is, it is no different in its intended effect from the tools already widely used in markets of all kinds. What is a PCC and how does it perform its function? The intended effect of the PCC statutory regime is to restrict the ability of a cell participant to enforce his claim against all the assets of the PCC. When PCC legislation was first introduced, it was sometimes customary to speak of cells as if they were separate legal entities; in fact, they were not. More recently, Guernsey has introduced legislation to do precisely that – as seen with the socalled incorporated cell company (ICC). But, typically, PCC legislation, while recognising that there is only one legal person, legislates the effect of a contract between the parties by providing for the segregation of cell assets and liabilities and restricting creditor enforcement to what are known as cell assets. This applies to both voluntary and involuntary creditors. The economic (but not the legal) effect of a cell is, therefore, broadly similar for the counterparty to the taking of a security interest over particular assets. Due to the nature of these companies, they do attract special consideration. There can be no doubt that the critical test of a PCC will come where there is a cross-frontier element (including insolvency) and the company has assets abroad. It is clearly impossible to give a complete global picture of the integrity of 46 such structures. While contract law, driven by the needs of international commerce, tends to harmonise over time, insolvency laws do not easily do so. A distinction needs to be drawn between the application of PCC legislation by a local court, and the likely interpretation of the legislation under rules of private international law by a foreign court, for example, if proceedings were instituted against the PCC in such a forum. In any action instituted in the courts of the jurisdiction of incorporation of the PCC, there cannot be any doubt that PCC legislation would be given effect. Such a court would naturally apply local law. The concern is that the protection afforded to cell assets may be lost where an action is instituted in a foreign court and these assets are situated within that jurisdiction. This, however, is not a new concern: even before Guernsey introduced PCC legislation in 1996, those involved in the discussion around the concept of the PCC identified this as an issue – but it was not felt by the Guernsey Financial Services Commission as a good enough reason for not implementing such legislation. Regulators in other jurisdictions (initially at least) took a more cautionary approach. The Isle of Man government, for example, at first decided against introducing PCC legislation and did not do so until 2004; even so, the use of the PCC was restricted initially to the carrying on of insurance business. This prevarication resulted in Guernsey having a head start over all its offshore competitors, although this was not without its challenges. Twelve months into its legislative life, PCC legislation in Guernsey came under the scrutiny of leading UK counsel, instructed by a potential PCC user, regarding the likely interpretation of the legislation by the English courts. Guernsey cannot write insurance business direct into the EU (via the EU passport), while it is only recently that Gibraltar (as the then only European PCC domicile) began to actively engage the market, with Malta following closely behind after it joined the EU. There seems little doubt that the PCC is now an established part of the international insurance market and will continue to be so. PCC-type structures have proliferated in recent years in many jurisdictions. They have received acceptance in many international transactions, and the market for these structures is no longer the exclusive domain of captive insurers or the large banks. Instead, we are seeing an increase in the numbers of PCCs being set up for high net worth individuals (HNWIs). The PCC and the investment fund The use of investment funds as a tool for raising and investing capital, is now widely used in the international markets the world over. The large majority of such vehicles are established in zero tax jurisdictions, guaranteeing a tax-free return on its investments. Over recent years, investment funds have been the catalyst for the growth of many PCCs. They include hedge funds and property investment companies. While larger funds will invariably be set up as single vehicles (in the same way as multinationals would set up their own insurance captives), there are undoubtedly gains to be made by smaller funds pooling together under a PCC. Such structures are also fairly easy to establish. As in multi-issue Note Programmes, which were previously adopted by banks over many years for repackaging deals for institutional and very wealthy individuals, the documentation has become very standardised and easy to produce. In the EU, Luxembourg and Dublin have both made provision for segregated cell-type structures for use by investment funds. A number of jurisdictions have also implemented ‘experienced investor’ (otherwise also known in some jurisdictions as ‘qualified The PCC structure can clearly be a very useful tool in international transactions where investing in a single corporate entity, via separate classes of shares with differing investment objectives and to which specific assets are attributed, is essential. Fund managers in particular have set up PCCs to introduce the platform to their clients. For each separate investment a new protected cell is set up. The promoters can in fact use the PCC for any business transaction based on the investment objectives of its investors. The investment management role can be delegated and performed by the fund manager. The investors have the economic rights over the cell and are also exposed to the risk of loss in respect of the activities of the cell. The promoters, on the other hand, retain the ownership risk related to the PCC and its core assets in order to obtain the benefits of the PCC’s management. There is a significant case in favour of the PCC as a means of raising and segregating funds within a single vehicle. The PCC life company The PCC is also an efficient vehicle through which to execute life policies for the account of separate cells supported by segre- A simplified illustration of a Protected Cell Company In the context of an EU insolvency of a PCC insurance company domiciled and incorporated in the EU (in Gibraltar, for example), cross-frontier applications to or from other EU countries would now be governed by the EU Insurance Insolvency Directive. As a general rule, therefore, an EU-based PCC insolvency should be recognised throughout the EU and, accordingly, PCC legislation would have to be respected. In the context of a non-EU insolvency, the House of Lords’ unanimous decision in McGrath v Riddell [2008] UKHL 21 came to the aid of the PCC. The House of Lords considered whether an English court should remit assets, when faced with a request to do so by a foreign court, when that foreign court could arrive at a radically different distribution of the assets (to the UK) of the insolvent entity. The House of Lords ruled that the English assets of the HIH Group must be remitted to the Australian liquidators to be distributed in accordance with Australian insurance insolvency law. The request from the Supreme Court of New South Wales had been declined by the court at all instances (including the Court of Appeal) on the basis that creditors would not be treated according to the statutory pari passu principle then applying in England. investor’) funds legislation, aimed at streamlining and relaxing the burden of regulation in funds sold only to experienced investors. Such investors are not deemed to require the same protection as retail investors who invest in such funds, informed as to the risks that they take. In general, this relies on a system of selfcertification by relevant industry professionals, with local lawyers and fund administrators in particular assuming the central role of ensuring statutory requirements are satisfied (via a process of registration with the local regulatory body). Within the EU, Gibraltar has been at the forefront of the development of a regulatory framework for experienced investor funds (EIFs). The typical fund is established as a bespoke PCC to raise money for specified investments. Umbrella Fund Cell D Cell A High Risk Strategy Cell B Medium Risk Strategy Cell C Low Risk Strategy Low Risk Strategy Unsurprisingly, the PCC structure has not been widely marketed in Europe. This is because the existing companies established in Gibraltar 2012 47 Financial Services gatedcellassets.ThePCCstructureissufficientlyflexibletoalso permitcellassetstobemanagedbyseparateinvestmentmanagersselectedbyindividualpolicyholders(mainlyHNWIs).Thereare somelifepolicieswhicharestructuredwiththeunderlyingportfoliobeingunitsinafundoffunds,orevenafundlinked‘Note’or portfoliobond.Inthisstructure,inessence,theHNWIobtainsexposuretotheunderlyingportfoliothroughalifeassurancepolicy. Thistypeofcompanylookssimilarandperformsasimilarfunctiontoan‘investmentfund’.Thebigdifferenceisthattheproduct offering for regulatory purposes constitutes insurance, even if it has some of the characteristics of an investment ‘wrapper’. To qualifyaslifeassurance,itisordinarilysufficientifthereisaright to benefit which is related to life or death. As a consequence, investment products that include provision to pay out a benefit ondeathorsurvivaltoacertainageshouldqualifyasassurance. Such a structure (which is essentially a hybrid between an umbrella fund and a life company) allow HNWIs to organise their personal, tax and financial affairs through the medium of a bespokelifeassurancecompany.Thebespokecompanywouldbe establishedasaPCCwhere,inreturnforthepaymentofpremium (forexample,handingoverinvestments),an‘insurancepolicy’replacestheinvestmentportfoliowhichinturnsitsinasegregated cell.Eachsegregated life sub-fund is then invested using asset managers arranged for and approved by the PCC. Through the useofseparateprotectedcells,theassetsarelinkedortailored milestone GRP tothecashflowsofeachindividualpolicy.Analternativetoa‘life wrapper’intheUKistouseaSIPPasa‘pensionswrapper’. Linkedlifepolicies,inparticular,lendthemselveswelltotheconceptofthePCC,giventhatpolicybenefitsarehighlycorrelatedto thevalueofadefinedpoolofassets.Forlinkedpolicies,generally,thereisnoneedtoencouragediversification.Ifassetvalues decrease,thenthepolicyvaluesdecrease.Thiscorrelationeliminatesanimportantsourceofriskforaninsurancecompany. Inessence,aPCClifecompanyallowsaninvestmentwrapperfor investors to transfer existing funds, bonds and equities with an insuranceproduct. Thegeneralfeaturesofsuchastructurewithinthejurisdictionof incorporationare: •notaxoninvestmentsheldwithinthewrapper; •notaxonsalesorpurchaseswithinthewrapper;and •notaxondepositinterest. Somejurisdictionsinturnprovidetaxbenefitsforpolicyholders, namely no tax on dealing within the wrapper and tax-free withdrawals. Interestingly,anumberofjurisdictionswhodonotcurrentlyhave PCClegislationareintheprocessofconsultationwithaviewto implementation. International Transparency and Cooperation Gibraltar’s 20 TIEAs by Mr Ghuozi Foo, Secretariat Administrator, OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes. GibraltarisamemberoftheGlobalForum,a108-memberorganisationresponsibleforpromotingtheimplementationoftheinternationalstandardfortransparencyandexchangeofinformation fortaxpurposes.Thisstandardwasdevelopedundertheoriginal GlobalForum,whichwasestablishedin2001.In2009,theGlobal Forumwasrestructuredtobecomeaconsensus-basedorganisationwhereallmembersareonequalfootingservicedbyaselfstanding secretariat based in the OECD’s Centre for Tax Policy andAdministration. The Global Forum monitors jurisdictions’ implementation of the standardthrougharobustandcomprehensivepeerreviewprocessinvolvinganexaminationofajurisdictions’legalandregulatoryframework(Phase1)andpracticalimplementation(Phase2) ofthestandard.TheGlobalForum’smainoutputsarethereviews of its members and non-member jurisdictions. To date, it has completed70reviewsandmanymoreareinprogress. GibraltarhasparticipatedintheworkoftheGlobalForumsince its inception. It committed to the international standard for exchangeofinformationfortaxpurposesin2002andhasparticipatedinalloftheGlobalForum’sannualassessments.In2009it becameafullmemberoftherestructuredGlobalForum. Gibraltar’s Phase 1 peer review took place in 2011. This was a comprehensiveandthoroughprocessinvolvingtheparticipation of the Gibraltar authorities, the secretariat, peer assessors and theGlobalForummembers.ThepeerreviewreportwasadoptedbytheGlobalForuminOctober2011andisnowavailableat http://eoi-tax.org/jurisdictions/GI. Overall,thepeerreviewresultsshowedthatmostoftheelements necessaryforeffectiveexchangeofinformationwereinplacefor Gibraltar.Theseincludetheavailabilityofownershipinformation onlegalentitiesandarrangements,bankinformation,accessto information and a relevant network of exchange of information partners.However,thelegalobligationsforrelevantentitiesand arrangements to maintain accounting records were deemed to JURISDICTION DATE SIGNED Indeed,thisisthenewinternationaltaxenvironmentandGibraltar haskeptupwiththesedevelopmentsthroughitscloseengagementwiththeGlobalForum.Buthavingarobustexchangeofinformationregimeismorethanjustaboutajurisdiction’sabilitymeet itsinternationalobligations–theelementsthatarekeytoeffective exchangeofinformationarealsoessentialforajurisdiction’sadministrationandenforcementofitsowndomestictaxlaws.Such elements include the availability of ownership, accounting and bank information, as well as ensuring the tax authority’s access tothisinformationforitsowntaxadministrationpurposes.Tothis end, we believe that building up strong systems that ensure the availabilityandaccessibilityofinformationhasakeyroletoplayin effectivetaxadministrationanditisourhopethatthepeerreview processwashelpfultoGibraltarinindentifyingaspectsofitslegal andregulatoryframeworkthatcouldbeimproved. Gibraltar’s progress in implementing the international standard demonstrates its commitment to tax transparency and being a responsiblememberoftheglobalfinancialcommunity.Gibraltar’s Phase2review,whichexaminesthepracticalaspectsofitsexchangeofinformationregime,isscheduledtocommenceinthe secondhalfof2014.ItwillalsoassessGibraltar’simplementation oftherecommendationsmadeinitsPhase1review.WelookforwardtocontinuedcooperationandworkingwithGibraltarontax transparencyandexchangeofinformationmatters. DATE ENTERED INTO FORCE Australia 26Aug2009 26Jul2010 Austria 17Sep2009 1May2010 Belgium 16Dec2009 notyetinforce Denmark 2Sep2009 13Feb2010 FaroeIslands 20Oct2009 8Jun2011 Finland 20Oct2009 6May2010 France 22Sep2009 9Dec2010 Germany 13Aug2009 4Nov2010 Greenland 20Oct2009 24Dec2009 Iceland 16Dec2009 notyetinforce Ireland 24Jun2009 25May2010 Malta 24Jan2012 1Apr2012 Netherlands 23Apr2010 1Dec2011 NewZealand 13Aug2009 13May2011 Norway 16Dec2009 8Sep2010 Portugal 14Oct2009 24Apr2011 SouthAfrica 2Feb2012 notyetinforce Sweden 16Dec2009 3Jul2010 UnitedKingdom 27Aug2009 15Dec2010 UnitedStates 31Mar2009 22Dec2009 CountrieswithwhichGibraltarhassigned TaxInformationExchangeAgreements 48 be insufficiently comprehensive and it was recommended that Gibraltartakestepstoaddressthisdeficiency.Gibraltar’sactive participationintheworkoftheGlobalForumandthepeerreview processisimportantbecauseGibraltarisanimportantfinancial centre, both in Europe and globally, and provides the platform for a large volume of financial transactions. Effective exchange of information for tax purposes is necessary to ensure that the lawsinGibraltararenotmisusedtofacilitatetaxevasion.Under the Global Forum’s peer review process, all jurisdictions are on a level playing field, subject to the same rules and obligations underaclearlydefinedstandard,andnojurisdictionmayseekan advantageoveranotherbynotfullyimplementingthestandard. GlobalForummember agreementmeetsinternationalstandard agreementnotyetreviewed Source: OECD‘s Global Forum on Transparency and Exchange of Information for Tax Purposes Gibraltar 2012 49 Financial Services milestone GRP On the Rock with Space to Grow Based in Gibraltar, insuring across Europe Interview with Ms Penny Hudson FCII, Managing Director, R&Q Caledonian Gibraltar Penny Hudson has worked in the insurance industry since 1987 for both insurance companies and brokers, dealing with life and general insurance. She has licensed and managed a variety of insurance vehicles including European direct writers, captives, life and general protected cell companies. Ms Hudson is a Chartered Insurer who completed her Fellowship of the Insurance Institute in 1996 when she set up Caledonian Insurance Management Services Ltd (now R&Q Caledonian). She served as Chairman of the Gibraltar Insurance Association from 2007 to 2010 and was actively involved in the launching of the Gibraltar Insurance Institute in 2009. She has also been involved with Financial Action Task Force and IMF evaluations of Gibraltar and has worked with Gibraltar’s FSC and Government on numerous occasions. Milestone GRP met with Ms Hudson to discuss the evolution of Gibraltar’s insurance sector, R&Q Caledonian’s growth within it, and the effects and opportunities coming out of new directives regulating the sector. Milestone GRP - What factors have contributed to the success of Gibraltar’s Insurance sector in terms of the size of the market and its profitability? Ms Penny Hudson - In the beginning Gibraltar was the new place to be. When the 2nd and 3rd Life and Non-Life Directives were brought in by the European Union, Gibraltar became a new place, with a new flexible system, and a tax efficient jurisdiction from where it was possible to do business all over Europe. Gibraltar grew its capabilities along side the changing legislation in order to create the professional infrastructure it has now. At the same time the Financial Services Commission was being founded and insurance was a significant area of growth for the private sector and the Government. We all had a common focus to bring that specific business into Gibraltar and those same people are here today. So, back in the 90s, it was the right people in the right place and at the right time. We were using new legislation, flexibility, tax efficiency and lower costs compared to other member states. One of the main reasons for the great success of the sector here is the fact that people come here to run their own business and are therefore very focused on the bottom line. Milestone GRP - What trends have emerged in the Insurance sector since Gibraltar became part of the European Single Market (ESM) for Insurance, and how do you see Solvency II affecting this? [Editor’s Note: Solvency II is an EU Directive concerning the amount of capital EU insurance companies must hold to reduce the risk of insolvency. Once approved, it is scheduled to enter into effect on January 2014.] Ms Hudson - With the ESM for Insurance, Gibraltar presented a new possibility. Gibraltar is one of the few places where you can have a European life insurance company with a cell base. So I am also, at present, Managing Director of London & Colonial, which writes a cell-by-contract product. In the mid 90s, UK legislation allowed a package product where you had to buy an annuity from your pension and it had to be in the EU. This meant that a company like London & Colonial could come up with a specific product that was extremely popular, that was nowhere near a tax avoidance product, but gave more flexibility. 50 Therefore, more product innovation was created in Gibraltar. In addition, many motor underwriters moved to Gibraltar to benefit from their knowledge and the ability to grow smaller portfolios in a competitive arena. Since the new European legislation, any insurance company within the EU can write anywhere in the EU. Now, because of Solvency II, there is quite a strong possibility that you will need a higher capitalisation. Therefore, the bigger companies that were not necessarily in Europe could represent a bigger market for us, if they have access to relevant capitalisation. A lot of people come to me who do not have the capitalisation to set up in Europe, but they want to write business in Europe. Milestone GRP - What categories of clientele do you deal with, and which countries are represented within it? service providers throughout Europe, and a network of people doing business in Europe. Ms Hudson - In the beginning, our biggest market was the UK. Our flexibility and efficiency encouraged people to move their business here whilst writing it in the UK. It was not very long after that though that we started building up an international clientele including North and South America, Eastern Europe, Spain, Italy, France and other areas of Western Europe. Milestone GRP - Are you seeing new opportunities emerge from new areas and markets around the world? Examples of the types of clients we have include London & Colonial, which was set up in 2001. They write life annuity business, with just under half a billion dollars in assets under administration. We also have one of the largest motor insurers, which writes business under the Freedom of Establishment basis. We also have an American client, with its own risk management team, which was using a major insurer in Europe. However, they felt that what they were being charged for the services they were being offered was not as good as they would have liked. They write their own Group risks throughout Europe, and for us this has been invaluable in gaining a huge body of knowledge on doing business all over Europe. We have dealt with the DGS (Spanish regulatory body) in Spain and with the Tax Office in Germany, just to mention a few. We have gained this huge amount of knowledge whether it is about paying premium tax or sorting out claims. Over the last ten years, we have built up close relationships with other Ms Hudson - At first I was on my own and then with local shareholders, but from 2010 we became part of a much larger group, Randall & Quilter (“R&Q”) who are based in the UK, are listed on AIM, and do business globally. They are extremely focused and entrepreneurial, and they have four main divisions: insurance investments, insurance services, underwriting management and the captive insurance/company management division that covers, at present, the US, Norway, Jersey and Gibraltar. The Group also deals with a variety of run-off businesses, which R&Q would also like to bring to Gibraltar. Being part of the Group gives us a much bigger infrastructure to work with and a great potential for expansion. We see potential opportunities arising from Latin American markets; from companies there that feel they may have exhausted their local markets and are looking for new ones in Europe. They may already do business with London but they are looking at basing themselves in Europe to expand their market in order to deal with both sides of the Atlantic. Gibraltar is a perfect location for South American companies as all companies here have bilingual staff. We also tend to be less bureaucratic and this is one of Gibraltar’s many great strengths. Then, I have other clients coming, saying that they are big enough and want to do business with those smaller clients in Europe. So it is the same market but with different people at different levels because of Solvency II and the cost of corporate governance. Matching partners is part of the interest. These are the two main trends: either clients who know their business very well and want to control it themselves, they have their own managed business and they set up on their own; or companies that have done very well in their own country and want to replicate this by writing a new product through Europe. Gibraltar, moreover, offers the benefits of flexibility, access to the Financial Services Commission and tax efficiency. In terms of the effects Solvency II will have on the market, I usually tend to be conservative, but I have been pleasantly surprised by recent new enquiries coming into Gibraltar. Entrepreneurs always appear to rise to challenges. Like in all economic cycles, there are people who are able to take advantage of downward cycles. Right now there are companies taking advantage of setting up insurance companies with higher levels of capital. So, if Solvency II comes in, and depending at what level, there is a certain amount of consolidation to be expected together with a number of new players. Many countries will have to cope with this new legislation and its requirements, and newcomers can benefit from having a head start. They will already have done the research, and they will come in knowing and providing for it. While in the past we would get smaller clients that were looking at doing business only in the member state they came from, and maybe expanding later, we are now starting to get bigger clients looking to do business all over Europe right from the start. It is not a huge change but rather a subtle one. Gibraltar 2012 51 Financial Services milestone GRP Banks Milestone GRP - So, EU directives and legislation do present opportunities… EU Directives Presenting Opportunities Fund Relocation to Gibraltar Mr Hogg - Yes, very much so. Due to AIFMD managers, advisors and investors need to consider where they manage their assets and where they invest their assets. Before AIFMD using the Caribbean model was the norm and many managers and advisors would not have been so enthused to recommend EU finance centres. Gibraltar, being a member of the EU through its status as a British overseas territory, has to adopt changes in the EU legislation and directives as they become. Gibraltar is fully compliant in respect of EU investment business and funds legislation. Investment Firms 12 10.2 10.3 £ (billion) 8 6 4 10.7 10.3 2.9 1.9 9.8 10 £ (billion) We anticipate that there will be a change in the global investment and funds industry whereby EU managers and investors will wish to manage and invest in EU structures as opposed to the Caribbean structures that were used during the 1980s, 1990s and the early part of this century. Gibraltar is a viable option in the EU for such investment and fund business. Gibraltar cannot be all things to all men. However, it is a very well regulated, credible EU finance centre. Gibraltar will not be the largest finance centre in the EU, however, we aspire to be the best EU finance centre and we, GFIA, believe that we are well on the road to being the best. 3.7 3.6 2.8 9.2 2.2 7.1 6.9 1.2 1.4 6.2 1 6.2 1 5.9 5.5 5.2 5.2 5.2 6.5 6.7 7 7.8 8.4 7 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 6.6 1.4 2 0 Funds, Assets Under Management Gibraltar Financial Services Commission Funds – Assets Under Management, 2010 Source: FSC Insurance companies have been using the PCC in Gibraltar for many years and funds have been using the PCC since the enactment of the original experienced investor funds regulations during 2005. It is a very versatile structure since it allows a manager to create a singe investment house within which there can be several different cells (funds) with different investment and risk parameters. The said manager could trading equity long and bonds in one such cell, and equities short and derivatives in another cell. As such, the manager can provide investment products for clients with differing risk and return appetites within one structure. It is a very powerful piece of legislation. Interview with Mr Adrian Hogg, Chairman, Gibraltar Funds & Investments Association Adrian Hogg is a Director of Grant Thornton Fund Administration Limited. He has been involved in the accountancy profession since his graduation in 1994 with a Bachelor of Arts Honours Degree in European Finance and Accounting where he majored in Accountancy, Finance and Economics. Adrian is a Fellow of the Institute of Chartered Accountants in England and Wales. Prior to joining Grant Thornton Gibraltar, he worked for five years in the British Virgin Islands. He sits on the Finance Faculty of the Gibraltar Society of Accountants and GFIA's Funds Sub-Committee. He is a Statutory Auditor and holds a Company Manager license issued by Gibraltar's Financial Services Commission in relation to the provision of directorships to Experienced Investor Funds. Milestone GRP met with him to discuss the current state and potential of Gibraltar’s Funds sector. Milestone GRP - Could you introduce us to GFIA and its role in Gibraltar’s Funds sector? Mr Adrian Hogg - The GFIA has in the region of 100 members and represents investment managers, investment dealers, banks, brokers, funds, and all those associated with the funds - from the administrators to the directors. GFIA’s objectives are to encourage the exchange of information between members and the relevant authorities in order to achieve common goals, to establish a recognized medium of communication between GFIA and the Government, the Finance Centre and the Financial Services Commission, as well as to encourage and promote the continuing education of its members and finally, to promote adherence by its members of the principals of investor protection, corporate governance, compliance and professionalism in investment and fund activities. We are constantly in dialogue with the Government and the Regulator to improve conditions for investment and funds business. We present workable, marketable initiatives to both the Government and the Regulator as we, the practitioners, are aware of what will serve to improve the competitiveness and relevance of Gibraltar’s investment and funds business. An example as such is the recent significant change to Gibraltar’s experienced investor funds regulations that was largely a GFIA initiative that after lobbying the Regulator, Finance Centre and the Government, came into force on 12 April 2012. 52 Milestone GRP - How do you envision the EU’s Alternative Investment Fund Managers Directive (AIFMD) affecting Gibraltar’s Investment Fund sector? Mr Hogg - The AIFMD is expected to come into force in 2013 and it represents a very significant piece of legislation to be passed for investment business and funds in the EU. AIFMD contains new rules on the marketing of alternative investment funds in the EU by both European and non-European managers, and also lays down rules for the marketing of those funds to professional investors within the EU. For those that market funds in the EU AIFMD provides the quandary of whether or not to keep the fund in a domicile outside of the EU, re-domicile existing funds to the EU or to create funds afresh in the EU. Re-domicilation is often the method of choice as it should be a seamless transition without triggering a taxable event and it allows established managers to maintain their track record. Changes to the experienced investor fund rules in Gibraltar could trigger interest in the state as a location for hedge fund managers and companies, attracting re-domiciles and start-up funds. Under the Financial Services (Experienced Investor Fund) Regulations 2012, various improvements to the original 2005 regulations have been made, including the opportunity for large funds to use fund administrators based outside Gibraltar as long as where they are based has oversight equivalent to that in Gibraltar. The regulations also allow funds to re-domicile to Gibraltar. From an opportunity point of view from Gibraltar’s and Europe’s standpoint (as Europe will gain the marco economic benefit of increased investment and fund business being undertaken in the EU as opposed to the Caribbean), AIFMD is making managers, advisors and investors alike pause for thought when setting up an investment structure and consider setting up in the EU and specifically in Gibraltar. The effect of this is that more wealth is going to be held, managed and controlled by European citizens in the EU. From the point of view of structures that are already in existence, the quandary is whether or not to keep the fund in a domicile outside of the EU, re-domicile existing funds to the EU or to create funds afresh in the EU. Re-domiciliation is often the method of choice as it should be a seamless transition without triggering a taxable event and it allows established managers to maintain their track record The new 2012 experienced investor funds regulations are re-domiciliation friendly. Milestone GRP - Is there a limit on how much Gibraltar can grow and how much investment it can absorb in the coming years? Is that a concern? Mr Hogg - I do not think so if we look at other successful small jurisdictions such as Singapore and Hong Kong and consider the size of the City of London. The size of a jurisdiction does not need to be its limiting factor. Milestone GRP - Do you think Gibraltar’s success through the last few years holds a message for the international business and investment community? Milestone GRP - What would you highlight as key legislations and directives that have been passed here, such as those governing Protected Cell Companies (PCC)? Mr Hogg - Gibraltar made the decision many years ago to undertake its business in a very controlled and regulated environment. When the decision was made to do so it was not a view held by all. The cautious, controlled, regulated approach and environment that has been fostered has been excellent for Gibraltar. Corporate governance and regulatory control have become ever more relevant and desired in the EU and elsewhere. Gibraltar got it right many years ago when it decided to go down that path. For manager, advisors and investors alike, visiting Gibraltar is easy and the investment business participants are professional, knowledgeable and approachable. When visiting Gibraltar the investment business service providers and the regulator can be visited all in one day. It is this kind of closely controlled environment that is key to Gibraltar’s business model. All participants in Gibraltar’s investment business work to protect the reputation and integrity of their business, and by doing so are creating an environment that allows for controlled growth. It is the kind of self-regulation that all investment business participants foster for the benefit of all. Mr Hogg - The Protected Cell Company structure is multijurisdictional. It can be found in the Channel Islands, the Caribbean, and under different names: Segregated Portfolio Company, Incorporated Cell Company, or PCC. We have had this system in place in Gibraltar since 2001. In the EU there are many choices and much competition, which creates strong investment business and products. Gibraltar has investment products that are relevant, that work and that are applicable. Gibraltar is an EU finance centre ready for the future. The changes are all positive from Europe’s point of view. AIFMD will result in more managers managing more within EU structures and investors investing more of their wealth within the EU with the increased corporate governance and regulatory control of EU regulators. It’s a good thing for investors, who ultimately are the benefactors of investment business, who are able to invest in greater controlled regimes within the EU. It is widely expected that AIFMD will create a fundamental change in the international funds industry whereby funds that are marketed in the EU are domiciled in the EU. Gibraltar, with the modernisation of its experienced investor funds regime, is ready for the change. Gibraltar 2012 53 Financial Services Regulatory Changes Improving Competitiveness Experienced Investor Funds Regulations 2012 by Mr James Lasry, Partner & Funds Team Leader, Hassans International Law Firm After nearly seven years, Gibraltar’s Experienced Investor Fund regime has been updated and modernised in a continuation of the partnership between the industry, the Financial Services Commission (the “FSC” and/or Regulator) and the Government of Gibraltar. Prior to 2005, Gibraltar’s Fund industry comprised a handful of funds regulated under the, then, Financial Services Ordinance 1989 and a few dozen private funds. Whilst the regime of the former worked in practice, it relied heavily on obtaining derogations from the Regulator. This made the process of authorising a fund somewhat cumbersome. On the other hand, the private funds industry grew fairly rapidly. Private funds in Gibraltar are not regulated and can only be offered to an identifiable category of persons whose number is fifty or less. Although there are no actual statutory requirements for the production of audited accounts, a prospectus nor the engagement of a fund administrator, the industry practitioners very much insisted on these as a matter of professional investment protection and proper corporate governance. Then, to meet the demand of certain funds that had grown and wished to market themselves to external investors, the industry proposed to Government the enactment of the Financial Services (Experienced Investor Funds) Regulations 2005 (the “Regulations”). These regulations ultimately codified what had become the practice with private funds and added a few elements to allow the funds to be marketed more extensively. Generally, investors into Experienced Investor Funds (“EIFs”) were limited to experienced investors which were defined as investment professionals, investors who had €1million besides the value of their residential home, or investors who invested €100,000 or equivalent. It is important to note that these conditions are not cumulative so it is sufficient for an investor to comply with just one of them in order to be able to invest in a Gibraltar EIF. The Regulations also required the engagement of two Gibraltar based directors who are authorised by the local Regulator to act as fund directors. They also required the appointment of a local fund administrator. The authorisation process was particularly attractive as a fund was allowed to begin trading on the basis of a legal opinion issued by local counsel stating that the fund was properly established in accordance with the Regulations. A fund would have to notify the Regulator within fourteen days of its commencement of trading. The notification would be accompanied by the company’s constitutional documents and Private Placement Memorandum and a regulatory fee of £2,500. The regime worked very well and is probably one of the most flexible regimes within Europe. After almost seven years of practice the industry requested certain amendments to the regime to increase its competitiveness and ease of use. The main areas of change are the permission to use foreign fund administrators in certain circumstances, the expansion of the definition of experienced investors and the addition of an optional pre-launch authorisation scheme. 