Against the run of play the ‘financial hub’ concept I thought wouldn’t even make a news brief in Back Office Monthly has instead become headline fodder in the mainstream press.
In my blog of fortnight ago, I referred to the ‘industries’, which would form around the hub as “mysterious” – and despite all the coverage they remain a mystery to most.
As the writer known only by the pseudonym “L’homme” (he, or she, appears to be Canadian) commented in response to Fran O’Sullivan’s story: “What is a financial hub? What does it actually do? What does it produce?
Can anyone explain how this type of industry can benefit people who don’t work in the industry, in real human terms?”
These are really good questions and I’m glad the man (or woman) asked them.
Not sure about the answers, however. But to explain the best I can, a financial hub servicing foreign funds would be like an upmarket Bangalore call centre, without the need to fake accents or phone prospects around dinner time.
New Zealand would offer to do all the menial, but important, and not so menial processing work required for smooth fund management operations at a cheaper rate than could be carried out in the home country.
As to how the hub contributes to the advancement of humankind, I don’t know, but it could create jobs (although I think the claims of 3,000-5,000 new jobs is wildly optimistic) and drum up much-needed tax revenue for New Zealand.
And the hub industry doesn’t really need a tax break, just careful technical planning of tax rules so foreign jurisdictions can be assured New Zealand won’t become a tax-avoidance machine.
Hugh Stevens, who heads BNP Paribas Securities Services in New Zealand, told me if the hub does succeed the country could benefit in a couple of other ways not yet discussed: our financial regulatory regime would improve to meet international standards, and; New Zealand investors could see their funds management administration fees reduce as local operators achieved the magical ‘scale’ provided by the global billions.
It’s all very speculative, of course, but Stevens, who is helping the government with its hub feasibility study says the potential benefits are real enough.
Unlike Back Office Monthly, which I made up but if the hub does make the leap from imagination to reality, I’m launching it.
Tags: David Chaplin