For years, Mr. Speaker, the airport had been creaking at the seams. This Government has finally delivered the modernisation for which our country was crying out.
Premier Hon. Alden McLaughlin
Published 16th April 2019, 4:11pm
Mr. Speaker, the Honourable Minister of Finance and Economic Development earlier today laid on the table of this Honourable House, and spoke to, this Government’s 2020/2022 Strategic Policy Statement.
Mr. Speaker, with your permission, I will read from that statement the summary of economic and fiscal forecasts:
The 2020 Strategic Policy Statement (“SPS”) provides medium term economic and financial forecasts for the Government for the next three financial years covering the period 1 January 2020 to 31 December 2022 along with the Government’s Broad Strategic Outcomes which will guide the development and implementation of Government Policy during this period.
In addition, the SPS sets the parameters for the preparation of the detailed 2020 and 2021 Budgets and provides the operating expenditure and capital investment targets to be achieved by each Ministry, Portfolio and Office over the next three financial years.
Mr. Speaker, overall economic growth in the Cayman Islands is forecasted to increase at a steady rate over the medium term. Economic growth as measured by changes in the Gross Domestic Product is forecasted to grow by 2.8% in 2019, 2.2% in 2020, 2.1% in 2021 and 2.0% in 2022.
The Consumer Price Index which measures the change in retail prices is also expected to increase by 2.7% in 2019 followed by increases of 2.2% per year in 2020, 2021 and 2022. These forecasted changes are primarily driven by forecasts in the United States a principal market from which the Cayman Islands imports its consumer products.
Mr. Speaker, the Government remains committed to a fiscal strategy that is centred on the following key principles, compliance with the principles of responsible financial management, in particular achieving substantial surpluses each year, no new fees or taxes levied on the public and no new borrowing.
The 2020 SPS builds on the central guiding fiscal policy objective for the management of the Government’s finances over the forecast period.
Growth in revenue is driven primarily by increased demand for goods and services as all sectors in the local economy are projected to expand during the forecast period. The Government also anticipates transferring a total of $74.3 million to General Revenues from various trust accounts whose holding period is scheduled to mature during the SPS period.
The total operating expenditure targets for the Core Government for each of the next three financial years have been set at $734.2 million for 2020; $741.7 million for 2021 and $746.8 million for 2022.
This expenditure will be used over the next three years to fund the following key priorities:
· Ministry of Human Resources, Immigration & Community Affairs - Improving safety and security through enhanced community policing; improving security of our borders; delivering better management of labour markets; implementation of the immediate priorities in the Older Persons’ Policy; and social assistance programme reform.
· New Ministry of International Trade, Investments, Aviation and Maritime Affairs – Establishing a new ministry to foster international relations and promote foreign investment in these Islands.
· Ministry of District Administration, Tourism and Transport – Enhancing tourism marketing to high value source markets; continuing service by Cayman Airways to strategic tourism markets; and the continued implementation of the National Tourism Plan.
· Ministry of Finance and Economic Development – Increasing funding to the Cayman Islands National Insurance Company for the continued provision of health insurance services to its clients.
· Ministry of Financial Services and Home Affairs – Enhancing the Financial Services policy functions of the Ministry and the regulatory services provided by the Cayman Islands Monetary Authority in response to recent international regulatory changes; and building capacity in the Cayman Islands Fire Services and the Prison Service.
· Ministry of Commerce, Planning and Infrastructure – Continuing to develop and implement Information Technology services including improved cyber-security and E-Government initiatives; and the continuation of the George Town revitalisation project.
· Ministry of Education, Youth, Sports, Agriculture and Lands – Continuing enhancement of teaching and learning in schools with a focus on increasing the use of online and computerised testing; strengthening core curriculum across primary and secondary schools; funding for scholarships for advanced, specialised tertiary education – such as Medical and Special Education Needs; and supporting and promoting growth in the agriculture sector.
