Cayman Enterprise City ended 2013 by surpassing its first benchmark – 100 companies in the special economic zone. For 2014, CEO Charlie Kirkconnell has ambitious plans, targeting to sign up twice as many companies as the year before.
Cayman Enterprise City has crossed what it considers a milestone. Starting the year with 29 zone companies, now more than 100 companies have been established in the knowledge-based special economic zone.
Kirkconnell says reaching the mark validates the company’s efforts and shows that CEC is well on its way to establishing a significant economic zone in Cayman. “For 2014, our target is to sign up in excess of 150 companies and in the process to create between 250 and 300 new jobs,” he says.
CEC anticipates that 20 percent to 25 percent of those newly created jobs will be filled by Caymanians or permanent residency holders.
Kirkconnell says the zone has had a significant impact on the economy already and projects that will increase this year as the project moves forward. In September last year, CEC put its economic impact since inception at $12.6 million. This was composed of $10.6 million in set-up and maintenance costs for the zone companies, spending for office fit-outs and equipment, and real estate purchases, as well as $2 million indirect impact from the money spent by the more than 100 zone company employees.
One reason the project has gathered pace, Kirkconnell says, is that CEC has become much more efficient in its processes and acquired a better understanding of its target markets. “We have just gotten better at what we do.”
The zone also implemented an automated customer relationship management system and client portal that accelerates the labor-intensive, manual process of moving a client’s application through the system. The electronic submission of documents to CEC by clients “takes out some of the pain of filling the application,” he says.
Still, even with more efficient processes, doubling the number of new companies in the zone this year is an ambitious target. But Kirkconnell says the figures are based on CEC experience and level of engagement with prospective clients.
“That’s what our client pipeline is telling us. We have got 240 companies that we are currently engaged with. Based on our conversion rates and our projections, we expect that 150 are achievable. We do consider it an aggressive goal, but we also think that it is achievable.”
New companies will also mean that new office space is needed. CEC is currently in the process of acquiring the site that is going to be the home of the special economic zone. This transaction is expected to be concluded in the early part of this year.
Notwithstanding the construction of the zone campus, which will take place in phases over 18 to 24 months, new additional temporary space will be required in 2014. “We will need to expand our temporary presence in advance of our building out and completing the first buildings on our campus,” Kirkconnell says. “The more successful we are in the early part of the year the sooner that will happen.”
Kirkconnell says building efficiency into Cayman Enterprise City’s processes is still a learning curve because it has to be built from scratch.
“There are no existing processes in a start-up. So we had to build and, in some cases, rebuild them based on better knowledge. That’s one of the ongoing challenges.”
Another one is learning what CEC’s market is, focusing on it, and maximizing the opportunity, he says.
Initial thoughts as to what the target markets and industries were and where business was mainly going to come from had to be revised. “Some of our assumptions were correct, some of them less correct. What we had to do was focus our business development efforts to really get the maximum return.”
This means that North America will always be CEC’s default market because of the familiarity and proximity. The Canadian outreach, for instance, has expanded well beyond Toronto. CEC now has channel partners targeting oil, gas and other commodity companies out of Calgary, Edmonton and Vancouver.
In addition, the Silicon Valley business development activities are now also extending to India, tapping software firms that aim to get into the U.S. market but are unable to obtain the visas for their high end programmers. Having a small presence in a time zone that is closer to the West coast of the U.S. than India makes sense for these firms.
Another new promotional focus is on Europe. Kirkconnell, who went to London in November as a guest of the government delegation that attended the Overseas Territories Joint Ministerial Council meeting, had successful meetings with potential clients and introducers of business. “We have seen some very good prospects emerge from that,” he says.
However, he acknowledges that it is more difficult to pitch to the European market with London as a focus and put together a concerted marketing effort from Cayman, considering the time difference. The main focus will continue to be on the traditional Cayman Islands markets.
In terms of industries, the zone is seeing the most interest from technology companies followed by commodities and derivatives trading firms and media companies.
As the zone’s reputation has grown and the value proposition has become clearer, interested parties no longer only include small companies and sole traders. CEC is now gaining more momentum with larger companies, including significant global companies, Kirkconnell says. “We had a number of companies come in who project to employ in excess of 40 staff, including one who projects to employ close to 100 people, going to ramp up to that over the next few years.”
Kirkconnell is confident that a model that combines special economic zone benefits with permanent establishment and actual employment will only see more demand in the future.
“The registered office model is probably not going to be something that is going to exist perpetually,” he says. “The idea that we are presenting the opportunity for clients to do business in and from the Cayman Islands, presenting them with the opportunity to set up a physical presence and actually conduct their business from the islands is an important part of how Cayman will go to market in the future.”
A major draw, in addition to CEC’s value proposition, is also the general business climate in Cayman.
Kirkconnell says, “Cayman has proven, through the vibrant financial services industry that we have here, that it is a very attractive place to do business. Many of the companies that we deal with that have no prior knowledge of the Cayman Islands come down and are pleasantly surprised by the environment that they find. This can contribute to growing the business.”
The favorable business environment, of course, has to be based on solid economic activity. As Cayman is emerging from a recession, Kirkconnell’s confidence in Cayman’s economy this year is buoyed by a number of significant projects.
“Given all of the projects that are in progress and coming online, I think the economic outlook for Cayman is very good. Cayman has set itself up for a decade of growth and perhaps beyond that as well.”
This activity is also encouraging for Cayman Enterprise City, he says.
“Obviously, our project entails a fair amount of risk. There are no guarantees that we are going to succeed. It is very encouraging to be building a project and see other people with their projects also having confidence in the future and feeling strong enough to make significant investments into the local economy.
“We hope that they are encouraged as well by our project and the economic growth that it will bring to the island.”