The government’s 90 day plan for an economic turnaround will be presented in just a couple of weeks, when, government promised, Cayman would see the path to a turnaround in the economic slowdown experienced since the global economic crash of 2008.
We’ve had glimpses of a light at the end of the tunnel, with fee decreases suggested for the construction industry and lots of talk about major construction projects that will stimulate the economy on a broad scale, yet still businesses and individuals are hurting financially. The Journal speaks exclusively with Premier McKeeva Bush, along with key individuals working on the plan, to find out if we really can expect an upswing any time soon.
Cayman found itself facing an enormous budget deficit of CI$416 million at the end of June 2009, dampening the entire local economy as a whole as government hiked up fees to close the gap. That figure has narrowed to approximately CI$15 million as at the same date this year, an important move forward; never-the-less the country still finds itself in an economic downturn as the impact of the global economic recession hits hard.
Thus getting Cayman up and on its feet again has been the focal point for government. Premier Bush announced a 90 day target mid September that, he anticipated, would outline how Cayman could get back on the path that created its success.
Dax Basdeo, Chief Officer (Financial Services), Ministry of Finance, Tourism & Development offers some background as to how this economic stimulus is being achieved: “There have been a wide variety of suggestions on economic stimulus measures from a number of groups, association, independent reports and individuals over the last year, including the Miller-Shaw Report, the National Investment Council Report, reports from the Cayman Contractors Association, the Tourism Advisory Council, Cayman Finance, the Immigration Review Team, and so on.”
Basdeo says the number of suggestions total well over 200, with some measures looking at short term fixes, while others focus on the medium to long term, both in terms of implementation as well as when the benefits would accrue to the economy.
In order to coordinate implementation of the measures that have been given priority, a Stimulus Implementation Group was formed under the chairmanship of Jude Scott and comprised of a core group of senior civil servants including Basdeo, along with Samuel Rose and Tim Hubbell.
What’s at the end of the 90 days?
However, even with this group now in place, as we now approach the end of the 90 days, skeptics say that the timeframe is far too short for Cayman to see an economic turnaround of any merit.
Premier Bush responds: “The 90 day promise was not that the economy would be fixed in 90-days, but that we would have charted a path to turnaround the economy and stimulate activity in all of the key sectors,” he says.
“At the end of the 90 days I will be releasing an implementation plan that will identify how my government proposes to get the economy back on track. This will include key short-term deliverables to provide an immediate stimulus to economic activity, but will also include measures that will help to sustain our recovery and build lasting long-term success.”
Bush cites examples as immigration reform, encouraging a physical presence in the financial services industry and key tourism infrastructure projects.
Fee reductions just part of the plan
Recent announcements that the construction industry would be one of the first to receive a stimulus brought measured cheer to that industry yet critics of this move suggest that the construction industry merely feeds off of the two main economic drivers of industry – namely financial services and the tourism industry, and therefore these two industries should have been initially targeted for fee cuts.
“The construction industry was the easiest and quickest one for us to hone in on and make an immediate difference to the industry and to the economy as a whole,” Bush states.
“Of course we are also focusing on the financial services industry; however I have been advised that high fees are not such an important issue for this industry as other issues, such as immigration. When it comes to getting work permits for the financial services industry we will be having a push to bring the industry back into position. We believe this is paramount to the industry’s continued success.”
Bush continued that it has been a point of contention by a variety of international bodies that a physical presence is required on island for financial services entities and immigration measures to ensure that this takes place smoothly will thus be a top priority for his government.
“The OECD says that a name plate is insufficient for businesses domiciled in Cayman. We need expertise located on island and we will be pushing ahead with making this happen. And as we attract more international expertise so the level of local expertise increases as Caymanians become increasingly upwardly mobile at the same time,” he confirms.
Basdeo adds that while fee reductions may be part of the package, they are by no means the only consideration.
“We are looking to determine the key drivers of investment in the country – e.g. certainty, ease of doing business, competitive position – and to find innovative ways of enhancing our business climate to stimulate business that is appropriate for the country.”
A fragile economy
Bush says he will also be looking at reducing fees within the financial services sector when the economy gets back on track.
“These things cannot be rushed,” he states.
“When we finalise our new budget we will be able to decide where to cut fees, if at all. Government finances are still very fragile and we are dependent on fees. Remember, last year after extensive public consultation the industry said it would prefer these fee increases to the implementation of any income or property tax regime.”
Bush says that his government is taking a careful measured approach to prioritising stimulus measures.
“From the budget perspective we are constrained by the three year plan approved by the UK government’s Foreign and Commonwealth Office. We must therefore ensure that whatever measures are introduced will have positive economic benefits that support this three year plan,” he advises.
Thus, he says, priority areas are those that will have an impact in the next three to four months.
Basdeo furthers: “There are also several diagnostic measures that will be used in the evaluation, such as the impact on employment, the net effect on government revenue and expenditure and the effect on the cost of doing business here.
Public/private sector partnership
Many credit the close public/private sector partnership that the country enjoyed back in the Seventies through to the Nineties for the phenomenal success of the jurisdiction as a whole. That relationship has waned in recent times and Bush says that he is focused on regenerating that relationship.
“We all need to work together in one, co-ordinated approach to ensure that Cayman is properly represented with a unified front overseas, as well as working together locally,” he states. “For this to succeed we needed a clear, cohesive strategy.
Recommendations on this strategy have been received through the Financial Services Council, the Tourism Advisory Council and the National Investment Council. These three groups represent the strong public-private partnership that will ensure that government can move swiftly to address the needs of our key industries.”
Bush says that the country as a whole is “moving in the right direction”, but that he believes the recovery will be slow.
“It will take time and it will be a fragile recovery. We have so many issues to deal with right now, including social upheaval and the rise in burglaries, etc, but I do not believe these issues will detract us from our mission to get the country back on its feet again,” he says.
“We have a very strong team leading the way and I am confident we will be able to reveal a positive plan for growth on 16 December.”