Cayman Islands Financial Services

In accordance with Financial Secretary Kenneth Jefferson, in the next financial year, July 2007 to June 2008, the Cayman economy is expected to go on with its strong growth.

When delivering the estimates of revenue and expenditure for the next year, Financial Secretary predicted growth in GDP at 3.5%, inflation also at 3.5% and unemployment at 3.6%.

GDP at the end of the current financial year, July 2006 to June 2007 is expected to be 4.2%. According to Jefferson, the slight drop predicted in the next financial year’s GDP signifies that intense reconstruction activity after Hurricane Ivan is almost over and the economy is settling.

Inflation and unemployment for the current inancial year is expected to be 2.2% and 3.1% respectively.

When presenting the 2007/2008 Budget in the Legislative Assembly on April 27, 2007, Jefferson said that the economy of the Cayman Islands is expected to remain robust because of the continued expansion of the financial services sector, the continued recovery of the tourism sector and the near completion of construction efforts.

On May 9, 2007, during his contribution to the Budget debate, Osbourne Bodden, Bodden Town MLA, suggested that the country should enact antitrust laws (also called competition laws) in order to help curtail the high cost of living. He said that bank interest rates and fuel costs were 2 of the 4 major culprits that had caused the high cost of living in Cayman.

According to him, the government should contact the banks in order to encourage them to lower their mortgage rates. However, Bodden did not hold up much hope that would work. He suggested that for rates to come in lower it is probably needed to pass some antitrust legislation in order to avoid the collusion between the banks and fuel companies.

It should be noted that most countries in the Western world have antitrust laws or competition laws. As to Cayman Islands, although the Information and Communications Technology Authority Law has some provisions designed to prevent anti-competitive practices, there are not specific antitrust laws to govern commerce. This situation with the banks seems wrong to Bodden, that is why considering antitrust legislation is a serious issue to be put forward.

Bodden said that consultants have recently completed a report on the situation with the fuel companies, but its findings haven’t been made public yet. However, Kurt Tibbetts, Leader of Government Business, in his Budget policy statement on April 27 said that the findings of the report require that the government meets with the bulk fuel distributors.

Bodden also was taking on insurance rates and electricity prices as the other 2 major culprits of the high cost of living in Cayman.

The Cayman Islands’ success story was told to South Korea-based financial sector professionals, government officials and university leaders by a local consultant Paul Byles at a recent seminar in this Asian country.

The event aimed at informing ongoing discussions about creating an offshore financial centre on the island of Jeju. An island province of South Korea, Jeju, is unique within South Korea as its only self-governing jurisdiction with a governor and significant local government infrastructure with a new constitution enabling greater autonomy. Jeju is similar to Cayman – it is mainly a services-oriented economy with little crime and a clean environment.

The seminar was attended by many major players in South Korea. Byles was invited at the event by the Korean Banking Institute and the local government of Jeju as one of the main speakers.

Professor of the Korean Banking Institute Cheoljoon Kang expressed his satisfaction regarding the results of the conference discussions. According to him, Byles added significant value to the event, because he talked both about Cayman and about numerous issues that influence the offshore world at the global level.

Professor Kang said that Byles’ presentation and discussions were helpful in terms of putting an idea of forming an international financial centre into context and revealing the potential challenges and the possible benefits to Jeju’s economy.

Byles suggested that the event was important not only for South Korea but also for offshore finance generally.

During the trip, Byles met with government officials and financial services representatives.

In the beginning of May, additional training for local business advisors was offered by the Cayman Islands Investment Bureau (CIIB).

In February, a supplement to the business advisor training series was launched, whilst one-off workshop held on May 4, 2007 was offered in conjunction with the Florida Association for Volunteer Action (FAVACA). Discussions conducted by FAVACA consultant Marian Morgan focused on the following issues:
- working with the entrepreneurial personality;
- understanding the “E-myth” (where “E” stands for “entrepreneur”);
- improving communication skills as related to the 4 types of behaviour.

