Apart from the country’s dominant financial and tourism sectors, health care and construction are important industries in Cayman. Major proposals are on the table to diversify the economy through medical tourism, a special economic zone and new Dart development.
The finance and leisure tourism industries define Cayman’s international reputation and dominate the country’s economy. However, existing industries such as health care and construction already are, and will certainly continue to be, vital components of the local economic picture. Meanwhile, in the wake of hurricane devastation and the global recession, many prominent individuals are lobbying for “diversification” into areas like medical tourism and special economic zones to hedge against future fiscal instability.
In 2010, Cayman had a real gross domestic product of about $2.3 billion, according to preliminary estimates in the Economic & Statistics Office’s Annual Economic Report. That is a decline of more than 11 per cent from the GDP of $2.6 billion in 2007. Over the same time period, the financial industry services’ contribution to the country’s GDP dropped nearly 21 per cent, though it still comprises 43 per cent of the total GDP at more than $1 billion.
According to a 2009 study commissioned by industry associations, financial services accounted for 55 per cent of the country’s GDP, when factoring in direct, indirect and induced impacts. The financial services industry directly supported 5,700 jobs (16 percent of all employment) and supported nearly 13,000 jobs in all (36 percent) in 2007, according to the study – which included in its calculations sectors such as banking, insurance, legal services, fund administration, accountancy and related regulation and support.
The World Travel & Tourism Council calculated that in 2011 travel and tourism will directly contribute $160 million to Cayman’s GDP (or 7 per cent of the total), and that the sector’s total contributions, both direct and indirect, will be $540 million (or 24 per cent of the total GDP), according to the Council’s recent annual economic impact report. Tourism’s impact reverberates through local hotels, restaurants, bars, retailers and providers of other services that visitors consume while on Island. According to the report, travel and tourism will directly generate 3,000 jobs (more than 8 per cent of total employment) and contribute 8,000 jobs in all (26 per cent of total employment).
Health care is “not seasonal”
While there is no doubt that finance and tourism power Cayman’s economy, those industries do have inherent drawbacks, as both are largely at the mercy of factors beyond Cayman’s control. Finance is subject to longer-term, worldwide market trends, while tourism fluctuates according to the season.
Mark Scotland, minister for Health, Environment, Youth, Sports and Culture, points to health care sector as an existing stable industry that has the potential to contribute steadily to Cayman’s GDP far into the future, while first and foremost ensuring that residents have access to quality health services. Two main economic goals are to have residents spend a greater percentage of dollars on health care locally as opposed to going abroad, and to foster medical tourism, where visitors travel to Cayman specifically for health services.
“Health care for local residents is needed on an ongoing basis, so if we increase our capacity here to provide that, we certainly put ourselves in a good position,” he said.
“Likewise, medical tourism, if we encourage that to occur here, again that’s not seasonal. So we see the whole aspect of health care: Medical tourism as well as local care being able to continue to be a good contributor to the local economy,” Scotland said.
The health and social work sector contributed $70 million to Cayman’s GDP in 2009, according to the Economic & Statistic Office’s Statistical Compendium 2010. That is about 3 per cent of total GDP. However, it was one of the handful of sectors to remain steady since before the recession.
Cayman has about 800 to 900 registered healthcare practitioners, including physicians, nurses and some technicians, but not accounting for other personnel working at medical facilities, Scotland said. About 750 people work for the Health Services Authority.
Scotland said government spends about $90 million annually on health care for about 15,000 people, including civil servants, pensioners and indigent persons, making up about 25 percent of the population. He estimated about 60 per cent of that was spent locally, while 40 per cent went overseas, primarily for specialised tertiary procedures, such as heart stents, chemotherapy/radiation and major surgeries, as well as treatments for major traumas.
According to Cayman Islands Monetary Authority statistics, private domestic insurance companies took in more than $110 million in net premiums for health insurance in 2009, more than half of the grand total for all net insurance premiums. Private insurance paid out nearly $89 million in health claims that year. Through the first quarter of 2011, private insurance had taken in more than $32 million in underwriting income and paid out nearly $24 million in claims and adjustments, according to unaudited stats from the Authority.
“What I’d like to see, from the Ministry’s perspective, is containing more of that spend here. A lot of it goes overseas in terms of overseas referrals because a lot of tertiary care isn’t available here,” Scotland said. “One of the reasons we’ve encouraged and supported Dr. Shetty’s project is because he’s going to bring tertiary care here, which is not only going to bring medical tourism but keep some of the spend that is currently going overseas on island as well.”
Medical tourism in Cayman
Dr. Devi Shetty, of India, signed a memorandum of understanding with the Cayman Islands Government in April 2010 to build and operate a 2,000-bed medical tourism hospital, which would also include assisted living quarters and a medical education facility.
