2018 Economic Forum Findings Report

2018 Economic Forum

Findings Report May 2018

Contents Introduction .............................................................................. 3 State of the Economy ................................................................. 4 Predictions for the future ............................................... 5 Discussion panel ........................................................... 6 Real Estate and Construction ...................................................... 11 Current state of the industry ......................................... 12 Opportunities .............................................................. 13 Key concerns .............................................................. 13 Discussion panel .......................................................... 14 Financial Services ..................................................................... 18 Current state of the industry ......................................... 18 Opportunities .............................................................. 19 Key concerns .............................................................. 19 Discussion panel .......................................................... 21 Tourism ................................................................................... 25 Current state of the industry ......................................... 25 Opportunities .............................................................. 25 Key concerns .............................................................. 26 Discussion panel .......................................................... 27

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Introduction The Cayman Islands Chamber of Commerce, in partnership with the Ministry of Finance and Economic Development, organised an economic forum on Thursday, 24th May 2018 at the Kimpton Seafire Resort & Spa. The objective of the forum was to provide members, local businesses, industry associations, Government leaders and the public with an opportunity to participate in an open discussion about the current state of Cayman’s economy and the leading industries and the challenges and opportunities to consider for sustainable growth.

It is the Chamber’s intention to host the forum annually with the support of the Ministry of Finance and Economic Development. The Chamber’s last forum took place nearly six years ago in November 2012. www.futureofcayman.com

President Paul Byles provided a progress report on the Chamber's Advocacy Agenda.

The Hon. Roy McTaggart was the Forum's keynote speaker.

Chamber President Paul Byles took the opportunity at the forum to provide a progress report on the implementation of the Chamber’s Advocacy Agenda and Action Plan, 20182021. The Hon. Roy McTaggart, Minister for Finance and Economic Development, delivered the main address, providing a detailed update on the current state of Government finances as well as three-year projections. President Byles moderated a discussion panel following the Minister’s presentation.

Cayman Finance, Cayman Islands Real Estate Brokers Association and the Cayman Islands Tourism Association each delivered a presentation about the state of their respective industry sector identifying the current challenges and opportunities. Presenters included: • Mr. Jude Scott; Chief Executive Officer, Cayman Finance • Mr. Tony Catalanotto; Treasurer, Cayman Islands Real Estate Brokers Association • Mrs. Theresa Leacock-Broderick; President, Cayman Islands Tourism Association These guest speakers were later joined by a panel of their industry peers, during which they responded to questions asked by appointed moderators and members of the audience. Panelists included representatives from the Cayman Contractors Association, Dart Realty. The Chamber wishes to thank the Ministry, industry associations, Cayman First, JN Money, and BDO for making the forum a resounding success. It is hoped that this report can provide some meaningful information that can be utilised by the Ministry and industry stakeholders to develop a medium term Economic Development Plan for the Cayman Islands.

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State of the Economy The Hon. Roy McTaggart, Minister for Finance & Economic Development indicated that, in 2017, Cayman’s gross domestic product (GDP) grew in real terms by 2.9%, and that the economy sustained the robust growth performance seen in both 2015 (3%) and 2016 (3.1%).

He informed the audience that the per capita income is approximately US$59,697 which, based on comparative date from the International Monetary Fund, is estimated to be the 7th highest in the world, and one place above the United States.

Regarding growth, Minister McTaggart identified the construction sector as the most dynamic, with its gross value growing at the rate of 7.2% for 2017. He added that the sector’s growth reflects the infrastructural capacity of the Islands keeping pace with the demand for residential, commercial and public facilities.

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He noted that the tourism sector was in a state of recovery in 2017, with some areas of the industry benefitting in part due to the closure of other markets because of hurricanes Irma and Maria. This contributed to an overall growth of 8.5% in real terms for 2017.

The largest economic contributor was the financial and insurance services industry, contributing directly 41% of Cayman’s GDP. He noted that the growth of the industry was impacted slightly by the declining demand for domestic credit by the public sector.

The second largest contributor to Cayman’s GDP – the professional, scientific and technical services sector – grew by 3.6% in 2017, contributing 14.6% to the total GDP. Minister McTaggart acknowledged that this sector is comprised mostly of legal and accounting services.

Minister the Hon. Roy McTaggart predicted a bright future for the Cayman Islands economy.

Regarding inflation, Minister McTaggart explained that rates had turned positive in 2017 after two consecutive years of deflation, with oil prices and other commodity prices recovering in the international market. The growth of the economy also spurred an increase in the demand for labour, rising by 1.1% in 2017. Despite this, the unemployment rate also rose to 4.9%.

Predictions for the future When discussing the future of the Cayman Islands economy, Minister McTaggart said that GDP growth is projected at 3%, slightly higher than the prediction for 2017. He also noted

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that growth is expected to continue in 2019 and 2020.

