I am happy to announce today that Disney has also given its commitment towards the financing of the port project
Premier Hon. Alden McLaughlin
Published 21st February 2019, 3:12pm
I thank President Chris Kirkconnell and the Chamber for this opportunity to address you.
Last year I highlighted the improving relationship between government and business and the importance of continuing to develop that relationship.
That spirit of partnership has continued to grow and there are many examples of how our joint leadership has served to advance the interests of these Islands. I will highlight those as I talk about them, but I thank Past President Paul Byles, the Chamber Council, member businesses, and Wil and his team for their important contributions.
The coming year will be very good for our Islands. The Royal Visit of Prince Charles and the Duchess of Cornwall in March will certainly be a highlight in a year that I expect will have many such, but none more important. And so Government intends to make 28 March, 2018, a public holiday in honour of this royal visit.
If you were present last year you may recall that I began with a video in which leading regional economist, Marla Dukharan, described Cayman as “the best run economy in the whole Caribbean”. The performance of Cayman’s economy over the last year consolidates our position at the top of Ms Dukharan’s league table.
Government continues to run excellent surpluses with preliminary 2018 results indicating revenues of $832.3 Million with a surplus of $178 Million; some $91.4 Million more than budgeted. We continue to pay down debt and to operate from cash.
GDP growth was 3.7% in the first six months of 2018 and the official forecast for 2018 year end is 3.4%.
The economy continues to perform strongly and, as we anticipated, our economic success continues to generate jobs and opportunities for Caymanians.
The 2018 Spring Labour Force Survey showed an overall increase in employment with Caymanians in work increasing by 3.4% while employment among non-Caymanians declined by 4.1%. Correspondingly, unemployment decreased to 3.4% from 4.1% in the same period of 2017. Unemployment was lower across all status groups but the highest reduction was among Caymanians, which fell from 7.3% in the first half of 2017 to 5.3% in the same period in 2018.
When the fall 2018 Labour Force Survey is completed and released it will show yet further improvement. Preliminary results indicate that in fall 2018, when compared with fall 2017, total unemployment would have dropped to 2.9% from 4.9% and Caymanian unemployment has dropped to 4.6% from 7.3% in 2017. This is the lowest level of Caymanian unemployment in more than a decade.
Last year I appealed to businesses to redouble efforts to employ suitably qualified and experienced Caymanians. These figures represent a significant achievement and I am grateful to all contributing employers.
I am far from complacent and acknowledge there is more we must do to strengthen the position of Caymanians in the job market. I will talk about the action we are taking in that regard shortly. For now, though, I will simply reflect that the figures I just gave represent a significant step towards fulfillment of this Government’s key pledge to achieve full Caymanian employment – a strong economy where every Caymanian who is willing and able to work can find a suitable job.
The other key macro-economic indicator, inflation, is one we are watching closely. The latest data for the consumer price index give an annualized inflation figure of 3.5% for the third quarter of last year. While high by recent standards, the figure has dropped back from a peak of 4.8% in the previous quarter.
Economists among you may point out that such is the nature of price variations over time and that these recent figures come on the back of a period of deflation – falling prices – in the Cayman Islands. And so, taking a longer term view, prices in the Cayman economy in September 2018 were actually only 2.5% higher overall than they had been in September 2014. That represents a significant five year period of overall low inflation.
However, we recognise that the current level of inflation can represent a squeeze on living standards, but the tools available to government to reduce inflation are limited. As an example, one of the most significant recent price increases was a jump in electricity prices - but remember, this Government has maintained the significant fuel duty reductions brought in by my last Administration that are still helping keep utility costs down. We also continued reductions on various import duties to licensed retailers to help lower prices. And we increased the duty free allowance at the airport from $350 to $500 per person for goods purchased abroad.
We will do what we can to maintain living standards, especially for the vulnerable. Last month saw the second of our promised increases in the minimum income we guarantee to those in receipt of social assistance, retired seamen and veterans, and retired long-serving civil servants. These individuals saw their monthly receipts from Government rising to $750. That increase of at least 36% since this government took office under two years ago is directly benefitting hundreds of Caymanians and, I should add, delivering on another of the key pledges we made to the country.
