Cruising toward 
public/private
 partnerships

Sink or swim, the economic fate of the Cayman Islands could very well be determined by a handful of major capital projects that the government will have to contend with in the new year.

Proposals to develop facilities for education, waste management and tourism all have their merits and are urgent to some degree, but to execute them all will cost many hundreds of millions of dollars – money the country simply does not have.

With the ill-advised $100 million-plus Clifton Hunter High School already on its balance sheet, the Progressives government made it a top post-election priority to, almost cavalierly, discard the Dart Group’s solution to the George Town dump environmental disaster. Then it turned its attentions to building cruise berthing facilities and expanding Cayman’s airports. The issue going forward isn’t the desirability of the projects themselves. It’s that government just doesn’t have the money and, because of the U.K’s Framework for Fiscal Responsibility agreement, can’t borrow any more.

That leaves government with only two options: Work with the private sector, or, don’t pursue the project. The latter choice may be the correct – and more courageous – one if the drawbacks of a project rival or surpass its benefits.
Government officials ought to keep that in mind as they begin negotiations with the cruise industry on berthing facility in George Town.

On Boxing Day, the country got a glimpse of the future when six cruise ships brought nearly 19,000 tourists to the shores of Grand Cayman.

The result, chaos, was predictable. George Town’s infrastructure is simply not capable of accommodating that many pedestrians, even on a holiday when most residents weren’t commuting to work. According to PwC consultants, the waterfront requires $15 million to $20 million in upgrades – apart from and in addition to the costs of the cruise dock itself, private investments in downtown businesses and relocating the cargo port in the future.

If the government is going to sign us up for a long-term obligation with the cruise industry, then it needs to be comfortable the country is prepared for the consequences of so-called success. Worst-case scenarios also need to be examined soberly.

Judging from news accounts of cruise deals gone south in the Caribbean and U.S., our government is being prudent by insisting on certain parameters to discussions with a cruise industry partner, such as no public financing, no shore-side retail development and retaining government control of the facility.

Tourism Minister Moses Kirkconnell is correct when he says that Cayman isn’t at a complete disadvantage at the negotiating table with the cruise companies – after all, Cayman’s geography and reputation are what make it an attractive destination, even with tendering.

“We do hold some cards here,” he said.

Nevertheless, we are reminded of a cautionary tale – more of a joke really – of how to learn to shoot pool really fast: Go into a rough, tough pool hall and shoot for money.

And, if you want to learn how to shoot pool even faster: Go into a rough, tough pool hall and shoot for money – when you don’t have any.

That’s the position Cayman will find itself in at the negotiating table in 2014 as we explore major public sector/private sector partnerships. We may hold “some cards,” as the Minister says, but our potential partners hold most of the chips.

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3 COMMENTS

  1. We need to do something The cruise ships are a big part of the life blood of this island. They generate thousands of jobs. If we build the dock the money will come to fix up the downtown.

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  2. @Bruce
    The point of the article is that the well is almost dry so the Government must be careful to direct its attention to whichever projects yield the best return on their investment of ‘your’ (public) monies.
    While the cruise ships may deliver a huge (even overwhelming) number of people to Cayman – those customers do not spend much per capita.
    Those tourists who arrive by air, while only making up around 20 of the total travelers to Cayman, outspend their waterborne contemporaries by about 12 times!
    Cruise ships contribute $100M to the economy vs. $300M from the much smaller number of air travel visitors.
    Assume you wished to grow the Cayman economy by $100M.
    Either you could DOUBLE cruise ship arrivals or increase air arrivals by a third…
    The island would cope much better with the latter option, indeed the extra cruise ship traffic may detract from the air travelers experience that the nett result is more of them stay away.
    That is why the CIG needs to consider its options carefully and prioritize spending where it will create most growth and generate most jobs.

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