· Ministry of Health, Environment, Culture and Housing – Implementing the new Integrated Solid Waste Management System and the commencement of operations of the new Long Term Residential Mental Health Facility.
The total capital expenditure target for the Core Government over the next three financial years has been set at $383.4 million to address critical investment in areas such as education facilities, road infrastructure, solid waste management, improvements to public safety facilities and continued support of Statutory Authorities and Government owned Companies (SAGCs). The Government is forecasted to maintain year-end cash balances averaging $282.2 million over the SPS period and full-compliance with the Principles of Responsible Financial Management. The Government does not intend to incur any new borrowings and plans to fund all of its operating expenditure and capital investments from cash generated from its operations.
I confess, Mr. Speaker, that as I rise today I find myself somewhat reflective, for this will be the last time that I am called upon as the Premier of these Cayman Islands to move the motion for adoption of the Government’s Strategic Policy Statement.
It is also recognition that I have just two years left to get as much done for my country in this role as I am able to do. So these next two years will not be a gentle wind-down, but rather a ramping up of delivery as my Government looks to push on further and achieve even more for our people.
Yet inevitably, this last Strategic Policy Statement does lead me to reflect on how different, indeed how much better, a place our Islands are in now compared to when I rose to make my first such speech six years ago following the 2013 elections.
Following those elections, as we formed the Government, we understood full well what Winston Churchill meant when he said, “the problems of victory are more agreeable than those of defeat but they are no less difficult’.
Everyone here will remember that at that time, Cayman was struggling to pull itself out of the last major recession. And so we knew that whoever won that 2013 election would face real challenges.
Certainly, the recession had taken its toll on our economy and the jobs market. Growth had virtually stagnated and the overall GDP of the Cayman Islands was still lower than it had been before the impact of the recession. Caymanian unemployment had continued to rise, reaching a high of 10.5% in 2012.
Consequently, Government finances were hit hard as revenues fell just at the time when the need for counter-cyclical government spending was increasing. Inevitably, Government deficits followed and public sector debt ran to a peak of over $613m.
Against that background, Mr. Speaker, when I gave my very first policy address to this House on 7th October, 2013, I set out both what I believed the task of the Government was and the approach we would adopt:
Quote - “In May this year the people of this country entrusted the Progressives to form a government to get this country back on course. As Leader I have striven from the very outset to honour that trust by forming as inclusive a government as possible.” End Quote
In the last six years we have indeed put the country back on course and across two successive Administrations I have kept true to that inclusive approach. As a result, what a very different position our country finds itself in. The economy has grown steadily. The latest figures from the Economics and Statistics Office show annualized GDP growth at 3.6% in the third quarter of last year.
Caymanian unemployment has plummeted. When the Fall 2018 Labour Force Survey is completed and released it will show that Caymanian unemployment has better than halved to 4.6% from that peak of 10.5% before we took office. This is the lowest level of Caymanian unemployment in more than a decade – a tremendous achievement by any standard. But this is not a singular achievement; there is more. Government continues to generate significant surpluses. My two Administrations have generated a total operating surplus of some $700m and we have managed to reduce Government debt to under $420m, having repaid over $150m since 2013. And we will substantially reduce this further before the end of this term.
All this has not just happened by accident. It is the product of this Government’s willingness to support and work with the private sector to achieve sustainable growth. It is the product of this Government’s determination to see that Caymanians are able to benefit from that growth through accessing jobs and opportunities. And, Mr. Speaker, it is the product of this Government’s sensible and prudent stewardship of the nation’s finances, including rebuilding surpluses and repaying debt.
However, I believe that as eye-catching as those headlines are, it is behind the numbers that the real achievements of this Government lie. Economic growth and sound government finances count for little if we cannot harness those things to make a difference in our country and to improve the lives of Caymanians.
The test is whether this Government is delivering on the promises we made to our people and against that yardstick we have a proven and growing track record of success. Taken together, what we have already achieved and what I am confident we can go on to put in place in the next two years will represent a record that everyone on these benches can be proud to put before the people who voted us into office.
