LOCAL | PAGE 2 NEW ARRIVALS WING OPENS AT OWEN ROBERTS AIRPORT FRIDAY JANUARY 26, 2018 • CAYMAN COMPASS Anthony Bourdain opens up The TV personality reveals his thoughts on food and ... Switzerland. Intrigued? B6 A chance to display your ‘Hatitude’ The annual National Trust brunch blossoms this Sunday B7 Lifestyle Events Food & Drink Cayman Arts Festival The February lineup promises musical magic from local and international talent B2 ■ FOOD & DRINK Taste of Cayman Festival celebrates 30 years of food, drink and music. B4 Talking about holistic health Professional practitioner Cindy Abrahams delves into the subject of mind and body B5 STOLI FLAVOURS 2 for $56 Until 31 July Registered Merchant of CaymanGiftCertificates.com Fine Wine and Spirits TORTUGA 15 stores island-wide and Mary Lou’s in Cayman Brac. For more information, please call 949-7701. JANUARY ONLY 20% OFF 750mL & 1L Blanco. Reposado. Añejo. 100% Blue Weber Agave. PHOTO: TANEOS RAMSAY CAYMAN WEEKENDER Taste of Cayman LOCAL | PAGE 2 WATSON, OTHERS ‘BENEFITED’ $6.8M FROM CAREPAY ESTABLISHED 1965 www.caymancompass.com – 75 CENTS – FRIDAY JANUARY 26, 2018 SEVEN MILE BEACH WATERFRONT WALKERS ROAD TOWN CENTRE PLAZA RED BAY WHITE VERSIONS BELOW ™ ® Financial services industry: Cayman’s ‘invisible’ giant See today’s editorial on page 4. MICHAEL KLEIN mklein@pinnaclemedialtd.com In 1960, the Cayman Islands could not have been further removed from its status today as a small but prominent global finan- cial center. At the time, the Cayman economy still largely relied on seamen’s remittances, fishing, agriculture, shipbuilding and hand crafts. Airline services were limited and the tourism sector in its infancy. Estimates vary but the economic output per person at the time was about US$450, more than Jamaica (US$430), about equal to the Turks and Caicos Islands but one-third the rel- ative economic strength of the United Kingdom and one-seventh that of the United States. More than a half-century later, the picture has changed dramatically. Cayman’s economic power, on a per person basis, now matches the U.S. and considerably exceeds that of the former motherland, the U.K., let alone that of other Caribbean nations and territories. The rise of financial services, which first led to the establishment of a large banking and trust sector, then the development of captive insurance and finally the growth of the hedge funds industry, shipping and air- craft registration as well as structured fi- nance, is synonymous with the rise of Cay- man’s economic prowess. It is known as the “Cayman Miracle.” Yet, locally the attitude toward the in- dustry is somewhat ambivalent. Jobs, government revenue Several years ago, an informal survey un- dertaken by Cayman Finance, the associa- tion representing Cayman’s financial services, showed the public believed (incorrectly) that tourism generated more economic activity for the country than financial services did and that at the same time (again, incorrectly) gov- ernment spent more to support the financial industry than the tourism sector. It is, thus, no surprise that when Min- ister of Financial Services Tara Rivers gave her budget address last year, she, in order to justify the spending of her ministry, chose to emphasize the seemingly obvious. “The financial services industry is the pri- mary driver of our economy. It is a primary contributor to GDP, the best way to measure our economy,” she said. The finance industry, together with the re- lated accounting and legal services sectors, contributed more than half (about 52 percent) of Cayman’s gross domestic product of $2.6 billion in 2015, according to the Economics and Statistics Office. This did not include any indirect impact the industry has, for example, through clients and other interested parties attending meet- ings or conferences locally. The notion that the financial services sector must still emphasize its size may in part be due to the proportionately smaller footprint of financial services in the labor market, compared to the sector’s economic impact. Still, a total of 7,669 people in Cayman work in financial services, accounting for more than 18.3 percent of employment, Ms. Rivers said, citing ESO statistics. Crucially, far more than half of these jobs, 62 percent, are held by Caymanians. This is considerably higher than the 47 percent share of Caymanians in the labor force as a whole, as indicated by the latest available Labour Force Survey from the first quarter of 2017. For government, the industry is an in- dispensable source of revenue with nearly half of all government funding (42 percent) coming from financial services contributions. This does not include items like stamp du- ties paid by individual businesses or people in the industry, which would bring the fig- ures even higher. Minister Rivers noted, this is the same revenue that is needed to pay for govern- ment services. “There is absolutely no doubt that the fi- nancial services industry is critical to the socioeconomic welfare of the Cayman Is- lands,” she said. “It is critical for our ability to fund schools, to fund education, to fund healthcare, to fund social services, to fund road infrastructure, environmental con- servation, etc.” For Jude Scott, the CEO of Cayman Fi- nance, the discrepancy between the percep- tion of the industry locally and its impor- tance for the economy, jobs and government revenue is in part due to statistical issues. Current statistics are based on interna- tional categories which do not represent in- formation in the same way financial services would be defined in Cayman. “For example, when you look at financial services in the ESO statistics, it does not in- clude the contributions of law firms and ac- counting firms, because they are included in the professional services category along with doctors, architects, etc.,” Mr. Scott said. Once these categories are aggregated, it becomes clear that the industry is a substan- tial employer, especially for Caymanians. Financial services vs. tourism Mr. Scott says there are several other rea- sons why the vital role of the industry for the economy, the labor market and govern- ment revenue is not well understood by the general public. “One reason is if you are using intellect