Archive for October 10th, 2008
A Financial Storm
Ronald Reagan said the worst words you can hear are “I’m from the Government and I’m here to help you”. In stark contrast, they were music to the ears of the US banking industry when the US Government said it would spend US$700 billion or more on dubiously valued mortgage backed securities.
This may be sufficient to stabilize financial markets but may not stop the deteriorating economic climate. The US, the UK and parts of Europe are in recession with a real contagion risk to the global economy. Cayman will not be immune.
Cayman’s domestic lending market is different from the US and the UK. There is no originate to distribute market, i.e. banks keep and manage the loans they make. And financial institutions have not engaged in unwise lending to those who cannot repay. But local deposits/savings are insufficient to fund local lending. So tightening international credit standards will make local loans less available and more expensive, adversely impacting local economic activity.
The post Ivan reconstruction, the Ritz Carlton and Camana Bay projects and Government’s huge (and much needed) investment in infrastructure resulted in a construction boom not seen before in Cayman. Related construction continues as the financial industry and support services expand. But a key statistic is that building permits (future projects) to April 2008 were down by 30%. There has been serious residential overbuilding inland and tourist related water/beach front development has likely peaked. Some local residential projects are in trouble. And we will shortly see an oversupply of office accommodation, particularly in grade B buildings.
The confidence of potential high end buyers is eroding. Manhattan and London prices are off their highs and starting to drop. Less noticed is the financial meltdown in Russia. But lack of confidence in financial securities and onshore centres may encourage continued investment in Cayman real estate as a safe alternative, if the price is right. And perhaps South American, Middle East and Asian investors will fill the gaps left by our traditional buyers. All big “maybe’s”.
At best, a continuing slow down in economic activity is very likely. Expansion and new projects will be put on hold. Overseas workers will go home. The value of pensions will decline. People will retrench. Government revenue will decline. Readers (and Government) would be wise to have their economic bad weather gear to hand.
Timothy Ridley is an attorney-at-law and the former chairman of the Cayman Islands Monetary Authority. This article first appeared in this months edition of The Journal and is reproduced with permission.
Diversity of plant-eating fish key
(Science Daily): For endangered coral reefs, not all plant-eating fish are created equal. A report scheduled to be published this week in the early edition of the journal Proceedings of the National Academy of Sciences suggests that maintaining the proper balance of herbivorous fishes may be critical to restoring coral reefs, which are declining dramatically worldwide. Go to article
Deathways Open Doors To Cultural Practices
(Science Daily): Cremation, "air burial," grave cairns, funeral mounds, mummification, belief in life after death — death practices sacred to one culture are often considered "odd" or even terrifying by another. The Greeks, for example, were fascinated with the historian Herodotus’ description of the ancient Issedonians chopping up their dead into a mixed grill and devouring them in a communal barbeque, something entirely contrary to the Greeks’ treatment of their own dead. Go to article
Police target community
(CNS): Officers from the West Bay Police Station were pursuing the fight against crime in the heart of the community recently. During a week of targeted operations they were engaged in various activities from carrying out search warrants and roadblocks to conducting public presentations. Designed to both deter and detect criminal activity West Bay Police say they are not going to let up on local criminals.
“This is our second week of activity designed to put pressure on those intent on committing crime,” said Area Commander, Chief Inspector Angelique Howell about the week long initiative between 22-28 September. “Although one of our main objectives was to target people involved in the illegal use and supply of drugs, we also used the week as an opportunity to make our presencefelt on the roads.”
Police also held a public presentation at the John A Cumber Memorial Church Youth Group with around 25 young people of the church in attendance. The talk focused on the importance of road safety and obeying the traffic law. “This topic was selected due to the number of serious road collisions, some fatal, which involve young people,” explained Howell. “As the traffic law enforcement agency, we have a duty to not only enforce the law, but also to educate young people on the do’s and don’ts of road safety”.
Those in attendance were aged between ten and eighteen. West Bay police is committed to working with the community and has pledged that this will remain a priority over the coming months. “We have various plans in place for the final quarter of 2008including the continuation of these weekly crime crackdowns which focus on drug crime, traffic matters and those wanted in connection with offences,” said Howell added.
The area Commander said there were other plans for the last quarter include placing a renewed focus on domestic violence in partnership with the Family Support Unit, holding a district community meeting and working with other agencies, such as the National Roads Authority, to address community concerns. “We have achieved a great deal in recent times but there is still a lot we can do. We will be working hard to improve on areas of weakness and address challenges that have been identified. “
Anyone with information about crime taking place in the Cayman Islands should contact their local police station or Crime Stoppers on 800-8477 (TIPS). All persons calling crime stoppers remain anonymous and are eligible for a reward of up to $1000, should their information lead to an arrest or recovery of property/drugs.
