Archive for February 8th, 2009
Smart policies, not more spending
In the wake of an impending economic downturn, what is required is not a desperate attempt to play the spending game; but effective policies to keep the economy going.
The global economy faces what many regard as its worse downturn in over 7 decades and governments around the world are responding with various degrees of ‘economic stimulus packages’. The US leads with about an 800 billion dollar package, with China next at 600 billion and other countries such as the UK following. In just about every country there is some activity on the public sector side to use Keynesian style interventions to replace the downturn expected, or already being experienced, in their private sectors.
So what about the Cayman Islands?
There are a couple of serious limitations as to what can be done in the Cayman Islands as far any financial stimulus package is concerned.
The first of these is that our government is essentially ‘broke’. The government does not have access to funds sitting around for a rainy day. We can tell from previous and current government forecasts that all is not well with the public sector’s fiscal position and the government’s own actions, in cutting back on its spending across the board, is also clear evidence of this position.
The second issue is that the government is not in a position to borrow significantly. The country’s borrowings have gone from $252 million in 2005 to a forecasted $658 million by this summer, representing an increase of over 161% in a single four year period. Our borrowing is also limited by the nature of our economic and monetary system. Unlike some other countries it would not be appropriate for the Cayman Islands government to engage in the type of monetary policy to effectively “print money” due to the fact that we have a full currency board system and for a number of other reasons.
So what’s left?
We can make some attempts to give a fiscal boost to the economy by spending what we can now. But the truth is that this ‘spending game’ is way out of our reach. Building a couple of schools or paving some roads may do good for the country in the long term, but will have only negligible affects over the next 12 to 18 months. What is required is a focus on those areas of policy that cause the most impact on the local economy today. We also need to consider policies that give consumers a reason to spend today and to avoid tightening up in response to tough economic times.
One of these policy areas relates to the work permit system. Work permits are a very powerful short term policy tool in the Cayman Islands economy due to the significant portion of foreign workers in our labour force. Work permit changes in Cayman have a similar impact as interest rates changes in the US economy. And while interest rates can take sometimes up to a year to start impacting the US economy, we usually see the impact of work permit changes within months in the Cayman Islands.
In the short term (the next 12 to 18 months) the business sector needs an environment that makes it as easy as possible to do business. That means they need access to work permits to either expand or to restructure their work force in response to the crisis. The recently announced new immigration system will clearly take some time for the bugs to be worked out. And neither can the new system be seen as addressing the need for short term policies to specifically deal with the economic downturn. The two issues must be kept separate so that the necessary policy stimulus can be provided while the immigration system can be allowed to work itself through over the medium term.
Another policy stimulus area is changes to stamp duty on property transactions. History provides some evidence that whenever the government reduces stamp duty, the net result is usually no harm to government revenues and the changes always results in more property transactions, which means more economic activity.
The final area relates to ensuring that, despite an impending election in May, the government refrains from the usual ‘man on the street/anti business’ rhetoric which creates further unease within the business sector, despite their political licence to do so.
None of these areas require any funding as such from the government and they will all go a long way in countering what we are now starting to experience. The question is whether the government is able to separate politics and protectionism from short term economic survival and pragmatism. If it can we will all be that much more likely to weather the economic storm.
Paul Byles is Managing Director of Focus Corporate Services & Consulting. He has worked in the offshore sector for over 18 years and is an economist and international consultant in the areas of economics and financial regulation.
Turning cooking oil into fuel
(New York Times): Vats of grease may make health advocates cringe, but Westchester County officials see excess cooking oil from the county’s 3,500 restaurants as a means of cleaner, cheaper fuel. With seven vehicles that run solely on fuel made from cooking oil and 125 vehicles that run on a mix of cooking oil and diesel fuel, the county has begun a program to take excess oil off local restaurateurs’ hands free to use it as an alternative energy source. Go to article
Politician to make house calls on voters
(CNS): With little money to spend on a high profile campaign, Sandra Catron, who is running for political office in the district of Bodden Town as an independent candidate, says that she intends to do things differently and is offering house calls to voters. Calling the initiative Talk Time, Catron says she will be available for individuals or organizations who would like to have a group meeting with her to discuss their concerns at their homes or anywhere suitable.
