Suspending Cayman’s work-permit rollover policy has been lauded by local professionals in the key industries of finance, real estate and tourism. Meanwhile, the news has rattled the political establishment in Bermuda, whose rollover policy was the inspiration for Cayman’s.
In late September, Cayman legislators voted to suspend the rollover policy for two years to allow a committee to study the policy’s impact and make recommendations for future laws. The committee, comprising members from the Chamber of Commerce, Cayman Finance, the Immigration Review Team and other organisations representing small businesses, is tasked with releasing its findings by April 2012.
Following the announcement from the Premier, the Cayman Islands Tourism Association and the Cayman Islands Real Estate Brokers Association have banded together to support the initiative to suspend roll-over,” said the bodies in a statement to the media.
“With the numerous challenges that both industries have faced during the economic downturn it is a relief for businesses to have the pressure of rollover removed, even if only on a temporary basis. If this had not been addressed there was tremendous concern over the economic loss that our country would continue to face.
“Between the effects of a shrinking population, the increasing cost of recruitment of new employees and the negative impact of our service standards when valuable team members are forced to leave, the situation was/is seen as critical.”
Likewise, Cayman Finance Chairman Richard Coles issued a statement expressing support for Premier McKeeva Bush’s proposal, saying that some financial services firms believe the policy has increased the cost of recruitment and training, among other issues. Cole added that he thinks the idea of assessing the impact first before making a permanent change is the correct and diligent course.
“The Government’s announced intention sounds reasonable as it will enable the government to review the impact of the policy, which we believe is now overdue, and it makes good economic sense to allow persons who may be imminently facing rollover to avoid being negatively impacted in the meantime,” Coles said.
Trina Christian of the Cayman Islands Tourism Association equally expressed satisfaction with the development.
She said the tourism association has had immigration and particularly rollover on its list of top issues critical for the success of tourism for many years and is pleased to see that the government is taking a step forward to suspend a policy that the association feels has done more damage than good.
“We respect that there may be a need for a policy to protect the longer-term immigration and citizenship of the country but at the same time the way in which we do that should be still feasible for businesses, the success of the economy and especially the tourism industry which is heavily reliant on service providers and people,” said Christian.
The Cayman Islands Real Estate Brokers Association said the controversial policy, which forces work permit holders to leave the island after a maximum term of seven years, had been instrumental in the drastic real estate downturn of 2009 and 2010 because of the associated drop in population.
Although sales volumes have recovered this year, transactions in lower and mid-priced properties are lower than ever before, said Jeremy Hurst of the brokers association.
“Middle level employees, who have traditionally been the mainstay of much of the local real estate market, have been deterred from buying homes, condos or land as they are scared to put roots down and then be rolled over.”
As a result of the population drop, there has been an increase in vacant properties and rents have also fallen.
Hurst added that the hope was that any rollover suspension would build investor confidence.
Chamber President James O’Neill in turn welcomed the opportunity for his organisation to serve on the rollover committee.
“The Chamber Council and membership has expressed concern about the term limit and work permit policies for some time. In fact, immigration reform is among the main action items in the Future of Cayman strategic report. Any sensible proposal that can help to stimulate the economy should be considered at this time,” he said in a statement.
One broker’s view
Toni Paolini, managing director of Cayman Real Estate, was upfront with his opinion.
“This rollover policy is a country killer and an economy killer,” he said.
“Who in their right mind would take out a 15-20 year mortgage knowing he has to leave in seven years?”
He took further issue with overall immigration policies that grant residence status to wealthy individuals but do not allow them to work, while forcing people on work permits to leave. He said the high-end retirees and occasional visitors do not put money back into the economy; as opposed to someone like Ken Dart, who has invested enormous capital into the Island.
“The don’t spend one cent even in the cinema. They have a 54-inch TV and invite friends over to have drinks, that they imported themselves anyway,” he said.
“I’d prefer 10 people who invest $500,000 in the Island rather than one guy investing $5 million. I prefer people who go to church, go to the movies, go to Camana Bay, put their kids in school, participate in the life of the Island, instead of being rolled over,” he said.
Paolini said there should be a cap on the population of Cayman, according to experts’ estimates of how many people the Island can maintain, and that the number of immigrants to admit should be based on that figure.
He also said he was having a very difficult time finding qualified Caymanians willing to work for his company, and even after unsuccessfully going through scores of local applications, he was unable to get approval from Immigration for a work permit.
“Why would I pay $5,000 per year for a work permit for a foreigner that I have the responsibility of housing, work permit, pension, insurance, if I could have a Caymanian who could do the same job?” he said.
“He wouldn’t even have to do the same job. If he could do more or less the same job I would be very happy.”
Paolini said he loves Cayman and would test his loyalty against that of any native-born Caymanian.
“I have four passports – Italy, Brazil, US and Cayman Islands – I can live anywhere I want. I choose to live here. Everything I have is in the Cayman Islands,” he said.
The Cayman Islands Tourism Association said that whilst the nature of many businesses meant that there was a somewhat transient employee pool, the hospitality industry was challenged by key employee issues within the sector.
