The Chamber of Commerce already outlined a strategic approach to foreign investment promotion in 2001 in a detailed report. Although it was drafted in a somewhat different economic context, much of the analysis and many of the recommendations still apply today.
The main recommendation of Inward Foreign Investment Report was to develop an economic policy that will define the future strategy for the development of the Cayman Islands. This detailed strategy is still lacking.
The closest thing to an explicit economic policy is the Strategic Policy Statement required by the Public Finance Management Law, which sets out the policy and financial parameters government intends to use in preparation of the budget.
However, the SPS largely lists desired outcomes and initiatives rather than a detailed economic policy strategy. The economic policy should also investigate opportunities for the diversification of Cayman’s economy, the report said nine years ago.
The report proposed the establishment of an Investment & Business Development Council under the management of the Chamber. This idea has recently been taken up in a different form through the creation of a government department with the support of a public and private sector National Investment Council, a body of which the Chamber is a member.
Focus on key industries
The Chamber inward investment report generally advocates distinct measures and alternate approaches for each industry rather than a general strategy for the entire economy.
The economic policy needed to refocus on tourism and financial services as the two pillars of Cayman’s economy. In particular financial services businesses coming to Cayman should be encouraged.
The Chamber report outlined the benefits of international financial services firms coming to Cayman in terms of employment, government revenue and career and development opportunities for Caymanians. At the same time the report acknowledged a limited supply of labour in the sector in the Cayman Islands, requiring a larger number of expatriates to support these businesses.
Despite the social and political climate concern by the number of expats working in Cayman, the report made clear that the viability of Cayman’s economy depended on the financial services industry.
Local company control and licensing
Existing legislation and regulations governing foreign investments in local companies were not an issue, according to the Chamber, but the framework needed to be better explained and enforced.
Local Company Control Licenses should not be issued in certain restricted business sectors, the report recommended, naming explicitly water sports, real estate, restaurants and public transport.
The analysis explicitly endorsed the Local Companies Control Law, which provides that no company incorporated in the Cayman Islands shall carry on business locally unless it is Caymanian controlled and at least 60 per cent of the company’s shares are owned by Caymanians. While several exemptions apply, for example, with regard to financial services companies, the 60:40 local business ownership rule can work as long as it is properly regulated by the Trade & Business Licensing Board, the report said. It also pointed to potential and existing problems with “fronting”.
However, the investment report also called for an effective balance between private and public sector representatives on Trade & Business Licensing and Immigration Boards, something which has not been implemented.