to add value, it is not something so physical and tangible. In tourism, you have tourists coming off an airplane, eating in restaurants and in ho- tels. That gives us a sense of the industry. If you look at the construction industry, you physi- cally see something being built,” Mr. Scott said. “One of the things that we recognize, because of the nature of the work that we do, it is impor- tant for us to create a visualization around it.” Another reason the work the industry is doing is not so obvious, he added, is that much of the work is done with counterpar- ties around the world: “That is not directly impacting the person on the street.” Financial services in Cayman are also made up of multiple, often independent in- dustries like investment funds, asset man- agement, banking, insurance, reinsurance, capital markets and fiduciary services. Cayman Finance itself now represents 15 Jude Scott, CEO, Cayman Finance PLEASE TURN TO PAGE 8 » “When you see a new commercial office building going up […] we would count that as construction GDP. The worker who is there has a construction job. [But] the demand for that is created by the financial services industry. If we did not have the industry, we would not need the building, we would not have the job.” “We were able to show government that they spend twice as much on tourism as they do on financial services. And for every dollar they spend on financial services, they roughly receive around $18 from financial services. Comparably with tourism, they receive less than $2 in revenue.”2 LOCAL NEWS BRENT FULLER bfuller@pinnaclemedialtd.com Cayman Islands busi- nessman Canover Watson and others “jointly benefited” from the CarePay public hos- pital fraud scheme to the tune of US$6.79 million, a Grand Court judge found Thursday. Grand Court Justice Mar- lene Carter has been hearing arguments since Jan. 19 from prosecutors and Mr. Watson’s attorney regarding how much money should be confiscated from Mr. Watson over his role in the CarePay fraud. On Thursday, Judge Carter noted that the court had de- cided, on balance of probabil- ities, that Mr. Watson “has re- ceived a benefit of the result” of his criminal conduct. The ruling indicated that Mr. Watson jointly bene- fited, along with his business partner Jeffrey Webb and un- named “others” in the scheme, and that the “value of the ben- efit must be the full figure for the monies paid as a result.” “I therefore set that figure at … US$6,789,864,” the judge said. The joint benefit figure does not represent what Mr. Watson must pay back. The exact figure will be some- what lower, according to Deputy Director of Public Prosecutions Patrick Moran, and is based in large part upon what assets the defen- dant has left. Mr. Watson’s attorney Amelia Fosuhene said ear- lier in the court proceed- ings that her client has about US$1 million in available as- sets. However, a further court hearing was set on Feb. 1 to determine exactly what Mr. Watson can repay. Mr. Watson, the former chairman of the Cayman Is- lands Health Services Au- thority, was convicted in Feb- ruary 2016 of conspiring to defraud the government and various corruption-related of- fenses in connection with the award of the CarePay public hospital patient swipe-card contract to a company pros- ecutors said he ran through “sham” frontmen. Mr. Watson’s alleged co- conspirator, Cayman Islands businessman Jeffrey Webb, has also been charged in the case but is currently in the U.S. awaiting sentencing in connection with the FIFA racketeering investigation – to which he pleaded guilty in November 2015. Mr. Moran argued during the course of the two-day hearing that the Crown would seek to recover nearly US$6.8 million from Mr. Watson and others involved – what prosecutors be- lieved was the full extent of the “take” from the CarePay scheme. Mr. Moran said the US$6.8 million amount was what appeared to have been paid into the bank account of the front company Mr. Watson and Mr. Webb had set up – known as Advanced Integrated Systems (AIS) Cayman Ltd.– to skim profits from the CarePay contract. “This was a 50/50 com- pany,” Mr. Moran said. “The evidence was abundantly clear in this case … that Mr. Watson was fundamental in setting up AIS Cayman Ltd. He had the checkbook. He had the ability to negotiate on behalf of the company and make agreements with others, and it was he that was responsible for making sure that money went into that account.” Ms. Fosuhene argued that prosecutors were at- tempting to make the en- tire CarePay card-swipe system appear to be a fraud when, in reality, a signifi- cant portion of the payments went to legitimate purposes. Ms. Fosuhene noted that prosecutors only charged Mr. Watson with taking US$348,000 as a personal ben- efit as a result of the scheme. “We have a legitimate company [that] has entered into a contract with the gov- ernment and, as part of that contract, persons within that company have skimmed off the top of that contract,” Ms. Fosuhene said. Mr. Moran said the US$348,000 cited in the charge as Mr. Watson’s per- sonal benefit from the scheme was understood by trial jurors at the time to be an “at least” approximation. “There were a huge number of cash withdrawals made from the [AIS] account … either by Webb or with his blessing,” Mr. Moran said. “The Crown simply can’t say whose pockets it went into.” Ms. Fosuhene said the US$348,000 figure suggested that Mr. Watson “was a paid assistant in the conspiracy, as opposed to Mr. Webb who is the lead in the conspiracy.” FRIDAY JANUARY 26, 2018 • CAYMAN COMPASS 947-2782 945-2290 “Come Visit our Booth at Taste of Cayman” Cayman Orthopaedic Group Dr. Krishan Rajaratnam, M.D., F.R.C.S.C. Joint Reconstruction & Upper Limb Specialist will be at #1 Smith Road Plaza Monday, 29th January 2018 to February, 2nd February, 2018 Please call 945-8380 for appointments Canover Watson arrives in court this week for his asset confiscation hearing. - PHOTO: BRENT FULLER Arrivals wing opens at airport JAMES WHITTAKER jwhittaker@pinnaclemedialtd.com The new arrivals hall at the Owen Roberts Interna- tional Airport – the latest piece in the jigsaw of Cay- man’s $55-million airport up- grade – opened this week. It is the second major wing of the new development to