Inflation rates are also expected to remain positive for the next several years due to the demand of domestic good and services and is expected to remain among the most stable in the region.

Unemployment rates are predicted to fall during the next three years, with unemployment expected to drop to 4% by 2020. The debt balance for Government by year end is also set to decrease, with an estimated debt of (CI$’000s) 286,682, falling from 420,745 as announced in the 2018 budget.

Discussion panel Minister McTaggart was joined by President Paul Byles for the post-presentation discussion, which was moderated by Chamber Councillor, Steve McIntosh.

Mr. McIntosh began the discussions by asking how important fiscal stability is to the Cayman Islands economy. Minister McTaggart responded by noting that it is one of the key drivers of the Islands’ recent economic growth. Instability can lead to increases in fees and this can, in turn, impact growth significantly.

Chamber Councillor Steve McIntosh moderated the discussion panel between President Byles and Minister McTaggart.

Steve then asked President Byles how to stress the importance of fiscal stability to the average person. President Byles noted that international investors will assess fiscal stability

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and strategies when deciding whether to invest in or lend to a country. He also noted that instability will affect everyone, especially the average person, as uncertainty and instability can see indirect taxes increase to help balance the Government’s budget. He said that it is the public who will eventually pay back Government debt, so fiscal stability and debt reduction is essential.

President Byles informed the audience that the Cayman Islands’ debt-to-GDP ratio for 2017 was 14%, significantly lower than the United States (which was recorded at over 100%) and the United Kingdom (>90%). He also noted that other countries in the Caribbean record a ratio of between 30-60%, so the Cayman Islands is one of the strongest performers in this regard.

Moderator Steve McIntosh discusses fiscal stability and the economy with President Byles and Minister McTaggart.

Mr. McIntosh asked about the importance of a low debt-to-GDP ratio, and Minister McTaggart responded by saying that the lower the ratio is the more likely the country is to service that debt. He said that higher ratios are unlikely to be paid back, so that it is critical to keep the number as low as possible to maintain growth and attract investors.

The topic of the discussion shifted to the Government’s operating surplus which, as Mr. McIntosh identified, was projected at $111 million for 2018. However, he added that there were fees of $94 million for capitalist venture, interest fees of $24 million, and loss of statutory authorities valued at $6m. In total, in real cash terms, the Government would record a loss of $13 million. Mr. McIntosh added that this figure does not include unfunded healthcare liability which, between 2014 and 2016, was recorded at $500 million.

Minister McTaggart responded by noting that, in 2014, the unfunded healthcare liability

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figures were quantified for the first time. Recent reports regarding these figures show a decrease of $100 million for the year, but that the overall number is still high, and that work is needed to control this figure. He noted that current liabilities are funded on a payas-you-go basis, and that this can be costly.

Steve asked how the Government plans to control unfunded liabilities, and Minister McTaggart said that the Government was assessing several practical options, although no concrete decision has been made yet. The Portfolio of Civil Services say there is a ‘smorgasbord of issues or potential solutions’ and that they are working through these to identify the most effective and appropriate solutions to the current issue. Minister McTaggart said that this is a priority for the Government, but that it is still a work in progress.

President Byles said that the Chamber has been meeting with the Government and private sector members to discuss issues such as these to assist in finding potential solutions. He noted that issues such as these are not unique to the Cayman Islands, however, noting that healthcare and pensions issues arise in countries across the globe. He stressed that people are still getting necessary support.

Healthcare and pensions were cited as concerns that affect all countries across the globe, requiring local social support.

Minister McTaggart added that many retired residents have exhausted their savings due to a lack of contributions made, and that this was expected due to the delay in implementing a more formal system. President Byles added that other support services around the world are more formalised, and that all countries face the same issues. He added that Cayman has social support to care for those who are vulnerable, but it is not as formalised as others around the world.

Mr. McIntosh brought the conversation back to surplus, explaining that it is the figure derived from revenue minus expenses. He said that Government can control their revenue streams and expenditure to an extent to control total surplus. He added that private sector companies often spend more on the expenditures to generate more revenue, whereas the public sector looks to raise revenue with as minimal effect on the economy as possible. He said that Cayman’s expenditure seems to be more fixed, whereas revenue is more prone to fluctuation or change, and asked Minister McTaggart how concerning this is for the Government.

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Minister McTaggart responded by saying that this is not a major concern for the Government currently, citing the sustained period of growth across public sector revenue streams. He said that the Government is remaining mindful of potential changes in the future, but that all current indicators point to maintained growth.

President Byles added that Cayman remains one of the few countries in the world that relies on indirect taxation, which in turn means that the cost of living is significantly higher.

However, he added that this system provides more freedom for residents and, ultimately, benefits the wider community.

Finance Minister the Hon. Roy McTaggart identified the growth of the tourism sector as a significant opportunity for the Cayman Islands economy moving forward.

