Guest Writer

Caribbean Financial Centres: a look into the future

The last two decades have proved challenging for the offshore financial industry. It has been an era of heightened initiatives both internationally and onshore, which have had a dramatic impact on the offshore financial services industry. The 2008 financial crisis added to this movement, certainly in terms of the rhetoric and renewed threats of drastic action against small offshore financial centres (OFCs), which have difficulty in pushing back in a meaningful way.

Post 2008, many OFCs, and those in the Caribbean in particular, experienced declines in their two key industries, tourism and financial services, which inevitably impacted on general local business activity and government revenues. This in turn highlighted both short and long term fiscal problems for their governments.

However, reports of the impending demise of the offshore industry have been somewhat exaggerated.  There will continue to be a place for high quality, innovative and adaptive OFCs, unless the world goes back to a wartime style era of exchange controls, fixed exchange rates and restricted global trade and investment, and despite there being some short term signs to the contrary, eg, currency controls/manipulations and ad hoc black listings, this is unlikely in the long term.

International Initiatives and Implications for OFCs

Driving much of the international activity is the battle to retain control of the world’s capital and thus the ability to tax it. The old guard is fighting hard to maintain the status quo under the cloak of securing financial stability, tax fairness and transparency.

Most major jurisdictions publicly support open and competitive global markets between which capital can freely move. Indeed, there is a growing body of academic studies that argues that OFCs enhance competition in onshore markets and facilitate foreign investment into onshore jurisdictions that might not otherwise be made due to domestic constraints in those jurisdictions.

But many jurisdictions that claim to support free markets principles and the unrestricted flow of capital do so only as long as this system works in their favour. Behind the façade of championing open markets, they actually pursue self-interested financial imperialism and protectionism.

For example, with their financial services and products and in facilitating the global allocation of capital, OFCs pose a major competitive and potentially uncontrolled challenge. Thus, the UK and the US in particular are not keen to see OFCs thrive too much, but they do recognise that for their own financial service industries and multinationals to be competitive they need to use OFCs. Further, they recognise that OFC structures are also often the conduit for valuable inward investment from foreign investors. This traditional position is now under serious pressure as many politicians see more electoral downsides than upsides in the continued symbiotic relationship between onshore and offshore.

Other major European nations with growing and unfunded entitlement programmes and ageing populations fear loss of capital to OFCs and as a result reduced tax revenues. And they wrongly see OFCs (as opposed to their own domestic policies) as the cause. So, while voicing their commitment to open markets for (their own) financial services and products, they continue to impose burdensome and anti-competitive regulation on OFCs and to raise barriers to their residents investing in or using OFC financial products or services.

Ironically, many of the very same major economies continue to give special ‘tax breaks’ to entice companies and individuals to relocate to or remain in their countries.

The international standard setters mandated to execute the various initiatives are generally the creatures of and are funded by the very same major countries that have no real interest in a level playing field open to OFCs or to anyone else threatening to deprive them of control of the world’s capital. The staff of these standard setters also has every reason to preserve and expand their activities and their tax free benefits packages.

Current Position

Various important initiatives are underway or threatened. These initiatives have been significantly energised by broad political support at the highest level in the major economies of the world as a result of the financial crisis. At the very top are the G8 and the G20 policymasters leapfrogging eachother every few months in producing macro statements, followed up by often overlapping reports. The G20 now seems to be the preferred leader.

The G8 and G20 have been laying out the ‘big picture’ framework for global standards on issues such as corruption, banking, corporate governance, taxation, financial markets and executive pay. The G20 has endorsed the work of the Global Forum (an OECD subset) on tax transparency and exchange of information and urged completion of the peer review of effective implementation and adherence to international standards and preparation of countermeasures against non-compliant countries. 

The OECD has since 1998 been pursuing its global tax initiative, that has been chameleon like in its changes during the period. The programme is now focused on automatic tax information exchange and transparency (beneficial ownership disclosure) and their effective implementation. In tandem with this, the OECD is now fast tracking its ‘BEPS’ (base erosion profit shifting) project at the behest of the G20. This potential recasting of the international tax regime should keep bureaucrats happy for decades to come.

The FATF (another OECD subset) is reenergised with its planned onsite inspections and assessments to ensure effective implementation of its anti-money laundering regime. The IMF continues its programme of regular visits and assessments. Also active are the Financial Stability Board (regulation and oversight of all things financial), Basel III (bank regulation), IOSCO (securities), IAIS (insurance) and the UN running its own initiatives on taxation and corruption.

In parallel with these global initiatives, there are various unilateral actions by the EU and individual nations, most notably the EU Savings Directive (mark II) and moves against offshore hedge funds (AIFMD), the US driven FATCA regime and its duplicates now being eagerly adopted by other countries, and the UK corralling of the Crown Dependencies and the Overseas Territories to sign up to automatic tax information exchange and beneficial ownership transparency.

The compliance burdens and costs of all these are significant and anti-competitive; and fall on both the private sector and governments in OFCs, and ultimately the clients. 

Price of OFCs Not Engaging

OFCs cannot safely ignore these issues and carry on as before. Switzerland has highlighted the dangers of playing the ostrich. This is simply not a sensible or viable long term option for those OFCs that participate in global financial markets, and for whom exclusion would sound an immediate death knell. Perception and reputation are very important, both for OFCs and their major clients. And uncertainty and delay are not good for either. So active engagement by OFCs is essential.

Actions to be taken by OFCs

The top OFCs are making significant progress in successful engagement on regulation and tax information exchange.  But there are things OFCs should do better:

• Ensure their legislation, regulation and supervision meet accepted and implemented international standards.
• More effectively implement and enforce existing financial services laws and regulations, anti-corruption and anti-money laundering laws and cross border assistance in civil, criminal and tax matters.
• Increase transparency by enactment of holistic data protection laws (balancing legitimate privacy rights and legitimate law enforcement), by increasing the publicly available information regarding both regulated and unregulated entities and by increasing the statistical information obtained and published by their regulators and agencies.
• Improve the delivery of innovative legislation and regulation, not just in financial services but also in areas such as intellectual property, technology, and medicine. 
• Improve (legitimate) intelligence gathering, lobbyingand media relations, particularly in key centres such as Washington, London, Brussels and Paris to influence political and media perceptions, opinions and outcomes.
• Embrace joint lobbying and actions by OFC governments to highlight the hypocrisy of many of the initiatives and to strive for a genuinely level playing field.
• Sponsor and support think tanks, symposia/fora/conferences and publication of quality academic studies analysing the (beneficial) role of OFCs.
• Ensure their infrastructure (eg, courts, telecommunications, ports and airports) is world class.
• Improve their domestic ‘environment’ to encourage, facilitate and expedite the establishment of physical businesses and institutions staffed by top decision makers.
• Ensure their public and private sector cost and fee regimes are competitive.

