It did not take the global pandemic to point out the fragility of economic sectors.
Cayman has for some time attempted to diversify its economic base. Tourism is only the most recent and obvious example of the setbacks that can befall an economy in completely unforeseen circumstances.
The financial services sector in Cayman must constantly innovate, adapt and evolve not only to satisfy the ever-increasing demands of global standard setters but also to remain competitive with other jurisdictions.
So far Cayman’s financial services industry has saved the day, as Finance Minister Chris Saunders said on the 29 Sept. episode of The Resh Hour, but it would be a grave error to assume that the sector is immune to sudden downturns.
This is why more than a decade ago, amid constant threats to its financial industry, Cayman started to look at other areas of economic growth, including the development of medical tourism, special economic zones and incentives to attract technology firms.
Today, Cayman has plans to bring a second foreign hospital chain to the island and Cayman Enterprise City has established itself as the country’s special economic zone.
The existing carve outs and concessions for tech companies, whether in Cayman Enterprise City or for TechCayman-sponsored companies, are important factors for the development of a burgeoning tech sector on island, says Brandon Caruana of tech consulting firm Cartan.
In his view Cayman remains one of the world’s top jurisdictions for tech start-ups.
The current tech landscape in Cayman
About 70% of special economic zone (SEZ) companies set up with Cayman Enterprise City (CEC) are tech businesses.
The zone has its dedicated government authority and offers a fast-track setting up process in combination with licensing fee concessions.
Charlie Kirkconnell, chief executive of CEC, is not surprised that of the 260 SEZ companies more than 180 are operating within the digital and tech sector.
“Technology companies are intrinsically agile and typically have smaller teams in comparison to their size, which make them excellent candidates for establishing a physical presence offshore,” he says. “Tech companies are attracted to the jurisdictional benefits that the Cayman Islands has to offer, which include a robust regulatory environment, a transparent free zones law, a predictable legal system, and a cosmopolitan island lifestyle.”
The growing tech community has become an attraction in and of itself, Kirkconnell says, with innovators and entrepreneurs wanting to be part of a vibrant, cutting-edge ecosystem.
The presence of tech companies has also led to the creation of industry sector groups such as Digital Cayman and the Cayman Islands Blockchain Association, which are playing their role in making the jurisdiction even more robust and driving Cayman’s tech sector forward.
Currently, Cayman’s technology companies represent a broad range of subsectors including FinTech, MedTech, software development, commodities and derivatives trading, maritime, aviation, media production, and digital marketing.
“Moving forward, we expect digital and technology businesses to account for 70% or more of CEC’s growth, and we see signs that MedTech, RegTech and trading in digital assets, could join blockchain development as significant drivers within that category,” Kirkconnell says.
He adds that Cayman’s culture of inventiveness combined with increasing levels of digital sector sophistication and private-public partnerships are big factors for the influx of new types of tech companies.
TechCayman is another venture that aims to establish Cayman as a tech hub through support services ranging from accelerated set-up and immigration processes to providing access to funding.
Like CEC, Tech Cayman leverages Cayman’s lifestyle, tax-friendly environment and legal framework, including its intellectual property legislation. Unlike Cayman Enterprise City’s offering, TechCayman is not tied to a specific location within a designated zone.
TechCayman’s chairman Gene Thompson says there is strong interest from a wide range of companies spanning nearshore outsourcing, aviation technology, blockchain companies in the non-fungible token (NFT) space, film production, digital payments and health-centred technology.
Thompson says: “Our initial thought process has been somewhat changed because I don’t think it’s a one size fits all. Now we’re learning that every company has a different motivation.”
Established tech companies from North America and Asia are looking at Cayman to set up offices. The reasons vary from financial and operational planning and geographical diversification to access to the US market.
There are also start-ups attracted by the ease of doing business, access to human capital and low-tax regime in Cayman.
Currently, the main obstacles remain COVID-related travel restrictions and local quarantine rules, which prevent senior decision makers from making the familiarisation trip to verify that everything they learnt about Cayman virtually is in fact true. As soon as the border reopens, the volume and speed at which tech companies set up locally is expected to increase significantly, Thompson says.
“Right now, we have a number of companies in the pipeline ready to come.”
While COVID has changed some of TechCayman’s methods of attracting companies, the business model has remained the same.
The benefits of generating, banking and transacting intellectual property through Cayman or nearshoring tech jobs on island for those who cannot obtain a US H-1B tech visa have not changed.
Despite the COVID delays, Thompson says, “we’re comfortable with where we’re at and we see tech as a growing industry”.
In fact, he adds, it has the potential to become one of the top two to three industries on island.