December 18, 2018

Cayman Islands premier’s address to the Fidelity CEO Conference

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Address to the Fidelity CEO Conference

By Premier Hon. Alden McLaughlin

9 a.m., 2 February, 2017

Seafire Kimpton

Good Morning,

And a warm Caymanian welcome to you all, especially to our guest speakers who have come to share their views with us today. I look forward to your perspectives on this year’s topic; in particular your views on finding a path to economic growth.

I mentioned to a friend that I would be speaking here today and to my surprise rather than ask what I would be speaking about asked me what I was going to tweet. I confessed I had not given it any thought. He sent me his suggestion the next day:

I will be performing live at the Fidelity CEO Conference on February 2nd and it is going to be amazing. So if you are not here, you are a loser. Sad, so sad.”

Naturally I declined his suggestion, but as Bob Dylan once famously sang: “The times they are a-changing.” So who knows, perhaps a post conference tweet is still a possibility.

In many ways we have seen revolutionary change over the last few years – 2016 in particular with the election of Donald Trump as the president of the United States and the Brexit referendum in the . Much of this change has proved impossible for economists and financial planners to predict and therefore difficult to counter from a policy perspective.

Globalization with its promise of the free movement of people, goods, services and capital appears to have lost its lustre among ordinary folk and there are noises about trade protectionism and nationalism being made by politicians across the globe. As has been noted at previous CEO conferences, the wealth gap between those at the top and the bottom is powering much of this disenchantment.

The proverbial ‘man on the street’ is becoming both the driver and the focus of change, with populist politicians only too happy to gain a competitive edge by falling in step. But there are other factors at play as well including the ongoing impact of the 2008 recession that have caused the loss of some types of jobs as well as a slower growth in real income.

This certainly was the case in the Cayman context. This is why my administration has focused from the beginning on providing business with an environment to grow and create new jobs.

More and more unconventional politics – perhaps even bad politics – and not rational economics are driving change and policy making. Witness the influence of , a political party rejected at the polls in the UK, but still able to create the atmosphere for, and to influence the outcome of, the Brexit referendum. Whether this is good or bad remains to be seen, but as a politician I know that you ignore the concerns of the electorate at your peril. So whilst I do not condone the politics of fear I certainly understand the impact it has on those who vote.

Fair trade relationships between countries, along with the ability to grow or attract the best talent, will be even more critical in the present swirling political climate on both sides of the Pond and will remain a key aspect of the success of western nations as globalization continues to evolve, or some would argue, disintegrate.

For Cayman, regional relationships are important too, but so is our relationship with the United Kingdom. Under the previous administration this relationship had deteriorated. I hope you will allow me a small parochial indulgence by reminding voters that this is but one of the reasons they must be careful who they choose at the polls in May. This Government has worked hard to rebuild our relationship with the United Kingdom based on mutual trust and respect because we believe the importance of good relations with the UK cannot be overstated.

So today, our relationship with the United Kingdom is strong. Indeed tomorrow I leave to attend the Joint Ministerial Council meeting on Brexit in London, along with Minister Wayne Panton, to represent the interests of the .

Our relationship with the UK is not the only thing that has seen improvement on our watch. During this term we have proven that we are a government that gets things done. Government finances are stabilized, tourism arrivals are at a high, our economy is growing again, necessary infrastructure development is under way and jobs and opportunities for Caymanians are better than they have been for almost a decade. And we are poised to do even better.

As long ago as 1830, the British Whig historian Thomas Macauley observed: “In every age, everybody knows that up to his own time, progressive improvement has been taking place; yet nobody seems to reckon on any improvement in the next generation. On what principle is it that with nothing but improvement behind us, we are to expect nothing but deterioration before us?”

With Macauley’s observation in mind let me mention where the Cayman Islands is today and consider what is before us; that is what the future holds for these Islands.

I can tell you that we have already bucked the trend of economic inertia, particularly in this region, through prudent fiscal management and sound policy initiatives. Even a cursory glance at other Caribbean economies shows that we have avoided the ravages of spiraling debt, unsustainable deficits, high unemployment and economic stagnation.

To the contrary, we have grown our economy, reduced unemployment, accumulated fiscal surpluses, paid down debt and indeed are seeking repay more debt early.

So under this Government, Cayman has indeed found a path to growth.

Our Minister of Finance the Hon. Marco Archer is a man who spends the Government’s money carefully. He is probably the most risk-averse man I have ever had the privilege of knowing, but his cautious and methodical approach, backed up by the support of his colleagues in our Caucus, provided precisely the stability that the country needed when we came to office in 2013.

