Statement by Premier Hon. Alden McLaughlin, MBE, JP, MLA to the House concerning report on JMC 2013

13 December, 2013

Protocol

Two weeks ago I led a delegation to London to attend the Joint Ministerial Council (JMC) along with the Minister for Financial Services and the Environment, the Hon. Wayne Panton and supported by JMC Sherpa, Jennifer Ahearn, Cabinet Secretary, Samuel Rose and Chief Officer Eric Bush.

In addition to attending the JMC, we took the opportunity while in London to arrange a series of meetings to promote the Cayman Islands both in terms of business and reputation. I am pleased to report that we were successful in all our endeavours and the Cayman Islands is held in new found respect for delivering quality and excellence in a wide range of activities from Financial Services to Tourism.

In the build up to the JMC, the Foreign and Commonwealth Office anticipated that some NGOs who are hostile to financial services would mount a public relations campaign on public registers of beneficial ownership while dismissing all the positive things the OTs do. All the Territories supplied material to a new Facebook page – The UK Overseas Territories Family – and an FCO official has said that Cayman had supplied the best material.  I commend our Government Information Services, Department of Tourism, London Office along with the Governor’s Office who worked hard on that and I recommend that all Members have a look at the pages.

Just as we arrived in London, Cayman’s ratings were published by the Global Forum at the conclusion of its meeting in Jakarta.  The Cayman Islands received a rating of largely compliant; this is the same rating as that of the UK, Germany, Italy, and the USA and we continue to prove that our standards as an International Financial Services Centre are as good as, or better than, that of much larger countries. Mr. Duncan Nicol, Director of our Tax Information Authority, was elected as a Vice Chairman of the Peer Review Group and Cayman retained its position on the Steering Group. As Minister Panton has noted, all of this acknowledges the value and role that the Cayman Islands bring to the table.

I have to add that we, the entire country, greatly appreciate the hard work and dedication by all concerned across the public and private sector for helping to keep us at the forefront of international business, including international compliance standards and best practices.

Not only are we getting the substance right, but we are also getting the presentation right.

Members would not be surprised; therefore, that Cayman was asked to lead the discussion in the opening session of the JMC on economic diversification and attracting investment.

In my speech I said that collectively our reputations as OTs and CDs received a welcomed boost earlier this year in September when Prime Minister David Cameron made a robust declaration, stating what we in Cayman have known for a long time; that it is no longer fair to refer to any of the Overseas Territories as tax havens.

I reminded those present, including the FCO, that we are in fact an important part of the global financial infrastructure and deserve fair treatment and the ability to fairly compete for business. We appreciate that we must look to diversify our economies, but financial services will remain, and must remain, a key part of our economic engine in those territories where this matters.

The UK White Paper entitled “Security, Success and Sustainability” speaks to the UK’s commitment to the on-going economic success and development of the Overseas Territories. This commitment confirms that economic success is as important to the UK as it is to all of us. Indeed, I recognised the support that Minister Mark Simmonds has given us in his role as UK Minister with responsibility for the OTs.

But Madam Speaker, while we do need the support of the UK, it is up to the Government and people of the Cayman Islands to build on and diversify our current key industries while seeking out new types of business to help further diversify our economy. We recognise that diversity in economies, as in nature, creates strength and is essential for helping sustain our way of life going forward.

A diverse economy – one that is based on a wide range of profitable sectors – plays a key role in a sustainable economy. Economic diversification also plays an important role in providing resilience and flexibility in economies and encourages new development in other sectors of the economy. This has benefits for the employment of our people as well as greater stability for government revenues.

Madam Speaker, this Government is committed to economic diversification, whether via Medical and Sports Tourism; new financial services products; the potential that new IT and Health related businesses could bring; to potential new businesses, including green businesses that may emerge as we move forward to protecting our environment and solving the problem with the George Town dump and moving towards recycling and possible waste to energy. And Madam Speaker, we believe that the efforts that we make towards revitalising the George Town City Centre will also bring new economic development in the years to come. We will continue to support responsible, larger scale developments such as the billion dollar planned community known as Camana Bay developed by the Dart Group and Dr. Devi Shetty’s Health City.

