CIMA chair calls for ‘two tier’ per capita income

| 28/03/2012

cash.JPG(CNS): Cayman’s perceived high per capita income in comparison to the rest of the Caribbean does not help this jurisdiction when it comes to receiving post-disaster funding or subsidised borrowing rates, says the former Financial Secretary and chairman of the Cayman Islands Monetary Authority, George McCarthy. Calling on the Finance Ministry to look at the way the per capita income of residents in Cayman is calculated, McCarthy believes a fairer system could be put in place that would properly represent the population and give a true reflection of the income of all residents. He called the method by which the per capita income is calculated in Cayman “crude” and said that when he was the country’s financial secretary it had always been a concern for him.

McCarthy was speaking at last week’s UCCI 50/50 conference, after a presentation given by Dax Basdeo, Chief Officer (Financial Services) in the Ministry of Finance, on the Special Economic Zone. McCarthy said that Cayman was penalised after Hurricane Ivan – the deadly category 4/5 hurricane that devastated Cayman in 2004 – because a country with such a very high perceived per capita income had difficulties in getting assistance.

He said the method of calculation for per capita income was to put a value on the accumulation of all goods and services, use this as the numerator in the calculation and divide this by the number of people residing on island. However, there is a distinction between what he termed the transient population and the indigenous population.

If the per capita income, which came out at around $47,000 to $48,000 per year, typified the average annual salary of someone who worked at the Westin, for example, McCarthy said this was a fallacy. He said he worried that this high per capita calculation would send out the wrong signal to the world – that even the poorest person in Cayman had a swimming pool in their back garden.

The CIMA chairman said the issue needed to be looked at because when the Cayman Islands had to engage in borrowing it had to do so at the market rate, with no subsidy. McCarthy said he hoped something could be developed that would cover this two tier per capita income – creating one calculation for the transient population and one for the indigenous.  

Deanna Lookloy, former director of government’s Children and Family Services department, also gave the view that she was concerned that Cayman “was looking so prosperous”. She spoke of the time after Ivan when the high level of Cayman’s per capita income did not really reflect the true economic state of the islands and in some ways prevented Cayman from getting the assistance that it should have received.

Print Friendly, PDF & Email

Category: Local News

About the Author ()

Comments (33)

Trackback URL | Comments RSS Feed

  1. Anonymous says:

    This is funny! We have been bragging about being the wealthiest country in the region for decades only to now discover its not us, it’s the investors and we need aid! Further, we want the work permit holders out so we can get the top jobs, however, that would further shrink our GDP immediately!

    • Anonymous says:

      Caymanians have been conned by certain expats into boasting about a system that benefits the financial industry expats but not necessarily the Caymanians.

  2. Anonymous says:

    This is without a doubt the most Moronic statement I have every heard from someone in this capacity. What are you sir? 9 years old? You want to implement two GDP’s for the country? Do you understand what that implies to the rest of the world? This statement in itself confirms that you as the head of CIMA and the past FS is validating the fact that we are a tax haven. That there is a huge wealth disparity between the transient investor and the residents. In simple language, you have just stated that we are a country of citizens holding and securing the wealth of others from other countries and that we are so poor we need aid.
    How about taxing the wealth to secure a sinking fund for emergency restoration? First of all, we, With the highest GDP in the region should be ashamed to ask the region for assistance.

  3. Fairplay says:

    I have some severe problems with the central suggestion in this story and these problems are as follows:

    1) why didn't Mr. McCarthy get this done during his 10+ year period as Financial Secretary;

    2) it is really overly-simplistic to suggest that the high GDP per capita number is caused by "transient" workers. Don't we know that there are many Caymanians with incomes that exceed $1 million each year – both those that are Caymanian by their parentage/descent and those that acquired that status by legal means? Should Caymanians such as Messrs Dan Scott, Naul Bodden, Ian Wight, Wayne Panton, Roy McTaggart, Rohan Small, Don Seymour, Andrew Reid, Canover Watson, (Dr.) Steve Tomlinson and Heber Arch, just to name a few, be excluded from the calculation because they do not represent the "norm"? Could we call these Caymanians "transient"; and

    3)   the suggestion that a high GDP per capita figure has a bad effect because it causes us to be ineligible for cheap borrowing rates is also shockingly naive! Take a look at the annual Moody's reports: it is clearly stated in those reports that one of the reasons Cayman gets a high rating by Moody's is because of the Islands' high GDP per capita figure. And what does a good rating do? It reduces the cost of borrowing!!                                                                                                                                 The suggestions made are just Little Boy Blue stuff/ what a clever boy am I, audio material that sounds impressive when spoken at what is becoming a major annual event that does not change anything in the Cayman Islands the next morning after the conference is over !!           What would be far more useful would have been for the former Financial Secretary to tell the country how to fix a Finance Law that he introduced that Civil Servants have failed to comply with because it was unrealistic and, if it can't be fixed it would be good for the current Financial Secreatry to have the courage to get rid of it by convincing the "good travelling" Minister of Finance that the Law should go!!                               

    • Anonymous says:

      There are just a handful of Caymanians earning those incomes. Most of them are expats.