The Future

The number and wealth of global businesses, families and investors will increase over time and the greatest growth will be in the new worlds not the old world.

Global competition inevitably includes tax and regulatory competition. No-one has yet created the perfect tax or regulatory regime, so competing regimes (within broad agreed norms) are perfectly proper. Individuals and corporations are still entitled legally to maximise their wealth. Indeed, it is one of the principal purposes and obligations of a corporation to do so.

Increased wealth will continue to make proper tax, estate and succession planning for global businesses, families and investors essential and lead to greater demand for tax advantaged/neutral and agreeable places to live and work with easy access to quality professional services and markets.

OFCs with high standards of sensible regulation, appropriate transparency, cross border assistance arrangements and good infrastructure while providing quality value-added services have a valuable and vital role to play in this scenario.

The barriers to entry as an OFC are ever increasing. The cost of developing the infrastructure and meeting international standards is significant and success cannot be achieved overnight or guaranteed. And there are probably now too many OFCs. Competition is increasingly fierce, and jurisdictions and structures are increasingly seen as fungible.

The survivors will be those who engage successfully, meet international standards, have an established infrastructure and track record (in all its aspects), tax efficiency, professional expertise and support services, a solid and diverse base of business, and the ability quickly to adapt and innovate in the ever changing global environment and to add real value to international transactions and capital flows in an efficient and cost effective way.

A number of Caribbean OFCs meet the tests for being survivors. But to thrive, they must learn better from history and from their (and others’) mistakes and work more effectively to be accepted as legitimate participants in the global financial world.

This article first appeared in IFC Caribbean Financial Centres 2014 Review.

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The Caymanian employment problem

In October 2006 I wrote an email to friends entitled "I am a frightened Caymanian". This was in regards to what I saw to be a major problem with the infamous 'rollover policy', and since then I have seen the effects of that policy play out. I have since sold all my investments and have left the island, living in Dubai, UAE and now experiencing Saudi Arabia with my family.

It is both fascinating and extremely rewarding on so many levels living as a expat in really foreign lands (i.e. non-western countries), but for the past four years I have kept a close watch on the island taking an economic beating, which was not unlike the rest of the world, including Dubai. However, Dubai has made a remarkable recovery, due partly to the unrest in neighboring Arabic countries and open immigration and economic policies.  By the way, Dubai is a tax haven with an incredible tourist market and a population of which only 11% are local. Sound familiar?

The reality is there is no quick fix for Cayman, so we have to get used to it. Second reality, no elected member has the guts to do what it takes to fix the problem because it will seem that it is getting worse before it gets better. So here a few solutions I think will work, based partly on some of Dubai's model.

Give foreigners full rein to come in and start companies. Yes, I said it. But here are the conditions that are paramount: each company must have a Caymanian "sponsor". This is not an investor; a sponsor is a Caymanian that gets a fee or percentage of profits to hold the license for the particular company. Encourage 'free zones' and offer fast track 2-day business license setups. The second major rule is that  a minimum 20% of that company's employees must be qualified locals.

This model accomplishes a number of  things:

1. Reverses a stagnant/declining  population — more people onthe island, more money gets spent so everyone benefits.
2. Increases foreign investments and competition, so prices will fall for goods and services.
3. It keeps money in the local sponsor's pocket and in the country.
4. Increases local employment.
5. It will stop "fronting" by making it legal for a Caymanians to benefit legally and directly from a foreigner opening a business locally.

Caymanians need to get over the bizarre idea that "they" (the foreigners) are taking over "our" island. Yes, we have one example of a very large investor (Dart) who has taken a major economic foot hold in our Island. However, I can assure you that if it was not for the presence of Dart and Caymana Bay pumping money into the economy, we would be in a much deeper economic hole than we are in right now.

So, let's look at the facts. Most "Caymanians" were expats at one point. The large majority of current Caymanians are marrying expatriates, author included. In other words, the so-called "real Caymanian" is a myth. Ask yourself, what is a real American? A culture is only held by what a group of people who chose to practice from their past. I have no idea how to dance a quadrille. I challenge any  reader to ask any Caymanian under age 30 to dance it or make a piece of rope or hat from silver thatch. If you find three of your friends, there is still hope and call me wrong. I know this sound harsh but it is the cold reality of the world we now live in.

All countries are becoming globalized. I am now working/investing in one of the only countries in the world (Saudi Arabia) that did not tolerate mixing of the cultures and they are now paying the price of this extreme segregation. They are now encouraging foreigners to come in to invest and work to train the population to an international level because they have realized that much of the population needs to change if they are to compete globally — and this despite the country's enormous oil wealth.

I respect  everyone's view and passion on this subject, but we as a country have it wrong and you are sadly mistaken if you think the answer is stopping people from making  this country that they love part of their home.  The past seven years have shown us this reality. I said it seven years ago and I will say it again: no one wants to invest in a country in which  they don't see a future. There is no confidence in the island; there are no new investments; there are no jobs being created; people are leaving to find opportunities elsewhere; less people are spending; government costs have increased; with less money for the people, crime is increasing. Welcome to the new Cayman Islands!

The rollover policy does not make companies employ more Caymanians. Why do I say this? Because a company that has an employee rolled over does one of two things. If they are able, they continue to employ that same person but from outside the country for one year. Many jobs can be done remotely these days, thanks to technology. The other option is to replace that ex-pat with another ex-pat and maybe at a cheaper cost due to the highly qualified yet cheaper workforce possible from many Asian countries. This will not change.