open to the public, fol- lowing the new ticketing area which opened in December. Construction crews will soon begin the tricky task of completing the work inside the original airport buildings. Albert Anderson, CEO of the Cayman Islands Airports Authority, said the opening of the arrivals hall was another major milestone. “I would like to say we are on the home straight but we are not quite there yet,” he said. “Things are going to get really tight inside the old terminal once we get things started in there.” He said the new arrivals hall, which includes cus- toms, baggage and immigra- tion areas, already created a lot more space and conve- nience for passengers coming through the facility. There are five baggage carousels in the new building, as well as ad- ditional customs and immi- gration desks. A Department of Tourism information kiosk has opened next to the baggage claim. There is still some work to do, including interior décor, art and advertising. One of the next steps will be to knock through the di- viding wall between the new building and the old baggage area to expand the immigra- tion area further. Mr. Anderson said there was some retail space in- side the new arrivals hall, as well as multiple spaces in the departure lounge – the last major part of the project. A decision on which busi- nesses have won bids for space in the departure lounge is imminent, he added. One of the first pas- sengers to come through the new arrivals area this week was Director of Tourism Rosa Harris. Stepping off a flight from Jamaica on Wednesday, fol- lowing a business meeting, she said, “It is wonderful to see our international air- port transformed. I have been through the full process this morning and there is a lot more space. It is beauti- fully designed.” Airports boss Albert Anderson shows off the new arrivals area Thursday. – PHOTOS: JAMES WHITTAKER The new building features five baggage carousels, though only one was initially operational. Judge: Watson and others ‘benefited’ US$6.8M from CarePay Mr. Watson’s attorney Amelia Fosuhene said earlier in the court proceedings that her client has about US$1 million in available assets. However, a further court hearing was set on Feb. 1 to determine exactly what Mr. Watson can afford to repay.The islands’ most-trusted news source 3 CAYMAN COMPASS • FRIDAY JANUARY 26, 2018 The islands’ most-trusted news source 4 – EDITORIAL – Opinion&Letters The Cayman Compass welcomes comments, opinions and viewpoints from readers. Letters to the editor can be emailed to editor@pinnaclemedialtd.com, submitted via www.caymancompass.com, sent by post or hand-delivered to the Compass office. We have all seen it – chil- dren, sitting together with smartphones, texting and otherwise communicating without use of voice or eye contact. Annoying per- haps, but not necessarily the threat to their healthy devel- opment or civilization that alarmists allege. Smartphones hardly pose challenges parents have not seen before. Telephones, TVs and PCs provided children with speedier communica- tions, broader access to in- formation and to the horror of adults, more convenient methods of escape from their supervision and guidance. And parents are delin- quent in their responsibili- ties if they deprive children of smartphones, for example until high school, because teaching youngsters to use those devices responsibly and safely is too nettlesome. We should all want to raise self-sufficient adults, who are capable of earning a decent living in a prosperous nation. Seen in this context, the smartphone is an essen- tial device but only a transi- tional one. Its successors may not have screens, alpha/nu- meric keyboards or be held in your hand. DARPA and Facebook and scientists elsewhere are working on a brain-computer interface that will permit hu- mans, simply by thinking, to communicate directly with computers. Smartphones could be worn like Google Glass, project images onto its lens or our retinas and permit direct access to the internet and a cacophony of apps to manage our lives, learn and work. By delegating time con- suming tasks to artificial in- telligence programs, the brain will go from violinist to con- ductor of an orchestra. Already, the smartphone permits us to do a lot of tasks more effectively than by re- lying on paper diaries, li- braries, calculators and other tools now relegated to the fast disappearing industrial age. Just as young children once learned to hunt, har- vest and prepare food – first by imitation through play and then by instruction and guided participation – now- adays they must learn to manage the tools of the dig- ital technology at an early age – not suddenly when they enter high school or college. The visual literacy and agility with symbolic lan- guage obtained through con- structive play on an iPad by a very small child is just as important as phonics and the wisdom of Aesop’s fables – or their modern reinvention on Sesame Street. Societies that shun these technologies – or fail to offer children adequate access and cultivate their agility with digital tools before those are really needed to learn and work – risk raising adults in the information age that are analogous to the 20th cen- tury illiterates. I would no more deny a middle schooler access to a smartphone than I would deprive him of books, paper and pen. The problems smart- phones pose for children are well documented – obsessive use, bullying, pornography and predators – but those are hardly new problems to childhood. Growing up in a blue collar neighborhood on Long Island, good parents worried endlessly about too much TV and transistor radios smug- gled into bed, bigger kids shaking down smaller chil- dren for lunch money, dirty pictures circulating among boys, and gangs. Beaver and Wally Cleaver lived in a place as foreign to me as Mongolia. My friends and I somehow emerged com- petent adults, because our parents engaged us instead of locking us in our rooms with an encyclopedia. Makers of iPhones, Droids and popular apps provide mechanisms for parents to monitor children’s activities and limit the time spent and content children access on smartphones, but software is no substitute for parenting. If you cannot find a secu- rity system a hacker can’t