Investment & infrastructure fund

| 04/10/2013

Cayman’s economic survival is on the line and in order for us to provide any opportunities for the next generation a new economic model must be crafted now. For the past 40+ years Cayman has been providing a variety of Investment vehicles to enhance the business and create wealth for the offshore clients. These vehicles have taken many formats, from exempt companies, trusts, re-insurance, to the latest hedge fund craze.

There is no question that these services have brought a significant improvement in the standard of living of all who live here. It has provided hundreds of millions of dollars into the government treasury over the years and it has made millionaires of many of theprofessionals who operate the financial services firms. But despite these successes, this industry has operated as an invisible hand in the lives of many of our people. And there has beenno attempt to bring these tools from the boardrooms to the living rooms to help enrich individuals who may not be direct participants in the financial services industry.

We brag to the world about our rankings in the funds business and we have some of the best expertise; so my question is why this is so difficult for us to do for ourselves some of the things we have been doing for others for years?

Until I am proven wrong, I am convinced that the economic model that brought us the 40 year miracle, of which I was fortunate to be a part of, has expired and must be retired. The actions and results of the previous administration’s tenure clearly demonstrate this; they wasted 4 years of time and millions of dollars trying to resuscitate this dead model with zero results and the FFR.

In our mental conditioning over this 40 year period, we have been led to believe that all investors must come from outside and the Caymanian people must simply be the workers. This was the old economic model and it worked for a time, but as we all can see even this option is being denied many of our people. This trend is not good and will lead to more serious issues down the road.

When we consider the global economic changes since the 2008 crash, as well as some major developments in the local commerce, whereby small and medium businesses are closing their doors, assets are being foreclosed, etc, and there are few, if any, areas of new commerce, we face a startling dilemma. To keep hoping and praying that the same actions which got us into this mess will take us out is only comfort to a fool. Therefore, the only logical conclusion one can make at this time is the upgrades and installation of the infrastructure needs we should have implemented when we were rolling in the dollars but failed to do.

The rate of development over the past forty years far outpaced the investment in the infrastructure necessary to support it. To compound the issue the impact fees from development were not sufficient nor were they used sensibly.

Our economy is now at a crawl’s pace, thus allowing us time to catch up and remedy the situation. However, due to a lack of prudent management government has no funds and no options to borrow. The reality is that government agencies are so constrained they can’t meet their responsibilities to operate and maintain existing, much less build new-public infrastructures.

Investment in infrastructure now is critical to support existing and future development, to put our people back to work and to protect our fragile environment. This presents not just a challenge but an opportunity for us to look to ourselves first to invest in our country, our people and our future. This is the goal of the Cayman Islands Investment & Infrastructure Fund, which I proposed during the recent election campaign.

Infrastructure funds are being established in many countries faced with similar challenges and is commonly referred to as PPPs (public, private partnerships). I suggest our model should add an additional “P”, representing our “People”.

At an Infrastructure conference held in Nassau Bahamas in June of this year, courtesy of CIBC/FCIB, it was very clear that other Caribbean countries are adopting this model for solving their infrastructure needs and the Bank is very keen to support these initiatives. In the major developed countries of the world PPP’s have been in operation in many formats covering various types of projects for years. However, what we are proposing is a slight expansion of this model to include our people as investors/owners.

The status quo:-

  • Cayman’s Infrastructure: wastewater, landfill, airport, seaport and roads have not kept up with the Country’s growth.
  • Waste management in particular: both garbage and wastewater have been long neglected to the detriment of our environment which impacts our tourism product, our health and quality of life.
  • There has never been a clear consistent mechanism of funding for the provision, expansion or upkeep of Cayman’s infrastructure needs.
  • Development and infrastructure while they should have worked hand in hand somehow got divorced.
  • Government has no money and cannot borrow any; thus the FFR.
  • Our government owns and operates some 26 companies and authorities, the great majority of which are losing money (note recent auditor general’s reports), this is a far bigger share of the economy than is necessary, particularly when the private sector is gasping for economic air.

