It's important to remember that the first offshore financial centres were set up by banks and companies on land. Why? Because they felt like they were being held back by old laws, rules, and regulations. Citicorp, the biggest bank in the US that is owned by Americans, was one of the first to set up operations outside of the US. Before long, 64 percent of its net income was coming from sources outside of the country.
Some of the first centres have grown into financial and economic centres that are among the best in the world. Since the early 1970s, these centres have put in place policies that are meant to encourage international trade. They do this by lowering or getting rid of taxes and other business restrictions. Because of this, the economic activity in these centres is geared toward the specific global needs of businesses and investors from outside.
Most of the time, these centres are small states with few people. There are now more than 75 of these places around the world. Each of them is a different kind of offshore safe haven that was made on purpose to attract investors with very specific needs.
For example, Aruba was set up in the first place to help the economy grow. It used to get most of its money from oil refineries, but now it has an investment policy that lets it join the global economy. The answer was to become a place where money could be kept safe. Aruba has started a much-needed process of economic growth and diversification by "renting" its laws about taxation, incorporation, and other related legal issues.
On the other hand, Singapore was made for the Asian dollar market. Today, on a per-person basis, it is one of the most wealthy places in the world. And Bahrain was built to handle the offshore financial needs of the Middle East, especially Saudi Arabia.
All of these offshore havens were made possible by the early 1970s electronic revolution in the ways money could be moved. With just that one technological change, banks, corporations, and holding companies could be set up in places that were previously too far away or too expensive. It also made business between and within time zones a good alternative to working from home. This, in turn, led to the creation of international wholesale banking, where large deposits could be kept in many different currencies, moved through a worldwide network of corporations, banks, governments, and private individuals, and lent to people who wanted them. This, in turn, led to new ways of doing business across borders and the growth of international subcontracting for loans and other financial transactions.
In general, international havens have become a stable part of the international intermediate economy. In a way, they act as "brokers" for business and finance around the world. It's important to remember that big banks, corporations, and even government agencies from around the world started all of this. Remember that every government, from the Soviet Union to Japan, China, and the United States, needs to get money from the international market. They, too, use money havens as easy places to exchange money. The Bahamas became one of the biggest offshore havens because it is used by many government departments, from finance to intelligence.
Offshore havens are now a well-known fact in the financial world. Even more important, they are seen as legitimate ways for individual investors to take advantage of the offshore option. If so, all you have to do is follow the basic financial rules of making money, avoiding taxes, and protecting your privacy. They were made by merchants, royal treasurers, and smart bankers in Florence over hundreds of years. The tools and plans are always changing, but the goals are always the same.