The cold reality is that if a company has to pay a Caymanian twice the amount for every job, plus the outrageous operating cost, they will just go somewhere else. Trust me, we are not that special as a nation. White sandy beaches are all over the world and those countries are opening their arms for new businesses to come.

I know I am mixing an employment and an immigration issue but I suggest to you that they are one in the same and cannot be viewed separately. Ask yourself, would the rollover policy be this big of an issue if every Caymanian had a job and was prosperous? 

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TLEPSonomy

Thegovernment has acted quickly and decisively by passing the new immigration bill amendments. Anyone who criticised the current premier in the past for being too passive will find the decisive moves on immigration very encouraging. Unfortunately, that's right about where the praise ends. The result of the changes is that any TLEP who fits even vaguely into the middle/low class and is not Caymanian will have to leave.

The lip service that domestic helpers and others should also have an opportunity to become permanent citizens is just that because we all know that getting PR has now become so difficult under the new regime that it is virtually impossible for most "ordinary" folks to obtain it.

What will very likely happen is that several hundred persons will have leave by the end of this year, straight and simple.

And what next?

The government has faced a lot of criticism for introducing the changes by many Caymanians because they feel (ironically) that it doesn't go far enough.

At the same time, there are many expats and their Caymanian friends and family who are registered voters who will have a lot to say to Mr McLaughlin on the injustices of essentially booting out hundreds of Jamaicans, Filipinos and other nationals through the back door.

Unfortunately for the government, in addition to managing to achieve this amazing double negative result (upsetting both the Caymanian and expat groups) they are also likely to fail in their own stated economic policy. Everyone was subjected to the government's argument that losing approximately 1,500 persons all at once would have a detrimental impact on the economy.

It almost doesn't matter what you think about their argument on that front. But if you consider that what they are actually doing (albeit in a far less transparent manner) is getting rid of a large number of workers because most of them won't qualify for PR, then are we not basically back to the same 'economic crisis' problem?

Immigration is a near impossible issue to 'fix' in this country and we should all cut some slack to any government or political leader when facing with the task of crafting solutions for the common good in such a controversial and emotive area.

But when three months of debate among policymakers leads to upsetting Caymanians, expats, the opposition and the so-called Southeast Corner, while risking further damage to the economy (based on their own theory) in one fell swoop, you do have to wonder.

If solving the TLEPs issue was about the economy then we would avoid getting rid of a large group of workers all at once, since that would be disruptive to businesses and cause a loss of wages currently being spent locally.

If solving the TLEPs issue was about protecting Caymanian jobs then we would expect an aggressive attempt to get rid of many expats ASAP, so that Caymanians could get a chance to fill those vacant jobs (if that is your theory).

The truth is both of these approaches are based on short term implications. The real source of the TLEPs issue started over three decades ago when successive governments started down the road of failing to invest in the development of Caymanians (to secure the higher paying jobs), failing to apply adequate enforcement in the face of the most basic immigration and labour breaches against Caymanians (for example those ridiculous classifieds ads that everyone complains about but which continue) and continuing to pretend that Caymanians will become domestic workers, yardmen, dishwashers and toilet cleaners if we give them an extra two dollars an hour or as soon as that "other person" leaves the island.

Our politicians have failed to plan and patched up labour policy along the way while continuing to play the people with immigration politics. Until they craft an informed strategy with medium to long term goals and stick to it, we will be faced with one version of 'TLEPSonomy' or another.

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I have a dream …

When you’re a kid, your parents would always tell you that you could be anything you wanted to be. At that age, what you wanted to be when you were older would change all the time – one day it was a police officer; the next a firefighter, doctor or even a soccer player. It wasn’t until I was in high school that I truly knew what it was that I was destined to do and that was to become a Crime Scene Investigator.

Although many people would try to discourage me against pursuing such a “different” career, I wouldn’t let anyone or anything change my mind. Everyone around me wanted to study Business Administration or Accounting or Finance but I knew that I would never be happy if I was to do the same.

In 2009, I was granted a Government scholarship to pursue my Bachelor’s Degree in Forensic Science. I was ecstatic as I knew that I was one step closer to reaching my dream. In 2012, I was given the opportunity to complete my internship with the Scientific Support Branch here in the Cayman Islands and it was truly an invaluable experience which enabled me to further expand my knowledge in the field of forensics.

It has been over a year now since I’ve graduated from University with my Bachelor’s degree and it seems like I am nowhere closer to becoming the Crime Scene Investigator that I so wanted to be for many years now, instead I feel like I am moving further and further away from my dream. I have made numerous attempts to secure a position with the RCIPS Scientific Support Branch but have been unsuccessful. Many people have promised that they would try to assist me in the matter however; I have yet to receive any promising responses.

I know for a fact that this unit currently has 7 employees – 2 of which are Caymanians and 5 which are expatriates. How is it that as a Caymanian who is qualified and willing to do the job, I cannot be given the chance to do so? I know I don’t have years of experience, but we all have to start somewhere. If I can’t be given the opportunity then how will I ever get the experience I need?

I know many people reading this article will think that I am trying to force someone’s hand or get my way, but I am just frustrated to know that I cannot even get the opportunity in my own island to use the knowledge and skills that I have obtained. Nothing brings a bigger smile to my face than when I am talking about “forensics”. There is not anything in this world that would make me happier than to be in this career. My passion and love for it is what has driven me to continue to fight for what I want.

I am not just writing this for myself but for all of those people that know how it feels to put so much effort into achieving a goal to sometimes feel like you have totally wasted your time. Why is it that we are encouraged to pursue degrees by teachers, parents and family members yet many of us cannot find a job when we return home? It makes you wonder if it even makes sense to obtain a degree anymore.

I read the news everyday and it hurts me to see how much crime continues to increase. It has always been my dream to work in the Cayman Islands and I would just love to be given the chance to demonstrate my skills and show that I have what it takes. 

I am one of the few proud Caymanians who can say I have a “unique” degree and I’d hate to see all my hard work and knowledge go down the drain with my dream. 

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Open letter to Tara Rivers

It is not your fault that we put you on a pedestal and pinned all our hopes on you, this ‘girl from West Bay’, but it is your fault that you embraced that pedestal, climbed on top of it and reveled in the attention. I have no problem with you enjoying the view from up there and would be happy for you to continue to do so IF you actually did something worthwhile to prove you were worth it. To date, I have to say you have been an absolute,utter and total disappointment.

