Skip navigation

Speech

We continue to cooperate with global authorities to ensure that our frameworks meet with appropriate standards.

Premier Hon. Alden McLaughlin

Published 7th February 2019, 12:22pm

Good morning. Thank you Chris for so ably establishing Protocol. We find ourselves at an auspicious time in the history of the Cayman Islands. We are winding down a yearlong celebration of the 60th anniversary of the Cayman Islands Coat of Arms and winding up the commemoration of the 60th anniversary of our first written Constitution. You may wonder what this has to do with today’s conference. So before you conclude that I have picked up the wrong speech this morning, perhaps I should explain. Over the course of the next two days I am sure the words disruption and innovation will be mentioned many times – and when it comes to international business and financial services, disruption and innovation are two words that definitely apply when speaking of these Islands. The 1950s and 1960s were certainly a time of disruption and innovation. Whether in music, social change or politics – it was an exciting time across the globe. These years saw the birth of an important symbol of national identity, our Coat of Arms in 1958, coupled with our first Constitution in 1959. This was swiftly followed with legislation like the Companies Law and the Banks and Trust Companies Law that provided the foundation for what has come to be called the Financial Services Industry. In 1958 women won the right to vote after lobbying for ten long years and in 1962 these Islands, bucking the trend at the time, decided to remain a British Crown Colony rather than seek independence as Jamaica and others did. These important events helped shape the direction of our three Islands over the past 60 years. At the point our Constitution came into force, the Cayman Islands population stood at 8,500 souls. Our economy was based on seafaring, on international trade, notably thatch rope and turtle, and on small-scale agriculture. In the six decades since we have become not only a tourism Mecca, but importantly a premier international financial centre – and in the process helped transform the way that legitimate global business is done. Disruption and innovation were a part of who we were in those early days and continue to be key to our success. Today we are a sophisticated jurisdiction, both in terms of infrastructure and business. Yet you can still find areas of laid back charm with a Caribbean feel as you move away from the commercial and tourism centres. Forgive me for saying unashamedly there is no place on earth quite like the Cayman Islands. In sixty years Cayman’s GDP has grown to over four billion US dollars. The Islands’ population has grown to over 64,000 as citizens from over 130 nations have been drawn to be part of our economic miracle. Taken together, those two data points put Cayman in the world’s top 10 of nations ranked by per capita income. Our economic miracle may have had divine assistance, but it certainly does also have distinctly man-made origins. It has been achieved through far-sighted decision-making, entrepreneurial spirit and government’s willingness to innovate in support of business and economic activity. That success has been most keenly felt in Cayman’s Financial Services Industry, which accounts for about 56% of our GDP. For example, the number of registered funds in Cayman was up by 4.1% to over 11,000 last year while 33 new insurance licenses were issued bringing the number of licensed insurance companies to 730. Across our economy, in the first half of last year, new company and partnership registrations rose by 39% and listings on the stock exchange by 38%. We saw another record year in tourist arrivals with about 2.4 million visitors in 2018, combining cruise and stayover, up 11% over 2017. And the development sector continues to do well with some 722 projects approved in 2018 at a value of US$500 million. This economic success brings benefits to international businesses based here as well as to Caymanians. GDP growth in the first half of 2018 reached 3.7%. Unemployment, when the next set of economic statistics is released, will have fallen below the last reported figure of 3.4%. Government is delivering significant budget surpluses which are being used for public service improvements, infrastructure investment and to pay down debt. And all of this without any reliance on direct taxation. The picture I am able to paint is one of a vibrant and successful economy; a private sector that continues to flourish; and a responsible and responsive government. And an economy that has shown the capacity to survive disruption and to innovate and grow. That is the picture today; but what lies ahead? The International Monetary Fund’s latest global economic outlook has downgraded its growth forecast from 3.7% to 3.5% for 2019 and points to a range of threats and uncertainties – from tariffs and trade barriers, to Brexit. Here at home our key financial services sector is facing specific challenges. Last month I led a delegation to Europe for discussions with key officials in the European Union and with individual member states. In more than a dozen meetings held in Brussels, Paris and Berlin, we sought to defend Cayman and to raise the level of understanding of this jurisdiction and our Financial Services Industry, and to restate our clear proven commitment to working within the same internationally accepted regulatory frameworks as everyone else. We demonstrated that commitment by explaining to officials the recent legislation that Cayman has passed in relation to the EU and OECD requirement that relevant entities doing business in the jurisdiction must have ‘economic substance’ in the jurisdiction. We, along with over 20 other countries, are currently undergoing another review, at the end of which the EU will either give us their good housekeeping badge of approval or ‘black list’ us as having a harmful tax regime. If the process is fair we ought not be on any EU black list. The approach we have taken to this legislation results from working closely with the financial services sector as well as with the OECD and the European Commission. I