Address
from the Premier of the Cayman Islands

Hon.
Alden McLaughlin MBE, JP, MLA

March
6th
2020

Good
morning.

Thank you Chris for your introduction and thanks too to
Royal Fidelity for this invitation to address CEO 2020 this morning.
This annual conference has certainly become a flagship event in the
Cayman business calendar.

As
I considered what I wanted to say to you today the opening lines from
Dickens’ ‘A Tale of Two Cities’ kept coming to me:

“It
was the best of times, it was the worst of times…”

There are two reasons for this. The first has to do with
the daily increasing concern regarding COVID-19, and its devastating
impact on people’s health; on already stretched health systems; and
on world economies, juxtaposed with what is acknowledged as one of
the longest periods of economic growth in decades.

The other reason revolves around the jagged edge of
local politics and colliding domestic issues rather than global ones.
And we must consider both local and global issues as the
Government’s ability to manage one is often impacted by the other.
Certainly, recently it has felt like the best of times and the worst
of times for Government. Indeed this past week some opponents of the
Government were happily crowing on a local radio talk show that my
Administration was having a very bad year.

The first words of ‘A Tale of Two Cities’ are often
quoted, as I did just now. Few though go on to the next line: “it
was the age of wisdom, it was the age of foolishness.” Perhaps
those of you who live here can appreciate why the discussions on that
particular talk show would bring this quote to my mind.

Admittedly this year has not started well. If we set
aside the politics, and there is always ‘the politics’, then we
must recognize that Cayman now has three major economic issues to
grapple with as a result of events over the last few weeks. The so
called blacklisting of the Cayman Islands by the EU finance Ministers
in a post Brexit world is one.

Another is the almost certain loss of Cayman’s cruise
berthing and enhanced cargo dock facility project following the
recent court decision – a 7 year project, with over $9M being spent
to date, on an improved seaport facility that is important to our
cruise tourism sector and to many local jobs and businesses.

And as I have stated, there is the looming threat of
COVID-19 to the country’s economic health, as well as to public
health.

But those of you who know something about how far these
Islands have come over the past seven years will understand that the
two Governments that I have led have proved our ability to manage
through tough economic times.

When I formed the Government in 2013 we were faced with
a country that was still struggling to emerge from the shadows of the
recession which began in 2008. GDP growth was struggling at just over
1%; Caymanian unemployment had spiralled to 10.5%; annual stay over
tourism numbers were under 350,000; cruise passenger arrivals at 1.4M
were the lowest they had been in over a decade. In summary, the
economy was still depressed and many Caymanians, especially in the
cruise tourism and construction sectors were hurting. Small
businesses were having a hard time keeping the lights on,
unemployment was persistently high and Caymanians were losing their
homes.

Both the Governments I have led understood that unless
we fostered the conditions necessary for business to flourish and for
our economy to grow, Cayman would remain stuck in the rut in which we
found ourselves when elected in 2013.

Crucial to our success was the plan we immediately put
in place to restore government finances by increasing surpluses,
paying down debt, and growing our reserves. Without that, we knew we
would not be able to restore the confidence of business to invest in
Cayman.

Secondly, we knew that we had to develop and implement a
strategy for sustainable economic growth that would benefit
Caymanians now and position Cayman so that when the next inevitable
economic slowdown arrived we would be best able to ride it out.

Fast forward seven years and we now have an economy that
is undoubtedly the best in the region. GDP growth has averaged over
3% during the past five years; unemployment is at a very low 3%
overall, while Caymanian unemployment remains below 5%; stayover
tourism has grown to over ½ million visitors; cruise arrivals,
although declining from a high of 1.9M in 2018, still ended 2019 at
1.8M visitors. The hotel & restaurant sectors grew an average of
3.7% since 2013 while financial services business activity grew at
almost 4% on average.

The development sector is booming with consecutive years
of over 8% growth and there are three new hotel projects as well as
other major commercial and housing projects under construction. In
2019, nearly 750 projects were approved with a combined total value
of over $890m. The population has increased from 56,000 in 2013 to
about 68,000 in 2019, driven by the strong growth in Cayman’s
economy.

The success of our economic strategy has been the key
component in my Government meeting our fiscal ambitions.