54 In April 2012, the Financial Services (Experienced Investor Funds) Regulations 2012 were signed into law by Gilbert Licudi QC, Minister with responsibility for Financial Services. The principle amendment of these new regulations is that under certain circumstances, foreign fund administrators are eligible to act for Gibraltar EIFs. In an attempt to enable funds, especially some of the larger and more institutional funds, to use brandname administrators, the regulations established a process whereby a foreign fund administrator can be authorised by the Regulator, with approval of the Minister, to service EIFs. There will be an actual list of authorised fund administrators produced which will be approved by the Minister. It was also proposed to expand the definition of experienced investors such that in addition to the existing classes of experienced investors, funds would be able to admit investors who are; • A participant who has invested an aggregate of €100,000 in one or more Experienced Investor Funds; • Professional clients under MiFID as defined under the Financial Services (Markets in Financial Instruments) Act 2006; • Investors who invest €50,000 and who have been advised by a professional adviser to invest in the fund, and the fund’s administrator has received confirmation of such advice. The adviser needs to be regulated to provide advice in the jurisdiction they are based in; and • Investors who are investors in funds which were established outside of Gibraltar and were aimed at professional or sophisticated investors and which funds are subsequently re-domiciled to Gibraltar. This is seen as an important addition because, in light of the Alternative Investment Fund Managers Directive (“AIFMD”) which is scheduled to come into force in 2013, there is the expectation that a significant number of Caribbean funds will consider re-domiciling into an EU jurisdiction such as Gibraltar, in order to avail themselves of the marketing advantages of European domiciled funds. The amendments to the Experienced Investor Fund regime in Gibraltar are anticipated to improve the competitiveness of the Gibraltar Fund regime while keeping the interests and objectives of investors and the Regulator intact. It is also anticipated that the new regime will be more user friendly for the more institutional funds. The funds industry in Gibraltar has matured over the last decade and has drawn on experience from clients and staff from other jurisdictions as well as developing significant home-grown expertise. Funds are now seen as one of the pillars of the Finance Centre in Gibraltar along with insurance, banking and private client work. Gibraltar’s size and the efficient communication between the industry regulator and Government have allowed it to develop into what is arguably the best experienced / expert fund regime in Europe and certainly the one with the greatest flexibility and quickest time to market. Financial Services milestone GRP Trust and Company Management The Rock Reaching Out Interview with Mr Ian Le Breton, Managing Director, Sovereign Trust (Gibraltar) Limited Interview with Mr Alan Kentish, Chief Financial Officer, STM Group/STM Fidecs Milestone GRP - The main trend over the last decade has been global integration and compliance. How has this impacted Gibraltar's economy and how has it impacted the Trust and Company Management industry in particular? Milestone GRP - Financial markets have been erratic. People are concerned with where to put their money and risk is a big concern. Is this impacting Gibraltar given that many of the companies that are based here sell their products elsewhere? International reach and depth of service Mr Ian Le Breton - Looking at compliance, we are regulated by the Financial Services Commission (FSC) with a strong but, at the same time, cooperative hand. They have turned what could otherwise have been extremely onerous, difficult to implement policies, into something that remains costly and time consuming, but is done with a cooperative spirit with them. From time to time we have discussions with them, and the relationship is good. I describe it as a hand in hand approach, not a hand in glove one. It is a partnership type of approach. There is lot of new regulation to take on, and other international groups, the OECD, IMF, the EU, are going to impact us. You need to have a pragmatic view and simply live with this, and even the Government cannot do anything about it. We work with this, whether we like it or not, we have to move with the times and we do it fairly successfully. That means that Gibraltar can look to the world and say that we comply with all these groups; we are signing all these TIEAs, we might soon have double tax agreements, and we’ve moved from being considered an offshore financial centre to what it is now an international specialised financial centre. Milestone GRP - Gibraltar and the Government are often described as agile and nimble. Do you agree with that characterization? Mr Le Breton - It is very true. Agile and nimble, but also positively reactive is the type of word to describe it. Proactive too, as we tend, in Gibraltar, to identify trends and adapt to them. That is what we do in Sovereign and a number of firms with whom we share the space in Gibraltar, too. We need to reinvent ourselves as we go along, and any firm like us that does not have this approach is going to find themselves falling behind because legislation and rules are changing all over the world at all times. So if you cannot be agile and nimble then you are lost. That takes us back to our small but perfectly formed nature. It is not difficult to talk to the Government's departments, even to members of the Government themselves, if we need to, quickly. Obviously legislation changes take time but we certainly have a good rapport with these people and that means that we can be agile and nimble. Milestone GRP - How has the global downturn affected the growth of the company? What areas are you are developing? Mr Le Breton - We have certainly seen growth despite the economic downturn. In the last 4 years our staffing has grown by 10% or more. As for our product here, it is certain that 56 there is an increasing depth to our services. We do a certain amount of work on the personal pension side, particularly the UK transfers, the Qualifying Recognised Overseas Pension Schemes (QROPS), and Qualifying Non-UK Pension Schemes (QNUPS), which is a different model altogether but has similarities. We are expending our marine division that is based in Gibraltar, looking at yachts, and last year we established an aviation division. Again looking at clients with big jets, big yachts; these are the types of clients we need to approach anywhere. So our strategy is to use these subsidiary groups to look at markets in a slightly different way. Milestone GRP - How have Gibraltar’s infrastructure developments contributed to these specific opportunities, such as the registration of yachts or aircraft? Mr Le Breton - The growth of Gibraltar's infrastructure is extremely useful to us. For Sovereign it is important that the infrastructure continues to develop in Gibraltar, not just for the business itself, but also for our staff. It is important that they continue to find this an attractive place to live and work. From Sovereign's point of view, we are one of 25 offices but we were established here in 1987. So here is where everything started and it continues to be our largest base. Milestone GRP - Are there any limitations to operating here? Mr Le Breton - There are limitations. We are never going to land a jumbo jet at the airport, so are we going to set up direct links with New York with 300 people on board a plane? No, we will not. But, using this as an example, we have infrastructure that is not right here but just a short drive up the road in Malaga where we have a full international airport, so that is not a real limitation. We have a wonderful time zone advantage, the climate is great, and this is important since people are attracted to Gibraltar for its climate and lifestyle. A lot of people like our firm are doing what they can to build it up. We have a lot of competition out there, but generally overall we are doing a good job. I encourage executives from wherever they are in the world to come and have a look. Milestone GRP - As a well established foreigner in Gibraltar, what do you see as existing misconceptions about the place? Mr Le Breton - One area I want to work on is the impression that Gibraltar is just open for the British. That is not the case. Brits make up a percentage of the client base, but just a percentage of it, and that is a message I want to get across. We are ready to build our market from around the world. Europe is obviously a main area of course, but there are advantages for other parts of the world, too. Gibraltar is a good place to headquarter a company and maybe the CEOs from around the world may want to start considering that, and then come to talk with us when they do. The EU and farther abroad Mr Alan Kentish - A lot of Gibraltar has grown up through the traditional Trust and Company Management business, usually in offshore structuring and looking after high net worth individuals, who are typically internationally mobile. Moreover, it is not necessarily the money that it is actually held in Gibraltar that is incredibly pertinent. You often have a structure that has a family trust but the banking is done in the City of London. What Gibraltar has managed to achieve pretty well is to provide the facility, the vehicle, the wrap-up and the infrastructure, and then tap into the experts out of the jurisdiction, or locally, that will do things such as investment management. The average Trust and Company Management individual will not do investment management. Gibraltar is reasonably short on banks in that banks that are here are typically branches, rather than separate stand alone subsidiaries. Milestone GRP - What are Gibraltar’s major strengths and its weaknesses at this stage? Mr Kentish - At this stage, one of its biggest strengths is being part of the EU. It is very clear that around the world, there is that concept that the age of the tax havens is over. It has become a dirty word, it does not work, and has not for a number of years. Therefore, being part of the EU, Gibraltar is a legitimate jurisdiction for tax planning and structuring. With such things as passporting, well-written insurance companies, insurance intermediaries, it becomes a powerful ability to base in Gibraltar and passport out. I see that as one of the key benefits. We need to make sure, nevertheless, that if we are passporting, into Poland for example, they recognize our passporting right. To date the ability to tap into the Regulator is a key criteria of moving forward. In the UK, if you try to get a ruling from the FSC, chances are that it is going to take you from 6 to 9 months. On the negative side, because of the regulations and because the UK can look over our shoulder, there is a slight paranoia that we must double tick all the boxes to ensure that if the UK comes to investigate, the firewall will stand up. It is a difficult thing to say, but I think the regulation here is more user friendly than in the UK, although I think it is getting more and more difficult now. As Gibraltar has progressed and has moved itself up in terms of credibility, it becomes more difficult to have an answer, as the more you have to protect, the more careful you are first. It is just that there is a concern that the UK can look over your shoulder, whereas in any other EU country, no one has the right to do that. of tax structuring and the lack of any double tax agreements. More and more international clients require the certainty of having double tax agreements in place. Double tax treaties would help us to ensure certainty in terms of structuring. This goes to the extent that there is an argument on the insurance side, that if you have a branch in the UK, you have to pay taxes in the UK and potentially you might not get tax relief in Gibraltar. So, there are some challenges and agreements that need to be ironed out. Milestone GRP - How do Trust, Company Management and Tax Planning firms fit in the Gibraltar economy today? and what are the factors that have contributed to this mini boom we are experiencing right now? Mr Kentish - There are two things that have to be considered. First of all, Gibraltar has done very well to reinvent itself since the days when the Ministry of Defense (MoD) employed most people. It went through the usual phase of tax planning wherein you set up an offshore company and you did not tell anybody about it; those days are long gone. I think Gibraltar has picked up a certain amount of business just because of our PLC. We have a honey pot of clients down the coast, and those are the people who exactly fit our profile. They are looking to retire overseas, they may have concerns and may need an Anglo-Saxon way of dropping off their assets, as well as a common law to protect their structures to do what they want with their assets, even just as part of their will. So that is the start of the typical Trust and Company Management business. What Gibraltar needs to do now is to see itself as a finance centre for the EU and to do this Gibraltar has to be very strong in demonstrating it is part of the EU. That is pretty straightforward, in terms of dealing with the UK, Ireland or any EU jurisdiction that has a sizable English-speaking population. But if you try to explain to a Frenchman that Gibraltar is part of the EU, the first thing he will do is to take the list of European countries and say that Gibraltar is not on it. You then have to explain that it is because of its association through the UK. So we have to strengthen that communication. And we have to not only target the UK but even beyond, even South America. It is a natural progression to look at those markets that Jersey or Guernsey would not be involved in, because they do not have the Spanish-speaking individuals. I think the weakness is not knowing where we really sit in terms Gibraltar 2012 57 Financial Services milestone GRP A Stable Sector in Rough Seas Banking supporting Gibraltar’s Growth Interview with Ms Emma Perez, President, Gibraltar Bankers’ Association Emma Perez trained as a certified accountant with KPMG, qualifying in 1996 and working in both the audit and fiduciary departments. She later joined the finance department of Credit Suisse (Gibraltar) Limited in 1997. Emma joined SG Hambros Bank (Gibraltar) Limited in May 2001 as the local accountant and was promoted to director in November 2002, then to Managing Director in May 2006 and Chief Executive Officer in 2011. She played a key role in the acquisition of the ABN Amro private banking business in Gibraltar, doubling the size of the local SG presence. Emma has been president of the Gibraltar Bankers’ Association since January 2011 and is also a member of the Gibraltar Finance Centre Council. Milestone GRP met with Ms Perez to get her insight into Gibraltar’s banking sector, it’s development and the advantages it derives from Gibraltar being within the EU. Milestone GRP - How would you describe the Gibraltarian Banking sector? Ms Emma Perez - Gibraltar has seventeen licensed banks locally, two retail banks along with a number of private banks that provide standard private and retail banking services. There are a couple of Swiss private banks and a French bank, which mainly deal with the international sector; then we have the other players who generally act in the local market. We have one locally incorporated bank and all others are multinational corporations, so we work very closely in line with the relative procedures and requirements. t Milestone GRP - Are opportunities such as Islamic Banking or Green Banking available in Gibraltar as we have seen them evolving in other countries? The Gibraltarian Banking sector works in accordance to all EU directives and we are fully transparent. We follow the EU directives in relation to anti-money laundering and in relation to all the requirements that are needed to take the Financial Centre forward. For example, we have just signed our 20th Tax Information Exchange Agreement (TIEA) with South Africa, showing our flexibility and our willingness to move forward and rid ourselves of the stigmas of the past. Ms Perez - Islamic Banking has been on the radar for a while now especially due to our proximity to Morocco. The Financial Services Commission and various lawyers have been talking about it for some time, in terms of the legislation, for instance. There are certainly interesting opportunities for Gibraltar in terms of funds, another big sector we need to move into. Shariacompliant funds, for example, will be something interesting to look at in the future. Milestone GRP - How are international trends and EU directives such as Basel III or MiFID (Markets in Financial Instruments Directive) shaping Gibraltar’s Banking sector? Do any challenges or opportunities arise from these directives? Milestone GRP - Asset Management and Funds have been highlighted as areas that present opportunities for growth. How do you see them evolving and what role do you see banks playing? Ms Perez - Being onshore and part of the EU is a benefit for us, as this will reassure the client that we follow the EU directives. Some of the directives that have come up now have changed the way in which business is done. MiFID introduced new ways of communication with the client, and the way all fees are divulged to the client. While these directives make things fully transparent for the client, they imply a lot of changes for the business and rises in terms of the costs, but it all means reassurance for the investor. Ms Perez - The Finance Centre has just announced that the jurisdiction will not be restricting the administrators of funds to be solely registered in Gibraltar. It will be done on a selective basis, but global players will be able to come to the market. Banks will be taking on custody services for the Fund industry. Some banks have taken on more of these funds than other banks. This segment is very beneficial for the jurisdiction and we need to play on that more and to be able to assist the funds. If we want funds to grow we need to provide all the necessary services. Banks need to take on the more complex types of scenarios, which are becoming more commonplace. Milestone GRP - What impact has the financial crisis had on the banking sector? Have any opportunities emerged from it? Ms Perez - There is definitely an interest in Gibraltar for organizations structuring through Gibraltar, especially with the new tax regime. Being onshore and in Europe does create opportunities that other jurisdictions may not have. Nonetheless, our banks have all have been suffering from the mitigation and diversifi- 58 cation of risk. In particular, a number of institutions, being part of multinational groups, have been suffering to a certain extent from cost cutting and redundancies. However, overall, Gibraltar has been sheltered from the rest of the world’s economic woes, as we are a small economy and it is therefore easier to manage. Moreover, we can count on strong sectors such as Online Gaming and Shipping to contribute to the economy. On the Asset Management side, we are ideally set up to support the Asset Management sector here, but more on a custodian basis. There are some banks that have specific platforms to cater for Asset Managers coming in, and external Asset Management is a key type of business that a lot of banks are looking at. Milestone GRP - Why do you think certain stigmas remain attached to Gibraltar despite the transformations on the ground? would also represent a great channel for investments in the rest of Europe. Some local companies in Gibraltar are already dealing with Russia, so there is already a good channel created with some of our intermediaries locally. With regards to the Banking sector, emerging markets may be synonymous with high-risk business. As a matter of fact, it is more challenging for the private sector to attract that sort of business because of the extra background work required in these circumstances. So while we appreciate it and support it, when it comes into practice it becomes a challenging task for banks. Ms Perez - It takes a long time for people's perception and trust to evolve, but we have seen some good business coming to Gibraltar. I think we do not publicize that enough and promote the abilities we have here. International marketing is a key area that needs to be developed, and this is already a topic of discussion in the Finance Centre. By improving the marketing we can make sure that people become aware of what we can do for the clients here. We are recruiting people to take on the marketing side more specifically and in order to streamline what we market. They will certainly be charged with marketing a set part of the Financial Services sector, going to the UK, trying to raise interest there but also from the BRICS countries, for instance. Milestone GRP - What would be your message to international bankers about what Gibraltar has to offer? Milestone GRP - Is there a specific type of bank you could attract from emerging markets? Ms Perez - Obviously, it would be good to have banks coming from some of these emerging markets. We will support anything that the Government is trying to push through. It Ms Perez - With regards to opportunities, there is the need to make Europe aware of our capabilities and the benefits of passporting; making Europe aware that Gibraltar is an EU jurisdiction, onshore and fully transparent with OECD and EU directives, regulations and requirements. The challenge is to raise the profile of Gibraltar and its reputation to ensure that it is a player within the global Financial Centre world. There is such a high concentration of professionalism in Gibraltar that we only need to show what we are capable of. Year Cash Balances with & Loans and Advances to Banks Loans and Advances Investments Other Assets Total Assets 2001 6,635 3,854,945 1,198,768 16,961 126,829 5,204,138 2002 7,788 4,113,943 1,300,700 18,464 115,126 5,556,021 2003 8,495 3,046,822 1,629,648 201,992 22,459 4,909,416 2004 10,679 2,763,150 1,772,733 187,224 31,740 4,765,526 2005 38,025 3,390,693 1,974,226 198,316 50,816 5,652,076 2006 9,868 4,536,277 2,080,912 266,375 44,795 6,938,227 2007 8,746 5,219,535 2,429,145 410,799 132,287 8,200,512 2008 9,890 8,877,377 2,861,493 297,747 273,262 12,319,769 2009 16,824 9,278,820 3,023,263 1,486,056 363,547 14,207,358 2010 19,350 3,851,397 3,033,018 1,944,146 55,978 9,387,126 2011 33,140 3,159,210 3,159,210 1,205,594 61,340 9,020,574 Credit Institutions – Assets, £ (000’s) Source: FSC Year Current Accounts Deposit Accounts Total Deposits Balances from banks Other Liabilities Total Liabilities 2001 874,694 1,606,541 2,481,235 1,746,770 976,133 5,204,138 2002 657,984 1,807,877 2,465,861 2,349,582 740,578 5,556,021 2003 729,876 1,923,320 2,653,196 1,700,347 555,873 4,909,416 2004 965,327 1,691,179 2,656,506 1,700,298 408,722 4,765,526 2005 1,018,750 1,896,837 2,915,587 2,235,103 501,386 5,652,076 2006 1,193,855 2,428,179 3,622,034 2,783,640 532,553 6,938,227 2007 1,372,428 3,014,320 4,386,748 3,288,329 525,435 8,200,512 2008 1,355,175 2,833,547 4,956,716 7,145,466 123,199 12,319,769 2009 2,012,157 2,730,249 5,194,245 8,044,041 62,083 14,207,358 2010 2,281,654 1,841,621 4,512,829 3,712,338 31,544 9,387,126 2011 2,420,667 1,950,481 4,786,976 3,266,478 47,140 9,020,574 Credit Institutions – Liabilities, £ (000’s) Source: FSC Gibraltar 2012 59 Financial Services milestone GRP Trends in the Banking Sector Gibraltar as Base Interview with Mr Marvin Cartwright, Regional Head - Gibraltar and Corporate Banking, RBS International / NatWest Interview with Mrs Marina Dominguez Steglich, PHD, CEFA, Interview with Mr Mark Johnson, Country Manager, Head of Private Banking, Lloyds TSB Private Banking Gibraltar Lloyds TSB Bank Gibraltar Milestone GRP - What trends have marked Gibraltar’s Banking sector in recent years? Where do you see the Industry now? Mr Marvin Cartwright -Overthelast20yearsGibraltarhas seen consolidation of the Banking market, especially around theretailenvironment,wheretheretailcaptivemarketremains relatively small. So whilst it is a pretty stable and secure environment for banks to lend and carry out activity, the reality is that for the returns that banks seek in their markets of operation,Gibraltarisasmallmarket.Thereareonlytwovery dominantplayersintheretailspace,whichareourselvesand Barclays. The main banking environment therefore is private banking.Privatebankinghasseensomesuccessovertheyears.InGibraltartherearesomemajorplayerswhosefocusis onprivatewealth,discretionportfoliomanagementandinvestmentmanagement. Milestone GRP - Many in Gibraltar identify being part of the European Union as one of the jurisdiction‘s key assets. This comes with many requirements in terms of regulation and compliance. How has this affected the Banking sector and has it presented new challenges or opportunities? Mr Cartwright - The challenges are constant. The pace of change accompanied by the sheer volume of activity that is happeningwithintheregulatorylandscapeisimmense.Along withthemanybenefitsofbeingintheEU,oneofthechallengeswefaceisthesheerscaleofoperationsrequiredtoadapt tothatlevelofregulatoryactivity,andforasmalljurisdictionit willalwaysbeachallenge. Ontheotherhand,GibraltaroverthelastdecadehasbenefitedsignificantlyfrombeingintheEU.Asthewholelandscape isevolvingintermsofregulationoversights,beingpartofthe EUwillbemorethanbeneficial.Indeed,Gibraltaroverthelast decade,notasaresultofthecrisis,haspositioneditselfas anonshorefinancialcentreandthathaslaidthegroundfor agoodsolidfutureinasmuchaswecanpickupbusiness looking to go into Europe. We can also give our customers andinvestorsthepeaceofmindthatwefollowEUstandards andregulations.Atthesametime,wearenimbleenoughin termsofoursizetoquicklyadapttochanginglegislation.We arestillkeentobringcustomersin,whilesomeoftheother majormaturecentresarequitefull.ProbablyintermsofvalueformoneyGibraltarwillremaincompetitiveoverthenext yearstocome. Milestone GRP - In line with this process of compliance and global integration, Gibraltar has signed 20 TIEAs (Tax Information Exchange Agreements) so far. Do you see these impacting the Banking sector? Mr Cartwright -Fromabankingperspectiveitisstillearlyto talkabouttheimpactofTIEAsonoureconomicactivity.Nevertheless,asallourfinancialservicescollegues,webenefitindi- 60 rectlyfromthem.Itisallpartoftheprocessofmakingourselves whitelisted;deemedtobeacountrythatundertakesitsfinancial servicesactivityinaresponsibleandprogressivemanner.Itis allaboutreputationandthesigningofTIEAswillbringpractical benefitsinduecourse.AtpresentitisaboutbuildingthatinternationalrecognitionthatGibraltarisanonshoreplayerwithhigh standardsofregulationandtransparency. Milestone GRP - North to South migration from Upper Spain to the Gibraltar and Costa del Sol areas is on the rise. Do you see this trend continuing in the future? Mr Cartwright -Yes.AlthoughSpainiscurrentlygoingthrough difficulttimes,weexpectthatassoonasnormalityreturnstraditionalexpatriateareaswillcontinuetogrow.SpainandPortugalhavebeengrowthareasforthelast25years,soasthe FinancialServicessectorontheRockhasevolved,theyhave been a natural hunting ground for some of the private banks here and will continue to be so. However, there may now be moredrivefortheprivatebankstolookfurtherafield.Someof themnowgointoWesternEurope,presentingmoreopportunitiesinthefuture. Passporting Private Banking across the EU Milestone GRP - How would you describe Gibraltar’s Finance sector? Milestone GRP - What section of the market has Lloyds TSB Bank (Gibraltar) focused on? Mrs Marina Dominguez Steglich -Gibraltarisasmallplace, intermsofitssizeandpopulation,andhasmaintainedagood level of diversity in terms of the Finance sector’s offerings. It hasthereforenotbeenreliantononeparticulartypeofbusiness andthathasgivenGibraltarahugeadvantage.Therehasbeen a move away from an antiquated system of offshore banking, transformingGibraltarintoamodernandtransparentEuropean financecentre. Mr Mark Johnson -LloydsTSBBank(Gibraltar)Limitedhasfocusedonexpatriates.Wehavegrownthatbusinesseffectivelyin line with our business prognostics since 2008, so from that perspectivethingshavegoneverywell.WhilstthenumberofexpatriatesleavingtheUKmayhavedeclinedoverthelasttwoyears, thebaseofpotentialcustomersandtheexistingonesacrossthe EuropeanEconomicAreaisstillverysubstantial,somethinginthe rangeofamillionEnglishspeakerswithinthatarea.Therefore,from thatpointofview,wehaveabigmarkettogoafter.Westartedout on this journey but we still have got a long way to go. We have foundthebusinesshasgrownandGibraltaritselfseemstohave handledthedislocationsofthelast3or4yearsbetterthanother jurisdictions. BankingisimportanttotheFinanceindustry,butcertainlyitis not the sole support of the sector. Banking, Insurance, Funds -thesearethethreemainpillarsoftheFinancesector,perse. Also,theplayersinGibraltarareallbignames.Theyhaveproper officesinGibraltar,arewellstaffed,wellresourcedandconnectedwiththeirglobalnetworks.ThatgivesGibraltarabigedge. Therearealsomanylocalfirmsthathavemanagedtocreatea greatnameforthemselvesintheinternationalarena. Milestone GRP - What is Lloyds’ structure in Gibraltar? Milestone GRP - The Banking sector has experienced tremendous growth, and so has the economy beyond the Financial Services sector. What are you expectations for the coming years? Mr Cartwright -ItisnicetobelievethatGibraltarwillcontinue to grow, and given the exponential growth and success we haveseenasanorganizationinGibraltaroverthelast5years, we hope the trend will persist. A degree of reality is required and,notwithstandingthat,thereisareasonabledegreeofoptimism,becausewecontinuetogrowatsteadynumbersand weseethatgoingonforthenextfewyears. Wealsohavereceiveda‘newness’oflifewiththenewgovernment and its fresh ideas. With regards to the UK, there is a greaterdesiretomarketthejurisdiction,sohopefullywiththe newtaxregime,aswellasthegreatstrengthofbeingonshore inEurope,Gibraltar’sfuturewillremainbright. Thewaytheeconomyworkshereisincredible.Evenifithas a small economy, one of the things Gibraltar is admired for, when we are benchmarked against our peer group, is our greatdiversity.IntheChannelIslands,forexample,theconcentrationofriskintermsofrelianceonfinancialservicesis farmorepredominantthanwhatwehavehere.Withregardsto theGamingsector,forexample,theGovernmenthasencouragedbluechipplayersandrealgrowthintermsofemployment.Nevertheless,theyarequitekeentomakesurethatwe balancethebooksandmakesurethatnosinglesectorbecomesoverlydominantbecauseotherwisethedominoeffectof anything going wrong would be more severe. The economic noveltymusthaveworked.Forajurisdictionwithnoagriculture,ithasdoneverywell. Mrs Dominguez Steglich-ThereareactuallytwoLloydsTSB banksinGibraltar.MybankisafullbranchofLloydsTSBBank Plc.intheUK,focusedonthePrivateBankingsector.Theother Lloyds TSB presence in Gibraltar is actually a Gibraltar incorporated subsidiary, Lloyds TSB Bank (Gibraltar) Limited. Their focusisonofferingmulti-currencyinternationalaccountstoexpatriatesbasedanywhereintheEU,withaclearfocusonthe BritishexpatriatecommunityandtheAnglophiles. Milestone GRP - What were the reasons for your focus on Private Banking? Mrs Dominguez Steglich -Thereareperhapstwoaspectsthat makePrivateBankinginterestinginGibraltar.Oneisthelocally basedhighnetworthindividualswhodecidetorelocatetoGibraltar,andhavepropertyandlivehereinordertotakeadvantage of the Category 2 Individual status. Private Banking is key to themsincepartoftheirmoveisoftenassociatedwithrelocating theirbankingarrangementstoGibraltar.Thisisaveryimportant clientgroup,butitisnotthesolemarketthatwearerelyingon. ThathasgottodowithGibraltarbeingpartoftheEU. AsanEUjurisdiction,wehavetheentitlementtogointoEurope andpassportourservicesandproducts.SoforPrivateBanking thetargetisthecoreofwealthyindividualswhophysicallyresideinGibraltar,andthecloseperiphery,suchassouthernSpain, Sotogrande,Marbella,andthewholeCostadelSolarea.There aremanywealthyBritishexpatslivinginPortugalaswell.The majority of the expatriates living in these areas are Brits. As a BritishbankofferingPrivateBankingservicesforhighnetworth individuals,thisisabigopportunity. Milestone GRP - What role do Gibraltar’s passporting rights play in your business model? Mr Johnson -Theyarefundamentaltoourdecisiontocreatea businesshereinthefirstplace.WewereconsciousthattheopportunityofbeingwithintheEUwouldallowustomakeuseofEU directives,particularlytheBankingConsolidationdirectiveandthe associatedinvestmentdirectives.Sothewholepassportingconceptwasfundamentaltowhatwedo. Milestone GRP - How have consumer demands changed over the last 2 years? Mr Johnson -WeareseeingcontinuedappetiteforSterlingproductsfromcustomers,whichisnotsurprisinggiventhevariations intheEurozone.So,Sterlingcontinuestobeareferencecurrency for the majority of our customer base. This benefits Gibraltar as well,havingthesamecurrencyhere.WeprovidefacilitiesinEuro as well but Sterling is the key driving currency for our customer segments.Wearealsoseeingadesirefromcustomersforsafety andsecurityintermsofsavingsaccounts.Thereisawillingness toexploreinvestmentswithalowriskprofile.So,acautiousapproachfromtheinvestor,andawillingness,whereproductsmake sense,toconsidersavingandinvesting.Weexpect,astheeconomyimprovesoveraperiodoftime,toseegreaterappetitefor moreinvestmentswithamoreassertiveriskprofile,butnotinthe immediatefuture. 