Madam Speaker, the JMC agenda also included a session on International Financial Services Regulation. This session would be attended by a Treasury Minister and I was keen that the financial services territories should get a chance early on to set out all the good things we had done, are doing and will continue to do – of our own free will – because it is good for our business, rather than have the UK Minister tell us what more he wanted.

I was also concerned that the Territories with financial serving sectors should present a united front and I considered the message we delivered to be more important than the messenger.  Accordingly, Cayman drafted a speaking note and circulated it to the Territories with financial services sectors. With a couple of small amendments, the other Territories agreed to it and asked me to deliver it. I thank my fellow Leaders from the other OTs who supported the points I made.

The key message I made to the UK Treasury Minister was that financial business is global and regulation of it must also be global; it must be universal and apply to all. The Territories cannot be asked to do things unilaterally that our competitors will never agree to do.

I told the Treasury Minister that the Overseas Territories have a long history of complying with international standards and taking action appropriate to each unique Territory;

The OTs’ continued commitment has been demonstrated through the support provided to the UK’s G8 agenda:

We have requested the extension of the OECD’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which was acknowledged by the OECD as an “important development” in its news release of 21^st November 2013.

We have published our Action Plans to Prevent the Misuse of Companies and Legal Arrangements, and; the consultation on our Action Plans is under way for some Territories and others will follow in due course.

This polite but firm defence of our interests was supported by the other Territories and, because we were united on the line Cayman had initiated, we were able to get the right language in the final Communiqué.

The Communiqué.

We then finalised and agreed the Communiqué, a copy of which is attached to this statement, and I can tell the House that parts of the final Communiqué are radically different from the initial draft. Over the last few weeks Cayman officials here and in London have been insisting on changes to the language of it so that the Cayman position was properly represented. I am pleased to say that much of the language in the financial services section of the final Communiqué was drafted by Cayman.

Our advice on the proper wording is listened to because we walk the walk and not just talk the talk. Thus the Communiqué says that Territories will consult on beneficial ownership and, even before the document was agreed, Cayman had issued our consultation document. Madam Speaker, I stress the word consultation. We have no pre-conceived ideas and we will not be pressured by anyone into taking action that is not in the best interests of Cayman.

I assure the House that this Government will take action that suits the Cayman context, after we have had a full and proper consultation.

The Communiqué also talks about exchange of information and while we were in London Minister Panton signed a TIEA with Malta and Poland and he signed the FATCA agreement at the United States Embassy.

Discussions between the Cayman Islands and the US on FATCA have spanned nearly three years, and I congratulate both countries’ negotiation teams for ensuring that these agreements fulfill not only the letter of FATCA, but also the spirit of global efforts on transparency and exchange of tax information – which is to vigorously fight tax evasion.

Thus in addition to talking the talk at the JMC we were walking the walk in carrying out commitments that enhance Cayman’s reputation as a jurisdiction of choice.

Whether it is in the OECD, amongst other British OTs or in the United Kingdom Government we are actively engaged, we are influential and we are recognised.

We met again at the Cayman stand at what the FCO termed The Business Event in Lancaster House where I and Charles Kirkconnell of Cayman Enterprise City explained the concept of the diversification activities on which we were embarked to scores of interested UK business leaders and investors. The Minister is very keen to promote alternative businesses in the OT s and was impressed by both CEC and Cayman Health City.

The evening before the Business Event I attended and spoke at a special briefing session laid on by CEC for potential customers. Again there was considerable interest from companies that may want to expand from the UK into the USA but want that safe, secure, English speaking, people friendly, cosmopolitan country, close to America but not in it. I thank CEC for the work it did in the UK during JMC week.

Our officials also attended some discussions on health and criminal justice matters. One of the best innovations of the former Minister Henry Bellingham and continued by Minister Simmonds is the chance for our officials to engage directly with officials from other UK Government departments and share best practice and ideas. Time is too precious for everyone to re-invent the wheel and these informal discussion sessions are very productive.

