Time to end Cayman-style prohibition

This one’s been on ice long enough.

Minister of Commerce Wayne Panton is absolutely correct in his assessment, informed by a committee he convened on the topic, that the government’s sustained moratorium on issuing new liquor licenses has created a “black market” where the licenses — which have no legal monetary value — are rented and sold at exorbitant prices.

Presumably, the original aim of the moratorium was to prevent the country from being overrun by seedy clubs and fly-by-night rum shops, and probably also to insulate Caymanian establishments from new foreign competition. In other words, Cabinet wanted to maintain control of the local liquor industry.

That may have been lawmakers’ intent, but that’s not what happened. As is often the case with government overreach, the clampdown on free enterprise presented opportunities for creative entrepreneurship, and the black market was born.

Rather than limiting the size of the local liquor market, the moratorium has created a secondary market driven by demand arising from the “artificial scarcity” of licenses.

Suddenly, it made more economic sense for many license holders to shut down their own businesses (or never open one up in the first place) and rent or sell their licenses to somebody else. Instead of preserving the market share for small mom-and-pops, the moratorium has led to greater and greater accumulation of the finite number of licenses by the biggest industry players. The Dart Group, for example, over the years has acquired dozens of licenses, for both existing and future operations.

Meanwhile, the moratorium has barred entry to the industry for locals who can’t afford to pay tens or hundreds of thousands of dollars for a license on the black market, just for a shot at opening up a business.

Minister Panton and his Department of Commerce and Investment deserve credit for finally responding to businesses’ complaints about apparently arbitrary regulations and seemingly capricious decisions from the Liquor Licensing Board, where the majority of members are either license holders themselves or are directly related to one.

Cabinet should follow the committee’s recommendation to end the liquor license moratorium, and should give serious consideration to restructuring completely the current liquor licensing regime, starting by abolishing the board entirely or else relegating it to an advisory and appellate role.

Government reformers shouldn’t stop there.

In addition to the liquor business, government should investigate the “60/40” Caymanian ownership requirement for local businesses. Like the liquor moratorium but on a grander scale, the 60/40 rule is a government-created fiction that has become an income source for many Caymanians who, contrary to the law, collect payments from their supposed “business partners” without actually contributing anything to the business other than their immigration status.

Rather than imposing restrictions on business ownership, our government should be encouraging entrepreneurship, regardless of nationality, at every reasonable juncture. The motivation behind exclusivist rules may be to protect and preserve, but the result is to constrain economic activity that is so vitally needed to fund government and provide employment opportunities for the Caymanian people.

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