Caricom nations to sign the EPA
(BBC Caribbean): After months of deliberation, it now looks as if all Caricom nations will sign up to Europea’s new trade preference deal, the Economic partnership Agreement (Epa). The Caribbean Community (Caricom) and the Dominican Republic form the group Cariforum which is scheduled to sign on October 15. Guyana, which had previously doubted whether it will sign the full document, is now expected to join the rest of Cariforum. Go to article
Fear grips global markets
(BBC): Wall Street shares have fallen sharply in opening trading, with the Dow Jones index down 6% at 8,056 points. It briefly dipped below the 8,000 points level. The fall in US shares comes as stocks fall around the world. Dealers’ trading screens across Europeand Asia have all turned red amid rising fears of a global recession. Go to article
Farmers increasing stock
(CNS): Local farmers along with staff from the Department of Agriculture (DoA) have gone shopping in Florida for new livestock for the Cayman Islands. With some 90 to 100 head of new breeding stock, including both cattle and goats being purchased this will be the largest single importation of cattle into the Cayman Islands, even surpassing the 2005 post-Ivan livestock replacement initiative and is a response a growing demand for locally reared meat said the DoA.
This visit is the result of a request made by the Cayman Islands Agricultural Society to the Ministry to assist farmers to import new breeding stock to expand and upgrade local cattle and goat herds. Under the agreement made between the Ministry and the CIAS, farmers will select and purchase their own animals and have them delivered to the quarantine facility designated by the DoA. Once there, Government will then assume the cost of quarantining, export testing and shipping of the animals to the Cayman Islands.
“This arrangement, will allow local livestock farmers to obtain top-quality breeding stock at costs similar to those paid by farmers and ranchers in Florida,” explained Acting Director of Agriculture Brian Crichlow. “These private purchases, coupled with Government’s support, will give our farmers a cost-effective and affordable means to rapidly expand the size and quality of their breeding herds. This is essential if we are to meet the growing demand for local meats.”
In preparation for the planned shipment, some farmers have already made their own arrangements to purchase animals; while others are taking advantage of this week’s trip to make their selections and purchases. Once purchased, the animals will then go into quarantine staring on 20 October and all animals for import must be in the quarantine facility by 22 October. Once in quarantine, the animals will undergo rigorous mandatory tests to ensure that they meet the necessary health standards which will allow them to be safely exported to Cayman.
Strict quarantine and testing is essential as it serves to prevent the introduction of new pests and diseases which could affect local livestock or even potentially threaten the public health of the Cayman Islands population. Only when this process has been completed will the animals that have met the DoA’s stringent import health standards be shipped. The shipment is expected to arrive in early December.
No more cash say ministers
(CNS): More than $1.6 million that has already been spent on the special police investigation into alleged corruption within the RCIPS is to be approved in this session of Finance Committee, which reconvened on Thursday. However, Minister Charles Clifford (left) has said he won’t be voting to allocate any more money until questions start to be answered.
“When this matter first came up…we had to employ a certain amount of trust in what we were being told,” said Clifford. “At this point I have some significant questions about the entire situation and…I don’t know what types of additional requests may come forward in relation to funding or any other issues to do with the investigation but I have to tell you that this is one minister that is not going to be supporting any additional funding unless we have more answers. So people are going to have to be held to account, otherwise the Governor is going to have to exercise his reserve powers to get the funding.”
Currently the elected government is responsible for approving the funds but if they decide not to allow the money the Governor has the power to simply overrule the elected government and take the money. Alden McLaughlin explained at the televised post-Cabinet media briefing on 9 October that when Finance Committee convened later that day the funds that have already been spent on the investigation would be coming up for approval.
“When Finance Committee starts today one of the matters for consideration is the$1.668 million supplementary appropriation. The reality is that money is already spent…we are going through an exercise. But I expect there will be robust questioning of whoever is sent there to deal with that matter and perhaps we will get some information that has been unknown.”
The minister said that there was also an undisclosed amount allocated to the investigation in the current budget for this year, a sum he was not sure of, but the money which Finance Committee was expecting to approve in this session was in addition to the already budgeted funds. None of the ministers were able to confirm the exact amount of spending so far on the overall investigation, and Leader of Government Business Kurt Tibbetts asked the media to be cautious of asking the government questions or asking them to speculate about the investigation.
Minister McLaughlin was less reticent, however, and said that he was really concerned about the impact the investigation was having on the jurisdiction and the confidence people had in it, and that he still saw the whole thing as disproportionate based on what he knew. However, the minister noted that it didn’t matter how much the elected government demanded more information, getting adequate answers from the Governor was another matter. McLaughlin said that what we are seeing with regard to the management of the issues was a symptom of a much bigger problem — namely the overall relationship with the UK and the constitutional framework in which the country operates.