Madam Speaker, you will be aware that shortly after the Election, Cayman had a visit from some United Kingdom Members of Parliament who serve on their Environmental Audit Committee. They were here for five days on an official evidence-gathering visit. They asked some searching questions, especially about the lack of a National Conservation Law.

Their report has been written but they decided to delay publication of it so that they could have an informal discussion with Territory Ministers while we were in London. Minister Panton met the Committee and set out what this Government is doing and will continue to do to protect our environment. As I said, their report had been written before Minister Panton met them and this was not an evidence session.

Regardless of what their report says, we are here this week to pass the National Conservation Law; a law that has been foundering for more than 10 years. As Minister Panton has said, “the time is now”.

Protecting the environment was one of the key messages I delivered in a keynote speech to a Cayman dinner of 70 guests and stakeholders from the worlds of finance, tourism, environment and government.

However, I began by setting out our overall Government strategy. I said that we need to be innovative, agile, and competitive in order to attract inward investment and encourage local investment to make this happen.  Our strategy is to foster an environment that facilitates private sector economic growth, employ prudent fiscal management within the public sector, further develop an educated and work-ready populace, and continue the development and modernization of Cayman’s infrastructure.

These four components of our strategy complement each other. Also, our fiscal policy will result in the Government improving its net financial position; supporting economic growth; creating employment opportunities and building infrastructure to serve the next generation of Caymanians.

I said that the economic health of the Cayman Islands drives all aspects of Caymanian society. It affects the amount of revenue the Government earns as well as the level of services it provides, the number of people with jobs, crime levels and residents’ overall quality of life. We have therefore identified the economy as a central and core policy priority, and will seek to ensure sustained economic activity for the long term by building on what Cayman has, while encouraging additional private sector growth. We are working with tourism industry partners to grow the numbers of both cruise and stay-over visitors in a smart and sustainable way.

We know we have to support small businesses by reducing taxes and bureaucratic hurdles while also providing entrepreneurs with access to training on how to successfully manage their businesses.

Turning to Financial Services, I assured them that we are also committed to maintaining and strengthening our financial services industry, which is the foundation of our economic success.

The Cayman Islands has been among the vanguard of the global financial services industry for more than 40 years. I reminded them that a country only enters into this company when its legislative and regulatory framework is strong enough to withstand international scrutiny, and yet flexible enough to provide industry with the products and services it needs to attract sound business.

Indeed, we have built our reputation as a jurisdiction of stability and integrity because of the collaboration between Government and industry. Although this partnership has existed for decades, I said that my Government recently strengthened it by signing an MoU with Cayman Finance, the primary body that represents our financial services industry.

I pointed to the Exempted Limited Partnership Bill and the amended Insurance Law as pieces of legislation that were the result of collaboration between Government and industry, and our financial services framework is stronger as a result.

I told them that while Cayman has had more than its fair share of scrutiny over the decades, the pressure has made us into a more brilliant diamond. As proof of that I quoted three recent examples. I said Cayman was named as a vice chair of the Peer Review Group of the Global Forum on Transparency and Exchange of Information for Tax Purposes. We also retained our membership in the Forum’s Steering Group.

These two examples speak volumes about what the forum’s 121 members think about Cayman’s contributions to the global discussion on tax and transparency.

My third example is the Global Forum ratings of member countries’ legislative and regulatory frameworks.   On the 10 elements that were assessed, Cayman was rated compliant in eight, and largely compliant in two. Our overall assessment was that of largely compliant.

I am proud of the work that has been done, and proud of the role that Cayman will continue to perform in developing globally accepted standards.

For example, the OECD/Council of Europe Convention on Mutual Assistance in Tax Matters was extended to Cayman this month and will come into effect on 1 January 2014.

And in April, we committed to joining the UK, France, Germany, Italy and Spain, in the G5 pilot on multilateral automatic exchange of tax information. This commitment complements our engagement since 2005 in the EU Savings Directive.