Public-private partnerships (PPPP) are the ideal solution for the fiscal problems plaguing this country. In this situation private sector brings the capital, expertise, efficiencies of business and takes the risk while government grants licenses and concessions for operations and perform the regulatory functions.

So why then has it taken us so long to seriously consider this option? We are a reactionary society — only acting when forced to and no government in recent memory has displayed the vision or the creative thinking to act outside the box. When you combine this with the knee-jerk aversion to allowing private enterprise to manage traditional public works, political grudges and fear mongering by those who are more interested in protecting their fiefdoms than protecting the public, your get the answer.

But there is one big elephant in the room: government is broke and cannot borrow. Thus change must come and we the people must drive and own that change. We cannot afford to give these infrastructure projects away as these are all we have left and we should not expect others to take a chance on us when we fail to take a chance on ourselves. The Caymanian people will be the payers of these services, e.g. sewage collection and treatment and garbage collection, etc. So why shouldn’t the people own these entities (this can include the government) and reap the financial rewards when they are profitable? This formula will not only create jobs it will create wealth as every person on this island will be given the opportunity to invest directly via cash or by sweat equity.

Ownership should be the overriding goal, a sense of belonging will result and a psychological change in attitudes will transform this country and create an economic bonanza, at the end of which our people can have an investment in the form of shares in the fund. It is time we believed in ourselves and not just sit around waiting on the foreign investor, many of whom we subsidize while they reap the rewards.

These entities will never be financially viable and efficient while under direct government control and operations, so I trust no policy maker will use this excuse not to support necessary change.

Funding is available from several sources:-

  • Individual investors
  • Allocating a portion of our $1 billion pension fund ( say 10-20%) for local investments
  • Bridging financing from local banks
  • Attracting a portion of the $10 billion dollars sitting in Cayman’s banks, much of which is earning little or no return at present
  • Institutional and other funding options exist.

Benefits of the Fund:-

  • It will create hundreds of new jobs
  • It will create ownership by our people
  • It will put in place the necessary infrastructure to support future development
  • It will protect our fragile environment and bring Cayman up to the highest international standards to truly boast that we are “green”
  • It will empower our people giving them ownership and commitment to the long term sustainability of their country
  • It will free the government from having to borrow and they can concentrate on core government services, thus reducing operational costs and hopefully the cost of living which is killing all of us.
  • It will provide a local economic block which can be the foundation for other business opportunities in the medium to long term.

By pooling our resources-vision, capital, talent and management we will all have skin in the game and there is no better way to unite people. Cayman should be the shining example of environmental protection and efficiencies; instead we are still arguing over where to put a 50 year old pile of garbage.

It is said that opportunity only knocks once. This is a golden opportunity to fix some things and do them correctly; we may not get another chance as other events like crime and hopelessness could overtake and control the agenda. Economist John Maynard Keynes said, “The difficulty lies not so much in developing new ideas as in escaping from the old.” It is time to escape from the old Cayman or we are heading for national bankruptcy and our own government shutdown. The financial trajectory of this country is simply not sustainable.

I am part of a local group that is structuring the CIIF. Anyone who has interest please contact your MLA to lobby their support. We can be contacted at: ciifund @gmail.com.

We can do this Cayman. Let’s all work together.

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Category: Viewpoint

Comments (45)

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  1. Anonymous says:

    Why would anyone think this would work better than the airline or the turtle farm or the road authority?

  2. Anonymous says:

    I did not make contributions to a pension to allow grubby little third-rate politicians to spend any of my money of glory projects.

    • Anonymous says:

      Your pension funds are not held by government but by private companies.  Government does not touch those monies.

      • Anonymous says:

        But this Viewpoint advocates giving the money to fund public projects chosen by politicians, presumably in partnership with the companies owned by the usual local cronies.  No thank-you. 

  3. Anonymous says:

    Given how badly my pension is managed and how it is being kept in a currency that does not suit my pension needs, I would rather you kept my money out of your road building plans.