You have achieved nothing with your new found power except increase your personal wealth at the expense of the public you were hired to serve.

I am appalled that you pulled a ‘sickie’ instead of attending the session on the immigration bill last night and suspect that it was less to do with your being sick and more to do with your wishing to abstain from the vote without having to publicly acknowledge that you were abstaining. How much simpler just to be absent instead of having to have an opinion which might put you in the firing line!

Well, Tara, I have news for you. This is precisely why we hired you in the first place, so that you would stand in the firing line and stand up for your people – have a voice and make it heard. You are not hired to win friends but you are hired to influence people and to stand up for what you believe in. But as of right now, I’m not sure I know what it is you believe in. I do know what our premier and much of the Cabinet believes in and I do know what the opposition leader believes in and I even know what all the backbenchers believe in – all of them have voices and to date have not been afraid to use them.

I don’t always agree with everything everyone says but I appreciate the fact that they’re not afraid to say it. I have lost every shred of respect I had for you and am not only upset with you but upset with myself that I romanticized what I thought you could be – you could have been so much to so many, not least because you’re a woman and a woman from West Bay. You were so ahead of the game, Tara, and perhaps it’s unfair that we pinned so much of our hopes on you, but instead of you realizing what an advantage this was and being grateful for the support, whilst trying to maintain it by being a decent, honest and hardworking member of Cabinet, you seem to have thought that, instead, this offered you some sort of entitlement which excused you from having to do anything. WAKE UP AND START EARNING YOUR SALARY HONESTLY – please!

So many of us want so desperately to support you but as we sit in our various cubicles (those of us fortunate to have jobs) working hard to pay our bills, it’s very difficult to continue tosupport someone who pulls a sickie the day some of the most important legislation (at least since you were elected) is being debated. Today I wanted to stay at home sick but I showed up to work, despite not having to be here to debate groundbreaking legislation that will affect the lives of almost everyone in these Islands.

I have no idea what is wrong with you but I do know that even if you absolutely could not make the debate you could have voiced an opinion or just done something to show that you’re paying attention to what’s going on and that you care. Even if you were just paying lip service, we probably would have bought it – that’s how advantageous a position you previously held.

I sincerely hope you get back to work and prove that I’m wrong to be so utterly disappointed in you. I will happily sit corrected, although have to say with your current track record I doubt very much it will come to that.

Please prove me wrong.

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World Polio Day 2013

Polio is a highly infectious disease which causes paralysis and is sometimes fatal. As there is no cure, the best protection is prevention. For as little as US 60 cents worth of vaccine, a child can be protected against this crippling disease for life. After an international investment of more than US$9 billion and the successful engagement of over 200 countries and 20 million volunteers, polio could be the first human disease of the 21st century to be eradicated.

The message to world leaders is clear: support the final push to achieve eradication now while the goal has never been closer, or face the potential consequences of a new polio pandemic that could disable millions of children within a decade.

Since 1985, Rotary has contributed nearly $1.2 billion and countless volunteer hours to the protection of more than two billion children in 122 countries. The disease remains endemic in three countries — Afghanistan, Nigeria, and Pakistan — although other countries remain at risk for imported cases.

The last cases identified in the Caribbean area were in Haiti/Dominican Republic in 1991. Before a Caribbean vaccination drive, estimated deaths in Latin America/Caribbean in the 1970s totalled around 15,000 cases and 1,750 deaths per annum. Here in the Cayman Islands, the last recorded cases were in 1957 and we have remained polio-free ever since thanks to a vaccination programme for all children which continues today. It is vitally important that all children receive the vaccine to prevent the re-introduction of the disease into the Islands and also to protect those children should they be exposed to the disease in another country.

In an extraordinary gesture of support, every $1 that Rotary raises between now & 2017 will become $3 thanks to being matched 2 for 1 by the Bill & Melinda Gates Foundation.

In Cayman, the four Rotary clubs & two Rotaract clubs are working to raise funds for Rotary’s ”End Polio Now” campaign, which features world celebrities, local icons and ordinary persons alike all showing that we are “This Close” to eliminating polio. This World Polio Day October 24th, please join with concerned Rotarians and help to eradicate polio in our lifetime. With global travel nowadays, it can be easily transmitted across national borders, or across the globe, as has already happened with wild outbreaks in several world areas. 

Poliomyelitis, commonly known as polio or infantile paralysis, is an infectious disease caused by the poliovirus, which enters the human body through the mouth. The virus multiplies in the gastrointestinal tract, spreads to different parts of the body and then enters the blood stream causing flu like symptoms. A small percentage of the virus may enter mainly the brainstem and spinal cord and causes damage to the nerve cells, resulting in a condition called Paralytic polio, with early symptoms of high fever, headaches, muscle weakness and muscle pains, back and neck pains. Paralysis (loss of muscle function) may occur in chest and abdomen causing difficulties in breathing. Paralysis in one leg is common but some victims suffer from quadriplegia (all four limbs affected). Paralyses in some cases are just temporary, while in a few it is permanent. Not all persons infected by the virus will have polio.

Two polio stories from Cayman Brac

Mr McNeil Hurlston: I was born on the 22nd January 1929 in Spot Bay but I live now in my own house at The Rock. I contracted polio when I was about 8 months old.  I had a high fever but there were no hospitals or doctors on island so my parents and the older folks did the best for me. I walked with a limp because my left leg was affected but I had many friends at school and no one tried to bully me. Of course I was big man and very strong and enjoyed boyhood days like nothing was wrong. (Pictured left with caregiver Lendell Moore Scott)

I left school when I was about 16 years old and did gardener work before going to sea. At the age of about 20 years I became an able-bodied seaman aboard the Kirkconnell Ships. I never missed a good time at every port. After many years at sea, I took-upa security guard post at the Airport in the early 1980’s and held that position for 22 years. I was never sick or absent from my duty and drove to work everyday.