  4. George A McCarthy says:

    I have read, with interest, the comments shared on the suggestion made at the recent UCCI Conference that there should be a mechanism found that would enable a more accurate representation of the 'Per Capita Income' for the Cayman Islands to be derived.  In this regard, I suggested that there should be two-tiers (a) income ascribed to the high earning segment of our population, particularly those connected with our Financial Industry (mostly transient workers) and (b) persons engaged in other sphere of work activities that would be deemed average-wage-earners ( mostly Indigenous).  The comments expressed by the various commentators, while differing with my observation, are to be welcomed as they are communicating a position which ably demonstrates that weall do not have to think alike on subject matters such as this; hence, it is always very good to engage in useful debates/exchange.  Further, I consider such differing views to be quite healthy and should always be welcomed.

    The thoughts which I hold to on the need for exploring such a two-tier system (being fully aware that to do so would likely require some modification to the traditional model used in the computation of such figures), were informed by my past experience as Finacial Secretary and being cognizant of the fact that our Country, on occasions, were denied needed financial assistance or had to pay a higher price for borowings when compared with other countries of the region strictly of the basis of our determined high per capita income. 

    A case in point, the Cayman Islands, as one of the founding members of Caribbean Development Bank, had to access practically all of its borrwings at market rates (from the Ordinary Resources pool of funds) while other countries of the region having more extensive and mature infrastructure (such as educational facilities) were able to have the rates at which they borrowed subsidized (Special Development Fund).   In all instances of borrowing when the Cayman Islands found itself being penalized for our perceived success, the single factor which was advanced as a reason for this was our "high per capita income".  The culmination of what I have outlined, as one will appreciate, means that we have had on occasions had to pay a much higher cost for our infrastructure development borrowings when compared to other countries.

    The concern which, therefore, promped my suggestion at the recent Conference is, while we were quite able absorb such costs in the past, should we now continue to operate on the same platform as if we are continuing to have access to an inexhaustable supply of revenue?  If such is the case, I would agree with those who would be critical of my suggestions for exploring a two-tier system, that to do so would be trite and should be ignored.  However, if we can agree that this is a concept that is worth exploring, we should turn our attention to it and see if it could make a difference in the way we are able to qualify for not only external borrowings but other external assistance from multilateral organizations.

    Whatever is to be outcome for expanding further on this subject, I would like to (a) take this opportunity to commend CNS for providing this platform which allows for our Community to engage in such dialogue on matters such as this and a range of other issues and (b) make it quite clear that my description of our 'per-capita-income' as crude has nothing to do with the methodology used by the Economic & Statistics Office (through its very able expertise) in computing same but merely a suggestion that, given our unique position, we should explore the use of new and credible tools that could betters assist in representing our per-capita-income in a more meaningful and defensible manner that will work to our overall advantage as a Country.

    • Anonymous says:

      If we had the friggin' census that has been on someone's desk for months, we could probably piece together the answers to this. How about telling the Premier to lay it on the table next month? It might have more effect than writing to CNS.

    • Anonymous says:

      I would like to thank Mr. McCarthy for posting a reply. However, it is clear to everyone who cares to look that we should not spend our time trying to identify how to get handouts in times of emergency. Rather we should adequately prepare for contingencies, get rid of the politicians who waste so much of our money seeking to enrich themselves and to live like princes and to replace them with elected representatives who are prudent and interested in public service rather than personal gain.

      • Anonymous says:

        Sadly, u missed the point. Mr McCarthy points out it’s not just a problem during disasters but when we want to get funding for projects such as infrastructure projects. Imagine we contribute to theCDB but we can’t borrow at developmental rates but at commercial rates.

        Local banks and their local attorneys who arrange the transactions probably won’t mind u and I as taxpayers paying top dollar for infrastructure projects but the point is without a different methodology for categorizing us we get branded with a rich country label. We pay way more in interest in projects.

        Just think, we might have been able to avoid the Chinese and GLF and all others dangling cheap financing if we could tap into the tons of $ out there for infrastructure projects at cheaper developmental rates.

        That’s the bigger picture. It’s way more than handouts after disasters.

        • Anonymous says:

          Sadly it appears that it is you that also misses the point. I agree with the initial comment about our wasteful politicians. We are, or al least would be a rich first world country apart from the idiotic spending habits of our utterly incompetent politicians. Look at the vast amount of money wasted on the Cohen loan and the GLF payout to name just 2 recent disasters. As for the CDB, if it offers no commercial advantage then clearly our wasteful politicians are wasting more money on the annual dues.

    • Anonymous says:

      I wrote earlier critical of your comments. Whilst I still stand by my own comments, I can only say Mr McCarthys response is admirable and shows character.

    • Anonymous says:

      George – the high earning staff of the financial services industry, whilst expatriate, are no longer transient. They are being granted PR and Status in very high numbers.

  5. Anonymous says:

    George has a point: per capita GDP is not a meaningful measure of the standard of living in Cayman given the nature of our economy and the composition of our population. Foolish bragging about it has made us a target for jealous high tax countries. Bermuda suffers from the same pretensions. Per capita GNP would be a more meaningful measure.

