Bad public policy

| 07/10/2011

Public policy issues may not have the headline grabbing appeal of some other topics, but creating and following good public policy minimizes waste, corruption and a host of other problems. Public policy should be designed to maximise the public good rather than the private profit of a few. Unfortunately, that principle often seems to be forgotten, ignored or not understood by some. 

Bad public policy tends to be prevalent in countries with endemic corruption. This is no coincidence as bad public policy tends to facilitate corruption. Many bad policies require great effort and expense to fix. Fortunately, the recent suspect policy decisions which are discussed in this Viewpoint can be put right quickly and with little cost.

The recent governmental decision to offer immigration and tax incentives to stimulate economic diversification was a good one, as was the decision taken by both political parties to get the ball rolling. However, the policy decision to limit access to these incentives, at least for the foreseeable future, to those who do business within a single privately owned special economic zone (SEZ) was badly flawed. Similarly, the policy decision to administer the incentives through a new bureaucratic authority is also flawed. 

There is no legitimate public policy requirement for forcing prospective new investors to rent or purchase from any “favoured” developer in order to receive government incentives. All this restriction is likely to do is to create an artificial shortage of favoured office space, entice existing tenants out of locally owned property, drive up costs for potential investors, deter both desirable investment and economic diversification, and make someone an unearned profit.

It would be far better from a public policy perspective if our legislation opened up the commercially zoned areas in the entire country to economic diversification based on uniform incentives. Let suitable investors rent from a “favoured” developer if they want, but do not try to force them to do so, and do not give any “favoured” developer or its tenants any competitive advantage at public expense. Who profits from forcing investors to rent from a “favoured” developer in order to get incentives? Certainly it is not the Caymanian public.

The existing pillars of the Cayman economy, finance and tourism, allow investors to choose where to locate within multiple appropriately zoned areas. The success of these existing economic pillars came about in part because there were uniform rules and no politically “favoured” developers.

The notion that a “favoured” developer had to be chosen as part of the diversification initiative because entities which locate in an SEZ will be given special customs and immigration incentives is entirely specious. We have existing incentive models that work quite well. The existing models provide incentives but do not hand a monopoly to anybody, and do not require the large and expensive bureaucracy that the new SEZ authority will produce. Hotels developments are provided with concessions based on what they do rather than which developer they acquire land from, or which real estate company they agree to sell through – or at least that is the way it should work now that the anti-corruption legislation is in effect.

Agricultural enterprises now receive duty and immigration incentives of various types based on what they do, without any need to rent property from a politically “favoured” developer. That existing uncomplicated system works well for a large number of farmers at minimal cost and with very little bureaucracy.   

A further aspect of flawed policy is apparent in the process established for limiting competition with the initial SEZ.What purpose does the SEZ approval process serve other than creating the potential for a toll booth operated by those who seek private profit? If all bona fide investors were provided with incentives on the basis of what they do to stimulate Caymanian employment and economic diversification, rather than who they pay, public policy will be better served. 

Fortunately, there are simple, effective, immediate and long term fixes to the policy failings recently translated into law. Even better, the fixes do not rely on those who designed the problems.

The immediate fix requires those honest politicians likely to be part of the government in 20 months time to demonstrate their commitment to good public policy by publicly stating that they will further encourage economic diversification by amending the SEZ legislation to allow all high tech and other targeted investors to receive the same incentives now restricted to those who rent or buy from “favoured” developers. Providing this assurance to existing property owners, potential developers, and potential investors will increase our chances of successful diversification by providing an incentive for many people to seek inward investment. That would be good for Caymanians in general and not just those politically connected. Who knows it might even limit the sending of questionable invoices. 

Category: Viewpoint

Comments (51)

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  1. Anonymous says:

    Yes genius Aristophanes.  Its bad public policy to develop jobs and opportunities for everyone in Cayman, and to have it done by private enterprise instead of the government.  The same government you people ridicule you want to run a special economic zone.  Bright idea!

  2. Anonymous says:

    how can you say the benefits are exclusive to the developer? If all goes as planned we all benefit.  I'm a lawyer and I fully expect to see more (and more diverse) clients as a result of this development.