  4. Ya Mon says:

    Just a comment on the use of the pension funds – those aren't YOUR pension funds, those are MY pension funds, together with all the other contributors.  Don't think for a minute you can just appropriate them to an investment that is never ever going to pay a return or a dividend, or even pay back the money loaned under the Bond.  As to the Bond itself, before you try to sell them to the rich who could afford them (Caymanian, furigner or Martian), ytou better figure out a pitch for how they will make money for the investor.  For example, say you float a bond for the seaport, but the seaport loses money like noting you've ever seen… so who is going to invest in the bond so that the seaport gets the money and then the seaport loses the money and so the bond never profits the investor but in fact loses all his money?  That's gotta be a hard sell.  Truth is this is just another sort of borrowing, and that ain't gonna fix your problem, which is that CIG and crew have not been able to run a budget or a business or even a government properly.  They just can't handle money.  Hpoefully this new crew can do bettter, but until they have a proven track record NO ONE is going to invest in anything they are running.

  5. Anonymous says:

    Please leave my pension alone.  I care more about my retirement income than the knowledge that my money is being risked subsidising infrastructure.  You can take your warm fuzzy feeling and shove it.

  6. Windy MIller says:

    XXX While properly managed these type of schemes have had good results, in Cayman they would be a disaster, with corruption and patronage so rampant and the usual cabal of professional middle men feasting at the trough. 

  7. Anonymous says:

    So manywords yet precious little said. We have been hearing about this fund for months now therefore I would have thought that by now we would be past the rhetoric and into the details of this fund.  Bo has appeared on the talk shows to discuss the details, he's published a proposal on line but there is not enough information for us to make an informed decision on this.  I am not lobbying my representatives for something that you cannot explain to me. 

    Now, in principal I agree with an infrastructure fund. However I have issues with Bo's proposal. Firstly, Bo talks about lawyers, accountants, etc volunteering their time to set up the fund.  Has no estimated his returns based on free services? Is that sustainable? 

    Also, Bo is selling this fund to everyone suggesting it is going to end their short term and long term woes. He speaks about people being hungry (I.e. short term cash flow) and ownership (I.e. long term focus). I feel he is over simplifying this to potential layman investors. Funds of this nature are very often reserved for sophisticated investors and with minimum investments simply for the risks involved and the costs of administration. This fund is a great opportunity for some but it is not the silver bullet that unsophisticated investors are being led to believe. Bo is using people's ignorance to get us to lobby for a sophisticated fund beyond most of our means. 

     

  8. Anonymous says:

    Bo's ideas sound good on paper but I cannot see them working. When you look at our population of say 35,000 Caymanians. Half, about 17,000, are children and thus cannot contribute to the fund.

    We currently have 8,000 of the other 17,000 on welfare, relying on government each month to survive. That leaves us with about 8,000 Caymanians that could possibly contribute. Of that 8,000   90% are just making it and could not contribute….so….we have 800-1,000 Caymanians maximum who could contribute something to this Infrastructure Fund. Even if they all contributed a $1,000 that would only add up to $1M….okay lets say 100 of that 1,000 could donate $100-200K each to it….we are still with a fund that only has $20M in it. 

    Lets extend the numbers and say that 500 persons can add $100K to the fund (which is clearly not possible)…we have a fund of $50M….this number being a really wild and huge number given our population and their financial scenario.

    We have seen estimates of up to $85M just to move the garbage dump!….okay so you leverage that $50M and borrow another $150M say….and we build some roads and a sewage system…what is clear is that the revenue from these sources will not be able to pay back the loans much less provide dividends….so…

    Bo, please explain the number to me. I get the idea, in fact love the idea, but I just cannot make the numbers make sence….please show us how this works with our population size and its economic situation.

    • Anonymous says:

      Well simply said some Caymanians won't be able to invest and some Caymanians will. Some Caymanians will have 10,000 to invest ,some Caymanians will have 50 million. It just depends on your means.

      But it will be better then putting your hard earned money in a bank that pays no interest. At the end of the day you could grow your investment by putting back the interest and growing the principal. May be something for a young person to do for their retirement. Maybe somethng for a granfather to do for a grandchild? 

