No help for merchants

| 09/11/2010

(CNS): A proposal to try and boost sales for local merchants by requiring developers given a duty waiver to ‘buy local’ has failed. A private members motion brought by the independent MLA for North Side was altered so much by government in the Legislative Assembly that it removes any obligation on the part of those given the waivers to buy from Cayman dealers. Ezzard Miller had called on government to use the duty waiver as a way of assisting local traders who were struggling to keep their doors open and in some cases laying off staff. In his motion, Miller asked that anyone given a duty waiver as a carrot to encourage development must purchase goods locally in order to access the waiver.

However, rather than voting ‘no’ to his motion the government submitted a private members motion amendment via backbencher Ellio Solomon, changing Miller’s original proposal from a legal obligation to buy local to get the waiver to the possibility of getting a higher discount on the duty if they chose to buy locally. It was not clear however, how that would work for those developers given a 100 percent duty reduction.

Rolston Anglin the education minister described Miller’s original proposal as “fatally flawed” because not all goods are available on island and developers would have to source many things they needed overseas.

The independent member for North Side pointed out that in such cases the developers would simply not get the duty – which was the point of the motion – and that he had worded it carefully to ensure that it had the guts to properly assist the local merchants. “This change will be of no benefit to them,” Miller told CNS after he was forced to vote against his own motion that was “hijacked by the government and neutered.”

Miller said he was disappointed and could not understand why government did not just vote ‘no’ if they did not agree with him. However, he said if nothing else the debate had revealed the fact that prior to the motion government did not have a policy to encourage developers to buy locally at all and at least now they were offering some encouragement.

The problem he said, however, was that the merchants were still left trying to scrape a living in tough times while the major developers who were purchasing materials and goods for their projects were simply by passing the local economy and despite getting the duty benefit were not spending their money in the Cayman domestic economy.

Miller pointed out that in some circumstances when developers simply ignored local retailers the point of the waiver to encourage development was lost. When government is deriving no revenue as there is no duty and the merchants are not benefiting either it was hard to see who other than the developer benefitted.

As well as trying to assist struggling traders Miller said that if more of the major developers were obligated to buy locally then the merchants themselves would be able to reduce their prices as they would be able to buy in bulk and access better prices which would in turn benefit everyone.

During his presentation in the House Miller had pointed to local developer Frank Hall who specialises in low cost properties as an example as he always buys his material through local traders. The independent member from North Side pointed said if Hall can do it when constructing homes where cost is significant and profit margins small, the larger developers selling units for millions of dollars with much greater profit margins would find it even easier to shop locally. “They must be made to have a social conscience,” Miller added.

Facing what he called the “Ellioanisation” of his motion Miller said he had done his duty by the people who had made representation to him that local businesses needed help and said his motion had been drafted to assist people. In difficult times, Miller added that he believed government should assist the people but that this altered motion would be of no substantial benefit.

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  1. dj4 says:

    I commend Ezzard for looking out for the locals. He has also suggested a minimum wage, and a job administrator which will ensure companies hire or consider Caymanians who are qualified. Ezzard loves his country and the people who were born and raise here, and that is very important, coming from a leader of a country.

    The PPM and UDP need to get their act together, and stop this mingling with the "god of self-centeredness" in politics. Leaders look out first for their people – not themselves!

    • Anonymous says:

      Dear poster,

      I am sorry to have to disagree with you but what you should be doing is making sure you get the whole story and not the one-sided story you are getting here on CNS. I listened to the replaying of the LA sitting where the debate took place and I am sorry but Mr. Solomon’s amendment to Mr. Ezzards motion is the best thing that happened to it. All you have to do is get the whole story or better yet ALL THE FACTS that are not presented to us here on CNS and you will change your mind that this motion will see the light of day AND it will help local suppliers in a great way.

  2. Testicle Tosser says:

    That’s what happens when local merchants choose to overprice items to pay for their lazy local staff. If they would streamline the business and not carry deadwood, maybe they could sell more product. The "good times" are over and it’s time to get inline with the rest of the world, meaning lower your prices and axe your distant family member. One’s back gets sore carrying around so much dead weight.

  3. nauticalone says:

    Thank you Ezzard for trying! You are absolutely correct to speak of the social cost also. We are only beginning to experience the effects of ignoring same.

  4. Caymanians for logic says:

    Do the MATH…Ezzard’s idea would NOT work.