Many people visit me now at home so I don’t feel neglected or alone. I was doing really well a few years ago but now my voice is weak, sight not so good but I can still smile and sing. I have my life partner to care for me and another beautiful caregiver. I am happy. My children and grandchildren are wonderful, happy and healthy. I know many people had polio, including the 32nd president of the United States Franklin D Roosevelt (FDR), who was paralyzed from the waist down and died at the age of 63. One German doctor who was aboard the ration ship, The Bristish- Man-O-War, told my father that I had infantile paralysis and I if I survive I will live for a long time, and so said so done.

Miss Ianthy Christian: I was born on October 17, 1929. I was about 2 or 3 years old when I began to experience high fever and severe pain in my legs. My first experience was on a bright summer day when my sisters and I went to the Spot Bay seaside to play. I was the smallest so they took special care of me and when I complained of pain they rushed me home. My parents and neighbours did what they knew best and with some medicines from the commissioner and dispenser, Mr Aston Rutty, I got some relief but my left leg was paralyzed. (Pictured left with Brac Rotary President Dhal Seeram)

I was not terribly affected by this disability and I moved quickly and energetically like the other girls. I loved school and had many great friends. I was petite and well dressed at all times and I still maintain these features today. One of my girl friends had polio with paralysis of the same left leg and she got married and left the island. She has many children and grandchildren but I believed she passed away sometime ago.

I had many offers also from nice gentlemen who wanted to marry me and take me abroad to get treatment but I refused because I didn’t want to leave Cayman Brac and my family. I was never married but I am happy to be single. I always have God and my family who love me and give the support I need. My bigger sister, Ms Faith, who is 95 years old, would walk over to see me sometimes.

I am well organized; I have a walker, a wheel chair and other aids to help me move around to do my daily chores. There is more pressure on the good leg so I have to rest as often as is needed to prevent any accidental falls. I eat, sleep and see well and I don’t blame anyone for giving me polio. For me this is normal and I feel I am going to live long and healthy until the Maker says I have to go.

Learn more about the End Polio programme here.

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Who’s guarding the gate?

I have read with interest the dialogue now taking place in the Legislative Assembly in relation to the current crime wave. I too endorse the calls for better policing and was happy to hear thepremier confirm his commitment to ensuring policies and resources aimed at crime reduction. Nonetheless, all of this talk took me back to only a couple of years ago (2011) when we were faced with a similar spate of retaliatory gang-related shootings (as they were then described). Many of you may remember a similar wave that took place even before then in 2005. 

Both times we heard the cries; but then the shootings quelled and so too did the impassioned calls for better policing and strong and effective crime reduction policies. While there is much to be said about addressing the current levels of crime in general, my current focus does not allow for that discussion (it will follow). My focus today deals primarily with the issue of gun-related crime.

I have watched intently as Commissioner Bains has taken licks (as he should) for what we all perceive as ineffective policing. That is, the failure of his officers to prevent, detect and successfully investigate gun-related crimes and apprehend the perpetrators to our satisfaction. But there is more than enough blame to share, so I must wonder why he sits alone in the hot seat.

The Customs Department has for too long escaped its share of the criticisms laid at the feet of the RCIPS. Customs’ most recent controversy is levelled at the hiring and qualifications of a suitable person to take on the position of collector. And I concede that as the highest revenue earner for the Cayman Islands Government, the department requires an educated and insightful leader (and person of integrity) at its helm.

However, revenue collection is NOT the sole (or most important) function of that department. As in all other jurisdictions, customs has a very significant law enforcement mandate to fill. It is charged with protecting our borders and ensuring that contraband such as guns and drugs don’t make it through to our communities … to the hands of unsavoury characters and our children. To the best of my knowledge no firearms are produced in the Cayman Islands and there are strict prohibitions surrounding their legal importation.

Therefore, the fact that we are seeing so much gun-related crime should tell us that there is a significant failing from this department, which precedes the blame to be held by the RCIPS. Ask yourselves, when was the last time you heard of a customs seizure of guns? Long before the mandate of the police to investigate a shooting kicks in, a crime relating to that particular firearm has already been committed. It’s called smuggling.

Why is no-one talking about this – the illegal importation of guns? Why aren’t we asking how they’re getting in, how many are here and who’s bringing them? Why aren’t we demanding arrests and holding customs to the same yard-stick as RCIPS? We chastise Bains for not doing enough to get guns and those who use them off of our streets, yet hold no one accountable for not keeping them from passing our borders in the first place.

For as far back as I can recall, customs had been hailed for the amount of duties it collected; but this has been part of the problem. As long as the additions to the coffers are bountiful we turn a blind eye to the fact that not enough emphasis has placed on its law enforcement function. Now with the search for a new collector in the spotlight, I believe that it is important that we all understand what we are search for.

It is clear that neither our MLAs nor the deputy governor thoroughly understands this. I listen to the calls on the one hand for a Caymanian and on the other for a master’s degree holder, neither of which properly articulates what should be required for the person collecting our money and guarding our gates. More important than having a Caymanian is having someone who understands the function and the mission of the department. More important than the need for a superfluous masters degree is the need for a LEADER, someone that understands the important balance to be achieved between revenue collection and border security and protection.

Whilst the requirement of a graduate degree is a reasonable expectation of the potential post-holder, for a position that emphases border security the need for law enforcement experience is equally as important. I dare say a master’s degree is not! Truth be known, most of CIG’s department heads would be without a job if that requirement were imposed across the board, which does make one wonder why it’s there.

If we are going to raise the bar (which we should), let it be raised to a reasonable and practical height. How about we not settle for just having a title-holder and demand some substance of the person charged with the guardianship of our borders. I’m sure Commissioner Bains would be all too happy to share his licks with anyone who’s adequately qualified to take them.

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Tax information exchange agreements

My attention has been drawn to two very important news items, one in the issue of the Cayman News Service dated the 9th October 2013 headed "ATO (Australia Tax Office) ignores Cayman Court", and the other one in the Compass News Paper of Friday the 11th October 2013 headed "Australia defies Cayman court ruling".

Both news media should be congratulated on the speed with which they have brought to the attention of the public in two well written and factually correct articles the facts surrounding this unfortunate and disturbing matter. These two articles should be read very carefully  by the general public, the Government of the Cayman Islands and our Legal Department and immediate steps should be taken by the appropriate authorities to prevent the action that has been taken by the Australian court  from ever happening again either by that Court or any other court.