I was able to tell all the guests from the financial services industry at the dinner that, just the day before, Cayman issued its public consultation paper on beneficial ownership. The paper reflects that beneficial ownership data has been collected and furthermore, updated, in Cayman for more than a decade; and that in April this year the Global Forum recognised that information relating to beneficial owners continues to be readily available to appropriate authorities in the 32 jurisdictions with which we have bilateral agreements.

I concluded the part of my speech on financial services by stressing that we all must ensure that transparency delivers benefits for rich economies and developing countries alike, and that we maintain confidence in the fairness and effectiveness of our tax systems and in the operation of global markets. Tackling tax evasion and fraud is a global responsibility in which Cayman will continue to play our full part.

Turning to tourism I reminded the guests that we are constantly looking for ways to improve our tourism product.  We are working to improve the experience for both our cruise and stay over visitors through upgrades at the cruise port and our airports.

A goal of this Government is to deliver the best possible product for the people of the Cayman Islands and the Islands’ tourism industry. We are addressing the sustainability of air and cruise transport to the Cayman Islands, while developing more tourism opportunities for our people.

There were also experts on the environment present as guests. I said that while we embrace economic development and welcome visitors to our Islands, we are very much aware of the need to protect our environment.

I reminded everyone present that Cayman created our now famous system of marine parks 26 years ago, 24 years ahead of the UK; we have rescued our Blue Iguana from near extinction and each year we add more green turtle stock to the oceans. That demonstrates our lasting commitment to protecting our wonderful bio-diversity.

In Cayman we recognise that we must do all that we can to protect the environment on all three Islands to ensure that we preserve paradise for future generations of residents and tourists alike.

Madam Speaker, I have quoted large parts of that speech to the House because it was the first time in many years that a Cayman Premier had set out in London in a keynote address our overall strategy for the growth, development and preservation of these Islands.

I also met with all other Territory Leaders in the UKOTA Political Council where we approved a strategy to enhance the UKOTA Secretariat.

We, as Premiers and Chief Ministers, were more united at this Joint Ministerial Council because we had had a pre-meeting in Gibraltar in September. I thank Chief Minister Fabian Picardo for arranging that event. I believe that a meeting of all Territory Leaders before we meet with the FCO is vital and I believe that we should meet earlier in the year so that we can determine the agenda and tell the FCO in good time what we want to discuss. Accordingly Madam Speaker, I extended an invitation to all OT Leaders to meet in Cayman next June for next year’s pre-JMC meeting so that they can experience for themselves what the world’s friendliest country is like.

I would also like to thank Her Excellency, the Governor, for her diligence in attending so many meetings with us. She never once intruded on our business but her presence and the interest she shows augurs well for Cayman and her term of office.  She has also added her support and expertise in areas of key concern to us.

I also want to thank all the officials of the Cayman Islands Government for the work they did and not just the Chief Officers who supported Minister Panton and me in London. There has never been a JMC or OTCC before with so many meetings that required briefing papers. At conferences like this, one has to be armed with information on a very wide range of subjects just in case someone else raises it. We had all the information we required and it was not wasted. I believe that we deployed it sensibly and to good effect.

I think the whole House will see, Madam Speaker, that we had a packed official programme and that we added other meetings and events all designed to advance the cause of Cayman. Advancing that cause is easier now because we now have their attention. Cayman’s financial and tourism products have long been recognised as excellent, but the same could not be said of our politics.

That has now changed with my government;

in London, the FCO listened and we got the changes we wanted to the Communiqué;

we were asked to lead discussions in the opening session;

That is the hall-mark of my government – diplomacy and dialogue delivering results; not diatribe and discord.

So there is now a new found respect for the Cayman Islands Government. We too are seen as professional.

When someone said of Winston Churchill that he had the heart of a Lion, he said that the nation and the people were the Lion and he was merely privileged to give the roar. I am not comparing myself to Churchill; of course not. But the analogy is the same; Cayman, our people, our businesses, our products are recognised for their excellence around the world – so I do not have to roar when I defend them overseas.

I commend this statement to the House.