  3. Anonymous says:

    It seems more people are against this madness than they are for it

    http://centos6-httpd22-php56-mysql55.installer.magneticone.com/o_belozerov/31115drupal622/business/2011/10/17/techy-zone-talks-virgin

    Aren't public policies about what the people want?  Isn't that how democracies are run?

  4. Anonymous says:

    The content of this viewpoint demonstates such a profound lack of understanding. Its truely very, very sad.

  5. anonymouse says:

    There is only one way in stopping Mr. Bush. Thousands gathering in Georgetown and all demanding that he step down voluntary while he is being investigated. No matter how long it takes. if he refuses in which he will I am certain then we heve to continue until it is evident to all including the UKthat we have lost confidence in him totally. And now he is asking the commission to educate the the public on Independence to future generations. Do you think we are stupid DumDum that is your only WAY OUT and sooner rather then later as you are on borrowed time one way or another. People this is getting serious what can he do if say 1000 civil servants participate along with persons from all walk of LIFE. His Power trip must come to an end!

    • Anonymous says:

      What date and time has been set?  I'm in!

    • Anonymous says:

      Howare you going to gather thousands of marchers when you won't even post your name?  How many movements do you know of that have been lead by "Anonymous"?

  6. Anonymous says:

    If people care about this issue or other publicv policy issues they should speak to the politicians who can make a difference. In the present situation it is the opposition politicians who can make the difference by stating that they will undo this evil.

    Unfortunately even the opposition politicians seem willing to speak up only about what people tell them is important. People tell them that they want personal protection so they introduced a policy to allow people to carry pepper spray and for security guards to were vests. If enough people approach the opposition politicians and tell them that they want the politicians to do something about corruption and bad public policy decisions like the SEZ, then the politicians will. It is up to us to let the politicians know that this issue is important to us. We also need to let the opposition politicians know that we understand that extending the incentives to everyone wanting to diversify the economy is good and that it will provide more real jobs for Caymanians than giving all the profits and no controls to this one developer.

  7. my my says:

    Thank You Aristophanes Duckpond, whoever you may be. I've been struggling to understand why if this SEZ is a good thing, then why wouldn't it be good for the whole country. – We are a very very small country – whatever we do should benefit everyone.

  8. Anonymous says:

    Aristophanes Duckpond this article would have drawn more attention if the article and the heading was written more sensationalized with a sense of urgency.

    Otherwise, people won't care….Which seems to be very much the case.

    Preventing this legislation from coming into effect is important for the entire Cayman Islands and not just the commerical property owners.  Every individual that wishes for the prosperity of the island as a whole should care that this legislation funnels the bulk of economic benefits to the named developed.

    • Anonymous says:

      The downturn in the economy has left us rather desperate for anything to jumpstart it. Under such conditions we must be careful not to sell our future. Managers behind each major national level project seeks to get favours for their projects and yes sometimes it is veiwed as if they get away with a lot.

      Until we see the next project.

      • Anonymous says:

        I don't think the Cayman Islands is that desperate and blind to build an economy on pure hopes and dreams of a foreign investor to get rich quick.

        Well I hope the Cayman Islands isn't anyway.

        As per the draft legislation the economic benefits of this project is filtered solely to the developers.  They are marketing the trickle down effect to the the rest of the Cayman Islands.  That sounds like they will be eating steak off the table and the rest of the country will be begging dogs for the scraps that fall off the table.

        How is that a public policy?  That sounds very much like a private deal which should not be granted through public policy.  The developers can do as they wish and build the building.  They can do as they wish and bring business to their building.  What is not right nor fair is that the business is not allowed to rent anywhere else on the island.  If the tenants are not happy with the monopolized landlords, what then?  They are not allowed to go to other landlords, so what do they do? Leave?  Now really how is that beneficial to the island?

         

  9. Anonymous says:

    I would like to join forces against this project.  I am not a commercial property owner, but I care about the greater good of Cayman.  I see that CEC is marketing its propaganda to the youth of the islands purporting to provide employment. We all know full well that these students will not be hired within the zone.  This is all a marketing ploy.  For goodness sake it was run by their marketing manager!

