BVI drives connectivity to Belt and Road

By Elise Donovan, BVI House Asia
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The Silk Road Economic Belt and the 21st century Maritime Silk Road, proposed by Chinese president Xi Jinping in 2013, aim to revitalize trade and investment links and bind economic and cultural ties among countries along the routes. The initiative provides enormous opportunities for a wide range of businesses – from small companies to multinational corporations.

Elise DonovanDirectorBVI House Asia
Elise Donovan
Director
BVI House Asia

The network passes through 60-plus countries and regions, with a total population of nearly 4.4 billion. The countries along those routes account for about 40% of the world’s gross domestic product, which also accounts for 29% of the world’s wealth.

At the Belt and Road Forum in Beijing in May, the influence and benefits of the initiative could be seen to be increasing, as China signed deals with 68 countries to jointly develop infrastructure along the new Silk Road trade routes.

At the forum, Xi pledged more than US$100 billion to help fund global Belt and Road initiative projects, on top of the US$60 billion in Chinese investment pledged since the Belt and Road initiative began. At the forum, all of the participating countries agreed to promote trade and investment along the Belt and Road to buttress regional and global economic growth.

Employment rates, and people’s incomes in countries along the route, are projected to further improve. The Belt and Road initiative provides enormous opportunities for participating in a wide range of businesses. This ranges from small and medium-sized enterprises to multinational corporations.

Situated at the centre of the Belt and Road initiative and uniquely equipped to help businesses and investors are British Virgin Islands (BVI) business companies, which are ideal vehicles for cross-border trade. BVI business companies have been utilized in joint venture structures as part of mergers and acquisitions (M&A) transactions, structures for project finance, and for the setting up of private equity (PE) funds.

The BVI demonstrates its flexibility and ability to cut through the complexity of different industries by arranging structures for projects and transactions in such areas as oil and natural gas, petrochemicals, metal industries, manufacturing and electronics.

According to the 2017 edition of the Vistra 2020 report, launched in April 2017, the BVI remains the top offshore jurisdiction worldwide. The report stated that the BVI is “an embedded brand” and still the go-to for most structuring conduits.

The BVI’s attributes – a legal system based on English common law, internationally compliant regulations and tax neutrality – make it an especially attractive jurisdiction to channel outbound Chinese investment along the modern Silk Road Economic Belt and 21st century Maritime Silk Road.

The BVI is well known for being trustworthy and robust, all of which plays a part in the globalized demand for the use of BVI structures. The BVI offers tax and jurisdictional neutrality, administrative convenience and country risk mitigation, among other benefits. If there are disputes, the BVI business companies offer legal and commercial certainty and protection of investors and creditors via English common law.

In Asia and in China particularly, there is a wide availability of seasoned and highly skilled professionals who deal with both the legal and financial aspects of working with BVI structures. For close to 30 years, BVI business companies have been vehicles of choice for successful Chinese firms trading across the world. BVI business companies are among major businesses listed on the London, New York and Hong Kong stock exchanges. Well respected companies worldwide use BVI business companies to manage their cross-border activities.

During that time, the BVI has served as a conduit for capital, connectivity and co-operation. As a result, the BVI stands ready to support companies that continue to reach out to Belt and Road markets. Not only does the BVI enable cross-border trade and investment, it also both supports millions of jobs globally and generates substantial tax receipts for governments worldwide. This brings tangible benefits to the lives of employees, voters, families and business people around the world.

The BVI enables global investment and trade, which supports more than 2 million jobs worldwide. The report, Creating Value: BVI’s Global Contribution, undertaken by Capital Economics, an independent economics consultancy, analyzes the significant global economic contribution of the BVI. It finds that the BVI mediates over US$1.5 trillion of cross-border investment flows, the equivalent to 2% of global GDP.

The report also finds that more than US$15 billion of tax revenues are generated annually for governments around the world, via investment mediated by the BVI and the resulting economic activity. The UK (US$3.9 billion), the EU excluding UK (US$4.2 billion) and China and Hong Kong (US$2.1 billion) are the largest beneficiaries of this tax generation. Coupled with the jobs it supports, the tax generation marks the BVI as a substantial net benefit to governments worldwide.

The report is unequivocal. Contrary to some accusations, the BVI is a sound and reliable centre that has worked harder than many bigger nations to meet international standards, and it is not a tax haven. This independent and authoritative report is equally clear in stating that the BVI is not a centre for corporate profit shifting. This helps clarify once and for all some of the inaccuracies and misunderstanding about what the BVI is and the valuable role it plays in the global economy.

The BVI provides the legal structures that allow companies, institutions and individuals to safely and efficiently carry out their business and make investments across international borders.

The BVI business company is a widely used and dependable vehicle to facilitate cross-border trade, investment and business. More than 140 major businesses listed on the London, New York or Hong Kong main stock exchanges use BVI vehicles to support their international investment activities. Similarly, major international development banks such as the World Bank’s International Finance Corporation use BVI business companies to help fund vital projects.

The report shows the BVI is a global powerhouse for cross-border investment equating to a conservatively estimated US$1.5 trillion across its 417,000 active BVI business companies. Of those, roughly two-fifths originate from beneficial owners in Asia. Another fifth (18%) have ultimate beneficial owners in Latin America and the Caribbean, while the remainder are primarily in Europe and North America.

Author: Elise Donovan is the Hong Kong-based director at BVI House Asia. She can be contacted on +852 3468 8532 or by email at elise.donovan@bvihouseasia.com.hk

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