6,000 5,000 £ (million) Consolidation and steady growth 4,000 3,000 2,000 1,000 0 2000 2001 2002 2003 2004 Total Bank Deposits Gibraltar–TotalBankDeposits 2005 2006 2007 2008 2009 2010 Source:FinancialServicesCommission Source: FSC Gibraltar 2012 61 Online Gaming Online Gaming milestone GRP Mr Montegriffo - Most of the e-gaming companies based in Gibraltar are in fact the largest and some are publicly quoted companiesinthesector.Inthisrespect,(althoughtheoperation ofonlinegamingcompaniesissimilarinmanyjurisdictions),it isprobablytruetosaythatthosebasedinGibraltarincludethe bestresourcedintermsofthedifferentelementsofthebusiness thatconstituteanonlinegamingactivity. Carefully Managed Growth Quality over quantity OnefeatureoftheGibraltarlicensingmodelhasalwaysbeenthat GibraltaroperatorsarerequiredtohaveaphysicalandsubstantivepresenceinGibraltar.Gibraltarhasneveradoptedamodelthat allowsmostortheentiretyoftheoperationtobeoutsourcedto thirdcountries.Whilst,therefore,thenumberofoperatorsinGibraltarisrelativelylow(currentlyjustover20)comparedtoother jurisdictions,theemploymentbaserepresentedbythissectoris reasonablylargebothasanempiricalfigure(over2,000individuals)andasapercentageofGibraltar’soverallemploymentbase. ItshouldbenotedthatGibraltarhasverylowunemploymentand infactprovidesemploymentformanyEUandnon-EUnationals thatareattractedtoGibraltarforwork.ThereasonGibraltar’slicensingmodelrequiresasubstantivepresenceistoensurethat thereisregulatoryaccountabilitytotheauthoritiesinthisjurisdictioninrelationtoactivitiesundertakenfromGibraltar. Interview with Mr Peter Montegriffo, Team Leader & Partner, Hassans International Law Firm PeterMontegriffo’sareaofexpertiseisincommercialandprivateclientmatters,andhehasalsoadvisedonnumerousfinancialservices,regulatoryandtrustrelatedmatters.HewascloselyinvolvedintheIPOsofvariousGamingcompaniesestablished inGibraltar,whichhavebeenlistedontheLondonStockExchange.Peterhasalsobeencloselyinvolvedindraftingnumerous changestoGibraltar'slegislationintrusts,financialservicesandgamingareas.MrMontegriffowasalsoGibraltar'sMinister forTradeandIndustry,withresponsibilityforeconomicdevelopmentandfinancialservices,betweenMay1996andFebruary 2000.HemetwithMilestoneGRPtogoovertheevolutionofGibraltar’sOnlineGamingsectorandthejurisdiction’sapproach toitssteadyandstablegrowth. Milestone GRP - What brought about the development of the Online Gaming industry in Gibraltar? What are the main highlights in the history of this still relatively young industry? Mr Peter Montegriffo -ThehistoryofremotegamblinginGibraltargoesbacktotheearlytomid-ninetieswheninitiallya numberofbettingoperationsrelocatedtoGibraltarinorder to take advantage of Gibraltar’s competitive taxation rates andalsoourpositionwithintheEU.Thisinitialactivitywas effectivelyoneundertakenviabetsplacedtelephonicallybut it is probably true to say that it provided the springboard forwhatwasthenthemuchmoreextensivedevelopmentof onlinegaminginthelateninetiesandespeciallyintheearly 2000’s. Thehistoryofthissectorisonethathasbeenmarkedbya prudentandconservativeapproachtoitsgrowth.Respective Governments have not sought to grow this sector beyond what is appropriate at any given time. The authorities have needed to carefully consider reputational risk and also the factthatsuchagrowingandstrongsectorinevitablyfocuses resources,suchasmanpower,telecommunicationsandprofessionalservices,awayfromotherimportantsectorsofthe economy,suchasfinancialservices. Milestone GRP - What legislation governs the industry in Gibraltar? 64 Mr Montegriffo-ThelegalsysteminGibraltarisentirelybased onthatofEnglandandWales.Whilstweareaseparatejurisdiction,ourstatutesandthecommonlawareverysimilartothat whichappliesinEnglandandWales.Gibraltarlegislationinthe areas of gaming, taxation and company matters therefore followsinmanyrespectsaspectsoftherelevantlegislationacross theUnitedKingdom. In the area of gaming specifically, the Gibraltar Gambling Act 2005closelymirrorstheprovisionsoftheUnitedKingdomAct on which it is modelled. The Gibraltar regulator also imposes standards of conduct and regulation that are among the very bestintheworldandwhichareconstantlyevolvinghavingregardtothefastdevelopmentoftheindustry.TheActsetsout the requirements in relation to licensing. A full business plan, details of the promoters, management arrangements andproposed technical infrastructure are all necessary ingredients of anapplication. Milestone GRP - What distinguishes Gibraltar in terms of legislation of protections and guarantees available for gamers on issues such as gains, anonymity and addiction, for instance? Mr Montegriffo -Gibraltar’slegislationmakesprovisionfor detailedrulesandcodesofconduct.TheGibraltarregulator haspublishedaseriesofcodesrelatingtoonlinegambling. These can be requested from the Licensing Authority. Gibraltar, in line with the other leading international regulators, constantly reviews its codes of conduct and regulatory requirements.Itsoperatorsarealsorequiredtoadheretobest practice and to ensure the highest levels of consumer protection in every respect. In this regard, both Gibraltar and manyofitsoperatorsareatthecuttingedgeofbestpractice andindustrydevelopments. Milestone GRP - What impact has the online gaming industry made in Gibraltar and on its economy in general? Mr Montegriffo -ThereisnodoubtthattheonlinegamingsectornowrepresentsamajorsectorofGibraltar’seconomy.Itis probablytruetosaytheindustryaccountstodayforabout20% ofGibraltar’sGDPandasignificantamountofdirectrevenueto Governmentand,asnotedearlier,agoodportionofGibraltar’s employmentbase.Justassignificantly,theemploymentbasein questionisonethatishighlydiversifiedandhasbroughtskills toGibraltarintheareaofe-commerce,paymentprocessingand technology,whichdidnotexist10yearsago.Thisprovidesan excellentbaseforthedevelopmentofane-commerceeconomy giventhatmanyoftheskillsaretransferrableacrossanumber ofdifferentsectorsusinginteractivemeansofcommunication. Asnotedearlier,Gibraltarhasadoptedaselectiveapproachin determiningwhotograntalicenceto.Inordertoavoidunnecessaryexpenditureandtime,itisusuallypossibletoobtaina fairlyearlyindicationfromtheregulatorastowhetheralicence applicationislikelytosucceed. Milestone GRP - How is Gibraltar looking to expand its e-gaming industry? Milestone GRP - What distinguishes Gibraltar’s Gaming companies from others in terms of their operations? Mr Montegriffo -Gibraltaralreadyhasareasonablydiversified e-gaming industry although it is true to say that most of our operatorshaveaEuropeanclientbase,intheUnitedKingdom, inparticular.Asyouknow,thereareanumberofveryinteresting and potentially huge opportunities opening up in various jurisdictionsincludingtheUnitedStatesandalsomorebroadly inEurope,asEurope’sfragmentedregulatoryregimebecomes morecohesive.OtheropportunitiesinAsiaandLatinAmerica arealsonoteworthy.IunderstandtherecentlyelectedGibraltar Government is keen to explore further how Gibraltar’s industry will be diversified but very much within the framework of theconservativeandprudentapproachwhichhashistorically beenadopted.Thereisnodoubtthattheextensionofgaming servicesintobroaderentertainmentandsocialgamingwillalso provideahugeboosttotheindustryinGibraltarandtooperatorsbasedhere. Milestone GRP - How does the gaming sector contribute to Gibraltar’s international image? Mr Montegriffo -There is no doubt that historically gaming hasbeenregardedasasensitivearearaisingparticularpublicpolicyconsiderationsinvariouscountries.Thishasalso beenthecaseinGibraltarandthecaretakenisreflectedin theapproachadoptedinlicensingandthemeasuredgrowth ofthesector.Itistrue,however,thatgamingasasocialphenomenonischangingdramatically.Theproliferationofchannels of availability, and also the explosion in social games morebroadly,ismakingthegamingexperiencemuchmore partofmainstreamentertainmentthanmighthavebeenthe case,otherthanforsoftgamingsuchaslotteriesorbingo, twoorthreedecadesago. Intermsofinternationalimage,therefore,aproperlylicensed andregulatedgamingsectorshouldenhanceandinnoway detract from the credibility and reputation of a jurisdiction. In any activity, excess and exuberance will lead to difficulties and reputational damage. One of the safeguards of an e-gamingoperationisthefactthatalltransactionsarerecordedandthereforeopentoconstantmonitoringandverification.Gibraltar’sassociationwithsomeoftheleadingpublicly quotedonlineentertainmentgroupshasalsobeenextremely important in enhancing the jurisdiction’s reputation as one opentoserious,wellregulatedbusinessenterprise. Milestone GRP - How much work needs to be put in to defend the right of Online Gaming companies established in Gibraltar in the context of EU threats and access to new markets? Mr Montegriffo -Theindustryhasalwaysworkedveryclosely with the authorities in defending the rights that exist under European law and more broadly to provide services to clients aroundtheworld.Thisisanuncertainandevolvingareaanduntillegislationinvariouscountries,andindeedatabroaderEuropeanlevel,becomesclearer,agreatdealofcautionisrequired. Gibraltar’sattitudeistofullycooperatewithallotherreputable internationalregulators.Ithas,however,alwaysbeentheview oftheGibraltarauthoritiesthatitisvitaltodefendthelegitimate interestsofGibraltarandanyeconomicoperatorbasedinour jurisdiction.Tothisend,theGibraltarGovernmentandindustry haveworkedovertheyearsinvariousareas,includingfinancialservicesandgaming,toproperlydefendGibraltar’sEUand broaderrightsofaccesstointernationalclients. Gibraltar 2012 65 Online Gaming milestone GRP Global Online Gaming Revenue Milestone GRP - How does Gibraltar specifically add value compared to other jurisdictions, for instance, in terms of regulation, the agility of its key institutions and its infrastructure? 35 30 US$ (billion) Mr Anderson - The Government of Gibraltar understands the onlinegamingindustryanditsprofessionalism.Theinfrastructurerequiredtoruntheindustryhasbeenimprovedenormously. Thisimprovementhasonlytranspiredduetotheempathythe Governmenthaswiththeindustry. 40 Online Gaming leaving nothing to chance Interview with Mr John Anderson, Deputy Chairman, Gibraltar Betting & Gaming Association JohnAndersonistheDeputyChairmanoftheGibraltarBetting&GamingAssociation(GBGA).HeisalsoNon-executiveDirector of888Holdingsplc;wherehewasCEOfrom2000until2006.Duringthattimehetook888Holdingstobecomeamemberof theLondonStockExchange.Priortojoiningthegroupin2000,JohnhadbeenCEOofBurfordHoldingsplc–aLondonStock Exchangelistedcompany.HehadtakenBurfordHoldingsprivateviaanMBOandstillholdsthepostofChairman.Johnhad joinedBurfordin1996fromLadbrokeGroupplc,wherehehadbeenamainBoardDirector.LadbrokeGroupisaFTSE100 London-listedcompanywherehehadspent26years.JohnisNon-executiveDirectorofseveralothergamingandproperty companies,andalsoholdsthepostofChairmanoftheIGC,aninternationalindustrybodyforbettingandgaming. Milestone GRP - Why was the GBGA created and what role does it play in the Online Gaming industry? Mr John Anderson -TheGBGAwasformedin2004toactasan industrybodywhoseinterestswerealignedwithbestpractice.It representsitsmembersonlyasanindustryspokesmanandwe haveverycarefullyavoidedrepresentinganindividualcompany onitsown.WefeelthatthismaintainstheintegrityoftheGBGA, whichisfundamentalwhenitistalkingtoGovernmentbodiesor anyotherbodieswhohaveaninterestintheindustry. Forinstance,weasabodypushedforaregulatorysystemtobe broughtinandallourmemberswereinagreement.Thisactually costsusverylittleasaby-product.WeattheGBGAconsider thatthemoreregulatedandtransparentweare,themoreprofitablewewillbe.Afterall,transparencyandregulationremove thecloudofmistrustinanever-changingindustry. TheGBGA’sremithasgrownfromtimetotimedependentupon whetherornotthereareindustryissuestoaddress.Onaconstantlychangingcanvasitcontinuestocarryoutitsrolesand maintainitspositionasahighlyrespectedbodyintheworldof business. Milestone GRP - How does GBGA work to promote a level playing field for the operators and access to appropriate entertainment for consumers? 66 Mr Anderson-TheGBGAisanindustrybodyinthatitworksfor thebenefitofallitsmembers.Itdoeshaveasmallnumberof behaviorallyimportantmembershiprequirementsbuttheseare precipitousandnottoxic.Inthiswayourmembersallsharethe samegoalsoftheGBGA,whichare,forinstance,toagreeupon methodsandproceduresgivingusbestpracticeoperationally. Thisgivesthemarketplacealevelplayingfieldonwhicheach operatorcanbuild. Milestone GRP - How do you compare the operators in Gibraltar to other operators elsewhere with regards to best practices, innovation and technological development? Mr Anderson -IhavealwayssaidthatGibraltarhasthe“crème delacrème”oftheindustryoperators.Thelineupofoperators isawho’swhooftheindustry,includingmanywhoareLondon StockExchangemembers.ThissituationisduetotheGovernmentbeingveryselectiveaboutwhotheygrantalicenseto. Thatbeingthestandardwhichexists,itwillbeofnosurprise toknowthatregulationhasbeenwelcomedandthebusiness systemshavebeencontinuallyupgradedbyall,inordertogive bestpracticetoallsolutionsfromatechnologicaldevelopment pointofviewandaconsumerprotectionposition.Ihaveoften made the point that our systems are probably amongst the bestintheworldandanyonewhovisitsourfacilitieswillsoon seethis. 15 5 0 2002 2003 2004 2005 2006 2007 GlobalOnlineGamingRevenue Source: H2 Gambling Capital 2008 2009P 2010E 2011E 2012E Source:H2GamblingCapital,2009 Mr Anderson-Thefutureoftheindustryisaninterestingtopic. Regulatedmarketsarenowthefutureifnotthenorm.Lookingat tenyearsago,regulationhardlyexisted.Thisregulatorymarket situationwillcontinueintothefuture. Mr Anderson - I have often said that the two most important wordsinourindustryare‘trustme’.Trustisvitalforbrandbuildingandcustomernumbers.Onceyouhavetrustyourmembershipnumbersgoupandpeoplecomeforalonglifetimevalue withtheoperators.Itisclearintheindustrythatfirst-moveradvantagesticksandlastsforsometime. Oncecustomerscome,basedonthetrustfactor,theywillstay forsometime.WeinGibraltarsellanentertainmentexperience andifnecessaryweeventeachpeoplehowtoplayenjoyably andresponsiblyandhowtoappreciatethegamesoveralong periodoftime.AsIstatedearlier,thisispartofourtransparency andregulation. 20 10 Milestone GRP - What impact does Gibraltar’s Online Gaming sector have on consumers in terms of service & entertainment, responsible gaming and trust? How does this contribute to the ‘acceptability’ of Online Gaming as a legitimate and successful business? Regulation and Transparency to Build Trust 25 Licensingwillbemoreandmoredifficultforoperatorswithfewer start-ups due to the high entry cost barrier. This will leaveonlythebestoperatorsleftstandingandthiscanonlyhelp Gibraltar’soperators. Milestone GRP - What can be learnt from Gibraltar’s success? Do you see opportunities for other jurisdictions to replicate it? Milestone GRP - What is the future for the industry globally, in terms of diversification, licensing, regulation and the opening of new markets? Mr Anderson-WehaveprovedinGibraltarthatthecasefor online gaming is sound. The model we see in Gibraltar is a good one and is likely to be copied, especially in the world environment of financial crisis in which we find ourselves. In fact,thecaseisextremelycompellingandEuropeandtheUSA areadaptingtotakeonboardtheindustrywithallthebenefits ithas. Global Market for Online Gaming Geographical Distribution 2010 / Expected Growth 2011 Online Gaming Global Market MarketShare2010&ProjectedGrowth2011 North America Share: Growth: 20,7% 0,0% Europe Share: Growth: Africa Share: Growth: 44,2% 15,2% Share: Growth: 1,2% 12,2% Central & South America Share: Growth: Asia & The Middleeast 3,2% 10,3% 25,9% 5,6% Oceania Share: Growth: 4,8% 6,9% Source: H2 Gambling Capital, January 2011 Source: H2Gambling Capital, January 2011 Gibraltar 2012 67 Online Gaming New Momentum for a Successful European Online Gambling Market by Ms Sigrid Ligné, Secretary General, European Gaming and Betting Association The European online gaming and betting industry is at the forefront of eCommerce. The sector grows at a steady pace and is expected to reach €13 billion in Gross Gaming Revenue in 2015, up from €8.5 billion in 2010. It is also a new market, coming on top of the traditional offline gambling market, which is predicted to grow by more than 10% to €79 billion over the same period. Last but not least, with 45% of the global online gambling market, Europe has developed a unique leadership position in the online economy. For the first time, Europe has produced a number of global Internet champions, something which has up to now been the preserve of US-based corporations. Against this backdrop, it is even more surprising that policymakers in the EU have been so slow in reacting, especially as European consumers have been voting with each ‘click’ of their mice. Gibraltar has been one of the very few jurisdictions in the EU that has recognized these developments early on and now has the considerable advantage of being an early mover and an experienced regulator. Today we see a flux of Member States regulating, or planning to regulate, the sector. But most regulate from a purely national perspective, without taking into account the inherent cross-border nature of the sector. Whilst gambling is an activity that is, and should be, subject to strict statutory regulation, the piecemeal European Gaming fashion in which the national legal frameworks are developing is not sustainable. Many of these frameworks are contrary to the fundamental principles laid down in the EU Treaties, but many also fail to provide a 2012P competitive regulated offer to the consumers. With the costs for a single EU operator to obtain and maintain just one French license being €8.7 million, even if the operator is already licensed in other Member States, it is unrealistic to assume that such an operator can compete with unlicensed operators that do not have to meet this burden. If the offer isn’t attractive enough, the consumer will easily find his way to the better odds on the internet. 134 concrete standards for, inter alia, the prevention of underage gambling, fraud and to protect consumers in general. EGBA strongly supports the political involvement of the European legislator and the development of a European framework for online gambling. Consumers in the EU should have access to an attractive and competitive offer and rely on properly regulated services that provide all consumers in the EU with a high level of consumer protection. EU-licensed operators should be able to have access to the internal Market without having to acquire 27 licenses and fulfill similar requirements in every jurisdiction. Not just as a matter of principle, but also to be able to compete with unregulated offers and thus keep the consumer off the black market. A European framework will not appear overnight. In the meantime, operators will have to deal on a daily basis with the national regulations that directly affect their operations. Even though the announced Commission Communication is much welcomed, the European Commission does need to take its responsibility as Guardian of the Treaties seriously and actively pursue infringement proceedings against those Member States that cross obvious “red lines” of non-compliance with EU law. Building trust and confidence between European regulators is essential. The European Commission is currently setting up a regulatory cooperation mechanism that will facilitate communication Market and regular information exchange amongst national regulators. EGBA welcomes the efforts of the Gibraltar Gaming Commission in bringing its considerable experience and knowledge to these European Gaming Market meetings, helping to build an EU framework for online gambling. Online Market share 11,9% Gross Revenue: €11 billion 2012P Online 7,65% €6,5 billion 2008 Offline 88,1% €82 billion A European regulatory approach is inevitable; carving up the Internal Market into 27 mini internet markets is simply no option. The EU is the only effective and realistic level at which to regulate Offline 92,35% an internet industry. The recent report of the European Parliament €78,5 billion on online gambling in the Internal Market and the Commission Source: H2 Gambling Capital January 2009 European Gaming Market European Online Gaming Market Outlook Communication on online gambling that has been announced for June 2012 show that European policymakers are starting to take 20 ownership as discussions on the direction of the policy are getting underway. H2 Gambling Capital, January 2009 The discussion doesn’t start completely without a basis. Gambling is covered by a number of European laws, including the 3rd anti-money laundering, the data-protection and the unfair commercial practices directives that apply to all EU-regulated operators, including those licensed by Gibraltar. The European Committee on Standardization (CEN) published a workshop agreement on Responsible Remote Gambling Measures in 2011, providing 68 US$ (billion) 15 10 Source: H2 Gambling Capital January 2009 5 0 2003 2004 2005 2006 2007 European Online Gaming Market Outlook 2008 2009 2010P 2011E 2012E 2013E 2014E Source: H2 Gambling Capital, January 2011 Source: H2 Gambling Capital, January 2011 2008 Online Gaming milestone GRP That company has been very successful in taking clients not onlyintheGamingindustrybutelsewhere,anditisaverysuccessfulstand-alonecompany.Ithasitsownmanagementand finance. GlobalOnlineGamingasPercentage ofallGlobalGamingRevenue 10 9 8 7 Weareinnovatingallthetime,wearelookingatwhatchanges, and things are changing very quickly. Smart phones changed thebusinessyetagain,andweexpect60%ofourbusinessin two years time to be on smart phones and pads. So it is somethingwewillhavetoworkon.ButIthinkwehavethebest applicationformobileintheworldnow,andwehavedeveloped itourselves. Milestone GRP - In times of economic downturn, is there a stronger case to be made for the Online Gaming sector to be legitimized and properly regulated? The Rock’s First Online Gaming Licensee Good numbers in the books 15 years on Mr Chandler -Weareindialoguewith3countriesthathavenot regulated,licensedortaxedthatmuchatthemoment,andnone ofthemareEuropean.Soitisaninterestingperiodofdevelopmentatthemoment.Weareintheentertainmentbusinessand strongly believe governments should regulate, tax and license thisindustry. Interview with Mr Victor Chandler, Chairman, Victor Chandler International VictorChandleristheChairmanandfounderofBetVictor.Establishedin1946,BetVictorhasoverhalfamillioncustomers in 160 different countries. Mr Chandler recognized the growth in international markets at an early stage and relocatedtoGibraltarin1999tobeabletooffersportsbettingfreefromthe9%taxleviedintheUK.In2006,theRacingPostwrotethatChandleris“arguablythemostfamousbookmakerintheworld”.MilestoneGRPsatdownwithMr Chandlertogethisperspectiveonhiscompany’sdevelopment,itstransitiontoGibraltarandhowheseestheOnline Gamingindustrytakingshape. Milestone GRP - What are the milestones and the key decisions that have been taken since the 1920s and have contributed to making Victor Chandler International what it is today? Mr Victor Chandler -Thebigmilestonehasbeenmovinghere toGibraltar,andthemostimportantthingforourbusinessis technology.Thathaschangedallbusinessesbutinparticular ours,becausenowwecanbeavailableoneverydevice,whereas before we had only the telephone. So the internet and nowtheiPad,theiPhoneandallthedevicesthatareavailable topeoplechangedourbusiness.Themostsignificantthingfor usisthatitallowsustocrossbordersaslongaswehavegot thelanguagesandtheabilitytotakemoney.Infact,oneofthe dependenciesisalwaysyourabilitytogetthepayments,probablyoneofthemostimportantthings.Gibraltarhasallowed ustodothisbecauseitisregulated;thisenablesustohavea platformtoengagewithclientsallovertheworld. Milestone GRP - You were the first licensee in Gibraltar about 15 years ago. What prompted you to come to Gibraltar at the time, instead of setting up elsewhere? Mr Chandler - I looked at six or seven locations, from South AmericatoAntiguatotheChannelIslands,andherethelicense wasalreadyavailablebecauseitbelongedtotheownerofthe casinothathadcleverlygotabettinglicensewhenitgotthelicenseforthecasino.Itwasimpossibletohavelicensesinsome places and others had bad telephony. Moreover, the fact that 70 thiswasanEnglishspeakingcountrymadeiteasierforus.So wewenttolookatmanyjurisdictions:GrandBahamas,Antigua, Puerto Rico, Jersey, Guernsey, the Isle of Man and Malta. We gotaverygoodreceptionhere.IdonotthinktheChiefMinister had any idea of how the industry would grow at the time and neitherdidwe.Nooneenvisagedwhatwouldhappenwiththe internetandhowquicklythingswouldchange.But12yearsisa shortperiodoftimeinabusinesslife. Milestone GRP - Is innovation something that has always been part of Victor Chandler or is this something that has come about more as an obligation? What has been your approach to staying ahead technologically? Mr Chandler -ItwasfairlylateinlifethatIcamehereandIhave alonghistoryintheUK,myfatherandmygrandfatherbefore me.MybusinessintheUKwasverysimilartotheirbusinesses: telephoneandbettingjobs.Therearetwoindustriesthathave pushedtheinternetforward,thatisPornandBetting.Pornhas nothingtodowithGibraltar,butthisindustry’sevolutiononthe internetwastheonewefollowedandwatchedwhatitwasdoingasfaraspaymentswereconcerned.Theydevelopedcloning software before anyone else, so even though this was not an industrywewantedtogointo,wewatchedthempushforward. I now own a separate company called Intelligence Payments Group(IPG),whichdevelopedapaymentssystemthatisworldwideandPaymentCardIndustry(PCI)compliant,linkedupto everybanksystemandcreditcardpaymentsystemintheworld. Milestone GRP - Where would you like to see markets opening up to this industry and to which would you orient your expansion? Mr Chandler -ThereisalotoflobbyingtobedonewiththeUK, therearealotofterritoriesthereareopentous.TheUSisgoing toworkgraduallybutIdonotseethemopeningupforsports bettingforawhile.Theyareopeningupforpokerbuttheirlobby againstsportsbettingisverystrong. WearelookingmoreEast.Historicallywewerethefirstoneto breakintotheChinesemarket,whichisamarketthathasexpanded.Butminorplayersinthemarket,liketheonesfromTaiwanorPhilippines,havealsoreactedtothat.Thereisbusiness for lots of players out there. Just have a look at the size and populationofthetwomajorplayers,whichareChinaandIndia. Eventhoughthereisahugegapbetweenthewealthyandthe poor,thereisbusinesstobedonethere,asthereisinEurope. Francewouldnotbeoneofthecountriestoconsiderbecause oftheirtaxregime,andifSpainwentdownasimilarpathitcould not be considered either. In the gaming world, sometimes the smallerthetax,themoretherevenuethecountrygets.Butalot ofthegovernmentshavenotbeeneducatedtothatfact. Milestone GRP - What is key to the future of the Online Gaming industry? Mr Chandler -Certainlymoregame diversity.If you canfind meanewpoker,Iwillbeveryinterestedbecausesomeonewill 6 % 5 4 3 2 1 0 2002 2003 2004 2005 2006 2007 2008 2009P 2010E 2012E hit upon something. Poker had a huge growth and it is now tailedoffandthemarketiscontractingnoticeably.Althoughit stillhaspotentialintheUS,asfarastheUKandEuropeare concernedthemarketiscontractingby60%.Soyouhaveto findanewone.Thisiswhattheindustryislookingfor. Milestone GRP - How would you judge the market in terms of barriers of entry? Mr Chandler -Itwouldbeveryhardforanybodytobreakinto the industry from scratch now. The barriers to entry are very highandtheinvestmenthasgoneintothehundredsofmillions ineachindividualcompany.Youcannotgetanywherewithout beingprettybig.Youcannotsupplytheproductwithoutahuge investment,frominfrastructuretohardware,software,andthe biggest investment you make is in staff. Putting a group togethertobuildabusinessnowwouldbeverydifficult. Milestone GRP - You’ve been operating successfully in Gibraltar for quite a while. What would you tell other businesspeople across different sectors about Gibraltar? Mr Chandler - Gibraltar is a small place so you have to fit in. Historically, I have had a very good relationship with the Government. I cannot say I have got as close a relationship withthenewGovernmentasIhadwiththepreviousone,butit isonlybecausewehavenotknowneachotherfortheamount of time I spent with the other one, but I am sure that it will change.Thebestrelationshipiswhentheyneedyouandyou need them. We have a good record of employment of local people,andbringingintalent,andtheyhavebeenveryflexible. Wetrytobringinasmanylocalpeopletoworkwithusaswe can,buthistoricallyithasbeenacceptedthat,forexample,if youneedaChinesespeakingdeveloper,youarenotgoingto finditinGibraltar.Therefore,theyhavestretchedthingsforus inallowingustogetworkpermitsveryquickly,understanding our problems. The previous Chief Minister said to me I had nineliveswhenIhadproblemsandthatIhadonlyusedone ofthemup.IamsureIwillhaveasimilarrelationshipwiththis newGovernment. Internet Mobilephones/Other InternetProtocolTelevision 2003 €4.8bn €0.78bn €0.32bn 2008 €5.9bn €na €na 2012 €7.32bn €3.51bn €1.33bn ProjectedIncrease 152.5% 450.0% 415.6% ShareofOnlineGamingMarketbyDevice 2011E Source: H2 Gambling Capital, 2009 Source:EUPublicConsultationonOnlineGamblingintheSingleMarket,2010 Gibraltar 2012 71 Online Gaming milestone GRP Milestone GRP - What advantages does Gibraltar offer the Spread Betting industry? Mr Brown -Agreatthingofbeinghereisthefinancialregulation.Itoffersourcustomerstheprotectionofknowingthatthe business is regulated while also legitimising the business. In ProSpreads’case,wearesubjecttodualregulation,fromboth theFinancialServicesCommissionandtheGamblingCommissionerattheGovernment.Youcouldactuallyarguethatweare subjecttotriregulation,inthatourparentcompany,LondonCapitalGroup,alsohasoversightofourbusiness. Straddling Finance and Gambling A bet that’s paying off IntheUK,financialspreadbettingcompaniesarejustregulated bytheFinancialServicesAuthorityandnottheGamblingCommission, as spread bets are recognised as a financial product andregulatedaccordingly.AsProSpreadswasthefirstfinancial spread betting company to set up in Gibraltar, it was deemed necessaryforbothregulatorstomonitorthebusiness;however itwouldmakesenseinthefuturefortheFinancialServicesCommissiontotakeoverasthesoleregulator. Milestone GRP - You have a unique trading platform. What does that deliver for the high net worth individuals you serve? Interview with Mr Simon Brown, Managing Director, ProSpreads SimonBrownhasover25yearsexperienceinthefinancialtradingindustry.HestartedontheLondonStockExchangeand thenmovedovertotheLondonInternationalFinancialFuturesExchange(LIFFE)markettotradederivatives.Simon’sexperienceinthetradingworldresultedinhimrunningtheproprietarytradingarmofoneofthebiggestfuturesandoptionsbrokers globally.Followinghiscareerintrading,Simonmovedtosettingupandrunningtradingbusinesses.Hefoundedoneofthe firstinstitutionalelectronicbrokeringbusinessesinLondon,followedbylaunchingthefirstwhitelabelfinancialspreadbetting business,whichSimonsoldin2007.Followingthedisposalofhisspreadbettingbusiness,Simontookovertherunningof ProSpreads,hiscurrentposition,withthebusinessbeingacquiredbyLondonCapitalGroupin2008.MilestoneGRPmetwith himtogethisinsider’sperspectiveonthepotentialforspreadbettingandProSpreads’approachtotheindustry. Milestone GRP - Spread betting sits at the crossroad of the financial world and the betting world, two industries with very strong presences in Gibraltar. How would you define ‘spread betting’? Mr Simon Brown -Spreadbettingstartedinthe70sbyagentlemancalledStuartWheeler,whostartedmakingmarketsonthe priceofgoldtoothercitytraders,viahiscompanyIGIndex.Over thenext30yearsthespreadbettingindustrystartedintroducing betsonotherproducts,includingindices,commoditiescurrenciesandsingleshares. Thetraditionalinvestor’smodusoperandiwastobuyandhold stocksandshares;howeverwhenthestockmarkettechbubble burstin2000thehugecollapseinsharepricesmadeinvestors lookforwaystocapitalizeonfallingprices,asopposedtojustrisingprices.Sotheyfellonthisproductcalledspreadbettingand thatwasreallythelaunchofspreadbettingforthemainstream investorandtrader.Itisnowthenumberoneproductforpeople