(CNS): The Cayman Islands economy is doing well with GDP growth at 3.7% and estimated at US$70,790 per capita, the creation of over 8,900 jobs post-pandemic, an unemployment rate down to 3.6% among local people, a human development index of 0.877 and a $40million surplus for public finances. Nevertheless, there are a number of significant challenges facing this country, Premier Wayne Panton told a business audience on Thursday. In an address at the RF Economic Outlook Conference, he said the cost of living “was staggeringly high and thousands of people here subsist on low wages”.
Panton said that the Cayman Islands was “very prosperous” by any measure. But while salaries in some sectors, especially financial services, were very high, the poor wages of others in the face of the high cost of living and rising interest rates were making it harder for them to make ends meet.
“With the forecast increase in property insurance rates, the reality is that without careful interventions, the gap in Cayman will widen,” Panton stated. He said that the disconnect between rich and poor leading to an ‘us’ and ‘them’ culture could erode “our tradition of openness, inclusiveness and Cayman kindness”. Panton warned of a “vicious cycle of dependency, resulting in demands for government services that in turn demand new taxes and fees that would make us less competitive”.
The theme of this year’s RF conference was “Evolving Risks: The Way Forward for the Cayman Islands”, and Panton stressed the dangers of a rising income inequality against the backdrop of a polycrisis reality of climate change, the war in Ukraine, rising tensions between America and China, the aftermath of the worst global pandemic in 100 years, supply chain issues, inflation and the risk of a banking crisis.
This, he said, was “the perfect cauldron for instability. And that instability leads to the rise of
authoritarianism and a breakdown in our social institutions.”
The evolving risk of income inequality was a growing threat globally, Panton said. “The increased concentration of wealth in the hands of the few and the widening gap between the haves and have-nots leads to an erosion of social harmony and leads to social instability,” he added.
Outlining what he said PACT had done and planned to do to protect Cayman and address its own internal challenges, including traffic issues, housing, a growing population, managing work permits, affordable health care, the cost of living and development, he said the government was going through a mid-term review.
“We are embarking now upon a mid-term evaluation,” he told the audience. “As we reach the mid-term of this government and we prepare for the April policy strategy statement and budget season, I will be challenging all ministries and departments to take their performance to the next level. This mid-term evaluation is looking at progress, results, functions and the human capital, including leadership in the elected government and civil service.”
He said he was taking a hard look at both the successes and challenges with a view to taking bold, decisive action necessary to make sure government accelerates the progress over the next two years. He also urged the business audience to engage with him on this review. “I urge you to tell me what is working and what needs improvement. Let us have these important conversations, even if they must be tough conversations. We need to make some tough decisions for the good of our country,” he said.
Panton said that Cayman had a number of “wicked” problems, and the cost of living and traffic were some of the most urgent.
“Our PACT Government is committed to tackling these problems head-on, and while there are no silver bullets and no magic wands that instantly or easily solve these complex problems, we must do what we can to provide cost of living relief in the short term and take steps to contain and, ideally, reduce costs in the medium term to long term. Similarly, when it comes to traffic, we must make it easier to get around our country without being stuck for hours in gridlocked traffic,” he said.
Short-term interventions were needed, he said, as well as policy changes for the medium and long term, such as changing development planning and zoning laws to create more dense mixed-use communities that are more conducive to walking, reducing the need to drive for every errand and allowing people to cycle or walk to work or school.
To achieve short-term solutions for commuters who live in the Eastern Districts while the East-West Arterial extension is constructed, the government will begin by discouraging the typical pattern of single occupants in the hundreds of cars making their way into George Town by incentivising car-pooling, introducing a subsidized bus service from the outer districts on weekdays, and having a tougher stand on the number and types of cars that can be imported.
“In the medium term, we need to create and resource an effective public transport system that reduces the number of cars on the road. Making public transportation more regular, more comfortable and more available will improve its usage,” the premier stated.