The two-year budget of some $2.25bn
that we steered through the Legislative Assembly late last year means
that across our eight year term we will have delivered on the fiscal
strategy we established when we came into office in 2013. In short,
we will have achieved and maintained full compliance with the
Principles of Responsible Financial Management which has also freed
us from UK oversight of our finances.

Across eight years, not only will we
have delivered on our commitment to levy no new fees or taxes on the
public, we will have taken opportunities to reduce the cost of
government to both businesses and individuals and families across
Cayman.

We have maintained our pledge to fund
our significant investments in infrastructure and public services
from the cash we generate. We have undertaken no new borrowings and
we have continued to pay down government debt to around half the
level we inherited in 2013. As at the close of 2019, Cayman’s debt
to GDP ratio stood at just 6.4%.

We have increased revenues through
economic growth; controlled operating and financing expenses;
prioritised capital investments, and generated substantial cash flows
from operating surpluses. These achievements have combined to enable
us to build and maintain significant cash reserves. The 2019
unaudited accounts show total cash balances of over $520m.

The challenge of operating public sector finances to
generate a surplus position is one that faces countries around the
world. Few are responding to that challenge as positively as the
Cayman Islands. Worldwide data indicates that fewer than 20% of
governments reported having a budget surplus. On the latest
available data, the Cayman Islands ranked 7th
in the world with a budget surplus equal to 4.4% of our GDP. Many
countries, including a large number of those who criticize Cayman’s
tax neutral status, are running significant budget deficits.

It is this sound, prudent fiscal
strategy which has resulted in the significantly improved state of
public finances and places the Government in the best possible
position to navigate a future of challenges and risks.

I hope that I have painted a picture not only of an
Administration that has proven our ability to provide stable
government, fiscal prudence, and a strong economy; but also of a
country that is today economically robust with a thriving business
sector.

If you compare the views of the critics of government
with the facts, then what you get is a tale of two very different
Cayman Islands.

The politics is as perennial and annoying as the
mosquitoes are but what is important is that we are not led to
believe that Cayman has been on autopilot these past seven years. Our
economic results are the product of careful thought, sound economic
policies and hard work in the context of a robust global economy.

Now, however, as I noted already, there are challenges
looming for our Islands, some local and others global.

First, I want to touch on something that I believe
provides the context for all that the conference today will discuss.
That is the prospects for the global economy.

In January of this year, the IMF’s economic report on
the global economy was still fairly positive. However, before the
ink was even dry on that forecast we were being reminded that global
risk can actually materialize quickly from unexpected sources and
that there is nothing that even the best laid economic plans can do
to prevent it.

The fast spread of the COVID-19 coronavirus to more than
80 countries both far away and close to home is a game changer. On
Monday of this week, the Organisation for Economic Cooperation and
Development (OECD) warned that over this year the global economy
could grow at its slowest rate since 2009 because of the effects of
the virus.

The OECD adjusted its global growth forecast for 2020
down by 0.5% to 2.4%. It added that a longer "more intensive"
outbreak could tip many countries into recession, including Japan and
the Eurozone. Governments and central banks are responding, most
notably with a 50 basis point interest rate cut by the Federal
Reserve in America. I would note that actions like these by the US
Fed have already been replicated by local banks, which will reduce
rates domestically. The IMF, the World Bank, and other transnational
institutions are promising support to vulnerable economies.

But let us not lose sight of the fact that COVID-19 is,
first and foremost, a human story. As of this moment, there have
been around 100,000 confirmed cases worldwide across at least 87
different countries and territories. Over 3,350 people have died.
This is driving concern and indeed panic across the globe –
including the growing concern of people in these islands.

Thankfully, as I address you this morning, Cayman has
not yet had anyone test positive for the virus. But we are a very
open society with more than 2.4 million visitors a year as well as
significant travel abroad by Caymanians and residents. Clearly,
there is considerable risk, if not inevitability, that we will see
cases in Cayman. However, health officials here in Cayman continue
to ramp up preparations and are providing the Government and the
public with excellent, timely advice on how to minimize that risk.
Already we have imposed travel restrictions, including restrictions
on at risk airline and cruise passengers, and we have instituted
screening techniques at our borders to identify anyone who has an at
risk travel history.