whowanttospeculateonfinancialmarketsintheUK. Now,ifyouwanttobuyVodafoneorAppleshares,youcaneither buythesharesthemselves,oryoucanbuyabetontheshares. Thesefinancialbetsaredefinedasderivatives,andthecompanies whoofferthemareregulatedbytheFinancialServicesAuthority intheUKandtheFinancialServicesCommissioninGibraltar.In additiontothesederivativeproductsbeingtradedonmarginand 72 Mr Brown -Speedandtransparency.Wehavesomeclientswho trade a thousand times in a month. So when the markets are moving in a very volatile fashion, as they have been over the last couple of years, speed of execution can be the difference between a profitable trade and a losing trade. To give you an example,aclientwillpressabuybuttonontheplatform,which willinstructustosendamessagetotheexchangetohedge,and onceexecutedinformtheclientthathehashisbet.Allthistakes placeinamatterofmilliseconds. Sowhenthemarketismovingrapidly,aoneseconddelaycould meanabigdifferenceinpriceofexecution.Goldisaperfectexampleasitcanmove50-100pointsinaminuteandthereforea delayinexecutingtheclient’sbetcouldresultinanunfavourable pricebeingachieved.Soforactivetraders,especiallytheones who like volatility, speed is everything. Because our prices are directlyreferencedfromtheactualfinancialmarketplace,ourclientshavecomfortinthetransparencyofknowingthatourprice isthemarketprice. Milestone GRP - What is your development strategy? Mr Brown -Innovationandinternationalexpansionisourfocus overthenexttwoyears,asourclientbaseatthemomentispredominantlyUKbased.Wearelaunchingotherproductsthatare verysimilartospreadbettingbutmoreappropriatefortheinternationalclientbase.ContinentalEurope,theMiddleEastandFar Eastaretargetareasforourphaseoneinternationalexpansion program and I expect our advanced technology and quality of servicetocreateahealthyinternationalclientbase. beingbets,thereisnocapitalgainstaxonanywinningsforUK taxpayers.SoyoucanseewhyutilisingspreadbetstogainexposuretothefinancialmarketsisverypopularintheUK. Milestone GRP - How did ProSpreads come to be based in Gibraltar? Mr Brown -ThefoundersofProSpreads(andmyself)usedto trade futures and options on the open outcry markets in Londonforabout20years.Followingthedemiseoftheopenoutcry marketsinLondonandtheintroductionofelectronictradingin 1999,thefoundersmovedoverseas,anddecidedtosetabusinessupinGibraltar. Giventhattechnologyhadfirmlytakenoverthefinancialmarkets, theythoughttheywouldprovideaserviceforindividualtraderswho used to trade on the futures market, allowing them to utilise the besttradingtechnologytonowtradefromthescreen.Theywanted toprovideanenvironmentdowninGibraltarwherethelifestylewas brilliant,thetaxwasefficientanditwasregulated.Sotheybrought UKtradersdowntoGibraltartoworkinatradingroomwithbestof breedtechnologyandsupport,tositthereandtrade.Thefounders soonrealisedthatnotalltraderswouldnecessarilywanttowork andliveoutsidetheUKandthereforethoughtofofferingaservice fortradersbackintheUKwiththesametechnologyandtaxefficiencywouldbeextremelypopular.Andasthetradewouldbeabet, theywouldbenefitfromtheprospectoftax-freegains. Gibraltar 2012 73 Telecoms & IT Telecoms & IT milestone GRP TheGRAcarriesoutmarketreviewsontheIndustry,whichare required by EU law. We regulate the industry and we licensetheradiospectrum.Iregulatealimitedamountofentities since Gibraltar only has 3 network operators, and 5 service providers. Milestone GRP - Is Gibraltar’s Online Gaming sector regulated under the Communications Act in any way? Ensuring Compliance and Fair Play Regulating the Telecoms sector Interview with Mr Paul Canessa, Chief Executive, Gibraltar Regulatory Authority PaulCanessaistheChiefExecutiveOfficeroftheGibraltarRegulatoryAuthority. HehasheldthepostsinceOctober 2000. MrCanessaisresponsibleforregulatingtheelectroniccommunicationssectorinGibraltar,whichincludesthe licensing of the radio spectrum, satellite communications and broadcasting. Mr Canessa is also the Data Protection Commissioner.PaulCanessa’sbackgroundisinbroadcasting,havingbeenatelevisionproducer/journalist,andthen HeadofNewsandCurrentAffairswiththeGibraltarBroadcastingCorporation. Milestone GRP - What are the Gibraltar Regulatory Authority’s (GRA) main areas of responsibility? Mr Paul Canessa - The GRA is the National Regulatory Authority (NRA) for Gibraltar, which follows the pattern of all EU MemberStateswhereNRA’shavebeensetuptoregulatethe electroniccommunicationssectortoconformwiththeprovisionssetoutbytheEUinthewayofDirectives,Regulationsand Recommendations.TheseEUdirectives,togetherwithnational law, were enacted to carry out these obligations, regulate the Gibraltarmarketandestablishalevelplayingfieldforthosenew entrantswishingtocompeteinofferingcustomersexistingservices or new services and products. The intrinsic purpose of the GRA is thus to regulate the market and effect fair, reasonableandnon-discriminatorytermsforotherserviceproviders wishingtoofferserviceswhilstmaintainingcompetition. The GRA is an independent body; it advises the Minister for Communications.TheGRAhasthepowerstoregulatetheelectroniccommunicationssectorbyvirtueoftheCommunications Act 2006 and accompanying Regulations. Its role is that of a supervisory body which regulates and enforces compliance in areassuchascompetitionandthegrantingandmonitoringof radio spectrum licences. Not all market players will behave in theappropriatemanner,some,likeinallbusinesssettings,will trytousetheirmusclepowertocompeteinwhatisnowconsideredanunfairmannerinordertogetmorecustomersoreven keepexistingones.Thiskindofbehaviourwillnotallowcompe- 76 titioninthemarkettodevelopinitstruesense,sotheGRAhas thepowertoputanendtobehaviourthatisnotallowedbythe legislationanddetrimentaltothecompetitiveethosoftheEU. In this and all its duties, the GRA is always impartial, fair and reasonable. TheGRAcananddoesissueDirectionsthatrequireactionby operatorsandserviceproviderstocomplywiththelaw.Apersonwhodoesnot,orrefusesto,doanythingrequiredofhimby aDirectionisguiltyofanoffenceandliabletobefined. The GRA has many regulatory powers, from a role in monitoringexistingandnewserviceproviders,tointerveningininterconnection agreements between network providers. Very importantly,theGRAalsoactsasarbitratorindisputesbetween customersandtheirserviceprovideroroperator,anddisputes between operators themselves. Procedures have been establishedwhichaimtoresolvethesedisputeseffectivelyforallthe partiesinvolved. Milestone GRP - Which of Gibraltar’s specific industries and sub-sectors do you oversee? Mr Canessa - We have two main areas of responsibility: telecommunicationsinallofitsfields,whichincludetheregulation oftheIndustryinGibraltar,SatelliteCommunication,RadioCommunication,includingthegrantingoffrequenciesandlicenses.I amalsotheDataProtectionCommissioner,soitisadualrole. Mr Canessa -TheGamingIndustrydoesnotcomeunderthe GRA.Itusedto,butithasnowmovedandcomesundertheMinistryforFinancialServices.Partofthereasonforthischangeis thatfortheindustriesweregulate,theEUdirectivesrequirethat our regulatory function be independent of the Government. In theGamingsectoritisdifferent;thereisnorequirementtohave independentregulation. SotherewasadualregimewherebytheMinistrydidthelicensingandtheRegulatoronlyregulatedpost-licensing,ensuring compliancewiththelicensing.SoIwasinvolvedintheGaming regulationupuntilearlylastyear. Milestone GRP - Does the telecommunications legislation in Gibraltar comply with the EU’s requirements? Mr Canessa -Yes,thenewtelecomsreformpackagebecame lawinGibraltaron26thMay2011.TherulesgoverningtheTelecomssectorintheEUwereagreedin2002.Inthisfast-developingsector,theregulatoryframeworkneededtoberevised,to ensureitcontinuestoservethebestinterestsofconsumersand industry in today’s marketplace. The EU formally adopted the TelecomsReformpackageon20thNovember2009anditenteredintoforceon18thDecember2009.Thesenewruleshavean importantimpact,amongstotherthings,oncompetition,consumerrights,datasecurityandspectrumuseacrossEurope.The newtelecomsrulesreinforcenationaltelecomsregulators’independencebyeliminatingpoliticalinterferenceintheirday-to-day dutiesandbyaddingprotectionagainstarbitrarydismissalfor theheadsofnationalregulators. Milestone GRP - How do you assess the quality of telecommunication infrastructure in Gibraltar? Mr Canessa - Gibraltar has excellent telecommunications infrastructure. The reach of the network is 100% and there are robust fibre networks which provide full resilience. Both GibtelecomandSapphire,thetwolargestoperators,haveinternational cable links from Gibraltar with enough capacity tomeetthecurrentandfuturedemandsofcompaniesusing Gibraltar. Milestone GRP - Gibraltar currently hosts one satellite services company. Do you see room for the growth of this industry in Gibraltar? ADSL Dialup Metro WiMAX 12000 Individual Connections InaplacethesizeofGibraltar,itiseasiertohaveonlyoneRegulatory Authority with common administrative infrastructure, anditkeepscostsdown.Moreover,therequirementsforboth telecommunicationsanddataprotectionallderivefromtheEU directive requirements. The EU Directives require an independentregulatorandthisindependenceisassuredbyestablishing theregulatoryauthority. 9600 7200 4800 2400 0 2003 2004 2005 2006 2007 InternetConnectionsbyType Internet Connections by Type 2008 2009 2010 2011 Source: GRA, 2010/11 Source: Gibraltar Regulatory Authority Mr Canessa -Themarketforsatellite-deliveredservicescontinuestogrowandevenintheaftermathofthe2008recession itbecameapparentthattheglobalsatelliteindustrywasquite resilienttotheeffectsofeconomicchange.Thedemandforsatellitespectrum,whichisafiniteresource,ishighlysoughtafter as the world’s geostationary orbit becomes increasingly congestedwithsatellitesprovidingservicessuchasbroadcasting, telephonyandinternetconnectivity. In order to consolidate the UK space industry and encourage growthofbothscientificandcommercialsatelliteservices,the UKGovernmentformedtheUKSpaceAgency(UKSA)in2010. TheUKisaleaderinsmallsatellitetechnology,andhasworld class expertise in space science and engineering but had never fully embraced the commercial side and most of the UK’s satellite operators are in fact US companies who have found theUSrequirementsforfilingandtheassociatedbondsfartoo stringentandexpensive,andhaveestablishedcompaniesinthe UKanditsOverseasTerritoriesasameanstofilefororbitallocationsovertheUSAatafractionofthecosts. Theinternationalsatelliteoperator,SES,hasestablishedacompany in Gibraltar to file for orbital slots across the globe, but primarilyforbroadcastingovertheUSA.Wecurrentlyhavefiled forover20orbitallocationsinthegeostationaryorbitandSES have6satellitesoperatingfromUK/Gibraltarslots.ThesatellitecontrolcentreinGibraltarisfullyintegratedintoSES’global controlnetworkandemploys8highlyskilledstaffwhocontrol andmonitor5satellitesandprovideback-upcontrolforanother 5satellitesandtheEarthstationlocatedonWindmillHillprovidesdirecttelemetryandcontrolofaUSsatellitewhichispart oftheSESfleet.Takingintoaccountthattheaveragelifespan ofbroadcastingsatellitesisabout15years,andthatGibraltar’s controlcentreisfullyintegratedintotheSESglobalnetworkwe are confident that SES will remain in Gibraltar for many more yearstocome. Lookingintothefuture,thereispotentialtodeveloptheuseof GibraltarforsatellitehostingandwehavereceivedseveralinquiriesfromsatellitecompanieswhoareconsideringusingGibraltar. Milestone GRP - How do you stay abreast of these new developments in the EU and globally? Mr Canessa -Byreadingalotandtryingtobeawareofup-andcoming changes. We were asked to join the International Institute of Communications’ (IIC) International Regulators Forum (IRF) several years ago. We attend their annual events, which Gibraltar 2012 77 Telecoms & IT milestone GRP Distribution of Registered Data Controllers Distribution of Registered Data Controllers 5% Gaming & Betting 9% Government Department largest market share are always much more heavily regulated than a new entrant is. Milestone GRP - How do you see the future of the GRA? 49% Financial Services, Insurance & Legal 18% Service 2% Education 11% Retail Source: GRA, 2010/11 deal with topical issues for regulators on telecommunications and broadcasting matters. The IRF is extremely useful because it is held over a weekend, and it is a closed session for regulators and totally unattributable, so there is no public involvement, which is very useful. That is one of the main events with which we keep abreast. We also follow what happens in the EU with any changes that are coming up, because those will affect Gibraltar. We have to implement all the relevant directives and it is a huge challenge to transpose directives and ensure that they will work for a market the size of Gibraltar. But we always achieve it. We still have to implement directives and adapt them and do market reviews periodically. We have got to impose obligations on the companies with significant market power and the ones with the Going up and high-tech Interview with Mr Harry Pallas, Senior Manager, SES Gibraltar 3% Health 3% Bank On the Med and in the Skies Mr Canessa - We have recently been given responsibility for the regulation of broadcasting. The new Audio-visual Media Services Directive, was implemented here last year and gave the GRA new responsibilities in the regulation of broadcasting content. Our role will increase once Gibraltar converts to digital broadcasting at the end of 2012. This will also permit the Government to license new broadcasters. Milestone GRP - What change would you like to see in the coming years? Mr Canessa - I would like the regulation to be simpler and certainly less onerous for Gibraltar, where we have to implement an EU regulatory regime, which was never designed for a place the size of Gibraltar. But we are part of the EU family, we have to comply with the rules, and Gibraltar wants to be part of Europe. Also, to its credit and benefit, Gibraltar has a superb knack for surviving and making the best of things. As such, it has not been affected very badly by the recession. There have been reports of some effects, but Gibraltar always survives and adapts. Milestone GRP - What does SES do in Gibraltar? Mr Harry Pallas - The business plan for SES is that we buy satellites, we have the expertise to operate them and we then rent out TV channels on those satellites to TV companies, thereby getting profit and repayment of the capital invested. To operate those satellites you need satellite control centres as well as a whole host of other activities. Gibraltar provides one of a total of 4 control centres that SES operates. We have a control centre in Luxembourg, one in New Jersey, one in Maryland, and this one in Gibraltar. So we are a control centre for the physical operation of the satellites, and this is because of the Gibraltar Government‘s requirement that when they licence a satellite, the control centre has to be in Gibraltar. Milestone GRP - Why did SES choose Gibraltar as a jurisdiction to licence its satellites through? Mr Pallas - Gibraltar was able to assist SES in obtaining slots for satellites in the correct orbit that are useful for TV communications. Without Gibraltar, you would be perhaps be looking at a one or two-year period in order to obtain clearance to place satellites in particular places in orbit. Gibraltar has been able in the past to do this generally within a six-month time frame. In a very recent case, we have done it in a two-month time frame. We do all the due diligence that companies require, and we have the expertise, the money and the previous experience of placing satellites in orbit. You have to obtain the licence from the International Telecommunications Union, which is a branch of the United Nations in Geneva. We use the office of communications in the UK, Ofcom, to assist in this but it is all an effort through the Gibraltar Regulatory Authority. Therefore, once you obtain the licence to operate a satellite in a particular slot, then that satellite has to be operated technically and controlled from Gibraltar. Milestone GRP - Why does Gibraltar have this capacity that others do not have? Mr Pallas - Gibraltar has a small and very fast Administration and Government, so that we can actually get things to market and we can assist companies very quickly to get their business plans on track. Unlike some other administrations like the USA, once you come to Gibraltar with the business plan, the Government can get it to happen, but you are the ones that have to do it. Whereas in the USA you come with an interesting business plan and you submit the proposal and the government says it is a good idea and two years down the line they publish a request for tenders and proposals. Therefore your competitors get to do it or get to compete with you for this brilliant business prospect that you 78 devised. So companies feel that Gibraltar is a great place to do business. Once you come in with a business plan, it is yours, it is not opened up to the competitors to come and do the same thing. If you demonstrate that you have the money, the expertise and a good idea, you can go for it. We have been very successful in this since we have got 6 satellites that are now licensed through Gibraltar. Milestone GRP - How do you see Gibraltar positioning itself as a knowledge-based economy? Mr Pallas - In many cases small can be beautiful. You can exploit niche markets by providing a good, quick service to customers, I do not know a lot about other industries, but I know we can get things to market very quickly within what we do. An example is the satellite called SES3. It was at 80 degrees west somewhere over the USA, we decided to move it 180 degrees east, somewhere at the level of Japan, serving the Indian and Chinese market. This was a relatively new satellite, had lots of fuel and we had to move it more than half way around the world, over the Atlantic and Middle East because there was more accessibility of ground stations to control it on the way there. It took us two months to move the satellite because it was three diameters away from the earth, it was a huge long journey, and we moved it as fast as we dared. The main thing about that was that Gibraltar managed to get the permissions for the slot during that 2-month period when we moved from one place to another. This would have never happened with any other administration, and Gibraltar was very agile in obtaining that and it is now the primary control satellite we fly that and it is serving the Asian market. It is a value-add for Gibraltar. What we do here brings direct cash input into the Gibraltar economy externally since we are not selling and moving money around inside here, we are receiving a net influx of money for the operations from our head company. We are not a profit centre but a cost centre for the company, and we get paid for what we do for them. In the context of a small economy like ours it is important it runs into the millions of pounds a year. We are providing that direct input into Gibraltar‘s economy. So if you are small and have good infrastructure, good telecommunications and a responsive agile administration, and also have an environment where you can do business, where there is hopefully little corruption, and you can get things done officially without having to wait until somebody agrees, things happen and results come in good benefits. Gibraltar being a very small economy, gives the opportunity to just focus on a few niche markets and exploits them to good effect, and does a better job than other administrations in that area. That is what we do with satellites. There is no reason why another industry could not do it; we just got here first. Gibraltar 2012 79 Online Gaming Telecoms & IT & IT milestone GRP What has been good for Gibraltar and the company, is that ecommercehashelpedGibtelecomtoraiseitsgameastheinternet businesseswedealwithareverydemandingorganizationssince everysecondcountsfortheminaveryimmediateandcompetitive environment.Thishashelpedusadvancenotjustthecommunicationstechnology,butmanyotheraspectsofourbusiness.Theegamingcompaniescouldnothavecomehereifthetelecommunicationshadnotbeenthere,butsincetheycametheinfrastructure hasbeenfurtherdeveloped.Asanexample,thereusedtobejust one fibre optic ring going out of Gibraltar so, if anything happenedtothatonelinkeverythingcouldbeout.Itneverhappened, butnowwehaveseveralindependentroutesacrosstheborderto Spain-fromwherewedropontodifferentcarriers.Wealsonow haveasubmarinecablelandinginGibraltar.Soallofthisdiversity andresiliencehaspartlycomeaboutbecauseofthee-gamingindustryanditsneeds.Butitwouldhavecomeaboutanywayintime asbusinessesareincreasinglydependentoncommunications. Telecoms Growing in Pace with the Economy An all-round provider extending its reach Interview with Mr Tim Bristow, CEO, Gibtelecom TimBristowhasbeentheChiefExecutiveOfficerofGibtelecomsince2002,whenGibraltarNynexCommunicationsmerged withGibtel.HeisalsoanindependentNon-ExecutiveDirectorofbwin.partydigitalentertainmentplcandChairmanoftheir EthicsCommittee.HispreviousdirectorshipsincludesubsidiariesoftheNorthumbrianWaterGroupplc,BritishTelecomplc andVerizonCommunicationsInc.MrBristowisaformerFinancialandDevelopmentSecretaryofGibraltarandbeforethat wasaDirectorattheUKNationalAuditOfficeinLondon,wherehetrainedasanaccountantaftergraduating.Hemetwith MilestoneGRPtodiscussthedevelopmentofGibraltar’stelecommunicationssector,Gibtelecom’spositionwithinitandthe howGibraltarisbecominganinternationaltelecommunicationshub. Milestone GRP - How has Gibraltar evolved as an IT hub? Mr Tim Bristow -Gibtelecomhasalwaysbeenattheforefront oftechnologicaldevelopments.Thecompanyoriginatesfrom two sources: one was always a private sector company, first Cable and Wireless and subsequently British Telecom. The othercamefromtheprivatisationofaGovernmentdepartment, GibraltarNynexCommunications(GNC),whichbecamepartof theVerizongroupoftheUS.Gibtelecomemergedfromthefusionofthesebusinesses,andisnowjointlyownedbyTelekom SlovenijeandtheGovernmentofGibraltar.Theprivatisationin May1990wasthereforeaheadofthecurveforprivatizations ofincumbenttelephonebusinesses.BritishTelecomhadbeen privatizednotlongbefore.Aspartofthatprivatizationcontract GNC, built a fibre optics network throughout Gibraltar. That was also ahead of the curve, and the fact that Gibraltar was able to advance the way it has, is partly because that fibre networkwasbuilt.Wecouldnothavehadthefinancialservices and e-gaming industries here unless Gibraltar had this telecommunicationsbackbone.Sointhatsense,IthinkGibraltar hasalwaysbeenattheforefrontoftelecomstechnology. Milestone GRP - How would you describe the current legislation regulating the telecoms industry in Gibraltar? Mr Bristow -GibraltarfollowstheEUlegislativeframework,and thereareawholerangeofdirectivesontelecommunicationsand 80 communications.Itdoesnothaveanychoice.Whenthesedirectivesfirstcommencedinthe1990sonecouldarguethatderogationsshouldhavebeensoughtforGibraltarduetoitssize. ButthatdidnothappenandsoGibraltarappliestheentirerange ofdirectives.ThisEUlegislationtoencourageliberalizationand competition,designedforcountrieswithmillionsofpeople,are actuallytransposedintoGibraltarlaw,andforabusinessofour sizeitcreatesquiteachallengeandcarriesacost.Gibtelecom haveaturnoverofabout44millionEuros.Thecostofrunning thebusiness–andofregulatingittoEUstandardsandallthat thatrequires-isquiteonerous.WearespendingwelloveramillionEurosayearonlicencesandbeingaregulatedentity,which isasignificantproportionofourturnover. Milestone GRP - What are the specific requirements of the specialized industries in Gibraltar and maybe even the sheer location that Gibraltar is to a telecommunications company? Mr Bristow -Gibraltarisamicrocosmofalargerstate,andallthe servicespeoplehaveinlargerplacesarewantedhere.Gibtelecom are just a micro-version of former incumbents elsewhere, but of coursethebusinessvolumesaremuchsmaller.Whatisperhaps differenthere,comparedtobiggercountries,isthehigherproportion of international traffic that requires good communications networks. I think for Gibtelecom the challenge with some of the e-commerce businesses is that the internet is a very immediate andunforgivingactivity. Milestone GRP - How have your three brands evolved? Which areas offer growth opportunities and what trends do you see emerging? Mr Bristow -Ourfixed-linevoice,likeeverywhere,isindecline. We have just as many customers because Gibraltar has been growing,butwearecarryinglessminutes.Sotherehasbeena growthinthenumberoflinesbutusagelocallyandtoabroadis reducinggenerally,partlyduetointernettechnologiessuchas conferencingtypecallingandemail. Mobilecontinuestogrowandwehavehada3G+networkfor quiteafewyears.Theinternetisalsoagrowingbusiness.ComparedtoEuropeanstandards,Gibraltarhasasubstantiallyhigh penetrationrateforbroadband.Itiscurrentlyreachingover80% ofhouseholdsandpercapitawehit35%.Becauseofthesmall geographicalareawecover,wedonotfacethebroadbandproblemsthatlargerplacesexperience.Wedonothaveverylong copperrunsandthereislotsoffibre,sothereisnodeterioration duetodistance.Peoplecanhavereasonablebroadbandspeed everywhereinGibraltar. Another growth area is providing international connectivity for businesses. We do point-to-point international private leased circuits,wherewetakeabusinessdirectlyfromheretosayMadridorLondon.Theegamingcompanieshirededicatedinternet bandwidththattakesthemtowheretheyneedtooperate,and thishasbeenasubstantialgrowthareatoo. Wehavealsomovedintodatacentresandarenowthebiggest providersontheRock.Wearealsoalandingstationforthenew Europe-IndiaGatewaysubmarinecableproject. Itisthisconsiderablebusinessdiversificationthathasfacilitated uscontinuingtogrow.Ourgrowthlastyear,inatimeofworldwideeconomicdownturn,wasapproaching10%.Wehavebeen reaching-orgettingcloseto-doubledigitgrowthforanumber ofyearsnow,andpartofthatisbecausewearediversifying. Milestone GRP - What are you developing right now in terms of data centres? Mr Bristow -Wehavethreedatacentres.Witheverynewone we’vebuiltwethoughtatthetimetherewasariskofsupply outrunningdemand.Wearecurrentlybuildingtwomoreina facility,locatedwellabovesealevelandawayfromthemain businesscentres,whichmovesourcapacityuptonearly300 racks.Butthesedatacentresfillup,evenbeforewelaythelast brick,andthathashappenedeverytime.Theyusethelatest industrystandardtechnologies,includingefficientcoolingand standbypower,andarePaymentCardIndustry(PCI)accreditedfordatasecurity. Milestone GRP - What is the Europe-India Gateway project and how is Gibtelecom involved? Mr Bristow - For many years, Gibraltar has wanted a submarine cable link, and for different reasons this did not happentillrecently.In2006,wegotinvolvedwithaprojectcalled SEA-ME-WE5, which was a submarine cable that was going to be built from India to London but the consortium eventuallyfellapart.Asmallgroup,Gibtelecomincluded,becamethe founder-shareholdersofwhatisnowtheEuropeIndiaGateway system. It is a consortium of 16 companies, and Gibtelecom arereallypunchingaboveourweightintermsofthepartners wehave–VerizonBusiness,BritishTelecom,C&WCommunications, South Africa Telecom and Bharti, just to mention a few. Put simply, the Europe-India Gateway is a 15,000 km submarine cable system utilising next generation fibre optic technology.Forusitrepresentsasubstantialinvestmentcosting about 30 million dollars. Most of these worldwide cable projectstodaytendtobebuiltbyaconsortium,becausethey are expensive and also because they involve many different places.Forexample,youhavetobelicensedtolandacable, soitworkstohaveapartnerwhoislocatedinthecountries or territories concerned. Within this 15,000 km system there are13landings:fromLondontoPortugal,thenintoGibraltar, toMonacoFrance,Libya,Egypt,thenthroughtheMiddleEast anddowntoIndia. ItisanexcitingprojectforGibtelecomfortworeasons.First,it isthefirsttimeacommercialfibreopticsubmarinecablehas landedhere.Itmeanswehaveevenmoreroutediversitybecauseseacablestendtobelesssusceptibletodamagethan land cables. The other exciting factor is that Gibtelecom are actuallynowaglobalcarrier.Becauseoftheamountofcapacityweown,wearenowaglobalcarrierandbandwidthwholesaler.AllofGibraltar’strafficwouldcurrentlyequatetomuch lessthan10%ofthetotalcurrentcapacityGibtelecomhaveon thecableworldwide,sowehavetosellquitealotelsewhere. Forthisreasonweappointedaninternationaldirectorlastyear. Hespendssomeofhistimehere,andasubstantialamountdoingGibtelecom’sbusinessaroundtheworld.Iwaswithhimin thesouthernhemispherelastweekandinEuropetheweekbeforelookingtodevelopourinternationalbusiness.Inthelong run,ifwearesuccessful,thisoffshorebusinesscouldprovide moregrowthopportunities.Iwouldliketothinkwecouldjoin other submarine cable projects. There could be the prospect for us to connect Africa and Europe via Gibraltar, which is a projectwehavebeenlookingatforsometime.Therefore,ifthis internationalbusinessgrows,itmayovertimebecomeasbig asourdomesticone.AswegoforwardGibtelecomwillbecome moreandmorediversified,becausehereastheformerincumbentwearehighlyregulatedwithpricecontrols,wefaceincreasingcompetition,andsoitbecomesaharderlocalmarket. Gibraltar 2012 81 Telecoms & IT Milestone GRP - Who are the clients? Who are you marketing to? Mr Bristow - We have to see what happens. I was in South Africarecently,partlyforanEIGconsortiummeeting,butalso using the opportunity of being there to build some relationshipswithsomelocalcarriers.Therearecablesthathavebeen built around Africa, but eventually they have to connect to othercablesystems.Itisahighlycompetitivebusiness,andof coursetheconsortiummembersareallcompetitorswitheach other.Sowhilstweworktogether,wearealsoincompetition. Milestone GRP - When we met Mr Isola of Sapphire, he stated that there are areas where the two companies could work together. What is Gibtelecom’s position on the possibility of such synergies existing? Mr Bristow - It is good for a former incumbent telco to face competitionandforconsumerstohavemorechoice.OurcompetitorshereinGibraltartendtofocusonanichemarket-Sapphire,apartfromofferingbroadbandservicesforwhichinpart theyareusingourtechnology,Iunderstandfocusonproviding dedicated bandwidth and other services to the egaming and business community. Of course there could be synergies, but the reality is that these online customers like to have different suppliers.Agamingcompanylookstohavediverseroutes,and havingdifferentcarriersensuresthis.Soobviousareaslikethat, wheretherecouldbesynergiesthatwouldbegoodforthewholeeconomyandjurisdiction,wouldprobablynotworkforsome consumers.Neversaynever,buttherealityisthatinaregulated marketsuchasthisone,Gibtelecomneedstohavecompetition andifitwasnotSapphire,itwouldbesomeoneelse. Milestone GRP - You have been with the company for 10 years. At which stage of its life cycle is Gibtelecom and how do you see it evolving over the next couple of years? Mr Bristow -Adecadeisalongtime,buttelecomisagreat businesstobeinhere-itisaconstantlydevelopingandchangingindustry.Wehavebeenthroughajourney,wherealotof synergieswereinvolvedtomergecompaniestogethertocreate Gibtelecom. Although the workforce was initially reduced, onthebackofthebusinessbeingmodernisedandreshaped backthenwenowdomanymorethingsthan10yearsago.We areagenuineone-stopshopforallfixedline,internet,mobile Europe India Gateway Project Bude andenterpriseservicesandproducts,withagroundbreaking singlebill.GoingforwardIcanonlyseeuscontinuingtomove inthisdirection.Thereisanothermobilecompanyherealready andanotheronesettostartup.Inthissmallplacethismeans there will be three local mobile competitors! We are just now at the stage where our broadband speeds are getting faster. Generally,ifwesellfourmegabytesofbandwidth,itwillrunat four megabytes. Later this year, we are completing putting in the technology that will enable us to ramp up our broadband speeds.Weenvisage40-50uncontendedmegabyteconnectionswithoutaproblem.Thissametechnologywillenableusto putmultimediaservices,likeTV,downthetelephonelines.That couldbeanopportunityifwedecidetogothatwayandifthe localauthoritiesarepreparedtograntGibtelecomalicence,or perhapswegetintoapartnershipwithanexistingbroadcasting provider.Therearealotofexcitingopportunities.Icannotsee thetelecommunicationssectorgettinganylesschallenging. However,aswellasopportunitiestherearethreats,theonline gamingsectorbeinganexampleofboth.Somethingislikelyto happenintheEuropeanegamingspace.Atthemomentcountriesareindividuallychoosinghowtolicenseandregulatethis industry, like the UK, Italy, France and Spain. Then you have othercountriessuchasGermany,whichhavemorerestrictive laws. The technology tends to be ahead of the politics, and I think in areas like online gaming something is surely likely to happenEuropeanwideoverthenextdecade.Itcouldbeboth anopportunityforGibraltarorathreat,butoverallIbelievethis industrywillcontinuetogrowhere. IthinkGibraltarisagreatplacetohavedatacentresandthis isanotherbusinesswecanbuildon.Beingawayfromthemajor centres of Europe provides companies with diversification andGibraltarenjoysverygoodtelecommunicationsconnectivitywiththewiderworld.Weprobablyneedtomaketelecoms morepricecompetitive,althoughtheoverallGibraltarpackage availabletobusinessisveryattractive.Ourdatacentresbusiness focuses on companies that have their head quarters or operationshereatthemoment,butwecouldalsolooktoattract clients operating from outside the jurisdiction. With the submarinecable,Gibtelecomhasnowbecomeaglobalcarrier and business. We are pretty unique and that provides an opportunity, because if we do the right things and carefully, we canbuildabiggerinternationalbusinessandcontributemore toGibraltarontheway. London London • 16 consortium members • $700m fibre optic cable, UK to India Marseille • c$30m Gibtelecom investment Sesimbra • 15,000 kilometres • Partial activation in February 2011 Monaco Gibraltar Tripoli Suez Alexandria Cairo Jeddah • Complements fibre land routes • Capacity of 3,84 terabits/second Djibouti 82 Fujairah Muscat Mumbai Telecoms & IT milestone GRP From Back-up to Primary Provider Keeping the Online Gaming sector connected Interview with Mr Lawrence Isola, CEO of Sapphire Networks LawrenceIsolaisafoundingmemberoftheFiduciaryGroupofCompanies,oneofthelargestcorporateandtrustserviceentitiesinGibraltar.HeisaDirectorofFiduciaryPropertyServicesLimitedandBMIPropertyMattersLimited.Mr IsolaisalsoinvolvedinthemanagementanddevelopmentofpropertyincludingEuroport,Gibraltar’slargestcommercial propertydevelopment,aswellasAtlanticSuitesandKingsWharf-twoofGibraltar’smostprestigiouspropertydevelopments.HeisafoundingmemberandManagingDirectorofBroadbandGibraltarLtdtradingasSapphireNetworks. Milestone GRP met with Mr Isola to get his views on the importance of telecommunications for Gibraltar’s economic growthanddiversification,aswellashiscompany’spioneeringroleinthesector’sdevelopment. Milestone GRP - How has Gibraltar’s Telecom sector evolved in the last ten years, and where does it stand today? Mr Lawrence Isola -The Telecom sector has evolved enormously.Intheearly2000swealreadyhadaninterestinasmall