New | Crackdown on Caribbean tax havens a surprise boon for Hong Kong

Hong Kong is tipped to become the world’s largest offshore corporate services centre by 2020, helped ironically, by the industry’s own struggles against reform demands coming from western governments and pressure groups.

On notice after high profile money laundering and tax avoidance scandals, traditional offshore havens like the British Virgin Islands and Bermuda face being squeezed by government action groups now coordinating new guidelines on transparency and tighter regulation.

Industry leaders say they need to rally in support of the sector.

“It is clear...that the push for regulation - the push to squelch the ambitions of offshore - will remain both ambitious and exigent...Proving the worth of offshore could weaken the regulatory urge,” Jonathan Clifton, managing director of incorporation giant OIL, a division of Vistra Group, now argues.

For Hong Kong this renewed assault may actually work in the city’s favour. The city’s common law system and relatively hassle free bureaucracy has long helped make it a key global player in the still fast growing market for incorporation, trust, and fund services, among others, with investors keen to take advantage of the city’s role as a bridgehead between China and the world. This market has in turn supported a local ecosystem of lawyers, accountants and advisers.

Helped by a forecast five-year 72 per cent explosion in Greater China demand for such services, by the end of the decade Hong Kong will be the world’s largest offshore market, OIL analysts predict, overtaking the British Virgin Islands, Cayman Islands, and Singapore.