CIG criticised over economy
(CNS): The Cayman Islands and the UK’s other overseas territories, as well as the crown dependencies, are being told to widen their tax base in the long awaited report by Sir Michael Foot. But the UK financial expert also takes the Cayman Islands to task for undertaking capital projects during the economic crisis and says the islands’ government must improve its economic management. In his review, which was commissioned by the Treasury, Foot says the territories must take greater responsibility for their economies and raise new taxes if they are to survive the economic crisis.
The report also reveals how badly Cayman did in comparison to the crown dependencies and other overseas territories in predicting revenue earnings for the last budget year, with only Anguilla and TCI making larger overestimations than Cayman.
In the report Foot states that governments need to demonstrate a clear commitment to improving economic management. “This is their primary responsibility,” Foot writes. “However, the UK’s interest in the good governance of the jurisdictions means that the UK should satisfy itself that each jurisdiction indeed has a framework capable of identifying and responding to external shocks and encourage local governments to undertake responsible adjustment programmes.”
Foot set the crown dependencies up as the standard which all territories should be trying to attain.
Although Foot acknowledges the different levels of vulnerability, he says that none of the territories can afford to be complacent. However, throughout the report Foot recognizes that Cayman has met international standards and is of key importance in the global financial market.
Cayman is also acknowledged as one of the UK’s major creditors and that UK fund managers earn significant fee income from the Cayman Islands. He describes Cayman as the world’s leading centre for hedge funds and also a significant wholesale banking centre, with high volumes of overnight banking business from the United States, which Foot does not seem to regard as particularly important in the grand scheme of global banking. Foot also notes the impact of the decline in the hedge fund sector on Cayman, especially as the downturn coincided with a downturn in tourism.
In a brief statement released this morning, Leader of Government Business McKeeva Bush said that Cayman has supported several third-party reviews of the financial sector over the years and their outcomes have consistently provided valuable insights for all involved. “This most recent review is no different and we welcome the constructive observations and recommendations put forth by the review team,” he said.
The Foot Review was commissioned by Alistair Darling in December 2008 to identity the opportunities and challenges generated for British offshore financial centres by turmoil in the financial markets and the subsequent impact on the world economy.
Check back to CNS later today for more details on the Foot Report.
Category: Headline News
The Wall Street Journal concludes its opinion of the Foot Report with the note that:
"compliance with global standards is especially patchy in overseas territories like the Cayman Islands and the British Virgin Islands while standards are generally better in the crown dependencies, which include Jersey and Guernsey in the Channel Islands, as well as the Isle of Man."
That ought to please our competitors. What is the damage control plan? To which the reply from government is likely to be "? Plan – what dat is???"
Time to move to Jersey methinks.
1. Mr. Foot’s report is in part an insult to the competence and integrity of the professionals from the FATF and the IMF who have evaluated the Cayman Islands regulatory and compliance regime in detail on a regular basis.
Furthermore, the Cayman Islands Monetary Authority and the Jersey Financial Services Commission, one of the jurisdictions that Mr. Foot apparently found to be acceptable have had an MOU since 2006! According to landandtax-news.com, "These.agreements have formalised arrangements for cooperation and information sharing between the regulators and facilitated the enforcement of, and compliance with, the laws of their respective jurisdictions in a bid to help protect investors and depositors and to promote the integrity of financial services markets in the two jurisdictions.".
2. The UDP government claims that CI$20M is required in the current financial year to repay loans for capital projects started by the previous PPM Government. The figure was CI$12M in the previous financial year, but even if we accept the CI$20M as correct that is less than one quarter of the total budget deficit. I would challenge any country in this global recession to produce metrics that conservative. If the Cayman Islands had zero public debt, the government deficit would have still havebeen CI$64M! But that is an other topic…
There is some good information coming out of this report. It certainly gives, for the first time, as I recall, a better and clearer picture of our Financial Services Industry. It also gives some excellent benchmarking data. The biggest gain, in my view, is a clearer understanding of our competitive edge regionally and even globally.
If our leaders are smart they can use this information to mitigate our losses; plan, grow or expand ; and the biggy for me, combat the scary movies, duppy stories-threats being batted about now by some of our new comers about their irreplaceability and our need to sell our souls to them as justfication.
I suspected this all along. Our country is a strong force on many fronts. Any move by companies locally would not be made on the not granting of PR or tenure. Our size and the alternative offshore jurisdictions, outside of the other OTs, are not tax nuetral and thus could not compete for the business we now have from the banking sector for example. The other OTs have niches in other areas and as such their internal infrastructure, among other factors, is built around their identified focus/niche.
Am I suggesting they could not shift to capture any unfortunate mistake by us – no! However, I am saying that our commading presence gives us an advantage and the staff to fuel this industry can be better achieved with a better balance from the Caymanian DNA, if the political will and vision will better align with that of the people.
