Budget Speech 2014 |12 December 2013

2014 a challenging year for Seychelles’ international financial services sector

The year 2014 will be a challenging one for Seychelles’ international financial services sector, especially in light of recent developments vis-à-vis the OECD (Organisation for Economic Development).

Finance, Trade and Investment Minister Pierre Laporte said this in his budget speech delivered in the National Assembly on Tuesday and noted that the country is confident the sector will recover through the measures already taken and those expected early next year to strengthen compliance with the organisation's standards.

Only last month, Seychelles was labeled non-compliant in two sectors – bearer shares and availability of records of companies and agencies in Seychelles – of the 10-criteria phase two of the process of becoming party to the multilateral convention on mutual administrative assistance in tax matters.

Seychelles has shown that it is determined to contribute actively to transparency on matters of international financial services and taxation. The country has already passed the bearer shares legislation and as to records of companies, measures are in place but unfortunately the report covered the period ending December 2012, meaning Seychelles had not completed all required changes by the time the OECD came here.

Minister Laporte said the Seychelles' financial sector needs a new strategy.

“The time has come for a fundamental re-thinking of the way forward for this industry. We will shortly begin preparing a strategic plan for the development of the sector, with help from the World Bank. The private sector will be invited to take part actively in the preparation of the strategy,” said Mr Laporte.

“This new strategy is critical to our aspirations to grow, diversify, and deepen the financial sector. It has to be one that has in place the right ingredients to attract high calibre investors and financial institutions. A fundamental aspect of this strategy will be redefining the future of our international financial services sector and raise the profile of Seychelles as a modern, efficient, and reputable global financial centre,” he added.

The minister has reiterated Seychelles' absolute commitment to ensuring the highest level of conformity with best international practices on transparency and exchange of information on tax matters, and in the fight against money laundering and terrorism financing.

“In this regard, over the next 12 months we will implement the following: (i) enactment of new laws governing the international financial services sector such as IBCs (international business companies) and Trust laws; (ii) amendment of other laws including Revenue laws to be consistent with international conventions; (iii) ratification of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters; (iv) becoming party to the Peer Review Assessment team and the OECD Peer Review Group; and (v) signing of more TIEAs (tax information exchange agreements) and DTAs (avoidance of double taxation agreements),” Minister Laporte said.

He noted that to strengthen our regulatory capability, Seychelles has decided to amend its proposal for the non-financial service regulator. Instead of a commission as previously indicated, Siba (Seychelles International Business Authority) will now become the Financial Services Authority (FSA) with its mandate to focus solely on licensing and compliance. The promotional role for financial services will be transferred to the Seychelles Investment Board (SIB).

“A well functioning regulatory framework is one prerequisite of a strong international financial services sector. Another is the need to have products and services of the highest calibre and diversity to bring us at par with the best in the industry. In this context, we will continue to introduce new products.

“In early 2014, we will amend the Financial Institutions Act to allow for private/investment banking in Seychelles. Moreover, the Legal Practitioners Act will shortly be amended to allow foreign legal practitioners to practice in Seychelles. This will add a new dimension to the sector and raise our status as a high-end jurisdiction,” noted Mr Laporte.

The minister explained that in line with its various international commitments there is a need for Seychelles to open up the financial services sector further. In order to balance out the demand for more professional services while safeguarding local professionals, the country will assess the merits of allowing more foreign involvement in certain services.

According to the minister consideration will be given to the possibility of operators currently licensed in the international financial services sector to also provide certain professional services to the domestic economy. For them to do so the operators will have to be subject to similar licensing and taxation requirements with regards to those services to ensure a level playing field with domestic service providers.

Minister Laporte added that government has been contemplating introducing Islamic finance as part of its strategy to continue diversifying its financial sector.

“We are finalising the framework and assessing the most appropriate model that would adapt best to our economy. Following introduction of financial leasing, which will target mainly businesses, the forthcoming launch of hire purchase will facilitate credit for consumable goods such as small equipment and home appliances. Meanwhile, the Central Bank of Seychelles (CBS) has begun exploring new financial products to assist small borrowers,” he added.

The CBS will also amend its legal framework to allow bureaux de change to provide other minor services such as sale of phone cards, lottery tickets, newspapers, etc. Bureaus will however have to keep separate accounts for the various activities.  In 2014, the government will also take additional measures to further reduce the cost of borrowing, by considering:

(i)    introducing a single transfer fee to replace the multitude of fees that is payable currently to discharge and recharge collaterals when transferring loans from one bank to another; and
(ii)     making insurance policies transferable at a minimal cost when transferring loans.  

On the securities exchange, Minister Laporte said Trop-X will increase its range of products to provide companies with new avenues to raise capital and provide more opportunities to diversify risk management policies.

“The year 2014 promises further developments with the prospect of more equity listings,” he added.