      So many ways of how to join and unite and be part of ownership in Cayman.

      • Anonymous says:

        The only Caymanian that can invest those kinda numbers is DART….and I am sure if he tries to invest in it there will be a march from West Bay and a court case right behind the march.

        The numbers just dont work….great idea but it just doesnt pencil….at least as far as I can see…

  9. Anonymous says:

    Fresh Ideas for a dying country is not going to help at this point Bobo but maybe your friends

    up North could use a few pointers because those extreme right folks that you have

    supported over the years are at risk of loosing their numbers in Congress and

    the White House has  long been out of reach,hey but you'd better not mention your

    position on theinvironment my friend they will have none of that even now that they 

    know the facts are in on the threats of global warming.We are all anxiosly awaiting

    the next election when hopefully you and Romney can hit the trail together..

    Terrible salesmen some how always end up selling to each other and after all that bull

    you were feeding about the elections in the U.S you honestly believe anyone would take you

    seriously?

    I suppose you still stand by John McCains joice for a running mate too,get real Bo

    the world is moving on without you.

    Investment and Infrastructure Fund,are you kidding?

  10. Ken says:

    Bo, is not  only intelligent and open minded about creating possible revenue streams but he's also a man with integrity, honesty and above all common sense which is seriously lacking today. Government is supposed to be run more effecient than a business as it has so many long arms and losing entities. Why aren't we charging 50 cents for every transaction that goes through Cayman on a daily basis, easily that would account for close to $200 million a year and also cap pensions that no withdrawals can be made in the next 5 years, withdrawals over $50,000 will have an automatic 10% fee of which remains in local banks. Create a National & Reserve Bank which would lower interest rates and also have extra cash for rainy days. Cayman needs to look ahead and try to develop a Vision 2025 Plan that would ensure that Caymanians have a very good education, job opportunities and a high standard of living.

  11. Anonymously says:

    Bo, your ideas are great but you are way ahead of your time.  People in Cayman today have developed the third world mentality as a result individuals that think like you need to come together form your own association, implement your ideas let it work and show Caymsn how it's done.  

     
     
     
  12. Anonymous says:

    So true that infrastructure has not kept up with development. Why would it when no development plan has been in place for the past 15 years? How does Development Board explain/excuse this? 

  13. Anonymous says:

    Best set of ideas since sliced bread for Cayman. But I have a feeling the present PPM govt- is a do nothing govt. They will not allow anything that is thinking outside the box.well done Bo – Cayman is behind you

    • Chris Johnson says:

      Bo always has fresh ideas and above all enthusiasm and drive but let us give the current Government a little more time to rectify the misdemeanors of the last government. One of the problems I see is that there is no turning back. The infrastructure has grown to be so big that without a substantially larger population it will be tough preparing budgets for growth. Continuing loss making enterprises such as Pedros Castle, the Turtle Farm, Cayman Airways and now the Port Authority are a continuing drain on resources. Hopefully the new Dart and Shetty projects will contribute to the budgets in years to come. I am not that convinced about the Enterprise Zone just yet but will give it a while longer. The key concern that I have is the continuing success of the Financial Community, any set backs, say even a 10per cent drop in revenue would be a disaster. Meanwhile the Government costs have escalated so much in the last fewyears that there is a danger potential users will choose other financial centres.

      • Anonymous says:

        You hit the nail on the head Chris. A marginal drop in the financial sector revenue will be a disaster for Cayman. Due to a variety of reasons ( led by G20 and OECD) Cayman will slowly , become less desirable to do business with in the financial world.This erosion of our business base can happen as soon as 2014   The govt. will then have no choice but to privatise operations that are presently done by the various 'authoritie's. When this privatisation happens I like Bo's idea of Caymanian ownership. Why should foreigners eat off the infrastructure pie when the Caymianian man on the street can invest and reap the rewards off their own infrastructure.Utilities fees paid by Caymanian residents will find its way back to their pockets. It is a noble idea Bo. I doubt though the present lot of politicians will give it the light of the day.

