There’s been a lot of talk in recent years
about the need to diversify Cayman’s economy.
The financial crisis that began in 2008 has
challenged the idea that Cayman can derive enough revenue from its two economic
pillars – tourism and financial services – to sustain the country’s long-term
needs, especially in times of recession.
Some people have argued the current
financial doldrums are just part of a natural economic cycle and that one day,
things will be as good as they were before. However, for those watching how the
world economies – including the great United States – have struggled to control
debt in the post-financial crisis era, it is becoming very apparent that a
return to ‘business as usual’ is not going to happen.
The Cayman Islands are particularly
vulnerable to the new paradigm because it lacks an export base and its only two
industries are affected greatly in times of recession. In addition, pressures
on offshore financial centres, new tax initiatives coming out of the US and
directives in Europe aimed at hedge funds are all taking their toll on Cayman’s
financial services industry. While most
industry professionals still believe Cayman can remain a profitable offshore
financial services provider, few think it will ever return to its previous
levels of success.
Now Cayman’s tourism industry is looking at
dwindling cruise ship visits, especially in the summer. This is partially
because of a lack of a cruise berthing pier, but also because cruise lines are
choosing to reroute their ships out of the Caribbean in the summer.
What all of this means is that Cayman can
no longer expect the financial services and tourism industries to keep us in
the lifestyle to which we’ve become accustomed. This is not only true in
recessionary times, but in good times as well.
If Cayman wants to create an economy that
can sustain itself and avoid the complicating ramifications of direct taxation,
then Cayman must diversify its economy. That might prove easier said than done,
especially with groups of protesters lining up to object to every proposal made
that would bring change – however much needed – to the Cayman Islands.