The economy of these Islands has grown steadily annually over the last 4 years from 1.5% in 2013 to a forecast high of 3% last year. For comparison, real GDP growth in the last year is forecast at 1.6% and Cayman was bettered only by the Dominican Republic at 5.9%, which appears to be at the end of a growth spurt.

The increase in prices of goods and services in Cayman in 2016 is expected to be in negative territory at -0.5% compared to 2.1% when we came to office. Prices increased by 1.2% in the US last year, with Trinidad & Tobago topping the inflation charts at 4.8%.

While low energy prices and a soft commodities market have undoubtedly contributed to the low rate of inflation, this Government has also assisted by reducing taxation. We reduced the import duty on diesel used by our electricity provider from 75-cents per gallon to 25 cents per gallon, which has directly benefitted every business and household – leaving at least $17M in the pockets of families and businesses annually. Over the course of the past 3- and a-half years we have also reduced the duty paid by licensed traders from 22 per cent to 20 per cent. This cost Government about $5M annually in lost revenues but it has allowed businesses the ability to provide better pricing to local consumers.

Combined, these have had the effect of increasing disposable income, reducing business costs, and helping to keep the economy ticking over.

We also significantly reduced Government fees for small businesses and have forgiven those businesses that may have fallen behind on their fees, provided they pay the current fee to reinstate them. This has allowed many small businesses to once again operate legally and to be eligible to bid on government contracts.

We have worked diligently with businesses across all of our key sectors. Tourism has made an important contribution to our growth. Along with targeted marketing campaigns in our major source markets that have yielded record increases in both cruise and air arrivals over the last four years, we knew we would have to do more to grow the numbers of tourism arrivals and make them sustainable.

Our Minister of Tourism and Deputy Premier Hon. Moses Kirkconnell has focused on increasing airlift, expanding our room stock and improving the efficiency and comfort of our air and sea ports. Let me give you a quick synopsis of his stewardship.

First, take a look around you at the wonderful surroundings of this, the brand new Seafire Kimpton. You will see before you proof positive that Cayman has turned the corner as far as investment in hotel plant goes.

The Dart Group, owner of the Kimpton, is planning another five-star resort and residences on Seven Mile Beach.

A bit further along the beach, the opening of the refurbished Margaritaville is imminent and work will start this year on an Arnold Palmer Lodge and Golf Course in Frank Sound. And we are seeing other major properties such as the Westin being renewed. All across all three Islands we are seeing development projects of all sizes, including boutique hotels.

I am especially pleased that Caymanian investors are behind many of these projects.

Those of you who are visiting for this conference, or those of you who travel regularly, will have seen that the redevelopment of the Owen Roberts International Airport is well under way. The current airport was designed to accommodate passenger traffic of 500,000 per annum. The renovated airport, when complete in 2018, will be able to accommodate 2.5 million travelers a year. Importantly this renovation is being paid entirely with cash with no added taxes or debt.

The Charles Kirkconnell Airport on Cayman Brac has also benefited from refurbishment and was named best small Caribbean airport last year.

Airlift is a key component in the tourism cog and following some hard work on both sides over the last two years, Southwest Airlines will commence a scheduled service to Grand Cayman this summer. This will open new gateways in our chief source market to fortify the sustainability of the industry.

Cayman Airways has also commenced updating its fleet and introducing new routes including Roatan, Honduras.

The impact of all of this is that with a growing economy overall unemployment in Cayman fell from 6.3% in 2013 to 4.5% in 2016. This compares to 4.9% and 14.3% in the US and the Bahamas respectively at the end of 2016. Unemployment by Caymanians fell from just under 10.5% in 2012 to 5.6% in 2016. And in the medium to long term, more Caymanians will be employed as the economy continues to grow.

Planning for growth often calls for some out of the box thinking. I am pleased to announce today that Government is close to finalizing an agreement for immigration pre-clearance at Miami International Airport for eligible passengers traveling to Grand Cayman. This will enhance the experience of passengers arriving here by avoiding local immigration lines, allowing them to go straight through to Customs baggage claim.

This will also have the added benefit of improving strategic border control cooperation between the Cayman Islands and the United States.

I am also especially pleased to announce that we will be introducing an ambassadors’ programme in which retired Caymanians interested in working will be employed at the Owen Roberts International Airport to assist arriving passengers.

While we work to improve things for passengers arriving by air, we are also looking to improve facilities for arriving and departing cruise ships.

When we took office we knew that if Cayman was to remain a competitive, desirable port of call on the Western Caribbean cruise circuit, we would have to provide the type of facilities demanded by cruise passengers as well as accommodate the new Oasis class cruise liners. In addition, our cargo port is restrained by its inability to berth larger cargo vessels with the resulting inefficiency impacting the cost of landing goods associated with small manifests.