The Australian Court has acted in relation to a judgment of our Cayman Court in a very important matter in a manner that I do not think our Cayman Court  would have acted in relation to a judgment of an Australian Court. In acting as it did the Australian Court has disregarded the well known principle Of International Judicial Comity, which is that courtesy and recognition of the judgment of one foreign Court is usually extended to such judgment by another foreign Court. This is especially to be observed when the two courts belong to states which both have Her Majesty  the Queen as their Head.
 
In relation to the principle of International Judicial Comity Australia should remind itself of the classic approachto this principle by Lord Denning in Rio Tinto Inc. Corporation v Westinghouse Electric Corporation 1978 A.C at page 560 where he said, "It is the duty and pleasure of the English Court  to do all it can to assist the foreign Court just as the English Court would expect the foreign court to help in like circumstances."

Our courts over the years have frequently acted in compliance with this dictum of this great English Judge and Jurist and I am disappointed to observe that an Australian Court has chosen to disregard it in this matter.

The Australian Court has instead chosen to disregard and defy a judgment of a Judge of our Cayman  Court in which he held that four requests for documents and information made to our Cayman Islands Tax Information Authority (the CITIA) by the Australian Tax Office (ATO) and granted by our CITIA were wrongly and illegally granted and that the documents sent to the ATO pursuant to those requests ought never to have been sent, should not therefore be used and should be returned to the CITIA or destroyed.

The Australian Court has permitted the ATO to disregard the request of the CITIA either to return the documents sent to them or  to destroy them and have permitted and sanctioned their use  as evidence in Australian proceedings despite the Judgment of our Cayman Court and even before the judgment of our Court by Quin J. has been adjudicated upon by our Court of Appeal in which Court I understand that an appeal by the CITIA against the judgment of Quin J is pending. This is an especially troubling ruling by the Australian Court for the Cayman Islands.

The Cayman Court in its judgment came to the conclusion  that the CITIA had acted wrongly, illegally and in breach of the provisions of the agreement and the law governing the agreement and granted to the Applicant Companies all the relief that they claimed against the CITIA.

It is this important judgment of our Court that has been disregarded and defied by a judgment of the Australian Court and pursuant to which the ATO has refused to  comply with the requests made to it in the letter written to it by the CITIA following the judgment of the Grand Court in the Judicial Review proceedings.

I think that in the circumstances that have arisen  the first step to be taken is for both our Government and Her Majesty's Government to  strongly protest to the Australian Government about the refusal of its Court to extend the usual International Judicial Comity to the Cayman Islands judgment and about the fact that its Court has decided to disregard and defy the Judgment of our Court whilst it is still binding and has not yet been adjudicated upon by our Appeal Court.     

I will make some other suggestions which might serve to prevent a similar situation from arising in the future but it is important to realize that if nothing is done the confidence of persons who do and wish to business here  will be seriously affected and they will no longer regard the Cayman Islands as a place where they can expect to see the judgments of Cayman Courts followed and respected by foreign Courts and also where they can expect to receive fair and equitable treatment from bodies like the CITIA according to the rule of Law.

In this matter it is clear from Quin J's judgment that it was the unlawful decisions made by the CITIA and its failure to follow clear and specific provisions in the Tax agreement  and the TIA Law that has given rise to the situation whereby the ATO has received and is in possession of Documents which was produced for it by the illegal and wrongful actions of the CITIA and which has enabled the ATO and the Australian Court to say that despite the fact that this is material that was obtained illegally and in breach of Cayman Law they are entitled to use it  and to disregard and defy the judgment of our Court to the contrary and  which must be regarded as a binding judgment until it is reversed by our Court of Appeal.

However the effect of Quin J's judgment as it stands, and until it is reversed either partially or entirely by the Court of Appeal, is that the CITIA is responsible  for creating the  embarrassing  and possibly very costly position in which Cayman now finds itself.

My other recommendations:

I respectfully suggest  that provisions  be inserted into the TIA Law by way of amendment thereto to require the CITIA before it supplies any information or documentation or gives its consent to any use of Documents which it proposes to supply in response to a request, to make an application to a Judge of the Grand Court  to sanction and approve the action that it proposes to take to the requests that have been made to it by the requesting party

This will enable the Court to consider and sanction and approve all the steps that the CITIA has taken in relation to a request and to verify that the CITIA has properly complied  with the Law and the provisions of the Tax agreement in respect of which the application to the Court is made.

Judicial supervision of the CITIA is both desirable and needed. Such a procedural step will I am sure be welcomed by the persons who do or intend to do business here and will restore and enhance their confidence in the Cayman Islands. It should also be a step that would be welcomed by the CITIA.

I do urge our authorities to take steps along the lines of the suggestions that I have made in this letter.

I certainly think that the public  would like to know :-

How many requests  for information have the CITIA received?

How many of such requests has the CITIA responded to  by supplying information and documentation?

How many times has the CITIA applied to the Court for directions under the provisions of section 21(2) which deals with the restriction on the use of information and provides that before consent is given for the use thereof that he CITIA should apply to a Judge for directions ?

Is it the practice of the CITIA to serve section 17 (1) notices on persons or entities who are the subjects of a request or requests as required by the provisions of this section? ? If yes how many such notices have been served by the CITIA?

Has the CITIA ever refused a request? and if so on how many occasions?

The CITIA is a body entrusted with very important  functions  and also to make very important decisions after following the provisions of the Law and the Tax Agreement and it is my hope that it will provide answers to the above questions.

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The good old days

What baffles me is that the same people condemning this generation are the same people that RAISED this generation. Ask yourselves, where did you fall short when raising us? What did you not do right when rearing us and "bringing us up in the way we should go"? The older generations complain about the younger generations but aren't you the ones who raised us, taught us, trained us? What could you and should you have done better?

The way I see it, if you all had done such a fine job as older people raising younger people then we wouldn't have turned out so bad. Not all of us are bad, just like not all of the older people are good.

