Cayman Enterprise City accomplished a lot in 2011 and it has even more in store for 2012.
When 2011 began, the public hadn’t even heard of Cayman Enterprise City. In fact, when Premier McKeeva Bush announced during the Fidelity Cayman Business Outlook in mid-January that he had signed a ministerial memorandum of understanding with Hon Development Company to create a knowledged-base special economic zone in the Cayman Islands, the announcement was met with more than a bit of scepticism.
Although progress on making Cayman Enterprise City a reality might not have occurred as fast as its dynamic CEO Jason Blick might have originally wanted, it’s happened very quickly in Cayman Islands terms. Blick is satisfied with what was accomplished in 2011.
“It’s extraordinary really, considering the whole thing was done in 11 months,” he said. “As it is… we’re only about eight weeks behind schedule. We’re very proud of how far we’ve come.”
A year of accomplishments
When Bush announced he had signed a memorandum of understanding with Hon Development Company, not many people in Cayman had a good understanding about special economic zones, or SEZs in industry jargon. However, Bush said the project would pump $500 million into the local economy over 10 years, create 5,000 direct jobs and 3,000 indirect jobs.
In February, the public learned a little more about the project, including that it would be called Cayman Enterprise City, when Hon Development’s Barry Hon and Blick gave a briefing to members of the Cayman Islands Chamber of Commerce as well as to the press. Blick said Cayman Enterprise City would consist of six parts – an Internet Park, a Biotech Park, a Media Park, a Global Commodities Park, an Academic Park and an Outsource Park.
The numbers touted by Blick in February were different from Bush’s, but still substantial: 500,000 square feet of new office space; 5,000 direct jobs; 4,800 indirect jobs; a total investment of $327 million. In addition, he said the economic activity generated by Cayman Enterprise City could contribute up to 15 per cent of Cayman’s GDP on an annual basis, something that would offer true diversification of the economy. However, to attract companies to establish in Cayman Enterprise City so that the benefits could be reaped, Blick said the government would have to grant certain concessions, including allowing an onshore entity to be 100 per cent foreign owned and reduced work permit and licensing fees. To accomplish all of this, a host of laws needed to be amended or created, something that always takes some time in the Cayman Islands.
But before any of that could be done, a definite agreement needed to be signed.
That agreement was signed in July and then in September Cayman’s Legislative Assembly enacted the
Special Economic Zones Law, which, among other things, created a Special Economic Zone Authority. In November, the Legislative Assembly passed a new Patents and Trademarks Law and amendments to the Immigration Law, the Customs Law, the Companies Law and the Exempted Limited Partnership Law all in order to facilitate activity in Cayman Enterprise City.
Also in November, Cayman Enterprise City announced it had purchased about 40 acres of property for the project, but declined to say were it was located, saying they wanted to speak with landowners in the area first and would announce the location by the end of the year.
During 2011, Cayman Enterprise City’s design and building team, consisting of Design Cayman Limited, led by Cindy O’Hara, and Build Cayman Limited, led by Russell Linford, did preliminary works and started lining up contractors to work on the project. In addition, Cayman Enterprise City put together a staff of 20 people, split between Cayman and a satellite office in Dubai.
“It’s important that we have the right team and the right Caymanian staff,” Blick said, adding that 70 per cent of the local staff is Caymanian, something CEC promised from the beginning.
Cayman Enterprise City also sent several of its staff members to Dubai to get firsthand experience with how special economic zones operate, he said.
Another big accomplishment happened late in the year with the forming of an alliance with Dubai Multi Commodities Centre, something Blick thinks will a springboard for immediate success for Cayman Enterprise City.
Dubai Multi Commodities Centre
The Dubai Multi Commodities Centre, the licensing authority for the Jumeirah Lakes Towers Free Zone in Dubai, is a “global giant” in the world of special economic zones, Blick said.
“It signed 140 companies in November alone and 1,000 new companies in the first 10 months of this year,” he said.
Blick sees the DMCC not only as an anchor tenant of Cayman Enterprise City, but as a strategic partner that will provide global reach.
“The alliance allows us to co-brand and cross market,” he said. “We will work with the DMCC and their more than 3,000 companies to attract them to Cayman.”
The DMCC will in turn use Cayman as a base to target Latin American and North American companies in effort to get them established in Dubai.
“So, it’s a very symbiotic relationship,” Blick said.
Although the agreement with the DMCC was only signed in early December, within two weeks of forming the alliance it had already led to leads for several very strategic tenants.
Blick said Cayman Enterprise City already had 40 tenants lined up to start taking about 30,000 square feet of temporary leased office space in five different buildings in George Town while the project is being built. The 40 waiting tenants will start signing lease agreements as early as the second week of January 2012, Blick said, adding that it would take three to six months to close all of the deals.
“We’ll really start to see a lot between April and June,” he said.
He said some of the big names Cayman Enterprise City was talking to were Johnson & Johnson, Hewlett-Packard and Cisco.
The lure of special economic zones everywhere is that they ultimately offer a physical presence to companies that wish establish in them for tax reasons. In that regard, Blick notes that Cayman Enterprise City will be attractive to many of the offshore companies already set up in the Cayman Islands.
“We will target Cayman’s 94,000 offshore companies and assist them in a substance over form model.”
Rather than seeing Cayman Enterprise City as a threat, Cayman’s financial industry welcomes its establishment, Blick said.
“We have massive support from the legal and financial community,” he said, adding that Cayman Enterprise City will not only lead to new company registrations but also to the registration of intellectual property and the development of more human capital.
“Permanent establishment means additional business for everyone.”
The first phase of Cayman Enterprise City’s build-out will consist of 60,000 square feet under roof. In addition to office space, the first phase will consist of an $18 million data centre that will provide the technology backbone of the special economic zone.
Blick said that his is often asked why companies registered in the special economic zone couldn’t lease space where ever they wanted to. He said the reason companies all want to be in the same place is that they share technology and even, in some cases, support staff.
The build out of the first phase of Cayman Enterprise City is expected to take up to 24 months. Companies that establish in the temporary leased space will have to share a mini-data centre, which will limit the scale of initial operations and which companies establish here, Blick said.
“We’re in a make-do situation until mid-2013.”
The buildings at Cayman Enterprise City will purposely be kept smaller so that construction can be carried out by any number of Cayman Islands contractors and so multiple contractors can work on the project simultaneously.
The goal is to get planning approval in time for a ground breaking in the first quarter of 2012, with substantial construction starting in the second quarter.
Although Cayman Enterprise City accomplished much in 2011, Blick said there are still two major inhibitors to how successful it becomes: The size of Grand Cayman’s airport runway and the existing bandwidth of telecommunications.
With regard to the airport, Blick said that many of Cayman Enterprise City’s clients have expressed the need to have direct flights to Cayman from Europe. In order to accommodate larger aircraft that can make direct, long-haul flights from Europe, Cayman would have to expand the length of the airport runway, something Blick believes there’s a political will to do.
“We get the feeling that government is committed to expansion,” he said.
As for telecommunications bandwidth, Blick said Cayman Enterprise City as already spoken with LIME about their needs. Although LIME’s MAYA1 undersea cable is sufficient to provide the necessary bandwidth, major investment in required on both ends of the cable to facilitate expanded bandwidth. Blick said one way or the other – either through LIME or another provider – Cayman Enterprise City would have to provide expanded bandwidth.
“The big Internet giants will come when the infrastructure is ready and part of our job is to create that platform,” he said. “From mid-2013 onward, we’ll start to see structural changes to bandwidth.”