(CNS): The failure of successive governments to develop an overall strategic, economic plan, to finish the much overdue National Development Plan, or to manage the country’s population surge are putting its future at risk, the office of the auditor general has found in a new report published, Thursday. Even though Cayman’s economy is strong, largely down to the financial services sector, as well as support from tourism and construction, the high cost of living and poor overall general management of the country’s economic fortunes leaves Cayman vulnerable and threatens its economic stability.
Although not stated outright the report leaves the impression that Cayman’s undeniable economic success is in spite of government efforts rather than because of any proper planning. This is evidenced by the population surge, an especially high inflation rate, over-development and the significant pressure on local infrastructure. The report notes the ambition of governments over the years to diversify the economy from its dependence on the financial sector, with support from tourism, which the government spends the most money propping up, and construction.
But efforts to actually diversify the economy have met with little success and questions are raised in the report about how sustainable local economic development actually is. Planning for and protecting the country’s future has been the Achilles heel of many governments as the short-term election cycle appears to prevent meaningful sustainable policy development.
While dozens of reports have been published over the years setting out ideas and proposals for managing the country’s rapid development, from transport to crime prevention, very little action has emerged from any of them.
Currently there is a rolling strategic plan for the offshore financial industry – which continues to contribute the most to the country’s GDP, generates the most jobs for local people and around half of government revenue. But the auditor said the tourism plan has not been well-managed, measured or monitored. More worrying however, for the local economy and Caymanians in particular, is the impact a lack of plan in relation to the construction and development sector is having on the growing economy, society and the environment.
In this detailed report, entitled Government’s approach to sustainable economic development, the audit team led by Sue Winspear, spell out four recommendations for how government can begin to address the shortcomings.
These include the establishment of an overarching economic development strategy, as well as strategies for the construction sector and options for the long touted economic diversification from financial services and tourism. The audit also recommends government works on improving its assessment of and response to potential risks that could hit the economy.
While Cayman’s economy is performing well the cost of living is high which Winspear said is something Caymanians and residents are well-aware. The report also shows that between 2018 and 2022, there was a high correlation between economic growth and population growth – an issue of major concern to many Caymanians.
“The population has a direct impact on the demand for public services now and in the future. Failure to respond to these demands and expectations could adversely affect the economy,” Winspear said. “Government needs to plan better for population growth and how this may affect economic development.”
The auditor said the increasing population has and will result in more pressure on the roads network, waste management and internet connection. It will also increase the demand for places in public and private schools, affordable housing and healthcare.
“Successive Governments identified economic growth as a priority,” she said, adding government has plans for the financial services and tourism sectors. “However, there is no overarching strategy, a strategy for the construction sector or a finalised National Development Plan to support the implementation of this government priority….Successive Governments have identified economic diversification as a priority. Some successes have been made in diversifying the economy but there are no plans on how to achieve this priority more widely.”
The report states that there are risks to and challenges for the economy ahead including the need for responsible financial management and managing potential economic shocks such as a global economic slowdown or another pandemic. The report concludes that it is unclear how well these risks have been identified, assessed and managed.
“Despite the economy performing well there are risks to and challenges for the economy. It is unclear if these risks and challenges had been identified, assessed and managed.” Winspear said adding that a new risk management approach is now being introduced.
A Chief Risk Officer was appointed earlier this year and the civil service is making progress in this area. A new risk management framework has been developed, which will include internal and external risk assessments. “This should significantly improve the way that Government monitors and manages risks, including economic risks,” the AG found.
Responding to this latest report from the OAG the Deputy Governor Franz Manderson said in April a new civil service 2024-2026 strategic plan was launched, making it a requirement for all ministries to create their own, along side the appointment of the chief risk officer, who has been tasked with creating a risk framework for adoption across the civil service.
“The officer continues to work in tandem with the senior risk committee comprising of chief officers to monitor and manage risks across the Cayman Islands Government,” Manderson said.
The civil service is entrusted with implementing the policies of the elected Government though the deputy governor fell short of pointing out that the elected branch has not developed a policy to guide a national strategic plan. Manderson leaned into the continued success of the off shore sector and the efforts of the civil service in supporting that industry.
“Through our collaborative efforts, alongside those of the broader business community, we have successfully positioned the Cayman Islands as one of the world’s leading financial centres,” he said. “A notable example of this partnership’s impact is the work to remove the Cayman Islands from the Financial Action Task Force grey list, demonstrating how cooperation drives meaningful progress. I am immensely proud of these achievements as we continue to advance our mission of transforming the Civil Service into a world-class organisation,” the deputy governor added.
See the full report here. The original OAG reports on which this report is based are all available at www.auditorgeneral.gov.ky
