Gonzalo Jalles, CEO of Cayman Finance, has called on government to do more to promote and defend the Cayman Islands financial services industry.
While the Cayman Islands government spends about $14.5 million to promote tourism, it does not have a comparable budget for financial services, in spite of the industry directly representing 52 percent of Cayman’s economy and 55 percent of all government income, Mr. Jalles said during a presentation at Government Financial Professional Development Week last week.
“The question is, are we doing enough to defend this industry?” Mr. Jalles asked.
Competitor jurisdictions like Bermuda, Guernsey or Jersey have promotional bodies that are financially supported by government. The budget for Guernsey Finance is about $1.3 million. Bermuda Pro Business has a budget of $4 million and Jersey Finance has about $6.4 million available to promote its jurisdiction.
Guernsey Finance, for instance, asked for more government funding, he said, because the association realized “they are not selling at the same pace as Jersey.”
In November, Cayman Finance signed a memorandum of understanding with government on government-private sector consultation on industry-related issues, such as new legislation and prospective products.
The agreement established Cayman Finance as the voice of the industry, charged with representing the diverging views across the financial services sector, and sets out joint initiatives between the association and government, including attending conferences, managing international public relations and hosting local seminars.
Mr. Jalles said much has been achieved in the past six months. “I am incredibly grateful to the government and optimistic that we are on the right path. But there is a long way to go.”
The agreement with government contains for the first time a small financial commitment by government, but Cayman Finance aims to get to a point where the association can undertake as much active promotion as competitor jurisdictions.
These initiatives will always be majority private sector funded and not require a government budget “even remotely close to what we spend on tourism,” Mr. Jalles said.
However, Cayman Finance does not have enough funding by itself to organize road shows and other promotional events. At the same time, the association does not want to make membership mandatory as is the case in Guernsey.
Business development agencies
Industry figures have been calling for the establishment of a promotional agency for some time. Steve McIntosh, head of offshore recruitment firm CML, says Cayman is the only serious offshore financial center in the world without an official business development agency.
Cayman Finance was not initially intended as a channel for inward investment, and so far it “lacks the government mandate and financial backing to play that role,” he said. The Department of Commerce and Investment, in turn, is more concerned with small business incubation.
Development agencies are typically funded in part by government but independently managed. Advocates for such a body highlight that development agencies are often the first contact point for companies considering where to set up their business.
“They roll out the red carpet for decision-makers, articulate the value proposition to the investor and do what is required to close the deal,” Mr. McIntosh said.
He added that one of the first acts of Bermuda’s new government was to “create a development agency, fund it with $4 million and hire someone with a great deal of experience and a successful track record – Stephen Lund, the former CEO of Nova Scotia Business Inc. – to run it.”
Nova Scotia’s regional development agency was coincidentally responsible for attracting a large number of fund administrators to Canada in recent years, causing the direct loss of fund industry jobs in Cayman.
Mr. Jalles said government needs to make a commitment to the promotion of the finance industry, and Cayman Finance would be the vehicle to undertake much of the promotional activity.
The available models from direct governmnent funding of Cayman Finance to sponsoring activities together have pros and cons. Direct funding would result in a stronger relationship but could potentially hamper the independence of the private body when it speaks on behalf of the industry.
“The point is, government needs to endorse that they want one voice from the private sector, [which it has done with the MoU]. And they need to support the promotional activities of that body,” Mr. Jalles said.
Cayman Finance also wants the ministry of financial services to be part of promotional events because investors want to hear about the opportunities for doing business in Cayman directly from the government.
Certain joint initiatives are already under way. “At the moment we are trying to organize a road show in New York around a big hedge fund conference, and we want the minister [of financial services] to speak there.”
Mr. Jalles said he understands government’s budgetary constraints and suspects that many of the budget items had been forced on government. But if a government budget is planned from scratch, he said, he could not see how one could argue that it does not make sense to defend and promote the financial services industry.
“It should be a joint effort. In the end you promote a brand that is Cayman.”