Cayman can’t have it both ways anymore

The Miller Report has confirmed
what we already knew, but always need an outsider to confirm; that Cayman can’t
have it both ways. We can’t maintain the current size, pay and benefits of the
public service and, at the same time, continue to ensure the shrinking of the
private sector by the increasing the refusal of: (a) work permits, whether it
is an initial application or a renewal; (b) applications by employers to have
employees designated as “key”; and (c) applications for permanent residence.

Let me say that I am not in favour
of significantly downsizing the public sector at this time; with the private
sector in retreat because of excessive bureaucracy, there would not be any jobs
for the Caymanians who found themselves unemployed. I am in favour; however, of
having public servants pay one-half of health insurance and pension
contributions. I am also in favour of significantly cutting government
expenditures; a line by line analysis of the Appropriation (July 2009 to June
2010) Law, 2009 would lead to many such reductions.

With respect to the shrinking of
the private sector, statistics recently released by the Economics and
Statistics Office how that, between 30 September, 2008, and 30 September, 2009,
2,488 work permits were lost. As stated in an earlier letter, conservatively
estimated, each work permit lost means a loss to the economy of $39,000;
therefore, the Cayman economy, from 30 September, 2008, to 30 September, 2009,
lost in excess of $97 million dollars. If we add in the work permits lost since
30 September, 2009, estimated at a 1,000, the Cayman economy has lost in excess
of $136 million since 30 September, 2008. This does not include the direct loss
to the government in revenues from permits, fees and duties, which the Miller
report estimates at $12,500 per year per lost work permit.

Commentators have tried to
soft-soap the loss by saying that the “demand” for labour has gone down. In my
opinion, this is not true. The demand has stayed the same (and, if given the
chance, would increase); employers do not submit applications and funds, after
having advertised, if they do not need the employee. What has gone up is the
number of refusals; this is exactly the wrong thing to do. We have shot
ourselves in the foot (and perhaps higher up).

The Solution

We are in the middle of a
self-induced economic and moral crisis. In my opinion, employers are stealing
the health insurance and pension contributions of employees to be able to stay
in business. Ex-government employees, according to the auditor general, are
stealing government gas. Government is stretching payment to its private sector
suppliers to intolerable levels and shooting the messenger. What kind of an
example is being set for our youth?

There is no use in reshuffling the
deck chairs on the Titanic; bold action is required and our politicians have to
level with the public. There has to be a realisation that only by growing the
private sector will the private sector be able to provide the jobs and the
revenue needed to keep Caymanians employed and the government functioning. What
we need is for bureaucracy to get out of the way. This is what the premier is
saying and he is correct.

In the short term, we need to: (1)
increase the number of work permits immediately; (2) make public servants pay
one-half of the contributions to health care and pensions; (3) sell
non-performing assets in businesses where the government has no business. Such
sales are being undertaken by various states such as California and countries
like Greece and Portugal; (4) re-centralise government functions; (5) examine
line by line what the government pays for outputs and cut where necessary; (6)
centralise purchasing for all of government with strict cost containment
measures. A department that needs to copy four pieces of paper a day doesn’t
need a $15,000 copying machine (and so on); (7) ask public servants for their
input, on a confidential basis, for cost-containment and performance-improvement
measures; and (8) go to each significant private business on the Islands and
ask  what measures are needed to double
the number of employees.

In the medium term, we need a
re-examination of the concepts in the Public Service Management Law. It is
obvious that the concept of the government buying outputs from each department
results in a lot of time being spent thinking up outputs which are not
necessary. We also need to look more carefully at where investment might come
from in the future. Hong Kong is not the place; Taiwan is.

There is urgency to solving the
current economic and moral crisis because the idea that Caymanians will be able
to find jobs in an ever shrinking private sector maintain the highest standard
of living in the Caribbean and maintain the public service at its current size,
with existing benefits, is an exercise in self-delusion. The ESO pointed out
happily that, between 30 September 2008 and 30 September 2009, domestic credit
granted by commercial banks in the Islands increased by 17 per cent. In my
opinion, this just means that Caymanians have gone further into debt to support
their lifestyle in the same way that the government has gone further into debt
to support the public service at its current size while encouraging the
departure of many hard working permit holders.

Paul Simon