Greater demands for opportunities and growth for all Caymanians currently in the field and our future students could be made. Our learning institutions’ curriculums at secondary and tertiary levels should be better intergrated with the countries’ strengths in this industry and that of torism as well.
Courses at the UCCI & ICCI should be on-going to better train the Caymanians now in the feild and to motivate and inspire Caymanian students to the FS industry – including the supporting feild like legal. That way we can long term reduce our dependency for the rocket scientists we claim to have here.
With this better educated caymanian workforce working our pillars brings better income for Caymanians. I would imagine that a shift away from lower and middle incomes to more middle and upper wealth/income distributions should help offset the suggested losses we would suffer (with permit fees and local purchases for example) for not giving away at skyrocketing levels our souls.
Our population growth levels, by natural migration for example, should be better planned to meet our needs and on our terms. This country cannot move forward in a positive way with our backs against the wall and with threats of gloom and doom. That is not healthy for caymanians and the nation.
Lastly, I believe, as a jurisdiction we just need to settle down now…re-focus and continue to do the good work we do. We are the experts and thought leaders in the field. Stop outing fires now (Mr. Travers), let the dust settle a little, examine our position, ears to the ground for any rumblings and just forge on. Rise to the challenges as they come.
We need to focus again on building our tourism product and find more ways to diversify our economy.
I need some good maxwell house now with lil sugar
Good post – read it with some Blue Mountain in my cup. One further consideration to keep in mind is that if Jersey, Guernsey and the Isle of Man are forced by the UK and the EU to repeal their current tax system (the so-called 0/10% system) then one of their options is to adopt a 0% direct tax system like ours (using higher indirect taxes). This would mean that we would lose that competitive advantage to competitors that are perceived as having a stronger regulatory regime than Foot gave us credit for. Hopefully the powers that be will take that into consideration going forward – we can always hope – it goes down good with the Blue Mountain.
Thank you and I agree…although I strongly doubt that it is possible for them to adopt tax nuetral system. Their biggest hurdle to sell that would be mother country. Further, no tax to them is so far fetched and foreign that it almost equals our revolt for the introduction of them.
Thanks for the recommend I shall have some in my re-read.
Sitting back and waiting for the challenge to come to us is the worst thing we can do . We need to think ahead and ensure we are never in position we were in a few months ago – I am grateful to Tony Travers for fighting Caymans corners and long may he have the strength to continue
The tourism industry is under threat by rate of crime also the attitude by an element of Caymanians who appear not be be very welcoming to people from overseas. Cayman is also way to small an island to rely on tourism completely – what happens if there is another major hurricane
You also im sorry to say dont have the calibre of people to take cayman forward and operate on a global stage – do you honestly think attending school in Cayman then university in Cayman gives them an idea of what is going on in the real world – the biggest problem is that you seem to think you have the right to the jobs by virtue of birth and not by experience.If you go down that path all the lawfirms and finance companies will leave and move to where they are treated with respect.
absolute ka-ka.
You are suggesting things i did not say and infering other things. I read your cheap shot, degrading, inflamed and inciteful overall position about us as a people. And boy am I tempted. I would suppose you one them rocketscientist we got walking around ya nah?
Trust me…you really do not want me to lean into your remarks. Seeing as I have made my position clear on so many of the duppy-stories you have raised…I will hold my penchant for a good ole caymanian za-papa-ing.
Let me have a nice blue mountain like my friend above suggested…I can feel the blood pressure lil bit ya coming on.
A large percentage of the publications which Foot cites to justify his conclusions were published by organisations like the Tax Justice Network which are highly critical of Cayman. It is too bad that there is no one credible out there putting out the other side of the story.
Today’s report in the FT also reflects the comments of the Tax Justice Network and Richard Murphy. Given that the TJN is such a shoe string operation it is unfortunate that it gets the attention while something as well funded as Cayman Finance seems to be completely irrelevant as far as the FT is concerned. http://www.ft.com/cms/s/0/1dfc2434-c4f2-11de-8d54-00144feab49a.html?nclick_check=1
Lately, we seem to be several million CI short after Operation Tempura were finished with us. We should have managed it better obviously, but we were counting on the Governor to do that. He had overall responsibility.
In the midst of this spanking this damn near slipped by me: "Cayman is acknowledged as one of the UK’s major creditors". I had to look up creditor. Someone who is… owed money?? We are owed money?? When I have owed money to someone I don’t often give them advice. Somehow it just wouldn’t be proper.
Since we’re also often associated with money laundering and criminal elements, can we send some of the mafia/mob goon squad (that clearly we talk to on a regular basis) over to break some knees and demand satisfaction for those debts?
"Where’s my money Britain!I want my money! You have a week to pay up, and the juice is flowing!"
Can’t wait till Cameron takes over up there. It’s inevitable.
Foot criticizes the Cayman government for "undertaking capital projects during the economic crisis."
This Foot man must be talking about the capital projects (especially that port) that the udp government is doing (despite the fact that their leader has ‘boasted’ that Cayman is bankrupt, & hypocritically blamed the PPM for over spending!)
