Miller: Cayman Airways, Turtle Farm should be privatised

Former Miller Commission chairman “disappointed” by lack of action

James Miller, the former chairman of the Miller Shaw Commission, said while he cannot expect the Cayman Islands government to follow the recommendations made in his report in February 2010 on how to put the islands’ government finances on a sustainable footing, he is nonetheless disappointed by the lack of implementation. 

The commission was appointed in 2009 to assess Cayman’s fiscal situation and economic health following the global financial crisis. It concluded that the main obstacle to restoring government’s fiscal financial balance was, among others things, the “crippling”, “excessive” and “unsustainable” personnel costs.  

Mr. Miller and fellow commission member David Shaw advised against the introduction of additional revenue measures, in particular direct taxation, and recommended major spending cuts, the privatisation of government-funded enterprises and the sale of government assets.  

“I have no right to expect, much less demand, that Cayman follow the recommendations we made,” Mr. Miller said while speaking at the Cayman Financial Review Speaker Series on Monday, 8 April at the Westin Grand Cayman Seven Mile Beach Resort & Spa.  

However, the difference between the positive reaction to the report by lawmakers and the actual actions taken on the recommendations, which would “lead to an improvement in the lives of Caymanians”, left him dissatisfied, he said.  

“And in that respect I have to tell you that I am disappointed, especially given that, at least by perception, both parties in the legislature welcomed the report and endorsed its findings. They made statements about carrying out many of its recommendations. So the rhetoric was much greater than what actually happened and that’s very disappointing.” 

Following the release of the report, the Cayman Islands government refrained from introducing direct taxation, but increased a wide range fees and levies, including work permit fees, against the advice of the commission’s report. At the same time, no successful efforts were made to privatise government-funded entities.  

Asked what his specific recommendations for privatisation would be, Mr. Miller mentioned Cayman Airways and the Turtle Farm.  

“I don’t see any reason for Cayman to have an airline,” he said. “It should be privatised. I don’t see any reason for [government to be involved in] the Turtle Farm. It should be privatised.”  

Other projects that should be pursued with private sector involvement are the expansion of the length of the airport runway and the berthing facilities at the George Town port, Mr. Miller said. “Why was it not done within the last three years?” 

Mr. Miller admitted that he has not closely followed the measures taken to cut government’s operating costs, but he said he believes some progress has been made to reform civil service pay and numbers. “So I am pleased about that.” Mr. Miller, who from 1985 to 1988 was director of the US Office of Management and Budget as well as a member of President Ronald Reagan’s Cabinet and a member of the National Security Council – and during this time able to shrink the US government – said he was struck by the similarities of the problems in the US and Cayman.  

For the Cayman Islands, Mr. Miller advocated a constitutional amendment to fix the size of government as a percentage of gross domestic product and put in place procedures to confine spending, including the cost of regulation, to this limit. Currently, the framework for fiscal responsibility, which was passed into law last November, only restricts the amount of debt financing for core government, statutory authorities and government companies in relation to core government revenue. 

In addition, government should incorporate in each budget the cost of future liabilities, including those of civil servants’ retirement and health care, Mr. Miller said. “Businesses do this all the time. Governments can, too.” 

A valuation of the post-retirement healthcare benefits for civil servants completed in 2004 valued the accrued liability for post-retirement healthcare benefits for retired and current public servants and eligible individuals no longer employed by the public service to be about US$798 million. This is likely to have increased according to the offering memorandum released by government as part of its government bond issuance in 2009. 

Reiterating his previous recommendations, Mr. Miller said government should complete all outstanding audits, keep them current and address all deficiencies immediately. He also reminded the Cayman Islands government to be mindful of the six principles of responsible financial management included in the Public Finance Management Law. “You are not meeting them all,” he said, referring to the rules requiring a net debt of no more than 80 per cent of revenues, a budget surplus and the maintenance of sufficient cash reserves. Government was not compliant with the three rules at different times during the past budget years.  

Finally, Mr. Miller said Cayman should resolve to end deficit finance and pay off government debt within a short time period of five to 10 years, and resolve never to rely on deficit finance again. “Following these suggestions will not be easy, I am sure, but the rewards for your children and grandchildren will make it more than worthwhile,” he said. 

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7 COMMENTS

  1. … Mr. Miller is not a candidate in the upcoming elections. Bet he’d boost the Islands’ economy and fix the government’s finances in no time. For the benefit of ALL Caymanians, including children and grandchildren!

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  2. Someone look at the number of planes flying many years ago with 74 employee’s and now I believe CA has well over 300 employee’s ! This is how government works ! Expands and loses money when running a business !!!

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  3. My suggestions would be that the Cayman Islands government LEASE out the turtle farm, with exceptions, understanding that Caymanians are given the first choice of working there and Caymanians are allowed to buy turtle meat for food. Not for some foreign company to use the products for Viagra and to cure wrinkles. There is much we are not aware of.

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  4. To fill in some information for Mr. Miller on Government asset divestment and privatization since the Commission report. Mac tried to divest the Water Authority sewer assets. Unfortunately, he charged WAC itself with carrying this out. Of course the technocrats at WAC in their own self preservation interests stacked the deck in the bidding process and successfully scuttled the sale. Then once that was done, to add insult to injury for the general public, awarded themselves a 10% increase in sewerage fees and added an energy surcharge to bills in November last year. Elected Government is not the only obstacle to change.

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  5. Hunter, in regards to your comments on Leasing out the Turtle Farm, I have to ask you a pertinent question. How do you propose leasing out the Turtle Farm, given the current level of expenditures for the organization? Currently the expenses generated by the entity far exceed the revenues taken in which is why the Turtle Farm lost over 9.75M last year alone. In the article written by Brent Fuller on 9 April, the last four years have reported a total loss of nearly 40M. Any educated investor, be it Caymanian or not, can see the math just doesn’t make sense. Why would anyone invest in a business that they were just going to lose money on? The government would have to lease out the organization at a loss, which defeats the purpose anyhow. Although you may not agree with the recommendation put forth by the audit, these individuals are very highly educated people who are trained at correcting fiscal policy and came to these conclusions after countless hours spent analyzing the financial data. In a perfect world, leasing the Turtle Farm would be a wonderful idea but the reality of it is that it is just unsustainable as is. The only hope is to sell it off (at a loss, none the less) to another investor who can maybe find some way to make a go of it, either by cutting costs, raising revenues or offering new business uses – whatever the case may be.

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  6. I would like to hear what the UDP, the PPM and the C4C have to say about this report and if they will follow the suggestions put forth.
    Ask each candidate if they agree and support this report and its recommendations.

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  7. Caymaniangirl @heart sorry I love you but cannot agree with you on this one. Cayman has already sold too much. When something is sold it is sold, and the property of someone else. I could never agree with selling it. That is so horrible, and do what put up another condominium. No, as far as I can remember we had a Turtle farm and I think we should keep the turtle farm. Maybe the dolphin park could go because dolphins are not native to cayman. Caymanians do not even go to see them. Cayman was once called turtle Island. We survived of turtle meat and its products from ancient days. If you are a Caymanian girl with a heart how could you have the heart to sell it off. No, I say find a way to make it work. We never fail until westop trying.

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