In order for Cayman to derive more money from the financial services sector it will need to drop the rollover policy and make immigration laws more attractive to professionals, says the chair of Cayman Finance.
Anthony Travers said that roll over policy does not create jobs for Caymanians but removes them. He warned that if Cayman does not enhance the situation for the sector government revenue will depend on tourism and a budget as little as US$150million which would see three quarters of the civil service disappear.
Speaking at an anti-money laundering conference sponsored by Global Compliance Solutions on Thursday at the Grand Cayman Marriot, Travers spelt out the problems of restrictive immigration policies. “There can be no doubt that the application of the roll over policy and the administration of the grant of work permits has had a very negative bearing on the fund administration industry in the Cayman Islands with trickle down negative implications for the real estate industry and job opportunities for Caymanians.”
The need to attract new areas of business in the financial services sector will require attracting new professionals to the island, Travers explained.
“It is highly unlikely in the foreseeable future that the volume of transactional flows will return to the levels experienced pre Leman Brothers,” he added. “To maintain both private and public sector revenues, the Cayman Islands Financial Industry must for the reasonably foreseeable future obtain greater revenue from fewer transactions. This in turn means that a more substantial element of each transaction must be undertaken from in and within the Cayman Islands and by those professionals capable of undertaking real financial engineering.”
He said the choice for Cayman was clear cut. In a hypothetical example where the financial industry was taken out of the local economy, Travers suggested, Cayman would be left with an indigenous population of some 27,000 people whose revenue could only be derived from tourism.
“There is absolutely nothing wrong with that as an economic model. Indeed, some people may prefer it and hence the matter is one of choice. But it must be understood that if that is the choice, that model will generate a budget of approximately US$150 million per year and support a civil service that is therefore less than one quarter of its current size.”
If the Financial Industry is not accommodated he warned that young Caymanians can only be prepared for local employment in tourism. If the finance industry is not moving forward with the full support of the Cayman Islands Government then it is moving backwards, he noted. “No financial industry in history has been able to maintain a status quo. And Government revenues from the Financial Industry will necessarily follow either trend -forwards or backwards-- it is as simple as that.”
Travers added that the real mechanism for ensuring proper Caymanian integration into the financial services industry is the Immigration Law. He said it was widely accepted that it had not worked satisfactorily and where it had failed to integrate Caymanians into the sector the answer should not be policies which drives fund administration, IT services, law firms and banks back offices out of the Cayman Islands.
He said Cayman Finance was advocating a change to policies that he believed would create more jobs for Caymanians not less. “There is nothing in the recommendations of Cayman Finance with regard to matters of immigration that will not operate in the best long term interests of young Caymanians seeking opportunity in the financial services industry,” Travers vowed but added the country needed to bring back business that had relocated and attract new business especially in the form of fund manager professionals.
Cayman Finance was enjoying a good relationship with the new administration, Travers said, with a substantial improvement in co-operation between the private and public sector, the industry body was providing coherent advice on behalf of the Cayman Islands Financial services Industry through developed channels. “On the key points, our advice is being accepted,” he said adding that Cayman Finance had also endorsed the government 2009/10 budget because a great number of the recommendations were developed by and recommended by the organisation.
Although the chair noted that no one thought the increased fees were compelling in their own right they were far preferable to direct taxes. “If cuts can now be made in public sector expenditure, (they) may represent only a temporary inconvenience,” he said but nothing would have justified "crossing the Rubicon and introducing direct taxation.”