pen- etrate, trust me, your 10-year- old has a friend who can beat any software you put on his device. And hardly a healthy trusting relationship with a child – or habits of self-con- trol and responsible behavior – can be cultivated by parents who put an electronic tether and 24/7 security camera on his smartphone. Folks that run Facebook, Snapchat and other platforms children use to communicate and play have their part to do. They must refrain from pur- posefully building addictive software and better police their platforms from harmful material and predators. But in the end, parents must set limits directly – shut down cellphones alongside their children at dinner and bedtime – explore the web with their children and talk with them about what is good for them and not. In all ages, parents come up against reckless childhood behavior and its ingenious methods of escape. Smart- phones make these times no different or more challenging. Peter Morici is an economist and business professor at the University of Maryland, and a national columnist. © 2018, The Washington Times. In recent times, much has been made about the per- ceived need to educate the rest of the world about the beneficial and vital role that offshore financial centers – and, by extension, the Cayman Islands – play in the global economy. This somewhat fashionable mantra (“If they only knew!”) has been repeated more often and more force- fully in the wake of negative attention prompted by data breaches (such as the “Panama Papers,” “Paradise Papers,” etc.) and ever-increasing scrutiny of offshore jurisdictions by entities such as the European Union. But as today’s Page One story makes clear, if we are to look inward at our own territory, we will see an astonishingly similar lack of knowledge about the impor- tance of the financial sector, which is the key piston in Cayman’s economic engine. In his story, veteran business journalist Michael Klein shines a bright and steady spotlight upon Cayman’s financial services sector, illuminating the positive effects this “invisible” giant has delivered to the country for the past half-century. Although, from time to time, the offshore industry generates high-profile headlines, on a daily basis the local players in Cayman’s financial services sector tend to maintain relatively low profiles – particularly compared to our country’s second economic pillar of tourism. Put it this way: Tourists are easy to spot. They sport garish raiment, tend to look the wrong way before jay- walking across West Bay Road, and are sometimes tipsy in public during the day. Lawyers and accountants, on the other hand, “blend in.” They wear sensible business attire, participate in morning and evening commutes, and cloister them- selves in their offices until quitting time. (At which point, many of them, like the rest of us, join the tourists at Cayman’s beaches and bars.) Let’s face it: In terms of drawing attention, bikinis beat briefcases every time. The financial services sector is anything but a monolith. It has many diverse components, including (but not limited to) commercial, investment and private banking and trusts; insurance; securities brokerage; trading or analysis; financial planning and advisory services; investment management; insurance services; shipping registry; company registration; and legal and accounting services. Maintaining those lines of business requires profes- sionals, such as accountants and lawyers – but also legions of office staff, support personnel and managers, collectively known as Cayman’s “intellectual capital.” In other words, the financial services sector is home to the best, brightest, most well-educated and most accom- plished individuals in the country. All of those financial services employees (some 7,669 of them in Cayman; more than 18 percent of the labor pool), in turn, create demand for services from other businesses, such as restaurants, retail, groceries, cleaning services, telecommunications, etc., etc. Despite perceptions from some populist corners, the financial services workforce is overwhelmingly Cayma- nian (62 percent, compared to 47 percent among the entire labor force). In terms of generating economic activity, financial services punches far above its weight, accounting for 52 percent (read: most) of Cayman’s gross domestic product. Similarly, contributions from the financial services sector amount to 42 percent of government’s revenue – which, in turn, is transformed into government spending, on things such as civil servant salaries, healthcare, public education, social services, road construction, etc. The net result, of course, is the “Cayman Miracle” our country has joyfully experienced for the past 50 years, transforming Cayman from a forgotten Caribbean backwater into a first-world economic powerhouse. During that time, our country’s wealth (as measured by per-person GDP) has far outdistanced former regional peers such as Jamaica and the Turks and Caicos Islands, has surpassed our mother country the United Kingdom, and is now on par with the United States. With continued good fortune, perseverance and high- quality education, we have no doubt that Cayman – energized and enabled by our financial services sector – will not only build on our half-century of success, but will surpass even those “miraculous” accomplishments. Paying homage to Cayman’s essential ‘invisible’ giant FRIDAY JANUARY 26, 2018 • CAYMAN COMPASS PRINTED AND PUBLISHED BY: Caymanian Compass Limited (a subsidiary of Pinnacle Media Ltd) Compass Centre Shedden Road, George Town SEND US YOUR VIEWS OR NEWS: P.O. Box 1365 Grand Cayman KY1-1108, Cayman Islands Telephone: (345) 815-0095 Email: newsdesk@pinnaclemedialtd.com ADVERTISE WITH US: Telephone: (345) 949-5111 Email: sales@pinnaclemedialtd.com Website: www.caymancompass.com PUBLISHERS DAVID R. LEGGE AND VICKI L. LEGGE EDITOR-IN-CHIEF DAVID R. LEGGE EXECUTIVE EDITOR PATRICK BRENDEL A MEMBER OF THE INTER-AMERICAN PRESS ASSOCIATION “Give light and the people will find their own way” Why smartphone hysteria is misplaced PETER MORICIThe islands’ most-trusted news source 5 CAYMAN COMPASS • FRIDAY JANUARY 26, 2018 Kimpton Seafire Resort Grand Cayman Thursday, February 1st 2018 What are the top trends facing the world