The discussion shifted to the topic of public beneficial ownership registers, with Mr. McIntosh addressing the United Kingdom’s recent ruling for British Overseas Territories. He asked whether this register would ever be implemented and how much of a concern it is for the Government. Minister McTaggart stressed that the Government does not intend to implement this register, acknowledging that it would go against the UK’s ruling and would be subject to discuss in British Parliament.

President Byles said that investors are often concerned with major changes, but not for reasons the media may suggest. He noted that, in the last decade, data protection has become a dominant topic and that people are more cautious about their privacy than ever.

The introduction of a public register, which is not a global standard, crosses the line of privacy for many investors, and these people may not feel comfortable with their information being made accessible to the public. He added that information should be available for security agencies and Governments for anti-money laundering efforts, but that the public and media should not have access.

Mr. McIntosh concluded the panel discussion by asking Minister McTaggart what the biggest opportunity is for the Cayman economy moving forward. The Minister responded by saying that industries are expected to grow even more. He said that the product offered by the

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tourism industry is set to improve and meet the needs of increased visitors, and a new industry of healthcare tourism will provide an economic boom with the continued development of Health City. He added that the financial services industry will continue to match and grow and adapt to the global market, and that it will continue to drive the economy. Minister McTaggart concluded by saying that steady growth is more important to the future of the economy than inconsistent, larger spurts.

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Real Estate and Construction Mr. Tony Catalanotto, Treasurer of the Cayman Islands Real Estate Brokers Association (CIREBA), said the real estate industry is in a healthy position in the current market, with the industry contributing 8.5% to the Cayman Islands GDP at Constant Basic Prices as of 2016. This contribution is the third highest. It’s a sellers’ market with a limited supply of property which has led to an increase in prices.

In total, the number of properties sold in the past year decreased by 6%, but the dollar volume of sold properties increased by 26%, and the average sale price rose by 34%.

Mr. Catalanotto identified Seven Mile Beach (SMB) as an industry leading area, with the average property price along the stretch rising from US$1.34M in 2017 to US$1.89M in 2018. There was also an increase in the average price of all units sold, with the average sale price rising from US$660K in 2017 to US$706K in 2018.

Whilst the real estate market is very active, Mr. Catalanotto stressed that this is dependent on location. For example, the SMB and surrounding areas are performing well, but the outlying districts and Islands are not experiencing the same buoyancy. However, this leads to several opportunities for the industry.

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Opportunities Whilst the outlying districts are not performing as well as the SMB and central areas, they have been ‘poised’ for development, especially for beachfront locations.

The active market has spurred significant development which is spreading Eastward, and there are number of major projects scheduled to begin, including the development of stateof-the-art hotels, the Health City expansion, and the Ironwood golf course, to name but a few. He also hinted at the revitalisation of George Town as an opportunity for future growth

The expansion of Health City Cayman Islands was cited as an opportunity for the industry sector.

of the industry, with rental rates being of excellent value in the current climate.

Other opportunities identified by Mr. Catalanotto included a demand for new and varied housing at various levels, the development of industrial land, under-market pricing for upper-market products, and more.

There are also several new trends that are leading to exciting and fresh developments, such as: • • • • •

More contemporary styled homes and condos Younger, international buyers More interest from first time Caymanian buyers Long term interest for repurposing of George Town Centre buildings Increased interest in the South Sound area

Whilst there are several opportunities for the development of the industry, there are also several concerns to be aware of.

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The Board of Directors of Cayman Islands Real Estate Brokers Association (CIREBA).

Key concerns Mr. Catalanotto noted that the proposed public beneficial ownership register may play a part in deterring international buyers from choosing the Cayman Islands as their ideal location.

The active hurricane season of 2017, which saw devastation occur in surrounding Islands, was also of concern. Potential buyers may be discouraged from developing or purchasing property in the Cayman Islands in the fear it may be affected by inclement weather.

The escalation in crime – particularly burglaries and violent crime – was also identified as a key issue. Buyers want to pick a location in which they feel safe and welcome, and the increased crime rate will only serve to worry them.

Infrastructure deficiencies were identified, specifically about: • • • •

Shortage of schools Lack of affordable housing Roads Telecommunications

Many buyers will come to expect the very best infrastructure, so outdated telecommunications systems and a lack of required infrastructural resources will be offputting.

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He also acknowledged that there are several issues that could hinder development companies, including lengthy delays in receiving planning approval, tedious immigration policies, and inconsistent valuation methods.

A final concern Mr. Catalanotto expressed was that of independent sellers. Whilst CIREBA and its member companies comply with anti-money laundering requirements and conduct comprehensive due diligence on both buyers and sellers, he could not say that all independent sellers do the same.

L-R: Mr. Catalanotto, Mr. Haroon Pandhoie (Director of Planning), Mr. David Johnston (President of the Cayman Contractors Association), and Mr. Justin Howe (Senior Vice President of Development, Dart Real Estate) discuss issues facing the development sector.