I thank our health professionals and border protection
oficers for the work they are doing and I promise that they will
continue to get the support from the government that they need. As
soon as the threat emerged, we provided $1m to the preparedness
efforts and should further resources be required, they will be
forthcoming.

The government has acted promptly and our vigilance is
being maintained. Travel restrictions have been put in place and
this week we decided to restrict all non-essential travel overseas by
public servants. This extends to the Cabinet as well and I have
cancelled my planned trip to London for the Joint Ministerial Council
at the end of this month. I am also urging the public and the
business community to restrict travel unless absolutely required.

We cannot lock ourselves away from the world but we are
being as thoughtful and pragmatic as we can. Government will
continue to do all that we can to minimize the risk of infection
spreading to Cayman. Today I can announce that the Cabinet has
agreed to a duty waiver on all hand sanitisers, protective facial
masks and surgical gloves. The waiver is effective immediately and
runs through to the end of 2020. I encourage merchants to pass on
these savings to the consumer.

While we can minimize risk, we cannot eliminate it.
Therefore we are also preparing for the worst.

Make no mistake, if there is a significant outbreak here
it will have a potentially devastating effect on the health of the
nation and the economy.

With that in mind, we have activated the National
Emergency Response Operation Centre to co-ordinate all the necessary
planning and activity needed for these types of situations. Much of
the response is naturally being led by our Health Services Authority
who are ramping up testing and screening procedures. The HSA has
established an email address for enquiries, flu@hsa.ky, and they are
establishing a hotline for people to call if they are concerned or if
they believe they are displaying symptoms. Should any case be
identified on Island, proper treatment and infection control
protocols are in place.

The potential economic impact of COVID-19 on the Cayman
Islands has the attention of our Finance Minister and indeed of all
Government. Certainly, given the work that we have done to improve
the Government’s finances and to encourage a robust economy, we are
as prepared as we could be for an economic downturn.

Of particular import for Cayman is what will precipitate
a drop in predicted economic growth. Much of the impact will be the
result of a drop off in discretionary consumption and, crucially for
Cayman, reductions in travel and tourism. We have already seen a few
planned visits from cruise ships being cancelled as Cayman tries to
stay infection free. The longer term impact on the cruise industry
could be considerable. Weaker investment and the knock on effects in
financial markets will also impact our economy.

I don’t want to sound like a prophet of doom but we
have to face reality. These impacts come at the end of a sustained
decade or so of global growth. I had previously been warning that,
in my view, a slow-down in the global economy was inevitable in the
short to medium term. The impact of COVID-19 is likely to mean that
the timescale is shorter and the impact deeper than I had previously
thought. But again we are in a much better position that we were in
2008 to ride out these storms. Slowdowns are cyclical after all, and
we shall be ready to take full advantage once we all come out the
other side.

As I noted earlier there are other particular issues and
risks that further impact Cayman. The Government’s role is to
recognize those issues and risks and to position Cayman for whatever
the future holds.

Your theme here today is “Colliding Global Forces”
but, in a very real sense, I believe it is not forces colliding that
present Cayman with its key challenges. Rather, we are facing a
period when one of the realities of our time is a rejection of
globalization and integration.

The obvious example of that is the decision by the
United Kingdom to quit the European Union. Brexit is now done and we
are into the transition period during which a new relationship is
being negotiated. I have spoken many times about the positive
opportunities that I believe that the UK’s renewed outward focus
can bring for Cayman if we are ready to seize them.

The Global Britain Initiative is potentially a gateway
for Cayman to develop new relationships and to open up new markets.
The strong and positive links we have built with the UK government
over the last six years position us well and I am confident that
Cayman will be an effective partner as the UK embraces the
opportunities that life outside the EU will bring.

Understandably, Brexit creates a tension between the UK
and the European Union, particularly in this initial phase as their
future relationship is negotiated. That tension has already cast its
shadow over Cayman with the decision last month by the EU to
‘blacklist’ Cayman as a so-called ‘non-co-operative
jurisdiction for tax purposes’.

Forgive me if I express my frustration here. In what
sense exactly is Cayman non-co-operative? We have put in place very
effective information sharing arrangements that allow us to provide
responses to requests from taxation and law enforcement authorities
across the globe. Equally, Cayman has been willing to adjust its
legal and regulatory frameworks in order to keep pace with global
standards and the requirements of international bodies including the
European Union. Specifically, since 2018 Cayman has made some 15 or
more legislative changes in order to meet the myriad requirements of
the EU.