in 2018? What does this mean for Cayman? Join some of the world’s most thought provoking experts to explore the threats and opportunities and how they impact Cayman. CEO 2018 brings you some of the most exciting speakers on the international conference circuit: fidelityceo.com Visit our website Our Partners Diego Zuluaga Laguna; Jamie Metzl; Erica Orange; Dr. Kent Moors Miko Matsumura Changemaker, Geopolitics & Biotechnology Expert, Futurist Novelist Futurist & Trend Spotter Global Economist Global Energy Strategist ICO Advisor, Founder of Evercoin Exchange & Venture Capital LP How will the shift from global integration and its wide ranging political, economic and social consequences affect us in 2018? Global Integration or Dis-integration? Surviving the Challenge6 LOCAL&REGIONAL FRIDAY JANUARY 26, 2018 • CAYMAN COMPASS Investment body dormant for 15 years KEN SILVA ksilva@pinnaclemedialtd.com A government committee that has the job of reviewing capital projects and making sure government can afford them has been dormant for some 15 years, according to statements made during Thursday’s hearing of the Public Accounts Committee. The statements were made in relation to a report released last October by the Office of the Auditor General, which criticized government for improperly budgeting its major capital projects. Ac- cording to the report, govern- ment does not typically factor in long-term maintenance and operational costs when calculating the final price of a major project, and govern- ment also does not include the full costs of major proj- ects in its budget documents. Speaking on those re- ported deficiencies and others, Public Accounts Com- mittee Chairman Ezzard Miller asked Financial Secre- tary Kenneth Jefferson about the presence of a government body that fully accounts for the long-term costs of projects to make sure they are feasible. Mr. Jefferson explained that the Public Sector Invest- ment Committee should ana- lyze any project worth more than $300,000, and report on its findings to Cabinet. However, that committee has not been active since be- fore Mr. Jefferson took his position in 2004, he said. Compass archives show the Public Sector Investment Committee has not been ac- tive since 2003. Then-Premier McKeeva Bush reportedly said in 2012 that he intended to revive the committee, but it remains dormant. Mr. Miller commented at Thursday’s Public Accounts Committee meeting that he re- calls that the committee was abandoned for “political” rea- sons, and Mr. Jefferson said there has been “a lack of a push” by government over the last 15 years to reinstate it. MLA Christopher Saun- ders expressed concerns that without proper safeguards and an account of what a project will cost over its life- time, a government could begin an ill-advised project before an election and leave the next administration to foot the bill. But despite the lack of a Public Sector Investment Com- mittee, projects are heavily scrutinized before government decides to move forward with them, said Mr. Jefferson. “I don’t want to leave the committee or the public with the impression that the proj- ects are not reviewed. Ob- viously there is a strategic policy statement process, where ministries and port- folios come forward before ministers of government, and present what they wish to undertake during a year,” he said. “In those presentations, there is an indication of what the costs are in the upcoming year. Oftentimes, there are indications of what opera- tional costs will be, as well – though not always.” Nevertheless, the financial secretary expressed that he was in favor of reestablishing the Public Sector Investment Committee. Such efforts are under way, he said. Mr. Jefferson said dis- cussions are ongoing about when in the procurement process the Public Sector In- vestment Committee would fulfill its duties. Mr. Miller suggested that the committee should do its job before a project goes to its “business case” – the process of analyzing financial and lo- gistical details about how a project should be undertaken – development phase. “It’s [a] more general and less detailed exercise where government states where it wants to invest in and what it can afford,” Mr. Miller said. Ezzard MillerKenneth Jefferson PUERTO RICO WARNS OF 11 PERCENT GDP DROP SAN JUAN, Puerto Rico (AP) – Puerto Rico’s governor sub- mitted a revised fiscal plan Thursday that estimates the U.S. Caribbean territo- ry’s economy will shrink by 11 percent and its popula- tion drop by nearly 8 per- cent next year. The proposal does not set aside any money to pay credi- tors in the next five years as the island struggles to re- structure a portion of its $73 billion public debt. The orig- inal plan had set aside $800 million a year for creditors, a fraction of the roughly $35 bil- lion due in interest and pay- ments over the next decade. The five-year plan also as- sumes Puerto Rico will re- ceive at least $35 billion in emergency federal funds for post-storm recovery and an- other $22 billion from pri- vate insurance companies – figures still far below the $95 billion in damage offi- cials estimate was caused by Hurricane Maria, which hit in September. Some analysts view the as- sumption of that much aid as risky given that the U.S. Trea- sury Department and U.S. Federal Emergency Manage- ment Agency recently told Puerto Rico officials that they are temporarily withholding billions of dollars approved by Congress last year for post- hurricane recovery because they believe the island cur- rently has sufficient funds. “I think counting on $30 billion is overreaching,” Puerto Rico economist Jose Caraballo said in a phone in- terview. “There’s great uncer- tainty in that sense, and es- pecially with a Republican government that cares little to nothing about what is happening in Puerto Rico.” The plan also projects a brief burst of 7.6 per- cent GDP growth for 2019 – a figure Caraballo said is overly optimistic. “Puerto Rico would grow more than Panama, Domin- ican Republic and China, and that seems a bit exaggerated to me,” he said. But Gerardo Portela, di- rector of the island’s Fiscal Agency and Financial Ad- visory Authority, said fed- eral funds should help boost the economy by that amount and said he was