internetproviderbythenameofGibnet,whichoriginallyintroducedtheinternetinGibraltarwhenpeoplestilldidnotknow anythingaboutit.Themarketswerenotproperlyliberalisedin Gibraltarandtherewasamonopolyinplace. As landlords of Europort, the biggest commercial business centreinGibraltar,wehadoneofthefirstbiggamingcompaniesthatsetuphere,888.JohnAndersonwastheirchairman. He used to visit me often to release his frustrations because theywouldhaveanaverageoftwohoursoutageeveryweek. Forabusinessdependentontheinternet,thatrepresenteda majorissue.Thisinfluencedourdecisiontoinvestinamuch neededtelecommunicationscompanynamedSapphire.Back thenGibraltardesperatelyneededanalternative.Notonlyfor competitivereasonsbutalsobecauseatthatearlystageofthe gaming industries growth in Gibraltar it became self evident thatthequalityandresilienceofconnectivitywascrucialifGibraltarwantedtocontinuetoattractthebusiness.Intheearly stagesofthegaminggrowtheventheRegulatorstruggledto imposefullcompliancewiththeirlicenses,whichmeantbringing all their services to Gibraltar because the quality of the 84 connectivitywassimplynotgoodenough.SapphiresoonenabledtheGovernmentandtheRegulatortodojustthat.Asaresult,whenwewereready,functioningandhadtherightservice quality,morebusinesscametoGibraltar.Gibtelecomsawreal competition and in fairness their services also began to improve.MyargumentwiththoseIknewinGibtelecomwasthat wewereallgoingtoshareinthatgrowthbecausewewereall contributingtoit.Todayeverybodyacceptsthathavingseveral providersinajurisdictionisnotjustimportant,itisnecessary anditgivesmorecredibility.Therehavebeenmanyadvantages from Sapphire coming in. We have taken many risks but nowwearepickingupsomeoftherewards. Milestone GRP - Do you work with the incumbent? Mr Isola-Wedo,weprovideanADSLserviceviatheirADSL linestosomehomes,butwecannotcompetewiththem.Whatevertheydo,wecanfollow,butwecannotdictateprice.This goesbacktotheReferenceUnbundlingOffer,whichinmyview doesnotwork.Whenmarketswereliberalisedtheincumbents weresupposedtoopenuptheirnetworksandletcompetitors in.ThisdidnotworkintheUKandithasnotworkedinGibraltareither.IntheearlystagesofSapphire,weweresupposed tobeallowedtousetheductsoftheincumbentfortherollout ofournetworkbutitbecameatotalnonsense.Ittookmethree monthstodecidethatwehadtoforgettheincumbentanddo it ourselves otherwise we would not have got anywhere. We wouldhavejustspentfiveyearsfightingit.Weendedupinvestinginourownnetworkandthatwasprobablythebestthing thathappened.SoweownourfibrenetworkaroundtheRock and we also have our own 10–12km fibre network in La Linea,Spain.Then,werentfibresthattakeustoMadridthrough diverse circuits. There are huge advantages that come from beingabletocontrolandrunourownnetwork.WehavesolutionsforDDoS(DistributedDenialofServiceAttacks),whichis veryimportantforthegamingindustry. cerned,Iwouldlovethefinancialsectortogrow,asmuchas thegamingsector.Withinthegamingsector,thereisnotthe same level of certainty that there is in other sectors such as insuranceandfinance,thesekeepgrowingslowlybutsteadily. GaminghasprimarilycomeinoverthelastdecadeandIthink there are still elements of uncertainty for its long term future largely due to the fragmenting tax structures forming within Europe.Eventhegamingcompaniesthemselvessaythatthey cannotseemorethan5yearsaheadastherearechangestakingplaceallthetime. Milestone GRP - At what stage of its life cycle do you see Sapphire now? Fromwherewearesittingwehopetohelptosetthestandard and maybe encourage other IT-orientated businesses to look atGibraltarmoreseriouslythaninthepastnowthatweenjoya newandcrediblelowtaxregime.IseeafutureofDataCentres housingcompaniesfrommanydifferentfinancialbackgrounds thatcouldpotentiallycontributetoGibraltar’sgrowthandwhat we provide in Gibraltar on the IP front is as good or indeed betterthaninanyotherpartoftheworld.Youcouldsaythat wehavethegamingindustrytothankforthequalityofconnectivitythatweenjoytoday,butthishasplaceduswelltoattract amorediverserangeofbusinesseswhichwillrequireequally highstandards.ThereforeGibraltarisalsowellplacedtonow attractmorediverseITorientedbusinesses. Mr Isola-IwouldliketothinkSapphireisnowestablishingitself asacredibleprimaryprovider.Westartedoffbeingthebackupto theincumbentandinmostcaseshavenowbecometheprimary providerwiththeincumbentservingasthebackup.Sapphireis wellknowninITcirclesandtothosethatarelinkedtothiskind ofbusinesssowedonottendtohavelargemarketingbudgets. Milestone GRP - How have you invested in technology and the consumer experience in order for Sapphire to reach that level of maturity? Mr Isola -Weareaboutiqueprovider,veryfocusedintheserviceweprovideprimarilytogamingcompaniesandtospecialisedbusinessesthatneedaparticularqualityofconnectivity. We are continuously interacting with the gaming community andwiththeirITdepartments,sowegetalotofusefulinformationthathelpsushelpthem.Ayearandahalfago,wejoined LINX in London and AMS-IX in Amsterdam, the two biggest Internet peering infrastructures. Therefore, we can peer with otherbigbandwidthprovidersinplaceswhereourclientsare based. For example, people that are playing in Manchester withBwin.PartywillbeahopfromManchester,toLondon,to MadridtoSapphire.Thisincreasestheefficiencyofthecommunication, the efficiency of the latency, without any packet loss-thelesshops,thequickerandcleanerthepassage.Althoughitwasexpensivetoset-up,thiswasverywelcomedby thegamingindustry. Wehavenowupgradedourequipmenttocarriergrade.Even thoughwearejustasmallcompanyinGibraltar,weareusing equipmentthatisusedbybigcarrierswithnetworksthattravel acrosstheglobe.TheedgeofournetworksitsinMadrid,not atthefrontier,andwehaveourownfibrenetworkinSpain.We sourceourownIPinMadridandhavefiveIPproviders-CogentspecialisesinnetworksthatgototheFarEastandLevel 3specialisesincrossingtheAtlantictoAmerica.Wetherefore haveplentyofredundancy.IfthereisacompanyinGibraltar that is doing more business with the Far East we direct their trafficthroughCogent,whichimprovesthelatencyandismore efficient.Thisisoneoftheadvantagesournetworkgivesus. Milestone GRP - The Financial sector is poised for continued growth but the Government is carefully managing the Online Gaming sector’s growth. How do you see the future along this line? Are you going to target new markets? Mr Isola -Itisnotforustodecidewhatmarketstoencourage, we do not really bring them here. As far as Sapphire is con- Milestone GRP - What factor do you see influencing investment into Gibraltar and which areas do you identify as ripe for growth? Mr Isola-Thetaxreformwillplayanimportantpart,evenifit willtakesometimetoseeitseffects.InthepasttheGovernmenthavebeenveryselectiveintheirchoiceofgamingcompanies and this is important but I do not think there is any harm in allowing a few more so long as they have the right qualificationsandstandards.AlthoughavailablespaceispresentlyaproblemforGibraltarIbelievethedatacentreareaof business is likely to continue to grow as more IT orientated businesseschoosetobasethemselvesinthisjurisdiction.We arenowabouttoacquireadatacentreandarealsodesigning anotherone.Iseethisasagrowtharea.Goingintodatacentre businessisalmostaformofdiversificationwithintheTelecom business.WearewellplacedhereinEuroportasweenjoyinfrastructurethatisunequalledinGibraltarwithwell-maintained back-uppowerstationswhichalsoback-upoursizeablecoolingplant.Gibraltarneedstobecomealittlemoreaggressivein themarketingofitsnewlowtaxregimewithitsexcellentcommunicationsfacilitiesforITbasedbusinessesthatcanbenefit fromtheseadvantages.ThisiswhereIseethemostobvious growthpotential,whichwillinfluenceinvestmentintoGibraltar. Milestone GRP - Will Sapphire become a full-blown complete Telecom service provider? Mr Isola -Thatwasalwaystheplananditwillbethecaseina fewyears,withoutanydoubt.Iamnotsureaboutwhetherwewill gointotheMobilesector.Ifwedo,itwillprobablybeontheback ofanothercarrier.Wearecomingupwithalocallynovelideafor VoIP[VoiceoverInternetProtocol]withcloudandDR,thingsthat are not available in Gibraltar, and wont be until we do it. I think Sapphirewillbealeaderinthatfieldaswearewiththeinternet. Butitdoestaketimetodothingsproperlyandrollingoutnetworks isnoteasyatthebestoftimes.Howeverwearegettingthere! Gibraltar 2012 85 Telecoms & IT Milestone GRP - You are one of the important entrepreneurs in Gibraltar, with interests in very different businesses. How do you create synergies between your different companies? Mr Isola - Gibraltar being a small place makes it more manageable to handle different interests. When you are dealing, as a landlord, with companies, in particular gaming companies that require telco and property services of one sort or another then obviously there are synergies and relationships inevitably develop in several ways. One example is the cooling plant which services the Europort complex, as well as the Hospital and Atlantic Suites. It is a huge asset for us, because it provides chilled water, which for the purposes of data centres is very important. Sapphire in partnership with the landlord developed this resilient facility to service tenants. This is an obvious synergy and has put Europort in the front line when it comes to infrastructure, which is a very important aspect of keeping business going through its redundant power and cooling facilities. Milestone GRP - Would you have a message for international 86 readers and the CGDC audience? Is there an example to be taken form Gibraltar? Mr Isola - Gibraltar is pretty unique. It is a very good example of a small city with different religious and cultural backgrounds mixing together and forming a Gibraltarian identity. It is a small economy but rather well run and diversified. It has the weather, the English judicial system, which is probably one of its greatest assets and it has been here for 300 years. As a Gibraltarian, my views are going to be a bit biased. I think the level of honesty in the management of Gibraltar as a country is probably exemplary. Gibraltar is a small community where nobody can get away with much. Gibraltarians are generally very entrepreneurial. There is a Latin element from Italy mixed with the English education. It is unique because it is in the southern tip of Europe. Gibraltar is open for business, and I am cautiously optimistic. Despite the uncertainties of the world, Gibraltar is very well placed to continue to grow it seems to be less influenced by the ups and downs of the wider world and I am confident about its future. Port Services & Shipping Port Services & Shipping milestone GRP that benefits the entire community and, as such, we would certainly not have spent €75 million on the new terminal. The Government maintains this position on the, in our view, entirely reasonable premise that the number of passengers arriving at Gibraltar by air is about 180,000 a year whilst the new terminal enjoys an annual passenger capacity of 1 million. A new or upgraded terminal could have been constructed at a more modest amount and in keeping with growth based on current figures. The people of Gibraltar have already spent the money on the terminal, however, and they have entrusted us with their public affairs, so that we will make sure that the new terminal works. In that regard, we must strive at all times to achieve two goals - the first is to maintain a solid commercial relationship based on mutual trust and direct communication with the current air carriers and local operators. Increasing Tourist Flow and the Port’s Growth Leveraging infrastructure and Gibraltar’s attractions Interview with The Honourable Neil Costa, Minister of Tourism, Public Transport & the Port Minister Neil Costa first joined the executive of the Liberal Party in 1999 and has been a Member of Parliament since 2007. On being awarded a Gibraltar Scholarship, he studied Law & Spanish at the University of Wales, Cardiff. Minister Costa was called to the UK Bar in November 2002 and to the Gibraltar Bar in January 2003. Before being appointed Minister of Tourism, Public Transport & the Port, he was a partner of a Gibraltar law firm practising litigation. Minister Costa is also responsible for Commercial Affairs, namely Small and Medium sized Businesses. Milestone GRP spoke with Minister Costa about his strategy for developing the peninsula’s burgeoning tourism sector by establishing a strategic balance between attracting tourists into Gibraltar by land, air and sea and accommodating their stay and movements once in Gibraltar. He also discussed his Ministry’s plans for the development of the Gibraltar Port and the new Government’s vision to realise the potential presented by the controversial new air terminal. Milestone GRP - How was your portfolio brought together? Minister Neil Costa - As an Opposition engaged in intense stakeholder engagement, we formed the view that tourism in general and the Upper Rock, in particular, had suffered from chronic underinvestment and a lack of attention for many years. By listening to the various experts and private entities, it was also clear that the tried and tested tourist product in Gibraltar, whilst sound, required a qualitative leap consistent with new trends in tourism worldwide, as well as looking toward attracting tourists from emerging markets. In Government we are more convinced than ever of the need for targeted investment, developing the existing tourist experience and a rebranding of our image as a leisure and business destination. Since being elected into office we have intensified our efforts in meeting with virtually all the relevant stakeholders in tourism to obtain their views with a very clear vision: which is to make sure that all visitors to Gibraltar, whether a business or leisure visitor, wishes to return to Gibraltar, again and again. In other words, to make Gibraltar their destination of choice. And the truth is that in Gibraltar we are very fortunate in respect of the innate and inspiring marvel of the Rock, with its network of natural and human engineered caves, tunnels, renowned historical sites, the panoramic views to North Africa and the Iberian Peninsula, as well as our links to ancient myths as one of the Pillar of Hercules. Gibraltar also constitutes a time capsule, 90 where, for instance, the tourist can find a Castle built by the Moors after their invasion in 711 next to tunnels drilled during the Second World War. The new Government can work on the high number of annual visitors to Gibraltar, always endeavouring to attract more as we capitalise on the Rock’s splendour, natural beauty and as we develop tourist and heritage sites – always in an environmentally sensitive and heritage conscious manner. Tourism, to our mind, is linked to the Port, as the Gibraltar Port is one of the main drivers of the economy, not least by reason of the vital importance of the cruise industry. One of our commitments is to ensure excellent services and facilities for cruise visitors. The Gibraltar Port provides, in addition, a one-stop shop for services including crew changes. When cruise passengers arrive in Gibraltar they constitute important tourists whom we hope will become regular visitors to Gibraltar. Ultimately, when tourists come to Gibraltar, whether by land, sea or air they will generate important economic activity, as well as raising challenges to our transport infrastructure. Milestone GRP - A new airport terminal was built under the previous Government. Whilst we understand this remains a controversial issue, how will the new Administration work to capitalise on this asset? Minister Costa - The airport terminal has and continues to be a controversial topic of discussion. As a centre-left Government we are concerned to spend taxpayers money in a way lue for money criterion. As such, we are currently working with private stakeholders and the Gibraltar Tourist Board in investigating marketing initiatives that are more effective and that are linked directly to results. Milestone GRP - Do you see a potential marriage between the development of the gaming industry and tourism, for instance in terms of MICE activity? Minister Costa - Absolutely – the reality is that tourism is married to several sectors such as sports, culture, heritage and events. In fact event-led and sports-led tourism constitute vital manifesto commitments. In order to substantively progress this concept, the new Government has established an interministerial committee comprising the ministries for the environment, sports, heritage, culture and tourism. By way of example, Gibraltar now rightly boasts of a very successful annual Chess Festival, which has been going from strength to strength and which has achieved international recognition. The event annually attracts a large number of people and thereby generates economic activity for, among others, hoteliers, shops and restaurants. The Government, through the Gibraltar Tourist Board, supports the existing air operators by way of marketing and advertising – these entities also know that we are keen to facilitate and assist wherever possible and know that we are open to meet with them at any time. Secondly, we will labour tirelessly to increase the services provided by the existing operators, on the one hand and attract new operators, on the other, not only from the United Kingdom but also from other countries both within and outside of Europe. The Gibraltar Tourist Board is fully seized of the new Government’s ambitious, but, in our view, entirely attainable business agenda in respect of the airline industry and are implementing effective systems to ensure fluid communication with the airline industry, so that we can react timely to evolving circumstances and a fluctuating industry. We also intend to target Nordic countries and Germany, which in some important respects, have weathered better the worldwide credit and financial crisis and have, on average, higher spending power per capita compared to other European countries. In addition, Gibraltar has the uniquely advantageous position of being based in the warm climate of the south of Europe. Whilst recognising the value of annual events like the Chess Festival, the Government is committed to investigating and establishing annual events that will not only mean money spent in the shops, but which will also increase the diversity and therefore dynamism of Gibraltar’s cultural calendar. We will, where possible, also endeavour to attract events that coincide with the seasonal economic downturn in activity, such as during the months immediately after Christmas. In connection specifically with your question on the gaming industry, there is absolutely no reason why a business visitor to Gibraltar cannot become a leisure tourist. The key is to effectively market the business visitor to Gibraltar that attends to gaming or any other business. Related to capitalising on the new air terminal is the question of marketing. As a new Government, we are firmly of the view that expenditure on tourism marketing must be driven by a va- Milestone GRP - How do you envision the development of the cruise industry alongside projects such as the development of the port infrastructure? Year Different Ships Number of calls Passengers 2002 46 149 116,918 2003 58 167 143,508 2004 61 168 164,883 2005 60 166 188,810 2006 65 202 210,799 2007 78 227 275,993 2008 74 222 308,989 2009 73 238 348,199 2010 59 175 305,161 2011 71 187 328,636 2012 n/a 178 303,842 Cruise Ships Calling at Port of Gibraltar Source: Port of Gibraltar Gibraltar 2012 91 Port Services & Shipping Minister Costa -Wearelookingattheportverycloselyand wefeelthatalotmorecanbedone.TheGovernmentiscommittedtoensuringthatthePortremainsasourceofrevenue forGibraltar,aswellasexploringnewbusinessandcommercialopportunitiesastheyarise.Asaresult,wearecommitted to invest in the Port. In fact, we consider investment in the Port and related services as one of the main gateways to develop an international business hub in order to further diversifyoureconomy.Thisthereforedoesnotjustmeaninvestment in areas related to cruise operators, although this is a central plank of our manifesto commitments, but also to develop a purpose built office and commercial facility at thePort.Wearecurrentlyintheprocessofinvestigatinghow to effectively invest in the Port’s infrastructure to maximise business potential and opportunities and provide excellent servicetothecruiseindustry. Milestone GRP - How do you assess the position of the Gibraltar Port compared to that of its main competitors? Minister Costa - It is true that Gibraltar faces competition from emerging and existing ports. As a result it is critical, aswiththeairlineindustry,toestablisheffectivesystemsof fluidcommunicationandanabilitytoreactquicklytounfoldingandchangingcircumstances.Theheavyinvestmentin othercompetingportsbyothercountriesmakesourcommitmenttoinvestallthemorevital.Again,Icansaythatweare fortunatethatGibraltarhasasoundbasisonwhichwecan build and that there is nothing stopping Gibraltar, with the right investment in the existing infrastructure, in becoming oneofthemostsuccessfultransitportintheMediterranean. At the same time, we will actively engage with local stakeholders and cruise operators to determine the feasibility of smallervesselsmakinguseofGibraltarasaportforpartialor fullturnaroundcruises.FurthertothecommentsthatImade beforeonthenewairterminal,giventhatitenjoysanexistingcapacityof1millionpassengersayear,ifwesucceedin attractingroutesfromnewEuropeandestinations,theremay beanoptionforpeopletodisembarkinGibraltarandtostay foracoupleofnightsbeforeflyingbackhome.Asaresult milestone GRP acertaindegreeofturnaroundmaybefeasibleifthevarious strandsoftheGovernment’stourismpolicyareproperlynurturedanddeveloped. Milestone GRP - Much is being done in terms of beautification of the city and cleaning up of the Upper Rock. What would you like to tell tourists about these developments? Minister Costa-TheUpperRockNatureReservecomprises anembarrassmentofrichesintermsofbiodiversityandflaura; itisalsothelungofGibraltar.Asaresult,wearecommittedto commence a programme to refurbish the Upper Rock Nature Reservetopreserveandenhancethisvitalpartofourenvironmentalheritage.InthatendeavourthenewGovernmentisluckyintheextremetocountwithinitsranksthenewMinisterfor theEnvironmentDrJohnCortes.DrCorteswastheDirectorfor theGibraltarBotanicalGardens,whichisnotonlyamagnificent verdantsanctuarytorelaxandescapebutwhichisyetanother exampleofourhistoricallinkstoBritain.AsaGovernmentit isourcommitmenttoreinvestthemoneygeneratedbytheUpper Rock in the Upper Rock. The Inter-Ministerial Committee that I mentioned earlier is currently working on various ways toenhancethetouristexperienceontheUpperRockwhether byinvestingonexistingsitesandbyconsideringnewheritage sitesthatarenotcurrentlybeingofferedtothepublicasatouristexperience. Milestone GRP - What is your approach to Gibraltar’s traditional markets and to new, rising markets such as the BRICS? Minister Costa -TheUnitedKingdomis,ofcourse,ourtraditionalpartner,notjustconstitutionally,butalsobecauseofimportant trade relations. In terms of tourism, as I have already indicated,itisalsomywishtostartcommercialrelationswith Germany and other Nordic countries by, for instance, encouragingflightstoandfromGibraltarandmarketingGibraltaras a modern, vibrant and dynamic tourist destination in the sun. ThenewGovernmenthasalreadycommencedfeasibilitywork toconsidertappingnewemergingmarketstoattracttourismto Gibraltar. Staying Ahead of the Tide A port leveraging its competitive advantages Interview with Mr Roy Stanbrook, Captain of the Port & CEO of the Gibraltar Port Authority AfteranearlycareerwiththeRoyalFleetAuxiliaryServiceduringwhichhegainedhisqualificationasMasterMariner,aswell as serving in a number of conflict areas, Captain Stanbrook moved to the world of cable ships and sub-sea engineering. Becominginvolvedintraininginthisfieldofwork,itwasashortmovetobecomingaSeniorLectureronshortcoursesata UKmaritimetrainingestablishment.SubsequentcareerchangessawhimworkingforP&IClubandafamily-ownedshipping companyasOperationsDirector.CaptainStanbrookjoinedthePortofLondonAuthorityin2001becomingHarbourMasterfor theLowerDistrictoftheportin2007.HejoinedthePortofGibraltarinFebruary2012.HeisaFellowoftheNauticalInstitute andaYoungerBrotherofTrinityHouse. Milestone GRP - How would you describe Gibraltar‘s Maritime sector? What challenges and opportunities does it present? Mr Roy Stanbrook -BecauseGibraltaroccupiesakeystrategicpositionattheentranceoftheMediterraneanandithas agooddeepwateraccess,itisideallypositionedtoprovidea verybroadspectrumofmarineservicestoaverywidecross section of the Marine industry, and that is a unique selling point. Havingsaidthat,therearelimitstotheavailabilityoflandfor expansion and that provides its own challenges in serving thisMarineindustryforwhichGibraltarhasquiterightlybecomefamous.Intermsofservices,thePortoffersunderwaterrepairs,shipbuildingandrepairfacilities,andbunkering, which is probably the most obvious. A lot of crew changes occurhere,andtheyareveryusefultoshipowners,because ofGibraltar‘spositionanditsexcellentlinesofcommunicationtotheoutsideworld,includingtherefurbishedairport. Wedohavesomechallengesofcourse,apartfromtheshortage of land. They mainly come from neighbouring ports where the land resources are not quite as constrained as theyarehere.ThethreatsfromtheglobaldownturninShippinghavenotreallybeenfelttoobadlyhere.Nevertheless, wearegettingsomeindicationsthatthismightbebeginning 92 to bite in some particular sectors where payments are becomingslower,andthetimesbetweeninvoiceandpayment are getting naturally stretched. But as long as everybody staysfocused,Ithinkwehavegotaveryrosyfutureahead ofus. Milestone GRP - What role do the Port Authority and the Gibraltar Maritime Authority (GMA) play within the industry? Mr Stanbrook -Gibraltarhasashipregisteronwhichthere arealargenumberofships.TheGMAistheorganizationthat runstheregistryofshipping.Italsorunsthesurveyactivities fortheadministrationtoensurethat,first,allshipsthatare ontheGibraltarregisteraremaintainedtostandard,second, that a proportion of ships visiting Gibraltar are surveyed in accordance with the Paris Memorandum of Understanding toensurethatshippingqualityisconsistentthroughoutthe world.Theyalsodealwiththeyachtregisterbecausethere areavastnumberoflargeyachts,anditwillbeadvantageoustohavethemontheGibraltarregister. In the Maritime sector, the Gibraltar Maritime Authority and PortAuthorityaretheRegulatorsforthePort.Wecontrolthe shipping and we ensure navigation safety within the Port, whichincludesthesurroundingwatersoffGibraltaraswell, whichalsofallundermyjurisdiction. Gibraltar 2012 93 Port Services & Shipping milestone GRP Port Activity, Main Purpose of Call Cruise Cargo Bunkers Repairs Off Limits Other 7000 6000 5000 4000 3000 2000 1000 0 2005 2007 PortActivity,MainPurposeofCall http://www.gibraltarport.com/ 2009 2011 Source:PortofGibraltar Milestone GRP - What place does the Port play in Gibraltar’s economy? Mr Stanbrook - A very large one. I think we have to look back at the history of the Port to get a better idea of that. Upto2009,thePortwasaGovernmentdepartmentanddid not return a profit at all; in fact it was a cost. A lot of work putinbymypredecessorshasbroughtthePortformbeinga GovernmentdepartmenttoastandalonePortAuthoritywith amuchgreaterdegreeofauthority,albeitstillunderthepurviewoftheMinisterofthePort.Butitisnowaprofitcentre. ItbringsahealthyreturntotheGovernment’scoffer:over2 million pounds a year. That is a very significant return on a turnoverofabout6.5millionpounds.SothePortrepresents quiteamajorcontributortothewealthofGibraltar,whenyou considerthatthepopulationisjustlessthan30,000.Thatis somethingthatweareparticularlyproudof. Milestone GRP - In Gibraltar, bunkering activities are booming and the cruise ship segment is one that has seen some growth, but that the Government is focused on expanding. How do you see these two of the Port’s activities evolving? Mr Stanbrook - Cruise ships are limited by the number of berthsthatwehave.Wecouldalwaystryandattractmorein thewinterseason,butnotmanypeoplewanttogocruising duringthewinter.Sothecruiseseasonstartsaroundabout theEasterperiodandcontinuesthroughthesummer,andwe have quite healthy berth occupancy during that period. We are not saturated by any means, but it will naturally cause thenumberstoplateau.Sothatiswhycruiseshipshavenot necessarily grown. We are currently looking at options for provision of additional berthing facilities for cruise ships to enableustobuildonthatbusiness. Because we provide a quality, cost-effective solution with minimum deviation from shipping range, our port is very popularforbunkeringactivity.SometimesIfeelthatmaybe someoftheproblemswehavewithbunkeringarebecause wearevictimsofourownsuccess,asweendupwithships queuing for bunkers for longer than we would like. But, of course, there are threats to that with increased storage facilitiesinAlgecirasBayandwearelookingathowwecould mitigate that risk by installing some form of storage within Gibraltar, which complies with future legislation that could potentiallystopusfromusingfloatingmotherships. Milestone GRP - What can the Port’s clients expect in terms of investment into the Port’s infrastructure? now,andifIdidIwouldnotbesittinghere;Iwouldbegoing offtoinvestorsandaskingformoney! Mr Stanbrook -Itisdifficulttopredict.Wehavetodosomething tooffsetthechallengesthatarepresentedbycompanieswho are building bunker fuel storage facilities in Algeciras. Finding ashoresomewhereinGibraltaristheonlywaytoachievethat, andthereareanumberofoptionsbeingconsideredatthemoment.Havingsaidthat,theoperationthatisofferedbyGibraltar atthemomentwillremaincosteffectiveanditwillremainwithin thelawforsomeconsiderableperiod.Sointheshortterm,we willprovideourusualqualitybunkeringservice,relyingonthe customerloyaltywehavebuilt.Weareveryfortunatethatthe WesternAnchorageisaverygoodshelteranchoragewithgood holdingground,butclosertotheGibraltarsidethantheAlgecirasone.Sowestillhavetheattractionofcomingforbunkers andstayingontheGibraltarside,ratherthanacrossthebay. Milestone GRP - You have identified the risk posed by competing ports in the region, such as Algeciras, Ceuta and Tangier. How have you sought to distinguish Gibraltar’s Port from others in the area? Mr Stanbrook -Theporthasspentalotoftimeandeffort in making bunkering operations safe. Therefore, we can provide a much better service to the ship owner, with reducedclaims,andmuchsmootheroperationsthroughout. Asfarascruiseshipsareconcerned,Ibelievethereisno competitionbecauseGibraltarisGibraltar.Itiscompletely uniqueandithasalottooffer.Therearewaysinwhichthe touristexperiencecouldbeimproved,buttheseareworks inprogress.Butrightnowitisgood,anditisgoingtobe better. Milestone GRP - What opportunities do you identify for investors? Gibraltarisalsoaportofchoicetohaveshipsarrested.This isduetocosteffectivenessandbecausewehavegoodtransportlinksheresothatwecangetcrewsfromaroundtheworld quite easily. The Admiralty Marshall has a very streamlined system that enables the arrest of a ship, the sale and funds tobedistributedrelativelyquickly.Anditisreallyacasethat every cloud has a silver lining because the global downturn actuallyhasincreasedthenumberofshipsunderarrest. Mr Stanbrook - Anyone investing in marine infrastructure willprobablybewellrewarded.Therehasnotbeenalotof physical investment over the years, so anyone that could come up with innovative ways of developing and providing needed infrastructure would be welcomed. It is all really based on the clever use of space. I don’t know quite how Registered Vessels & New Registrations 12,000 No. of Vessels New Registrations 400 10,000 EASTERN ANCHORAGE 350 300 8,000 50 250 Vessels 6,000 4,000 0 2001 Europa Point 2002 2003 2004 2005 ShipsCallingatPort 2006 Ships Calling at Port 2007 2008 2009 2010 0 2011 http://www.gibraltarport.com/ Source: Port of Gibraltar 51 150 50 11 309 312 2009 2010 45 47 200 100 2,000 48 51 28 138 26 170 175 187 2003 2004 2005 217 249 271 2007 2008 93 65 2000 37 25 2001 2002 2006 RegisteredVessels&NewRegistrationsSource: Port of Gibraltar Gibraltar Airport Little Bay Camp Bay Ocean Village Dock 1 Dock 2 Dock 3 Main Wharf M.O.D. Gibdock Gun Wharf Queensway Quay Marina Coaling Island South Mole Extention Jetty Container Berth Bunker Volume 300 Rosia Bay 200 150 100 N 50 B Head A Head D Head WESTERN ARM 5 250 (million) Ship Registry Tonnage Volume(milion) North Mole Marina Bay 0 2001 Detached Mole 2002 2003 2004 2005 Total Tonnage TotalTonnageCallingatPort C Head 2006 2007 2008 2009 2010 2011 Source: Port of Gibraltar http://www.gibraltarport.com/ 4 3 2 1 0 2001 2002 2003 2004 BunkerVolume http://www.gibraltarport.com 2005 2006 2007 2008 2009 2010 2011 Source: Port of Gibraltar WESTERN ANCHORAGE Source: Port of Gibraltar 94 Gibraltar 2012 95 Port Services & Shipping milestone GRP Gibraltar’s key position as a Maritime Service Centre Freight rate developments, 2010 - 2012 by Mr Torben C. Skaanild, Secretary General, The Baltic and International Maritime Council (BIMCO) Containerships - SCFI Bulk carriers - BDI Crude oil tankers- BDTI Product tankers- BCTI European shipping banks are undecided regarding their future exposure to the industry, alternative sources of finance from all over the world and in many disguises have stepped in. We certainly see this trend continuing throughout the coming year. 140 The Port of Gibraltar Today, Gibraltar’s unique geographical features have allowed it to become a maritime centre with great potential. Located at the crossroads of the Mediterranean and Atlantic shipping lanes, Gibraltar is ideally placed to provide a wide range of services to vessels of all sizes and types. Its location adjacent to the Gibraltar Straits - the western entrance to the Mediterranean - means there is negligible diversion time allowing ships to be able to berth in about an hour after leaving the shipping lanes. There are no tidal restrictions or locks to negotiate. With its large area of anchorage waters, the exceptionally weathersheltered port facilities and deep water have made the port an ideal location for all types of bunkering and related operations. This combined with its status of being outside the European Customs Union has made Gibraltar a focal point for passing ships to call in for bunkers, provisions and crew changes. The port is open 24 hours daily. The local airport is just a few minutes from the harbour, adding an advantage when effecting crew changes with frequent scheduled flights connecting it with Heathrow, Gatwick, Luton and Manchester airports along with proximity to Spanish regional airports at Malaga, Seville and Jerez. There are also regular flights to Morocco. Gibraltar is a well-placed as a bunkering hub and has for many years been a fuel-supplying port holding a strong position in the Mediterranean. A huge number of ships call at the Rock every year for different purposes. The supply of Bunkers and Luboils or water can be carried out either alongside or at the anchorage, day or night. All grades can be supplied by barge, pipeline or road tanker. Luboils are available in barrels or in bulk. Recent developments on the regulatory side, with an increased focus on exhaust gas emissions from shipping and stricter requirements coming into play, could support and develop Gibraltar’s position in a positive direction. Today ships need to carry fuel with a maximum sulphur content of 1.0% before entering into the Emission Control Area (ECA) in the North of Europe. This limit will be lowered to 0.1% sulphur by 2015. All the ships heading for Northern Europe and coming via the Suez Canal and Mediterranean will at some point need to bunker suitable fuel to be in compliance with the IMO rules in the ECA. The same could also be the case for ships heading towards the US and Canada, where similar rules will apply from 1 August 2012. This regulatory development combined with the wide range of bunkering related services available at Gibraltar and the perfect geographical location right next to one of the busiest shipping routes in the world seems to ensure a bright future for the bunkering industry in Gibraltar. 