This is an example of how Cayman has benefitted from
having the UK at the table in previous discussions on the listing
process. Before Brexit, the UK Finance Minister would have been
present at the meeting. He could have given the meeting any
reassurance needed about the actions that had been taken by Cayman.
And there is every chance that had the UK still been a member of the
EU then what is a technical blacklisting could have been avoided.

In passing, it is also worth noting that now the UK is
on the outside, the EU is levelling threats at the UK itself as well
as at Cayman. In the immediate aftermath of the blacklist
announcement, we have seen the European People’s Party grouping in
the European Parliament saying, and I am going to read this out for
you in full: “The UK would be well advised to take note that EU
Finance Ministers put a British Overseas Territory on the blacklist
of tax havens. This sends a clear signal that the idea of turning the
UK into a tax haven will not be acceptable to the EU. If the British
Government intends to do so, there is a good chance it will end up on
the EU’s blacklist as well," said Markus Ferber MEP, the EPP
Group Spokesman on Economic and Monetary affairs.

Despite this hyperbole, we recognize that even though
the EU review process is flawed, it is a process with which we must
continue to engage. The technical part of this process remains a
valid one as world regulatory standards are raised. Both Cayman and
the EU agree on the need to eliminate money-laundering and to prevent
the financing of terrorist activity. Cayman wants no part of such
business. We can, and we will do everything possible to eliminate
the risk of such activity in Cayman. We can, and we will ensure
robust enforcement action against any who attempt to get around the
regulations this jurisdiction puts in place.

Achieving technical compliance in order to have Cayman
removed from the ‘blacklist’ when next the EU Finance Ministers
meet is imperative. No doubt in the weeks and months ahead, the EU
will continue to ratchet up its requirements. But even against a set
of moving goalposts, Cayman will ably comply and continue to prosper
as we have always done. I am grateful for the support already
offered by Cayman Finance and firms within the industry, including a
number in this room, which will help us to ensure we do so.

The political engagement required will remain one of my
Government’s key priorities this year.

In this effort, I know we can count on the support of
the United Kingdom Government even though it is now outside of the
EU. The remarks from Herr Ferber that I quoted just now clearly
demonstrate that the UK increasingly has its own interests at stake
alongside Cayman’s. The meetings I had in London last week with
the new Overseas Territories Minister, as well as at 10 Downing
Street and at the Department of International Trade, with key
advisors to Prime Minister Johnson, reinforced both the mutual
interest Cayman has with the UK and our shared commitment to working
together. I remain grateful to the Governor and the UK government
for their co-operation and support. I am also grateful to those
members of the private sector who travelled to the UK to join with me
in those conversations and to help champion the cause of Cayman.

Championing the cause of Cayman as well as the
environmental interests of our region was certainly the focus of a
conversation the Cayman delegation had last week with HRH Prince of
Wales at his residence at Highgrove. We discussed an initiative that
the Prince proposed in 2015 but to date, no one had been able to get
off the ground - that is a fund whose purpose is to provide financing
for Blue/Green initiatives.

The Prince was pleased to learn that such a fund was
being worked on by Cayman entities to provide financing for
Blue/Green initiatives in the Caribbean, including here in the Cayman
Islands. All going well, the launch of the fund should take place in
June of this year.

The fund will certainly showcase the usefulness and
importance of the Cayman Islands funds sector despite the views of
some EU member states.

While our interests often align with the UK’s, they
are not exactly the same and Cayman must also be prepared to speak
for itself and to defend our interests directly.

As we have learned, while periodic engagement can and
does yield results, the EU bureaucracy grinds on in between such
times and experience tells us that we need to invest in more routine
engagement. We have therefore decided to establish a permanent
presence in Brussels, subject to obtaining the requisite approvals.

Like all jurisdictions, Cayman will sometimes find
itself buffeted in a dynamic global economy. It is government’s
role to assess and, as far as possible, mitigate risk. Where events
are beyond our ability to mitigate fully, we must prepare and stand
ready to respond as we are doing with the COVID-19 situation.

