Fund aims to bid on capital projects
An infrastructure fund that will allow Cayman Islands residents to invest in major capital works will be registered with the Cayman Islands Monetary Association in January and will be in a position to bid on public and private sector projects in 2015, according to its founder.
With massive infrastructure upgrades required and major privatization of government services under consideration, Bo Miller believes his fund could help create new jobs and stimulate an “economic boom” in the territory.
Also involved in the fund as directors are Ian Wight, a former partner at Deloitte, Samit Ghosh, head of structured finance at HSBC, and Heber Arch, of construction firm Arch and Godfrey.
Mr. Miller said his fund would aim to provide more reasonably priced financing for capital projects and allow Caymanians to take ownership of the country’s future development.
“From sewage to waste management to the road network and the airport and cruise terminal, there are around $1 billion in public infrastructure works required,” said Mr. Miller.
“The EY report is there. It recommends major privatization of many government entities. If you are going to privatize, isn’t it better to have your own people own it?”
The basic principle is simple. Local people get first option to contribute to the fund, which invests in public-private partnerships that can’t currently be financed by government, taking a share of the revenue stream for its investors.
Mr. Arch said the cruise terminal, for example, could be financed through the fund. He said the revenue from fees levied from cruise lines, which currently go to tendering companies, and a share of the government head-taxes could yield a solid return for investors in the region of 5 percent to 10 percent.
Mr. Miller said tapping into the estimated $10 billion in savings kept in Cayman banks to fund projects locally would create an economic “virtuous circle” where the proceeds of the development stay on island.
“This model allows every single person to be owners and investors instead of spectators,” he said.
Mr. Miller has enlisted the expertise of a slew of blue chip financial services companies, including Walkers Global and KPMG, to help establish the fund. Andre Wright, a former Wall Street investment banker who is now president of the Standard International Group, a financial advisory firm focusing on emerging markets, including the Caribbean and West Africa, is also on board as a consultant.
Mr. Miller said the focus of the fund would be on the Cayman Islands. But he acknowledged there were no guarantees that it would win any government contracts through the open tendering process. He said it could also be used for similar development in neighboring countries, including Jamaica and Bermuda, which have similar issues with funding large capital works through government revenues.
Mr. Ghosh, also a director of the fund, said the concept and structure would be no different than the 10,000 funds already established in Cayman. He said the concept is simply being applied with the intent of investing within Cayman rather than overseas.“We are not trying to fool the Cayman people. We aren’t doing anything radically different, and we aren’t going to be able to do these projects significantly cheaper than anyone else. We hope that the RFP [Request for Proposals] process will not be simply about the lowest dollar value bid.
“We hope it will consider what else is brought to the table in terms of recycling the money and the trickle-down effect.”
He said there would be an option to allow working class people to buy into projects with smaller stakes investments offered in high-street banks, operated in the same way as mutual fund. Mr. Ghosh said Cayman, as the fund capital of the world, has the necessary expertise, as well as the potential investors, to make the fund work.
“It is as simple as taking what we have got here and using it for the benefit of Cayman,” he said.
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