    The incentive is likely to bea 50 % discount from existing duty or to set duty at 5% or 10%. Cost on site is “material cost + shipping + Insurance, then add 22% duty” to get landed and cleared cost currently.

    If you mandated that the purchase is made from local supplier, (if they indeed even carry the products), the cost on site is “material cost + shipping + insurance, then add 10%(say), THEN ADD STORE overheads and MARK-UP.” Even the duty is marked up. This will be MORE than without incentive. Even with a 100% rebate on duty, the “local mark-up” is likely to exceed the savings.

    It is clear to see that the developer will bypass the “incentive with local purchase” and go with the straight duty as it is cheaper. The inventive is no longer beneficial (no longer an incentive)! And there are other reasons such as warranties, servicing, agency fees, to take into account.

    His other thought that the local merchants will have more and therefore spend more in the economy is a fallacy. They will likely keep the extra profits.

  5. Anonymous says:

    And what do you expect from a Government that buys most of it’s goods overseas?

    Give local companies a break on duty, and maybe, just maybe we might survive.

    I can’t see why I have to pay duty on shipping in the USA, shipping to Cayman. I even pay duty on my wire transfer charges.

    I even pay for the mandatory form that I need to fill out!

    Give us a break!!!!!!!!!!!!!!!!!!!!!!!!Before you break us.


  6. Anonymous says:

    Here is another example of the Mac showing he is all for local business!!!

    All of those persons that voted for the UDP based on a fools promise are you happy with your choice?

    • simon says:

      UDP is making an effort more than if PPM was in power. PPM got us into economic decline with 81 million deficit.

      There may be two heads of evil, but UDP head I would rather, because the PPM head took food from out tables and spent all the monies on extravagance… then had the audocity to say it was because of the Global Recession

  7. Da Wah Yah Get says:

    Oh Boy, the UDP gan bite de han dat fed dem now.

    I have not been a big proponent of the local supply store whose owner XXXX decided to stop giving Chamber discounts after Ivan. However, I must admit that the building supply business in Cayman is competetive and all of them are approachable and the deals are as good as or better than the average person could go to Miami and negotiate.

    It’s easy for a local supplier to have the ultimate beneficiary listed on the invoice and Customs could waive the duty on that particular item, so Ezzard’s proposal seemed like something that would benefit the economy.

    I suppose the one good thing to come from this debate is that Ezzard and McKeeva’s families will not be posting joint Christmas greetings in the newspaper this year.

    • Wake UP!!!! says:

       The ALTernative (sorry – my CAPS lock got stuck) is to accept that the big home supply stores are just there to make their killing.  However, s you note, most of the stores have come around and figured out that flat out reeeeeeming of the public won’t work, so now they figure out what an individual would pay to go to Home Depot and Lowes and buy it, ship it, pay duty, and clear it, and make their price close to that.  

      I have to admit that even the main ALTernative to shopping overseas has figured this out and now I buy a lot more local – EXCEPT when it is a big order – then the overseas guys still have them beat…

      ‘Cause the overseas guys KNOW the value of volume and give great price cuts, which, when translated through the import process, really do mean savings…

      One day, the local guys will click on this one too – until then – keep price shopping, both here and overseas…

  8. Applause Please says:

    As a student and sometimes teacher of economics, I cannot see how this could work.  Give a duty waiver, but then make a company buy from an on island company?  They would then be paying duty.  The simple fact is dollars and sense:  If all Cayman Companies were "competitive" then it wouldn’t make sense for companies to try and import their goods on their own.  Everyone understands that it is expensive to do business on this island, but it’s also not right that companies often gouge consumers because they are the only or one of few suppliers that exist.  If there are problems with competition from foreign firms, then the government needs to look at its fees and how it is being a barrier to competition for local companies.  A business owner or individual has every right to go the source of supply that it chooses, whether this is for price, quality, or any other reason.  Competition has two problems on this island: 1) Prices that consumers pay are often inflated compared to the prices available in other locations in the world.  In this point I am only speaking to greedy business owners who try to maintain margins that are way above what the rest of the world earns.  I know several business owners that add 20-35% after all government fees are added.  In today’s world economy, this is unsustainable (and yes, I understand the risk of owning a business).  Again, this is above and beyond government fees.  2) Government has to get its fee structures and its Civil Service spending inline so they are not a barrier to competition. Years of success and unprecedented growth have made the government too big and unsustainable in both the current time and in the future worldwide economy as a whole. Businesses worldwide have had to become more competitive as the internet and global logistics has shrunk the both the distance (intellectual and psychological) and cost to access consumers. We are not a little island where unknowing and uninformed consumers now buy. Cayman is a player in a global economy with sophisticated consumers that help shape and mold the very global economy business compete in. Local firms and governments will have to change in order to stay relevant to the consumer.

