RESPONSE TO THE CAYMAN ISLANDS GOVERNMENT ECONOMIC ASSESSMENT & STIMULUS PLAN
Oct obe r 2020
Cayman Islands Chamber of Commerce A response to the economic assessment & stimulus plan
TABLE OF CONTENTS 1. INTRODUCTION
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2. OUR OBSERVATIONS & RECOMMENDATIONS
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2.1 The General Approach
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2.2 Maintaining an Effective Workforce
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2.2.1 Retraining and Retooling Workers
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2.3 Assistance to the Unemployed
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2.4 Supporting the Labour Market
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2.5 The Unintended Impact of Unemployment Support
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2.6 Reprioritising Capital Expenditures
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2.7 Economic Diversification
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2.8 Proposals Negatively Impacting Businesses’ Bottom Line
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2.9 Addressing the Fallout in the Tourism Sector
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2.10 CIG’s Plans for our Cruise Tourism Sector
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3. HOW THE CHAMBER OF COMMERCE CAN HELP?
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Cayman Islands Chamber of Commerce A response to the economic assessment & stimulus plan
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1. INTRODUCTION Over the past 7 months the Cayman Islands Chamber of Commerce has been working hard to ensure that our members and the wider community receives information and support during this COVID-19 pandemic. Following our COVID-19 economic impact study in April, we facilitated the creation of the Resilience Cayman programme which is providing humanitarian and other forms of support to thousands of residents. The Chamber Council continues to develop ways that the Chamber and its members can contribute to the Cayman Islands recovery. We were therefore pleased to see the release of the Cayman Islands Government’s Economic Assessment and Stimulus Plan which includes over 70 recommendations on how the country can, not only recover, but become even stronger following the pandemic. This document includes our proposed actions based partially on an assessment of the recommendations and outlines several ways the Chamber is offering to provide assistance. We remain committed to helping in the efforts of the Government and the community towards a stronger and more sustainable Cayman Islands economy and would appreciate a meeting with the Ministry of Finance and Economic Development to discuss our observations at the earliest opportunity. We believe that the Government has struck the right balance between safety and protecting our economy. This has resulted in an enhanced image of the Cayman Islands as one of the safest countries in the world. The approach taken early on by the government has also enabled our local economy to continue to operate in the face of immense global challenge brought about by COVID-19.
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2. OUR OBSERVATIONS & RECOMMENDATIONS This section provides our observations on the plan and the approach to economic recovery generally. The Chamber is supportive of the Government’s efforts to address the immediate impact on businesses and individuals as well as to aid economic recovery over the medium to longer term. The observations and recommendations below aim to assist in achieving these objectives and we look forward to discussing further with the Government.
2.1 The General Approach Based on the plan which was prepared by the Economics & Statistics Office (ESO) the general approach taken towards addressing the impact of COVID-19 can be summarised in the following steps: 1. Implement measures to limit and eradicate the spread of the virus, while investing in the health care sector to improve its ability to manage the pandemic. 2. Increase social spending to minimise the impact of containment measures on the most vulnerable members of society, while simultaneously collaborating and partnering with the private sector to mitigate the impact on businesses and assist in continuity planning. 3. Assess the effects of containment measures on businesses and individuals and provide strategic and financial assistance to displaced workers and institutions struggling with working capital and liquidity needs. 4. Manage the strategic removal of containment measures and the promotion of sectors needed to drive economic recovery. This may include implementing fiscal measures to stimulate growth and minimise the possibility of a stagnant economic recovery. We provide our summary observations on the extent of success in each of the above stages as follows:
STEP 1 •
The Government has done an extraordinary job with step 1 above as current indications are that the virus has been significantly diminished within the Cayman Islands community.
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Cayman Islands Chamber of Commerce A response to the economic assessment & stimulus plan
STEP 2 •
The objectives of item 2 have not been fully materialised partly due to delays in getting the required support to vulnerable families and individuals. We believe that there has been some level of partnerships with the private sector and this has had a very positive impact.