Marian Morgan has rich experience in working with both small business owners, with Fortune 500 companies and non-profit organisations. Also, she is the author of 82 Tips for Thriving in The Workplace and the founder of Integrity Miami – an initiative investigating the meaning and value of integrity as a tool for conducting business and personal relationships across Miami.

Recently, the Cayman Islands Financial Services Association (CIFSA) reflected on its achievements since its launch 4 years ago. According to the financial body, it had made significant strides in promoting an international image of financial services industry in Cayman.

The website of this non-profit organisation, became a popular source of information on an international scale. The site is among the top 10 in the search engine Google for such terms as “Cayman finance”.

Eduardo D’Angelo Silva, CIFSA director, said that the local agency regularly receives many enquiries through the website and that CIFSA in general has become a popular entity for numerous questions regarding the financial industry – from simple information to complex regulatory and tax issues.

In accordance with CIFSA, its involvement in many key visits by important official bodies and international publications increased its value to the financial industry the last 4 years. Silva said that many international bodies are approaching CIFSA directly as a central contact point, which is a significant achievement for it.

This year CIFSA has conducted interviews with the Financial Times, the LA Times and a number of prominent industry magazines and journals as well as has negotiated sponsorships with such conferences as the OffshoreAlert Conference and Hedge Funds World LatAm 2007.

A good news for Cayman – during the 1st quarter of 2007, the country saw a 14% drop in serious crime.

In accordance with the new numbers, from January, February and March 2007, burglary is down by 24% and assault is down by 17%. Robbery, attempted rape and attempted murder have also decreased in number.

However, according to Police Commissioner Stuart Kernohan, the Cayman Islands has seen an increase in detections for unlicensed firearms, and therefore this crime is to be focused further.

As to less serious crimes like theft and threatening violence, they have increased by some 7%. The upward trend is also traffic offenses. However, there is a 56% drop in number fatal wrecks as compared with January, February and March 2006. Commissioner Kernohan suggested that the overall stats for traffic are not surprising.

The Cayman Islands police are promising to go on doing everything possible to keep the crime numbers heading down.

On April 16, 2007, Minister for Tourism Charles Clifford announced that the Cayman Islands tourism industry has launched a new programme aiming at consistent delivery of excellence standards of customer service.

To implement the programme, the Freeman Group was contracted. This is the US consultancy firm with a 23-year experience in Caribbean hospitality training. The entire programme costs about USD 700 000 for 3 years and is worked out to train up to 2 000 people in the Cayman Islands tourism industry.

The programme will allow Cayman tourism to build and protect its brand and to increase consumer confidence. Clifford emphasized that the quality of service delivery has to be elevated to a superior standard in order to continue and sustain growth of the Cayman economy as well as to reach and maintain “a competitive edge in a liberalised tourism business environment”.

Clifford also outlined the Human Capital Development programmes that are already in process through the Department of Tourism to create awareness about the tourism industry.

The new service standards initiative is expected to incorporate the ideas of stakeholders, find consensus among them and ensure service delivery monitoring.

Director of Tourism Pilar Bush indicated several objectives for tourism, which are as follows: to be sustainable, to have sustainable growth and provide high economic returns for Cayman respecting the environment and local culture.

According to a review carried out by Deloitte Property Consulting Services, in 2006, the value of property sales in Cayman reached a historic yearly high. However, the actual number of transactions during 2006 decreased.

The Annual Property Review, based on Lands and Survey Department, Economics and Statistics Office and Planning Department figures, reported that the total value of property transfers in the Cayman Islands in 2006 hit $600.6 million, which is a 33% increase as compared with 2005. But the total number of transfers in 2006 dropped by 30% as compared with 2005 (from 2 640 to 1 868).

These figures involve the entire market, including all residential properties, hotel and commercial sales. The report emphasizes the few high-value transfers that occurred did not distort the statistics as might have been expected.

The sale of the Marriott Beach Resort was the largest transaction was for about $31 million. The 2nd largest sale was Victoria House – about $22 million. 3 other sales exceeded $10 million.

The Annual Property Review was prepared by property professionals at Deloitte .