    How do I as a concerned Caymanian make a stand against this project? My vote is as good as any.  Can my concern be tabled up to voting against the project?  Laws are put in place for the good of the people.  If the people don't want it, then the project should not be put through.  Cayman is supposed to be a democratic society. 

     

     

    • Harry B says:

      You know full well they will not be offered employment – how? Please provide you reference material – and please don't tell me this is based on a 'hunch'?

      • Anonymous says:

        The history of Cayman has proven that most companies tend not to hire Caymanian youth.  They will hire the best fit for the job. The best fit will be someone who has an education, qualified and has overseas international experience.  The Caymanian youth CEC spoke to were high schools students.  These students will not be getting a job unless CEC is hirng 'token' Caymanian youth. 

        The majority of Caymanians will not have overseas international experience, while some may, there just isn't enough.  Marketing to young Caymanians that they will be hired is the same as what Mac has been doing by telling Caymanians you are owed jobs.  Talking to these students was a means to brainwash them into believing the project is actually good for them.

        • Anonymous says:

          and yet you want to repeat that history you speak of by having the movers and shakers of the financial industry reponsible for this project.  the same financial industry thatwon't hire Caymanians as you say……you're an idiot.

  10. Anonymous says:

    CALLING ALL COMMERCIAL PROPERTY OWNER!!  The incentives offered to those located in the SEZ will serve to pull your tenants out and into the SEZ.  Ask youself, is your tenant dealing directly with the Cayman public?  If not, then they are very likely to relocate into the SEZ and you will be left holding empty properties.   We must unite against this now!

    • Anonymous says:

      Where do we meet?  What date? When?  Where?

      • Anonymous says:

        Yes Mr. and Mrs. Anonymous: where do you meet?  At the duckpond behind Aristophanes house?  Jackasses.

    • Anonymous says:

      I am a commercial property owner, and just this week I signed a lease for 10,000 sq feet with CEC.  Stop trying to take my business away!

  11. Anonymous says:

    How do we go from here and fix this?

    How do we get the legislation opened to allow  free choice of location in the Cayman Islands on part of the investor?

    What are the steps? What do we do? How can we still make this work for the entire Cayman Islands?

  12. Anonymous says:

    Is it only a few in the public that realise the implications of this?  Or is it only a few that care about the implications?

    Obviously the creation of this so called public policy is not based on the interests of the wider Public.  How can legislation be put in place for thegeneral public when it truly only benefits a few individuals? 

     

    • Anonymous says:

      I think that those who have taken the time to consider the implications are very concerned. Many just accept that for the next 19 months a small group of people are going to continue to do anything they can to enrich themselves and their cronies. So many things of a similar nature have been done over the years by the same people with apparent impunity that people just say – its wrong but there is nothing that can be done because the laws and the people that are supposed to protect the people don't.

       

  13. Anonymous says:

    If the SEZ does not need to exist because the same outcome can be achieved without it, then why are the politicians entertaining it?

    Something does not add  up!

    • Anonymous says:

      It is called political math – a lot for me, none for you, a lot for me, none for you, a lot for me ……………………………..

      • This SEZ Stinks! says:

        If that is really what this is, then this deal should be fully investigated.  As that is the basis of what the Anti-Bribery Act and the Anti-Corruption Law are based on and all the culprits involved should be treated accordingly.  No more nonsense should be tolerated.

        A Public Policy is for the general public not for politicians pockets.

  14. Jaded not surprised says:

    The tremendous irony is that at one time the entire country was for all intents and purposes an SEZ.  It was only the dramatic hiking of work permit fees that necessitated a separate zone to attract new business.  Just a few years ago, competitors (Ireland, Dubai etc) had to create SEZ's just to compete with Cayman for financial services. 

     

    Aristophanes calls it correctly.  Companies in the zone are avoiding a government soaking and accepting a private sector one in its place.

     

    Why not simply offer unilateral incentives for new companies within designated sectors without the attendant restrictions on location, landlord and service providers?  Let the free hand of the market decide where companies will take office space, where people will liveand what service providers they will use.  If someone wants to create a purpose-built location for a particular sector, go for it.  But it better offer a real advantage over the alternatives.

