Efforts to attract major financial institutions to the Cayman Islands should focus on marketing to US-based managers, although amending local immigration laws could prove difficult without first persuading Caymanians, according to local analysts.
“I think Cayman has to do the following to get new financial services businesses, of all sorts, physically here,” said financial analyst and former Chairman of the Cayman Islands Monetary Authority (CIMA) Tim Ridley.
“Make the immigration regime proactively genuinely welcoming in theory and practice; and efficient, transparent and fair, and then go out and promote it aggressively in the key centres overseas,” he said.
“Encourage more quality developments [like] the Ritz-Carlton, Camana Bay, golf courses and marinas to enhance the lifestyle to attract these newcomers; and encourage the local community to welcome the above for Cayman’s long-term economic good,” Mr Ridley said.
He advocated boosting local education “so the local community can participate in the industry at all levels,” and warned that traditional business-as-usual attitudes were counter-productive.
“The way forward for the political leadership is to persuade and to educate local voters by explaining to them the facts of life, rather than pandering to their ill-founded fears and prejudices,” he said. “In essence it all boils down to: ‘It’s the economy, stupid’, a [US President] Bill Clinton slogan.”
Leader of Government Business and Minister for Financial Services, Hon McKeeva Bush, he said, “understands this, and has started to make the right statements and take encouraging actions.
“But the bottom line for Cayman is to solve the immigration regime for the long term or we go nowhere,” Mr Ridley said.
The former CIMA chairman was responding to announced efforts in recent weeks by Mr Bush to encourage expansion of the local offshore industry, seeking a greater “bricks and mortar” presence to reassure both international regulators and US policymakers.
As Cayman moves on 13 August to sign its 12th and culminating tax information exchange agreement, clearing the way for graduation to the Organisation of Economic Cooperation and Development’s “white list” of internationally approved financial jurisdictions, Mr Bush has called for a “comprehensive strategy” to attract fund managers and international businesses.
Saying he wanted to achieve “an enhanced pro-business strategy that encourages investment both local and foreign,” Mr Bush told a 23 July Chamber of Commerce luncheon that he was “seeking legislative support to encourage fund managers to physically set up operations in Cayman” and would create a working group to design strategies.
“I also intend setting up a similar group to encourage international businesses to establish a physical presence locally,” he said.
Mr Ridley suggested, however, Cayman’s political leadership equally had a crucial role:
“Our leaders need to do a better job at economics 101. Growing the wealth in the community as a whole – and paying for the roads, schools, hospitals, etc with that that such wealth brings – require that Cayman market itself as a jurisdiction people want to come to, either for tourism, or for financial services, and possibly law, medical and other further educational studies such as offered by the Law School, and St Matthews and UCCI [University College of the Cayman Islands].
“We need to welcome them and encourage those with special skills to stay. Construction and other services follow those primary industries and; they are not drivers in themselves, whatever people in those industries think,” he said.
Chairman of the Cayman Islands Financial Services Association (CIFSA) Anthony Travers said that appealing to a changing international industry required nimble policymaking.
“We cannot fight today’s battle with yesterday’s cavalry when what we need is heavy armour,” he said.
“After so many years of unbridled success, it will understandably take some time for the new reality to take hold. In a competitive world where our competitors control the regulatory agenda there is no guarantee that Cayman will continue to succeed.”
If Cayman is to succeed, Mr Travers said, “It will succeed only because it adopts the right policies at the right time. The Institute of Directors in the UK stated [last] week that offshore hedge funds could be attracted onshore by a few simple UK legislative amendments. That is creative thinking. Cayman will need to be equally creative.”
A revitalised and expanded industry, he said, would provide “significantly enhanced employment opportunities”, but managers need to be “courted”.
“Someone,” Mr Ridley said, underlining the point, “should do a survey of hedge fund managers and investment advisers – and their professional advisers – in New York City and the UK asking them what would really encourage them to set up physical offices in Cayman with meaningful economic activity here,” he said.
“Cayman cannot sit and wait for people to come. We have to market the jurisdiction more effectively and make key people want to come here and set up shop and live here, and to feel appreciated and valued once they are here. We in turn will expect them to contribute to the community once they are here,” he said.