      • Anonymously says:

        Well said Chris, so what is your solution? Grow the population by how many and where will the jobs come from? The only solution I see is open it up to wealthy and educated Chinese as they are the only people today with that kind of money to invest to grow the economy that would be willing to.  The clientele of the past have all gone to Jersey, Monaco, Bermuda and now BVI.

  14. Anonymous says:

    What a bunch of idiots. Where are we going to get the money ? Can't you read? Well read it again, If you don't understand the english words look it up in a dictionary. 

    Next guy. Money is still coming to Grand Cayman. We had the drug treaty, MLAT, OECD black list and now the FATCA. No one will ever stop the banks. The people who have US $ will bring them here.You may see them changing it to a different currency but it will be here to take advantage. Cayman is still better then any other island in the caribbean or Latin America. Crime will not stop investment, it just depends on the return. If crime stopped investment there would be no coke or marijuana so get over it. People in the states are leaving, the gov't shutting down. They looking for summer skies and warm water just like you . Welcome aboard. 

    Bo I'm sorry you didn't get in this election. We would have been further on to changing life back to the way it was. People would be having jobs, and houses would have sold for good money or we would be able to pay the loans. Pirates week is coming so fast and my bills keep going higher and higher and business is  slower. We need to cut food,school fees, medical insurance, elect.,water,etc. The cost of living is unreal. Especially for the unlivable wages people are given. 

    These infrastructure ideas is fantastic. It will allow people to make money which the banks are not giving back as interest. Why aren't we doing this? Don't we need a cruise ship dock? and airport expansion which would facilitate hotels that would create more apt rental? Money would flow like a water fall. That garbage that you can smell across lakeland apts. must be killing those poor people. 

    A bond that people can join to get more then 3% back maybe 7-8% would be great. I could use it to get some retirement money. My island would be looking better and people would start to get happier and crime would go down. Pure genius.

    Come on people what are we waiting for? Lets move into the future, we don't want only foreigners getting this .Ring up your investment. 

    • Jonas Dwyer says:

      A Brave new Cayan is what Derrington is advocating. A new world where we the people are involved again. In our economy and not subservient to a few Bankers, whose arse you have to kiss to borrow money for projects that are viable. A brave new cayman, where we are not afraid to publish our names, for it is our right to speak our minds without fear of repercussion from our foreign partners or even our own. 

      Derrington I salute you, but, we are not ready. Our politicos who gain favor by telling the people what they want to hear and do nothing will always prevail. Our leaders who never ran business, don't understand business and therefore muddle through for four years, seeking advice from the chamber leaders,who in turn prop them up for their own selfish gain, and funding their campaigns. That s why our politicos advocate against us rather than put s first, for we the people are considered stepping stones to their power throne.

      Sad I indeed Derrington, sad indeed, but there is a revolution brewing my friend, not a violent one  as some are wont to occurr, but one of  intellectual understanding by many of us;  that   way forward is to do what our ancestors would do if they were around today, and that is reclaim what is ours, through taking care of our own, educating our children, punishing miscreants with the cat o nine and not staying in at home shuttered in and complaining. Coming out and mingling everywhere and assisting everywhere and therefore Showing the ones who are disrespecting us in so many ways that this land is ours and we are out to take it back.

      Fellow citizens, do not be afraid or do not let the criminal element foreign or local overcome us,  stand up and fight, talk what you know and most of all let us respect and nurture each other. And to those who work here but yet despise us beware do you can't bite the hand that feed you forever.

      • Anonymous says:

        Dear sir you have written words of wisdom. The winds of change are blowing and the present politicians, their chambers cronies and potical advisors are not necessarily aware of what really is going on. Why did Alden go to the Ritz to explain his rotten horrible immigration plan to a group of elites who are feeding at the trough? Why not go to rockhole in GT where the real problem lies? Derrington is relentless and do not be surprised if a good man prevails!! Cayman deserves it. Real action compared to lip service. I hope the like of Ezzard, Arden and hopefully the new breed in PPM embraces such ideas – Caymanian ownership – what's wrong with that?