    • Anonymous says:

      I know what you are saying, but you are forgetting one small principle and that is Volume vs Price. Lets put this in simple terms, do you think that Kirks or Fosters can buy Coke at the same proce as Wall Mart or any other big retailer in the USA? Of couse not, because they are buying daily more than we probably do for an entire year and price is always determined by the quantity you buy, and I think it is safe to assume that in the building industry as well. I am an expat and I love living here, i dont like having to spend more, but if I want to have a selection of items avaialable on island that is the price I have to pay, local retailers have to spend a lot more than their international competition on Water, Elec, work permits and general labor, so why should they not charge a higher margin than the USA retailer, economics does not always relate well accounting. In economins supply will always adjust to demand, and under that theory if they are charging to much localy the demand will drop and reatilers have a choice to drop their margin or go out of business. I believe in that principle, so there will be a price point where it is worth while me buying on island vs going off and generally i shop on island for a lot of day to day items, and i think to paint local retailers as a bunch of money hungry idiots is crazy, and to assume that a market on < 50,000 as player in the global ecomony misleading, glad I did not attend your economics class….

    • Da Wah Yah Get says:

      See my comment above, but here is how it works in simple terms using plywood as an example.

      Developer "A" is granted a duty-free waiver for plywood on the condition that it is purchased through a local supplier.

      All local suppliers quote Developer "A" on a price per sheet for plywood delivered to their construction site, and Supplier "B" gets the contract.

      Supplier "B" now orders 25% more plywood than they normally would and receive a lower cost due to increased volumes.

      When Supplier "B" receives their shipment, 25% of the product is exempted from duty.

      All of the local workers for Supplier "B" are kept busy with the increased volume of work, and island residents can get a sheet of plywood from Supplier "B" for a slightly lower rate than they could before due to the increased volume handled by Supplier "B".

      Now take plywood and expand it to an entire list of items. Government writes a letter to Developer "A", with a copy to Customs, saying the following items are duty free if purchased through a local supplier and let market forces dictate the rest.

      Where is the problem? There are no additional rules, regulations, or departments to create. This system is already in place for certain Government Statutory Authorities and core Government itself to import items duty free using local suppliers.

      Any suppliers attempting to import items duty free for any unapproved project or purpose run the risk of paying duties equivalent to three times the amount evaded. This is already in the law.

      • Wake UP!!!! says:

         And two times the duty in RESTITUTION if you still want to get the goods…



    • Anonymous says:

      Mr. Economist, don’t you see the benefit of big developers being "encouraged" to shop local? Tell me, if you or your family member were to lose your job tomorrow, would you then prefer that big developers were encouraged to shop local?

  9. Karyll Iton says:

     "Rolston Anglin the education minister described Miller’s original proposal as “fatally flawed” because not all goods are available on island and developers would have to source many things they needed overseas."

    Am I missing something here? I thought the point of a duty concession was to have the merchants bring in what they need without the duty. Who cares if it’s on island or its not so long as they can have the duty waved. I mean if I have to choose between paying shipping and paying 22% on the price of the goods AND the shipping, or paying a local vendor (who ships in bulk and has the option of a duty wavier) a modest mark up I know which way I would swing. This gives us a chance to retain as a country at least some of the money which normally ends up as an outflow due to our horrendously one sided balance of payments. 

    Thumbs up or down, I think this was a very good thing. Just a shame it wont see the light of day.

    • Anonymous says:

      Poster you are wrong..the motion will see the light of day just in a better form. Try listen to the Legislative Assembly replays on Radio Cayman in the evening. You can then get all the facts and decide for yourself what is going on instead of CNS or any other media outlet TELL you what is going on or how to feel.

  10. Anonymous says:

    This would not work anyway. The ridiculously high "local business" markup on wholesale/retail merchandise would result in various arrangements to avoid a government attempt to insert local middlemen into such transactions.

    • Anonymous says:

      Use your head. More volume equals lower prices, not to mention more jobs. Can you say , "Reduced costs of living and infrastructure that keeps up with the increasing population"?

      Thanks, Ezzard, for putting Caymanians first.

      The "others" obviously have different priorities.

