This year’s Cayman Economic Outlook forum, organized by Fidelity, brought together key leaders from Cayman’s business community to hear the thoughts of some global commentators and thinkers from a broad range of industries. The Journal took the opportunity to sit down with some of the business leaders to learn how they see Cayman’s economy shaping up this year.
Discussions with business leaders at last month’s forum revealed that infrastructure development (including waste management, the airport, the dock and the development of George Town), Cayman’s reliance on the U.S., the cost of doing business, and Cayman’s global image are all important issues when it comes to assessing the territory’s economic growth.
Slow but steady growth
A variety of indicators have signaled to MLA Roy McTaggart, councilor to the minister of finance and economic development and to the minister of financial services, commerce and environment, that Cayman’s economy will take on slow but steady growth during 2014.
“It won’t get back to the glory days of GDP at 8 [percent] to 10 percent, but I foresee around 2 percent growth this year,” he says.
This year, McTaggart says, there could be an upturn in business, with clear indicators such as last month’s opening of the new Shetty hospital, which he believes will generate a good deal of ancillary growth.
Nevertheless, a potential obstacle, which McTaggart termed “the common cry” regarding the cost of doing business in Cayman, has led to government looking into what could be done to alleviate this. Still, he noted, government must balance this against other streams of revenue generation.
The financial services industry could be cheered by one certainty, he said.
“The fact that government has confirmed that there will be no new taxes this year sends a clear message to the financial services industry that there will be nothing unforeseen from government for them in the next budget,” he said.
The U.S. influence
One element that is out of Cayman’s control is the fortunes of its powerful neighbor, the United States.
“We depend so much upon the U.S.,” McTaggart said, “with 80 [percent] to 90 percent of our trade and tourism reliant on America and our financial services industry centered on America. The health of their economy directly impacts our success, which means in some ways we are limited as to how much we can stimulate our own economy because we are so linked to our neighbor up north.”
Eduardo D’Angelo P Silva of EDPS Consulting and former chairman of the Cayman Islands Bankers Association and of the Cayman Islands Financial Services Association (the precursor to Cayman Finance) is also acutely aware of the precarious nature of Cayman’s economic fortunes, as they are linked to larger economies.
“There are international effects that we cannot control,” he said. “While the economies of Europe and the U.S. remain stable, they are also fragile and can be easily tipped. Cayman’s financial services industry, and especially the hedge fund industry, is susceptible to downturns. While I believe the financial services industry is optimistic for the coming year, it is concerned that things can change very quickly.”
Action needed on infrastructure
As far as Cayman’s domestic economy is concerned, Silva says the country needs to see movement on infrastructure development such as the George Town dock, the airport and waste management.
“We are getting to a critical point for businesses with regard to these issues as to whether they decide to do business here or not,” he said. “We have to see serious commitment, and some hard political decisions need to be made. If we don’t, we will just see the issues continue to be rolled over.”
He thinks the government should make a decision on the location of the landfill, explain to the public why the decision was made and then move on.
As far as the development of the airport is concerned, Silva thinks Cayman could be a regional hub for visitors from Europe and other parts of the world who don’t want to travel via the United States, Cuba or Jamaica. But the issue of enhancing and expanding the airport must be a priority.
“I believe we are missing an opportunity for Cayman to become a regional hub,” he said. “These visitors could stop over in Cayman and boost Cayman’s economy at the same time.”
His final point relates to employment, human resources and the workforce.
“It’s important for government to give a clear message as to how they intend to manage employment and education and training of local people,” he said. “Every new minister comes up with a new plan in this regard. Businesses want to employ locals, but they want quality personnel. They don’t want to have to train people up who have left school with no basic level of education.”
Medical tourism upswing
Minister of Health, Sports, Youth, and Culture Osbourne Bodden said he believes the signals for an economic recovery are evidenced by the level of interest from investors, particularly in the medical field in Cayman.
“We’ve had a lot of interest from clinics that have been varied in nature,” he said. “One such was a clinic to treat addiction; also from research clinics which have already started to do more and more here in Cayman. Yesterday I attended a presentation on an adolescent behavioral clinic. This is all under the umbrella of medical tourism, with clinics advising that they would be bringing patients into Cayman from overseas. The potential from the medical perspective is quite exciting.”
Bodden says a major hurdle to economic growth is the current immigration system for investors seeking to expand their business here.