I have repeatedly made the point, in this House and beyond, that success in driving economic growth is a pre-condition for everything else that an elected government wishes to do.
Support for our two pillar industries – financial services and tourism – has therefore underpinned the Government’s economic strategy. In both respects, we have been successful.
In financial services, despite the upheavals of the last recession and more recently the seemingly endless compliance initiatives and the endless assaults from those working to undermine our jurisdiction, the Cayman Islands remains the international financial services centre of choice across a range of key markets. This is the direct result of Cayman’s approach in balancing its open-for-business attitude with fair and proportionate regulation coupled with world class, legal, accounting, and asset management professionals.
This Government has continued to develop our legislative and regulatory frameworks to meet global standards, most recently with the passing in this House before Christmas of the economic substance legislation.
We have also been willing to go the extra mile – or thousands of extra miles actually – to take the political arguments to the European Union and elsewhere in support of our Financial Services Industry. I must acknowledge the work of the Minister for Financial Services and the team in her Ministry for the tremendous effort they have put in over the last 18 months in particular in making the case for Cayman.
The fact that Cayman has yet again avoided any kind of blacklisting by the EU is, in no small measure, the direct result of the efforts that the Minister and I, supported by the Ministry staff and the Hon. Attorney General, have made in taking Cayman’s case directly to the capitals of Europe.
And I have to again acknowledge the tremendous contribution made by our private sector financial services partners who worked long hours to help us fine tune the legislation on economic substance.
We have more to do as the goalposts continue to move – but this is no surprise. The EU has now added a requirement that Cayman should address an apparent need to give appropriate economic substance to collective investment vehicles or, more simply put, funds.
I say “apparent need” because the EU has yet to make it clear why the thousands of funds based in Cayman should be required to be given economic substance when that is not a requirement for funds anywhere else in the world. Nor indeed have they been able to articulate quite what that requirement actually means; nor how it might be achieved. Nonetheless, we will continue to engage with the EU and work with the industry here to devise a way forward so long as that is practical and is an accepted global standard.
As well as the EU, we have the Financial Action Task Force’s report, released last month, to deal with. We have fallen short of changing requirements as, for the first time, the inspection considered not just the legislative regime in place but the effectiveness of its implementation.
There are those who would say that it is because of our significance as a Financial Services Centre that the bar is higher for us. However, even if there is truth in this, I believe that the report’s recommendations will help to strengthen our jurisdiction. I have said before that Cayman does not need or want illegitimate business and we stand ready to do all that we can to resist any attempts at using our Financial Services Industry for money laundering, terrorist financing or other illegal purposes.
With much work still to do, the Government’s SPS and budgetary planning and our legislative timetable both reflect our determination to support our Financial Services Industry and to defend our position.
Our Tourism Industry also continues to thrive. Last year Cayman welcomed nearly 2.4 million visitors; the highest number in our history. The number of stay-over visitors broke previous records and cruise visitor numbers would have also seen a record year but for bad weather in December that prevented 12 ships from stopping here.
This success is the result of a lot of hard work. The Minister for Tourism and his team have a marketing approach that is the envy of the region and the House will no doubt want to join me in recognising the success they bring to Cayman.
Perhaps one of the most tangible expressions of the Government’s support for the industry is the new airport terminal. For years, Mr. Speaker, the airport had been creaking at the seams. This Government has finally delivered the modernisation for which our country was crying out.
No sooner has the Prince of Wales opened the new airport terminal than we are turning our attention to the next phase of the airport master plan – runway and other improvements that enhance efficiency and safety.
And so, we continue to support the development of our tourism product, whether through private sector projects, new air routes, or government sponsored infrastructure.
Hotel projects in the pipeline, and the new air links, such as the Denver route recently opened by Cayman Airways, will continue to expand our stay-over visitor business.
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