Read our article in the Cayman Financial Review Magazine, eversion
Much discussion has taken place over the past couple of years on the need for Cayman to expand its reliance on its two traditional economic pillars – financial services and tourism – and its quickly developing third, real estate, and look to embrace new forms of industry that will fit seamlessly with existing business, while at the same time broaden Cayman’s economic reach.
In a tough economic climate it is the innovative and daring who will emerge out of the stranglehold of slow economic growth and lead competitors going forward. In this way, expanding the economy brings rewards for all, as the trickle-down effects are felt throughout the community, from real estate to retail, hospitality to construction.
Learning from the competition
But Cayman is not the only offshore jurisdiction with a determined outward-looking, growth-focussed perspective; Singapore has been tipped to become the largest offshore centre by 2015 and has made concerted efforts to market itself as such not just regionally to the Asia-Pacific, but globally as well.
According to a report earlier this year in The Daily Telegraph, Singapore has the world's highest density of wealthy people, and had just over 150,000 high-net-worth individuals, each worth more than $1million by the end of last year, according to new figures. Such individuals now make up 2.9 per cent of Singapore's population, the report said.
Singapore has made concerted efforts to hire the best and the brightest over the last ten years, increasing its foreign workforce to accommodate the growth in business and thereby strengthen its presence on the global stage, welcoming new workers and new business with open arms.
While Cayman is unable to compete with Singapore when it comes to location with regard to the Asian market, it has the ability to retain its stronghold over our location. It is certainly able to compete when it comes to the quality of the professionals we have here.
Where we can learn, however, is with regard to how the jurisdiction as a whole facilitates business. Ensuring that Cayman offers streamlined business processes that are not so labour-intensive and can provide a quick turnaround for work and other related permits are vital components in this Island’s bid to stay at the top of its game.
In addition, Cayman could look to areas such as the ease and speed at which visitors are processed at the airport, another important area of focus for Singapore. It takes about seven working days for an Employment Pass to be issued in Singapore; about six weeks for an Entrepreneur Pass.
Positive immigration moves
New moves by the Cayman Islands government indicate that this jurisdiction is making concerted efforts to improve the infrastructure that greets investors when they first investigate whether to invest in our Islands.
Investors who choose to purchase property in the Cayman Islands as a second home and those investors who wish to work in the Islands and who can demonstrate a substantial business presence are catered for under proposed legislation.
Changes to the immigration law are in the pipeline that will give people of independent means the chance to apply for a Certificate of Permanent Residence (without the right to work) so long as they invest in real estate in or above the prescribed amount.
In addition, investors who demonstrate a substantial business presence in the islands, owning 10 per cent or more of the business and who spend more than 90 days in the islands in any year, will get the chance to obtain a renewable residency certificate for a period of 25 years. At the time of writing these proposed changes were being discussed within the government and will most likely have come into force by the time of publication.
These are bold and exciting moves that will no doubt stimulate interest, removing the barriers for high net worth individuals who want to make Cayman their long-time second (or even first) home as well as those who wish to establish new businesses.
The question of concessions
While concessions offered to stimulate business growth are generally welcomed, it is important to remember that Cayman is a small jurisdiction with around just 55,000 residents and as such additional benefits offered by government meant to woo new business ought to be tempered by the need to protect and nurture existing businesses.
Very recent discussion has taken place with regard to new immigration and other financial concessions being offered to attract the reinsurance industry away from its traditional stronghold in Bermuda down to the Cayman Islands, as Cayman is at present the number two spot for the global captive insurance market.
This is a very positive move that has been welcomed by the industry here. It makes sense to grow and nurture Cayman’s existing and highly successful captive insurance industry in this way, expanding on our already substantial presence within the industry and bolstering Cayman’s highly skilled local professionals to properly allow the Islands to take centre stage in this important sector of the financial services industry.
Wide-ranging and very broad concessions have also already been put in place to create a Special Economic Zone for the development of Cayman Enterprise City, the entity that promises to establish special business parks for global conglomerates in the technology, publishing, media and commodities sectors to set up shop at very reasonable cost without having to be subject to usual fees and duties.
Such concessions include a blanket work permit fee of just $1,230 for all work permits, even those of senior management, which, outside the zone, can amount to tens of thousands of dollars, as well as huge reductions on duty usually paid on construction and other materials used to create enterprises within the Special Economic Zone.
In addition, unlike the rest of industry in the Cayman Islands, businesses operating in the Special Economic Zone do not have to advertise for job applications, do not have to consider hiring Caymanians first and foremost and have no obligation to train Caymanians.
Such broad concessions may well have been considered somewhat over-reaching for existing industries looking to grow and develop further; concessions this huge for an as yet untested and unproven new industry will really have to prove their worth in the short term, if the public is to accept them as positive moves for the Islands as a whole.
It will be interesting to see just who Cayman Enterprise City markets its opportunities to, and whether sufficient safeguards have been put in place to prevent existing business in the Cayman Islands from simply crossing over to the Special Economic Zone, thereby curtailing the need for them to pay the usual fees and duties.
Such moves would not be beneficial to anyone, will lose government much needed revenue and will not bring any benefits to the Islands in the perceived trickle-down form of encouraging new people to the Islands because businesses will just move their existing infrastructure and current personnel.
Diversification is key to strengthening and sustaining Cayman’s economy, so long as it is well thought out, works in tandem with, and seeks to nurture and grow, existing business in areas where Cayman has a proven track record for excellence. In this way everyone wins, not just a chosen few.