  15. Benjamin Hurlstone says:

    There is a lot of "Rah Rah" in this article, and some interesting ideas.  For myself, I do not want to see our island covered with concrete and business offices and hotels everywhere.  I do not want to see Cayman buried in tourists and people from other places.   Am I old-fashioned?  Yes I am.  I liked it better years ago before we got into this rat race we're now in.  Am I alone?

    • Anonymous says:

      No you are not alone.

      An expat here for 40 years.

      • Anonymous says:

        Why is it important for you to say you are an expat here for 40 years?

        Think back to when you first got here, your immigration status was not required to be verified prior to you entering into every conversation you had, therefore out of respect for what caused you to stay here please stop helping the idiots out, lets get back to being an inclusive society.

         

         

    • Anonymous says:

      Nobody said that the infrastructure fund means solid concrete and tourists everywhere.  There are many environmental issues that can be solved with funding to make Cayman a better place to live.

  16. PB says:

    Grand Cayman made money from being a tax haven – smartest thing the Adiministration ever did, and then, due to pressure, in 2002 signed an Agreement with the United States and the whole tax shelter thing unravelled. The resulting mess has put the Caymans in a strange position where people are unsure what to do next. You seem to be part of that group, itemizing all manner of things that suck up money, yet unclear as to how to raise the new cash.

    Without the tax haven attraction, new money has no reason to come in. What would you propose? Taxing the resident of GC? I don't imagine that'll be popular. Best thing is to live within your means. Limit immigration to those with high net worth. Export the garbage. Don't extend the airport runway (why does GC need jumbos anway?).

    I suggest that you are overreacting to the issues. The departments that the government created which are losing money? Close them! Who ever saw a government department that performed up to expectation anyway.

    Ask yourself, of the items that you listed, are they really necessary? A new airport will be glamourous, but is it necessary? No. GC gets $20 from every departing passenger, so that should pay for a paint job.

    GC has sufficient income now – just live within its means, and get rid of the free loaders who come illegally and suck up services.
     

    • The Caymanian says:

      If only you could get rid of the free loaders who were born here and suck up services there would be a huge surplus of funds.  But Caymans criminaly corrupt culture will not allow it so your ploblem will always follow you around no matter what the rest of the world does.

      • Anonymously says:

        There are many freeloaders that were born here but are not Caymanians we should send them to the place of their patents birth.  This is where we made that big mistake of  letting non citizens give birth her. These are the people with the entitled mentality that is sucking the life out of our government and social service department.

        • Anonymous says:

          One does not become Caymanian just because one is born here if the patents are not Caymanian.

  17. Anonymous says:

    This man should be running our country!!! 

  18. Anonymous says:

    Anyone with an interest in the pension fund would shudder at the thought of politicians using any of it as play money.

    • Anonymous says:

      Who said politicians?!

      • Anonymous says:

        It's a private intiative – to run it like a proper business. Caymanian owned and managed is what I can from this article. Great Idea.

        • Anonymous says:

          Bad idea sounds even worse.  Not with my pension money Bobo.

          • Anonymous says:

            The pension funds invest the funds received from the partticipants in a myriad of investments. so it could invest in the local infrastructure fund, provided that fund is found to be  a sound investment. By investing in the infrastructure fund, the pension funds are contributing to the development of the Cayman Islands by participating in the financing of assets of national importance. When the pension funds invest in GE for example, that investment may be of benefit to the pension plan participants but not to the national development of the infrastructure of the country as a  whole. Caymanians need to come together to particiapte in the financing of development which will benefit them directly as well as benefitting the country .

            • Anonymous says:

              My pension fund is to make sure I have money in my old age.  It is not to reduce the costs of an overfat government. 

            • Anonymous says:

              Oi buster, I am not Caymanian and I don't want one cent of my pension risked on "coming together".

              • Anonymous says:
                 
                TO:Submitted by Anonymous (not verified) on Wed, 09/10/2013 – 16:04.                            I guess you hate Cayman and "coming together" so much that you prefer to lose your money overseas like a few years ago when the stock market crashed.Bravo for you.