Editorial for 14 November: A hostile investment environment

Cayman Airways is losing more than $20 million a year and is
a serious drain on the country’s budget. In an ideal world, Cayman would find a
willing party to invest in Cayman Airways without controlling interest. 

Miraculously, such an interested party – the San Miguel
Corporation – has come forward and approached the government about investing.

Yet most of what we’ve been able to observe regarding that
proposal from a local perspective is disdain.

This huge conglomerate is the largest publicly listed food,
beverage and packaging company in Southeast Asia, employing more than 17,000
people across the Asia-Pacific region. The company also owns a 49 per cent
share in Philippines Airlines, the national flag carrier,

Once one of Asia’s largest airlines, PAL – as it is called –
had financial difficulties in the late 1990s and early 2000s. Now out of
receivership, PAL, with the help of San Miguel Corporation, is trying to regain
its former glory.

The airline is undergoing a fleet modernisation process and
this year alone PAL purchased 64 new Airbus aircraft for US$9.5 billion.

Despite its impressive expansion and the fact that PAL is
the only airline in the Philippines that has an internationally recognised
safety accreditation,it has a problem: The US Federal Aviation Authority
downgraded the Philippines aviation regulator in 2008, meaning no
Philippines-based airline can change the aircraft it is flying to the United
States or increase the frequency of its flights there. Cayman just might be in
a position to help PAL.

Getting involved with San Miguel and PAL could be a
game-changer for Cayman Airways and the country, especially since upgrading
Cayman’s aviation infrastructure is also a part of the discussions.

We would think the people here would be happy that the
government is finally doing something to address the perennial Cayman Airways
problem. Instead, it seems some – possibly with political agendas – want only
to criticise  without even knowing all
the details.

This situation is one of the reasons for our fear that
Cayman is becoming an increasingly hostile place for investors. With the way
things are going these days, it is really a wonder that Cayman gets inward
investment at all anymore.
 

 

0
0

10 COMMENTS

  1. Ridiculous! The government’s track record is so bad that it is impossible to imagine that this will be handled priperly. You in fact allude to the only reason PAL is interested–the possibility of making an end run around the US restrictions on PAL’s operations. Do you really think this is the way to go? or will it just cement Cayman’s reputation for tricky business.

    0

    0
  2. You must be nuts if you think people would be happy with this. I’d like anyone to show my one development or investment plan that the opposition or the people didn’t criticize. Any development or investment I’ve read about so far has always immediately generated a negative response.

    This is why I am sure the government keep these things under wraps, because I am sure they feel that the minute it’s made public the opposition and the people will do whatever they can to squash it.

    0

    0
  3. What concerns me are those who inflame voters with their us vs them rhetoric and now with radio platform they can give us their good old boy routine and tell how their father’s would throw some developers off the island.

    0

    0
  4. I quote:

    Despite its impressive expansion and the fact that PAL is the only airline in the Philippines that has an internationally recognised safety accreditation,it has a problem: The US Federal Aviation Authority downgraded the Philippines aviation regulator in 2008, meaning no Philippines-based airline can change the aircraft it is flying to the United States or increase the frequency of its flights there. Cayman just might be in a position to help PAL.

    The FAA has a problem with Philippines aviation regulator, and for a few dollars investment we stamp Approved by Cayman Islands Civil Aviation Authority on their documents and send them into the USA?

    I’m no financial genius, but any investment by San Miguel in a lost-making entity such as Cayman Airways must have seemed a cheaper alternative than trying to rectify the problem(s) at home.

    What happens if the FAA decides to take action against Cayman Airways and CICAA for assisting PAL in trying to circumvent their rules?

    I agree that there is no need to be hostile to investors, but at the same time commons sense should tell us to be wary of strangers bearing gifts.

    0

    0
  5. …Instead, it seems some – possibly with political agendas – want only to criticise without even knowing all the details…

    ————————————————–

    And the difference between some and the writer of this editorial is?

    0

    0
  6. I think San Miguel investment is for real business, to earn a profit and be exempt from Philippine taxation. The Wet leasing plan is only temporary, simply the ban against Philippine aviation is only temporary, and the fact they are building their own private international airport.

    Just imagine, the net income of PAL for its Manila US flights would trimmed down because of high cost of wet lease charges imposed by Cayman airways, low income means lower tax for Philippine operations.

    In return Cayman Airways will earn a lot because of wet leasing charges to PAL, and out of that income San Miguel Corporation will earn a fixed rate from preferred stock returns. Overall San Miguel will earn income from preferred stock free of tax, as a Philippine taxation rule income earn and consummated outside Philippine is exempt from taxa. I think San Miguel and Cayman Airways will be the winner.

    Tax free countries is nothing new San Miguel, their Vietnam operation was domiciled in BVI.

    0

    0
  7. Cayman isn’t just hostile to investment, but to them in general, as in us versus them. Rollover policy cast that attitude in stone and things have not gotten better since.

    I can only note the other major story of the day, McAlpine is downsizing, and for good reason.

    0

    0

Comments are closed.