“Here we are again, the elected government, sitting facing the media, answering questions as best we can, often the subject of criticism for not being able to answer questions or being held to account for matters for which we have no constitutional responsibility or authority or even information,” he said. “If we are to have truly responsible or accountable government all of the organs of government have got to be held to the same level of accountability. Hence our press for greater sharing of responsibility between elected government and Governor.”
He said that the decisions of the Governor’s office needed to be subject to review by the courts and open to scrutiny of the press in the same way as those who hold elected office. He said if these issues weren’t addressed, things would get worse as these are real governance issues.
“If this country does not wind up with a constitution that redefines the relationship between the Cayman Islands and the UK along the lines that this government has pressed for, we are in for even more difficult times as a jurisdiction,” Minister McLaughlin added.
Government sets out plans for economic slump
(CNS): As banks moved to cut interests rates by 0.5% this week the Leader of Government Business has also announced a number of measures in an attempt to mitigate the potential detrimental impact the global financial situation could have on the Cayman Islands. He said that while government earnings were likely to be affected there would be no new fees levied and the major capital projects would still go ahead.
LoGB Kurt Tibbetts said that not all planned government capital projects were underway as yet and it would proceed with certain ones based on the level of need for the given development combined with the positive impact on the local economy.
“It is imperative that the local economy continues to function and to generate activity, and we believe that government must lead by example,” he said, adding that the development of the schools had demonstrated how government spending could fuel economic activity.
“The decision we took to proceed with a number of major government construction projects….is having a huge positive impact on the local economy,” he said. “These….government projects are providing significant employment and are pumping millions of dollars in to the local economy each month. This will continue for at least the next 18 months to 2 years.”
Aside from maintaining targeted Government spending, Tibbetts said the government was creating an Economic Monitoring and Advisory Group which he would chair and which will meet monthly or more frequently as needed, until Cayman has successfully navigated the local impacts of the global economic storm.
“The Group will comprise a broad array of representatives from the private sector and members of the Cabinet. Its terms of reference are to facilitate the sharing of updated information on the local economic situation, and identify issues that need to be addressed as they may arise,” he explained.
He said government would also be watching out for any economic opportunities that the country could capitalise on coming out of the global downturn. “Even in the face of difficult circumstances and changing operating landscapes, opportunities inevitably arise. We need to position ourselves to take advantage of these opportunities while at the same time protecting our existing business,” he said.
Assessing the potential impact on Cayman’s economy, Tibbetts stated the local retail banking sector is not experiencing any stress arising from the global conditions and lending continued, although he noted the banks are mindful of potential credit quality issues that could arise with any significant deterioration in the local economy.
Areas expected to suffer however were, he said, mostly connected with hedge funds and structured finance. “Current global market conditions in the hedge fund arena are characterized by heavy redemptions,suspensions and re-structurings coupled with much-reduced new fund formations,” Tibbetts added. “In the structured finance arena there has been severe drop-off in deal flows as a result of the freezing of the global capital markets.”
He also reported that the country was already seeing an impact on the public sector side, with new company registrations down 10% this year over the same period in 2007. “By some expert estimates, the number of hedge funds globally could contract by 20-30%, which will obviously affect Cayman’s book of business,” he warned.
As far as tourism was concerned he said the sector is cautiously optimistic about the short-term outlook with advance bookings for the winter season on track to exceed last year’s but the medium-term outlook is less certain given the fixed trend of compressed booking windows which make it difficult to predict demand. He also noted a decline in the economy generally with retrenchments in the restaurant sector and the commercial real estate development sector in particular.
A celebration of the life of “the Major”
(CNS): Following the passing of Stephen Hall Jones, aka ‘the Major’, on the morning of Monday, 6 October, at his home in George Town, his friends and colleagues are invited to a celebration of his life at the Rugby Club in South Sound, Saturday 11 October at 7:00 pm. Organisers said that in keeping with the Major’s express wishes this is to be a happy occasion with "no tears" and bright, casual dress and no ties.
Donations in lieu of flowers may be made to Cayman Hospice Care at PO Box 10614, George Town Grand Cayman KY1-1006 or via Diamond Law Associates. A Barrister and Attorney at Law, Hall-Jones served with the British Royal Iniskilling Fusiliers in the 1960s and 1970s. For six years he was a senior crown counsel and at one point an Acting Solicitor General in the Chambers of the Attorney General.
Described by many of his friends as a wonderful attorney who stood up for the underdog, the Major is a great loss to the community as well as his family and close friends. An entertaining and erudite commentator he also wrote a regular column for Cayman Net News until he became too ill to continue.
Carol Hay, who penned “My take…For what it’s worth” also in Net News and often sparred with him on the page, said that while he infuriated her he managed to be likable and lovable at the same time. She recalls their last meeting a few months ago, for day-old spaghetti. “The Major humorously dubbed it “The Last Supper”…and he was right, for that was the last time I saw him,” she said. “Despite his cantankerous ways and ability to wind me up, I respected (almost envied) his scholarly wit.”