By Premier Hon. Alden McLaughlin, MBE, JP, MLA
8:20 a.m. 4 February, 2016
Ritz-Carlton
Good morning.
For those of you experiencing your first time in the Cayman Islands, welcome. For our returning visitors, welcome back. We are glad you are all here.
I thank Chris Duggan and Dart for inviting me to speak briefly with you this morning.
So, your theme of the next two days is “Supercharging Alternative Investments in an age of Uncertainty”. I cannot profess any expertise in how to supercharge alternative investments, but I certainly recognize the challenges of uncertainty.
While the challenges we face in politics can sometimes be described as “a little local difficulty”, we share your concerns over the current uncertainties in world markets and the impact of a slowdown in economic growth.
The business of alternative investment, and the theme of the conference, is to create opportunities from those uncertainties. As traditional markets have come under pressure, high net worth individuals and, increasingly, institutional investors have sought fresh approaches that deliver value and balance risk. Alternative investment, through constant innovation, has won business and, as the diverse range of participants here shows, moved into the mainstream.
I commend you for that approach. And I am delighted that Cayman is central to the story of some of your success.
It is a shame, then, that there are those who wish to shut us down.
You may have seen – and if not will probably be aware of – last month’s BBC documentary, “Britain’s Trillion Pound Island”, journalist Jacques Peretti’s investigative deep dive into this most secretive of societies.
What did he find?
Well, in a triumph of investigative journalism, Mr. Peretti revealed that there are some rich people living on the Island. Lots of them have boats. Some of them have expensive cars. Who knew? We thank him for that insight.
As the investigation moves into true Woodward and Bernstein territory, we “follow the money” and get to the big reveal. Apparently, much of the wealth here is fueled by the financial services industry because a lot of other rich people chose to put their assets here. The Pulitzer is in the bag.
No argument from me on the analysis so far. However, at this point, I am sad to say, Mr. Peretti and I begin to diverge. His main argument appeared to be that people should not have that choice to invest here. A successful and thriving financial services industry is apparently an affront to Mr. Peretti and his ilk and he questioned whether this was therefore something that the United Kingdom should in some way shut down.
Perhaps a better question for him to ask would have been why the industry is so successful and why people make the perfectly legitimate choice to invest here.
The answer to that question is in this room. It is because our small Islands possess some of the most innovative and creative individuals and businesses in the sector. It is also because those individuals and businesses enjoy the support of a government determined to help them succeed.
Rather than burden success with excessive taxation, this is a Government that has used its success in restoring stability in its own finances to cut duties for the benefit of businesses and households alike.
Here, I hope you will forgive a little bit of politics creeping into my speech this morning.
When this Government was elected in May 2013, Cayman was certainly in a challenging place; still reeling from the effects of the 2008 financial crisis but also facing a serious crisis in leadership and a crisis in confidence that exacerbated the impact of the Great Recession and left the economy stagnant. It was not a pretty picture.
I am pleased to say, and I believe virtually everyone here would agree, that the Cayman of February 2016 is a much better place than the Cayman of February 2013.
Let me give you a few examples of what I mean. By the end of 2016, if current forecasts hold true, the economy will have grown on average annually by 2 per cent over the three years following our election. Contrast this to an average increase of 0.81 per cent in GDP for the preceding three years. And there are a number of impressive major development projects under way or in the planning stages that will help bring more growth and employment opportunities.
We have had excellent budget surpluses created through economic growth and reduced expenditure and not via new taxes. And so Government finances have been stabilised; government debt is being greatly reduced, and business confidence is high.
And we have over the last two budgets also reduced various fees and import duties so as to help reduce the cost of doing business and the cost of living. Public sector workers have had wages frozen for years and this too created a drag on the economy – we have provided relief to families and to the economy by correcting this.
Mr. Peretti’s BBC documentary did profess to show another side of Cayman. He highlighted relative poverty in parts of our community.
I commend him for doing so but I for one need no reminder that times are still tough for some on our Islands. I know that because I see it every day and each day I use that to drive myself and my Government to do more.