98 Dry docks, slipways and repair facilities are available for carrying out all types of hull and engine repairs. Underwater Repairs can also be carried out at Gibraltar. Vessels calling for lay-up or repairs can be berthed at the Detached Mole. There are also two berths of 100m in length available to vessels discharging general cargoes. Even on the recreational front, Gibraltar is well represented where berths for yachts are provided by three marinas capable of accepting vessels with drafts of up to 4.5 metres Gibraltar has all the essential peripheral services needed in connection with Marine activities - banks, hospitals, dentists, police and consuls are all available. The Spanish border is open 24 hours a day for both vehicles and pedestrians enabling easy movement of ships’ stores and provisions. A fast sea crossing connects Gibraltar with Tangier. Gibraltar is a profit-oriented capital base with low levels of corporate tax, with few restrictions in moving capital or repatriating dividends. The legal system modelled on the English structure contributes to making Gibraltar the highly regulated, globally acclaimed jurisdiction it is today. With a stable political and economic environment already appreciated by established investors and customers, Gibraltar also benefits from its membership of the EU including access to the EU financial services market. The harmonious, multicultural and English-speaking environment, (preferred by many international businesses), provides access to regional markets in Mediterranean Europe and North Africa. The majority of people in Gibraltar are at least bilingual. Global economy: A cautiously optimistic outlook supports the road towards higher growth and reinstates stronger business confidence With a 4% World GDP growth in 2011 and the prospects of a similar level for 2012, shipping will continue to be impacted by significant oversupply of tonnage in all segments, but shipowners have traded in harsh market conditions before – not an unusual scenario in a cyclical business environment – and there are of course remedies in the form of idling and recycling of tonnage to bring better balance between supply and demand, a condition for improvements in freight rates. When addressing the effects of the weak global economy on individual shipping market segments, it is first and foremost the container and tanker sectors that have taken the beating, whereas the dry bulk markets appear to have suffered less with considerably lower but, toward the end of the year, rela- 120 Index Value Gibraltar’s strategic location at the southern end of the Iberian Peninsula explains why it has been used as a naval fortress for centuries and why so many battles have been fought over this relatively small enclave at the entrance to the Mediterranean Sea. Vessels calling at Gibraltar can take advantage of a well-established chandlery network which can provide all other requirements for vessels. An increase in vessel calls will lead to increased ship chandlery requirements. Dry Bulk shipping: Will this be the year where India takes off? 100 80 60 40 20 2010 2011 2012 Source: BIMCO, Baltic Exchange, Shanghai Shipping Exchange The year 2011 had barely started before a series of unforeseen events took place across the Globe. Most of them affected dry bulk shipping negatively and the large Capesize vessels particularly were under pressure. Amongst the events were the flooding in Australia and South Africa, the triple disaster in Japan and the “Arab Spring” that also affected the supply of oil into Europe. tively better rates. The good news is that the wheels of the world are still turning and trade is growing albeit at a slower pace; if the political will returns to the US and EU, perhaps confidence can be restored in the financial sector, a necessary condition for investments, consumption and overall economic growth. The continued high oil prices are not supportive for global GDP growth, neither are the still struggling housing markets in the US, some European countries and some Asian countries. Shipping demand will definitely benefit from a more calm and positive macroeconomic environment. So the challenges for politicians across the Globe, and especially in the EU, are still very tangible and they must focus on establishing the right economic framework. This is necessary to make growth stay around and to stimulate consumer confidence and pull private consumption to a higher level. Half a year down the road, during which many Capesize vessels had earned less than any other dry bulk vessel size, the unexpected happened again. Strong demand for iron ore and coal from China and the recovering Japan, sourced from Brazil and Australia, ignited freight rates for Capesize vessels. A tight tonnage situation in the Atlantic basin combined with increased congestion in loading and discharging ports pushed average rates above USD 30,000 per day. A far cry from the peaks of the super cycle but surely an indication of the peak levels we have in sight for the near- to mid-term future as the supply side remains a considerable burden for the industry. The demand side is set to be relatively stable in 2012, although it’s likely to grow somewhat slower than in 2011 – at least in volume terms. Overall iron ore demand is likely to slow. Still, a lower world market price, as compared to the domestic costs of mining it within China, holds the key to provide positive demand shocks for this valuable steel ingredient. Growing demand for thermal coal from large Asian consumers is set to be a steady demand driver. Overall ship supply: edging down from all-time high Newbuilding deliveries in 2011 surpassed an only one year old record. The dry bulk fleet topped the ranks growing by almost 75 million DWT (deadweight tonnage). Had it not been for a recordhigh level of large vessels being recycled, the glut of tonnage would have created even greater challenges to the owners. Looking forward, our crystal ball tells us that the dry bulk fleet will grow by not less than 11% in 2012, while the containership fleet is set for another year of growth close to 8%. As regards the oil tankers; crude oil tankers are facing one more very challenging year as the fleet is set to grow by 6%. Whereas the product tankers have left previous years with high inflow of new tonnage behind, to see only 3% increase of the fleet in 2012. Taking all of the three main shipping segments into consideration, none of them are able to deliver comforting sounds from a large-scale recycling potential to counterbalance the amplified pace of newly built vessels about to enter the world fleet. A potential positive surprise would come from the dry bulk segment as it did in 2011. Financing of business as well as of the order book will be key issues on every owner’s agenda. As the traditional large Looking forward; expect the unexpected, as has been the lesson learned. The start of 2012 has been quite devastating with freight rates dragging on below the USD 10,000 per day mark for all vessel sizes; the large Capesize vessels being hardest hit. Recent very tough times in the dry bulk markets are likely to improve gradually, as the downward over-shooting of rates is corrected. Speaking about the unexpected, maybe even India will begin to influence the market as a significant importer. This would fulfil the prophecy and release a vast potential that has been simmering for a very long time and provide a much needed second major demand driver. Supplementing China as the dominant factor in the market would create a more sustainable freight market going forward. An optimist would for sure name India the best thing that could happen to the dry bulk shipping industry. In the meantime volatile iron ore export and strong demand for thermal coal is likely to characterize India’s contribution to the dry bulk markets. Tankers: Slow economic growth also affects oil demand The positive demand picture that was firming freight rates on benchmark routes in all crude tanker segments towards the end of 2011 and the first two months of 2012 is still hanging around. Gibraltar 2012 99 Port Services & Shipping milestone GRP Currently, the growing demand for oil is coming from countries closer to the large oil producers than previously. That in turn provides fewer tonnes-miles as compared to demand originating from the Western Hemisphere. As a rule of thumb, volume demand in the East must grow by factor two to offset the decline in volumes that used to go to the West. On the oil products side, refineries in the Far East or the Middle East are coming on stream later than expected. This provides lower oil product volumes for exports than previously expected. But before the Western demand for oil in general gets back on track the potential support to the product tanker market coming from that front will not materialize. The product tanker sector holds optimistic prospects for the near-future, but its complex business and ever changing business conditions and opportunities can be difficult to forecast. But as the “demand stories” of Atlantic gasoline arbitrage, winter markets and refinery dislocation are struggling to perform to expectations, the focus has turned towards a wider range of products. Moreover, demand for oil products with a lower sulphur-content than the local refinery is capable of producing provides trading of the same product with different sulphurcontent between nations. An evidence of growing demand for oil product transports despite overall lower oil demand. Amongst the swing factors that could improve earnings in both tanker segments are slow steaming, virtual arrival, longer hauls for example to avoid the growing threat from pirates and off course a faster than expected recovery in the large oil consuming nations. World trade volume of imports of goods, %-change year-on-year 15 10 5 % …and liner companies know the most effective medicine that will make the pain disappear, but not cure the decease. Idling of tonnage has recently proved its point once again as extensive cut backs of deployed tonnage on Far East to Europe/ Mediterranean trading lanes was instrumental behind the recent historical high hikes in container freight rates. Focus will now be on limiting the expected weekly drops in rates as weeks go by, bringing the market closer to the traditional high season in the third quarter. As the macro and micro economic elements recently have boosted confidence in container shipping, demand will hopefully follow up soon. For 2012 as a whole, the sector is battling on two fronts from the trenches. A bad global economic weather forecast is the main demand threat while the oversupply issue is an internal job to handle. Demand is very unevenly distributed; while the volume of inbound loaded containers to US West Coast Ports is barely growing, the intra-Asia trades and new-markets trades are growing briskly. This difference in growth rates is very illustrative for the underlying market. The battle against oversupply has to be fought simultaneously with low demand and in a tough competitive environment. On the world’s largest trading lane from the Far East to Europe it has been possible to observe the “open exchange of punches” between the market participants during most of 2011. Vessels of ever increasing sizes have lowered the cost per transported unit, and triggered a massive cascading from this trade of suboptimal vessels - this trend will only get more severe. 2012 will see another 50% increase in capacity in the segment for Ultra Large Container Ships (ULCS) capable of carrying more than 10,000 containers. 0 -5 -10 -15 2003 2004 2005 2006 2007 2008 2009 2010 2011F 2012E 2013E 2014E Source: BIMCO, IMF. Slow steaming of any tanker would ease the pressure from the supply side, as it remains the least bad option for the cashstrapped owner as he attempts to maintain his cash flow. Moreover, being at the right place at the right time continues to be crucial, to take advantage of any non-planned-for events that would provide a window of higher earnings e.g. shortage of prompt tonnage in the Mediterranean due to Bosporus Strait congestion. For the longer perspective; should the world decide to move fast away from using nuclear power plants for power generation – this could improve tanker demand. In the meantime, product tankers are expected to see the sun first of all segments, as the supply side pressure is easing and the complex demand picture leaves able room for upside. Whereas crude oil tankers are likely to face challenging markets for an extended period of time. 100 Container shipping: We have been here before … A very high number of newbuilding contracts placed in 2011 have made this sector stand out from the tramp shipping segments which have avoided a repeat of last year’s astoundingly high contracting activity. Half of the new box-ships orders are for 2013-delivery which is the earliest possible delivery time. It remains unknown whether it is pressure from ship yards or owners that has pushed delivery dates closer – instead of further away which probably would be more prudent. 62 of the orders in 2011 were made in the ULCS segment. Homegrown and Venturing Out Born in Gibraltar but expanding internationally Interview with Mr James Gaggero, Chairman, Bland Group Milestone GRP - What parallels can be drawn between Gibraltar‘s 300-year history and the Bland Group’s development? Mr James Gaggero - My family came in from Genoa as Italian traders to carry out business with the British garrison, as did the Maltese, Portuguese and others around the Mediterranean. Our family business was founded in 1810 by Bland, a merchant from Liverpool, who came to trade on the Mediterranean and West African coasts; it was through this sort of activity that Gibraltar developed as the port it is today. My family came in as ship agents, facilitating trade between the UK and this part of the world and eventually bought the business. Gibraltar gradually evolved from being a military base into the diversified economy that exists today. The shipping industry and the port activity in general, from the provision of bunker, safe refuge, crew changes, ship repair, towage and salvage, grew to the point that Gibraltar reached a high status. As the economy grew alongside the civilian community, we established more businesses. Milestone GRP - What set of circumstances have allowed Bland Group to grow internationally? Mr Gaggero - One of the things that sets us apart from many companies in Gibraltar is that we have worked very hard and have always been at the vanguard of going overseas to look for opportunities, very often bringing businesses to Gibraltar. So when we ran an airline out of Gibraltar and Gibraltar became stuck in a political difficulty with its neighbours, we were very quick to recognize that that was going to cause us difficulties. We therefore moved our headquarters to Gatwick. Concluding remarks Gibraltar was still a significant part of our operation, but it became less than 10% of the new business that we had created at Gatwick. The scale of the business grew from a few hundred thousand passengers to 3 million passengers a year; from 3 or 4 routes, we grew to 44 routes; and from 1 or 2 aircrafts, we ended up with 17. Therefore we were able to significantly grow our business scale by recognizing that Gibraltar had limitations, and not being afraid to grow internationally. To sum up, Gibraltar’s geographical location make it very attractive for shipping companies, and Gibraltar has catered well for the industry with a variety of bunkering and repair facilities as well as a solid political and juridical framework. Last year was not kind to Far East-EU routes in the container segment, nor was it kind to westbound tanker routes from the Arabian Gulf. However, there is light at the end of the tunnel. Macroeconomic indicators suggest an end to the slump before long, especially if it is backed by the right politics. Should these positive predictions materialise, Gibraltar has great prospects of upholding and improving its position as an important maritime services centre. When our borders were closed in 1968, Gibraltar lost a lot of its capacity to be seen as a gateway, so we went over to England, we brought in marketing companies and we promoted Gibraltar as a destination in its own right, rather than a stepping stone to Spain. This gives you a flavour of how you can either sit here and want others to solve your problems, or pick yourself up and pick your own quest for solutions beyond the frontiers of Gibraltar. That worked very well for us. It also made us less dependent on a single basket of eggs. We have got a significant variety of businesses, and that makes us much less vulnerable to shocks in our hometown. Gibraltar has done remarkably well to adapt to the changing circumstances around us. One of the greatest successes of Gibraltar in recent years is the determination of getting the regulatory regimes in harmony with international requirements, in terms of money laundering, tax evasion or even tax avoidance. Gibraltar has dealt with them vigorously in an attempt to create a reputable and credible finance centre that is not a predator and a parasite, but actually a complimentary source of activity meeting the needs of the international community, and in harmony with our neighbours. Milestone GRP - How much did these efforts at harmonization with international requirements help Gibraltar in dealing with its sovereignty issues and to position itself internationally? Mr Gaggero - This is a critical point. You can be either a parasite where you encourage your client market to come to you as a way of hiding and creating false profit at the cost of others; or you partake in an endeavour aimed at efficiently creating a competitive jurisdiction, which is well regulated, transparent, and collects its values by attempting to do business in a legitimate way. I think the critical factor that allows Gibraltar to be a single uniform low tax regime, is that if you conduct your activity in Gibraltar in a correct manner, you will enjoy the fruits of a very efficient regime that is good for business. Gibraltar enjoys a much better reputation today as a result. And we have a community that understands what it takes to meet the needs of international investors wanting to trade with Gibraltar. Milestone GRP - What emerging trends do you foresee for Gibraltar in the region? Where can Bland Group play a significant part in their development? Mr Gaggero - Gibraltar is able to capitalize on its ‘Britishness’, its location, its culture, bilingualism and its serious attitude towards business. I am very optimistic about the future of Gibraltar. I would like to see our relation to Spain at the very least become neutral. Spain was never able to get away form its anachronistic attitude towards Gibraltar and to see Gibraltar for what it is: a good neighbour and a willing participant in generating jobs and economic activity in this region. I think if the relationship with Spain was positive, Gibraltar and the hinterland would do enormously well. Many of the offshore jurisdictions are based on islands which offer very limited capacity to grow. Gibraltar is not an island, it is attached to the mainland by the isthmus, it is a peninsula. It has all the attributes of an island offshore centre but with all the benefits of having unlimited access. It is also able to create a lifestyle for those who live and work here which is second to none. You have all the facilities here. As far as the Bland Group is concerned, we will continue to invest into this environment. But if we had a situation whereby Gibraltar started to stagnate then that would be a great sadness. I see Gibraltar as one of the key dynamos of regional economic activity and it would be a shame if we lost that desire to be number one in this area. Gibraltar 2012 101 Port Services & Shipping milestone GRP Milestone GRP - Which units of your business have grown more than others? importations of equipment, employee relocations and courier requirementsneededinthisindustry. Mr Davis -Ourshippingdepartmentcontinuestogrow.Weprovideavarietyofservicesforshipscallingatourport.Customs brokerageisalwaysontheincrease. Milestone GRP - Is international expansion part of your growth strategy? Theimportationofoverlandfreighthasgraduallygrownandis generallymadeupofthreesectors: •DirectweeklyimportsfromtheUnitedKingdom Mr Davis -AlthoughwearealreadyactiveintheUnitedKingdomandinSouthernSpaintherearestillsubstantialbusiness possibilities within Gibraltar itself. Gibraltar’s progress on the Maritime, Financial, Gaming and Tourist fronts during the last tenyearsaugurswellforthefuture. •DailyimportsfromSpain’sCampoDeGibraltar–theneigbouringareaacrosstheborder •DailyimportsofEuropeanconsignmentsviaTNT. Land, Air and Sea Connecting all the freight shipping dots Interview with Mr Colin Davis, Operations Director, East Gate Express ColinWDavishasextensiveon-the-groundandmanagementexperienceintheLogisticsIndustry.Hespecialisesincustoms proceduresforbothEuropeandGibraltar.AsOperationsDirectorheoverseestherunningofallthecompany’simportand exportlinehauls.HestartedEastGate,alongwithco-partnerDaphneAlcantara,17yearsagoinasmallofficeatGibraltar’sInternationalAirport.EastGateisnowoneofGibraltar’smajorlogisticsplayersandcurrentlyoperatesofficesandhandlinghubs atstrategicpointsinGibraltar,suchastheirCommercialFrontieroffices,Depot,andofficesattheNewInternationalAirport andtheMainDepotatNewHarboursIndustrialPark.MilestoneGRPmetwithMrDavistogethisperspectivesonGibraltar’s freightandlogisticssector,andEastGate’spositionwithinit. Milestone GRP - What services does East Gate Express offer? Mr Colin Davis - East Gate Limited is an established locally basedfreightforwarderthatprovidesweeklyoverlandservices from the UK mainland and daily airfreight services. As CountryAssociatesforTNTinGibraltarweofferworldwidenext-day documentexpresscouriers,andEuropeanroadexportsandimportsusingTNT’sextensiveroadnetwork.Customsformalities forimportationandexportationplayaveryimportantrolewithin our service provision since Gibraltar is outside the European CustomsUnionduetoitszeroVATratestatus. Milestone GRP - Gibraltar has historically been a shipping hub. How would you characterize the various elements of the sector in this day and age? Mr Davis-ThefactthatweareVAT-freeandwithinEuropewith a great port facility naturally attracts business from maritime shippingactivity.Thissectorcreatesserviceprovisionactivities for many local businesses ranging from customs declarations upon importation into Gibraltar to 24/7 ship supply at port, warehousingandstorage,couriersreceivedorsentonbehalfof vessels,andmanyotherservices. Bunkering services are another important area of Gibraltar’s port activities and although these are not part of our services 102 Mr Davis - Gibraltar has survived economic and political turmoil.ThankstoGibraltar’ssuccessfuleconomyweareweatheringthecurrentinternationalcrisiswithconsiderablesuccess. The presence of the Gaming industry in Gibraltar contributes to our employment stability and our sector benefits from the Set down Picked up 300 250 Tonnes Milestone GRP - Since East Gate’s operations are international by their nature, how have the financial crisis and European downturn affected your business? 350 200 150 100 50 0 2001 2002 2003 2004 CommercialAirFreight 2005 2006 2007 2008 2009 2010 2011 Source: GSO theyalsoprovidealotofspinoffservicerequirementsforusand otherlocaltraders. Gibraltar is not a manufacturing or agricultural country. Just about everything has to be imported hence an indispensable import industry has developed with constant incoming freight requiring services from locally based freight forwarders, such asourselves. Milestone GRP - The airport has just been upgraded and its capacity in terms of passengers expanded. Will that affect your business in one way or another? Mr Davis -Theimpressivenewairportterminalwillconsiderably increasetourismintoGibraltar,whichwillindirectlycreatemore businessinoursector.Moretourismmeansmorebusinessboth forthehighstreetshopsandthefreightindustry. ThenewAirportTerminalbuildingwillbeprovidinguswithmuch betterwarehousingfacilitiesfortheprovisionofairfreightandcourieractivities.ThechallengeforusandtheGibraltarGovernment istopromoteairfreightactivityviatheairportwiththeobjective ofservingbothGibraltarandtheneighbouringPortofAlgecirasin Spain,whichisoneofthebusiestportsinEurope.Itwillhopefully enableustoreroutesubstantialbusinesscominginfromneighbouringSpanishairportssuchasthoseinSevilleandMalaga. Gibraltar 2012 103 Tourism Tourism milestone GRP verysafeplace,andthecurrencyhasalsobeenveryimportant becausewearenotaEurodestinationbutaPounddestination. Withalltheeconomicproblems,visitorsfromtheUKwerelookingforplaceswheretheexchangeratewasmorefavourable, orwheretheydonothavetochangetheirmoney.Sothatisone ofourbigsellingpointsandweemphasisethisinourmarketing campaigns. In terms of the day trip market our main source is the area aroundGibraltar-theCostadelSolinparticular,whereGibraltar isoneofthebiggest-sellingdaytrips.Agreatpercentageofour visitorsareday-tripvisitors.Soit’seasytoseethatwedonot specificallyhaveoneprofileforvisitors,itvaries.Gibraltarissold mainlyasashortbreakdestination,becauseitsproductisideal forthatmarket. Milestone GRP - Do you see opportunities in event or sport tourism? A tourism sector ready for investment and growth Interview with Mr Nicky Guerrero, CEO, Gibraltar Tourist Board NickyGuerreroisagraduateofthehospitalityindustryandhasworkedinGibraltarforthegreaterpartofhiscareer.Hejoined theGibraltarTouristBoardin1997andcarriedouttherolesofProductManagerandSales&MarketingManager.Nickyis responsibleforallairlinemattersfortheGovernmentandinparticularforroutedevelopmentwork.MilestonespoketoMr GuerreroaboutGibraltar’stourismproductsandthemainchallengesfacingtheindustrytoday. Milestone GRP - Based on its main tourism offerings, what category would you classify Gibraltar in as a tourism destination? Mr Nicky Guerrero - Gibraltar does not fall under one single categoryoftouristdestinationsincewehavesomuchinsuch a small space, and people visit us for many different reasons. Wehaveournaturalhistory,ourheritageandtheviewsfromthe UpperRock.Ourgeographicallocationisalsounique.Unique isawordthatIoftenusewhentalkingaboutGibraltarasthere arenotmanyplaceswhereyoucanstandatthetopofabeautifulrockandseetwocontinentsandthreecountries.Youcan alsolookoutattheStraitofGibraltar,whichisoneofthemost important shipping lanes in the world, the Pillars of Hercules, theAtlanticOceanandtheMediterraneanSea.Whenyouwalk downMainStreetitispossibletoseethedifferencesinarchitecture,wherethemanydifferentcivilizationsofGibraltarhaveall left their mark. For example, the buildings covered in ceramic tileshaveaPortugueseinfluence,theshuttersareItalian,andso on.Thereissuchasmixofarchitecture,withBritishinfluences aswell.Then,ourmilitaryhistorywithbarracks,wallsandfortificationsfromdifferenterasisimpressive.Therearenotmany placeswithsuchawealthofheritageandnaturalhistory,allwith thebeautyoftheUpperRockinview.Wehavetheadvantage of being able to offer something for everybody, even if some aspectshavetobepromotedanddeveloped. Milestone GRP - What are the main facets of your tourism marketing and outreach strategy, and which market segments do you target? 106 Mr Guerrero - Our main source market is the UK. So the UK iswherewecarryoutthebulkofourmarketing.TheUKisour numberonesourceforovernighttourismandbusinessvisitors whichareveryimportanttous.WerunacampaignintheUK thatisamixtureofallthemarketingmediaavailable.Thereisour mainwebsite-visitgibraltar.gi-thatcarriesalltheinformation aboutthedestinationandwealsohaveFacebookandTwitter portalswhichtheteaminourLondonofficekeepsupdatedand interesting for visitors and people looking for information. Our office in London also provides an information and marketing servicefortheUKmarket. IntheUKwedoseveralactivities.Someofthemarebasedon road shows and tourism events and exhibitions. For example, for the travel trade we hold road shows, where we invite travelagentstocometohospitalityeventswheretheyaregivena destinationpresentation.AlongsidetheGibraltarTouristBoard willbedifferenttourismindustrypartnersfromGibraltarandthe UKthattravelwithusandexhibittheirproductsandservices. Wealsoholdconsumerroadshowsspendingacoupleofdays in some of the largest shopping centres in the big cities. We recentlycarriedoutoneoftheseeventsinNottingham.Thiswas primarilytopromotetheroutefromEastMidlandsAirporttoGibraltar,startedattheendofMarch.Wedoalotofadvertisingin thepressintheUK.Finally,wehavearepresentativeintheUK who goes out and does destination training courses for travel agents. Gibraltar also has fantastic sporting facilities. We are surroundedbysea,whichprovidesopportunitiesforalotofactivities. Wewouldliketoseedivingandwater-basedactivitiesdevelop. Atthemomentwearelookingtopromoteournichemarkettourismofferings,suchasbirdwatching.Thesearethemarketswe wouldliketodevelop. Milestone GRP - What are the main challenges the Tourist Board currently faces? Mr Guerrero -Wewanttodevelopmoreovernighttourism,but wedonothavemanyhotelbedsinGibraltar,sothereistheneed formorehotels.HowpeoplemovearoundGibraltarisachallengetoo.Whenwewelcomeacoupleofcruiseshipstheimpact isverybig.Gibraltarisasmalldestination,sooneofourmain challengesishowtoefficientlymovepeopletowheretheywant tobe. Mr Guerrero -Yes.Thisisprimarilybecausewehavebuiltupa day-tripmasstourismmarket.Wehaveovernighttourists,but therehasbeenlessofabalancebetweenbothsegments.We obviouslywouldliketogetpeopletostayovernightaswefeel we have so many interesting products. Overnight tourists are the ones who can truly experience the product and the many beautifulattractionsthatGibraltarhastooffer.Itisnowaquestionofdevelopingtheproductforcertainsectorsofthemarket, suchasovernighttourism,aswemustattractmoreofthattype oftourist. Milestone GRP - What is the path that a typical investor would follow when willing to invest in Gibraltar and develop this infrastructure? Mr Guerrero -TheymaycontacteithertheTouristBoardorInvestGibraltar.Theinquirieswouldthenbechannelledtoanyof therelevantdepartmentswhowouldstarttoreceiveproposals and take it from there. Investment proposals are usually dealt withbyInvestGibraltar,andtheTouristBoardwouldusuallywork withthisentity. Milestone GRP - The cruise segment has been highlighted as one that is ripe for development. What plans do you have in this regard? Mr Guerrero -Oneoftheadvantageswehavewithregardsto cruisepassengersisthatthereisaveryshorttransfertimefrom the port to the attractions. In five minutes visitors can get to MainStreetandtheyarenotfarawayfromanyofthetourism, retailandhospitalityservices.TheairportandportareafewmiVisitors by Nationality, 2010 12 Air Departure Coach Park Frontier Spanish Other EU Cruise Liner Visitors 100 10 80 8 60 6 % 4 40 2 20 0 2000 For the UK, in particular, Gibraltar is a very familiar market in termsoflanguageanditisnottoofaraway.Gibraltarisalsoa Milestone GRP - Are you in a situation where you would like to attract more tourists, but more infrastructure is needed to do so? Tourism by Year 2000-2010 (million) An Amazing Location and Prime Attractions Mr Guerrero -Event-ledandsporttourismaretwoaspectswe wanttodevelop.WehaveaChessFestivalthatwasstarted10 yearsago,andthishashadafantasticimpactonthetourism industryinthemonthofJanuary.Itisoneofthemostimportant openchessfestivalsintheworld.Itsbenefitshavemadeuslook intoevent-ledtourismveryseriously.TheimpacttheChessFestivalhasonoursmalldestinationisgreat,andtherearethings we can look at, such as music festivals, for example. We do haveeventsinGibraltartakingplaceeveryyearthatappealto manyvisitors.Peoplearelookingatdifferentthingstodoand experienceandweareverywellplacedtoprovidethesedifferentofferingsbecauseofouruniqueness. Wearealsolookingathowpeoplearetravellingandhowthey choosetobooktheirholiday.Therehasbeensuchashiftfrom the traditional tour operator-led booking patterns. We have to beawareofthesetrends.Thisiswhyourwebsiteisresponsive toFacebookorTwitter,whichhavebecomepowerfulmarketing tools.Wearefacedwiththechallengeoflookingatallthemarkets we serve, how they interact, how to accommodate them andhowtoprovidetherightproductsandservicesfortourists. Furthermore,wewouldliketoseemoremovingforwardinterms of creating visitor attractions. The majority of those are on the Upper Rock right now. We need to create a balance between touristattractionsandthenaturalenvironment,achallengefaced everywhereintheworldnow. 