Bermuda election result could impact Cayman

PLP leader David Burt celebrates winning Bermuda's general election this week, with his wife Kristin. - PHOTO: BERNEWS

The Progressive Labour Party won a landslide general election victory in Bermuda this week, taking power from the one-term One Bermuda Alliance.

David Burt, 38, becomes the territory’s youngest-ever leader. Former Premier Michael Dunkley resigned from the leadership of the OBA immediately after the election.

The PLP was in power in Bermuda from 1998 after decades of opposition, but lost the 2012 election amid a financial crisis and mounting public debt.

The OBA was credited by some in Bermuda with beginning to reverse the economic decline, but was beset by a political scandal that unseated their original election-winning leader Craig Cannonier within 18 months.

They also faced large public opposition to some of their plans, including a scheme to offer “pathways to status” for longtime residents.

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Public debt remains a problem in the territory. The island, which has a similar sized population to Cayman, has a net debt of US$2.4 billion, according to the Royal Gazette newspaper, compared with Cayman’s total government debt of just over US$700 million.

The OBA was credited with slowing the rate of increase of that debt, but the island still faces a $186 million annual bill for debt servicing and interest – more than is spent on any government ministry.

At his swearing in ceremony on Thursday, Bermuda’s Premier Burt said, “We will be a government that will put Bermudians first and make sure we work to advance the interests of every single Bermudian in this country.

“We will be a government that will govern with integrity and will work every day to improve the conditions for so many of us.

“Today the work begins. This is without question an honor but without question there is an incredible amount of work to be done.”

Robert Pires, a financial analyst and chairman of Bermuda Investment Advisory Services, which also has offices in Cayman, sees little reason for economic optimism following the election, saying the PLP was historically antagonistic toward business and had a poor track record of managing the country’s finances.

He said Bermuda’s loss could be Cayman’s gain, economically speaking.

“The antagonistic approach to business during the PLP’s previous 14 years in power caused many businesses to move staffing to other jurisdictions due to the difficulty in gaining work permits, as well as its general antagonism,” he said.

“When I started doing business in Cayman around 2000, Cayman was a close second to Bermuda. The more constructive approach to business by Cayman has allowed it to surpass Bermuda by a large margin.”

If the PLP retains what he sees as an “antagonistic posture” toward business, the migration of business to Cayman could continue, he predicts.

“Our license to conduct investment business in Cayman was issued in 2003. After that time, we started to see other Bermuda brands crop up in Cayman – Logic, Appleby, Conyers Dill & Pearman, The Security Group, and more recently Bermuda’s BF&M has bought Island Heritage. This represents an investment in Cayman in terms of service infrastructure, employment, and the transfer of intellectual capital.”

He said the “considerably higher” government fees in the Cayman Islands are the main barrier to further investment in the territory.

Despite Bermuda’s economic malaise, pundits in the territory believe social issues and political scandals led to the demise of the One Bermuda Alliance after just one term.

The island’s history of racial division is also believed to have been a factor.

The OBA received some credit for attracting the America’s Cup to the island, but faced criticism from political opponents for failing to ensure the economic impact of the event spread throughout the economy.

A plan to privatize airport services – essentially the same deal that was offered to and rejected by Cayman – spurred controversy, while moves to offer status to long-term residents also met opposition.

Don Burgess, who covered Tuesday’s election for Bernews, and is the executive officer of the Media Council of Bermuda, said the One Bermuda Alliance had too many miscues and lost the confidence of the people even though the economy was on the upswing.

“They were seen as not putting Bermudians first and this was a critical factor in the huge vote swing,” he said. “The December protests about the new airport saw people pepper-sprayed by the police, which was just one of many catalysts against the OBA.”

He said the PLP had struggled to handle the fallout from the 2008 economic crisis and this had presented the OBA with the chance to pull off a surprise win in 2012. “They mishandled it completely, with their first premier having to resign in disgrace, and were seen as not being in touch with the people.”

He said Mr. Burt, a former chairman of the PLP and shadow finance minister, was highly regarded in Bermuda, despite his relative youth.

Mr. Burgess does not expect to see a significant backlash from the business community to the election result.

“There will be a minimal impact on offshore business domiciling in Bermuda. There might be some hesitancy in the first six months or so, but as long as the PLP show good governance, there should be no problem. The tricky part is putting the needs of the average Bermudian first while making sure business thrives to help provide employment.”

Mr. Pires expects the move toward pathways to status for expatriates to fall away under the PLP, which strongly opposed the policy.

“This further increases the likelihood of reduced investment in the island, as well as a shrinking of the tax base, should international business move positions to other jurisdictions,” he said. “This contrasts to Cayman’s rumored objective of increasing its population from around 60,000 to 100,000. Population increase is essential to building your tax base but this strategy is opposed to the Progressive Labour Party’s stated objectives.”

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