British Virgin Islands - Economy

Economy

As an offshore financial centre, the British Virgin Islands enjoys one of the more prosperous economies of the Caribbean region, with a per capita average income of around $38,500 (2004 est.)

The "twin pillars" of the economy are tourism and financial services. Politically, tourism is the more important of the two, as it employs a greater number of people within the Territory, and a larger proportion of the businesses in the tourist industry are locally owned, as are a number of the highly tourism-dependent sole traders (for example, taxi drivers and street vendors). Economically however, financial services associated with the territory's status as an offshore financial centre are by far the more important. 51.8% of the Government's revenue comes directly from licence fees for offshore companies, and considerable further sums are raised directly or indirectly from payroll taxes relating to salaries paid within the trust industry sector (which tend to be higher on average than those paid in the tourism sector).

Tourism accounts for 45% of national income. The islands are a popular destination for U.S. citizens. In 2006 a total of 825,603 people visited the islands (of whom 443,987 were cruise ship passengers). Tourists frequent the numerous white sand beaches, visit The Baths on Virgin Gorda, snorkel the coral reefs near Anegada, or experience the well-known bars of Jost Van Dyke. The BVI are known as one of the world's greatest sailing destinations, and charter sailboats are a very popular way to visit less accessible islands. Every year since 1972 the BVI has hosted the Spring Regatta, which is a seven-day collection of sailing races throughout the islands. A substantial number of the tourists who visit the BVI are cruise ship passengers, although they produce far lower revenue per head than charter boat tourists and hotel based tourists. They are nonetheless important to the substantial (and politically important) taxi driving community.

Substantial revenues are also generated by the registration of offshore companies. As of June 2008, 823,502 companies were so registered (of which 445,865 were 'active'). In 2000 KPMG reported in its survey of offshore jurisdictions for the United Kingdom government that over 41% of the world's offshore companies were formed in the British Virgin Islands. Since 2001, financial services in the British Virgin Islands have been regulated by the independent Financial Services Commission. While at one time the BVI was well regarded as a good domicile for captive insurance services, this changed beginning in recent years with the change of insurance regulators in 2007 and the government's increasing pressure to hire only locals ("belongers") in the insurance industry. Official reports from the Financial Services Commission reflect as of June 30, 2010 only 207 captives in the BVI. Informed sources report that the actual number is closer to 100, with the 50% decline over the last four years attributable to the lack of ability within the FSC in administering insurance companies. Beginning in 2008 there was a mass exodus of captives for better staffed jurisdictions like Anguilla. In 2011 it was reported that only one captive insurance company was formed in the jurisdiction with many dozens choosing to leave on account of the hostile regulatory environment.

Agriculture and industry account for only a small proportion of the islands' GDP. Agricultural produce includes fruit, vegetables, sugar cane, livestock and poultry, and industries include rum distillation, construction and boat building.

The official currency of the British Virgin Islands has been the US dollar since 1959, a currency also used by the United States Virgin Islands.

The British Virgin Islands is heavily dependent on migrant workers, and over 50% of all workers on the islands are of a foreign descent. The national labour-force is estimated at 12,770, of whom approximately 59.4% work in the service sector but less than 0.6% are estimate to work in agriculture (the balance in industry).