STEP 3 •
The Government has introduced several initiatives aimed at assisting businesses which the Chamber supports. However, we have been made aware that the process of securing this support has meant that several businesses have not been able to secure assistance in a timely manner. We also note that while this support was initially aimed primarily at smaller businesses, it has now been expanded to medium sized ones. We agree with this general approach and recognise that many businesses, and particularly those relying on tourism, need significant support to avoid a collapse.
STEP 4 •
Although many sectors have been permitted to reopen, we believe that our Islands are still in the early stages of this phase of recovery. Despite the positive impact created by the release of some pension fund withdrawals into the economy, the reduction in the consumer market due to repatriation of work permit holders and loss of all tourist visitors means that it will take some time before this phase can realistically materialise.
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Cayman Islands Chamber of Commerce A response to the economic assessment & stimulus plan
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2.2 Maintaining an Effective Workforce The Government has decided to facilitate the repatriation of several thousand employees to their home countries. This has been effective in significantly reducing the financial burden on the government and the community in general as it would have been challenging to provide the necessary financial support to those workers facing unemployment. It is also important to recognise the impact of these repatriations on the local economy due to the significant reduction in the number of consumers experienced by local businesses and property owners. Faced with this delicate balance between reducing the cost of supporting thousands of employees while preventing a collapse of the local economy, we believe the Government has largely struck the right balance. However, as the economy has entered the first phase of economic recovery with a focus on the domestic economy with closed borders, it is important that this recovery effort, including many of the initiatives proposed by the Government in its plan, is sufficiently resourced with the most effective workforce. This will mean facilitating the processing and placement of Caymanians and residents who are registered as unemployed and the return of work permit holders and those most needed by local businesses seeking to stabilise their businesses during this crucial phase. Workforce Opportunities & Residency Cayman (WORC) is an integral enabler for the pace and success of any economic recovery strategy. The department will need to be properly resourced and given specific, fit-forpurpose policies and directives for the efficient assessment and placement of unemployed Caymanians and processing work permit applications. It is an ideal time to evaluate all WORC systems. The Chamber recommends the introduction of a risk-based approach when evaluating and processing work permit applications and establishing performance measures. Protracted processing delays will frustrate the economic recovery and may prompt employers to transfer local positions to other jurisdictions, particularly in the financial services sector. This sector provides the greatest number of middle-to-high income positions some of which had been positioned in other jurisdictions during the pandemic. This recommendation is vitally important for the economic recovery and must be managed properly so that jobs can return to Cayman while we rebuild our economy. Otherwise, some businesses may decide to continue the practice of repositioning businesses/jobs to other jurisdictions. Once these businesses leave Cayman it is highly unlikely that they will return. It takes far more effort and resources to convince a business to return or to create jobs locally once they have decided to relocate to another jurisdiction. The pandemic has demonstrated that many businesses can work from anywhere. We should be positioning our islands to harness this paradigm shift and ensure that the WORC processes are enabling businesses to grow here.
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2.2.1 Retraining and Retooling Workers We support the strategy of retraining and retooling displaced workers to enable them to transition from one sector to another. In some case this process will take several months, and in the case of some unemployed persons, preparation for alternative jobs may take up to a year or more. We recommend that consideration be given to this transition period when the Government is considering the return of work permit holders and that, if necessary, formal plans are put in place with companies to ensure that in cases where a Caymanian has been identified and is entering into a formal training programme, that a succession plan for that Caymanian is put in place with one of the companies with a work permit position. UCCI, Inspire Cayman, and other training institutions should be supported as we seek to retrain Caymanians to move into new positions and fields. One of the key observations of the Auditor General’s report (2019) is that the Cayman Islands does not have a long-term workforce plan for education. The Chamber supports the development of a long-term workforce plan guided by specific investigation into the manpower expertise available, the existing demand as well as a projection of future demand for certain types of human resource expertise and qualifications and to match that to a longterm plan for our education sector.