Stop chatting to hear yourselves because it would seem to me that you all are intrigued by the sounds of your own voices rather than realizing that hindsight is 20/20 vision, and maybe you older folks as a collective bunch aren't so perfect and didn't do such a great job after all. Too late to correct that now, huh! Now it's left to us same young people to clean up ALL your mistakes and failures across the board, beginning with the Government and the community at large and identifying your shortcomings to ensure we don't make the same errors when raising our own kids, starting with sweeping their badness under the rug, which is what you all are good for doing.

But as usual nothing changes in Cayman. All you do is sit and chat among yourselves, saying bad things about this one and that one while forgetting that the majority of you are so virtuous and forthright as it would appear that you older folks were seemingly raised in a culture of sweeping your misdeeds under the rug and never again mentioning the family sins in order to keep up appearances so the person down the street couldn't have anything negative to say.

Tell me how many child molesters, pedophiles and don't forget murderers were roaming around in you all's generation? Didn't a guy stab up and chop up his own cousin (killing him) and stab the unfaithful girlfriend (nearly killing her) at a house in town "donkey years ago"? What about the guy that was chopped up in West Bay and left in the bush "donkey years ago"? Oh, because it was "donkey years ago" then that means its ok for you all to forget, I reckon.

You can't say, can you, because it was all swept under the mat and never spoken of again? Let's not mention the "cousin make dozen" relationships that were common knowledge to all and whispered about in hushed tones.

Stop acting like we young people are so horrid when many of the acts committed by your generation are just as bad, or so bad that they were unmentionable. I guess what the old people say is true — back in the day there was less street light and more bush, so you all could get away with virtually anything. 

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The economics of unemployment

Albert Einstein once remarked that if he were given only one hour to save the world, he would spend fifty-five minutes defining the problem and only five minutes working out the solution. How might Einstein’s wisdom be applied when it comes to solving the Cayman Islands’ unemployment problem?

According to the most recent Labour Force Survey (conducted in October 2012) there were 1,925 unemployed Caymanians in the Cayman Islands labour market. But consider for a moment the significance of the word “market”.

A market is a place where buyers and sellers come together to engage in an exchange of value – normally an exchange of money for goods or services – through which both parties benefit.

One of the most critical features of a market is freedom of choice. Sellers are free to decide what to make and how much to sell it for. Buyers are free to choose between quality levels and prices. If buyers offer a price that is too low, they will be unable to find a willing seller. If sellers set their price too high, they will be unable to find a willing buyer. 

Thus sellers are incentivised to compete against one another by offering the lowest possible price and best possible quality in order to attract a buyer. This process ensures that products and services in a free market offer a reasonable profit incentive for sellers, while offering the best possible price and quality to buyers.

Thus markets harness every human being’s natural instinct for self-interest to allocate resources, generate profit, reduce prices and increase quality of all the things we buy. Adam Smith, "the father of economics", termed this unseen, beneficent force “the invisible hand of the market”. When the things we buy become less expensive and better quality, the overall result is of course an increase in our standard of living.

It is worth considering what would become of a “market” without the key ingredient of freedom of choice.

If buyers did not have freedom to choose the product with the best value for money there would be no incentive for sellers to improve quality or lower costs in pursuit of sales. Instead, the same self-interest among sellers that would normally lead to competition would work in reverse. Sellers would become complacent, raising prices and having little regard for quality, which would be bad for buyers, leading to a decline in our standard of living.

That free markets generally lead to better outcomes and rising living standards is a matter of settled fact among economists. This is not to argue against regulation. Even in heavily regulated markets buyers and sellers have the freedom to choose what to buy or sell, at what price and whether or not to engage in a trade. Without such freedom, whatever we were attempting to describe would not be a “market”.

Coming back to the Cayman Islands employment market, an economist would define the problem as follows: 1,925 sellers of labour are not able to find willing buyers.

In order to gain a better understanding of why this might be, let’s consider the reasons a seller of any product might struggle to find a buyer. According to economic theory, there are only ever four possible factors preventing a seller from finding a buyer.

First, it could be because the price of the product is too high (a “price gap”).

Second, it could be because the quality of the product is too low (a “quality gap”).

Third, it could be because buyers are not aware of the product or have bad information that makes it appear unattractive (an “information gap”).

Fourth, it could be because there is insufficient demand for the product (a “demand gap”).  In other words there are too few buyers and too many sellers.

Some readers may believe they see another possibility, that the price being offered by buyers is too low. But it is the buyer’s prerogative to buy at the price they believe to represent the best value for money. And all potential buyers must unanimously agree the price is too high (if a single buyer disagreed, the product would sell). Can they all be wrong?

Moreover, the buyer isn’t the one that has a problem — his need is being satisfied by the market. It is the seller that has a problem — he can’t sell his product. Economic theory, not to mention common sense, suggests that anyone without a good reason to change his or her behaviour will generally not.

So, to recap, our hypothetical seller has four potential issues that are preventing his product from selling: a price gap, a quality gap, an information gap, and a demand gap.

Every unemployed Caymanian is in this exact same boat, each a seller of labour unable to find a buyer, afflicted by one or more of these issues to some extent. Therefore, the war against unemployment is a war on these four fronts.

Let’s consider the issues, and potential solutions, in more detail, starting with the demand gap. First of all, does Cayman have one? Yes and no.

While most western nations are suffering from relatively high levels of unemployment, the underlying problem in each nation is basicallyarithmetic – most countries simply have more people than jobs. The Cayman Islands on the other hand is in the unique and fortunate position of having more than twice as many jobs as there are citizens in the workforce. So rather than a lack of demand for labour as such, if anything, what we have is a lack of demand for work unemployed Caymanians are willing and able to do.

Yet because economic growth (the proverbial “rising tide”) benefits all Caymanians – the unemployed, the employed and business owners – it is not just important, it is imperative for the government to create jobs in order to maintain our current standard of living. For in a service-based economy such as ours, creating new jobs is the one and only means of sustainable economic growth. 

That is precisely why it is so important that the government come up with a new work permit system that guarantees employers either a suitably qualified Caymanian or a work permit for a suitably qualified expatriate (the current system does not). No company will establish itself or grow in Cayman if it cannot be assured of the ability to hire suitably qualified employees. 

While the new immigration system should guarantee Caymanians access to job opportunities, as well as protection from discrimination, it must not be so restrictive as to come at the cost of economic growth. Otherwise the system may give the appearance it is protecting Caymanians while in reality it is holding them back.