“We have to ensure a clear, smooth and user-friendly system of immigration,” he said, adding that government is discussing with all agencies concerned with the immigration process to ensure that they are working toward a common goal.
Bodden also recognizes that having suitably robust infrastructure is key to economic success. “That’s why we have made it a priority,” he said.
Bodden says the right infrastructure is needed in terms of the airport, roads and also waste management system to accommodate new business such as the newly opened Shetty hospital.
Solution to landfill
Regarding waste management, Bodden says government is “certainly not ignoring what has already been done,” referring to the urgent calls to action by various business leaders in the wake of two recent serious fires at George Town’s landfill site. “But we have to follow the proper procedures as detailed in the law … We need to find the funding to ensure that the landfill is properly managed.”
Bodden said he would like to see a comprehensive waste management system in place within two years that includes a recycling facility.
Chamber of Commerce President Johann Moxam noted the recent upturn in economic development.
“After six long years of economic stagnation, several indicators suggest the beginnings of Cayman’s economic recovery – consistent increase in air arrivals, the opening of Phase 1 of the new Health City Cayman Islands, the start of several development projects such as the Grand Cayman Kimpton Hotel and Residences, the Cox Lumber facility in Bodden Town and several other smaller residential or commercial projects,” he said.
He also pointed to the anticipated increase in cruise visitors and the expected start of a cruise pier project and the Owen Roberts International Airport redevelopment, both of which would stimulate new jobs and interest from investors.
However, Moxam said that financial services, as an industry, and small businesses, as an important driver of job growth and local investment, are both facing extraordinary challenges.
“Financial services continue to face increasing fees, outdated legislation and far-reaching regulatory pressures. Small businesses, who lead job creation and entrepreneurship, face the same government cost structure as multinational enterprises or large companies. Both are challenged to find skilled labor available for work. The construction sector, particularly among the smaller contractors, remains stagnant,” he said.
Moxam says many companies continue to outsource jobs and services to other jurisdictions and that Cayman needs to evaluate and address the reasons why they are making these decisions and consider how the island could reverse the trend.
More available property needed
Cayman Enterprise City’s board chairman and chief development officer Cindy O’Hara directed attention to an other area that affects growth. She said there is a problem finding homes for purchase.
“We really need Cayman’s residential market to grow,” she says. “It’s great to build office space, but our clients cannot find places to live. We used to have a huge surplus in Cayman but not many condos have been built in a long time. We need more, and this is a huge obstacle for clients. I believe this provides a huge opportunity for the development of housing, including high-end housing.”
She also mentioned the dearth of class A office space in central George Town, which she believes is a hurdle for business growth, coupled with the lack of suitable parking.
“The space where the Tower Building used to stand has been empty for years,” she noted. “Why not turn that into a car park? I would be happy to pay a reasonable rate to have a car parking space. Lack of parking is a real deterrent to people coming to George Town. At the moment, we cannot use our own capital.”
O’Hara also says Cayman needs to develop its entertainment for residents beyond the restaurant and bar culture that currently prevails.
“We have sophisticated residents and so we need to develop entertainment that excites them. People are forced to travel overseas to get rid of ‘island fever’ but that’s not necessary if we were to build up decent entertainment here,” she said.
Bullish on Cayman
Jeremy Hurst, owner/broker with IRG International Realty Group, who has traveled in recent months to 10 countries and 20 islands across the Caribbean, says he is “exceptionally bullish.”
“The fundamentals for growth are excellent,” he says. “We have weathered several storms really well, and we are poised for growth, particularly when you look at other Caribbean islands. Out potential comes from our diverse economic platform, and it’s our diversity which will give us future resilience.”
Hurst said Cayman’s well received financial services product and also its quality tourism product, desirable both from a visitor and hotel brand perspective, means Cayman is well positioned for future growth.
“Our medical tourism product is the envy of the rest of the Caribbean and now we are growing our sports tourism products as well. Apart from striking oil, I’m not sure what else we can do,” he said.
Even so, Hurst pointed out that Cayman now needed to do a far better job of telling Cayman’s success story to the rest of the world.
“It’s still an uphill battle to explain who we are and how we are portrayed,” he said.
“To be able to do that at that high level in a considered and measured approach is exactly what we need to do. “We’ve got to get the message out. We cannot be frightened, we have a solid case. We are a real place and a real, sustainable business model for a small island economy.”