Jersey’s part in world economy

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Several hundred investors, specialists, clients and politicians attended the conference and dinner at the Hotel de France, which was chaired by Anatole Kaletsky, principal economic commentator of The Times, and featured local and international speakers.

As always the presentations were presented seamlessly against a constantly-changing giant screen backdrop.

Setting the scene, Ashburton director Ian Ling looked back over the past 150 years to identify the main features of periods of economic growth.

For trade to flourish, he said, there needed to be well-developed transport and communications, an acceptable form of payment, minimal tariffs, a stable political and economic environment, and population growth – factors which clearly were not in evidence during the first half of the 20th century, but which since the 1980s and the fall of Communism had once again picked up speed.

Mr Kaletsky focused on the immediate future of the global economy.

He differentiated between healthy stability – currently a feature of the United States and Great Britain – and stagnation, a factor of the European economy.

Although the first half of next year would see a mid-cycle slowdown and rise in interest rates in the US, which would slow activity and corporate profits, he was nevertheless optimistic about the American economy for the rest of the decade, and to some extent Britain, where he predicted interest rates would be cut to as low as 3.


However, the cloud on the horizon was UK government spending on health and education, which could come to a head in 2007.

The main problem, though, was the laggardly performance of Europe, which was showing signs of going into reverse and had made mistakes in its demand and supply policy.

‘In terms of economic understanding, Europe is on a different planet,’ he said.

‘The worrying question is how bad will things get before Europe is ready to embrace change?’ In contrast, Rudolf Gouws, chief economist of Rand Merchant Bank, outlined the political and economic advances of his native South Africa.

‘We are now in a period of gain,’ he said, ‘and we are hopeful that will be true for many other countries in Africa as well.

Closer to home, John Boothman, retired managing director of Deutsche Bank International and JEP columnist, said the good news was that the Island was ‘miles ahead’ of many major economies in relation to Gross National Income per head, reflecting ‘years of shrewdness and cunning’.

But Jersey remained overly dependent on the finance industry and over the past four years had been through a ‘torrid time’ of recession, with inflation straying to four and five per cent.

But small could be beautiful, said Mr Boothman, enabling the Island to be flexible and establish niche activities, despite problems of over-concentration, logistical difficulties and inability to take advantage of economies of scale.

In order to thrive, government policy required more emphasis on investment and productivity gains, while the financial services industry should move towards more complex areas where expertise was key.

The Island should also grab inward investment – such as that offered to develop the waterfront – with minimum intervention from the government.

Ultimately, he said, Jersey’s future lay in the hands of entrepreneurs and business strategists.

Finally, Ashburton director and global strategist Peter Lucas forecast 2006 as ‘a splendid year of opportunity for the absolute investor’, focused on the second half of the year.

Asked whether hedge funds had ‘lost their sparkle’, he said the flexibility they offered was commendable, although there was a question mark over the high fee structures and lack of transparency.

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