Infrastructure a key to success

Fifty years ago, the word infrastructure
had little relevance in the Cayman Islands. Much of Grand Cayman was without
electricity. There were no telephones, no piped water and no sewerage system.
Many of the roads were unpaved. Few buildings had air conditioning and there
were mosquitoes everywhere. Office space was scarce and accommodations for
expatriates were even scarcer.

The Cayman Islands seemed a most
unlikely place to establish an offshore financial centre, but that is exactly
what was about to happen. And infrastructure became a key word in the equation. 

Starting in the mid-1960s several major
advancements occurred that laid the groundwork for Cayman’s rapid growth. In
1966, Caribbean Utilities Company began the generation, transmission and
distribution of electricity for all of Grand Cayman. That same year,
improvements were made to the runway at Owen Roberts Airport, allowing jet
service. Cable & Wireless also commenced providing local telephone service
in 1966 and two years later it commenced telex services. Within in a decade,
the Cayman Islands was said to have the highest number of telex machines per
capita in the world. 

When the Bahamas began its road to
independence in 1967, nervous investors looked for other nearby offshore
financial centres. Soon, investors and investment professionals were pouring
into Cayman; but they needed homes, hotel rooms and offices.

The building boom 

George Town became a sea of construction
dust in the early 1970s. New office buildings went up all over town. The
government needed new buildings to keep pace with the business advancements,
leading to a new Legislative Assembly building, a new courts building, a new
police station and a new government administration building, all in less than
four years.

The government also completed
redevelopment of the port facility, including the long finger pier that allowed
for more efficient unloading of cargo ships. 

Tourism-related building also occurred.
The 125-room Holiday Inn opened in August 1972. It quickly became too small and
went through two expansions during the next few years, bringing it up to 183
rooms.

The Registered Land Law of 1971 and the
Strata Titles Registration Law of 1974 paved the way for investments in real
estate, including condominium developments, which started going up on Seven
Mile Beach in 1974.

Homes and apartments were also built in
other areas around George Town, giving expatriates arriving to work in the
financial services industry places to live.

Construction slowed in the early 1980s
as a result of a US recession, but only temporarily. In 1985, the new airport
terminal building opened and the following year, the Hyatt Regency hotel
opened, setting a new standard for tourism service and accommodations. 

In the 20 years that followed, Seven
Mile Beach would see almost unbridled development, with new condominiums,
hotels and shopping plazas springing up along both sides of West Bay Road,
culminating in the opening of The Ritz-Carlton, Grand Cayman in December 2005.

Although the financial crisis in 2008
put a halt to a long building boom – stopping work on two new high schools and
shelving plans for two other schools and a new courts building – the
construction of a new 185,000 square foot government administration building
continued and opened earlier this year. With several other infrastructure
projects mooted for 2011, including a cruise berthing facility, airport
renovations and a sewerage system for central George Town, a new construction
boom looms.

Technology 

As important construction was to
Cayman’s growth as a financial services centre, advancements in technology were
just as important, says Tim Ridley, former Maples and Calder partner and former
chairman of the Cayman Islands Monetary Authority.

“The great majority of professionals who
send business to Cayman never come here,” he says. “They are simply interested
in getting the transaction done efficiently and at the best cost, so their
principal interest is in high quality professional service and telecommunications.”

With the completion of a submarine cable
between Grand Cayman and Jamaica in 1972 came the capability of making
international telephone calls. Many more technological advancements came in the
years and decades that followed.

“Cayman and the offshore financial
centres generally have benefited hugely from the development first of the fax
machine, followed by the Internet and email communications,” Ridley says. “That
combined with the quantum leaps in computers and document production has made
it far easier and quicker to do deals and close transactions within tight time
frames.”

Huw Moses, managing partner of the law
firm Appleby, agrees telecommunications advancements have been the most
significant infrastructure development. 

