There’s long been talk of diversifying Cayman’s economy into areas beyond finance and tourism. The Future of Cayman initiative aims at translating those long-held intentions into actions.
In a nutshell, diversifying the economy entails growing industries that are new to the jurisdiction or still undeveloped. It is a goal that is challenging even for large nations, not to mention a small territory with scant natural resources such as the Cayman Islands.
While the Future of Cayman driver group dubbed “Diversify the Economy” is still in a nascent stage, the Government is already making moves in that direction, for example striking deals to generate medical tourism and create a special economic zone to attract so-called ‘knowledge-based’ corporations.
The driver group has the following mission: “In response to evolving global economics and the new financial challenges placed on us and other countries around the world, we must look beyond our traditional industries and innovate. Economic diversity is critical in today’s market and exploring opportunities in medical tourism and other new industries will be key in establishing a sustainable and prosperous future for generations to come.”
Under that heading are three main objectives: “Promote business development as a vital strategy for Cayman’s future success”; “Leverage Cayman’s legal and physical
infrastructure”; and “Attract new industries and grow globally competitive business, investment and tourism that can create new jobs and business opportunities”.
Each of those objectives is broken down in multiple actions, for instance, “Facilitate the introduction of medical tourism sector by passing tort reform and enabling legislation for organ and tissue transplant.”
That action is directed specifically at the Narayana Cayman University Medical Centre, a proposed $2 billion medical centre slated to be built in stages during the next 15 years, with the first phase consisting of 140 beds. Ultimately, the medical tourism facility by Indian Dr. Devi Shetty would comprise a 2,000-bed tertiary care hospital, an education facility, a biotech park and an assisted living community.
The government has already passed a number of laws to help pave the way for the establishment of the hospital, including the Health Practice Law, which enables medical staff trained in India and other overseas countries to practise in Cayman; the Tax Concessions (Amendment) Law, which exempts companies from potential future taxes; and the Medical Negligence (Non-Economic Damages) (Amendment) Law, which caps pain and suffering damages awarded in medical malpractice cases to $500,000. A final piece of legislation, which will allow human organ and tissue donations and transplants to be done in Cayman, was expected to be tabled before the end of 2011.
In early August, Narayana group local director Gene Thompson and developer Joseph Imparato issued a joint statement saying an agreement had been reached to locate Shetty’s health care city on 600 acres at High Rock in East End. According to the statement, discussions had been going on for more than a year; although, as recently as June, Imparato had held a public meeting about a proposal to locate a sea port in that area, which he owns. Thompson said work on the site would begin before the end of 2011.
The hospital developers said the site is ideal due to its high elevation, offering natural protection against flooding, and due to its size, allowing for future expansion. Additionally, the developers said the site’s proximity to deep cold seawater may allow engineers to employ an energy-saving form of air conditioning called Seawater Air Conditioning System, with cost savings projected at near 70 per cent compared to conventional technology.
At the time, Imparato said he still believes in the idea of an East End seaport and was disappointed that residents reacted critically to his proposal, which would have allowed cargo facilities to be relocated away from George Town.
Cayman Enterprise City
Also on tap for the eastern part of Grand Cayman is a vision to establish a special economic zone called Cayman Enterprise City. Modelled after projects in places such as Dubai, the zone is intended to entice major corporations to Cayman using the allure of tax freedom and well-developed infrastructure, the same assets that have enabled the growth of Cayman’s financial services and legal industries.
Enterprise City will consist of five elements – Cayman Internet Park, Cayman Media Park, Cayman Biotech Park, Cayman Commodities Park and Cayman International Academic Park – in a 500,000 square-foot, low-rise campus in the eastern part of Grand Cayman. The announcement of the actual physical location of the site, the first phase of which is 150,000 square feet, was anticipated to occur in the fourth quarter of 2011, with a groundbreaking expected in the first quarter of 2012.
In its final form, the campus could accommodate some 1,200 businesses, generate US$9.8 million per year in government revenue and contribute US$500 million in annual GDP.
Cabinet officials approved a definitive agreement with Enterprise City in July, and lawmakers unanimously approved enabling legislation in late September.
Introducing the Special Economic Zones bill to the House, Premier McKeeva Bush said, “This is an exciting and important project for the future of the Cayman Islands and presents an opportunity for our jurisdiction to grow into several new industries that will complement our strengths in Financial Services and Tourism. This project will lead the way in the diversification of Cayman’s economy and enable our nation to compete on an even footing in the global arena in new future-proof technology based industries.”
Construction of the Enterprise City Campus is expected to total $327 million. During the first phase of the development, 900 new jobs will be created, with the first 800 or so related to construction. Additionally, while the campus is being built, Enterprise City tenants can rent existing space in George Town from Caymanian landlords.
New supports old
The point of diversification is not simply to attract new industries for the sake of attracting new industries. Rather, the new sectors will provide the jurisdiction with a more stable economic base, to the benefit of existing industries as well. For example, employees in the new sectors would spend their earnings in local restaurants, in hotels for ‘staycations’, in stores, to buy homes, etc.
A primary beneficiary of any new development, is, of course, the construction sector, which has suffered in recent years by the general economic slowdown. According to government statistics, the construction industry’s contribution to Cayman’s GDP in 2010 was about $76 million, a 45 per cent decline since 2007. More than 4,600 work permits were issued for construction work in 2009, a 28 per cent decline since 2007. The number of work-permit holders has only declined since that time.
Overall economic stability is especially desirable given the nature of Cayman’s key sectors of finance and tourism, both of which are at the mercy of external factors beyond the jurisdiction’s control. The financial services industry’s fate is largely in the hands of global economic conditions, as well as large countries’ regulatory decisions. Tourism, meanwhile, is also influenced by how much disposable income foreigners have, in addition to variables such as the weather.
According to a 2009 study commissioned by industry associations, financial services accounted for 55 per cent of the country’s GDP, when factoring in direct, indirect and induced impacts. The financial services industry directly supported 5,700 jobs (16 percent of all employment) and supported nearly 13,000 jobs in all (36 percent) in 2007, according to the study – which included in its calculations sectors such as banking, insurance, legal services, fund administration, accountancy and related regulation and support.
The World Travel & Tourism Council calculated that in 2011 travel and tourism will directly contribute $160 million to Cayman’s GDP (or 7 per cent of the total), and that the sector’s total contributions, both direct and indirect, will be $540 million (or 24 per cent of the total GDP), according to the Council’s recent annual economic impact report.
Tourism’s impact reverberates through local hotels, restaurants, bars, retailers and providers of other services that visitors consume while on Island. According to the report, travel and tourism will directly generate 3,000 jobs (more than 8 per cent of total employment) and contribute 8,000 jobs in all (26 per cent of total employment).