2001 2002 TouristsbyYear Gibraltar statistsics office 2003 2004 2005 2006 2007 2008 2009 2010 Source:GSO 0 British Gibraltar statistsics office VisitorsbyNationality,2010 Other Source:GSO Gibraltar 2012 107 Tourism milestone GRP nutesawayfromeachother.Therefore,wewouldliketoseethe developmentofpartialturn-aroundcruises,meaningwewould havetouristsjoiningshipsandcomingoffshipshereinGibraltar,whichisnotthatcommonrightnow.Wehaveaninitiative forcruiselinerstoallowthemtoopentheirfacilitieswhilethey areinport.Thisisquiteattractivetothecruisecompanies. Milestone GRP - The new air terminal was a controversial project and the present Government was clear that it didn’t believe it was necessary. However, now that it is a reality, what are your plans for the maximization of its use? Mr Guerrero -We need to develop traffic for the airport. Part ofmyresponsibilitiesistomanageroutedevelopment,whichis somethingIhavebeendoingformanyyears.Thepriorityatthe momentistodevelopmoreregionalconnectionswiththeUK, astheUKisourbiggestsourcemarket.InthelastcoupleofyearswehaveseentheintroductionofflightsfromtheNorthWest oftheUKandfromtheMidlands.Wewouldliketolookatother destinationsintheUKsincethiswillcreatenewcatchmentareas.EastMidlandsAirport,forexample,hasmanycitiesaroundit andfeedingintoitsuchasNottingham,LeicesterandDerby.We haveflightsfromLondonGatwick,HeathrowandLuton,which isoneofthelargestcatchmentareasforus.Sowearelookingto developtrafficfromtheUKandfromothercountriesinEurope. WefeelthereisapotentialmarketinnorthernEurope. Milestone GRP - What does the new air terminal offer in terms of facilities and benefits for Gibraltar? Mr Guerrero -Thenewairterminalhasallthefacilitiesyouwould expect a modern terminal to have including retail and catering outlets.Itisanimprovementonthepreviousterminal.Asfaras airlinesareconcerned,Gibraltarisauniquemarket.Wehaveour ownspecificcatchmentareas,notonlyhereinGibraltarbutin thesurroundingareasaswell.Itisapreferredgatewayforthose whohavepropertiesaroundthisarea.Furthermore,Gibraltaris notonlyatourismdestination,butalsoabusinesscentre,sowe alsohavealotofbusinesstrafficcomingtoGibraltar,whichis obviouslyverywelcomed.Therefore,ouraimnowistodevelop trafficwithinallsegments,frommoredestinationsintheUK,and fromotherdestinationsinEurope. Milestone GRP - What would you point to as the highlights and unique selling points of Gibraltar’s tourism offering? Mr Guerrero -ThereissomuchtoexploreinGibraltar.'Unique' isprobablythebestwaytodescribeourdestination.Itoffers such a mix of culture, heritage, natural history, and you can walkeverywhere,theviewsarefantasticandwehaveagood climate.Gibraltaroffersanexcellentshoppingexperiencetoo andthebarsandrestaurantsoffergreatproducts.Therereally iseverything,Ithink. Therearechallengesasweoffersuchadiverseproduct,forall thesedifferentmarketsegments.Weareverywellplacedasa centreorbasetoexploredifferentculturesandareas.Tourists cancomehereanddoatwoorthree-centreholiday,withAfrica being a short hop away. Gibraltar has always been very well placedforthissortofmulti-stoptourism. Ultimately, it is also fair to say that the people make a destination.Ourhospitalityisveryhighuponthescaleandweare friendly and helpful to our visitors, making them feel at home and part of the family. The place is striking, and it has a very specialatmosphere.WeareproudofourbeautifulRock. Arrivals by Air Visitor Arrivals by seas, 2009,2010 Seats Offered Seats Used 2009 500 60,000 400 Arrivals (000‘s) 2010 70,000 50,000 300 40,000 200 30,000 20,000 100 10,000 0 2001 2002 2003 2004 ArrivalsbyAir 2005 Gibraltar statistsics office 2006 2007 2008 2009 2010 0 2011 Source: GSO Jan Feb Mar ArrivalsbySea Apr May June July Aug Sept Oct Nov Dec Source: GSO Average lenght of stay, all arrivals Tourist Expenditure , 2000-2010 7 300 5 225 4 £ (million) Days in Gibraltar 6 3 2 150 75 1 0 2000 2001 2002 2003 2004 2005 2006 AverageLengthofStay–AllArrivals 108 2007 2008 2009 2010 Source: GSO 0 2000 2001 2002 2003 TouristExpenditure Gibraltar statistsics office 2004 2005 2006 2007 2008 2009 2010 Source: GSO Gibraltar 2012 109 Tourism milestone GRP Gibraltar as a Cruise Port Punching above its weight by Mr Peter Wild, Managing Director, G. P. Wild (International) Limited Gibraltar’s present position and future prospects as a cruise port can only be understood in the context of the developmentofthecruisemarketintheMediterraneanandinparticular cruisingintheWesternMediterranean. Figure1:GrowthofCruiseCapacityintheMediterranean2001-2012 Med Total Linear (Med Total) East. Projections for 2012 are a little more modest reflecting, toadegree,somereductionincapacityamongstNorthAmericanoperatorswithongoinguncertaintiesleadingtoAmericans continuing to cruise closer to home, although capacity is still expected to exceed 30 million. Royal Caribbean International isonesuchoperatorwhichhasplannedasignificantredeploymentofcapacityowingtotheweakdemandinthisregionduring 2011 and because it is making a “big push” into the Asia Pacificmarkets. TherehasalsobeensomereductionincapacityfromEuropean operatorsstrugglingwithongoingdomesticeconomicdifficulties such, as operators in Spain (Iberocruceros) and Greece (Louis CruiseLines),whileCostahasofnecessityhadtoreducecapacity,followingwell-publicisedaccidentsaffectingtwoofitsships. 45 40 Within the Mediterranean the Western segment currently representsaround40%ofcapacity,asillustratedinFigure2.Gibraltar,however,alsobenefitsconsiderablyfromcruisestothe Mediterraneanfromnon-Mediterraneanports,whichrepresent 12%ofcurrentcapacity. Pax-nights (million) 35 30 25 20 15 10 Figure2:SectorSharesofMediterraneanCruiseCapacity2012 5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 12% Non Med 2012 40% West Med Source:G.P.Wild(International)Limited. Growth of Cruise Capacity in the Mediterranean 2001-2012 Source:G.P. Wild (International) Limited 2% Black Sea As shown in Figure 1, cruise capacity in the Mediterranean, expressedinpassenger-nights(bed-days)hasrisenthree-fold 12% Adriatic sincetheMillennium.Although2012appearstorepresentasetback,causedpartlybyreactiontolastyear’s“ArabSpring”and partlybythefall-outfromtheCostaConcordiaincident,theupwardtrendisexpectedtoresume.Ifthehistorictrendscontinue to2020,themarketmayreach50millionpax-nightsinthatyear. 34% East Med Figuresfor2011showedtheregion’sbestyearever,withtotal capacityrunningaheadofthetrendandtotalpax-nights(beddays) exceeding 30 million for the first time. In the event, demand for 2011 was moderated by reluctance amongst some Americans to travel to Europe owing to the uncertainty surrounding the region in terms of both economic turmoil in the EurozoneandpoliticalupheavalinNorthAfricaandtheMiddle 2001 2002 2003 2004 2005 2007 2008 2009 2010 2011 % + 2001-11 Valletta 273,521 356,031 389,361 291,225 320,263 408,264 487,817 555,861 441,913 493,748 566,042 +107 Cadiz 72,017 114,664 145,000 164,248 125,877 171,608 190,000 224,905 235,324 334,162 376,000 +422 Gibraltar 118,628 116,918 215,352 162,780 188,810 210,799 275,993 308,989 348,199 305,161 328,636 +177 Ibiza 23,087 36,983 79,983 80,105 118,474 69,786 79,904 79,210 103,485 132,149 129,369 +460 Alicante 34,353 25,909 44,615 48,001 36,253 51,868 72,063 82,487 96,615 75,911 111,711 +225 Cartagena 16,415 15,040 12,423 18,401 29,073 29,337 39,799 35,374 67,931 104,294 90,000 +449 Source:G.P.Wild(International)Limited. 110 portiscurrentlyheavilydependentoncruisesfromUK-based operators and North American operators cruising from UK ports,whichtogetheraccountfor68%ofpassengersvisiting theportthisyear,whereasthesetwosegmentsmakeuponly 22%ofthetotalWesternMediterraneanandex-UKmarket.To someextentthisbiasisunderstandableforbothgeographical and cultural reasons, for, as noted above, Gibraltar is especiallywell-placedtocapturecruisespassinginandoutofthe Mediterraneanbasin,whileitscoloniallinkswiththeUKgiveit aparticularappealtoUKpassengers. Figure 3: Gibraltar Passenger Profile compared with Western Mediterranean and Northern European-based cruises 2012 UK operators N American ex-UK S Europe N American fly Other 100 90 80 70 60 50 40 30 20 10 0 Gibraltar Western Med non-Med port Source:G.P.Wild(International)Limited. Source: G.P. Wild( International) Limited Gibraltarhas,however,achievedsomethingofabreakthrough amongsomeofthecruiselinesservingSouthernEurope,with MSCinparticularmakingaseriesofninecallsin2012withits 33,300-passenger mega-cruise ship, MSC Splendida. As can beseenfromTable2,MSCisnowthirdamongthetenleading cruiselinescallingatGibraltar.Thesetenlinesrepresentaround 90%ofallpotentialpassengervisitstotheportthisyear. Table2:LeadingCruiseLinesusingGibraltar2012 Source:G.P.Wild(International)Limited. Gibraltar’spassengerthroughputhasalsoincreasedduringthe lasttenyearsorso,asshownin Table1,whichcomparesits progresswiththatoffivecompetitorsintheWesternMediterranean and Atlantic Europe. These are all ports that compete mainlyforport-of-call(asopposedtoturnaroundorhomeport) businesswithintheMediterraneanoronrepositioningandexNorthernportvoyagestoandfromNorthernEurope. 2006 Asaresultofthisrestrainedgrowth,fromapositionofsecond largestportintermsofthroughputin2001,onelargelymaintained until 2009, Gibraltar now occupies third place among theselectedports.Moreover,thispositionisexpectedtocontinuein2012withanestimated303,842passengersexpected bytheport.Currently,nevertheless,theportiswell-equipped toreceivecruisecalls,offeringatotalquaylengthof940metreswhichallowsuptofourmediumsizedortwolargesized vesselstoberthalongsidesimultaneously.TheCruiseTerminal wascreatedin1997,usingarenovatedwarehouse.Although additionalberthscanbemadeavailableelsewhere,ifrequired, it is perceived by the port that expansion is necessary if Gibraltar is to fully capitalize on the market growth. Plans are thereforeinhandtoextendtheTerminal,toexpandthosefacilitiesalreadyonofferandtocreateadditionalamenitiesfor cruisepassengersandcrew. Itisalso,however,arguablethatGibraltarneedstoextendits appealbeyondtheUKsourcemarket.AsFigure3shows,the Table1:GibraltarThroughputscomparedwithSelectedCompetitorPorts2001-11 Port Evidently Gibraltar’s growth as a cruise port reached somethingofaplateauin2009anditsthroughputshavefallenaway slightly since then at a time when most of its competitors have benefited from the strong recent growth in the market asawhole.Notably,Cadiz,whichisamajorcompetitorasa “staging-post” between North and South, has expanded its businessatmorethandoubletherateofGibraltar.Amongthe lesserports,Cartagenahasalsoachievedaveryhighgrowth rateandalsosecuresasignificantamountofitsbusinessfrom shipsonrepositioningcruises. Pax-nights (%) Gibraltar occupies a strategic position at the gateway betweentheAtlanticOceanwithaccesstoNorthernEuropeand the Mediterranean Sea, stretching the full length of SouthernEurope.Asacruiseport,itmaybesmall,comparedwith the marquee ports of Barcelona, Civitavecchia and Venice, butitpunchedwellaboveitsweightwith2011throughputof 329,000-overtentimestheterritory’sresidentpopulationof 29,000. Cruise Line Primary Source Market(s) No of calls Potential Passenger Throughput * P&O UK 32 81,210 Royal Caribbean N America (ex-UK port) 16 49,448 MSC Italy 13 40,750 Princess Cruises N America (ex-UK port) 11 25,152 Thomson UK 13 19,138 Fred Olsen UK 16 15,005 Celebrity N America (ex-UK port) 4 11,400 Costa Italy 4 10,324 Cunard UK 5 10,226 Holland America Line N America Total 8 9,683 122 272,336 *Thismeasuresthetotalnumberofpassengersvisitingtheportif100%oflowerberths(normallytwopercabin)oneachshipareoccupied. Source:G.P.Wild(International)Limited. Apart from MSC and Costa, the leading cruise lines are largely taken from the major operators serving the UK market, P&O, Thomson, Fred Olsen and Cunard, together with North AmericanoperatorsplacingshipsatUKports,normallySouthampton, for the summer season namely Royal Caribbean, Princess and Celebrity. Holland America Line calls are derived from a mix of fly-cruisesandvoyagesoutofRotterdam,partlytargetedatthe Dutchcruisemarket. Gibraltar 2012 111 Tourism milestone GRP Welcoming Tourists and Ships Some key source markets are, therefore, largely absent from the mix of passengers and these include some of the fastest growing markets in Europe, as shown by Table 3. A long history operating in Gibraltar’s ports of entry Table 1: Gibraltar Throughputs compared with Selected Competitor Ports 2001-11 2007 2008 2009 Interview with Mr George Gaggero, Deputy Chairman, MH Bland Source Market 2006 2010 % Change 2006/11 % of Gibraltar 2012 UK ¹ ² 1,204 1,335 1,477 1,533 1,622 1,700 28.0 +41.2 67.8 Germany 705 763 907 1,027 1,219 1,388 22.9 +96.9 0.8 Italy ³ 517 640 682 799 Spain 391 518 497 587 889 923 15.2 +78.5 16.6 645 703 11.6 +79.8 1.9 ‘000s Pax 2011 ‘000s Pax % Share (Eur) France 242 280 310 347 387 441 7.3 +82.2 0.5 Sub-total, Big Five 3,059 3,536 3,873 4,293 4,762 5,155 85.0 +68.5 87.6 Scandinavia 62 94 123 173 283 306 5.0 +393.5 0.5 Benelux 64 82 92 110 126 159 2.6 +148.4 n.a. Austria 44 52 59 80 93 104 1.7 +136.4 n.a. Switzerland 56 64 65 76 91 121 2.0 +116.1 n.a. Other 123 175 211 212 212 224 3.7 +82.1 0.7 Total 3,409 4,004 4,422 4,944 5,567 6,068 100.00 +78.0 88.8 10,380 10,452 10,290 10,402 10,997 11,520 - +11.0 11.2 North America 4 ¹ Includes Republic of Ireland. ² Gibraltar % includes North American ships cruising from UK. ³ Gibraltar % includes all passengers on Italian-based ships. 4 Data published by the Cruise Lines International association Source: G.P. Wild (International) Limited from ECC and CLIA data. (CLIA) have been inflated by 2% to take account of non-CLIA lines supplying the North American market. It will be evident from the table that Gibraltar is heavily dependent for its business on the two slowest growing markets, the UK and North America, which together make up 79% of its business. Their growth figures over the five years of 41% and 11% respectively are in sharp contrast to the 97% growth in Germany, which is frequently tipped to eventually take over from the UK as the leading European source market for cruise passengers. However, with a handful of calls by Peter Deilmann, Hapag Lloyd and Phoenix Reisen, less than one per cent of passenger throughput at Gibraltar can be ascribed to the German market. This is a lower share even than that of the Spanish cruise lines, where there has been perhaps an understandable reluctance to cruise to a territory to which Spain has a claim. In particular, the two largest German operators, Aida Kreuzfahrten and TUI Cruises, are absent from the current call schedule. Aida is a part of the Carnival group, while TUI Cruises is jointly owned by Royal Caribbean and the German-based travel giant, TUI. Other members of these cruise groups are already calling at Gibraltar: • Carnival – P&O, Princess, Costa, Holland America, Seabourn, Iberocruceros; • Royal Caribbean – Royal Caribbean, Azamara, Croisières de France (CDF), Pullmantur; • TUI – Hapag Lloyd, Thomson. We would suggest, therefore, that Germany should be a key target market for Gibraltar as it seeks to extend its capability and, at the same time, broaden its client-base. In addition, some of 112 the smaller countries in Europe have also achieved high five-year growth rates, some well over 100%, and should also be borne in mind. One of the smaller markets, Finland, is represented among Gibraltar’s source-markets and indeed, the operator, Kristina Cruises, has used Gibraltar as a turnaround port for embarking and disembarking passengers. Here again is something on which Gibraltar can build, as it seeks a share of the additional passengers expected to cruise the Western Mediterranean in the course of the next decade. Milestone GRP - How was MH Bland established in Gibraltar and how did your family get involved in the business? Mr George Gaggero - It goes back 200 years, when Marcus Henry Bland, a Liverpool merchant, arrived in Gibraltar just before 1810 and set up a Port Services agency. The business was then passed down to his son and then his grandson. At the time, Emanuel Gaggero was working as a manager of his business. When Bland‘s grandson died, he bought the business off the family and took it over with his brother. I am the fourth generation participating in the business with my brother. Then, the family parted, one part going to the Airline business while my father kept the Ship Agency business in 1986. We have always felt that our roots are in Gibraltar. Geographically and strategically, it is a wonderful place for the Shipping business and it provides fantastic opportunities. In the early days, MH Bland provided Salvage and Ship Repair, then the business evolved. In the last ten years we opened up Port Agencies in Algeciras, Ceuta, Las Palmas, Gran Canaria. We have also diversified the business by offering shore excursions out of Malaga. We felt the need to offer a wide range of services and extend beyond the Port of Gibraltar. So, for example, we will handle 60 cruise liner calls in Malaga and 160 in Gibraltar this year. We are building on the relationships we have with our clients and trying to transfer that standard of service to places where they feel it is lacking. Tangiers is a particular port of interest. The ports of Malaga, Gibraltar and Tangiers could work together as a triangle with regards to cruise liners in the same way that Gibraltar, Algeciras and Ceuta are working together in the Bunkering sector. If one port works better than the others, we are going to benefit from it. So we are trying to make the region as a whole more attractive. Milestone GRP - Has the crisis affected the Shipping business either in terms of volume or in key trends? Mr Gaggero - Gibraltar only needs a small percentage of any market to be able to flourish. With regards to Shipping, the number of ships coming into the Port of Gibraltar has actually increased since companies have been taking advantage of the duty free fuel and the efficient service our Port offers. Despite the global crisis the business has not decreased. This means that MH Bland, and Gibraltar as a whole, are both offering the right services. Milestone GRP - What is the competition like within Gibraltar’s Shipping sector? Mr Gaggero - Some of the biggest agency players in the world are here, such as Inchcape and Wilhelmsen. Then, the- re are 4 or 5 local companies. Nevertheless, two local companies handle more business than anybody else: MH Bland handling 25% of the ships coming into Gibraltar and Gibunco, accounting for about 20% of the total business. Moreover, MH Bland is not just competing against the other players in Gibraltar, but also against other Ports such as Algeciras, Ceuta, Malta or Rotterdam. Milestone GRP - Although the new government has been very clear on the fact that Gibraltar’s new airport terminal was not an investment they would have made, there is consensus that its utility and economic return must now be maximized by increasing air traffic to Gibraltar. What role will MH Bland play in this development? Mr Gaggero - First of all, in terms of Gibraltar’s Tourism sector, it is not a matter of bringing in more people, it is a matter of improving the product and increasing our capacity. Both these aspects need to be improved and everybody is aware of that. Out of the 3 million genuine tourists coming to Gibraltar every year, only a third go to the Natural Reserve and see the sights. Gibraltar has a fantastic product that needs to be moved into the 21st century. We have wonderful potential in the assets of Saint Michael‘s Caves, the Barbary Apes and the Upper Rock with its fantastic scenery. If we improve the product, it will promote itself. The previous administration did a fantastic job in other fields, but they did not focus on tourism as they should have. It was one strong pillar of the economy they did not give enough attention to, and the potential of the Tourism sector to contribute to the economy is far greater than people appreciate. Milestone GRP - What investments is MH Bland looking to make into the Tourism sector? Mr Gaggero - We are conscious of the limitations of the Upper Rock. At the moment, we are developing plans for a complete rebuild of the cable-car facility, which will offer expanded capacity. At the moment its carriages are capable of carrying 30 people per trip, every 6 minutes, and the new one would carry 80 passengers per trip. We have already talked to the Government and the other stakeholders with the view to enhancing the transport system on the Upper Rock. Although the private sector must drive investment into the Tourism sector, the new Government is in a unique position to assist in that process since its representatives represent the grass roots of Gibraltar‘s community. The Chief Minister in particular, having previously represented the Tax Association as a lawyer, has got an understanding of the mentality, issues, the business community and its requirements. If he can bring the various stakeholders together it will be a massive step forward for Gibraltar’s Tourism product. Gibraltar 2012 113 Tourism milestone GRP Hotel Arrivals 2000-2010 hotels whilst in other destinations, the leisure market is going in the other direction, as a result we are having to compete with emerging destinations and the global economic climate, which has created an extremely competitive market - to an extent price driven more than destination driven. Milestone GRP - The human resource aspect of your operations is a key priority at the Caleta Hotel. What initiatives are in place to maintain high standards? Mr Ostuni - Human resources are most probably the most important aspect of our business. At the Caleta Hotel we are very fortunate because we have a very low turnover compared to industry average. Out of our total workforce 15% have over 20 years of service, 30% over 10 years of service and 25% over 5 years. The rest are really seasonal positions and fluctuate following business levels. Milestone GRP - In terms of the development of the tourism sector, what project would you like to see completed under the new Government and how will they support your activity? The Caleta Hotel A Gibraltar Landmark Interview with Mr Franco Ostuni, General Manager, The Caleta Hotel The Caleta Hotel is the largest hotel in Gibraltar, and a hub for social and business activity on the Rock. Opened in 1964, it has been refurbished many times since to maintain the hotel’s position at the vanguard of Gibraltar’s hospitality offerings. Major changes it has been through include the addition of a dedicated conference center that hosts many yearly international events such as the Tradewise Gibraltar Chess Festival and the KPMG eGaming Summit. Milestone GRP sat down with the Caleta Hotel’s General Manager, Mr Franco Ostuni, to discuss the current trends affecting Gibraltar’s tourism industry, the benefits and potential of event-led tourism, and his perspective on how Gibraltar should approach the development of its tourism image. Milestone GRP - Can you please give an historical overview of the Caleta Hotel? Mr Franco Ostuni - The Caleta Hotel was built in the early 1960’s and opened in 1964 by a local businessman who had a vision to build the largest Hotel in Gibraltar on the eastside of the rock next to the fishing village of Catalan Bay, with the aim of attracting holiday makers to the destination. This was an innovative concept considering what Gibraltar was at the time - fundamentally a naval base living directly from the military presence in Gibraltar. During the last 50 years the Hotel has received various transformations, extensions and development of facilities like conference centre, health and beauty club in order to offer the product the market required. The Hotel has achieved prestigious awards; Gibraltar Leading Hotel in 2009/10/11, the Hotel features the only 2 AA Rosette Restaurant in Gibraltar, the award received in 2006 and maintained since. 114 Mr Ostuni - Indeed the new Government came into office with a manifesto strongly supporting tourism in Gibraltar. I believe tourism is not about hotels, restaurants and nightlife, these elements are the commercial response to a demand, it is really about destination. I am confident the new Govern75,000 60,000 45,000 30,000 15,000 0 2000 2001 Gibraltar statistsics office Hotel Arrivals 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: GSO ment will look at improving the Gibraltar tourism experience as a whole, as a result of this activity we will directly and indirectly benefit and I am sure new players will come to the market. Milestone GRP - The Government aims to increase the frequency of international events in Gibraltar. The Caleta Hotel hosts the annual Tradewise Gibraltar Chess Festival. What potential do you see in this area? Mr Ostuni - Event lead tourism is very important and I believe the Tradewise Gibraltar Chess Festival is proof of the potential in this niche market. It is the result of considerable work and 10 years of constant effort in positioning the event at international level. It is now recognised as the best ness, need to respond to clients needs. In the 70’s and 80’s the average shelf life of a hotel ranged between 8-12 years, nowadays, due to technological progress and changes in trends, hotels need refurbishment every 4-6 years on average. This translates to an increase in capital expenditure required and a shortening of repayment periods. Milestone GRP - What is the hotel’s capacity? What are the occupancy rates and the business to leisure traveller’s ratios? Mr Ostuni - The Hotel has 151 bedrooms including suites and self-catering apartments, this makes us the largest hotel in Gibraltar not only in bedroom stock but also for the facilities on offer, Health and Beauty Club, Conference Centre, two restaurants, the largest banqueting facilities in Gibraltar and so on. Our occupancy is generally constant throughout the year and ranges around 60%, our business mix between leisure and corporate market is 50/50. Milestone GRP - What were the challenges faced over the years during the transformation of the Hotel? Milestone GRP - How would you qualify the Gibraltar business and tourist visitors in terms of consumer behaviour? Mr Ostuni - Challenges are part of the hospitality industry and they seem to get tougher over the years due to the rapid evolution of our society. Fashion, customs and trends change so quickly nowadays that hotels, like any other busi- Mr Ostuni - There are different business segments within both the leisure and business markets. While the business and conference market coming to Gibraltar is becoming more and more sophisticated and using 5 star and 5 star deluxe Gibraltar 2012 115 Tourism opentournamentintheworld.ThishasputGibraltaronthe map and attracted in 2012 some 400 participants from 58 countriesaroundtheworld.ThemodeloftheChessFestival canbeeasilyduplicatedforothereventsandadjustedtothe specificneeds. Milestone GRP - Did the idea for this event originate from the Caleta Hotel? Mr Ostuni-ItwasourChairman,MrBrianCallaghanO.B.E., whohadtheideatoorganiseaninternationaleventofsome sort in order to attract visitors to the Hotel and Gibraltar in the winter months. Many activities were considered, chess was chosen because it is an indoor activity and therefore weather conditions are not so important and because the tournament is an 11 round and not a knockout tournament therefore particularly interesting from a hotel point of view, consideringallparticipantswillplayfortheentireduration. Milestone GRP - The Government and Tourist Board participate in numerous international tourism events, such as the Fitur International Tourism Fair in Spain. What role does the Caleta Hotel play in terms of developing Gibraltar’s image internationally, and what initiatives does it take part in? Mr Ostuni-TheCaletaHotelhasalwayssupportedandparticipatedalongsidetheGibraltarTouristBoardinexhibitions, roadshowsandgeneralactivitiesaimedtopromotethedestination.IntheparticularcaseofFitur,wedonotparticipate becausewedonotbelieveinapotentialmarketfromSpain into Gibraltar for resident tourism in the Hotel. Spain has nevergenerated,inspiteofGibraltarTouristBoard’smarketingactivities,anymeaningfulinflowoftouristsinGibraltar hotels. We prefer to invest our limited marketing budget in markets that have responded and enjoyed our product or canpotentiallydosointhefuture. Tourism Hotel Occupancy, 2000-2010 Percentage of Visitors by Length of Stay Total 80 Family/Friends Business Holiday Transit 100 70 60 80 50 % 60 40 % 30 40 20 20 10 0 2000 0 2001 2002 2003 Gibraltar statistsics office HotelOccupancy 116 2004 2005 2006 2007 2008 2009 2010 Source: GSO 1 2-7 8-14 15 Or More Average DaysinGibraltar PercentageofVisitorsbyLengthofStay Source: GSO Tourism milestone GRP Hosting the World of Chess Chess in Schools Withpopularpassionforthegameandawidespreadbeliefthatall whoplaychessatsometimeintheirlivesbenefitfromit,Chess has also been introduce to Gibraltar’s schoolchildren. Gibraltar todaycanboastachessclubinalmosteveryschool,andayoung BritishchampioninStephenWhatley.AlsothefirstJuniorInternationalwasheldlastsummer,thesecondandbiggereventwillbe heldinAugust2012. A global tournament with a high – and rising – rank by Ms Alice Mascarenhas, Features Editor, The Gibraltar Chronicle Gibraltar’s Tradewise Chess Festival TheworldofchesshasauniquerelationshipwithGibraltar.The overwhelmingsuccessofitsinternationalchesstournament,the TradewiseChessFestival,whichatthestartof2012celebrated its tenth year, owes much to this special bond. Its tenth editionwasoversubscribed.Itbrokeallitspreviousrecordswith58 GrandMasters(GM)participating,11ofwhichwererated2700. It also saw the greatest ever gathering of female chess players inamixedevent-neverbeforehadsomanyoftheworld‘stop womenjoinedleadingmaleplayerstocompeteinthesametournament. Tradewise2012wastorocktheworldofchessandmakehistory. HouYifan,17yearsofagefromChina,playedthebestresultby afemaleplayerinthehistoryofthegame.Theworldofchesswill be talking about her achievements in this tournament for many yearstocome–she not only beat Judit Polgar, up till now, the bestwomanintheworld,butfourtopplayerswayaboveherown rating.Thefinalroundwasthrillingaseveryonewaitedtoseeif NigelShort,whobyhisownadmissionplayshisbestchesson theRock(believingitisthebestopentournamentintheworld), wouldmakeitanawe-inspiringfinish–asheplayedagainstHou Yifanintheplay-off.Andhedid,victoriousafterjustonehour,and regainingthetitlehefirstwonin2003. The 2012 Winner Inall,thetentheditionattracted240players–thelistoffamiliar namesimpressive,establishingthetournamentasthestrongest openeventintheworld.Butperhapsthehugesuccessofchess inGibraltarisbestillustratedbyastunningstatisticrevealedby ChiefMinisterFabianPicardoonthefinaldayofthetournament whenheannouncedthetournamentwebsitehadfaroutreached itsownrecord,attractingaquarterofabillionhitsasthechess internetworldwasrunningonoverloadoverthose10days,since the chess commentary and analysis from the team and Grand Mastersareamustforinternationalfans. Fortwoweekseveryyear,theRockbecomesthefocalpointof theprofessionalandamateurchessworld-atightshipcaptained byitsfounderandorganiserBrianCallaghan.Itwashisbrainchild, andithasbecomearegularfixtureontheglobalchesscalendar. Theexclusiveatmospherecreatedbyeveryoneinvolvedhasbeen acrucialpartofitssuccesswithaprivatevisitafewyearsback bythelegendaryBorisSpasskyandtheworld’snumberone,MagnusCarlsen. Effective organization, led by Stuart Conquest, and impeccable hosting by the Caleta Hotel management and staff, are key to the event’s success. Also, the fact that amateur players can sit side-by-sidewithprofessionalGrandMastershasprovenamajor pull,attractingplayersfromfivecontinents.Equallyvitalarethe sponsors who make the tournament possible. Gibtelecom was thefirstmajorplayerandcontinuesonboard,especiallyonthe technicalside.TheTradewiseInsuranceCompanyisnowthelead sponsorandforthetentheditiontheprizemoneyincreasedtoan amazing£155,000. energyandresources,everythingispossible.Hefirmlybelieves the festival offers a blueprint for the future of Gibraltar tourism, ledbyinternationaleventsofthisnature.Italsoconfirmsthedrive thatifaspecificnicheisfound,itshouldbetargetedwithvigour. Fromdayone,MrCallaghansawanothernicheinthemarketand quicklysetouttowelcomeallwomenplayersandGrandMasters totheRock.Aseparateprizewastheanswerandthisprovedto beamostimportantpartofthetournamentandthecompetition. ThisiswhythereweremoretopfemaleplayersandindeedWorld Championsinthetournamentwithsevenofthetoptenwomenin chessplayingontheRock,includingJuditPolgar,theonlyfemale playertohavewonagameagainstaMen‘sWorldchampion. Advances in Live Streaming Overtheyears,thetournamenthasbeenenjoyedbyahugeinternetaudience.Ithasbecometheleaderinthisareaofthechess world and has introduced the game to a wider audience. This hasbeenthankstoGibtelecom’sinnovativetechnologyandthe unique,built-for-purposewebcastingsuiteinstalledattheCaleta Hotel,whichhasbroughtthousandsofchessenthusiastsfromall overtheworldintothearena. NigelShortnotonlytookthefirstprizein2012butalsowonthe specialCommonwealthprizeinthisDiamondJubileeyear.HouYifan,whocamesecondinthetournament,alsotooktheWomen’s Award,aswellastheJuniorAward.VicktorKorchniowontheSeniorAward,andBestGamewasawardedtoEmmanuelBerg. GMNigelShortfromEnglandsaidinhiswinner’sspeech:“Idon’t knowwhatitisaboutthisplace.Igetsuchagoodfeelatthistournament,itissowellorganisedthatithelpsmeplaybetter.Ireally couldnotimaginethatIcouldbeupherethiseveningmakingthis speech.Iwasranked15thandIthought,mygoodnesswehave comealongwayin10years.Ihavenotplayedeveryyearasitis myfifthyear.Iplayedinthefirstyearanditwasagoodlittletournamentwith60players,andIwasthestar,andnowIamjustoneof manysuperstars.TherearemanyrealgiantsofthegamewhoIam honouredtoplayagainst.Itisagreatevent.Iamgladtohaveseen itgrowandIreallydobelievethatthisisthebestopentournament intheworld.” Thestreaming,explainedaGibtelecomspokesman,hasbeenenhancedfromyear-to-yearandcanhandlethousandsofconcurrent connections,whereaswhenthetournamentfirststartedithada limitofonly10.Today,itboatsabillionhitsinjust10days,with visitsfromasfarafieldasGermany,Russia,BrazilandtheUSA. ButMrShortwhohadfeltthemightoftheyoungChineseplayer intheplay-offjustafewshorthoursearlierinsistedhewasnotthe storyoftheevent.Thestorywastheresultoftheyounggirlfrom China whom, he said, had put in a remarkable performance and shownwhataworldclassplayersheis. “Maybe,” he suggested, “what we are seeing here is the start of somethingnewinwomen’schess.IhaveinfrontofmeJuditPolgarwhohasbeenforever,basically,therepresentativeofwomen’s chess–thestarabovestars.ThisisnothingagainstJudit,whoI respectgreatly,butIamgladshenowhassomecompetition.Long liveGibraltar!Longmaythiseventgoon!I’llbebacknextyear.” “Itisdifficulttobelievethatfromourmodestbeginnings,Gibraltar nowhoststhemostprestigiousOpenChessTournamentinthe World. ItisacredittoGibraltarthattheTradewiseChessFestival isatournamentthatparticipantsfromallovertheWorldnowwish toplay”,saysBrianCallaghan. Chief Minister Fabian Picardo, wife Justine and tournament organizer Stuart Conquest 118 A Niche Market For Gibraltar, the tournament’s success has meant that in the slow winter months – for those two weeks a year – hotels are full. Mr Callaghan has made his hobby pay-off, reinforcing the knowledgethatevent-ledtourismhasamarket,andwiththewill, Governor Sir Adrian Johns presents the Commonwealth Trophy to winner Nigel Short, next to him Is Bruno Callaghan Brian Callaghan and Hou Yifan FortournamentorganiserBrianCallaghan,withworldpressheadlinesdescribingthisasthebestopenever,theevent’ssuccesswas clear.2012hadbeenanhistoricyearcoupledwiththeGovernment’s assurancesofproactivesupporttochessinGibraltar.Hestated: “Whatanamazingtournamentwehavehad.It‘sabouthavingfun andplayingserious,veryseriouschess.ThechessplayedinGibraltarthisyearhasreverberatedaroundtheworld.” Gibraltar 2012 119 Tourism milestone GRP WeavesouththroughourbustlingMainStreetshoppingarea - I dare you to resist the bargains. Pause for shade in our quaint museum. Stroll between cathedrals, mosques, synagogues almost within touching distance of each other; but you'llfeelnoreligiousorculturaldisharmonyhere. Informally salute or photograph the military guard stationed outside our Governor's residence and then pay homage to menwhofoughtanddiedforourBritishwayoflifelyingburied in the Trafalgar cemetery. The military are challenged to shoreline-to-summit running races but you're on holiday, so takethecablecar412mtothetop. Two mighty continents, Europe and Africa, and three countries, Gibraltar, Spain and Morocco are at your feet. To the ancients,thiswasthefinalfrontier.Nothingoftheworldwas known beyond. The legendary Pillars of Hercules were createdtoprotectintrepidmarinersfromcascadingintotheunderworldabyss.Onlyin1492didColumbusventurebravely duewestfromhere.OnepillarstandsinGibraltar,buttryto spottheother24ksouthinMorocco,liketheRoman,Greeks, CarthaginiansandPhoeniciansdidfromthesea. Gibraltar’s Tourism Highlights Lots to Discover Gibraltar occupies a pivotal position on the main route betweenthehemispheresandtheaxislinkingtheoldandnew worldsEastandWest.Assuch,itspeoplehavebeenagatekeepersandkeybearersoftheMediterranean.Phoenicians, Arabs, Egyptians, Greeks, Romans and others had only this Cable car to the top of the Rock accesspointbeforetheSuezCanalopenedin1869.Ourflag reflects this dominance. We've become a fortress citadel foughtoverthroughthecenturiesbyArabs,SpanishandBritish. We've been battered, bruised, bombed, blitzed, beleaguered,infected,invadedandisolated.Butwesurvive.Some by Ms Karen Lawson, Gibraltar Tourism Enthusiast & Author Discover Gibraltar, colloquially known as The Rock. The biggest pebble in the world, the best of Britain without the rain, theworld'sonlyrealthemepark:smallinsize,hugeonhistory. Wehatetobrag,butwhennature,orthegods,createdasolid 6.5km²limestonerockattheepicentreoftheworld,aquirky, unique holiday destination was created. Think location, climate,sun,sea,sand,historystretchingback100,000years, culture,myth,legendandwildlife-withdolphinsridingyour bow wave, eagles soaring above and monkeys hitching lifts on vehicles. All this in a place so safe that if you stumble someonewillcatchyoubeforeyouhittheground. Wehavebeautifullyplacedhotels;maybetheCaletaHotelon our rugged geographically inspiring eastern side would appeal? Wake peacefully like a cat warmed by the sun rising overtheMediterraneanandponderwhetheritwilleverclear theloomingrockbehindyou.WatchasdescendantsofGenoese migrant fishermen bring their Italian styled village to life frombelowyourbalcony. If you're fit, everything is within walking distance but buses andtaxisspeedyourjourney.Sofollowthesun-timetohit thewestendastheBritishwouldsay. PauseinCasematesSquareforSpanishcaféconleche.Spain held this rock for over 250 years, secured within monstrously thickdefensivewalls.TodaythisBritishoverseasterritoryisstill dominatedbythewatchful14thcenturyArabcastlerememberingaperiodof750yearswhenGibelTarikwasinArabpossession.Fortunately,we'veabsorbed,andyoucanenjoy,thebest ofthreerichcultures.Peopleareaneclecticmix,mostproudly Gibraltarian,withblendedbloodlinesfromBritish,Italian,Maltese, Portuguese, Jewish, Indian and Arab forefathers. Some marrySpanishcitizensandasneighbourswehaveasymbiotic relationship. Remember later to sample fish and chips, couscous, sardines, tapas, pizzas and other local delicacies, all servedinamyriadofeateriesbyfamiliesthathavebeencookingthisfoodforgenerations. 