“Whilst air and sea facilities are
important, at least in the context of the legal business, these are less
important than modern and reliable communication systems that enable global
networking and a sound basis for data transmission,” he says.

Improved technology has also improved
efficiencies, noted David Smailes, chief information and technology officer at
the law firm Walkers.

“[Technological improvements have] had a
positive impact on the way we do business as a greater number of meetings can
now be conducted over the wire and our professionals that are required to
travel have immediate access to information through their BlackBerries or
notebooks,” he says.

However, as Moses points out, there are
some consequences to the immediacy of today’s technology.

“The development of modern
communications has resulted in a much more demanding service-orientated
environment for law firms,” he says. “Gone are the days when a client would be
happy with a response next week to a letter sent by post or even a fax. Now
it’s e-mails to desktop, laptop and BlackBerry and an expectation of an almost
immediate response.” 

Even with all of the advancements in
telecoms, international long distance calls remained very expensive until the
end of the Cable & Wireless monopoly in 2003. Smailes says deregulation
made the telecommunications market more competitive.

“As a core business requirement, quality
telecommunications at a reasonable cost make Cayman a more attractive prospect
when compared to some other [offshore financial] centres, including the BVI and
Dubai.”

However, Smailes sees some limitations
to Cayman’s telecom infrastructure, particularly because there are only two
submarine fibre optic cables connecting Cayman with the outside world.  

“Additional routes would offer greater
resiliency and greater bandwidth which will be important if Cayman continues to
develop at the rate at which the current government would like,” he says.
“Bermuda and Jersey, for example both, offer better options in that regard.”

Keeping up with ever-advancing
technology takes money, effort, and commitment, something with which Ridley has
concerns.

“I worry about the ability of LIME and
Digicel to keep pace with the developments in telecommunications and to provide
state-of-the-art services at a competitive price,” he says. “I also worry about
the slowness of government services generally to embrace and implement
integrated and efficient computer and web-based services to the public.” 

Jason Blick, CEO of Cayman Enterprise
City, a planned special economic zone that will require high tech capabilities,
says Cayman has always been at the forefront of intellectual innovation.

“Today we are witnessing the dramatic
rise of a new economy, a digital economy – a new global medium that will be the
most important driver of business and economic change in the next century,” he
says. “Is our telecommunications infrastructure ready? Can it support the needs
of business and the broader community as the Cayman Islands strives to take a
leadership role in the digital economy? I believe it can and it will.”

Electricity supply is something else
that some of Cayman’s financial services competitors do better, says Smailes.

“Power is also a challenge here compared
to financial centres such as Jersey and Dublin,” he says. “It is expensive and
the system can be temperamental, however overall it is pretty good when
compared to other countries in the region.”

Living and working in Cayman

Even if, as Ridley says, most financial
industry professionals who send business to Cayman never come to the Cayman
Islands, there are still visitors and residents to whom the local
infrastructure is important.

For example, Ridley says captive
insurance investors tend to have regular and often large meetings in Cayman.

“They need and value an efficient
airport, transportation, hotel and restaurant facilities,” he says. “Until
recently, not all those facilities were adequate, but The Ritz-Carlton in
particular has made a huge and beneficial difference for large group meetings
and conventions.” 

Many of the things that make the Cayman
Islands an attractive tourist destination, make it a desirable place to live.
Modern supermarkets, dozens of good restaurants, great beaches, water sports
along with high-quality accommodations help make living in Cayman enjoyable. 

Grant Stein, global managing partner of
Walkers says it’s Cayman’s overall infrastructure that matters most, not any
one particular aspect.

“Without a good housing stock, good schools
and medical services, young professionals would be a lot more difficult to
recruit,” he says. “Cayman’s physical infrastructure is better than most other
offshore financial centres except for the Crown Dependencies and possibly
Bermuda, although the availability and quality of housing in Cayman is much
better than Bermuda. The infrastructure is vital in enabling the financial
sector to recruit the best people.”

