Non-Sovereign small islands in the international economy Essay

Non-Sovereign small islands in the international economy - Essay Example Generally speaking, the OFCs were accused in undermining the stability and inviolability of the global financial system. To manage the situation, a group of initiatives were taken by the Financial Stability Forum, the International Monetary Fund, the Organisation for Economic Co-operation and Development (OECD), the European Union and the Financial Action Task Force (Woodward 686). In addition to the development of small islands as offshore financial centres, there are some other examples of cases when many small islands have exceeded in small-scale, high-value service and product-niching in various fields of economic activities, including: finance and banking, brokerage, tourism and hospitality (Baldacchino 254). This paper is focused on the research the small islands, performing an important role in the international economy and on the global arena. The more detailed analysis is carried out for the British Isle’s Crown dependencies: the Isle of Man, and the Channel Islands o f Jersey and Guernsey, as well the Prince Edward Island. The Financial Services Sector: the Isle of man, the Channel Islands and New "Havens"Among Developing Small Islands There are many various definitions of the offshore, which is the evidence of the challenges which many scholars and economists face in attempt to explain this concept precisely. For example, Palan defines the offshore as a â€Å"special territorial or juridical enclave†, in which regulation or taxation in the state is either partially or fully withheld (cited by Payne 627-628). While significant stress in the definition of the offshore falls on the territorial dimension, juridical properties is what really matters. Richard Woodward clarifies this view by the statement: â€Å"offshore is a legal as well as physical domain; where an activity takes place is secondary to the rules under which it takes place† (cited by Payne 628). Even though there are some slight variations in definitions, offshore finan cial centres have a set of common characteristics. The offshore financial centers can be characterized by the following attributes: minimal taxes or tax free; bank anonymity and secrecy laws at a high level, a high number of financial institutions, which serve mainly non-residents; flexibility of use of various company structures, the proportions of financial systems are exceeding needs of the domestic economy, light financial regulation (Levin 2), protection of the secrecy of transactions and few or no restrictions of financial transactions (Palan 155). The most successful OFCs are characterized also by stable economic and political climate, support from of a large international financial market, money laundering or drug money scandals free, availability of agreements for avoiding double-taxation with major countries, and are easily reached due to established information-exchange facilities (Palan 156). Referring back to the last item, many OFCs are developing laws and investing in telecommunications for attracting e-commerce providers (Levin 5). Obviously, telecommunications and IT is a very important factor that enables OFCs to respond to the needs of their customers and operatively react to external changes. Financial centres can be distinguished by many different ways. Thus, for example, International Monetary Fund (n.p.) has developed its own way of differentiation of the financial centers by splitting those into three categories: 1. International financial centres (IFCs) – are large internation