How To Diversify And Future-Proof A Sids Economy? Ask The Cayman Islands
I was hoping to catch a glimpse of DJ Khaled earlier this year while he was recording at Albany in The Bahamas, as more and more international artistes do. And why not? Apart from Jamaica, it’s hard to beat The Bahamas’ beauty and vibe, not to mention the possible tax benefits of registering IP there. THIS is what everyone should be thinking when we think of the Caribbean — not just sun, sea, sand and sin, but superior ease and cost of doing business, efficiency (tax and otherwise), and high-wage and knowledge-based industries. And this is exactly what Cayman Enterprise City (CEC) has been able to create in the Cayman Islands over the past 11 years, as demonstrated by the Economic Impact Analysis that my team and I had the privilege of conducting.
CEC is a private Investment Promotion Agency (IPA) in Cayman, whereas most IPAs are Government funded. According to the WTO and the OECD, a lack of economic diversification is often associated with increased vulnerability to external shocks that can undermine prospects for longer-term economic growth. The industries that the over 320 innovative companies CEC have been able to bring to Cayman’s three Special Economic Zones (Cayman Tech City, Cayman Maritime & Aviation City, and Cayman Commodities & Derivatives Centre) are largely knowledge and technology-based, such as FinTech, MedTech, software development, artificial intelligence, Web3, commodities & derivatives trading, maritime, aviation, media, and digital marketing.
| CEC supports a more diversified, gender balanced & resilient Cayman
Diversification into these innovative sectors future-proofs the Cayman Islands’ economy in a way that would not occur otherwise, especially not organically. Such diversification creates a healthy counterbalance to the longstanding dominance of the tourism and financial services sectors, and is almost infinitely scalable within Cayman’s small physical space. Via these high productivity sectors, the economy can grow with less strain on its natural resources, defying the law of decreasing marginal returns; knowledge-based sectors have the potential to achieve high productivity and growth in output without a commensurate increase in inputs. The Cayman Islands economy generated USD55 in GDP for every manhour worked in 2019 across all sectors, with knowledge-intensive sectors like Finance & Insurance generating USD227 in GDP per manhour worked. Cayman already has a comparative advantage in human capital sectors, and the people with knowledge are increasingly Caymanian and Permanent Residents.
CEC’s economic impact has reached USD806.8 million in 11 years since inception, and in 2022, CEC increased its contribution to the Cayman Islands Economy by almost USD147 million generated USD5.3 million in fiscal revenue. CEC creates new companies and jobs at a faster rate than the wider local economy; CEC saw 25% growth in new company formations in 2022 while Cayman as a whole saw 9% growth. In 2022 the overall Cayman economy created 9,696 jobs for non-Caymanians but only 740 jobs for Caymanians and Permanent Residents. Within the SEZ however, 43% of jobs created went to Caymanians and Permanent Residents.
Furthermore, monthly salaries for locals working for CEC companies earn almost double than their counterparts outside the SEZ; 52% of Caymanians earned less than KYD4,000 per month in late-2022, while the average monthly salary for Caymanians employed in the SEZ was estimated at KYD7,232. In addition, women employed in the SEZ earn higher salaries than women do in the broader Cayman economy, on average; 54% of women in Cayman earned less than KYD3,200 per month in late-2022, while the average monthly salary for Caymanian women employed in the SEZ was estimated at KYD5,459.
Overall therefore, companies in the SEZ are pulling Cayman in the right direction — towards a more diversified economy, towards a knowledge-based economy dominated by innovative and high productivity sectors, towards less resource-intensive growth, towards gender wage-parity. My team and I congratulate the founders and the team at Cayman Enterprise City for what they have been able to achieve for their country, over the past 11 years.
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