Lest we forget though, the best way to ensure a good standard of living is to ensure we deliver economic growth so our people can access well-paid jobs. Indeed the best social programme is a good job.
The picture of success I am able to paint this afternoon owes much to the continued strong performance of Cayman’s two pillar industries – Financial Services and Tourism.
Cayman’s Financial Services Industry continues to thrive even as it constantly adapts to changing global circumstances. The ability of the industry to innovate and the willingness of government to combine a business-friendly environment with appropriate but proportionate regulation will continue to maintain our competitive environment.
But we must recognise there are major global players determined to undermine Cayman’s success. Our position is straightforward. Where there are reasonable demands to raise global regulatory standards we will comply, so long as there is a level playing field. Our willingness to do so is evident in the economic substance legislation passed by the Legislative Assembly immediately before Christmas.
This is one of those areas where I must thank the representatives of more than 15 financial services and commerce associations that supported the Minister for Financial Services, her team and the Government to tailor that legislation to meet the requirements of those who set global regulation standards as well as our own local business community.
I remain confident that if the EU listing process is fair, we will not end up on any blacklist. But we take nothing for granted and continue our engagement with the EU Commission and member states.
Looking ahead, the future of Cayman’s Financial Services Industry will face more challenges; not just from the EU and OECD, but also from the FATF. I am confident that we can manage those challenges and, working together, government and the industry can keep pace with changing global standards while preserving the special characteristics of this jurisdiction that make it an attractive place to do business.
Given the challenges our Financial Services Industry is constantly facing, it is even more critical that we do all we can to secure the future of our other key economic pillar, tourism, and seek to accelerate economic diversification to reduce our reliance on both those industries.
For that reason, the current controversy over the cruise dock is not something that can be seen in isolation.
Cayman’s tourism sector is flourishing. Last year we received 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. In the end, though, it is the quality of the offer that drives our success. Yes, we have many natural advantages but it is the continual improvement in the standards of our hotels, restaurants and associated businesses along with our infrastructure as well as our people that keeps bringing visitors to our shores.
Some of our critics point to our success and ask why we need to change. Surely, if Cayman continues to attract visitors, why do we need a new port?
Even our fiercest critics accept that the cruise industry is changing. They accept the trend towards bigger ships but seem to believe the changes can leave Cayman unaffected. They argue that these bigger ships will only gradually come into service and that they can continue to tender their passengers ashore in Grand Cayman.
I liken this approach to that of the Kodak company, which enjoyed decades of growth and became a cultural point of reference the world over. It’s “Kodak moment” tagline became part of everyday speech. I am sure there were those sitting at the company headquarters during the 1990s saying, ‘we are continuing to grow, why do we need to change’?
Kodak did not fail because it did not see digital photography coming; indeed Kodak invented the world’s first digital camera in 1975.
Rather it failed to understand the profound impact that change would have on its business – not overnight, but over time.
After a period of decline that lasted some 20 years, Kodak filed for bankruptcy protection in 2012. The company survives but is unrecognisable from the 20th Century giant it had been.
I fear that will be the outcome for our cruise industry if we refuse to pay attention to the way the market is developing. We will go into a gradual but sure decline and our cruise sector will eventually be diminished.
This government will not allow that to happen.
It was at a Chamber Luncheon in 2015 that I announced that, after careful consideration, Government had agreed on the merits of building a cruise port and enhanced cargo port. We not only remain committed to the cruise dock and cargo port project, but are even surer of the merits today.
The new cruise dock is vital to safeguard the future of Cayman’s tourism industry; whilst the new cargo facilities will receive larger cargo ships and help support the Islands’ growing population and, by allowing greater economies of scale, help to mitigate some of the cost pressures impacting the cost of living that I spoke about earlier.