120 Local fare, in all its international varieties, by the marina Gibraltar 2012 121 Tourism milestone GRP areas look rough and neglected but what a story every cannon,crumblinggunposition,shatteredsteporwallcanshare! Meanderoverthespineofourrockwheretheonlywildmonkeys in Europe scamper round. They've survived here since the British brought them from the Barbary Coast 300 years ago. They fooled us into believing they symbolise the sovereignty of the British on the Rock. Winston Churchill insisted theybeforeverprotected,registeredandevennamedduring theupheavalofWorldWarII. Strideuptoourhighest point at the south and almost touch the heavens above and Africa beyond. The monkeys wait while you explore our bottomless abyss, St Michael's Cave, among 173 formations magnificently created over millions of years by water seeping through Jurassic limestone. Phoenicians named the Rock ‘Calpe’ probably derived from a word meaninghollowedout.InWorldWarIIthecavewasprepared asanemergencyhospitalandnowhousesabreathtakingamphitheatre,contrastingwiththeonebuiltoverwaterwithinthe tranquil Alameda botanical gardens below. Neanderthal and NeolithicmeninhabitedsomecavesandtheirstoriesarecontinuallybeinguncoveredaswecurrentlyseekWorldHeritage Status.GibraltarhasthehighestdensityofNeanderthalsites worldwide,soyou'rewalkinginthefootprintsofthelastNeanderthalsfacingextinctionhere24,000yearsago Gibraltarisafortressandassuchhasbeenbesiegedfourteen times. The Great Siege of 1779-83 was the longest in Brit- ish history. A contingent of 5,500 military, surrounded by the empiresofFranceandSpain,stoicallyresistedoverwhelming odds, starvation and disease and what was surely inevitable defeat.Drivedesperatementowheretheyhavenothingleftto giveandnothinglefttolose,andoutstandinglybraveorvery foolhardyriskswillbetaken.Thesurroundedsoldiersrealised theonlythinginabundancewastheRockitself.Courageously they created tunnels above the enemy, using anything availableinsiegeconditions.Provingtheoldadage“Solidasthe Rock of Gibraltar” right, they audaciously fired cannons impacted inside 400m of rock down upon the enemy; even inventingadownward-facinggunforthepurpose.Takeascenic long walk to the famous north face of Gibraltar. All the hard workhasbeendonesowanderthroughourextraordinary18th centurydefensivepositionsandpitythehaplessexposedenemytryingtogetafootholdonourrockbelow. Churchill,duringWorldWarII,withvisionbuoyedupbyhistoricalawareness,againmadeGibraltaraninternalfortress.With Eisenhower's aid British and Canadian engineers excavated 50km of tunnels creating one colossal air raid shelter and warehouse. Everything from partially constructed airplanes, offices,operationalcentres,roadtransport,ammunition,food, water, equipment, hospitals, hutted accommodation, galleys, rest areas and latrines were housed safe from enemy action. Take a guided tour within these more contemporary tunnels; youmayevenmeetanonagenarianrevisitinghiscreation. Our nightlife sizzles with action and romance; the casino, nightclubs,moonlightbeachwalks,gourmetrestaurants…but ifyouhavetoleave,lookbackatGibraltar.It'snotverybigis it? But it's famous throughout the entire world. Don't underestimateuslikeourenemieshavetotheircost.Wemayhave cannons peeping out behind every plant pot and are riddled with gun positions but you can safely walk through history andreceiveaquintessentialBritishwelcomeanywhereinGibraltar. St Michael’s cave right in the Rock itself Stroll towards town past the City under Siege exhibition, a Wildlife from sea level all the way up 122 stark reminder of a harsh and cruel world 300 years ago, or visittheArabcastle,datingbackto1333.Thenwindthrough ancientArabstreetsintotown.Ourvibrantmarinasbeckon. Take a meal at The Landings restaurant in Queensway Quay andletthebayentertainyou-maybetomorrowgamefishing, divingoradolphintrip? The Caleta Hotel perched between rock and sea Gibraltar 2012 123 Holdings Tourism milestone GRP Mr Montegriffo -Weplay2roles:weactasrealestateagents offeringthebestandmostaccurateserviceaswepossiblycan with the aim of building on our success. Our second role was developed10yearsagowhenwewentintoadvisingdevelopers whowerelookingtoinvestinGibraltar.Basically,wetooktherole ofanestateagenttoanotherlevelandgotinvolvedinprojects fromthemomentthedevelopershadlocatedaplot.Anotherkey factorthatwehavebeenkeentomonitoristhestructureofsales andtypeofclientsthatgetinvolvedinprojects.Inasmallplace likeGibraltar,theadvantageisthatweknowalotofourbuyers personally and are better able to guide developers toward the typeofbuyersormarketthatweaimtotarget.Thisgeneratesa greatdealofconfidencewithourdevelopersandbanksthatare financingtheprojects,andIbelievethatthestrategywechose ontargetingtherightmarketandfocusingonowneroccupiers thereby underpinning the developments, gave way to the successofKingsWharfandTheAnchorageunderdifficulttimes. Building on Rock-solid Foundations Agents on the ground, and higher Interview with Mr Louis Montegriffo, Director, BMI Group MrLouisC.Montegriffoisco-founderandDirectorofBMIGroup,aleadingrealestateagencyanddevelopmentconsultants basedinGibraltar.Louishasbeenakeyplayerinthepropertysectorsince1996andbeeninstrumentalinpositioningBMIat theforefrontofpropertysales,lettingandcommercialrealestateontheRock.Hehasactedforvariouspropertygroupsas developmentconsultantandplayedanimportantroleinthesaleofGibraltar’slargestcommercialcomplex.Hisknowledge inproperty,andthatofhisteams,istestamenttothesuccessofBMIandisunderpinnedfurtherbycloserelationshipswith leadingbusinesspartnersinthefinancesector. Milestone GRP - What impact has the global financial crisis had on Gibraltar’s Real Estate sector? Mr Louis Montegriffo -Fromourperspective,2008wasavery alarmingyearintermsoftheimpacttheglobaldownturnmight haveonus.Inthe1980’sandearly1990’stheeconomiccrisesreallyharmedGibraltarlargelybecauseoureconomyinthosedays wasnotasrobustanddiversifiedasitistoday.Safetosaythat most were surprised how well we managed to sail through this crisis.Theeconomycontinuedtogrow,unlikemuchoftherest oftheworldwithGDPgrowthof5%to8%between2008and 2012.Insteadthough,wehavesufferedacrisisofconfidenceas a result of external factors and internal expectations. We have also had an issue of oversupply of real estate, in terms of new buildprojects;howeveritwouldbefairtosaythatmostactually stillmadeprofits.GenerallyIthinkthemarketheldverywelland thepricespersquaremeterhavenotgonedownmuch.Insome areas,priceshaveactuallygoneup.Thetopendofthemarket, whichstandsatabout£5,500to£6,000/m²,hasmaintaineditself. Milestone GRP - Where does the market stand today? Mr Montegriffo-ThereistalkabouttheneedfornewpropertiesandtheGovernmentislookingtofurtherdevelopthelocal market,whichisconsideredagoodfeedertothepropertyladder.ThelastmajordevelopmentstobecompletedwereOcean VillageandKing’sWharf,whichhavenowbeenoccupiedforthe last2to3years.Speculativeinvestmentshavenowbeenre-sold 124 Milestone GRP - What is BMI’s client portfolio and what key projects is the company involved in going forward? Mr Montegriffo -Iwouldsayabout60%ofourclienteleisinternational and 40% is local and that has been the trend for a while.Wearecurrentlyworkingwithonecompanyrelocatinginto 700m²,whichisconsideredfairlylargeforGibraltar.Wearealso workingwithadeveloperwhoiscreating1,400m²ofofficeaccommodationinGibraltarforanestablishedplayer.Thataspect ofthebusinessisverypositiveandisdrivenbynewinvestment in Gibraltar. We are also at the early stages of working on two commercialdevelopmentswhichwouldamounttoasubstantial andmuchneededincreaseofofficeaccommodationinGibraltar. In residential sales our average market lies between £250,000 and £600,000 but lately we have been encouraged by larger transactions,includingsomewellabovethemillionPoundmark andwehaveseenseverallargesalescomingfromthelocalmarketwhichalsospeaksvolumesaboutourownlocalwealth. We are also delighted to have been instructed in the sale of Gibraltar’s newest and finest address; Buena Vista Park Villas isanexclusivelow-densitydevelopmentofvillasandtownhouseslocatedintheuppersouthdistrictoftheRockandperched onaclifffacelookingovertheBayandStraitofGibraltar.We havebeenhugelyencouragedbythefactthatoutofthe16£1m plusunits,nearly40%aresold;alltoowneroccupiersandall purchasersbaronearelocallybasedalready. Wearealsopleasedtoseehighnetworthindividualsrelocate from places such as Switzerland or other competing jurisdictionssuchasMaltaandMonacoforinstance.Thisshowsthat Gibraltarhasdoneagreatjobatcreatingtherightsortofenvironment,whichiswellregulatedandstillenjoysgreatstandards ofliving,bothculturallyandeconomically;whilstwearenowherenearMonacointermsofmarketandprices,Iamconfident thatGibraltarpresentsgreatpotentialandmarginsforthefuture. orrentedandthereforereflectsnewbusinessdevelopmentsand internalgrowthintheOnlineGamingandFinancesectors. Asfor2011,weknewitwouldbeagoodyearbutwedidnot expectittobeasgoodasitwasforBMI.Wereachedlevelsof interestnearlyasgoodas2006and2007andhadhighvolumes ofpeoplerenting.Thelasttimewesawsomethingsimilarwas around1998-1999,attheadventoftheonlinegamingboom.At BMI,wehaverecentlydealtwithseveralfunds,Insuranceand E-moneycompanies.Ibelievethemarketisstableandweare cautiouslyoptimisticinGibraltar. Milestone GRP - What is your outlook for the coming years? Mr Montegriffo - Some experts argue that another recession could be an opportunity for Gibraltar, others will argue that a smalleconomymightbemorevulnerable,sofarwehaveprovedotherwise.IwouldliketothinkGibraltariswellpositioned toattractmorebusiness.Gibraltarissmall,safe,well-regulated, EnglishisourfirstlanguageandweapplyCommonLaw,which also presents advantages for firms looking to relocate to our shores.AccesstotheEUmarketthrough‘passporting’andthe uniformtaxregimethatwasimplementedlastyearcouldlead companiestocontinuetotakestepstorelocatetoGibraltar.In short,wehaveanopportunitytocreatefurtherbusinessopportunitiesandhavetheeconomicfundamentalstodoso. Milestone GRP - What role does BMI play in Gibraltar’s market? Gibraltar 2012 125 Professional Services Professional Services milestone GRP re-fashion what is already available. This is however also why thingsarefairlyefficientinGibraltarbecausewecandrawonthe substantialvolumeofliteratureandlegaltomesanddealwithall thosewithourownchallenges.Thisissomethingthatwehave workedwithformanyyearsandithasprovenveryuseful.We havemanagedtore-draftlocallegislationand,infact,Ispent many years advising the Government on the implementation of European directives with regards to financial services, anti money-laundering,banking,insuranceandmanyotherdirectives.WhenGibraltarwasstrivingtoimplementthesedirectives, myteamandIbroughttensofEuropeandirectivesup-to-date, together with a consultant who was probably the most senior legaldraftsmanintheUKGovernmentatthetime. At the Centre of Gibraltar’s Legal Evolution Growing in and beyond Gibraltar Interview with Mr James Levy QC, Senior Partner, Hassans International Law Firm JamesLevyadviseslargepubliccompaniesonmergersandacquisitionsandpropertycompaniesonacquisitionsthroughoutEurope.MrLevyassistedtheGovernmentofGibraltaronitsdevelopmentofthejurisdictionasafinancecentre.This hasincludedadviceonanti-moneylaundering,banking,insurance,financialservicesandtrustlegislation.JamespioneeredtheuseofAlternativeDisputeResolutioninGibraltarandisaqualifiedMediator.AnHonoursgraduatefromManchesterUniversity,MrLevyattendedtheCouncilofLegalEducationinLondonandqualifiedin1972,becomingapartnerof Hassanssoonafterin1974.HewasappointedQueen‘sCounselinOctober2002.HeistheonlylawyerinGibraltartohave beenrated"Starperformer"byChambers&PartnersandLegal500forfouryearsinarow.InMay2008hereceivedthe highlyprestigious"LifeTimeAchievementAward"fromChambersandPartners.MilestoneGRPmetMrLevytodiscuss Hassans’tandemgrowthwithGibraltar’seconomy,theevolutionofthejurisdiction’slegalframework,aswellasthefirm’s internationaloperationsanditsplanstodoubleinsizewithinthenext2or3years. Milestone GRP - Hassans has a long history in Gibraltar. What are the firm’s roots? Mr James Levy -Thefirmwasfoundedbymyuncle,thelateSir JoshuaHassanwhoisalegendinGibraltar,asahumanbeing,as apolitician,asalawyerandeverythingelse.Hefoundedthefirm in1939.Ijoinedthefirmin1972andatthetime,wewereintwo roomsandakitchenwithSirJoshua,apart-timesecretaryand myself. We moved several times, bought neighbouring facilities and today, we have this office, the neighbouring premises and athirdpremiseonMainStreet.Sonowwehavereachedacertaincriticalmass;andasafirmwehaveaverylargeinternational practiceinfinancialservices,mergersandacquisitions,litigation, trustworkandmuchmore. Milestone GRP - From a legal perspective, what are the challenges Gibraltar faces? Mr Levy-Gibraltarhasevolvedfromatax-freejurisdictionto a financial centre, which applies taxes on its individuals and businesses. The challenge is therefore to be recognized as a verygoodEuropeancentrewherecompaniescanbebasedand operatefrom,wheretaxationisreasonableandtheinfrastructureisverygood.Byinfrastructure,Imeanmuchmorethanthe 128 physicalaspect,whichisverygood;wealsohaveanabundant poolofqualityprofessionalsandapplyCommonLaw,whichis very important as illustrated by some of the cases happening intheUnitedKingdom(UK)atthemoment,someofwhichwe areinvolvedin.Infact,someofthemattersbeingdealtwithin thesecasesemanatefromGibraltar.IwouldsaythatGibraltaris probablyoneofthemostefficientCommonLawjurisdictionsin Europebecauseofthegoodjudiciaryandcourtsysteminplace andbecausewehavelawyerswhocanactuallycopewithboth transactionalandlitigationwork. So the challenge now is for the larger countries and corporations to recognize Gibraltar as a legitimate European centre wherepeoplecanbasetheirheadoffices,inasimilarwaythey doinLuxemburg,IrelandorMalta,forinstance. Milestone GRP - How much has to be re-invented or even created in Gibraltar in terms of legislation, and how is that helping the Rock position itself globally? Mr Levy - A lot has to be re-fashioned in Gibraltar. Indeed, manyUKprecedents,transactionalorlitigationdocumentation andtheso-called‘WhiteBook’applyinGibraltar;butithasits own peculiar difficulties and therefore from there, we have to These directives now apply in Gibraltar and it is safe for large companiestoestablishhereintheknowledgethatwearethe same as Ireland, Malta, Cyprus or Luxembourg, for instance. Moreover,wehavetheproximitytoalargehinterlandwithgood facilities in terms of recreation; therefore, Gibraltar is now positionedtotakeoffasanimportantfinancialcentreinEurope. Ihavebeenadvocatingforreasonabletaxationsincethemid90’s,forwhichpolicyhasnowbeenimplementedafteranumber ofyears.Wenowhavetoattracttherightsortofcompaniesto GibraltarapartfromtheGamingcompaniesthataredoingvery wellhere.Asyouknow,Gibraltarattracts la crème de la crème intheOnlineGamingworldandwewanttoremainexclusivein general. Milestone GRP - Could you please provide an example of legislation that has been specifically re-fashioned in the context of foreign investment? Mr Levy -Wehaveverygoodantimoney-launderinglegislation whichisbasedonEuropeandirectivesandUKlegislationand workswell.Moreover,wehaveexcellentbanking,insuranceand financialserviceslegislationingeneral.Gibraltarisanimportant gatewayfor‘passporting’servicesintheEU;whilstaGibraltar licenseisnoteasytoobtain,itismoreuser-friendlythaninbiggercountriesandallowscompaniestopassporttheirservices inanyEuropeanstate. Forexample,wehaveactedforlocalbanksandotherfinancial servicescompaniesthathave‘passported’theirservicesinto Spain,despitetheissuesbetweenourtwocountries,andother EU jurisdictions. Similarly, we have acted for Spanish banks that have ‘passported’ their services here in Gibraltar, as well as other European companies. Gibraltar is not only attractive asabaseforfinancialservicesprovidersbutalsoforfinancial institutionsfromoutsidetheEUtolicensehereand‘passport’ intotheEU. Milestone GRP - What are some of the key criteria applied for business registration in Gibraltar? Mr Levy-Ifwearetalkingaboutinsurance,bankingandfinancialservices,thesamecriteriaareappliedasanywhereinEurope. Theonlydifferenceisthathereonehasgoodandquickaccess totheFinancialServicesCommissionandthereforeonecanget promptanswerstoanyquery.Forinstance,settingupahedge fundorabankisquickerthaninotherplacesbecauseGibraltar isverysmall;butthevalueofaGibraltarlicenseisequivalentto alicenseinLondon. WhatIthinkpeopledonotunderstandyetisGibraltar’ssophistication, the valuable asset of our location, being next to the hinterlandaswellasthegenerallevelofinfrastructurehere.The gamingcompanieshaverecognizedthepotentialGibraltarpresentsasaheadofficelocationbuttheinternationalcommunity hasyettodoso. Milestone GRP - As an authority in your sector and on Gibraltar in general, how much of your work at Hassans revolves around reassuring investors? Mr Levy -Notsomuchtobehonest;IthinkGibraltar’sstability isquiteclear.However,peoplesimplyjustdonotthinkofus.We needtobepublicizedmore.ThisishowtheOnlineGamingtrend started;andlookatwherewearenow.IamofteninLondonand people often admit that they did not consider Gibraltar as an investmentdestination.Asafirm,wehavesetupanumberof bankshere,especiallyinthe1980’sandthe1990’s,tothepoint whereitalmostbecamefashionableforbankstosetuphere. Today, things have changed simply because of the way the world functions. We are however seeing a number of funds setting up here; our Funds department only must have 60 to 70ExperiencedInvestorFundsinitsportfolio.Buttothisdate, GibraltarisstillnotthefirstpointofcallandIthinkweneedto improveourimage,especiallyforfunds,financialservicesand indeedforheadquarters. Milestone GRP - How has Hassans’ work in Gibraltar influenced the firm’s operations internationally? Mr Levy -WestartedinGibraltarofcoursebuttodayitisour baseaswehaveofficesinLuxemburg,inSpainandwe’recontemplatingopeningnewpremisesinCyprus.Whilstitisnotincidentalthatclientscometoushereandtheyoftenwanttobe inGibraltar,ourclienteleisveryinternational.Wedoagreatdeal ofworkforpeopleoutsideGibraltar.Forexample,wehavejust completedaLetterofIntent(LOI)foralargeAmericancompany withaEuropeancompanyinrespectofassetsinSouthAmerica, AfricaandAsia.ThissortofworkhasverylittletodowithGibraltarbutratherwiththefactthatourclientswerehereandmany companieshereareveryinternational. Gibraltarhasbeenourfoundationanditisourintentionthatit willremainourbaseforalongtime,evenifweexpandhugely. For one, my family has been in Gibraltar since the early 18th centurysowehaveover300yearsofhistoryhere. Milestone GRP - You have stated your intention to double the firm’s size within the next couple of years. Which direction will this expansion take? Mr Levy -IexpectourgrowthtobeorganicandIhopeitwillbe matchedbythesettingupofsubstantialheadofficesforlarge companiesthatwillrequireourservices.Weemploytheservices of numerous in-house chartered accountants. I would indeed saythatthefirmwillprobablydoubleinsizeinthenext2to3 yearsalongsideGibraltar’sgrowthandthatofourpractice.For instance,oneofmysonsjustjoinedusandanotheroneofmy sonswillstartnextyearbutofcoursetheystartasIstarted,from thebottom,astheyneedtolearn. Gibraltar 2012 129 Professional Services milestone GRP distribute dividends without any withholding tax. From a cash managementpointofview,italsobecomesquiteinterestingas theprofitswouldaccrueataverylowleveloftaxation. Milestone GRP - What challenges do companies face when doing business in Gibraltar? Upholding International Standards A well-regulated European jurisdiction for serious investors Mr Pisharello-Ithink,inthiscase,oursizeworksgenerallyin ourfavour.Forinstance,itiseasiertogettoknowtheorganisations and people with which companies need to engage to dobusiness.Wedohoweversufferfromalackofofficespace, whichisasymptomofourownsuccess.Forexample,thenew gamingcompaniessettingupinGibraltar,whichemployabout 10%oftheworkingpopulation,haveabsorbedmuchofourofficespace.ThenewWorldTradeCentreexpectedtosetupin Gibraltarsoonandotherdevelopmentsinthepipe-lineshould alleviatethesituation.Livingspacehasbeenanotherproblem, butatthesametime,theneighbouringSpanishcitieshavebenefitedfromitandprovidedtheneededbuffer. Milestone GRP - International firms like Baker Tilly are governed by global principles and adopt local expertise and knowhow. How is this balance best illustrated in Gibraltar? Interview with Mr Joe Pisharello, Chairman, Baker Tilly Gibraltar MrPisharelloqualifiedasaCharteredCertifiedAccountantin1991andhasbeenworkinginpracticeinGibraltareversince, acquiringin-depthknowledgeandexperienceofthelocalcommercialandbusinessenvironment,particularlyinthefieldoffinancialserviceswherehehasspecializedinbankingandinsurance.Histeam’sexpertiseininsurancehasresultedinBakerTillyGibraltarbecomingaleadingfirmintheprovisionofauditandadvisoryservicestotheInsuranceindustryinGibraltar.Hehas servedasPresidentoftheGibraltarSocietyofAccountantsandiscurrentlyamemberofitstaxfaculty.MilestoneGRPspoke tohimaboutthechallengesandopportunitiesofdoingbusinessinGibraltar,andhisfirm’soutlookforitsfutureontheRock. Milestone GRP - Which do you identify as the key characteristics that most affect the set-up and operation of business in Gibraltar? Mr Joe Pisharello -GibraltaroffersthebenefitsoftheBritish legalandregulatorysystemcombinedwiththeattractivenessof beinglocatedinabeautifullocationsuchastheMediterranean withgreatweatherandgreatleisurefacilities,aswellasitsproximitytoNorthAfricaandtoSpain.BeingpartoftheEuropean Union also brings business opportunities to Gibraltar, such as beingabletotakeadvantageoftheSingleEuropeanPassportin areassuchasbanking,insuranceandinvestmentservices.The passportallowsGibraltarlicensedentitiestoprovideservicesor setupsubsidiariesandbranchesinotherEEAmemberstates. TherearealsoattractivetaxbreaksforHighNetWorthindividualsandpeoplewithspecialistskills. Intoday‘svolatilefinancialandeconomicclimate,manypeople arelookingforplacestheycantrust,wheretheregulatoryenvironmentissufficientlystrongandrobustbutwithoutitbeing detrimentaltodoingbusiness.PeopleconsideringGibraltarnowadaysdosobecausetheywanttobringbusinesstoaplace wheretheyaregoingtobewellregulated;infact,ourclientacceptanceproceduresaresuchthattheywouldactasadeterrent forpeopleconsideringGibraltarforthewrongreasons.Thisis thekindofmessagewewanttosendtotheworld:Gibraltaris theidealplaceifyouwanttodogoodqualitybusinessinawellregulatedenvironment.Nevertheless,Ithinkthattheinstitutions Mr Pisharello -BakerTillyInternationalisoneofthe8largest accounting networks in the world. Most of the other large accounting networks are also represented in Gibraltar. Baker Tilly Gibraltar, our predecessor firms, can trace its origins to the1920’sandwearealsooneofthelargestfirmshere.Asa memberfirmoftheBakerTillyInternationalnetworkwehaveto follow quite strict rules; however, as an independently owned firm,weenjoyconsiderableautonomytobeabletotakedecisionslocallyandquickly.Ourmembershipalsoallowsustobring in business, or refer business, from other parts of the world. Crucially, clients may seek international solutions and we can dothatbecausewearerepresentedgloballyinmorethan100 countries.Thisgivesusandourclientstremendousleverage. Milestone GRP - Do you see any opportunities coming from new markets and new investors coming to Gibraltar? Mr Pisharello -Yes.AsGibraltarisincreasinglyconsideredby moreandmoreplayersasamodern,wellregulatedjurisdiction, itwillcertainlybenefitfromthat;wehopetherewillbea"tipping point"effectifyoulike.Areassuchasfundsandinsuranceare potentialgrowthareas.Infunds,forinstance,thenegativeeffectsfromMadoffcouldmakeinvestorsturntowellregulated andtaxneutraljurisdictionssuchasours.WithrespecttoInsurance,manycompanieshavelookedatGibraltarandhavecome in,consideringGibraltarasanexcellentlocationfromwhichto insuretherisksofassetsandriskssituatedintheEuropeanUnion by, for example, setting up captives here. This has been a traditionalgrowtharea.Ithinkthatapartfromwhatishappening aroundtheworld,thefutureisstillbrightforus. wehaveinGibraltar,liketheFinancialServicesCommission,for instance,havetaken,whereverpossible,apragmaticapproach in the sensible application of EU directives and regulations to avoidregulatorycreep.IalsobelieveitwasimportantforGibraltartorepositionitselffromtheinevitablenegativeconnotations ofbeinglabelledanoffshorecentreor‘taxhaven’tothatofa reputableonshoreinternationalfinancialcentre;andthisisexactly how we want to be seen. For example, until recently we were grey listed by organisations like the OECD but, through measures such as agreeing Tax Information Exchange AgreementswithanumberofcountriesincludingtheUSandUK,we have been removed and are now white listed. We also introducedothersignificantchangestoourlegislationtoeffectively repositionourselves. Wenolonger,forinstance,discriminatebetweenlocalandoutsideinvestors;allbusinesses,whichaccrueandderiveincome inGibraltarwillbeliabletotaxinGibraltar.Thisrepresentsabig attractivenessinoperatinginGibraltarwherethetaxrateis10%, probablyoneofthelowestintheEuropeanUnion;andthatisthe headlinerate.Dependingonhowtheoperationsaresetup,the actualeffectiveratecouldbelessthan10%.Forinstance,wedo nottaxpassiveinvestmentincome,dividendsorroyaltiesandwe donothavecapitalgainstaxorVAT.Thisprovesveryattractive for someone who considers investing in Gibraltar. In addition, anydistributionofdividenddoesnotcarryawithholdingtax.So, imagineanoutsideinvestorsettingupanoperationinGibraltar paying tax at a maximum rate of 10% and then being able to S ample • Sa m p l e • S a m p l e • S a m p l e • S a m p l e • Sample 130 Gibraltar 2012 131 Professional Services milestone GRP Mr Vaughan - Our firm provides not only the expected services of accountants, such as audit, accounting and tax, but as a professional services firm our range of services is broad andthedepthofknowledgeandexpertiseisevidencedbythe relatively, for Gibraltar, high staff numbers. This makes us the leadingaccountancyfirminGibraltarintermsofsizewithover 110 partners and staff. Our local knowledge and practical experience in the full range of business and legal issues facing inwardinvestors,andthosebusinessesandindividualsalready establishedinGibraltar,allowsustoadviseacrossallindustries andservicessectors.Inaddition,withouraccesstotheglobal networkofPwCfirms,andthespecialistandexpertresources providedbymorethan169,000peoplein158countries,wecan adviseonpracticallyanyareaandsubjectmatterthatourclients mayrequestfromus. Serving Businesses On and Off the Rock Local knowledge, international network Interview with Mr Colin Vaughan, Territory Senior Partner, PwC Gibraltar Colin Vaughan is PwC Gibraltar’s managing and territory senior Partner, and has been with the firm since 1985. Mr VaughanistheVicePresidentoftheGibraltarSocietyofAccountantsandhasservedseparatetermsasChairmanof theSociety’sAudit,TaxandAccountingFaculties.HeiscurrentlyaboardmemberoftheRegulator’sAuditAdvisoryPanel,theFinancialCentreCouncilandtheInvestorCompensationScheme.Heisalsoanalternateboardmemberofthe DepositGuaranteeScheme.HemetwithMilestoneGRPtodiscussGibraltar’sinvestmentpotentialandopportunities itoffersemergingmarkets. Milestone GRP - How do you compare Gibraltar as an investment destination to other markets? Mr Colin Vaughan -Gibraltarisaself-governingterritorythat joinedtheEUatthesametimeastheUK.MostofitsinhabitantsarebilingualinEnglishandSpanish.Fromaninvestment destinationperspective,ourmaincompetitorsareotherjurisdictionswithaBritishconnection,pastorpresent,suchasthe ChannelIslands,theIsleofMan,CyprusandMalta.Nevertheless,unlikesomeofthesecompetitors,asGibraltarispartof theEU,itcantakeadvantageofEUdirectivesandpassporting servicesassociatedwiththis–thissuitsmanyfinancialservicescompanieschoosingtoinvesthere.AndunlikethosecompetitorswithintheEU,GibraltarisexemptfromapplyingVAT. Milestone GRP - What are some of the concerns and other factors that investors and businessmen consider when coming to Gibraltar? Mr Vaughan - Without having visited Gibraltar, investors are mostlyconcernedabouttheregulatoryenvironment,theability to operate at a low cost base, and of course, taxation. The truthisthattheregulator,theFinancialServicesCommission, isveryefficientandresponsivetoinvestorapplications,which impacts positively on investor confidence immediately. By comparison to other jurisdictions, Gibraltar offers a low operatingandlivingcostbase,withahighstandardofliving.Gibraltartaxesallcompaniesataheadlinetaxrateof10%,and 132 respectto“category2”individuals,effectivelycappingtheannualtaxliability,Gibraltarisattractingindividualswithahigher levelofwealththanbefore,whichhasledustostartoffering Family Office services to those who require such dedicated service. Milestone GRP - According to PwC‘s Global CEO Survey, CEOs see strong opportunities in the BRIC countries. How does that impact your activities here? Milestone GRP - What do you offer High Net Worth Individuals (HNWI)? Mr Vaughan -OurleadershipinPwCconcurswiththesurvey asdoestheGovernmentofGibraltar,whichhasidentifiedthe BRICcountriesasprovidingmajorpotentialforinwardinvestment. For some years, Russia has represented growth areas for PwC Gibraltar, and it is likely that this will continue. We havealreadystartedtofocusontheotherBRICcountriesand wecanexpectmoreactivitystemmingourway,notonlyfrom Brazil,butfromtherestofSouthAmericainthenearfuture. Mr Vaughan -PwCoffersapersonalconcierge,orhand-holding,servicetohighnetworthindividuals.Wehavededicated teamssupportingthoseHNWindividualsthroughtheapplicationsrequiredtoestablishinGibraltar.Theservicesincludeliaising,ifapplicable,withimmigration,assistingintheopening of bank accounts and in finding suitable properties. Beyond this, we offer private wealth management solutions for those needingitonanannualbasis.Duetothespecialtaxrateswith We fully support transparency and disclosure, which is why theGovernmenthassignedTIEAs(TaxInformationExchange Agreements)with20countriesandintendstoenterdoubletaxation agreements with other territories as well. We feel it is imperativethatGovernmentislobbiedtoensurerelevantTIEAsanddoubletaxationagreementsaresignedwiththeabove countries to allow efficient business relations with investors fromthesecountries. theGovernmenthasembarkedonapolicytoreducepersonal income tax, which is already relatively low, over the coming years.Soasajurisdiction,Gibraltaristaxcompetitive. Milestone GRP - Is human resources a major challenge for overseas investors? Mr Vaughan - Gibraltar’s education system mirrors the United Kingdom’s except that there are currently no universities inGibraltar,althoughtheGovernmentofGibraltarisexploring thepossibilityofsettingupauniversityinGibraltarinthenear future. Gibraltarian students continue their further education atuniversitiesintheUnitedKingdom.Thesestudiesarefully fundedbytheGovernmentofGibraltar,whichrecognisesthat investmentineducationisnecessaryforthefuturesuccessof Gibraltar. The number of Gibraltarian students continuing with further education,includingsubsequentprofessionalqualifications,is thereforeproportionatelyhigh.Accordingly,Gibraltarprovides abroadbaseofhighlyeducatedandqualifiedpeople.Nevertheless, the continued success of Gibraltar as an investment locationhasplaceddemandsonhumanresources,whichcannotbemetbylocalsupplyalone.Asaresult,asignificantproportionoftheworkforceinGibraltarisnon-Gibraltarian. Milestone GRP - What services does PwC offer investors looking at Gibraltar? Gibraltar 2012 133 milestone GRP w w w. m i l e s t o n e g r p . c o . u k