confident they will arrive. “Puerto Rico is insolvent,” he said. “We need the money as soon as possible. We need to rebuild our infrastruc- ture, we need to rebuild the electrical grid, we need to build roads.”7 LOCAL NEWS CAYMAN COMPASS • FRIDAY JANUARY 26, 2018 Former RCIPS commander hired to review complaints about police BRENT FULLER bfuller@pinnaclemedialtd.com The former head of the Royal Cayman Islands Po- lice Service’s Professional Standards Unit has been hired as the senior investi- gator for the ombudsman’s office tasked with fielding public complaints about po- lice misconduct. Peter McLoughlin, who has served with the RCIPS since September 2009, left his post with the police on Jan. 5 just before he was hired to the newly created position in Ombudsman Sandy Herm- iston’s office. Mr. McLoughlin served 30 years with the Greater Manchester Police before ar- riving in Cayman. The new public com- plaints function will be over- seen by another new hire at the office, Deputy Om- budsman Sharon Roulstone, a long-time Caymanian at- torney. The ombudsman will receive only residents’ com- plaints about officers. In- ternal issues – complaints made by officers against other officers – will still be dealt with inside the RCIPS by the Professional Standards Unit. In an interview Wednesday, Ms. Hermiston said she real- ized there would be ques- tions about Mr. McLough- lin’s appointment, given he had just left the RCIPS to staff what is supposed to be an independent authority looking into complaints about the police. However, she urged ob- servers not to have a knee-jerk reaction to the hire simply because Mr. McLoughlin was em- ployed at RCIPS. “We had a couple of [job] candidates who didn’t have a police background, and knowledge of how a police force works is absolutely cru- cial,” Ms. Hermiston said of the senior investigator po- sition. “He’s been here for eight or nine years and was in charge of the Professional Standards Unit. That’s a way tougher job, to be inside the police, trying to investigate your colleagues.” Ms. Hermiston is also setting up the ombuds- man’s office to have levels of accountability, meaning Mr. McLoughlin will not be making decisions on cases alone. “We will all be vigilant in looking for any kind of bias,” she said. “His decisions will go through Sharon. “I’m not sure [the hire] doesn’t look right. People need to step back and say, ‘did they make an informed decision about the hire?’ Peter was the best candi- date in that job pool. He’s got a unique view of the RCIPS because he was there, and his integrity is be- yond question.” Mr. McLoughlin has a busy time ahead in his new position. It is estimated that hun- dreds of public complaints against the Royal Cayman Islands Police Service that have been filed since 2010 will have to be reviewed by the new ombudsman’s office since no one has been legally allowed to hear those cases. The issue involves the failure of the government to follow amendments to the Police Law in 2010, which called for the ap- pointment of the territo- ry’s first police public com- plaints commission. The commission was never appointed, largely due to funding and staffing dif- ficulties. The RCIPS could still hear internal complaints filed by its own officers, but the police Professional Stan- dards Unit no longer had any legal power to hear public complaints once the Police Law was changed. Since the public commis- sion was never appointed, it was not able to hear any of the complaints until now. “He’s go t a unique view of the RCIPS because he was there, and his integrity is beyond question.” SANDY HERMISTON, ombudsman Concern over reprisals after murder Detectives investigating Saturday’s murder of Omar Bailey are concerned about possible reprisal attacks after a picture of a suspect in the case was circulated on social media. A 27-year-old man was arrested Monday in connec- tion with the crime but was released on police bail as in- vestigations continue. Officers said there was currently insufficient evi- dence to charge anyone with the crime and urged anyone with information to come for- ward. They condemned the “irresponsible” circulation of an image of the alleged sus- pect on social media and warned the public against making assumptions of his guilt based on that image or what they read online. “Due to the images that have been circulated on so- cial media, which were ac- companied by comments and statements alleging the guilt of this individual, we are very concerned about the threat of reprisals against this indi- vidual,” said Superintendent Pete Lansdown. “We would like to remind the public that the presumption of innocence is given at all times and that any unlawful acts, regard- less of motivation, will be prosecuted to the fullest ex- tent of the law.” Mr. Bailey, a 28-year- old father of two, was shot and killed as he stood by his car in the parking lot of the Walton Centre shopping plaza on Eastern Avenue at around 9:20 p.m. on Saturday. Anyone with any information is asked to call the George Town Police Station at 949-4222 or call Crime Stoppers anonymously on 800-8477 (TIPS).The islands’ most-trusted news source 8 FRIDAY JANUARY 26, 2018 • CAYMAN COMPASS industry associations and has set as one of its goals bringing them together “so you see it and feel it as one industry.” There has also been, from the political perspec- tive, a disproportionate focus on tourism. “I am obviously a big ad- vocate for tourism, in partic- ular stay-over tourism, which adds tremendous value to the jurisdiction,” said Mr. Scott, who was previously chairman of Cayman Airways and sat on the ministerial council for tourism and development. But he noted that gov- ernment has released a lot more information in support of expenditures on tourism than in support of the finan- cial industry. “That sends an inaccu- rate signal to the community to the importance in relative terms,” he said. This prompted Cayman Finance to conduct its own analysis, which, based on ag- gregated Economics and Sta- tistics Office data, found that the industry employs 4,000 Caymanians and contributes more than $300 million a year to government revenues. Based on the limited in- formation, the association pulled together different ele- ments that