Sponsors invite local shareholder participation
In the 1960s as Britain divested herself of more and more of her African colonies, the newly independent nations invariably opted for two symbols of their “freedom” – a national flag and a national airline. The flag was an understandable choice…though on at least two occasions (in Zambia and Swaziland) the flags were so unfamiliar to the soldiers handling them that - as the strokes of midnight heralded independence – when the Union Jack was hauled down and the new symbol of nationhood was broken out, it was flown upside down.

There was less justification for the establishment of national airlines and often these were set up as a matter of prestige and the African equivalent of keeping up with the Joneses. The yen for an airline stirred first by Ghana’s Kwame Nkruhma, a succession of new African leaders followed suit. At the independence ceremonies of tiny Swaziland – only a couple of hours drive from major international airports of Johannesburg and Lourenco Marques – a senior cabinet minister acknowledged: “We don’t really need an airline…but we have to have one. Everyone else has…”

For some of the world’s smaller offshore financial centres a bourse or stock exchange seems to fill a slot similar to that of those African airlines – symbol of their standing rather than a necessary arm of their financial services. And, if all goes according to plan, by March next year Gibraltar will have joined the small bourse brigade.

Shareholders called for
Local financial institutions have been invited to become shareholders in GibEX, as the local bourse will be known, joining the scheme’s sponsors – local international lawyers Hassans, the Austrian-based Bank Medici, and the Vienna Stock Exchange. The Vienna Stock Exchange also will provide technical assistance and the know-how drawn from its own experience as a small but successful bourse.

This is not the first time that a local stock exchange has been proposed. But plans put forward by a group of foreign investors a decade or more ago were scuppered when the Bossano government insisted that the building which was to be built to house the exchange and trading floor should also provide low cost housing.

“Can you imagine the impression this would have made on visitors to the bourse… all that washing hanging from window racks and balconies,” a senior figure in the Rock’s finance sector remarked some years ago when he told me about the failed project.

This version of events is probably apocryphal; and a more likely and practical reason for the failure was that a decade ago our finance centre lacked the skills it can offer today; Nor at that stage did we enjoy the right to passport banking, insurance and other financial services into the EU; and our sound international reputation as a jurisdiction better regulated than most had still to be won.

Since the days of brass plate companies our financial services sector has developed and reached a level of mature sophistication that makes feasible the concept outlined at a high-powered breakfast gathering of the Rock’s leading financial players in February.

And the three men and a woman who are in the driving seat hope that the Caruana Government - which has given its blessing to the project - will take a small financial stake in the project, so adding to GibEX’s international credibility, according to former Trade & Industry Minister Peter Montegriffo who is now a senior partner in Hassans.

Government investment?
“EU passporting has transformed the position of Gibraltar and we are now able to curtain-raise the project,” Montegriffo said. And though a handful of the businessmen and financial players - among the hundred or so who tucked into the ham, salami, croissants and tepid coffee – doubted the need for a local bourse, most were enthusiastic and already several have inquired about investment opportunities as possible shareholders, I understand.

Draft legislation providing for the establishment of a local exchange is already in the pipeline and the plan has been given a cautious go-ahead by Government.

Several of the smaller offshore financial centres have established reasonably successful stock exchanges, while both Malta and Cyprus – which, with Gibraltar, form the trio of nations comprising the Chief Minister’s suggested Mediterranean economic “bridge” - have flourishing bourses.

Insurance firms a possible target?
Clearly, success will hinge on the type of business a local exchange can attract. A few local equities seem feasible and GibEX might persuade the gaming companies which have gone public to seek partial listings here. Similarly a local bourse could attract some insurance business – though the international insurance market is already served by the big exchanges and some of the Caribbean operators. A possible niche could be in the field of trusts or funds – particularly high investment trusts which, in most jurisdictions, require less stringent reporting – and some of the smaller bond markets.

Mrs Sonja Kohn, chairman of the Vienna-based Bank Medici - who along with Levy and the bank’s local general manager Moe Cohen have spearheaded the proposal - argues that GibEX could attract listings not only by some of the international firms which already have a presence on the Rock but also companies in China, India and South America which are seeking European investors. It could also encourage some of our bigger firms – a bus company, say, or the communications or utilities players – to seek local listing, according to Montegriffo.

“We believe that Gibraltar is a ‘sleeping beauty’, a sleeping lion with a high potential,” says Mrs. Kohn. And she adds that Gibraltar is “an ideal door to Europe” – something she always stresses when “taking the message of Gibraltar to the Arab emirates and China” …both areas where Bank Medici does extensive business.

There was a global trend to conduct business in Europe, she added and, in the same way that Vienna had formed a bridge between the emergent economies of Eastern and Central Europe and the economic powerhouse of Western Europe, so Gibraltar could act as a bridge to Europe for countries like China and the nations of South America.

“Gibraltar has the opportunity to add a new dimension to financial services all over the world,” Mrs Kohn said.

The proposed participation of the Vienna Stock Exchange and the interest of the Bader Group (currently the biggest market-maker in Germany) along with the backing of Bank Medici and Hassans added weight to the scheme, while the Government’s expression of interest in taking a “small stake” added to its credibility, Montegriffo believes.

Many opportunities?
Stressing that Gibraltar is one of the few major financial centres which does not yet have an exchange, Montegriffo argues that the more sophisticated of our investors and financial services players “need an exchange and facilities for listing.” In the past six months three of the Rock’s major gaming companies have been listed in the UK, but had there been a local exchange they would probably have sought to go public here.

“There are in fact a multitude of opportunities for a plethora of companies to seek a Gibraltar listing,” Montegriffo said. “We are unique in straddling both on-shore and off-shore business” and GibEX would be “strategically placed to pick up work from both sides”. Gibraltar already had a track record of handling debt instruments; and there would be the need for “mezzanine finance” among e-com companies.