Walmart-style giveways not the answer to our economic woes
Bob Stewart, Guest columnist, BDA Sun
Like Bermuda, Cayman has experienced a significant economic downturn and is seeking to reverse it.
One way of doing this has been the creation of Cayman Enterprise City (CEC), a Special Economic Zone that seeks to remove the red tape and financial constraints associated with setting up offshore enterprises. The aim is clear: new companies create jobs and opportunities for Caymanians whilst at the same time allow international entities to enjoy the financial benefits of being incorporated in a low-tax jurisdiction.
The CEC provides, for a modest fee, full service turn-key operations including a five-year work residency visa for staff who relocate to Cayman. No messy applications to the Immigration Department with its time-consuming delays. Foreign staff are treated like royalty, bureaucracy is minimized, and international business is welcomed as saviours. Wow — it was only a few years ago that Cayman copied Bermuda and treated international business employees like lepers. Nothing changes social behaviour and attitudes like a bit of poverty.
Bermuda has had something similar in place for a few years — known as Economic Empowerment Zones (EEZ). Unfortunately, I cannot recall anyone that has taken advantage of it. It was a PLP stunt masquerading as an economic initiative.
The question then arises, should Bermuda copy the wizards of Cayman and take positive steps to encourage the creation of new business? Is this a great idea?
On the face of it, the answer is ‘yes’. Government doing positive things, businesses flocking to the welcoming shores of Bermuda, jobs being created, and high salaries ensuing. Sounds like a no-brainer.
But the fact is, government actions like CEC rarely create jobs and rarely live up to their hyped objectives. For example, in the 1920s the UK Government had a scheme to bring jobs to the depressed North of England by providing all sorts of subsidies and benefits to employers. Ninety years later the North of England is more depressed than ever, but the policies are still in place; new jobs and economic prosperity are as elusive as ever. Much the same thing can be said about similar schemes in other parts of the world.
Higher government spending and Walmart type giveaways are not the answer to economic problems because in most cases, government is the problem. The task for Bermuda is to limit government powers and influence over the economy, not extend it. All the economic planning and social engineering that accompanies it simply results in more civil servants leeching off the wealth creators.
Economic decisions become politicized and voters depend more and more on government — which tends to let them down.
One of the main thrusts of the SAGE Commission is to reduce the dead-hand influence of government over the economy. As we have seen over the past few years, when we give Government more power, things become decidedly worse.
This is not to say that Government should not cooperate with business. David Saul and John Swan were expert practitioners of working with international business people in the 1980s and 1990s but they understood only too well the difference between cooperation and government interference into the workings of our free market economy.
The Bermuda Government has become bloated and fails to perform its rudimentary functions — think crime. It is awash with debt, and it is endangering the future of young people and confronting too many of us with the spectre of poverty.
If the Bermuda Government wishes to re-create the prosperity we enjoyed during the administrations of Swan and Saul, it should take action to reduce crime, improve road traffic behaviour, ease the tax burden on everyone and end the evil of corruption in high places. Doing that is the equivalent of creating a Cayman Enterprise City. We did that in the 1980s and before — no reason why history cannot repeat itself. We have no need to copy Cayman
PHOTO: Bob Stewart
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Related story:
We’re familiar with the Enterprise City model’
Don Burgess, Deputy Editor, BDA Sun
EEZ says some ideas from Cayman could be adapted here in Bermuda
Could an Enterprise City concept work in Bermuda?
Erica Smith, executive director of the Economic Empowerment Zones, told the Bermuda Sun that we already do part of what Enterprise City does.
“To a certain extent, the EEZ is a bit of an Enterprise City,” she told us.
“In Cayman, you have the opportunity to take undeveloped land. In Bermuda, you would have to look at areas that are developed already.”
She said in Bermuda there is challenge and opportunity in the EEZs in that there isn’t a clean slate but instead, already established people, businesses and properties.
Ms Smith said: “Part of it is how we work in collaboration with all that to see some growth.”
She added that some aspects of the Cayman Islands model already exist here, so the question becomes “do we want to create a whole new area?
“The EEZs already accomplish a lot of what Enterprise City does. We might not have focused a target on a particular industry, but that is something we have been considering. Our focus has to be in line with what the Government wants as its focus.”
She said once there is clarity on what types of businesses Government wants to have in Bermuda, then the EEZ can focus its efforts on incentives to lure that type of business: “We already have a lot of incentives. Our role is to try to make people aware that they’re available.”
Some of these incentives include:
• Deferred customs duty on major redevelopments up to five years;
• New businesses moving into the EEZ get payroll tax concessions down to the lowest rate for over two years;
• Preferential loan rates for Northeast Hamilton from HSBC and Butterfield Bank;
• St George’s and Somerset EEZ new business can also get low loan rates on a case-by-case basis.
Roxanne Christopher, economic development officer for Northeast Hamilton EEZ, who has done research on Enterprise City, said: “There are many aspects that could be replicated to a degree locally.”
She said the use of undeveloped spaces is one component: “There are some aspects which can be done through all our various zones. But we have to have the resources to get that off the ground.”
She said one of the ideas that could work here is the setting up of medical research facilities and IT companies at Southside.
Ms Christopher said the shared office space concept could be used to help bring more people into the areas.
She added that one example of that, even though it was outside of the EEZ, was Tim Miller’s Nineteen.bm, which is located on Queen Street: “It can be a brainchild for new business ideas, concepts and startups.
“There are opportunities that are left stagnant and that are undeveloped all throughout the island.”
Image: www.caymanenterprisecity.com
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See iNews Cayman related story published Wednesday 27 November 2013 “Cayman Enterprise City: Something we [Bermuda] should try” at: http://www.ieyenews.com/wordpress/cayman-enterprise-city-something-we-bermuda-should-try/
