Monday, March 17, 2014

17/3/2014: That Ugly Rating for IFSC... Gets Uglier With Time...


It's dog-eats-dog ugly competition going on out there in the broader wider world of the global financial centres. Competition for talent, managers and investors confidence, regulatory efficiency, tax environment, compliance and supervisory quality etc etc etc...

In that competition, Ireland's (well, most Dublin's) IFSC used to be one of the top dogs... 2007-2009 we ranked in top 25, 2010-2012 in top 26-50... Just as Irish domestic banks went through bust to boom cycle (in share prices and capital, if not actual performance and health), the Government has spent extraordinary amount of resources promoting IFSC as being an unrelated entity to the comatose domestic banks.

The efforts, so far, are not exactly paying off. As the chart below clearly shows, our IFSC ranking in the Global Financial Centres Index continue to fall, and fall catastrophically:


As the main rankings table in the latest GFCI report clearly shows (http://www.longfinance.net/images/GFCI15_15March2014.pdf), our 'non-brass-plate' (remember the pivotal point of Government's argument in favour of our tax and regulatory regimes is that they create 'real' activity in IFSC, as opposed to just setting space for brass-plate operations) are now ranked behind such brass-plate domiciles as Cayman Islands (ranked 43rd), British Virgin islands (ranked 44th), Isle of Man (ranked 51st), Gibraltar (ranked 53rd), and so on...

Actually, Dublin is now lower ranked than 'Mighty' Almaty (Borat-the-banker anyone?). Or for that matter tiny Wellington (yep, New Zealand). The minuscule Malta now ranks 67th, just one tiny bitty place behind the 'Intergalactic Centre of Excellence' on Dublin's Liffey shores.

May be, just may be, our IFSC figure heads can figure out that their advanced age and heavy past careers emphasis on politics rather than finance might need to be augmented by younger blood and broader thinking? Or that Irish Government continued insistence on listening to the entrenched insiders might need to be diversified by attempting to hear new voices in global finance?

Here's the list of top 25 world-wide financial centres...


Note two regularities:

  1. Of smaller, specialism-driven locations, Swiss are doing their best to stay at the top. Their strengths: human capital, tax system that favours high skills, open society and huge degree of international and internal (meritocratic) mobility. Our weakness: glass ceilings for foreigners, high taxes on skills, transitory human capital and more closed society focused on promoting insiders and taxing outsiders.
  2. Of smaller (similar to Dublin) locations at the top, excluding the Swiss, we have indigenously-driven expertise of Vienna, and international-mobility focused Lux and Monaco which openly flaunt all rules about not being brass-plating havens. Their strengths: expertise built over centuries, reputation for regulatory and taxation stability, and extreme affinity for zero or near-zero taxation.
These two models, and may be some hybrids of others, can probably serve us well in regaining 20 or so places in the rankings. To rise further will require more than that.

Likelihood is, however: our arrogance will continue pushing Ireland down the well-trodden road of arguing for more corporate tax optimisation schemes and sending more shamrocks-in-the-bowl delegations of aged men in 'bankers ca 1956' suits to 'rescue' the golden goose of growth that is the IFSC... The steering committees will be meeting, the back doors to various Government departments will continue swing open for insiders, and 'Johnny the Foreigner' with skills and talents will remain a hostage of complex, immovable bureaucratic apparatus of visas, permits, restrictions and costs.
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