Another way they are alike is in the dislike directed in their direction by larger onshore jurisdictions that really should know better. Only two weeks ago, both were put on an EU black list for being involved in nefarious activities and abetting tax evasion. Where did that come from? Both places have spent the last 20 years bending over backwards to share information and stamp out any such activity -- which didn't actually exist in the first place. It has always been a figment of the larger jurisdictions' imaginations. Trouble is both are tiny and have no voice in the world compared to the larger countries.
This means both countries therefore have to take time out of turning their respective economies around to convince these other countries for the umpteenth time that they are wrong. Bermuda has 40-something tax sharing treaties and Cayman a couple fewer -- but in Bermuda's case it seems that we missed out Estonia and probably Latvia from our TIEA list and in that process incurred the black list wrath of the EU!
We don't do business with either country, never have, so why do we need to go to that extra trouble and of course expense?
None of this seems to matter when politicians are involved for the latest survey took the opinions of half a dozen senior policy makers in each EU country asking which nations are the busiest in helping people hide money and evade tax.
Several European countries starting with Poland (thank you) subsequently distanced themselves from this ridiculously ill informed survey but it doesn't matter now. The initial front page announcement has been made (yet again) that tarnishes our reputations. That's what people will remember particularly as the apology and retraction will likely be published (if at all) on page 7, under the obituaries.
With this rumbling along I did a mental comparison between how Cayman and Bermuda are emerging from the financial crash in 2007/8 that decimated our economies. Both realized that the single largest leg (international business) was not as previously supposed untouchable by world events for when Lehman went down, so did the hedge fund industry and the administrators that supported it -- based in Cayman particularly and Bermuda.
Both noted that it was important to create better diversification in the respective economies so that IB isn't as all dominant. Both jurisdictions lost thousands of jobs mainly expatriates who worked in IB and whose impact on the economy was massive -- the trickle down effect in Bermuda is estimated at least at one to one, namely 1 expat job means another local job is created in a service industry. I am presuming it is the same in Cayman. With a 60,000 population in each country, this meant that the impact was/is greater than 10% of GDP.
That's a crash.
What Cayman did was to try to ditch the two-party system that led the country into that mess (recently that is) and which created gridlock. It didn't work completely but there has been an injection of new, business savvy former non-politicians into government. In Bermuda one of the previous incumbent parties in their two-party system vaporized but found rebirth in a fashion within a new more inclusive party that took power at the last election (at about the same time as the Cayman changeover, in fact). Both countries now had systems and the possibility to turn the tide on economic malaise.
One major difference is that Cayman has a multi-billionaire benefactor who has pumped over a billion dollars into the island in various building programs that to my mind haven't a hope of making a return for years still. But they are working and so long as he has the patience to deal with some of the small island stuff in Cayman, he will keep on. His new Kimpton Hotel is half built and he plans another Four Seasons Resort on Seven Mile Beach to follow close behind. The new Kimpton Hotel will be 500+ bedrooms and will need 800+ new employees to man it. This is a massive boost to Cayman simply in these terms without considering the impact on the wider economy, need for housing, etc.
|Progress on the new Kimpton|
As a result the need for increased airlift to bring the hotel stay tourists to Cayman is intense. Ground breaking on the expansion of the airport is due to start in August.
The new dock is also at an advanced negotiation stage -- Cayman sure needs it with 4-6 cruise ships daily staying between 7 am and 6 pm. This could start in the next year and be a multi-year project.
The Shetty Hospital that currently brings medical tourists to the island recently partnered with several US health insurers so that US patients can receive treatment at a lower cost in Cayman and be covered with their insurance -- the critical element previously missing. Phase I has 200 beds, Phase II will break ground before the end of the year and add a further large number of beds.
|Soon to be progress at the Shetty Hospital|
In sum, the new Cayman government has managed a shift away from IB to a more diversified economy than before the financial crisis and have achieved a primary surplus on the economy (i.e. before debt service and capital spending) to boot.
By contrast, in Bermuda the new government is faced with opposition on every issue from a seemingly ever more divided parliament. It almost seems to not matter what the issue is, there is very rarely bi-partisan agreement on anything. This makes it difficult for Bermuda to take the sometimes politically sensitive hard medicine it needs to cauterize the wounds still left from the financial crisis.
The deficit has narrowed from $330 million to $260 million to be sure, but that still means new borrowing on the open market is required each year simply to keep the lights on.
If global regulation and downright opposition for financial centers tightens ever further in the future, it makes you wonder where the benefit will ultimately lay for companies to continue to do business through offshore centres like Cayman and Bermuda.
If that happens, Cayman will be in far better position to weather that particular storm. Bermuda should take note and move in a similar direction. America's Cup 2017 will help, but more needs to be done.
|The beaches and sunsets are still beautiful!|