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Caruana’s “Mediterranean Rim” Flame

By vox 07 April, 2006 06:25 This article has been read 777 times.

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With so much currently on his plate – the new constitution, the tripartite talks with Britain and Spain, and the vexed question of the Rock’s tax structure are only a few – it is understandable that the Chief Minister appears to have pushed onto the back burner his proposals for what could become a powerful economic alliance of three relatively small Mediterranean jurisdictions – Gibraltar, Malta and Cyprus. However local members of the financial community who heard Mr Caruana float the concept at the Commonwealth Business Forum in Malta last November are carrying the matter forward. The Gibraltar arm of SG Hambros Bank is looking to Malta as a potential market for its structured financial products and trusts and Jonathan Mills, who heads the Barclays corporate division in Cyprus is keen to establish closer cooperation with the Rock.

In a significant speech to the Forum – which, however, received little attention on the Rock - Mr Caruana urged greater cooperation between Malta, Cyprus and Gibraltar which he described as the three "Mediterranean rim" countries.

Global, regional and other groupings of countries were almost always advantageous to small countries, Mr Caruana said at the time. “They tend to rebalance the natural disadvantage of small size and thus level the playing field to our advantage – not just politically, but economically as well. The political advantages are clear – a meaningful stake in regional and global decision-making and consensus forming processes. These political advantages are immediate and automatic The economic advantages are perhaps greater still, but need to be nurtured and exploited. They do not endure automatically. They do not happen by themselves. They have to be seized through effective execution of carefully laid plans and policies.”

“What the Chief Minister said in Malta makes a great deal of business sense,” says Franco Cassar director of SG Hambros in Gibraltar and, coincidentally, Malta’s honorary consul here. “Although Malta’s financial service industry is reasonably sophisticated, structured products – an area in which SG [Societe Generale] is a world leader – are relatively new and we are promoting them through intermediaries.”

Because Maltese law follows the Napoleonic civil code, special legislation had to be passed to allow trusts to be sold… And it was stressed that this was not a way to avoid tax, Cassar explains.

“Though the Maltese save, historically they have put their money, their savings, into property,” he adds.

In fact, helping Malta’s financial sector get to grips with trusts and structured products seems very much a practical example of the cooperation which the Chief Minister urged in his Forum address. “How can we help each other overcome our disadvantages and share our advantages to mutual benefit?” he asked.

“Consider that there are three countries taking part in this forum, Malta, Cyprus and Gibraltar, that are part of all three of the Commonwealth, the European Union and the Mediterranean rim. Let’s call our-selves ‘bridge countries’. The economic scope and potential is huge for bridge countries to assist others to exploit the economic opportunities offered by the blocs or groupings to which the bridge country but not the other belongs.”

Commonwealth countries had the advantage of tending to have similar commercial law, legal and judicial systems, political and administrative decision-making processes and commercial ethos. “We tend to be Anglophone,” he added.

“These factors (which we might call our ‘Commonwealth heritage’) make it particularly attractive and reassuring for our business people to do business with each other and, equally important, through each other with regional third parties. EU countries enjoy the advantage of harmonised trade regimes, single markets and market access rights. Mediterranean rim countries enjoy cultural and historical links, and relationships that enable us to understand each other and how we do things perhaps better than people from further away might understand.”

Putting all of these together – “which is what we ‘bridge countries’ that are in all three categories the EU, Mediterranean, and Commonwealth offer” - and the business opportunities became obvious. Businesses and companies in non-Mediterranean or Commonwealth countries which were not in the EU could, through the establishment of businesses in the bridge countries, obtain access to EU markets for their capital, services and goods, while dealing in a language (English) with which they were familiar, as well as laws, legal, political and administrative systems with which they would be familiar – and advised by professionals, lawyers, accountants, banks and others – which operate more or less like the ones at home.

“The reverse is true as well. EU companies can similarly, and with similar benefits, better exploit and structure business opportunities in Commonwealth countries and non-EU Mediterranean. Taking advantage of the better cultural and systemic experience and understanding that bridge countries have of commonwealth countries.”

The permutations were almost endless, he added. And the scope for enhanced business opportunity through intra- and interregional, and global networking and partnerships considerable.

“These thoughts are not just theoretical. They are real. They are already real to many international businesses which are already taking advantage of these very same advantages in my small country to bridge between regional and cultural blocs, and between different politico-legal systems, and thus to better and more safely exploit business opportunities within a particular region of which they are not a part. And this bridging of the one country’s disadvantages and another countries’ advantages provides economic benefits to both.”

Because Gibraltar was in continental Europe and the UK was responsible for our external affairs, we are part of the EU and benefit from EU legal regimes and market access rights, he said. This combination allowed Gibraltar to take full advantage of the economic opportunities available from EU membership, Commonwealth and Mediterranean “rim” membership. It had enabled us to construct a vibrant, and prosperous economy precisely by exploiting our status as a “bridge country” into the EU markets, and by combining our Commonwealth heritage (legal systems, laws, political and administration systems) with our physical location in the Mediterranean to exploit “the huge international inward investment into the Mediterranean rim, particularly in the sectors of tourism, real estate, shipping and financial services sectors.”

Non-EU companies gain access to the EU through business established in and through Gibraltar. Illustrating that “this bridging works in practice”, Caruana pointed out that though Gibraltar was “a very small country – only 8 sq. km with a population of only 30,000 people” yet it had a GDP of nearly £600 million and, if an independent country would have the 12th highest GDP per capita in the world.

“We receive seven million visitors a year. We are the Mediterranean’s largest ship bunkering and ship re-provisioning port. We are probably the world’s leading online gaming jurisdiction and we have a prosperous and growing international finance centre. Many international companies are organising much cross border, international trade and business, particularly into Europe, from a Gibraltar, fiscally competitive, base”, the Chief Minister pointed out.

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