The government’s stimulus plan for the economy was unveiled at the end of last year. Although the response from business leaders was in the main positive, fears that words are not translating into action abound. The Journal speaks with representatives from all industries to find out why it’s so important to get Cayman’s economy back on track as quickly as possible.
“…businesses have witnessed some of the toughest years in recent memory. But we can no longer afford to talk down our economic prospects. Our country needs stronger companies, more new start-ups and more employment. While all signs point to our economy recovering, we need to take action now for it to continue. …Only growth in the private sector will ensure that the country’s prospects recover.
“In 2011, the Government must ensure all policy decisions are pro-business, tackling the obstacles that prevent small- and medium-sized companies from getting ahead. We need a year where costly regulatory barriers are removed, where companies are given real incentives to expand, and where businesspeople are encouraged to take risks – especially in new and growing markets.”
Not a quote from Cayman’s business leaders, although it may as well have been, but from the British Chambers of Commerce Director-General David Frost in his New Year message to members, the organisation recognising the need for a pro-business approach by government to lift the UK out of its economic downturn.
Similarly in the Cayman Islands, business leaders have been crying out for a strong lead by government to ensure that Cayman’s economy also recovers quickly from the recession. Thus, the Cayman Islands government revealed its own economic stimulus plan to the nation mid December last year.
More is needed
While business leaders here welcomed the move, they had hoped for more. Butterfield’s Managing Director, Conor O’Dea says: “The plan outlines a framework for input and analysis and a process for implementation, which is the stated purpose. Based on comments, I expected detailed plans as opposed to the framework. The framework needs to deliver economic stimuli which are actioned and introduced effectively.”
O’Dea says he’d like to see an aggressive plan to kick-start development with the immediate negotiation and agreement to finalise the three projects with private capital funding i.e. cruise ship/Port and Narayana Hospital.
“These are big infrastructure projects, which will help restore confidence,” he says. “The ongoing development of Camana Bay and Dragon Bay must be facilitated to ensure we have sustainable development. These developments will help take pressure off government to boost construction through large capital expenditure projects, which we can ill afford at this time.”
When it comes to financial services, O’Dea says that Cayman needs to amend the immigration process to support business and stop the current outsourcing and downsizing of Cayman’s financial services.
“Immigration change has been proposed and some implemented as outlined in the plan, but we need more change supported by a well thought out training programme for the development of Caymanians in the business. We need to be proactive in the drafting and introduction of legislation, a key driver of financial service products and an area where we have become reactive over the last 10 plus years.”
Stimulus is no quick fix
RE/MAX owner/broker Kim Lund says there are definitely some good measures in the stimulus plan that will have a positive impact on business and the economy – over time.
“Some of these measures will not only take time to implement, but they will also take even more time to get traction and produce the desired results of more revenue and jobs for the country. Still, it is critical that we get these measures started to finally reverse the negative course that we are currently on,” he states.
Lund worries that there will be no tangible results from the stimulus plan in the short term. For example, he says that the options for residency are attractive “but even if enacted immediately, it will take several months to get market exposure about these new options now being available. Then, it will take several months for someone to potentially investigate Cayman as a possible residence or place of business, locate a residence or business location, close on it, and finally uproot their current situation to move here. By the end of this year, we will hopefully start to see some traction from this, but it will probably take at least that long before we see much benefit locally,” he confirms.
Cut immigration fees
Business owner Eddie Thompson said government has taken great strides to stimulate the economy; however, some of the efforts are of no significant benefit to the populous and in some cases will only make life more difficult.
“The topic of minimum wage needs to be addressed once and for all if Caymanians are to survive in their own country at a level we are accustomed to. A blue collar working Caymanian will never be able to own a home with an hourly wage of US$5. In fact, it is safe to say that he or she could not even afford rent and associated costs,” he comments.
Thompson calls for a reduction in work permit fees for all industries. Lower fees for more companies will generate more revenue than higher fees for fewer companies and also increase new business start ups as well as a multi tier work permit fee structure for companies based on number of employees.
“Currently a law firm consisting of two staff members is paying the same work permit fee as a law firm with a staff of 30 or more, thus making it extremely difficult for competition. This would give a small firm the ability to compete, thus grow and provide more job opportunities,” he said.
Thompson also said all government contracts should be carried out by local firms.
“It is accepted that not all services required by government can be provided by somebody or company on island, but that does not stop local companies or individuals from soliciting the services from overseas. This would allow local companies and individuals to gain the relevant experience (in collaboration with overseas consultants) resulting in the majority of contract sum staying within the local economy as opposed what happens now where the majority (if not all) is sent overseas to improve some other economy.
No expense should be spared on education for without it, no investor will come to a crime ridden island.”
Encouraging inward investment
Anthony Travers, chairman of Cayman Finance, expands this thought further.
“The current issue for Cayman is inward investment in a challenged global economy. Without inward investment and without any natural resources there can be no job growth and certainly not enough job growth to accommodate 700 school leavers a year. The resulting unemployment can be a direct driver of local crime,” he says.
Travers said it is not sufficient simply to announce pro stimulus policies.
“These policies have to be implemented against a well recognised recent history that has strangled inward investment and indeed resulted in an exodus of local financial services business and job opportunity for Caymanians,” he states.
Travers says that solutions that cut red tape and speed decision making have to be seen to be functioning effectively by potential investors whether these are in financial services or tourism.
“In a de-leveraged global economy there is less cross border investment and more competition for investment so investors have choices,” he explains. “We have to be more effective than the competition to get a place on the podium.”
Efforts are being made by the administration to reverse past policies, he says, but questions whether these efforts are regarded as effective and credible by those in London New York and other financial centres whose investment we seek.
“This is now an issue of implementation. The continued movement of jobs out of Cayman in the financial services industry is not a positive indication. No doubt the Government is moving Cayman in the right direction but that does not ensure the result,” he states. “The notion that Cayman can self sustain and employ its school leavers by maintaining itself in a Seventies-style bubble is an economic delusion. Lying down in front of a bulldozer prevents a Caymanian bulldozer driver from doing his job even though it might create one job opportunity in another field of employment.”
Unshackle the private sector
dms President Don Seymour is clear in his mind what needs to be done.
“The steps taken by the government are marginal and don’t deal with the central issue that is stifling economic growth – uncertainty. Businesses are reluctant to invest because there is massive uncertainty in our economy,” he states. “From West Bay to East End and all points in between, initiatives that could ignite economic growth are stalled and mired in bureaucracy and politics. Whether it is the cruise terminal project, the garbage dump project, Shetty hospital, the East End seaport, the immigration situation, or reducing government spending, the future of these initiatives is very uncertain so optimism is low. Just imagine the confidence boost if these initiatives were under way and how that confidence would propel our economy forward. Government cannot lead the recovery. For the economy to turn around government needs to unshackle the private sector and get out of its way. I trust that they will urgently get it right.”