According to David Legge, spokesperson for the Narayana Cayman University Medical Center, “The project will bring an enormous economic stimulus to the Cayman Islands, and many sectors, including government, will benefit. It will also provide much-needed employment and educational opportunities to Caymanians for decades to come.”
According to Legge, the direct investment in the hospital would total about US$2 billion over 15 years, with US$100 million spent in the first two years, including US$55 million on construction and US$18 million on local labour. If the facility proceeds as planned, other industries would also see a significant boost, through increased airline travel, the building of residences for employees and construction of hotel rooms for medical tourists.
Scotland said Shetty’s project will also stimulate other medical tourism initiatives on a smaller scale at individual doctor offices. For example, Scotland said the government is working with one office that would like to perform some outpatient stem cell procedures.
Healthy economy, healthy construction industry
In contrast to the prospect of health care as a stabilizing force independent of other economic considerations, the construction sector is intimately intertwined with the state of the overall economy. Construction contributed more than $76 million to Cayman’s 2010 GDP (4 per cent of the total), according to the Economic & Statistics Office. That is a decline of 45 per cent in dollars and 30 percent in proportionate contribution since 2007.
The Office’s annual report does not include 2010 employment figures broken out by industry, but it states that in 2009, about 6,900 persons were employed in the broad category of agriculture, fishing, manufacturing, construction and utilities, with construction and utilities being the largest of those sectors. According to the report, more than 4,600 work permits were issued for construction in 2009 (a 28 per cent decline since 2007).
The downturn in construction numbers is illustrative of the sector’s interrelation with the overall economy, said Garth Arch, general manager of National Concrete.
“When the construction industry is being challenged and unhealthy, it’s really a direct indication that the economy is not good,” he said. “A health economy means a healthy construction industry.”
When finance and tourism are booming, that leads to demand for new buildings for offices, hotels, retailers, homes for professionals, and so on, Arch said. When those sectors are lagging, the demand for new construction also ceases, leaving many construction workers seeking jobs. That has construction professionals anticipating major new projects such as the Dart Group’s plans near Camana Bay and along Seven Mile Beach.
Since 2005, Camana Bay has created more than 1,000 construction jobs and has had a total local economic impact of US$826 million, Camana Bay’s public relations manager Joanne Gammage said. Citing a study by Deloitte, she said, “on average the construction of Camana Bay accounted for more than half of Grand Cayman’s construction activity from 2005-2010”.
In 2006, Camana Bay generated 72 per cent of the island’s construction activity, she said. It is estimated that the redevelopment of the former Courtyard Marriot hotel into a new four- to five-star hotel will create 230 construction jobs plus 170 jobs at the hotel when it is operational, she said.
“One thing we learned with Dart and Camana Bay is that they use local companies, and so we can expect the same going forward from them,” Arch said.
He hopes other proposed projects, such as the Shetty hospital and Cayman Enterprise City, will also use local companies.
“CEC is a holistic economic driver”
In mid-July, the Government inked a definitive agreement with Cayman Enterprise City to establish the knowledge-based special economic zone, to be based on a 500,000-square-foot campus somewhere on the eastern half of Grand Cayman. Construction is expected to total $327 million, with a ground breaking on the first 150,000 square feet set for the first quarter of 2012. During the first phase of the development, 900 new jobs will be created, with the first 800 or so related to construction, and eventually the goal is to have 5,000 workers at the campus when it is completed in about 2018. Additionally, while the campus is being built, Cayman Enterprise City tenants can rent existing space in George Town from Caymanian landlords.
Cayman Enterprise City CEO Jason Blick said his intent is to hire all local contractors. He said his group has also conversed with local developers about constructing supporting residential, retail and restaurant-oriented areas next to the special economic zone. “We want to give other developers, Caymanian developers, opportunities to leverage CEC in order to build new communities,” he said.
Beyond brick-and-mortar, Cayman Enterprise City advocates point to a KPMG analysis they commissioned that projects the completed development could generate $500 million per year, or 15 per cent of the country’s GDP. Blick points to Dubai’s free zones – upon which the Cayman project is largely based – which he says now generate 40 per cent of the United Arab Emirates’ GDP, 30 years after being created.
The goal of the project is to attract major international companies in the fields of Internet/technology, biotechnology, media and commodities/derivatives – industries that would be new to Cayman, as well as an academic presence from big-name universities that would offer bachelor’s-level degrees related to those fields. A promised long-term effect is to create high-paying, high-skilled job opportunities for Caymanians. Globally, workers in leading special economic zones earn salaries 20 percent higher than their national averages, he said.
The resulting increase in disposable income will feed into the core industries of finance and tourism, Blick said, as the new professionals begin to build a capital market and local lending pool, and spend on things such as “staycations” and expats bring their families over.
“CEC is a holistic economic driver and adds very significantly, not only directly to the GDP of Cayman, but indirectly to those stable platforms of tourism and finance,” Blick said.