Again, though Mr. Peretti and I diverge at this point. His contention was that this relative poverty for some is a price these Islands pay for having a thriving financial services industry and, it appeared, that in some way the Government is prepared to connive with business in a willingness to pay that price.
Mr. Peretti is not simply wrong. I believe he is willfully missing the point.
This Government believes that economic growth benefits everyone. We believe that a strong and thriving financial services sector in Cayman drives economic growth and therefore it deserves our support.
Consequently, in contrast with other jurisdictions, we believe in regulatory frameworks that provide necessary safeguards, yes, but that also support business rather than hampering innovation and growth.
We continue to be at the forefront of regulatory changes and in many instances ahead of G20 countries in drafting legislation and helping lead the way in Anti-Money Laundering and Countering Financing of Terrorism legislation. And we are still world leaders in developing useful financial services products that enable the transaction of global business.
Just this past December we introduced legislation for the formation of a new Cayman Islands vehicle: the limited liability company, or LLC. We did so in response to requests from the investment funds industry. The flexible nature of the vehicle means that it will be well-suited to a broad range of general corporate and commercial applications. We believe the introduction of the new LLC will further cement Cayman’s position as the domicile of choice for offshore investment funds and structuring vehicles. We expect the LLC will come into full force during the first half of this year.
At the same time, we will continue to support those individuals in our community who need our help.
Many of you were at the recent Cayman Economic Outlook event were I highlighted this Government’s record on tackling all forms of inequality. I will not repeat all that here but I will just say one thing.
This Government believes the key to tackling poverty is not giving handouts but creating employment. Growth delivered by the private sector is the most important determinant of employment but we as Government also have a direct role to play in helping Caymanians overcome important barriers to their getting jobs. That is why we have developed the Ready2Work KY programme, which will bring Government and business together to work with individuals to help create opportunities and pathways to employment. I thank those businesses who have already joined the programme and I urge those of you in this room that run businesses based here to do likewise.
I am grateful for the recognition in your programme for this conference of the role of business in delivering broader outcomes. It is great to see so many of the visiting speakers being involved with promoting humanitarian causes and social justice. I commend the organisers for including the perspective of these individuals at a business conference around alternative investments. Businesses can sometimes forget that social justice and opportunity can positively impact profitability. The organisers of this conference do not fall into that category and I congratulate them.
So, it is clear to you, I suspect, that I did not think much of Mr. Peretti’s BBC documentary. We should not, however, just dismiss it as trivial nonsense.
We must recognise it for what it is – part of a concerted campaign to undermine the financial services industry in these Islands.
It is a campaign taken up by politicians in the UK, the EU and the USA eager to deflect from their own failings. Why deal with long-standing structural problems in your own economy when you can simply cry foul at someone else’s economic achievements? Instead of looking at the need to reform your own over-taxed and bureaucratically regulated systems, why not try to wreck the success of another jurisdiction.
These are uncertain times. You are right to consider that as your conference theme.
But let me help by giving you at least some certainty to hold on to. This Government remains absolutely committed to supporting the success of the financial services industry. We will continue to fight for your right to do business in a jurisdiction that does not penalise success with excessive taxation and over-regulation.
These are not just the hollow words of a politician. Our willingness to back your success has been widely recognised. We remain the principal offshore jurisdiction for hedge funds and mutual funds. In fact, Hedgeweek Global Awards 2015 declared the Cayman Islands the best hedge fund services jurisdiction. Helping us maintain our status as a successful fund domicile is the presence of sophisticated and professional service providers whose knowledge of the nuances of the fund industry is vast and vastly appreciated.
Ours is a truly symbiotic relationship. You will succeed if Government ensures the environment is right for you. Your success drives economic growth and brings revenues to Government, both which allow Government to act in the interests of our wider community.
The Cayman Islands will be stronger, the more you in the Alternative Investments sector are able to continue to innovate, create wealth and drive growth. So I have one last message for you – go supercharge it!