Gp14 BusinIess Bp24 RNew FundsA RegulationLs TMaAy/June/JuR ly 2012 INTERNATIONAL FINANCE l INVESTMENT l BUSINESS Exclusive Interview: Chief Minister Fabian Picardo www.gibraltarinternational.com SPONSORS Gibraltar International Magazine is grateful for the support of the finance industry and allied services (with the encouragement of the Finance Council) in the form of committed sponsorship. We would like to thank the following sponsors: GIBRALTAR FINANCE CENTRE Tel: + (350) 200 50011 • Fax: + (350) 200 51818 www.gibraltar.gov.gi DELOITTE ISOLAS / FIDUCIARY GROUP Tel: + (350) 200 41200 • Fax + (350) 200 41201 Tel: + (350) 200 78363 www.deloitte.gi Tel: + (350) 200 76651 www.gibraltarlawyers.com EUROPA TRUST COMPANY LIMITED www.fiduciarygroup.com Tel: + (350) 200 79013 • Fax + (350) 200 70101 www.europa.gi QUEST INSURANCE MANAGEMENT LTD. 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Latest figures Contents show a sharp slowing down in the amount of new business local firms are generating and in net NEWS p6 T government spending. Economy is “underperforming”, but 50% growth Arguably the most important of all economic statistics, still in prospect the Gross Domestic Product (GDP) figure attempts to capture the state of an economy in one number. Euro airline links in prospect In recent years, we have become used to seeing Widening funds appeal Gibraltar’s annual growth in GDP reported as being between 5 and 7 per cent. And the new Government’s FINANCE P10 pre- election manifesto promised the jurisdiction will see GDP £500m higher at £1.65bn by 2015/16. Corporate Governance and whether the composition Although there are several ways to calculate this of the Board would have made a difference? figure, Gibraltar uses two – the income and separate, expenditure methods - to arrive at a Nominal GDP result, FINANCE P12 which is the one most usually used by politicians locally. But when the effect of inflation is stripped out of GDP What are your Options worth? results by using constant prices from a set point in time, a clearer picture of underlying economic growth emerges – BUSINESS P14 what is known as Real GDP. Doing business in Gibraltar - FAQs Taking 2005/6 as the base year and GDP then at £655.88m, the Real GDP figure of £903m to end March PROFILE P16 2011 shows a growth of 37 per cent; that compares with the headline 60% Nominal rate of growth over the same Bringing a military bearing to business period. The Real GDP growth in the year 2010/11 on this FUNDS P24 basis was only 1.7 per cent, sharply down on the two New Financial Services (Experienced Investor Funds) previous years when it was 8.4 and 7.8 per cent respectively. Regulations 2012 In the UK for example, most interest centres on changes to GDP in real terms - that is, after taking into BUSINESS ROUND UP p26 account changes in prices (inflation) - to determine economic performance. Chief Minister Fabian Picardo is relying primarily on GIBRALTAR INTERNATIONAL MAGAZINE the private sector to fuel expansion in the economy – particularly with government projects - from an expected Published by Gibraltar No part of this publication may be 2011/12 Nominal GDP result of £1.1bn at an average year- International Publications Ltd . reproduced without the written on-year growth of more than 10.5 per cent for each of the G7 Cornwall's Centre permission of the publishers. PMB 104 The publishers have tried to next four years! PO Box 561 ensure that all information is That will take some achieving, especially when Picardo Gibraltar accurate, but emphasise that they believes Gibraltar’s small economy, with no agricultural cannot accept responsibility for sector and only limited industry, has been underperforming any errors or omissions. The in recent years. publishers accept no responsibility Editorial enquiries Gibraltar is heavily dependent on imports, with more [email protected] for statements made by contributors or for any claim than four fifths coming from Spain and the UK, which made in an advertisement. Advertising enquiries largely accounts for local inflation. Almost half of non-fuel [email protected] imports come from the Eurozone, which became more © 2012 Gibraltar International expensive in recent years as Sterling lost value against the Publications Ltd. Design Euro and meant increased costs and squeezed profit [email protected] margins for Gibraltar companies. Conversely, tourism - that accounts for a fifth of the UK Agent: economy - benefitted from the falling exchange rate by Tel: + 44 (0)1993 703560 making Gibraltar more attractive for Euro-based shoppers. This year’s Budget in June will be especially important to give clear indications of how the government will achieve its tough expansion target in a relatively short timeframe of four years. A proposed Economic Advisory Council has yet to be formed, but the finance centre is making early progress with changes to Funds laws. Ray Spencer 4 GIBRALTAR INTERNATIONAL www.gibraltarinternational.com NEWS HILL INSURANCE COMPANY LIMITED Economy is “underperforming”, but 50% growth still in prospect aced with an unexpected in 2010/11 slowed sharply to to these issues is to ensure that money in its own projects”. £100m costs ‘black hole’, 1.7 per cent compared with GDP grows without the govern - In 2012/13, Picardo sees spending of significantly around 8 per cent for the two ment being the main driver.” GDP growth being “very high Fmore than that to provide previous years. Working with investors in indeed as the new government’s a secure power supply and “I am convinced the Gibraltar, GDP can increase projects start to take off.” needing a solution to the airport Gibraltar economy has been “much more without the gov - Continued on page 8 tunnel project that is likely to cost underperforming in the past ernment investing its own £88m to complete, Gibraltar’s years”, he told Ray Spencer in new Chief Minister, Fabian an exclusive interview, adding Picardo, remains “very confi - that despite scepticism from Euro airline links dent” that he still will grow the Opposition supporters on his economy by 50% and halve financial projections, “we have in prospect public debt by 2016. the confidence that we can Gibraltar Airport may soon be connected to a central In 2009/10, Gross Domestic achieve them”. European hub that would make possible connections to other Product (GDP) was £998m. The Last year, Picardo main - finance centres outside of the UK. In addition, talks are Government forecasted it to be tained that much of the taking place with two other airlines, both believed to be out - £1.05bn in 2010/11 and has expected high economic growth side of the UK. based its growth plans on the [that will be reported in June] Gibraltar International sources suggest that Amsterdam’s assumption it will have risen to was the result of “massive Schiphol airport is the strong European hub being considered, £1.1bn for 2011/12. government spending”. whilst airlines flying from Dublin and Scandinavia are also To achieve the govern - thought to be in the process of evaluating new links with the ment’s target of £1.65m for Unsustainable Rock. GDP in four year’s time, He maintained: “Last year the Chief Minister Fabian Picardo, confirmed Government Gibraltar’s economy will need [previous] government spent talks with three airlines, but declined to give details. He said: to expand by an average of £220m of taxpayers’ money “I am not suggesting daily flights to Frankfurt or Zurich. I am more than 10.5% in each year. on capital projects. That suggesting, for example, flights less than daily to a central That 50 per cent anticipated is utterly unsustainable and European hub from which you will be able to connect to other We operate under Freedom to Provide Services in growth compares with 31 per irresponsible.” finance centres.” l UNITED KINGDOM cent in the previous four years. If the new government He emphasised that no decision was imminent for fresh l But looked at in terms of spent similarly, “of course GDP routes to Gibraltar, where the €80m+ new terminal is ITALY Real GDP, using constant growth would be back at 7-8 preparing to become fully operational at the end of May.