Moses agrees. “There is no doubt that
Cayman’s infrastructure makes recruitment easier here than in some
jurisdictions such as the BVI,” he says. “This coupled with no restrictions on
property ownership or leasing give Cayman an edge compared with say Bermuda and
Jersey, where property ownership for non-nationals is restricted. Our close and
easy air links to both the UK (direct flight) and short flights to other major
US cities also help.” 

Traffic started becoming a problem in
the 1990s, but a series of new roads including the Esterley Tibbetts Highway,
the Linford Pierson Highway and the East-West Arterial have all lessened rush
hour traffic problems. The government has plans to extend the East-West
Arterial all the way to the Colliers area of East End. Since the extension of
that road is a prerequisite to several planned private sector projects, it
could happen soon rather than later.

Parking in George Town is also an issue
and Moses would like to see much more of it. 

“But we are in… ways already much better
off than many of our offshore competitors, where car ownership is sometimes
restricted and land for public parking facilities is even more restricted.” 

One infrastructure aspect in which
Cayman lags compared to many competitors is the airport.

“The airport terminal now needs urgent
upgrading and is looking increasingly tired and overcrowded at peak times,”
says Ridley.

Moses also sees the airport as something
that needs attention.

“I would certainly encourage investment
at the airport to create modern gates and terminal facilities,” he says. “First
impressions count and whilst the number of clients visiting the island are few
relatively to our overall client base, the airport facilities do currently not
portray Cayman well.”

The extension of the airport’s runway to
accommodate long-haul flights from Europe and elsewhere is seen as important to
the success of Cayman Enterprise City. Blick says telecommunications is only a
part of the puzzle.

“Ted Turner once said ‘To be happy in
this world, first you need a cell phone and then you need an airplane. Then
you’re truly wireless!’ Despite a variety of challenges, the Cayman Islands
Airports Authority and other stakeholders are keenly focused on the long-term
sustainability of the Islands’ airports and I believe that attracting new
markets, especially Europe is key,” says Blick.

Plans to address two infrastructure
issues affecting the environment, namely the George Town landfill and a
sewerage system for central George Town have lagged, but an announcement was
made in early 2011 that the Dart Group would cap and remediate the existing
landfill and establish a solid waste facility somewhere else on the island.

Disaster preparedness

Hurricane Ivan in September 2004 put
elements of Cayman’s infrastructure to the test. Although the storm destroyed
or damaged a large percentage of buildings in Cayman, much of the Island’s
financial services industry was up and running in less than a week. Moses
thinks Cayman is even better prepared now.

“I think those who have monitored Cayman
recovery from Ivan have been impressed not only with the speed of recovery, but
with the post-Ivan infrastructure investment to ensure improved business
continuity should there be a similar event in the future,” he says. 

“If all of Cayman’s major business were
to compare their pre-and post-Ivan infrastructure from a business continuity
standpoint, I am sure most would, like Appleby, be readily able to list
infrastructure improvements.”

Moses says Cayman’s private sector
entities invested in things like hurricane-rated windows, storm shutters,
large-scale generators, back-up water supply and in-house facilities like
showers and washing machines. 

“We have seen a similar investment by
government with improvements in public sector areas such as the hospital,
prison, airport etcetera,” he says, noting that the planned installation of a
Doppler radar will enhance early warning capabilities.

“An Ivan-like storm is likely to have
far less impact on government and the financial services sector than did Ivan.”

However, Moses says it’s important not
to become complacent. 

“‘Be prepared’ is not rhetoric but
essential good business management,” he says.

Moses does have concerns about Cayman’s
ability to deal with some disasters.

“I do worry about our capacity to handle
mass casualties and major search and rescue which might arise from say an
earthquake,” he says, noting the lack of sufficient ambulances and
search-and-rescue dogs. 

“That said, the authorities have to
adopt a practical approach based on risk profile especially in present economic
times.” 

  

 

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