The States should be investing £50 million in new enterprises
Monday 15th March 2010, 3:00PM GMT.
From Kevin Keen.
JOHN Boothman is completely right to urge Jersey to diversify its economy. Although diversification will not do much in the short term for our structural deficit, long term it certainly will. Like most Islanders I pray that the financial services golden goose continues to lay those eggs but, as any investment adviser would tell you, it is very unwise to only have one kind of egg in your economic basket.
Unfortunately, over the years our government seems to have been poorly advised about economic diversification. I have often been told that Jersey would be wrong to consider any new industry that did not immediately produce the same gross value added per capita as our mature financial services sector. To be fair, the Economic Development department have been doing their best to change this recently, but they have also been subject to some penny-wise, pound-foolish economies.
For example, only last week we heard that Economic Development still don’t have full access to money promised for the Tourism Development Fund way back in 2002.
About 18 months ago I wrote to the Jersey Evening Post suggesting that Waterfront land should be deployed to support diversification, perhaps by the creation of an enterprise zone.
I now think the States should also consider investing a small part of its strategic reserve, alongside private sector partners, in sectors unrelated to financial services, although our financial services sector would certainly play a big part in this strategy – allocating capital, structuring deals and, hopefully, the Channel Islands Stock Exchange could be used to facilitate private investment in new ventures, especially if suitable tax breaks were available.
We should also take the opportunity to ensure that when our corporate tax system is modified (again!) it allows Jersey to collect some tax from these new ventures, wherever their shareholders may live.
Israel, a comparatively small country with all sorts of problems and no natural resources, has shown that economic diversification is possible. At the end of 2009 this country had more companies listed on NASDAQ than Europe, Korea, Japan, Singapore, China and India combined. Why? Israel has been prepared to take bold action, including a willingness to invest risk capital in new ventures. What could Jersey, with its long history of entrepreneurial activity, achieve, I wonder?
Mr Boothman puts forward some great ideas for new industries. As well as new exporters I would like to see opportunities pursued for import substitution, perhaps finally making energy production from tidal and wind power a reality before oil gets even more expensive.
So as well as sorting out their current financial headaches, the States should get on and establish an economic diversity fund with, say, £50 million of seed money from the strategic reserve and the Waterfront land.
This should be backed with suitable tax breaks and a big advert in Global Entrepreneur’s Weekly (or similar publication) announcing that Jersey really is open for business. We will need to take a 20-year view of such a plan, but the sooner we start, the sooner Islanders, particularly our children, will benefit.
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I don’t disagree with wee Kevin on this just get a bit tired of a man who clearly really wants to be a politican but does not stand for election. To be fair at least he is making a bit of sense this time rather than just spouting the usual failed 1980s privatise-privatise-privatise economics by numbers that he usually comes out with. Then again the new direction here is probably just another bandwago to jump on with Bankers United collapsing the world over and threatening to take all of us with them.
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I am in agreement with Mr Keen, good to see examples being given where economies in difficult positions can diversify. Consider also whether the economic stimulus package is being spent wisely, whether the States do have a handle on economic indicators and whether investment in items such as fibre optic broadband to support online gaming or a technology park rather then a Waterfront Enterprise Board set up would be of more strategic value.
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No 1.
“just get a bit tired of a man who clearly really wants to be a politican but does not stand for election”
Keen and Boothman both like to be in the local limelight, but I’m not convinced either want to be politicians.
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The finance industry in Jersey is doing a terrific job in the style of the preverbal Purser rearranging the deckchairs on the Titanic.
The latest figures released by Jersey Finance show the impact of the economic downturn on the finance industry. In the last reporting year Bank deposits were down by 20 per cent while the value of funds under administration fell by 30 per cent in 2009.
However, there was some room for cautious optimism with the values of specialist funds growing as compared to the previous quarter. These include hedge, private equity and real estate funds.
Meanwhile, the value of funds under investment management increased from £18.4 billion to £19.7 billion – a rise of 4.4 per cent – during 2009.
Jersey Finance chief executive Geoff Cook said that the decrease of almost 20 per cent for Jersey’s banking deposits during 2009 was hardly surprising given the very low level of interest rates throughout the year.
In the case of deposits what is being seen is not so much as a trend as a rout. In December 2009 there was £165bn on deposit in Jersey, down form £206 bn a year before and £212 bn a year before that. Funds under management were down to £166 bn from £241 bn a year before.
Geoff Cook of jersey Finance says cash is down due to low interest rates: that’s absurd; they’re down all over the world. Jersey would not see cash deposits fall for that reason. Total funds leaving Jersey in 2009 amounted to £160 bn.
What possible explanation could there be for funds leaving in such enormous quantity?
It’s a simple and logical one. In many of the prime markets for Jersey there have been tax amnesties. Italy is one, and its biggest market of all (the UK) is another.
What alternative explanation is there?
Is this is anything but the outflow of huge amounts of illicit funds. If so then all these previous protestations that there were no illicit funds in Jersey, it had never welcomed any and all its systems were tight enough to ensure none remained look hollow.
All this is disastrous for Jersey. The financial services industry is 55% of Jersey’s GDP, which is now bound to be in freefall.
Jersey looked to financial services to be its salvation. But its business model, as many admit, was based on illicit funds.
The future of Jersey’s economic growth is to be found in tourism and the small business sector, not the corporat financial world – and that is a fact that will chage the economic face of Jersey very much for the better.
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Good points no. 4.
It should also be noted that many deposits/funds etc. are held in Euro’s and Dollars. Sterling has depreciated considerably against these currencies in the last two years, so all other things being equal, the sterling value of deposits/funds should have risen by about 20%.
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Agreed, good points No.4
I guess new financial services centres with lees established regulations and able to offer professional services at a fraction of the cost will also have a catastrophic effect on Jersey’s Finance Industry.
If, as reported in Andy Sibcy’s front page report in yesterday’s JEP is correct, i.e the average wage in the retail sector is £430 a week, I dread to think what the average wage for professionals in the financial services sector is.
If tourism is to be Jersey’s saviour once again, a lot of forward thinking and major investment will be required, if we are once again to have unique selling points that will attract visitors. However, even if our States Assembly was remotely capable of taking on such a challenge, I doubt Jersey has the potential to be a major tourist destination once again.
What do we offer at the moment? Expensive travel and accomodation, a town that is virtually a building site, limited and more expensive shopping, roads that resemble those of a Third World country, the list just goes on. So, whay would somebody want to holiday in Jersey?
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Very good point Dave (no5). Additionaly with the extra regulatory effect from the EU the finance industry will have greater challanges ahead.
As for why people want to visit Jersey, the reason is that it is beautiful. It must not become over priced.
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Peter, reason people want to visit Jersey is because its beautiful!
I agree, it is in places, but if I was in the UK or elsewhere in Europe, I could find as good as, or in honesty, many better locations to visit than Jersey, without having to take a flight or a ferry or pay overinflated prices for mediocre services and products.
Jersey is not as special as many people seem to make out, just look around you, and, then consider your alternatives for a short break if you live in the UK or the Continent. Much more beauty and interest on your doorstep I think you’ll find.
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