With the previous Government’s failed attempts to build a cruise dock still fresh in people’s minds, we knew we would have to get it right. Right from an environmental perspective; right in relation to the revitalisation of George Town, the right return on investment; the right business partners and the right financial structure.

We have issued a request for proposals to assist with the financial modelling, the review process is under way and a contract is expected to be awarded soon. The RFP inviting pre-qualified contractors to submit a bid is expected in June. We anticipate the contract for construction will be awarded later this year.

The cruise dock is likely to be the largest infrastructure project Cayman will see for decades and I am certain that voters will be cognisant to whom they entrust its execution.

I have given you a broad overview of our sectoral priorities and policy direction, without mentioning the main piston of our economic engine – financial services. Financial Services account for over half of our GDP and about 40% of government revenue. Clearly we must protect its viability at all costs.

This Government has also been alert and agile in responding to threats and perceived threats to our main breadwinner. We have defended the right of the Cayman Islands to operate a sound and well-regulated industry in the face of much hypocrisy by advanced economies whose “do as I say, not as I do” dictum are, quite frankly, no longer acceptable.

We have shown the willingness and ability to fight on the international stage to defend Cayman’s business model and reputation; whether at Chatham House in London, on BBC’s HardTalk, in Brussels at the European Parliament or at the Anti-Corruption Summit in London. We will go wherever needed to fight the case for Cayman.

But fighting the case for Cayman also means that we fight to improve business alliances within the region and globally. Because of this we have negotiated and signed tax information exchange agreements with 37 countries, 30 of which are in effect.

And more recently China has agreed to grant Most Favoured Nation Status for Cayman ships entering Chinese ports. This followed a recent visit to Cayman of the Chinese Ambassador to the UK. Cayman flagged vessels will benefit from this agreement, as it provides our ship owners and charterers a preferential rate on port tonnage fees when visiting ports in China. That translates into making our shipping registry more attractive in the global market.

We have good reason to believe that our relationship with China will improve further and that more Chinese nationals seeking a Caribbean vacation or place to invest will consider the Cayman Islands.

And so to help facilitate this, I am pleased to announce that Cabinet has agreed to amend the Immigration Regulations to exempt nationals of the People’s Republic of China from the requirement to possess a visitors’ visa for the Cayman Islands for a stay of up to 30 days. This will apply where the person possesses a valid unexpired visa for Canada, the United States or the United Kingdom and they arrive in the Cayman Islands directly from the country for which they hold the visa. The latter requirement is to ensure that their US, UK or Canadian visa is authentic.

I am also pleased to announce that this new exemption will also apply to Jamaican nationals. This will facilitate not only ease of travel for our visitors from Jamaica but also assist business between our islands. Jamaica and Cayman share historic, familial and cultural ties and I am very pleased that we have been able to make this change.

To help ease the travel of our own people between the Cayman Islands and the United States, my Government has pursued, and the US Government has agreed, that Cayman can join what is known as the exclusive “Six-month Club.” This means that holders of Cayman Islands passports will be able to enter the USA so long as their passport is valid for the period of their stay in the USA. Currently the passports have to be valid for 6 months to allow entry .

This is a tremendous achievement in these uncertain days and makes travel to the US more convenient for Caymanians. This should come into force before the end of March.

These various initiatives are part of this Government’s overall strategy to draw new business and traffic to Cayman and to promote growth in the economy as well as jobs and opportunities for Caymanians.

Given the firm footing on which this Government has placed the country, the mid-term projections over the next Parliamentary term indicate year-on-year economic growth averaging 2.5%. As a politician, I will tell you that is good, solid growth. And as an economist, Minister Archer will tell you I am right.

Economists like to tell us that all growth is cyclical and the goal is to avoid the boom and bust syndrome that has characterised so much of the last 100 years or more.

So what is the one untapped resource that can hedge against external shocks and ensure sustainable growth in these islands? My answer is our people!

This Government recognizes the absolute necessity of providing our people with the skills and education that will land them jobs for their entire productive years. It is a key component in our strategy for growth and led by Education Minister Hon. Tara Rivers.

The recent World Economic Forum in Davos threw up some interesting perspectives, as I am sure our discussions will here today. When asked to identify the things most likely to impact their businesses delegates listed among others: the irreplaceability of human creativity, leadership and emotional intelligence in the workforce.

Cayman is a service driven economy – whether that service is delivered in tourism, health, technology or financial services. We therefore have a duty to ensure that future generations of Caymanians are the first choice to fill jobs in these sectors and the industries that support them. Thus we are prepared to continue to make massive investments in our people, which we believe are essential to a secure future.