Discussion panel Mr. Catalanotto was joined on the Real Estate and Construction discussion panel by: • • •

Mr. Haroon Pandhoie; Director of Planning Mr. David Johnston; President of the Cayman Contractors Association Mr. Justin Howe; Senior Vice President of Development, Dart Real Estate

The panel was moderated by Mr. Ben Meade, Communications Consultant for Tower Marketing.

The focus of the panel was to determine “What’s going to drive the real estate sector for the next three years? And how much of it is reliant on policy?”

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Mr. Meade began the discussions by asking Mr. Catanolotto for his thoughts on the industry in the next three-to-five years.

Mr. Catalonotto expressed positivity about the developmental opportunities emerging but did not that these are mostly in the outlying districts. He said that there is little room for further development along SMB or the SMB Corridor, and that areas such as Savannah and Bodden Town are suitable locations. This might prove problematic for those looking to live centrally for work.

Mr. Meade raised the issue of beach access, to which Mr. Catalanotto said that there was not really any major concern, and that the issue may have been exaggerated. Director of Planning, Haroon Pandhoie added that the Government will place more emphasis on keeping beach access areas clear, working with all parties involved to formalize the process.

Mr. Catalanotto addresses the audience at the 2018 Economic Forum.

Regarding protecting the environment, Mr. Howe acknowledged that developers will need to be mindful and respectful of maintaining the land for future generations. Mr. Johnston said that steps for environmental protection have been taken with the enaction of the National Energy Policy in 2017.

An issue raised by Mr. Catalanotto was that of the beneficial ownership registries, a matter than Mr. Meade asked for further clarification on. Mr. Catalanotto responded by saying that he recently oversaw a transaction with a vendor for the sale of a property due to the UK

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announcement. Whilst he believed it to be premature, he acknowledged that uncertainty in the political landscape can worry potential buyers/sellers, and that communication from the Government is key moving forward to ensure that this issue doesn’t become too problematic.

Chamber Councillor, Mario Ebanks asked the panel whether or not a long-term development plan had been developed, and whether or not the Government had the capacity for sustainable growth and development.

Mr. Pandhoie acknowledged that the development of a Development Plan is key for the industry, especially in identifying who the key stakeholders are in growing the industry, what areas are vital for this growth, and how much it will cost the parties involved. He noted that the 1997 plan is being updated by Government now, and that a policy statement is set to be released at some point during the summer.

There were also concerns raised regarding money-laundering, with one audience member asking whether the Cayman Islands is effectively safeguarding the industry. Mr. Catalanotto responded by saying that CIREBA and its members conduct thorough due diligence on all buyers and sellers, and that the process complies with anti-money laundering regulations. He did, however, express concern that independent sellers might not be conducting the same processes, meaning that those not affiliated with CIREBA could be problematic in the future.

REAL ESTATE SECTOR Opportunities 1. Proposed development projects

Comments • • •

2. Demand for new and varied housing

• • • •

3. Development of industrial land

•

4. Under-market pricing for upper-market products

•

Challenges 1. International buyers being deterred from purchasing in Cayman

With Seven Mile Beach and central areas performing well, outlying areas have been poised for development.

Many projects under development or planned for Eastern districts in Grand Cayman: Health City expansion, Ironwood Golf Course, and new hotels.

George Town revitalisation also a possibility for future development.

More interest from first-time Caymanian buyers.

Younger international buyers also looking at the market.

Increased interest in the South Sound area.

Demand for more contemporary homes and condos.

New opportunities to use existing land and initiative fresh projects particularly in the eastern districts of Grand Cayman.

Rental rates are of excellent value in George Town centre in the current climate.

Comments • The Beneficial Ownership Register may put off international buyers from relocating.

• The active hurricane season, which saw nearby Islands devastated may discourage buyers.

• Escalation in crime in the past year or two may make buyers feel unsafe and unwelcome.

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2. Infrastructure deficiencies

•

•

Shortage of schools and placements will make it difficult for international buyers.

There is a lack of affordable housing.

Telecommunications systems are not as advanced or sophisticated as other jurisdictions.

Roads need to be improved and developed.

3. Government regulations/procedure

• • •

Lengthy delays in planning approval.

Tedious immigration policies.

Inconsistent valuation methods.

4. Independent sellers

•

May not be complying with anti-money laundering requirements.

May not conduct comprehensive due diligence.

• •

•

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Financial Services The Financial Services presentation was delivered by Mr. Jude Scott, CEO of Cayman Finance. The highlights of his presentation are as follows.

Current state of the industry Mr. Scott described the Financial Services industry (FSI) as the ‘engine’ that drives the economy. Some of the key statistics provided to support this claim were: • • • • •

4,000 Caymanian jobs in the FSI Over CI$300 million in CIG revenue Over US$1.5 billion contribution to GDP Over CI$1.8 million contributed towards scholarships, internships and training for Caymanians Over CI$2.2 million contributed per year to local charities

Contributions of the financial services industry to the Cayman Islands economy and community.

