NEW ECONOMIC REPORT CHALLENGES THE STATUS QUO

By Staff Writer

A new economic report looking at the challenges and opportunities facing Cayman has come in for intense scrutiny in the past few weeks with a range of opinions on either side of the spectrum.

The report titled Unleashing Cayman’s Potential: A Journey to Prosperity and Unity was researched and written by prominent Caribbean economist Marla Dukharan.

The new report focuses on the economy broadly, and addresses specifically the sectors of tourism, financial services, and construction. It also deals with issues surrounding employment and inequality.

But the assertions on tourism have jumped to the forefront of local reaction, including criticism by the Hon. Minister for Tourism, Kenneth Bryan.

In the report, Ms Dukharan stated that tourism is a heavily import-dependent sector in the Cayman Islands - more so than the rest of the Caribbean, based on the largely-foreign workforce in tourism.

“But has anyone ever looked at the data to analyze whether there is any truth to these widely held beliefs that tourism and financial services are the twin pillars driving the Cayman economy and that construction is needed to create growth? And if not, why not?” she queries.

Against that background, her analysis raises several questions for Cayman’s policy-makers to address.

It states that the Cayman Islands is the only country in the Caribbean that consistently shows a net outflow of remittances, as foreign workers send a portion of their wages back home. Ms Dukharan says this net outflow of remittances “constitutes a drain on the Cayman Islands economy, just like imports.”

She cautions that “if Cayman continues growing the tourism sector, which requires more and more physical space, more hotels, bringing in more and more people, and generating more and more waste and pollution, we risk jeopardizing the very culture and natural environment which are the only major domestic input into the tourism sector.”

The economist also raises the question: What about the impact that tourism has on the amount of revenue the Government earns and can therefore spend in the economy?

According to her, “While we have found no official data published on the revenue generated from Work Permits granted to the tourism sector specifically, the Tourism Accommodation and Cruise Ship Departure charges amount to less than 3% of Government Revenues.”

The Hon. Minister for Tourism Kenneth Bryan has taken exception to the report’s conclusions on tourism declaring that “her analysis on the lack of contribution to our government revenues is unfortunately slanted.”

“Who asked her to do it, who paid her to do it?” Mr Bryan asked during an interview on Radio Cayman’s For The Record programme with Orrett Connor.

He further questioned what he felt are political insinuations within the report where it says in part: “It is especially important in the year ahead of an election, to make sure Caymanians understand how the economy works and what actually are the problems you need to resolve, so you can make the best decisions possible when you head to the polls.”

Mr Bryan termed that “highly inappropriate to get into our local politics” adding that he would be addressing the matter further in Parliament.

In responding to the concerns raised, economist Marla Dukharan affirmed that this report is an independent in-house document produced solely by her company as part of a regular series of economic perspectives and analyses not only on Cayman but other countries.

Speaking on the Radio Cayman programme Talk Today with Sterling Dwayne Ebanks, she viewed some of the reactions “as an attempt to discredit the analysis and the findings.”

“I would say categorically that nobody paid me to write this report. It was funded entirely independently by me. And the fact is that I’ve been covering the Cayman Islands economy for the past 12 years or so…people like me need to say what needs to be said irrespective of who might not like it.”

While the section on tourism has jumped to the forefront of comment and reaction, Unleashing Cayman’s Potential: A Journey to Prosperity and Unity also addresses other areas.

Comparatively, it places the financial services sector as the bedrock of the economy having an impact on the tourism sector as well. It asserts that without the license fees paid by the financial services sector, the Government will generate a fiscal deficit every year, and will have to borrow to pay its bills.

“The financial services sector therefore, in effect, subsidizes everything else in the economy - including tourism…So - tourism isn’t quite the goose laying the golden egg that many believe it is, and I think it is safe to say that while financial services is producing a bounty of golden eggs, these are really the only solid eggs in Cayman’s basket. And this makes Cayman fiscally and economically vulnerable (not unlike the rest of the Caribbean).”

Under the heading of ‘WORK’ it credits the labour force participation rate in Cayman as “probably the highest in the region, which means there is less idleness and less informality in the economy - all of which is positive…Cayman is the only country in the region where unemployment is not a problem.”

However, the report sounds a note of caution regarding the link between employment and education in Cayman: “Only 27% of students in Government primary schools and 37.5% at Government secondary schools are achieving the expected standards in their education. This is at odds with a country of Cayman’s GDP per capita and the level of fiscal spending on education. It suggests that Cayman will likely have to continue to outsource its most highly paid and highly sought after jobs for the foreseeable future.”

It also said that a skills-gap analysis has not yet been conducted in Cayman which would tell the specific skills employers need versus the existing skill-set of the Caymanian workforce.

And while the construction sector is highlighted as “a major growth driver in Cayman”, the Dukharan report asks: “Why then does Cayman seem to have a long-standing affordable housing problem?”

Unleashing Cayman’s Potential: A Journey to Prosperity and Unity also touches on issues of inequality within the economy and society. “Regrettably, we do not have any data beyond 2015 on inequality in Cayman. This puts Cayman’s policy-makers and nation builders at a significant disadvantage in addressing inequality, and there has been no meaningful improvement in inequality since 2007.”