contribute to sup- porting the tourism and finan- cial services industry, such as regulation, legislation, policy development, marketing and business development. “We were able to show gov- ernment that they spend twice as much on tourism as they do on financial services. And for every dollar they spend on fi- nancial services, they roughly receive around $18 from finan- cial services. Comparably with tourism, they receive less than $2 in revenue,” Mr. Scott said. The invisible giant As part of the value equa- tion, the industry is also a large purchaser of services in the ju- risdiction. An analysis by Dart and the developers of Cricket Square showed that financial services tenants occupied 90 percent of the office space at Camana Bay and 80 percent at Cricket Square. This strong impact on local developers and property com- panies remains largely unat- tributed to the financial sector, Mr. Scott said. “When you see a new com- mercial office building going up at Camana Bay or Cricket Square or similar locations, we would count that as construc- tion GDP. The worker who is there has a construction job. [But] the demand for that is cre- ated by the financial services industry. If we did not have the industry, we would not need the building, we would not have the job,” he said. Other indirect effects, on professional support services such as marketing and public relations, various forms of re- tail, or restaurants are difficult to determine but likely to be very significant. In fact, the financial services industry is so entangled into the local economy that its suc- cess and support of the height- ened lifestyle locally can easily be taken for granted and be- lies the fragility of Cayman’s development during the past five decades. For an industry that rep- resents more than half of the economy, for example, an 8 per- cent decline, as discussed re- cently as the potential fallout from an EU tax blacklisting, would translate into a 4 per- cent decline for the economy as a whole. In other words, a significant downturn in the fi- nancial services sector would almost certainly plunge the entire country into an eco- nomic recession. However, regulatory pres- sures are nothing new and Cayman’s financial industry al- ways had to continuously in- novate, not only to respond effectively to the evolution of the international regulatory regime, but also to changing client demands. Texas A&M University law professor An- drew Morriss, an expert in regulatory competition, said it was this ability, underpinned by Cayman’s social and con- stitutional stability, which sus- tained collaborative policy- making, that was responsible for its success. Together with Tony Freyer, Mr. Morriss is the co-au- thor of the paper, “Creating Cayman as an Offshore Fi- nancial Center: Structure & Strategy since 1960.” He agrees that the tourism sector, with tourists on the street, cruise ships in the port and hotels along Seven Mile Beach, is simply much more visible than the financial ser- vices industry. Government’s fiscal sup- port of tourism is also often di- rected into general infrastruc- ture projects, such as airports, roads and cruise ship facilities, that are much more noticeable to the general public than gov- ernment ministers heading for talks to London or the crafting of new legislation. Mr. Morriss also noted that the same applies to the media coverage of both industries, which in the case of tourism will be more tangible in terms of tourists coming to the is- land, new airline connections and development projects than financial statistics or regula- tory initiatives. No ‘Cayman Miracle’? Given the different trajec- tories of Caribbean countries since the 1950s, an interesting question arises, “Where would Cayman be today without the fi- nancial services industry?” Mr. Scott believes Cayman could have been successful “in any number of industries that use high service industry skills combined with smart people coming together and creating in- novation.” The question, he said, is how soon those industries might have developed. Cayman has always been a very entrepreneurial jurisdic- tion and through its history developed a sense of being a global citizen. As a jurisdiction, Cayman positioned itself early on to take advantage of mul- tiple paths, Mr. Scott said. First, seafarers had to compete in this space, then it was local indus- tries through turtle, coconut or rope exports. “So, in terms of business perspective, quality of service and business opportunities that can be pursued, it is looked at from a global perspective. It is not limited to what we see in the region. “In our case, what ended up being our path was financial services. The original building block of that was the banking industry. From the banking in- dustry, we built the captive in- surance industry, the trust and private client business, the cap- ital markets business, hedge funds. We are now building out the governance offering for the jurisdiction using similar types of qualities and innovation.” Mr. Morriss believes, without financial services, Cayman would look a lot like the Turks and Caicos Islands. “Both were about at the same level of development around 1970, and the big difference is that Cayman’s financial in- dustry took off and Turks’ didn’t, leaving it with tourism,” he said. While he acknowledged the qualities that made Cayman successful in financial services, he said the problem is deter- mining where Cayman would have had a competitive advan- tage: “Cayman does not have a big labor force, cheap labor, low transportation costs, a natu- rally advantageous position geo- graphically for being a transit point, cheap utilities, a great nat- ural harbor, etc. Besides tourism, it’s hard to see what else could have developed – especially in the 1970s to 1990s.” During his research, Mr. Mor- riss unearthed documents in the British Archives from the 1960s and early 1970s from the For- eign and Commonwealth Office which asked what the overseas territories that were turning into financial centers could do be- sides offshore finance. He said, “To some extent, the response was ‘not much other than tourism’ and that’s part of what led the FCO to be able to win against the U.K. Trea- sury complaints about leakages