Cayman Islands Monetary Authority Chairman Tim Ridley stressed the importance of Cayman’s financial services industry during a speech last Thursday made to the Rotary Club of Grand Cayman.
Making it clear from the onset that his remarks were personal and not the official views of CIMA, Mr. Ridley noted there have been expressions of dissatisfaction with the financial services industry and questions about its contributions to the Cayman Islands.
‘I consider these criticisms to be broadly unwarranted and unjustified,’ he said. ‘One only has to look at other small islands in the Caribbean and elsewhere to see the value of the financial services industry. It is that industry, not tourism, that has given the Bahamas, Bermuda, the Channel Islands and the Cayman Islands such high per capita [Gross Domestic Product].
‘After all, places such as the Dominican Republic and Jamaica dwarf us in terms of its total tourism activity; not so in per capita GDP.’
Mr. Ridley said there were a number of things that could be done to make sure the broader community understands and remains convinced that the financial services industry is critical to the well-being of the Cayman Islands.
‘First, I hope that we will see this year a broadly-based study showing the detailed economic impact of the entire financial services industry.’
Mr. Ridley said the financial services industry contributes more than direct revenue to government through fees.
‘The indirect benefit is significant – from customs duties and stamp duties to the car dealerships to the construction industry to the supermarkets.’
Mr. Ridley said many unrelated businesses benefit indirectly from the financial services industry and their owners often appear to be unaware of what drives their business and employment.
‘The car dealers, the construction companies, the supermarkets and so forth all feed at the table of the financial services industry,’ he said. ‘And if anyone is in doubt, cast your mind back to post-Hurricane Ivan. It was the financial industry, not the tourism industry, that kept the Islands going, paid the insurance claims and got the infrastructure rebuilt.
‘Employers of all kinds should regularly remind their staff who is the primary business generator for the Islands.’
Mr. Ridley pointed out that the financial services sector provided ‘responsible employers and quality employment opportunities, in contrast to the comparatively low-paying and seasonal jobs in the tourism sector.’
Concerning outsourcing, Mr. Ridley said people in Cayman had to accept it as a fact of life.
‘For Cayman to compete with low-cost centres in terms of labour – such as India – will always be a futile exercise,’ he said. ‘Protectionism is not the solution. Rather, we must focus on providing excellent service to high value-added business that uses as little labour as possible for the dollar produced.’
Mr. Ridley said Cayman needs to improve its efficiency and make greater investments in education, training and technology.
‘And it means our leadership must be willing to inform and educate our voters as to the way forward and not simply to respond to the short-term emotions of the electorate in order to secure their votes.’
Mr. Ridley also said competition, not more regulation, was the key to improving banking and insurance services for the consumer.
‘Market forces operating under a light-touch risk- based regulatory regime produce efficiencies and benefits for all,’ he said. ‘There is no reason in principle why qualified mortgage banks, car finance companies, internet banks or insurance companies should not enter the market in Cayman.’
With regard to having the Cayman Islands dollar tied in value to the now-weakened U.S. dollar, Mr. Ridley said it made compelling sense, given the dynamics of the Cayman economy.
‘But that necessarily means local interest rates for loans and deposits will be broadly similar to U.S. dollar rates, both upwards and downwards,’ he said. ‘The current weakness of the US and Cayman dollars should be used to market the improved value of our prices to those from Canada and Europe in particular.’
Mr. Ridley acknowledged that there were still some inequalities in Cayman.
‘This is not inherently wrong as long as society as a whole gets richer, there is a safety net for the very poor and everyone has an opportunity to climb up the ladder,’ he said. ‘So we must strive better to use our wealth generation powers to assist our less well-off residents, to provide better education and training and to better provide possibilities for advancement.’