In any case, to the extent jobseekers suffer from issues under the other three fronts described below (price, quality and information), increasing demand in itself would have no impact on unemployment because the additional demand would more than likely lead to new work permit applications. While such economic growth would still, incontrovertibly, be a good thing for Cayman, it would be cold comfort to the unemployed.

Compared to the vexing challenges of the demand gap, addressing the information gap should be relatively straightforward.

While every job not already filled with a Caymanian is required to be advertised in the newspaper, this is evidently not sufficient.

The current fall-back is the National Workforce Development Agency (NWDA), the government department tasked with introducing unemployed Caymanians to potential employers (among many other things). But the NWDA is significantly lacking in resources – both technology and manpower – to deal with the current level of unemployment. The annual budget for the department, according to the latest Annual Plan, is a mere $835,000 (a small fraction of the $10 million annual subsidy to the Turtle Farm).

Even a modest investment in technology would help close the gap. For example, every job registered with the department could be listed online for unemployed Caymanians to browse and apply for directly. This would be cheaper, easier and faster than applying for jobs via newspaper advertisement and regular mail. Those without computer access should be assisted by the NWDA. After all, the information gap cuts both ways — unemployed Caymanians may not be aware of every available job.

Improving the flow of information between the unemployed and the employers is one battle; improving the quality of the information is another. The NWDA should provide resources to Caymanian jobseekers, such as resume-writing support and interview preparation, to enable them to put their best foot forward with employers. They could also provide helpful resources to employers, for example, to ensure they accurately describe job vacancies.

The third front of the war on unemployment is the effort to bridge the quality gap.

Of course improving the “quality” of labour means up-skilling, in other words education and training. While providing more full and part time vocational training opportunities would help, the government should be realistic about the prospects for addressing the current unemployment problem through up-skilling.

Unfortunately, for the many unemployed Caymanians with family responsibilities, receiving an income is probably a higher priority than receiving an education. And in any case, the best way for someone to up-skill is by gaining work experience on the job. Hence it may be necessary for those people to find a job with the skills they have today and seek opportunities to improve them tomorrow.

If other unemployed Caymanians are able to invest more of their time in education and training, they must be given both the opportunity, and the financial assistance, to do so.  But the outcome should be a skill that is in demand and a qualification that employers value. The government should partner with the private sector at every opportunity to ensure that is the case.

Unemployed Caymanians, for their part, should make sure they take full advantage of the training opportunities that are currently available.

While improving the quality of labour, through education and training, is of limited usefulness in addressing the existing unemployment problem, it is of course critical in preventing future unemployment. To that end the government should spend time considering what, if any, role historical shortcomings in local education have played in creating the current situation and ensure they are being addressed.

The final front of the war on unemployment is the most critical and the most contentious: the price gap.

As mentioned before it is almost impossible to persuade a buyer to change their behaviour to solve someone else’s problem. Therefore, no amount of “brow-beating” employers is very likely to succeed.

A better use of resources would be to change the economic calculation to make hiring unemployed Caymanians a rational way for employers to exercise their freedom of choice. That means closing “the price gap” between what buyers are willing to offer and sellers are willing to accept.

In fact, government is already lowering the price of all Caymanian labour relative to the market through work permit fees. Work permit fees artificially raise the price of all non-Caymanian labour by between 10 and 20%. But government can only increase permit fees so high before they become unbearable for small businesses and prospective inward investors. Most believe work permit fees passed that tipping point several years ago.

The introduction of a reasonable minimum wage would help, because, like work permit fees, it would spread the cost of bridging the price gap for the lowest earners among all buyers, rather than asking a small minority to pay over the odds. While such a measure is controversial in the business community, minimum wage laws have been introduced in most western countries without calamitous consequences.

Although it is somewhat unlikely that a person unwilling to work for $4 per hour would suddenly be motivated by the prospect of earning $5 per hour, unskilled Caymanians should not be made to compete on price with foreign workers prepared to live in squalor.

It would also be helpful for unemployed Caymanians to know the current market rate for their skill level. Some people that have lost lucrative jobs in declining industries may have unwittingly tied themselves to the mast of unrealistically high expectations. Others may have gone from job to job in the buoyant employment market of the 2000’s and failed to adjust their expectations to the “new normal” wage levels that have prevailed since the beginning of the global recession in 2009.

Whatever the reason, every unemployed person ought to know what the market considers a fair wage in order to know what wage to seek or accept. The NWDA, in cooperation with the private sector, should have resources that allow them to determine market salary levels with reasonable accuracy for jobseekers they assist. 

Any jobseeker unwilling to work at the market rate for their skillset should not be eligible to receive government assistance (from NWDA or Social Services). Neither should anyone else that is effectively unemployed as a matter of personal choice.

The most problematic subset will be those people no employer wants to employ at any price: the so-called and infamous “unemployables”. Those with deal-breaking criminal records or psychiatric problems; serial job hoppers; those without decent employment references; in short those most in need of government assistance.

Programs such as Passport2Success (which should be expanded in resources and scope) can go some way to addressing the quality gap for those people in terms of basic “employability skills”. 

However, the country will need to decide what is to become of these people. If the government wishes them to become productive members of society, it will need to provide a viable pathway to employment. This will involve a combination of remedies including counselling, social intervention and pro-active monitoring. But ultimately, some kind of direct government subsidy may well be required in order to provide private sector firms with an economic incentive to engage with government agencies and facilitate a return to work.

The alternative to providing a viable pathway to productive private sector employment is for such people to be marginalised and forced to live on government hand-outs indefinitely. It is surely better for the government to temporarily pay an employer to hire and train an unemployed Caymanian than to pay them to stay home.

While many will balk at the suggestion of any new investment designed to reduce unemployment (in the form of subsidies or new government resources), consider that the government rakes in more than $60 million dollars a year in revenue from work permit fees alone. Better to invest a few million dollars of that back into the Caymanian workforce than to decline, drive away or forgo a few million dollars worth of work permits in the hope that frustrated employers will suddenly “see the light” and hire people they have so far exercised their freedom not to.

After all, Einstein also said “the definition of insanity is doing the same thing over and over again and expecting a different result”. 

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