      • Caymanians for logic says:

        Volume discounts do not kick in unless you buy a whole lot of one product. This will not happen in Cayman- our market is too small. Even if the store can purchase less than the developer, and on large purchases that is doubtful, the cost of business and the REQUIRED local mark up to stay in business here will erase any difference.

        Then you have the issue that much of what is imported for the large developer is SPECIALLY Designed for the project and a one off purchase. It is not stocked locally. So Ezzard’s scheme might seem logical for one or two sheets of plywood but not for the typical large developer materials.

        Will not work.

        • Anonymous says:

          Ezzard’s scheme seems VERY logical. Let the developers contribute to the local economy, as they well should. All the developers are interested in is increasing their profits. Do you still believe the oft quoted, "This proposed project is going to bring in millions of dollars per year for the islands, after it’s completed!" Yeah, we’ve all heard that many times, since day one. If that were true, we’d all be rolling in money and dancing in the streets with not a (government financial budget) care.

          Face it. These developers are making millions off these big developments, taking the profits with them and not contributing enough to the infrastructure that is necessary later.

          The developers are getting all the breaks, the public is getting broken.

  11. Anonymous says:

    Certainly they must be able to agree to developers who get the waiver at least buying 30% (or other %) of material locally – *** if and where the material is available locally ***

    Quite simple.

    Why not? In a struggling economy. Its not a major inconvenience that will put off developers who are already interested in doing a development and are being given waivers. It will simply cause them to add an extra step in thier ordering of supplies system. e.g. We need 10,000 planks of wood – email local company x and order 3,000. Email overseas company y and order 7,000. If the local company x only has 1,500 – order 8,500 from overseas. If local companies x l and m don’t have the particular matterial, order it from overseas.

    Ifwe tried to keep more money within the economy instead of buying everything from overseas our economy and our people would be in a much better position right now. Of course there is the matter of local supply. However if there was an effort to buy more locally, the supply would improve.



  12. Anonymous says:

    Common Merchants are not on the "friends of CIG" list.

  13. Anonymous says:

    Elio and Rolston, I supported both of you and the UDP during the election and even stayed with you through many of the many mistakes and hiccups you have had along the way but now you have taken a knife and driven into my back and twisted it several times.

    I am in business and one of the reasons I voted UDP over the buffoons in the PPM was because you guys sold me as pro-business. I guess I didn’t understand that was for only one sector of business.

    I have been supplying products and services to companies such as McAlpine, Arch and Godfrey, Phoenix, the former Hadsphaltic and others of the same ilk. I have yet to get one job or provide a service for DECCO because they under Mr. Dart’s status as a Caymanian has set up every type of purchasing business they possibly can to avoid purchasing on island from people like myself.

    It is not only limited to DECCO either, I hada local Canadian Bank, believe it or not the one that i had done business with for 30 yrs, contact one of my suppliers in the US to by product directly from them. they were told that I was there agent on the island and a copy of the email sent to me. They never bothered to contact me and instead went to Canada to the Canadian owned part of this company and bought it directly from them. Before anyone rushes to the conclusion  that this was about price, please remember I was not even offered the opportunity to bid. My only saving grace came when it came to the installation of the product, government refused temporary work permits for them to bring in crews to install this specialty product and then I was contacted after the fact to install it because I had the only staff trained on island to to this installation.

    Now tell me, why is it that I am supposed to pay all of the high cost of doing business here and a developer can come in, get reduced or no fees at all, plus duty concessions? There is something definately wrong with this situation and whilst I don’t always rush to support Ezzard, this is one time when he really put forth a good and sound idea.

    Shame on you Elio and Rolston…SHAME SHAME SHAME!!!!!!!

    • Anonymous says:

      Same thing I was saying a couple of weeks ago.  Dart is not playing fair.  They nickle and dime the little man to death so much so that the little man doesn’t want to do business with them anymore.  Why, because they will lose money and small businesses have wised up to this.  I am in the construction industry as well and I can tell you that Decco will be the ruination of McAlpine and Arch and Godfrey … mark my word.  It doesn’t matter if Decco loses money, at this stage they are simply hell bent on building an empire – that is the DART EMPIRE.  It’s all me me me me.   Lose money now and cream it later when they’re the only game in town – that’s the plan. 

  14. Caymanian says:

    This is shame!  Ezzard Miller is the only real voice of opposition out there that wants real monies into the pockets of locals. Yet LA has shown to us that they can’t even deliver on such benefits!  It makes me wonder where we are headed!