would like publicly to thank colleagues in Cayman Finance and individual businesses for their help and support. We continue to cooperate with global authorities to ensure that our frameworks meet with appropriate standards. Sadly, it has become increasingly clear that for some countries the issues are less to do with effective international regulation than with their own domestic politics and economies. By example, despite the ongoing EU compliance process, last month the Netherlands government placed the Cayman Islands and 20 other jurisdictions on a ‘blacklist’ of its own devising. The reason? Nothing to do with global standards – simply put, the Netherlands takes the view that corporate tax rates in Cayman are too low. Well, I suppose at zero, it was unlikely anyone would think our tax rates too high! The serious point is that the Netherlands, and there are others, cannot understand how a country as small as we are can be such a success and have no direct taxation, relying instead on indirect taxes and fees to provide revenue to government. Imagine, if you might, a small, low-lying land of enterprising traditionally seafaring people, making their way in the world to become a centre for international trade. They are confronted by an over-bearing European power intent on pushing back against their freedoms and determined to impose high levels of taxation upon them. I am not describing Cayman in the 21st Century. Rather that is the story of the Netherlands in the 16th Century as the people there revolted against their Spanish rulers. Given that the ensuing war lasted some 80 years and was crucial in shaping their nation, it is a wonder to me that the Dutch appear to have forgotten the lessons of their own history. Let me be absolutely crystal clear. Cayman will comply with international standards and will maintain transparency and exchange information to allow local tax and law enforcement agencies in other jurisdictions to do their jobs effectively. But will not be bullied by those who are jealous of our success, resentful of our taxation policies and unable to compete with us on a level playing field. In all apparent adversity there are opportunities. Over the last sixty years, Cayman has been innovative and flexible, capable not just of responding to the winds of geopolitical change but of leading the way in creating and sustaining new business opportunities. It is in that spirit that we look to the future. We will continue to support Tourism as well as our Financial Services Industry, particularly the sectors in which our jurisdiction is pre-eminent - such as hedge funds and captive insurance. Alongside that we stand ready to support the development of new markets such as reinsurance or fintech. The technology space is crucial to the futures of us all and it is no surprise why the organisers have chosen to focus on that during the conference. Technology itself is, of course, neutral but its future use will be both a disrupter and an enabler in economic and social terms. As a political leader, I welcome the breadth and immediacy of contact that technology brings but confess to considerable frustration at the repeated attempts to hijack my social media accounts or to set up fake online scams in my name. As a Government we are investing in a comprehensive e-government programme that draws on the experiences of the Estonian Government’s world-leading programme. E-government is making public services more accessible, customer-centric and cheaper to deliver. We have a shared interest in how technological change will shape the future of financial markets. In particular, we need to come to terms with how regulatory frameworks need to be created in response to the new products that technology enables. The vexed questions of the regulatory frameworks that need to apply to crypto-currencies are but one example. What we do know is that these technologies will have a huge impact and here in the Cayman Islands we are preparing for the new digital financial services revolution. The online magazine, International Investment, reported that Cayman-registered blockchain companies are amongst the fastest growing anywhere – with upwards of about US$5.5bn raised from initial coin offerings. You see the same formulae that make Cayman attractive for traditional financial services businesses also attract those in the Fintech sphere. And as we did with financial services, we intend to play a key role in helping develop the required regulatory framework needed for this growing sector – internally via a Cayman Islands Monetary Authority working group now looking at this and also via our memberships in organisations such as the Caribbean Financial Action Task Force. We in Cayman are determined to develop and exploit new markets. We are establishing a new Ministry with responsibility for international trade and investment, and this year we will establish an Asia Office based in Hong Kong with a similar role to our existing London Office. And we anticipate opening an office in Washington DC towards the end of 2020. We believe these steps will help us to advance our international reputation while making us easier to do business with and attract more inward investment. Cayman is a successful and attractive jurisdiction. I am confident in the future of our economy and in the role that financial services will continue to play. The Government I lead will continue to speak for the industry internationally. We will continue to ensure effective but proportionate regulation. And we will continue to support innovation and diversity and work with the industry to keep government actions aligned with developments in the sector. Cayman is looking to the future in a realistic way that recognizes challenges but also sees huge potential and opportunities - opportunities for business; opportunities for investors; and, yes, opportunities for Caymanians. Whether you are invested in Cayman or visiting this conference to find out more, you can see the evidence of our past and current success and you can be assured that this Government is doing all it can to create and sustain Cayman’s future. I hope that you will want to be part of that future with us. Thank you.