Growing the Hub in Curaçao

A hub is ‘a center around which other things revolve or from which they radiate; a focus of activity, authority, commerce, transportation, etc.’ Historically, Curaçao is already familiar with what it means to operate as a hub. It has had great success as a transportation hub, operating, at one point in time, the 5th busiest port in the world – the last-stop on the way to the Panama Canal, the first stop on the way out.

Text Gordon Casey, Managing Director At Front Shore

In the world of financial services, starting in the late 1930’s, Curaçao pioneered the basic elements of offshore structures that can now be found throughout the world and led the move to globally structured asset protection vehicles. In this sense, Curaçao was a hub for the legal ideas that were germinated here.
In the late ‘70’s and early ‘80’s, some of the most successful and popular hedge funds were set up on Curaçao. The resulting boom in offshore administration services locally turned Curaçao into a hub for those services, with a number of globally competitive organisations starting on the island. Not to mention that the industry itself, fund administration, was born on Curaçao and is now a huge part of the global financial network.

Today
The fund administration business is no longer based on Curaçao; nowadays, most of the operators have their main offices onshore. The decision to move back onshore was driven by a combination of the relaxation of tax rules onshore and the stringent labour laws operating offshore (Curaçao is not the only offshore jurisdiction to see labourintensive operations shift onshore in the past decade or so).
Similarly, in the banking industry, the current regulatory environment is squeezing the profitability of the existing players. The rising cost, in every sense of the word, of compliance is making it more difficult for new entrants to innovate and find a niche where they can participate in the marketplace – leaving mostly the global behemoths behind.
Another factor these days is that global asset protection structures established on Curaçao are just one of dozens competing in a marketplace that is primarily driven by price. This results in an industry that is driven by volume and, wherever possible, technology.
The common factor across these industries is the amassing of experience and knowledge and the creation of a talented and skilled workforce, coupled with the shrinking of an industry and a reduction in opportunity for those workers to exploit their own experience here on the island. The current situation, insofar as the financial service sector is concerned, is that we have a highly experienced but underutilized labour force.

The Challenge
In a commoditized market such as offshore structures, it’s hard to hold on to any unique structure or feature for long – other jurisdictions can copy it overnight if they have the political will. Additionally, the global attitude to the offshore industry as a whole has shifted so quickly and comprehensively that financial incentives are no longer sufficient motivation or justification; not for those establishing the structures nor for those who we are asking to enter into double-taxation treaties and the like.
Experience, knowledge and the ability to attract top-quality individuals and companies are a different story altogether. Experience, by definition, only comes with time; knowledge comes with education. Top-quality individuals and companies are already here; we need to ensure that they do not leave!

Key Characteristics of a Successful Hub
In addition to having the experience and knowl- edge to service the particular industries on which we are focusing, we also need to have the willingness. Curaçao has, in my opinion, come a long way in the past two years or so in this regard; there is an increasing number of stakeholders that have recognized the need for us all to both look and step outwards. This is leading to small, but dynamic, collaborative efforts across the island and a whirlwind of new energy is surging. The industries of focus need to have platforms established that encourage the free flow of information between competitors and other players — ideally encouraging an increase in collaboration between service providers — which is frequently the hallmark of a successful hub. To a large extent, being willing and able can ensure that a substantial increase in opportunities will flow to Curaçao, but if we can add ‘ready’ to that list, we will take off. In this context, in order for a hub to succeed there needs to be certain infrastructures in place, both physically and in terms of process. We need government, tax and regulatory organizations that are stable and reliable, but also flexible enough to be able to adapt to market conditions rapidly.
Lastly, we need to embrace innovation. The term is in danger of being dismissed as little more than a buzzword, but in this sense, I actually mean it quite literally; both the culture of the island and the organs of state and commerce need to facilitate innovation and entrepreneurship – this means tax and labour incentives for start-ups, fast-track loan mechanisms from banks, flexible rental schemes at business parks (such as shared space) and a myriad of other tools to ensure that good business ideas are supported by government and industry.

SaaS – Smile as a Service
In our experience, the world could care less about the unique elements or features of your service, your bank, your structure or even your expertise; what they want is fantastic service. They want you to put them first and consider their needs and requirements ahead of everything else. Approaching clients with the attitude that you are not there to sell them any one thing, but rather to facilitate the process of putting them together with the right products, services and people, you soon learn that oftentimes the right thing (for the client) is simply the most pleasant thing.
The most technologically advanced product may be the right one, but if you can’t get anybody to tell you how to turn it on, or to troubleshoot the purchasing process, then it might as well not exist. The same goes for financial services and the other industries in which Curaçao could act as a service hub. Our products may be as good as anything else that is out there but our approach could be truly unique – willingness to work with any other party in order to deliver what the client truly needs, coupled with our experience and the ability to deliver excellent service. That approach, delivered by all of the relevant players on Curaçao, would make a huge difference and could lead to such success that, at a certain point, the most efficient and pleasant way to set up any structure globally could be to start with one of the service providers on Curaçao.

Industries with potential
Given some of our natural resources, we have the potential to be a source of inspiration and to be a thought leader in the world, taking steps now to create and usher in the realities of tomorrow. The airport is aiming to be a service hub for the region by establishing itself as an Airport City. Part of the tools to accomplish this, and also to encourage investment and participation, will be through the use of Sea-Water Air Conditioning, Ocean Thermal Energy Conversion, Waste to Energy systems, Aquaculture and other innovations that would mark us as one of the most developed, sustainable nations on the planet and certainly in the region.
Renewable energy, food systems, ocean protection and human rights: in each of these areas Curaçao has either a vast natural resource, a considerable position as stakeholder or has played a key historical role. As a result, we could legitimately lead the way forward on establishing the best practices, at a national regulatory and legislative level, in each of these areas.
Our legal system is robust and our lawyers are very skilled. Why not become known as the island that passed the legislation of the 22nd Century – protecting our human rights, our oceans, our climate and our food stocks and systems?

The Curaçao Hub
Located smack in the middle of the two American continents, Curaçao is physically positioned appropriately to start self-identifying as a hub for a wide range of ideas and services. We will never be a substantial manufacturing hub, nor will we be exporting corn-based fuels. However, we can export our knowledge and expertise, our experience and excellence, and in doing so, initiate a virtuous cycle whereby we attract the people and ideas to ensure we are in an even better position for the industries and business ideas of tomorrow.
At Front Shore we are agnostic when it comes to the jurisdiction in which we establish a fund, or an asset protection structure, for our clients. We try to match our client’s needs with the right product and service; most of the time that means that we work with service providers in jurisdictions other than Curaçao in order to setup the structure.
We believe that Curaçao’s financial services sector could embody this approach across all sectors, exporting its expertise to clients based throughout the world irrespective of their location and the location of the other service providers.

For more information about Front Shore, you can go to their website at www.frontshore.com or on Facebook at www.facebook.com/frontshorenv.

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