All about reaching out to people, Catron said she has already reached out via e-mail and website technology but nothing can replace door to door canvassing and small group meetings, she says. “It’s very easy to think that people should come to me, but I subscribe to a different fundamental philosophy and think that I need to make myself available to people, and that means going into their homes and organizations,” she added.
She said that having a politician visit your home or organization is a powerful opportunity, allowing people to organize what questions and issues they would like to discuss. Catron explained that she has identified herself as a new political philosophy called “peopletician”.
“A peopletician is someone with a style which is aligned more with the interests of the people than with the interests of the government or with business,” she said in a release. "Peopleticians are often perceived as fighters for the common man and they are commonly beloved by their constituents." Catron added that she has adopted the mentality of a peopletician by demonstrating a commitment to individuals and community values.
John Douglas, a member of Catron’s political committee, said Talk Time will break down the alienation people feel towards politics and politicians. “When a politician visits the home or workplace it is personal and concrete and it shows the reciprocity that should be inherent in the political process,” he added.
Catron is inviting people to contact her at 939-7602 or visit the website www.sandracatron.com to book an appointment at your home or office today.
‘Nonsense’ in our genes
(ScienceDaily): 1 in 200 of our human genes can be inactivated with no detectable effect on our health. A study by Wellcome Trust Sanger Institute scientists raises new questions about the effects of gene loss on our wellbeing and evolution. The study explores single letter changes in our genetic code that affect the ability of genes to produce proteins. The researchers’ findings suggest that such mutations, while sometimes harmful, generally have little consequence for the individual and may occasionally even be beneficial in evolutionary terms. Go to article
“Ancient” Syriac Bible found in Cyprus
(Reuters): Authorities in northern Cyprus believe they have found an ancient version of the Bible written in Syriac, a dialect of the native language of Jesus. The manuscript was found in a police raid on suspected antiquity smugglers. Turkish Cypriot police testified in a court hearing they believe the manuscript could be about 2,000 years old. The manuscript carries excerpts of the Bible written in gold lettering on vellum and loosely strung together, photos provided to Reuters showed. Go to article
Prison reading project at risk
(CNS): Local non-governmental organisation the Cayman Islands Reading Aides, which helps adults who have difficulties with literacy and numeracy, is in desperate need of volunteers in order to maintain some of its valuable programmes. While CIRA receives financial support for its material resources from Rotary, without volunteers the programme cannot function and there are particular concerns for the prison reading project where there is a desperate shortage of volunteers.
“CIRA is always in need of volunteers for a wide variety of community adult literacy programmes but we are particularly short of people to help keep the prison programme running,” said Michelle Pentney the co-ordinator of the prison project. (Pictured above working with Northward Inmates.) “We are the only people offering literacy classes to prisoners and we feel that helping those in the prison system tackle their literacy issues is probably one of the most important jobs we do.”
Pentney explained that she needs people who can spare a couple of hours to help on Monday evenings and on Wednesday afternoons to help some of the most vulnerable people in our community get their lives back on track. “It is always harder to find people willing to work with prisoners or those on parole but we need to help these people most of all. If we can give prisoners the tools they need to find gainful employment when they leave the system we are not only helping them but we are protecting the community from further crimes those individuals may commit if they are not offered alternatives.”
Governor Stuart Jack recently unveiled the new classroom block at the HMP Northward, which was built by the inmates, and noted how important education was to rehabilitation. “For rehabilitation to work, we will need the community to actively partner with government,” he said. “With this emphasis on rehabilitation, inmates are being helped to improve their attitudes and skills. The goal is to ease their re-entry into the mainstream.”
That said some of the prisoners who have severe learning difficulties still only receive one class per week conducted by CIRA, and while Pentney has introduced a programme, under the tutor’s and her own direction, whereby inmates who are literate are helping those who are not, without more volunteers the project is at risk.
“If we are not there to help these prisoners there are no other opportunities for these prisoners to be helped and possibly turn their life around,” she said.