Mr. Scott noted that the Cayman Islands remains competitive in the jurisdiction and on the global scale due to the quality and professional experience offered by businesses, maintaining a strong and diverse industry, and maintaining legislative and regulatory balance, to name but a few.

Regarding specific aspects of the FSI, Mr. Scott said the following.

• • • •

Investment Funds: Cayman continues to be a top jurisdiction for the formation of Alternative Investment fund products Banking: Cayman maintains a well-established, robust regime supported by worldclass AML regulation, and appropriate and effective cross-border cooperation Insurance: Cayman is the leading jurisdiction for healthcare and group captives Reinsurance: the sector is in its growth period, but established reinsurance entities have already become a sizable portion of all insurance related assets under management in the jurisdiction

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• •

Capital Markets: Cayman is the preferred jurisdiction for issuers and borrowers Trusts: Cayman continues to reinvest in new products, growth and innovation to efficiently meet the needs of global clients and increasing global regulatory requirements

Opportunities

L-R: Wil Pineau, CCE (Chamber CEO), President Paul Byles and Jude Scott (CEO, Cayman Finance) attended the 'Great Festival of Innovation' in Hong Kong earlier this year.

As the largest contributor to the Cayman Islands, Mr. Scott indicated that the industry can continue to grow, thanks in part to emerging opportunities.

He acknowledged that, given the positive returns from the reinsurance markets thus far, that this aspect of the FSI could continue to grow and become a key component of the Cayman Islands market.

He also acknowledged international opportunities, including the likes of China as a future economic partner, the United States regarding infrastructure investing, and the United Kingdom and Europe in regard to Brexit.

Other opportunities he earmarked for growth were the Cayman Islands a physical presence, and FinTech.

Key Concerns Whilst Mr. Scott expressed some positivity at the opportunities for growth, he equally

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expressed concern when detailing the many issues and challenges facing the FSI. The UK’s decision to make BOTs to make establish public beneficial ownership registers may impact the industry and deter investors away from the Cayman Islands, and the results Brexit are so uncertain that they could create turbulence.

The Cayman Islands’ ‘grey listing’ by the EU is also of concern, and if the proper measures are not taken the jurisdiction could become blacklisted.

Another key concern Mr. Scott acknowledged was how NGOs and the international media portray the Cayman Islands as a financial hub, with their depictions and comments often damaging and negative.

He also acknowledged a series of domestic challenges facing the FSI too, including: • • •

Insufficient funding for CIMA, Ministry of Financial Services and Cayman Finance Under utilising expertise within Cayman Finance as a primary industry advisor Restrictions on Cayman Finance’s ability to promote, protect, develop and grow the industry

Regarding insufficient funding, Mr. Scott argued that more financial support was required to ensure that CIMA can establish and maintain regulations, that the Ministry of Financial Services could establish policy and legislation effectively, and so that Cayman Finance could effectively promote and market the industry.

Mr. Scott compared the Government funding for the tourism industry with that of the FSI. The Government provided the FSI with CI$750,000 in funding which, when taking into consideration the 4,000 Caymanian employees, equated to CI$190 per head spend. On the other hand, they contributed CI$20 million to the tourism sector which employs 2,000 Caymanians, equating to CI$10,000 per head spend.

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He said that, without proper investment in the FSI, the Cayman Islands economy could suffer. A 10% reduction in the FSI alone could result in 400 Caymanian job losses, a loss of over CI$30 million in CIG revenue, and a loss of over US$150 million in GDP. He further noted that other jurisdictions in the region – including Bahamas and Bermuda – had suffered, and that the threat of an industry crisis is real.

Panel discussion Joining Mr. Scott on the discussion panel for the Financial Services industry were: • •

Dr. Dax Basdeo; Chief Officer, Ministry of Financial Services and Home Affairs Mr. Colin Robinson; Treasurer, Cayman Islands Chamber of Commerce

The panel was moderated by Chamber President, Paul Byles.

President Byles began the discussion by asking about the prospects of the FSI. Mr. Scott responded by saying that the prospects for the industry were very positive, providing that it receives proper investment from the Government. He stressed the need to utilise all resources possible to grow the industry, noting that a recent meeting with the Premier Hon. Alden McLaughlin was very positive. Dr. Dax Basdeo added by saying that the Government is building strong relationships with key stakeholders to tackle challenges faced by the Cayman Islands, and that they are implanting innovative techniques to adapt.

Mr. Scott also identified emerging markets as areas for future prosperity. He said that the private equity and active capital markets are growing, and Cayman is adapting to meet these needs. He also spoke about China and Asia as new territories to do business with, with Cayman Finance and the Chamber of Commerce having recently joined a Government delegation on a trip to Hong Kong.