Issues such as traffic and development and the cost of living have all been impacted by the population growth, which is partially fuelled by the work permit system. Panton told the business audience that the conversation about work permits has been and always will be a difficult one.
“The reason it is so difficult is because a balance must be struck,” he said. “On the one hand, we know that growing our population is one way of growing our economy. It creates jobs; it creates demand and customers for local businesses and revenue for government coffers. Fundamentally, it creates economic opportunity for Caymanians. But on the other hand, it also has the potential to price Caymanians out of our own country and make it more difficult to live here. And it has had the effect of fundamentally changing our country culturally.”
Panton spoke about the “many, many, many stories of Caymanians denied opportunities because the employer would rather bring in a guest worker”, which he said was unfair to the local qualified workforce. “Now, how do we balance this?” he asked the audience, made up of many employers. “Go too far in one direction, and we stifle economic activity. Go too far in the other direction, and we lose our country.”
The balance is about preserving the rights of Caymanians in their own country while ensuring businesses have the labour they need to grow, he said. “We need to be diligent and exercise due care in the processing of work permits. We also need to pursue ways to achieve growth through increased productivity and through economic activities which rely less on large amounts of human capital.
“You have heard us say that we are looking to innovate, to grow our economy through tech and healthcare and to be deliberate about diversification. We will be sharing more about those efforts in the coming months,” the premier revealed.
Among the many other challenges that Cayman faces, climate change is one of the biggest long-standing threats, he said. “We see it most in the rising sea levels but also the intensity of the storms that impact our shores. We are a small, low-lying country, which means that we will bear the brunt of climate change.
“It is therefore now essential that we take decisive action to adapt to the inevitable, adverse impacts of climate change, many of which are already being experienced across our natural and human systems, while also doing all that we can to mitigate our contribution, however small, to the problem,” he said.
The government has “nearly completed” the update to the Climate Change Policy, which will “deliver robust strategies for responding to the current and anticipated adverse risks of global climate change on the economy, society and natural environment”. But Panton said building standards would need to be enforced to minimise damage in the face of fiercer storms, and the “incredibly high” local emissions must be reduced.
“Harnessing renewable energy opportunities and democratising access to renewable energy will protect our economy against future shocks in oil prices, shocks that are out of our control,” he said, adding that the government was in the advanced stages of a comprehensive review of our National Energy Policy and producing a draft policy for public consultation.
Panton added that the government has continued to protect natural habitats through the designation of additional protected areas and was producing Natural Capital Accounts alongside the traditional financial accounts to better understand the value and range of benefits provided by natural assets and track their condition.
The premier also committed to protecting the financial sector in the face of mounting issues by strengthening controls. He said that globalisation had been good for Cayman — and Cayman had been good for globalisation. But he said, “We now appear to be entering a period of deglobalisation, with nations seeking to re-shore economic activity through the application of tariffs and incentives. Fortunately, the signs are that Cayman is resilient to this threat.”
In spite of measures such tax cuts and employment legislation to re-shore capital in the US, the introduction of tax-neutral structures in Singapore and Hong Kong intended to encourage capital to move there, and the return of capital to Russia, Cayman’s financial services industry has continued to grow.
“However, if countries were to impose more aggressive restrictions on the pooling of capital from certain jurisdictions, it could lessen the value add that we are able to provide. To address this threat, we continue to facilitate the development and adaptation of our financial industry, enabling us to offer a wider array of financial services, and we continue to diversify our economy, encouraging next-adjacent sectors such as fintech, as well as new sectors such as healthcare and tech. We believe that such diversification will make us more resilient to the threat of deglobalisation,” he added.
The premier told the business community that overall, even with the numerous problems he had noted that were affiliated with growth, Cayman’s economy was “strong and getting stronger”, with a strong financial sector, unemployment at record lows, a government surplus and investment in people and social programmes to help improve health, educational outcomes and employability.
See his full address below:
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