     

    A good idea gone awry as usual.

  15. tim ridley says:

    I agree. As I have commented previously, the entire Cayman Islands should be a SEZ. (Re) making these Islands as a "business friendly" and welcoming environment for new and existing high quality businesses of all sorts and (re) implementing a "talent without borders" immigration policy are absolutely critical to revitalising the economy for the long term. Messing around with mini-SEZ's is not the best way to go about it. 

    • Anonymous says:

      Mr. Ridley I would pay you to make this right for the Cayman public.  What is your going rate?

  16. Shock and Awe says:

    SEZ who?? 

    Comment from Premier (and his favored developers)

    SEZ we!!!

  17. Someone with sense! says:

    Aristophanes Duckpond thank you! 

    I have been blasting this project from the beginning.  Namely because XXXX, but ultimately because of the implications and effects to the Cayman Islands.

    Having the SEZ's is not a guarantee that any economic boom will happen. For the moment it is all build it and they will come.  Of course the developers have presented the case that SEZ's are successful but it is not the case in all attempts.  I am finding that the ZONE is being sold that it cannot fail.  Other countries have failed.  It is only a few that have been successful.  However those countries did not have another economy, they have high populations willing to take substandard salaries, and it is the industrialized world that have been successful.

    Cayman, like many other countries are experiencing troubling financial problems. So is the rest of the world!  The SEZ is to provide jobs for Caymanians….as…..?????  Why isn't this transitioned to a government initiative? Government writes the policy.  Shred the SEZ legislation.  Government enacts the new law making Cayman attractive to tech, commodities, companies and entiies etc.  Then the developer can continue to build as it wishes.  Build whatever your heart desires.  The monopoly of having the ONLY rights to rent to the new sector should not be made LAW.

     

    • Anonymous says:

      My kids need jobs….Will YOU hire them?!

      • Anonymous says:

        I'm Caymanian and if I was offered the same advantages as this government has given to this company I would work to bring in high tech companies too. If your kids have the qualifications and want to work I probably would given them jobs if I could. There are many more like me. If the government had brought in laws that give Caymanians a chance, your kids would be much more likely to get jobs rather than relying on just one foreign developer.

      • Anonymous says:

        The way of the world is that if your children (not kids, that means you are a goat) has an education, has a trade, has experience in either of the two there will be jobs. 

        There are always jobs available.  It is a matter of whether the person wants to take it.  Would your children work in the service industry?  Would you children travel to another country to get worldly experience?  Our forefathers travelled for opportunities.  What is different now?  I think what is different is that the generational expectations has changed from our forefathers.  They had the drive and ambition to go and get something, whereas the mindset has changed to "it has to come to me".  I don't blame the current generation as they have been told it has to come to them.  Unfortunately that is not how the world works.  Prosperity waits for no one. 

        The SEZ won't hire your child unless your child has specific skills.  So don't bank on those lies they are telling.  Besides, if the market was open for all and not just the CEC your child would have opportunity for employment.  Having only one supplier of jobs in the new economy allows the employer to pick and choose who to employ as there will be high demand with limited supply.  If your child is not the best of the best, they will not get the job.  You better advocate for an open market, if you want your child to get a job.

  18. Catch phrase says:

    SEZ is nothing more than a catch phrase.  It is a sexy term to describe what Cayman accomplished in the Financial Sector without having only a private developer benefit.

    Cayman should NOT be turned into a SEZ.  Cayman politicians should grow spines and the government should take ownership of this policy, make it into PUBLIC POLICY as it should be and allow all residents equal benefits.

    How this "ZONE" is put forward only the few and I really mean few -approx 5 maybe- will get the bulk of the benefits.

  19. Anonymous says:

    Everyone whofeels like I do that giving a special advantage to this SEZ is wrong, should go to see one of the opposition MLAs. There is no way that the government MLAs will do anything now that they have have control of what Mr. Duckpond calls the tollbooth. .