2.3 Assistance to the Unemployed To date the Government has awarded stipends to unemployed from the hospitality & tourism sector and has recently extended this support. Financial support for the unemployed is important not only due to the immediate benefit to the individuals and their families but because of the important impact this continued support has on the wider local economy. We support continued extension of this unemployment support. Pension The Chamber supports an extension to the pensions holiday scheme which was introduced to help both businesses and many unemployed persons. We support an extension to the end of 2020 and possibly to the end of the tourism season in April 2021. We also support the pensions withdrawal scheme but only until the end of October 2020. Temporary Jobs We support the suggestion to increase Government led employment programmes post- COVID-19. The example given was the National Community Enhancement (NiCE) project could be implemented utilising unemployed and displaced Caymanians. This is an effective short-term measure.
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2.4 Supporting the Labour Market The Chamber supports the ‘Caymanians first’ principle that the Government has taken to ensure that in the current crisis, Caymanians fill as many of the vacant job positions as possible. We also recognise that the labour market will need some support in relation to work permit holders, many of which are also still needed at this time. We therefore support initiatives that assist local businesses with work permit holders and the following 2 recommendations in particular: Permitting businesses to cancel work permits and granting refunds – Many businesses still have work permit holders on record and will not have access to this labour for many more months until the economy recovers. We recommend that the Government permits these businesses to cancel existing work permits and provide them with full refunds. Labour law amendment – We support the recommendation to waive the existing prohibition in Labour Law against rehiring an employee in the same position within 12 months. This amendment would enable an easier transition for business in terms of access to employees due to the resulting portability of positions and workplaces.
2.5 The Unintended Impact of Unemployment Support It is unfortunate but a reality that in some cases the support provided in response to unemployment can serve as a disincentive to some individuals who, having received the benefit of welfare payments, choose not to return to work or are very slow in responding to opportunities to re-enter the job market. This phenomenon is not unique to the Cayman Islands but should be monitored and directly addressed by policies tied to such support wherever necessary. The Chamber is aware, for example, of situations where employees who are receiving Government support and who have withdrawn pensions have been reluctant to return to their regular jobs when called upon to do so by their previous employers. We are aware that the Government has policies in place to prevent abuse via the Needs Assessment Unit and recommend that similar diligence should be applied to the support being provided to the additional unemployed within the economy. Several local charities, service clubs and organisations have provided financial, volunteer and food and housing assistance that has greatly helped thousands of persons in our community. These organisations should be commended for this work which has defrayed the direct costs to Government and has demonstrated the tremendous corporate and community generosity during the pandemic.
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2.6 Re-evaluation of planned capital expenditures There are several recommendations contained in the plan which present an opportunity for the Government to either accelerate or reprioritise planned capital expenditures. We appreciate that this expenditure has the potential benefit of stimulating additional domestic economy activity. However, we recommend that the Government carefully re-evaluates each of the proposed capital expenditure projects in order to minimise public debt as well as to ensure that financial support remains available for the unemployed in the event that the crisis continues for several additional months, as seems likely.
2.7 Economic Diversification As mentioned in our COVID-19 Economic Impact Report, the Chamber supports efforts to further diversify the Cayman Islands economy. New strategies are needed to adjust to, and to capitalise on, the ’new normal’ post COVID-19 and the Cayman Islands situation is no different. An updated economic strategy that better prepares the Cayman Islands to deal with external shocks, diversify its economy, create a more substantive domestic economy, embrace technology and enhance local agriculture are also elements of the discussions to be held. The Chamber is willing to assist the Government by taking the lead on a national discussion on ways to diversify the local economy and reduce its heavy reliance on financial services and tourism.