“The rollover has been damaging to certain businesses and in a wider discussion [we would address] the issue of key employee approval for tourism professionals is that they require different criteria for evaluation than the financial industry.
“There are people who have been written up in international publications as well as here in the Cayman Islands as ambassadors; when people come here on vacation and are creating memories and meet someone who is completely committed to a destination they become friendly with them and it helps to bring back repeat business, which is really what we want to do.”
From a larger strategy standpoint, Christian continued, it costs more to bring new visitors here.
“The more we can have repeat business, it certainly makes our advertising dollars go a lot further and definitely helps the sustainability of our tourism industry.
And from a small business standpoint, the costs to recruit new talent and find that special person can often mean the owner or manager has to fill in a lot of the blanks which in these days they are already doing. It puts a lot of extra strain on business and how they perform.”
Although employees are able to reset their clocks after a year off-island and become eligible for a new seven-year maximum period, Hurst said that many employees did not return and the brokers association felt that a year break was too long.
“When an employee packs up and goes for a year, typically he has no choice but to obtain employment and put down roots elsewhere. The rollover has resulted in us losing good people from Cayman as well as discouraging those that work here to become as involved in the community as they should.”
He added that the association believed that the only long-term solution was to either reduce the break period to no more than three months or even remove rollover altogether.
Cole said the financial services industry has been “extremely responsible” in its practices of hiring and training Caymanians.
“In my opinion, the financial services industry has generally been extremely supportive of the recruitment and training of Caymanians which can be seen by the number of Caymanians employed by the industry and the number of Caymanians in senior positions. Of course, improvements can and should always be made, but I feel that there are many firms in the industry that can be considered role models in that regard,” he said.
As of 1 June, the number of work-permit holders in Cayman dropped below 20,000 for the first time since Hurricane Ivan hit in 2004. According to the Economics & Statistics Office’s 2010 Compendium of Statistics, there were about 22,900 work-permit holders in 2009, spread out across Cayman’s industries. Of those, 20 per cent worked in construction; 18 per cent in private households; 14 per cent in restaurants, bars, hotels and condos; 13 per cent in business services; 12 per cent in wholesale and retail; and 8 per cent in financial services.
Immediately after Bush proposed the rollover suspension in mid-September, Bermuda Premier Paula Cox jumped to the defence of her country’s immigration policy, as her political opponents seized the opportunity to attack.
According to The Royal Gazette, Cox said, “The benefit of the Bermuda immigration model is that it is dynamic and this highlights the flexibility of our policy. It is not enshrined in statute and so more absolute. Our approach differs from Cayman as they embedded their rollover policy in legislation, so it lacks the nimbleness of the Bermuda model.”
She said Bermuda’s immigration minister can identify additional carve outs to the policy, such as a 10-year work permit and incentives for creating jobs.
Cox said Bermuda’s work-permit mechanisms are more efficient than Cayman’s.
“I do not think that Cayman’s actions alone on this front would make us less competitive. The way they process work permits and the cost of work permits has always been a problem for them,” she said. “For example, our charge of $20,000 for a ten-year work permit is less than what the fee is for an executive for one year only ($25,000).
“Their turnaround time for the processing of a work permit is far longer than our turn-around time. They have only started addressing the fast-tracking of work permits. Their fee structure is quite complicated. Businesses also have to pay annual fees. Our plans to provide 10-year permits and incentives are way ahead of them. Even the client base is different, with more hotel workers,” she said.
The Royal Gazette cited a critical response to Cox’s comments from an unidentified “senior executive who has offices in both jurisdictions”, who took issue with Cox’s characterisation of Bermuda’s and Cayman’s respective policies.
According to the newspaper, “He said from his experience, the annual payroll tax bill for some Bermuda executives is higher than the annual $25,000 work permit fee for an executive in Cayman.
“That’s not the only thing where she’s mislead the public,” he added.
“The policy is less flexible in Cayman than in Bermuda, but the Cayman Islands have a process whereby after seven years you are able to apply for permanent residency and after a further five years or so you can apply for citizenship.
“Bermuda has no process for permanent residency, although they say that if someone is an executive they will consider it. And there’s no process for anyone creating intellectual capital, and therefore wealth to get citizenship. In the Cayman Islands there’s a progression of rights that are available.
“There’s no process for retaining intellectual capital in Bermuda. You can’t build wealth and have a healthy economy unless you retain intellectual capital. The term limit policy should be altogether done away with.”
Bermuda’s Shadow Finance Minister Bob Richards told The Royal Gazette, “The Bermuda Government’s partial retreat from its own policy earlier this summer through a programme of limited work permit exemptions for key workers was de facto acknowledgment that its policy was hurting the people of Bermuda and the Island’s attractiveness as a business centre.
“Cayman, our competitor, instead of just thinking about it, has taken action to help its people and put Cayman first. Here at home, the government is putting pride before country unwilling to change one of its signature policies despite evidence that it is neither working for the benefit of Bermudians nor enhancing the Island’s attractiveness as a business centre.
“We think in their heart of hearts the government knows its policy is wrong for the Island but that saving face is too important to them.”