Cayman’s special economic zone, here & now

Read the article in the Cayman Financial Review Magazine 

 

CEC, present day

Establishing an international business in the Cayman Islands has many benefits. Setting it up in Cayman Enterprise City goes even further by removing the few potential drawbacks of red tape, immigration issues and government fees.

Cayman Enterprise City is Cayman’s special economic zone. It was created with the vision and commitment that it would become a third pillar of the local economy by attracting new industries to the Islands.

The Cayman Islands government has put in place the concessions required to draw in technology giants as well as entrepreneurs searching for a suitable place to launch innovative ideas. And they are discovering Cayman’s special economic zone. This is due in large part to aggressive sales and marketing outreach by the CEC team which has travelled from London, to China, across the States and Canada to sell the benefits of Cayman and the zone to potential clients in key markets.

Companies from six specific sectors, including internet & technology, media & marketing, commodities & derivatives, biotechnology and academia can be licensed to operate within the zone to conduct international business, but they cannot transact business in Cayman’s domestic economy.

CEC, the solution

There are now over 60 companies that have established a physical presence in the zone and more than 170 are in the growing sales pipeline. The CEC team actively searches out opportunities worldwide and takes advantage of what is happening on the world financial scene to highlight the benefits of Cayman’s special economic zone.

Early trends show that companies are utilising CEC as part of their global structuring for tax mitigation. A physical offshore presence in the zone enables them to generate tax-exempt active business income in the Cayman Islands which in turn makes them more competitive in the global marketplace.

As governments around the globe attempt to crack down on brass plate offshore companies, CEC offers a sustainable option: set up a physical presence in the CEC zone which has stripped away much of the red tape and financial constraints that were previously obstacles to companies setting up real operations in Cayman.

A company established in Cayman Enterprise City will have offices and employees and genuinely do business from Cayman while enjoying all of Cayman’s jurisdictional benefits.

CEC also offers an easy solution for entrepreneurs trying to start innovative businesses in Silicon Valley and other places in the US, who face an uphill battle because of foreign work H1-B visas which are capped and hard to come by.

The problem quickly became apparent to the CEC team during business development trips to the US, and in particular Silicon Valley, where they heard it from the horse’s mouth. Established in 1990, the US federal programme allows American employers to import foreign workers each year to fill jobs that require “highly specialised knowledge”.

This year more than 124,000 applications were filed, a lottery system was implemented and the visas were gone in a week. The vast majority of these visas are granted to Silicon Valley tech giants like Microsoft, Sun Microsystems, Motorola and others, looking to fill staffing shortages. Entrepreneurs who struggle through the process and are not picked for an H-1B visa have to leave the country.

An opportunity has opened up for the Cayman Islands, to locate key staff from any country and obtain five year work/residency visas in five days.

The Cayman government’s forward thinking approach allows start-ups to remain anchored closely to the United States while working for entrepreneurial companies that will create opportunities for growth and employment.

These C level, highly qualified technical staff fit perfectly with the type of residents the Cayman Islands wants to attract – they earn a high disposable income, buy property and vehicles and spend generously in the local economy but most importantly they bring new specialised skills to Cayman which will present training opportunities for locals.

CEC, the beginning

The concessions and Cayman’s tax-neutral environment set Cayman Enterprise City apart from the 3,000 other free zones around the globe, which justifies the bold step taken by the Cayman Islands government in 2011 when it signed a definitive agreement with Cayman Enterprise City giving the green light for the creation of Caymans Special Economic Zone.

The desire was to create an economic driver to stimulate direct inward investment and diversify the economy by enticing new industries that had not previously considered Cayman as a viable option. International companies can now easily take advantage of Cayman’s jurisdictional benefits along with a series of compelling concessions granted by the Cayman Islands government, and operate from an OECD and World Bank compliant special economic zone.

The special economic zones law was enacted in September 2011 and the Special Economic Zone Authority (SEZA), which licenses and regulates the zone, was opened in February 2012, paving the way for CEC to open its door for business.

This third pillar of the economy will help boost Cayman’s economy, and create new career opportunities for future generations of Caymanians. Through the new sectors attracted to Cayman Enterprise City, young Caymanians can expand their choices and enter new industries as entrepreneurs, employees or service providers, instead of being limited to the traditional career paths of law, accounting or banking.

From the outset CEC has been intent on developing a compelling proposition that will set it apart.