in tax and sterling that the de- velopment of offshore finan- cial centers in overseas territo- ries and Crown dependencies were causing.” Future challenges, opportunities Now that Cayman has pur- sued the financial services path, its position is continu- ously threatened, be it through regulatory initiatives elsewhere or changing services and client needs. But Mr. Scott said he does not lose sleep over that. “Because when I look at fi- nancial services and the offer- ings that we have from Cayman, we have been very specific at what we developed. When we really define those at the core level, we are providing a very ef- ficient, trusted, neutral platform for legitimate parties who have capital and financing to con- nect with parties who need cap- ital and financing around the world,” he said. “So as long as the world needs capital and financing, someone, somewhere has to pro- vide the service.” Cayman’s qualities, in terms of global outlook and quality of service, have allowed the juris- diction to remain innovative. Mr. Scott believes that glob- ally, technology is going to play a huge role in redefining finan- cial services transactions. As a result, services are not con- strained by geography anymore and can be provided from any- where in the world. “To have a high impact now, you have to have upscaled, been innovative and cutting edge. Again, this works well with the skill sets that we have in Cayman,” he said. “When we look at capital and financing being needed in the world more now than ever, we have continued to evolve our product offering, our global standards, transparency and co- operation to make sure that we are meeting the needs of the world and upholding the stan- dards,” Mr. Scott said. “We provide a very valuable role and there will continue to be a place for us.” CONTINUED FROM PAGE 1 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 13+12+14+39+86Cayman Islands Jamaica Turks & Caicos U.K. U.S. $0 $10,000 $20,000 $30,000 $40,000 $50,000 $70,000 $70,000 82+7+33+59+82 GDP per capita in 1960 GDP per capita in 2016 Source: World Bank, Cayman Islands Economics and Statistics Office $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 $ 0 $10,000$20,000$30,000$40,000$50,000$60,000$70,000 Financial services industry: Cayman’s ‘invisible’ giant9 LOCAL NEWS CAYMAN COMPASS • FRIDAY JANUARY 26, 2018 Pageant beach hotel approved JAMES WHITTAKER jwhittaker@pinnaclemedialtd.com Plans for a 10-story, five- star resort at the site of the old Pageant Beach hotel were approved by the Central Plan- ning Authority Wednesday. The application for a 456-room hotel with six pools, two restaurants, a movie theater and a board- walk, was given outline ap- proval last year. However, de- veloper Howard Hospitality Group had to go back be- fore the planning authority Wednesday to get approval for specific design details, in- cluding parking and setback distances from the ocean. That was granted this week and the developer can now seek building permits to begin construction. There were several objec- tions to the project, mostly from condo owners in the neighboring strata develop- ment, Poinsettia. Chief among the complaints were the size and height of the develop- ment, the possibility of noise pollution and concerns over traffic and parking. Some resi- dents suggested large tourism developments on this scale should be confined to the northern end of the beach. In its analysis of the ap- plication, the Planning De- partment indicated that two other 10-story projects had been approved on Seven Mile Beach and that this project fit within the allowed zoning for the site. It indicated that the de- sign had sufficient parking spaces for the size of the project, though some were “stackable” spaces. “This site is located on the southern fringe of the Seven Mile Beach tourism corridor and is surrounded by com- mercial development, apart- ments and restaurants. Al- though this site has been vacant for a number of years, the Pageant Beach Hotel pre- viously existed on this site in the 1970s,” the Planning De- partment noted. The Howard group and its partner, New Jersey- based Madison Hill Proper- ties, purchased the land for the site for US$25 million in December last year. Michael Wilkings of HHG said the aim was to open the hotel in 2020.An artist’s impression of the five-star hotel planned for the Pageant Beach site. ‘Reefs Go Live’ at National Gallery The Central Caribbean Marine Institute is hosting an interactive virtual reality experience called “Reefs Go Live” at the Cayman Islands National Gallery on Saturday. Alongside presentations by CCMI, there will be activi- ties for children and a video and Q&A session. The exhi- bition will include an intro- duction to the “Reefs Go Live” educational program, which is a virtual gateway through which school children and members of CCMI can watch a live feed as divers explore the reefs around Little Cayman. CCMI’s education team is developing the “Reefs Go Live” pilot project to help transform how the ocean is taught about at schools, using virtual live experience methods to connect students and the public to real-time coral reef activity in an in- formal science setting. Using high-tech, full-face masks, specialized cameras, and streaming computer equipment, divers and scien- tists can deliver live lessons from the underwater and lab environment. The masks have in-built microphones and headphones so the divers can interact with the crew on the dive boat and speak di- rectly to teachers and pupils in their classrooms. Tom Sparke, CCMI’s edu- cation program manager, ex- plained, “A series of lessons had been developed around the national curriculum, ranging from a broad spec- trum of topics to very specific lessons such as the tagging of lionfish and exploring of a shipwreck.” The educational pro- gram is the latest by CCMI and is being held to help mark the third International Year of the Reef. The event will be held at 1:30-3 p.m. on Saturday, at the Dart Auditorium. A young student checks out an interactive ‘Reefs Go Live’ video about parrotfish by the Central Caribbean Marine Institute at the STEM Carib conference at UCCI last year. CCMI is holding a ‘Reefs Go Live’ event at the National Gallery on Saturday afternoon.Next >