    The opposition MLAs are the ones that need publish a statement that they will change this law to give everyone a fair chance to compete. The SEZ will not be ready until after the next election and we need to know and potential investors need to know that everyone can offer the same advantages to investors. Then we can all start  to build our country back.

    • Anonymous says:

      Where is the office and how do we contact them?

      • Anonymous says:

        Their office is on Crewe Road in George Town

        Mailing address is PO Box 10526 KY1-1005,
         
        Phone is 945-1776
         
         
  20. Anonymous says:

    It did not see any performance guarantees that attach to the benefits given to the new economic zone. That seems like a mistake to me. What happens if they don't do what they put in their hype? Do they get to keep the beneifts? Are there performance bond requirements that are not in the legislation? What happens if a developer takes a bunch of deposits from investors and walks off leaving Cayman with a bad name? Did anyone even consider those issues before this was pushed through?

  21. Where do I sign? says:

    Please let me know where I sign the protest against this project. 

  22. I HATE THIS SEZ says:

    Aside from my personal interests in Commerical Property, I think this SEZ is a FARCE!

    There! I said it!  It is BS!  It does not facilitate Cayman growth, it facilitates the growth of the developer.

  23. YOU are blaming says:

    I am very much anti-SEZ for Cayman.  I was previously an advocate until the realisation came around that it was only a real estate deal and nothing more.  the legislation is exactly what Duckpond says, a private deal written in public policy. 

    If Cayman needs an SEZ then the CAYMAN Islands should be the SEZ not one building.  It is a public benefit not only for private individuals.  Honestly Cayman does not even need an SEZ, all Cayman needs to do is create laws which facilitate businesses and encourages businesses to want to set up shop in Cayman.

    I will sign whatever it needs to be as I am a private owner of commercial property.  I will march if needed.  I will protest if needed.  Cayman commercial property owners, let us band together to help one another.  Let us make a stand against this SEZ!

    • Anonymous says:

      You are absolutely right. Let all of Cayman be the SEZ!

      • Not necessary says:

        How about no SEZ?  It is not necessary.  Just have a law that facilitates technology companies or whichever company Cayman wishes to attract.  The financial industry created laws which attracted business to Cayman, so what is the difference? 

        An SEZ as it is written only facilitates these developers.  An SEZ for the entire country is still silly as the legislation has been proposed requires an SEZ regulatory authority.  Again more nonsense.  There is already an inflated civil service.  Cayman does not need to hire more individuals with ridiculous salaries for the sake of some private individuals wanting to open a business.  Just make ammendments to the companies law for the technology companies.  Add ammendments to the immigration law or create a new provision which provides concessions or discounts.  Something similar to the tax exemption certificate for a number of years. etc. 

        Legislators of Cayman, please wake up and take this on.  Do not allow some Shaman to come into the country with his magical words and fancy presentations, dazzle you to think that the voodoo is real.  This SEZ is nothing more than a sham.

    • Anonymous says:

      There is no way in hell the voters of Cayman would allow the entire island to be an SEZ!  Think of what you're suggesting.  Letting any business come into Cayman and do whatever they want, including bringing in all the foreign workersthey want and competing with Caymanian businesspeople.

      Not gonna happen.

      • Anonymous says:

        Are you suggesting that the SEZ allows any business to set up shop within the SEZ?  I thought the SEZ was only to facilitate foreign business.  If it is for foreign business then what is wrong with allowing that to anyone who wishes to open the business.  Why the registration through a private entitiy?  Why not just stop at the govt?

  24. Anonymous says:

    The hype surrounding the new SEZ made me wonder what was really going on. If any incentives are going to be handed out they should go to Caymanian property owners first and then to developers wanting to do legitimate developments. Nobody should get special treatment because of deals from any politician.

  25. Anonymous says:

    "honest politicians"……now there's a contradiction in terms!

  26. Anonymous says:

    Excellent. I hope that  all owners of existing empty commercial property will immediately start meeting with the politicians to demand that exactly these changes are made. Let the SEZ people compete on equal terms with everybody else.

    • Anonymous says:

      Commercial property owners have already met with the politicians AND they've met with the SEZ people.  And guess what?  Commercial propery owners, such as myself, LOVE this project!