Unlike other free zones in the region, no manufacturing is permitted, and CEC targets only knowledge-based and technology-focused businesses. That, coupled with its strategic geographic location only a stone’s throw from both North and Latin America, plus the benefit of Cayman’s tax-neutral regime, makes it unique in the Americas.

Cayman has the opportunity to gain the competitive edge as a regional pioneer in special economic zones as this new free zone model compliments Cayman’s existing financial services offering and is not available in any other competing jurisdiction.

CEC, the zone

The CEC zone is currently housed in three gateway office buildings in and around George Town. A master plan for a main campus has been designed and is in the final stages of development. CEC originally planned to break ground on a main campus in 2012, but moving entire companies and their staff to the Cayman Islands is proving to be a big, and often challenging, decision for some firms joining the zone, no matter how eager they are to take advantage of CEC’s benefits. However, CEC is now close to reaching the critical mass it needs to break ground later this year. 

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CEC, the clients

The core asset supporting most technology companies is their intellectual property and in the digital and internet sphere, many see the advantage of having their IP held by a zone company and licensing internationally.

Some are transferring their IP early, as part of an overall business structure to ensure maximum value throughout the company’s lifecycle, to avoid any applicable anti-inversion rules and in preparation for a future buy-out so the resulting capital gain can be genuinely deemed tax-exempt.

Of the 62 companies in the zone, currently 52 per cent are in the technology sector, and the remaining 48 per cent is split between media and marketing, commodities and biotech firms. While the CEC team initially felt the greatest interest would be from companies the Middle East wanting access to North America, the most significant take-up has been from North America and the sales pipeline includes companies as far reaching as China, Singapore, Latin America and Europe.

Due to the tax information exchange agreement between the Cayman Islands and Canada, there has been a very positive response from Canadian companies and CEC is being viewed as a catalyst to help them spur growth internationally into new lucrative markets such as Latin America.

It is not only the geographic origin of zone companies that’s diverse, but also their size, as they range from mid-sized international enterprises to fledgling technology start-ups. Like the highly successful zones in Dubai, the CEC business model was designed to be flexible and meet the very distinct needs of its growing client base. CEC is a one-stop-shop and its business licensing packages include the trade certificate to do business, the work/residence visas for any overseas staff and turn-key office solutions which range from fully-serviced to vanilla shell.

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CEC, the team

Our message is loud and clear: The Cayman Islands is the ideal jurisdiction in which to locate your international head-quarters; it is pro-business, appropriately regulated with a sophisticated infrastructure and we want to help you grow your business.

Providing a seamless service and making it easy for companies to choose the Cayman Islands over other compelling locations such as, Ireland or Switzerland is paramount. Companies can now efficiently establish in the zone and CEC’s client services team guides them through all aspects of setting up and moving to Cayman by introducing them to local service providers such as Cayman law firms, tax advisors, movers, recruitment firms to help them hire local staff, real estate agents and so on – they are here to help clients at every step of the way. These referrals have created a much-needed new stream of business for local service providers.

Our team is on track to achieve the goal of bringing 100 companies into the zone by year-end. While the business development team continues to work tirelessly marketing Cayman across the globe, the operations team is focused on developing on-island initiatives, to ensure locals benefit from the zone. Enterprise Cayman is such an initiative.

CEC, the community partner

Enterprise Cayman is a partnership between CEC and government to provide opportunities for Caymanians. The purpose is to aid in the training, employment and advancement of Caymanians in the special economic zone. The group meets regularly and is developing a strategic action plan for the short, medium and long term.

We plan to do a good job in updating Caymanians and the general public on all of CEC’s endeavours and progress on a regular basis. And we strive to ensure that our commitments to government and the people of the Cayman Islands are met.

A majority Caymanian-owned and led company, Cayman Enterprise City was created with the commitment that it would form the third pillar of Cayman’s economy by attracting new industries. With this commitment comes the promise to be a dedicated contributor to the community, both now and in the years to come.

The directors remain committed to Cayman Enterprise City giving back to the community of the Cayman Islands, and this will primarily be done by enriching the lives of locals, both young and old, current and future generations, through training, education, business opportunities and other exchange of knowledge in the new technology industries to be housed in the zone.

Now into its second year, the directors say Cayman Enterprise City is well on its way to achieving its goal and keeping its promise to future generations.

We want young Caymanians who enter new careers in the special economic zone to one day say, ‘we were there when Cayman Enterprise City was launched’ and be proud of what we have achieved here. Cayman Enterprise City has everything required to build a special economic zone that is able to compete with the best in the world. 
 

 

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