We passed a new Education Law last year as a first step to achieving this goal. The law guides education policy in six strategic areas:

(1) International Competitiveness and Raising Standards;

(2) Special Education Needs and Disabilities;

(3) Conflict Resolution Training and a Crime Reduction Strategy;

(4) Technical and Vocational Education and Training ;

(5) Information, Communication and Technology as well as Science, Technology, Engineering and Mathematics; and

(6) Public-Private Partnerships in Education and Training.

We have also addressed the long-term issue of pay stagnation of experienced teachers and we are looking at what is needed to improve teaching and learning in general including facilities.

We have ambitious plans to continue the work of enhancing the education system. This includes completing the John Gray High School and further enhancing internship and apprenticeship programmes in partnership with the private sector using the Cayman Finance Internship Programme and the Hospitality School as models for success.

We also instituted a “Ready-to-Work” programme to upskill unemployed Caymanians and help them find and keep jobs. This pilot programme will be expanded over the next year to enable every person wishing to find employment to be able to do so.

We will also increase our support to the micro and small business sector and will work with the Small Business Association on how best to do this. We have other plans for the small business sector as well, but as we draw closer to the date of elections all I will say on this is – stay tuned.

Small business is a proven facilitator of employment and wealth accumulation and it is important that as the economy grows businesses of all sizes have the opportunity to share in that growth.

Of all of our achievements, there is one that is perhaps most satisfying to the business community. We have imposed no new fees or taxes 4 budgets in a row! There has never been another administration that has gone a full term without increasing fees and taxes but have instead has reduced them. But we have done so. And as the economy continues to improve we will look again at what taxes or fees can be further reduced. So, while I acknowledge concerns about the cost of doing business, I believe that everyone, if they are fair, will agree that this Administration has done a significant amount to address this issue.

I am proud of what we have achieved to restore confidence and provide an environment for business to flourish, which has allowed our economy to grow and provide more jobs and opportunities for Caymanians and those resident here.

But I am equally proud of what we have been able to do to help advance our social growth. This includes the introduction of a National Minimum wage as well as an increase in the retirement age to 65 to allow those who need or want to continue working past the age of 60 the opportunity to do so. And we intend in our next term to focus even more on ensuring that our social services regime is efficient and effective. The goal is to get the right people – the right help – at the right time as well as to move people from welfare back into work.

Concomitant with preparing our people for the growth and jobs of the future is a fair and transparent immigration process. As would any country that has experienced massive immigration over the past four decades, the Cayman Islands has had its share of challenges from issues with work permits to permanent residency. I have to confess that managing these issues is a task akin to walking the razor’s thin edge, but suffice it to say that we will manage it with the same resolve that has seen us rise to the top of the economic pyramid in the region.

While we prepare our people for the opportunities that await them, we will continue to protect and enhance the natural environment of these Islands for residents and visitors alike.

This includes the completion of a new, modern waste management facility, which involves composting, recycling, and a waste-to-energy component. We signed a contract last month for legal consultation and will announce the preferred bidder to deliver the project by the end of April. This is yet another major milestone for our country and further proof that we are a government that gets things done.

We are expanding our plans for the revitalisation of George Town to address issues of roads, drainage and recreational facilities. The Development and Planning law has already been amended to allow for mixed use zoning in central George Town.

More family-friendly, recreational green spaces and the protection of public beach accesses are some of our priorities. The South Sound Beach Park will be completed in the coming months and we will shortly commence enhancements to Smith’s Barcadere on the adjacent newly acquired property.

In the meantime existing Phase One road works continue at a good pace. The Esterly Tibbetts extension up to the Butterfield Roundabout is expected to be finished by the end of April. The first phase of the Linford Pierson Highway extension from Tropical Gardens down to Agnes Way will be completed by the end of May.

As you can see, and will have heard, this administration has done much and has much planned.

As we wind down this term and look to a second term in office, there are some principles that will remain constant in our administration.

Number 1 will be the continued prudent management of our financial affairs;

Other priorities will include the defence of our financial services sector;

The expansion of our hospitality industry;

Completion of key infrastructure projects such as a modern waste management facility, needed road improvements, airport and cruise and cargo facilities.

And there will be new investment in our human capital and our environment as we continue to grow our economy for the benefit of all. Benefits that must include good jobs for Caymanians, a healthy environment, first-class healthcare and safe communities,

Warren Buffett famously said that “In the business world the rear view mirror is always clearer than the windshield”. As Premier, I can tell you that the same is true in the world of politics.

But of this I am certain, we have come a long way in 3 ½ years because of the work of this Government. In the midst of political, social and economic turmoil globally, our three small Islands have performed remarkably well over the course of this political term. We have avoided the threat of economic stagnation and have found the path to sustainable growth. The best, the best, is yet to come.

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