One of Pentney’s long standing volunteers told CNS that working with prisoners and those on parole is exceptionally rewarding. “These people really need our help most of all. The reason why many of them are incarcerated in the first place is because of their disability. If you can’t read it is almost impossible to hold down a well paying job,” she said. “Often, too, these people have been let down and failed by the system and the community so many times that when they see someone who comes to help for no other reason than to help they are exceptionally grateful. After all they are not used to kindness.”
Anyone who thinks they can help CIRA with the prison and related projects, please contact Michelle Pentney on 925 2624 or email: michelle@pentney.com
Pedro staff in fuel scandal
(CNS): Following the emergence of irregularities regarding the Pedro St James fuel account at the Texaco Gas station in Savannah, the Auditor General’s Office has undertaken an investigation and found that the fuel purchased may not have all been above board. In a special report Auditor General Dan Duguay reveals that gas purchased by staff, and in particular the general manager, may not all have been used for official business.
According to the report, there was an increase in fuel charges of 177% between the end of 2003 through to 2006. Even allowing for the increase in the cost of gas, the auditor general found the increase excessive and stated that inflation alone was not responsible for the significant increase in costs.
Following the destruction of Pedro’s truck in 2004, employees were allowed to charge fuel for their own personal vehicles on the basis that they were using them for Pedro business. As a result the average fuel cost went from $244 per month to $677 a month over a three year period. In his report Duguay indicated that the change in policy to allow staff to charge their fuel costs to their own cars was done without adequate policies or controls to monitor how fuel was being used and charged.
“The process was conducted in a haphazard manner with employees in some instances being given only verbal approval to charge gas and not being required to provide any formal documentation or identification other than a signature at the gas station,” the report states.
Duguay says that the sum in question is $18,513, and although not a significant amount in terms of overall government spending it is still public money that may have been misappropriated. The AG noted that it is the mismanagement of the funds that is the issue, which is something he says the public needs to know about.
“The reason why we decided to make this report public by sending it to the Legislative Assembly is because we believe all public expenditure should be scrutinized and it is important that the management of public funds is improved upon,” Duguay told CNS. “It is not a large amount but it is an example of how things can be mismanaged and we are trying to emphasis better controls.”
The decision to investigate the matter came as a result of the CEO of the Tourism Attraction Board (TAB) discovering the irregularities in the fuel system during a budget review, after whichthe system was stopped in May 2007.
The report notes that in many cases the signatures were unreadable, making it impossible to tell who had purchased the fuel. Over the period investigated Duguay found that 52% of the fuel charges had been made by Carson Ebanks, Pedro’s general manager, 32% was charged by illegible signatures, and the remaining 16% by 8 other named members of staff.
“Granting employees permission to charge fuel to a company account with the only requirement being a signature opens up the considerable risk of misappropriations,” Duguay states in the report. He notes that at the very least the minimum requirement should have been printed names as well as registration numbers of the vehicles being fuelled up.
“Being able to use the PSJ charge account without formal identification to acquire gas for private vehicles presented opportunities for persons not employed at PSJ to use the account,” Duguay wrote.
He explained that managers of government companies are responsible for government resources. It is their job to prevent waste and account for all spending. However, according to Duguay’s report, in this case not only did the general manager not do that with regard to the fuel account, he himself was using the account when he was already entitled to a fuel allowance as a result of his position. Duguay found that Ebanks had not taken the fuel allowance but used the Texaco company account instead. This resulted in him receiving almost $4,000 worth of fuel above the amount he would have received if he had used his fuel allowance as per his contract.
The AG’s reported concluded that it was unacceptable for the general manager to give verbal permission to employees to incur company expenses and to personally use the account in a way that resulted in excessive fuel expenditure. “Such excesses could have been avoided if management at PSJ had ensured that an appropriate system of internal controls was in operation,” Duguay stated.
CNS contacted the TAB, which oversees Pedro’s, and was informed that the board chair had only just received the final report and was assessing its findings and was hoping to provide comment sometime on Monday afternoon.
To read the full report go to www.gov.ky