Mr. Byles asked for some further opinions regarding the future of investment funds and the

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The Financial Services panel respond to questions asked by President Paul Byles and the Forum's audience.

insurance industry assisting in the growth of the industry, with Mr. Robinson acknowledging that there is growing competition from offshore. However, he noted that the market in Cayman is diversifying, and that more and more services are being offered by the Cayman Islands’ FSI. The panel also discussed policy and legislation, as well as a long-term strategic plan for the FSI. Dr. Basdeo noted that, whilst a long-term strategy is essential for any industry, it is particularly difficult for the FSI due to the number of challenges they face. He said that the Government have pro-actively tackled challenges as they arise, working closely with industry leaders and advocates to ensure new markets (including FinTech, blockchain, cryptocurrencies) are introduced in accordance with regulations. However, other challenges spring up rapidly and, sometimes, out of nowhere. For example, in the space of the several months, the Cayman Islands was greylisted by the European Union and the United Kingdom announced it would impose public beneficial ownership registers in BOTs. Dr. Basdeo said that, whilst the Government is taken the necessary steps to tackle these challenges, the industry needs to take a step back to re-assess its future.

Mr. Scott echoed this opinion, noting that significant changes are happening immediately, so to prepare a long-term plan is difficult. Mr. Robinson added that one of the Cayman Islands’ greatest strengths was its adaptability to overcome the challenges it faces, saying that a five-to-ten-year plan is not necessarily feasible.

On the topic of emerging technologies (i.e. blockchain and cryptocurrencies), Dr. Basdeo admitted that technology is evolving faster than some countries can adapt. He said that the Government is working closely with CIMA to discuss these markets and noted that, just

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because these industries are growing rapidly, doesn’t mean that they are suitable for Cayman. Mr. Scott agreed, saying that aspects of these technologies – such as anonymity and lack of regulation – mean that they cannot work in the jurisdiction.

President Byles wanted the panel to discuss the FSI’s role in supporting local education. Mr. Robinson informed the audience and the panel of IMAC’s commitment to education, citing the high number of Caymanians that have completed their university studies with the assistance of scholarships provided by the organisation. Mr. Scott also referenced the educational initiatives implemented by Cayman Finance, but said that more needs to be done to meet the demand of Caymanians wishing to join the FSI. Dr. Basdeo agreed.

Jude Scott (far right) speaks with Chamber members Charlie Adams (left) and Past President Robert Wood after his presentation.

The discussion returned to the issue of funding for the FSI and organisations such as Cayman Finance, with President Byles asking for further clarification from Mr. Scott. He responded by saying that increased funding of Cayman Finance would allow the organisation to develop and improve their resources. He noted that similar organisations around the world have much larger teams to conduct research and advocacy efforts, whilst Cayman Finance did not have that luxury. He said that there were approximately 30 threats facing the jurisdiction at this moment in time, but that Cayman Finance cannot develop strategies to tackle them all without improved funding.

Dr. Basdeo acknowledged this point but noted that the Ministry of Financial Services is still relatively new, and that budget allocation had grown over the years. He said that the Government are aware that the industry requires more funding, and that they will aim to provide this moving forward.

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The discussions concluded with Dr. Basdeo summarising the FSI and its portrayal in the international media. He said that the Cayman Islands is often smeared in untrue claims, which ultimately apply a lot of pressure on the jurisdiction. He described the portrayal of the Cayman Islands as the ‘villain on the world stage,’ and that the Government and the industry must work together to tackle these misperceptions head-on.

FINANCIAL SERVICES Opportunities 1. Continued growth a certainty

Comments • •

2. Reinsurance to become a key component of the Cayman Islands market

•

3. International partnerships

•

•

• • 4. Innovative technologies

Challenges 1. Beneficial ownership

•

Largest contributor to the Cayman Islands gross domestic product and Cayman Islands Government revenue.

Emerging opportunities ensure future development of the industry.

Positive returns have been seen from the reinsurance markets thus far.

Continued success of this market will see Cayman become a leader in it.

New territories, such as China, are emerging as future economic partners.

The USA is a targeted partner for infrastructure investment.

Brexit could see new opportunities in both the European Union and United Kingdom.

Cryptocurrencies, blockchain and FinTech could provide new opportunities for Cayman.

Comments • •

2. European Union ‘greylisting’

•

3. Insufficient funding

•

•

•

Beneficial ownership registry may deter investors from choosing Cayman as their place of business.

Current investors may be wary about maintaining their presence.

If proper measures are not taken the jurisdiction could be blacklisted.

Grey-listing may affect the image of Cayman for potential investors.

More financial support from Government needed for CIMA, Ministry of Financial Services and Cayman Finance to support the sector and maintain research/regulation.

Lack of proper investment could see the FSI industry suffer. This could have a significant impact on CIG revenue and Cayman’s GDP.

