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It is important to keep in mind that offshore financial centers were
originally established by onshore banks and corporations. Why? Because
felt hemmed-in by archaic laws, regulations and statutes. For example,
Citicorp (the largest American-owned bank in the United States) was one
of the first to set-up offshore operations. It wasn't too long before
64 percent of its net income was being generated by offshore sources.
Some of the pioneering centers have evolved into world-class
financial and economic headquarters. Since the early 1970s, these
centers have initiated policies deliberately designed to attract
international trade by minimizing tax obligations and reducing (or
entirely eliminating) other restrictions on business operations. The
result is that economic activity within these centers is specifically
geared to the special global needs of outside businesses and investors.
Typically, these centers are small states with tiny populations.
To date more than 75 of these tax havens exist throughout the world.
Each one of them is a unique offshore haven of sorts deliberately
intended to attract very particular investors with very specific needs.
For example, a center like Aruba was set up primarily for economic
development. Formerly dependent on oil refineries for its revenue, it
has now implemented an investment policy that gives it entree to the
global economic system. Becoming an offshore money haven was the
answer. By "renting" its laws regarding taxation, incorporation and
other related legal matters, Aruba has begun a much needed process of
economic development and diversification.
Singapore, on the other hand, was designed to serve the Asian
dollar market. Today it's one of the most prosperous money havens in
the world on a per capita basis. And Bahrain was developed to process
the Middle East's offshore financial needs, especially Saudi Arabia's.
All these offshore havens were made possible by the electronic
revolution in fund transfer mechanisms which occurred early on in the
1970s. That single technological development made it suddenly possible
and affordable to establish banks, corporations and holding companies
in relatively remote locations. It also made inter and intra time-zone
business a viable alternative to home-based operations. In turn, this
gave rise to the creation of international wholesale banking — where
large deposits could be maintained in a variety of currencies,
transferred via a worldwide network of corporations, banks, governments
and individuals, and lent to interested borrowers. This, in turn, led
to new transnational business practices and the development of the
international subcontracting of loans and other financial transactions.
Basically, international havens have become an established part of
the international intermediate economy. They stand as "brokers" of a
sort for global business and finance. It's important to keep in mind
that all of this was initiated by large banks, corporations and even
government agencies from around the world. Keep in mind that every
government from the Soviet Union to Japan, China and the United States
needs to obtain money on the international market. They, too, use money
havens as convenient transaction points. The Bahamas became one of the
biggest offshore havens because it serves the purposes of various
government entities from finance ministries to intelligence agencies.
Offshore havens are, today, an accepted financial fact. Even more
important, they are seen as legitimate vehicles through which
individual investors can take advantage of the offshore option. If is
simply a matter of applying the basic financial principles of profit,
tax protection and privacy. They were developed over the centuries by
Florentine merchants, royal treasurers and brilliant bankers. The
mechanisms and strategies change continuously, but the goals always
remain the same. |