Whilst we are committed to delivering the port project, cruise and cargo, and to securing the growth and jobs it will bring, we are not doing so recklessly and without regard to the costs. I have previously made two promises to the country, which I will repeat here.
First, we will structure the finances in such a way as to not expose the country’s finances to disproportionate risk.
Secondly, we will minimise or mitigate the environmental impact of the project.
We have already delivered on the first of those promises. We announced last December that we have concluded agreements with Carnival and Royal Caribbean, the two largest cruise companies, on their financial commitment towards the costs of constructing the new dock.
I am happy to announce today that Disney has also given its commitment towards the financing of the port project. These agreements, coupled with the finance to be provided by the preferred bidder on the project, effectively ensure that no public money will be required to build the new cruise berths and enhanced cargo facility. When I addressed you in 2015 I stated that the cruise companies must have skin in the game to ensure that we receive the necessary volume of cruise passengers over the period required for the financing to be repaid. That promise is being kept and I want to again assure the Leader of the Opposition that no current fees paid by the cruise companies to Government will be used to repay the financing package.
Having delivered on that first promise, we will now ensure that the second promise is kept as well. I have said before that I respect the views of those who argue that no economic benefit can outweigh environmental concerns. But whilst I respect their viewpoint, this is not a position that a responsible government can take. In my view this comes down to a question of judgement – do the benefits outweigh the costs? In my judgement and that of my government, $245 million of net economic benefit, hundreds of construction jobs and then decades of increasing employment and business opportunities for Caymanians in the Tourism Industry definitely outweigh the inevitable environmental costs in a part of Grand Cayman’s only working harbour. What we can and will do is ensure that the final design of the new piers will avoid as much environmental impact as possible. Where we cannot avoid it, we will aim to mitigate the effects.
The project is now in its sixth year and we continue to move forward carefully and deliberately. The procurement process is winding down and a preferred bidder will be chosen by the summer. Once this is done we will be in a position to speak more to the final designs and projected costs.
So we will continue to support tourism as well as our Financial Services Industry, despite the challenges. But we will also continue to support increased diversification of our economy.
I was delighted, therefore, to attend the ground-breaking ceremony on the first phase of the new campus development at Cayman Enterprise City late last year, as well as welcome the launch of the new Tech Cayman initiative. Both add further strength to this country’s offer to attract knowledge-based industries and other entrepreneurs and both have the support of Government.
I would add that Health City Cayman Islands continues to prove its increasing social and economic value, especially for health tourism. Recently in New York I addressed a Reinsurance Roundtable event where reinsurance businesses spoke in glowing terms of the value of locating in the Cayman Islands. These are market segments that are both ripe for growth and Government will do what we can to attract and support reinsurance and health tourism companies. The brilliantly organised and hugely successful Kaboo music festival is also a good indication of the potential value of large scale festivals and conferences to these Islands.
Our development sector continues to help power the Cayman economic engine and the addition of new hotels to our tourism product will help stimulate, as well as support, more growth for years to come.
There is no other way to put it; Cayman is doing very well. However, our future success is not guaranteed and in an increasingly competitive global economy this jurisdiction needs to be ready to compete in good times or in bad.
That competition is not just about attracting business to Cayman. It is also about making sure that entrepreneurial Caymanians are able to take the opportunities that the future growth of our economy will bring.
The Minister for Commerce has been pursuing a two-pronged strategy to support small business development. In the first strategy, Trade and Business license requirements have been streamlined and the whole renewal process has been moved online. Indeed we are making good progress across a range of e-government services.
The second strategy is about improving the support available to small and micro businesses. Just last week the Minister and the Cayman Islands Small Business Association signed a memorandum of understanding aimed at delivering services including workshops, mentoring sessions, grants and individual assistance to small business. The partnership between public and private sectors will be further enhanced through the establishment of a small business centre.
This Government has also maintained the greatly reduced fees for small businesses put in place by the last Administration, and in 2018, some 4,800 micro or small businesses benefitted from these reduced fees.