4. Brexit

•

Results of Brexit are not yet clear, so impact on the jurisdiction could be costly.

5. International opinions

•

Damaging portrayals of the Cayman Islands in the media may deter investors and influence opinion.

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Tourism The tourism industry presentation was delivered by Mrs. Theresa Leacock-Broderick, Director of the Cayman Islands Tourism Association. The highlights of her presentation are as follows.

Current state of the industry Mrs. Leacock-Broderick began her presentation by noting that, in 2017, the Cayman Islands drew a total of 418,403 stayover visitors, an increase of 8.55% over 2016. She also acknowledged that the industry is continuing to break records in 2018, and provided the following statistics for January-April 2018 in comparison to the same period last year: • • • •

23,063 air arrivals (up 15.36%) 127,000 cruise arrivals (up 18%) Estimated stayover visitor spend of CI$216.5 million (up CI$29 million) Estimated cruise visitor spend of CI$82M (up CI$12.7 million)

Opportunities

Artist's rendition of the Owen Roberts International Airport which is currently under renovation and expansion.

Mrs. Leacock-Broderick cited increased air service, increasing accommodations capacity, the expansion of Owen Roberts International Airport, and the planned development of a cruise ship berthing as major drivers for the industry.

Regarding industry growth, she said that she expected tourism to continue to grow moving forward, with small businesses and entrepreneurs entering the market and providing a wider

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range of services, attractions and choices for visitors.

She also explained that there are sustainable opportunities for the industry moving forward, especially regarding the ‘four pillars,’ including: • • • •

Service environment: auxiliary services such as culinary, transportation and watersports Built environment: brick and mortar of hotels and infrastructure such as airports and roads Natural environment: natural resources such as clean beaches, pristine waters, coral reefs, marine life and terrestrial habitats Social environment: all that relates to the identity of the Cayman Islands

Key concerns Whilst the industry continues to set records, Mrs. Leacock-Broderick stated that the most critical challenges facing tourism in the short-to-medium term are all related to managing the services offered, and the experiences of visitors.

She stated the development of a National Tourism Plan is crucial to the success of the sector, and that strategies must be developed and implemented to ensure that extra focus is place on visitor management. She said that the Plan is being developed by the Ministry of Tourism and that a draft of it is currently in the revision stage.

Whilst she was encouraged by the development of a National Tourism Plan, Mrs. LeacockBroderick expressed caution about its implementation, noting that it must be integrated with other national policies and regulations.

Regarding time critical challenges, she identified safety as a key issue for the sector. She

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said that the increase in the number of visitors and residents to the Cayman Islands will increase the likelihood of serious accidents or negative incidents, so preventative and response measures must increase to account for them. This means that higher regulatory standards and greater enforcement of these regulations is required in some areas.

She also noted that the preservation of Cayman’s seas and marine life is of vital importance, especially considering that it is one of the many reasons that holiday-goers choose the Cayman Islands as their vacation destination.

Other time critical challenges Mrs. Leacock-Broderick identified include: • • • • •

Crime prevention, road & marine safety, and emergency medical response services Public transportation and taxi services Work force development and deployment Legislation that impacts the business environment Balance between stayover and cruise tourism

Discussion panel

The tourism industry panel discuss future projects and opportunities, including the upcoming KAABOO festival.

Joining Mrs. Leacock-Broderick on the discussion panel for the tourism industry were: • • •

Ms. Pilar Bush; Executive Vice President of Marketing and Communications, Dart Mrs. Oneisha Richards; Deputy Director of International Marketing and Promotion, Cayman Islands Department of Tourism Mr. Mark Langevin; General Manager, The Ritz Carlton, Grand Cayman

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Chamber CEO, Wil Pineau moderated the panel discussion and began by asking the group how they would best describe the brand of the Cayman Islands.

Mrs. Leacock-Broderick began by saying that the brand of the Islands is a feeling that visitors experience and share, and that it is effective in drawing new and returning visitors.

Mr. Langevin described it as non-artificial, but natural. He also acknowledged that Cayman is somewhat of a niche market, catering predominantly to those seeking luxury. Mrs. Richards discussed the importance of authenticity, claiming it to be the core belief of the Cayman Islands brand. Ms. Bush agreed, adding that the brand resonates with visitors as the Islands offer an authentic experience, which is both honest and of high quality.

The Crystal Caves in North Side is one of Grand Cayman’s newest and most exciting visitor attractions.

Mr. Pineau raised the matter of stayover and cruise tourism and asked the panel if they thought there was a conflict between the two. Ms. Bush said that the conflict is more about their experiences, as there is, a noticeable difference between the two in this regard. Mrs. Richards agreed, acknowledging that cruise passengers had a lesser experience when visiting in certain areas, but that the overall experience for these visitors is improving over time. Mr. Langevin called for balance between the two sets of visitors, whilst Mrs. LeacockBroderick expressed some concern about cruise passengers disrupting the experiences of stayover visitors.