    Don't think this will help with getting aid though.

  6. Anonymous says:

    There may not be much difference. It would lump the few foreign accountants in with the many foreign maids and laborers.

    • Anonymous says:

      "The few foreign accountants". There are literally hundreds upon hundreds of foreign accountants, lawyers and bankers who earn $250K+ p.a.  

  7. Anonymous says:

    The suggestion is so naive that it would be funny – except for the fact that it is attributed to the head of our financial regulatory authority. That calls the country into question.

    • Anonymous says:

      i couldnt agree more!  What is he doing, lining up to run in the next election?!  Why on earth would he issue this sort of a statement as Chair of the CIMA?  Thats the problem with political appointments, they have little to do with the best man for the job!

  8. Anonymous says:

    I sincerely hope that this story is not picked up internationally. Our political leader's statements already provide all the laughs and head shaking that is needed. Having the chairman of our regulatory authority making this suggestion publicly is embarrassing.

  9. Anonymous says:

    Geo: I am going to take all the money from my front pocket and put it in my back pocket and then I am going to show the aid agency that my front pocket is empty and they will give me lots of money. I am such a clever fellow I am.

  10. Anonymous says:

    This is one of the most idiotic ideas I have heard in a long time. There is no way that international aid organisations would look at a GDP number calculated in a non-standard way and say "OK then – have a big bag of money". 

    Instead of coming up with ridiculous ideas to secure future handuts while leaving the real problems intact, perhaps the gentleman could simply call on the Minister of Finance to stops wasting so much of the money this country has. If all of the money that has been wasted in the last few years was put into an emergency fund (and I don't mean emergency luxury travel) then there would be no need for handouts. By the way did this gentleman not accompany the Premier on some of those wonderful yet completely questionable foreign trips?

  11. anonymous says:

    This is looking at the wrong issue. The relatively high (and probably understated) per capita GDP figure for these Islands is a product of many factors,some good – some not so good. But rather than trying to develop a formula to persuade overseas aid agencies and others to hand over more assistance (a likely wasted exercise), we should look closely at and address the structural flaws in the way we deal with catastrophes and care for the old, sick and the poor. And, most importantly, we should analyse the role of Government and the way we fund Government to deal with these problems.

    Tim Ridley

    • Anonymous says:

      …and the important civic concept of philanthrophy, albeit much improved in recent years, but still far from first world levels.

    • Later Ron says:

      Yes it is looking at the wrong issue, but George needed to find something to talk about that was vaguely relevant and XXXXXX


      The only way to do this properly  – provide for healthcare, money (pensions) for the elderly and so on is a form of income tax. Hardly likely to go down very well and who can blame us when the people elected just can't wait to grab our cash and blow it.

    • Anonymous says:

      So Tim,

      Having analyzed your comment, are u suggesting income tax or redistribution of wealth? Structural flaws I saw from last time was rich guys getting their stuff first and lots of it because at the end of the day u all got connections.

      So unless u have a better suggestion for getting help to the many poor people who didn’t have home insurance or lost their rented abode, or got wiped out completely, I don’t see how international aide can be turned down.

      Unless of course we follow the logical conclusion of your comments and tax tax tax….but I am sure u will be gone gone gone before u put a shilling in the Treasury.

  12. Vertical Pig says:

    Any free "post-disaster funding" comes from taxation levied on citizens of other countries. Here's a clue for y'all. Tax your rich instead of taking it from our already overburdened tax payers (you know, the ones who don't have offshore accounts).

  13. Slowpoke says:

    99% vs. 1% in Cayman – No way! 

    OK, I'll bet 95% vs. 5%.  (Not legally allowed or binding.)

  14. Anonymous says:

    It would be interesting, for a start, to compare Cayman's average income versus the median income.


    A frequency histogram would also be interesting. I suspect that the distribution might be bi or tri modal.

    • Anonymous says:

      That would take proven comptent work and record keeping.  Won't happen here.

  15. Anonymous says:

    I can't imagine why George is raising this again. We raised it many years ago repeatedly -Joel Walton used to argue persuasively about the same point George raises. A lawyer friend of mine in one of the large law firms 10 years ago earned $30,000 a month and he was not a partner.. It has to be more now. It is pointless banging on about trying to get different ways of calculating per capita income.. Our enemies are full of glee about being able to say how "rich" we are so they don't have to give us any funds. Meanwhile we have over 1000 indigents and their medical bill, along with the seamen and veterans some of whom are indigent and most of whom have very little money, is simply enormous -$18 million I think.

    Of course, as Mrs Lookloy would agree, many of our "indigents" have children who could very easily look after their parents but alas in this brave new world it is "government" that has to do that while the children enjoy the money from their parents land and don't pay their bills at the Pines.

    • Anonymous says:

      There are Indigens, Indigents, and Indignants.

      • Anonymous says:

        and then there are some who are simple "In the Gents"

        • Anonymous says:

          And there r “innocents” who r suffering while some of u laugh and
          squabble about us trying to find a way to address the growing gap between have slots and have nots.

          And some of u dare to call yourselves enlightened. Arrogant snobs is what u r.