ALL capital projects that were undertaken by the PPM government started BEFORE any economic crisis! B-E-F-O-R-E!!!!
How can the udp now start their pet projects & take on massive spending if we are bankrupt? This is so hypocritical & is proof that we the people were not being told the truth by the udp about being bankrupt (it was simply typical udp politricks!).
I agree with Foot; how can the udp government now undertake any major capital projects during this economic crisis? It is irresponsible of Bush & his cohorts! They are a bunch of greedy hypocrites!
But, as a country, we are poor at medium term planning. Heaven forbid there might be some sense in this report. We are also very poor at data-driven decision making, often due to a lack of good data to start with, but often, I suspect, because that would not lead to the desired outcome which is what is best for an indidvidual or their company and not the country or society as a whole. Govenment is run on a day to day reactionary basis, with little observance of strategic development plans.
Very good points. Having read through most of the report now I can see that there is information there that we could use if there was anyone in government interested. Unfortunately we have politicians rather than statesmen and politricks rather than longterm strategic thinking. I look forward to the day when younger well educated Caymanians step forward to replace the current incompetents. Hopefully they will be interested in what they can do for their country rather than what the country can do for them through backhand deals.
Good one. The last thing we need right now is some younger well educated Caymanian to step forward and mess up this great thing we got going. Do you realize how long it took us to get where we are making what we make, taking what we want without careing what you think?
Just wait until the government rolls out its new plan, including advertisements, for the new initiative to bring more inward investment. Then ask who the mastermind was behing it .. it might be that you "current incompetent" will find your statement at 10/29/2009 – 21:08 rather ironic!
The UK handed Hong Kong back to Mainland China because it expected all the offshore business from Hong Kong would move to the UK, That was not the case and most of the Finances that moved from Hong Kong went to the Terrorities. Hong Kong continues to be a great offshore financial center with China being the beneficiary.
Since that move was a miserable failure, the UK has now decided that it will destroy the economies of the Overseas Territories by forcing them into taxing positions.
They have not learned from the Hong Kong mistake and think that it will work this time.
With the mentality of the UK towards Financial institutions that will again be wishful thinking. They just dont seem to get it!
The Colonial days are over. People will take Independence before they let the UK have its way.
I think you’ll find that the UK was legally obliged to give Hong Kong back to the Chinese as the 99 year lease on the island expired and not for the reasons you mention.
So when will the UK lease on the Cayman Islands expire?
I hope it will be very soon.
We were discovered by Christopher Columbus who was from Spain.
Will we be returned to Spain when our lease is up, or were we stolen from Spain by the UK.
Either way they have no right to kick us around.
Columbus was from Italy. He sailed for Spain and they didn’t want Cayman. I dont think Columbus even landed here, as his ships were distressed and he went to Jamaica for repairs.
Cayman isn’t leased by anyone. A couple of wars were fought and the Caribbean was distributed amoung the nations – France, Netherlands, England, Portugal and Spain.
Nice post though — made me laugh.
I agree that the UK does not necessaeily have Cayman’s best interests at heart. But by going independent we would play right into their hands. The financial industry would shrink to next to nothing and the UK will have washed its hands of us.
WHY and HOW? If we leave them alone the UK will destroy us anyway and what will we have left then?
Rather than concentrate on Foot’s criticisms of Cayman’s short term debt problems ( which we are well aware of anyway) it is worth noting that he acknowleges the huge role we play in supporting The City of London and Wall Street. He also comments that HM Government cannot be expected to bail out any of the territories however it is always worth repeating that Cayman has never asked London for money.
One has to chuckle though when Foot criticises some of the territories for their fiscal mismanagement. The words "pot" and "kettle" spring readily to mind.
It would be interesting to know how much this report cost the British taxpayer. The MG Rover report cost £16million and noithing happened after its publication. Never mind, it keeps accountants in work.
The link to the actual report is here
http://www.hm-treasury.gov.uk/d/foot_review_combined.pdf
It is a worthwhile read for anyone interested in our financial services sector.
The PPM should be shame:
“Decisions taken by some of the Overseas Territories to use increased revenues to raise current and capital public spending, sometimes combined with insufficient attention to data quality and the absence of robust medium-term planning, has left local governments facing difficult short-term choices to restore the public finances. This is clearly illustrated by recent events in the Cayman Islands.”
Maybe Foot should also be commissioned to review the economic management of the United Kingdom itself and publicise his Report.
Just another way of Mother turning the screws!!!
One has to wonder who is paying for all of theseReports, which have been commissioned to tell us that we have been doing it wrong all along.
In the U.S. several states, universities…got involved in auction-rate markets (auction rate bonds yields fluctuate with short-term interest costs). These entities are paying millions of dollars to terminate these agreements with some that will expire in 2011-2019 – some are paying to refinance the bonds. Very, very interesting!!!!