Maintaining the focus on cruise tourism, a member of the audience asked whether the Government would be interested in scheduling several types of ships – ranked regarding class and passengers – on different days to ensure all visitors had the same experience.

Mrs. Richards said that scheduling cannot happen in this regard, as all cruise ships (like hotels and planes) have different classes, meaning a diverse group of passengers will always be aboard a ship. She added, however, that more will be done for specific markets. For example, the Disney cruise ship is obviously a family-oriented experience, and as such the Department of Tourism is working on specific plans to cater for their needs.

Mr. Pineau talked about the high-season for the tourism industry, asking whether the Cayman Islands could effectively care for all guests during this time. Ms. Bush acknowledged that there are days during which the standard of care for visitors is not as high as the industry would like. She added, however, that maintaining the highest-level of

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care is not always easy. For example, cruise passengers are like a ‘tidal wave’ when entering town, and the infrastructure in George Town Centre simply cannot cater for them all. She added that the number of visitors need to be managed, especially when you consider that the number of cruise visitors fluctuates during the year.

Mrs. Richards said that more needs to be done to diversify the experiences on offer for visitors. She noted that there is too much reliance on Seven Mile Beach and Rum Point, and that other areas need to be made accessible to ease the pressure. She said that the Crystal Caves and Pedro St. James have helped in this regard, and that the National Tourism Plan would take a closer look at supporting entrepreneurs to help diversify the tourism market and take pressure off leading attractions.

Chamber Councillor, Mario Ebanks also expressed concern about care capacity during the high-season, referring to the upcoming KAABOO music festival. Ms. Bush responded saying that the festival will generate a lot of positive publicity for the Cayman Islands, and that it will bring a new and diverse audience down to visit. Mr. Langevin agreed, saying that diversification of visitors is crucial, citing how the Cayman Cookout, Taste of Cayman, and Batabano Carnival bring different visitors to experience the culture. Ms. Bush added that the initiative is funded solely by the private sector and is showing innovation in the market. She urged the community to support the project to ensure that Cayman, as a collective, succeeds.

The panel was asked whether the tourism industry could effectively collaborate with other industries to develop the Cayman brand. Ms. Bush said that this should be the goal, with all industries working together to create a collective, Islands-wide brand for visitors. Mrs. Richards agreed, saying that all industries in Cayman share the same goals and attributes, and as such it makes sense to collaborate with one another.

The final question for the panel was asked by Dr. Guy Harvey who expressed concern about the sandbar and Stingray City, asking what steps the Government is taking to ensure its protection, citing an increasing number of complaints from residents and visitors. Mrs. Richards acknowledged that there are increasingly negative experiences when visiting the sandbar and acknowledged that the Government has not been as pro-active in tackling these problems as it should have been. She added, however, that visitor management to the sandbar is a top priority for Department of Tourism, and that they are collaborating with other agencies to tackle the challenges in their way to ensure experiences improve.

TOURISM Opportunities 1. Development driving arrivals

Comments • • •

2. Sustainable opportunities for the ‘four pillars’

• • •

The expansion of Owen Roberts International Airport will see more air arrivals.

The planned cruise ship berthing should see more cruise arrivals.

New hotel projects will increase accommodations capacity.

Service environment (services such as culinary, transportation, watersports) Built environment (brick and mortar hotels, infrastructure developments) Natural environment (natural resources, beaches, marine life)

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3. Growth of small businesses

Challenges 1. Managing expectations and experiences

•

Social environment (identity of Cayman)

•

Expected growth in arrivals is expected to prove beneficial for small businesses and entrepreneurs.

New businesses to enter the market and provide a wider range of services for visitors.

•

Comments • • • •

2. Implementation of a National Tourism Plan

• • •

3. Increase in negative/serious incidents

• • • •

4. Protection of marine life and natural resources

• •

Increased number of visitors means that the experience of visitors may suffer in the short-tomedium term.

Businesses will have the challenge of ensuring all visitors share the same/a similar experience.

Balance between stayover and cruise tourism may also suffer.

Public transportation and taxi services must improve.

Positive that a plan with new strategies is being introduced to benefit the sector.

Plan must integrate with other national policies and regulations to be successful.

Legislation that affects the business environment is also of concern.

The greater increase in arrivals will increase likelihood of these incidents.

Preventative and response measures must increase.

Higher regulatory standards and greater enforcement of them is needed also.

Crime prevention must also improve so visitors feel safe.

One of the biggest attractions for visitors.

Sandbar, Stingray City and other popular areas must be protected for future visitors.

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Unit 4-107 107 Governors Square 23 Lime Treey Bay Avenue West Bay Road P.O. Box 1000 Grand Cayman KY1-1102 T: 345 949 8090 E: info@caymanchamber.ky www.caymanchamber.ky

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