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2.8 Proposals Negatively Impacting Businesses’ Bottom Line We appreciate that several of the proposals contained in the plan were submitted by the wider community and included for consideration and have not necessarily been accepted by the Government to be implemented. Several proposals contained in the plan would negatively impact businesses financially and we believe that the following principles should be applied in response to the crisis: a) There should be no additional taxes levied on businesses at this time b) There should be no policies that negatively impacts a business’ profits during this period. Our observation is that during this period most businesses will be facing a decline in revenues and therefore proposals aimed at encouraging businesses to accept lower profits during the period would be counter-productive. In addition, most businesses experiencing a decline in profits or facing any additional fees would seek to recover these losses during the recovery period. This will negatively impact the pace of economic recovery in the short to medium term. While we appreciate the significant decline in Government revenue due to the pandemic, all efforts must be taken to avoid increasing taxes or fees on businesses and consumers. We must balance creating employment opportunities to keep people employed while trimming non-essential government services and expenditure. Not getting this right over the medium to long term could lead to disastrous decisions by our Government.
2.9 Addressing the Fallout in the Tourism Sector The government has been providing assistance to the unemployed in the tourism sector. This has been a great help to our community and the Government should be commended for their support. Given that the border reopening has been delayed to October 1st, and the current situation in the United States and other nations.,
We must find a p r udent, s a fe w a y t o b r ing i n l o ng t e rm r e sidents, l o ng t e rm t o urists/workers s o t h at w e resuscitate our economy. Staycations and the financial sector cannot sustain our Islands for too much longer. W e support Government’s efforts to utilise technology to monitor visitors and returning residents so that we can open our borders safely and efficiently. At this stage the economic recovery within this sector has become a great challenge. A detailed plan to address the transition of workers from this sector to other sectors should be established and implemented as a matter of urgency.
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2.10 CIG’s Plans for our Cruise Tourism Sector It is clear that the cruise sector, while being a key part of our local economy has not only been hit hard but looks unlikely to recover anytime soon. There are several thousand employees relying on this sector and several hundred local businesses. There is great uncertainty created partially because the sector has not yet had an ‘all clear’ to sail by the Center of Disease Control (CDC) in the United States. There is also significant debate within the local community regarding the balance between cruise and stayover tourism, with some making the argument that having too many cruise visitors has had a negative impact on our stayover tourism product and the environment. The Chamber values our cruise tourism sector which has had a significant positive economic impact. However, we also believe that a plan should be established which allows the sector to remain viable, generating jobs and opportunities for Caymanians while being rebalanced to prevent any negative impact on our stayover sector and our local environment. We recommend that a clear plan be established and communicated to the public on how the Government will proceed with this sector including how the issues raised will be addressed. The cruise berthing topic was an incredibly high profile one amongst our entire community. Something that raised so much attention, whether you were for or against, should be rethought. We feel that we must get this right as our Islands depend on us at this time to be thinking about what is right for the future.
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3. HOW THE CHAMBER OF COMMERCE CAN HELP The Chamber of Commerce stands ready to continue to assist with all recovery efforts and we are offering to work closely with the government in a number of areas. With nearly 600 member businesses employing approximately 18,000 employees we believe we are in unique position to assist the Government in 3 ways: •
Communicate and general awareness of information to aid economic recovery
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Seek support from our membership with specific community initiatives Bring together subject matter experts to volunteer their services to assist the Government with technical support.
We have outlined below some specific ideas on how we may be able to assist the Government directly and indirectly in the economic recovery efforts. 1. We are willing to organise a forum or roundtable focus groups to discuss how the local economy can be better diversified. 2. Work jointly with the Government on a buy local campaign and promote through our membership base. 3. Assist, via extensive discussions with our membership base, in the development of a long-term policy position on the balance between cruise and stayover tourism sectors which enables the cruise sector to continue to play a valuable role in the economy while protecting our stayover product and the local environment. 4. We are willing to launch an annual education summit in partnership with the Ministry of Education that gathers public and private sector education and business leaders to discuss ways to work collaboratively on the most effective strategies to transition students from the classroom to the world of work. 5. We are willing to work with Government to host an economic and planning development forum.
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