More generally, part of any effective strategy to
mitigate the impact of changes in the global economy is to make sure
that the things that are possible to be done right here in Cayman do
actually get done. Government must act in the long term interests of
our economy by making sure that Cayman is as competitive as possible.

Therefore, it is still incredible to me, particularly
given the not yet fully understood impact of a likely recession, that
we have put ourselves in a position where the recent court decision
quashing the Referendum Law means that the project is now seriously
at risk because of the resulting delay. My concern is not about the
cruise companies, they will be fine should the project fall away. My
concern remains where it always has been - to secure the best
possible outcome for those thousands of Caymanians and small
businesses who rely on cruise tourism for their livelihood. Without a
cruise berthing pier, I am afraid that we must again expect the
inevitable decline in cruise visitor numbers over the next few years.

And equally important, we need to ensure that there is a
viable solution to pay for the revitalization of our cramped outdated
cargo port facilities. For make no mistake, without the cargo
enhancements, we will struggle to import the quantity of goods we
will need as our economy develops and our population increases.
Without the cruise berthing project, any future cargo port
improvements will have to be funded by the Port Authority and the
costs passed on, no doubt, ultimately to consumers.

The cruise berthing part of this project would secure
hundreds of jobs and create numerous business opportunities for
Caymanians. The cargo element would secure our ability to import the
goods we need as our country grows.

We had on the table a firm commitment to deliver both
parts of the project at no financial risk to the Caymanian people,
with cruise passenger head tax paying for the construction. In a
period of almost certain economic slowdown, the case for the project
is even more clear and obvious. Without the project, we will be
exposing our economy – and our people – to more risk. And, in my
view, totally unnecessary risk.

Although I said earlier that I didn’t want to be a
prophet of doom, having heard what I have said so far, you might be
tempted to conclude that my purpose here this morning is to say that
the Cayman economic outlook is bleak.

If so, you would be wrong. I remain confident in the
strength and resilience of Cayman’s economy. I believe that the
same entrepreneurial spirit, the same innovation, and the same
creativity shown by Caymanians and residents that created and fueled
Cayman’s economic miracle, will maintain our economic strength into
the future.

The fundamentals of the Caymanian economy are sound, for
all the reasons I noted earlier.

I have to add that this Government’s own financial
performance continues to underpin business and investor confidence in
our jurisdiction.

This track record is reflected in
market confidence in Cayman. Last year, Moody’s Investor Services
reaffirmed the Cayman Islands’ Aa3 sovereign debt rating with a
stable outlook. Moody’s based the debt rating on our high per
capita GDP; a robust institutional framework anchored on political
stability; and the comparatively low government debt burden.

We must though recognize that our relative prosperity
cannot be taken for granted. This government is ready to work through
any coming downturn and we will continue to work tirelessly to
strengthen our position in established markets and to diversify our
economy for the good of our country and our people.

Cayman is at a point in its development where we need to
think longer term about what will drive future growth in the economy.
The more diverse the economy, the more resilient it becomes.
Diversifying our economic base also creates new kinds of
opportunities for our people, both as entrepreneurs and in the labour
market.

In Cayman we have shown we can get things right if we
work together. As some of our friends in the European Union could do
with learning, it is private sector innovation that drives an economy
forward, not government. Government can and will play its part in
providing the right kind of environment for inward investment and for
the support of local business growth. However, it is the people in
this room that will generate the growth and improved job
opportunities in the future.

I understand there are risks and challenges in our
future. There is risk enough in the international situation. This
is not the time to be looking to create challenges for ourselves. We
need to hold firm to the direction that this government has set and
to continue with the sensible and pragmatic growth strategy we have
put in place.

I see plenty of opportunity for Cayman. I remain
ambitious for my country and I am determined that the government I
lead will complete its two terms and leave Cayman in a considerably
stronger position than we found it.

I welcome, and I am very grateful for, the support this
government has had from the business community. Ours has been a
shared endeavour over the last seven years, we have one more year to
go. I intend for us to finish as we began, guided by the principles
of good governance, strong finances and sustainable growth that are
indispensable to a vibrant economy and have been the hallmark of my
two administrations.

I will leave you with words of inspiration again from
Dickens’ ‘A Tale of Two Cities’ of which I am very fond:
“Nothing that we do is done in vain. I believe, with all my soul,
that we shall see Triumph!”