Thesis
Economic prowess of any country depends on availability of factors of production in that country and extends of utilizing such factors towards economic development. For instance, the ability of country to be agriculture productive depends on whether it has enough and fertile lands. Again we get minerals from the land and if our land has abundance of various minerals then the changes to economic prosperity are high. Entrepreneurship refers to ability of the country’s labor force to co-ordinate other factors of production towards achievement of goal; does the country has enough experts to deal with challenge or does is depend on external professionals. Another question to ask is whether the countries population can provide enough and desirable labor force (human effort for production). Finally, a country requires capital for investment such human capital, fixed, working and financial capital. Availability of affordable capital favors investment and hence economic growth.
Body
Cayman Island comprises of three islands namely Grand Cayman, Cayman Brac and Little Cayman located in western side of Caribbean Sea. “The latest 2008 census estimates the Island’s population to be about 65,000 comprising of more than 100 nationalities; 60 percent African-Europe mixture and the remaining 40 per cent half of them are of European origin and the other half African decent.” (Murton)
In the beginning, isolation and lack of natural resources have been the main hindrance to viable economic activities. Initially the main economic activity for the Cayman citizens was harvesting sea turtles. Agriculture at that time was enough to feed the Cayman island small population, but lack of enough land curtailed its expansion as the population grew. After depletion of the turtle population in 1970s, the industry was replaced by financial and tourism industries. Despite being a small island the islands gross domestic is ranked 12th in world’s highest.
“Currently the economy of Cayman Island is fueled by financial service and tourism services sectors accounting for 70to 80 per cent of the island’s gross domestic product.” (Bureau of European and Eurasian Affairs) The emergency of tourism and the financial sectors as the pillars of Cayman island economy was fueled by development of modern communication and transport in early 1950s.The Seven Mile Beach is the main attraction feature in the islands which is ranked as one of the best beaches around the world. Most of the islands large hotel and resorts are located on this beach. Its capital city, Georgia town has modern state of the art port were major ships which carry tourists dock every day. It is estimated that at least 22,000 tourist visit Cayman Island daily, five days in a week.
Apart from beaches there are historical sides such as Pedro St James castle located in Borden town attract many tourists. Because of her crystal clear sea waters and wall dives, most tourist visit to practice Scuba diving. The water is also suitable for swimming. Another tourism attraction side is the, “Hell’s iron shore landscape; a marine park Boatswain’s beach, the home for turtle farms, the annual pirates show and the mastic trail; a trail through the island’s forest.” (Morton) On Brac Island, there is rock climbing and cave exploring while in little Cayman island her wildlife attract those who love nature and fishermen, particularly bird watchers who try to get glimpse of the island famous Red-Footed birds. Other features that attract international visitors include art and culture.
Cayman Island is regarded as world financial center. The financial sector comprises banking, investment, captive insurance, mutual funds, companies both private and public, and the Cayman stock exchange. As at 2005, “Cayman’s banks are ranked fifth in the world with banking liabilities of more than $ 1.5 trillion.” (Bureau of European and Eurasian Affairs) As of June 2008, the island had 290 banks and more than 70,000 companies. 19 of the banks offer services domestically while the rest only operating internationally with minimal domestic operation. Availability of high-quality providers such as leading accountancy and administrators has helped Cayman Island to be a leading offshore financial provider. Doing business with the highland is not expensive because of low taxes and less regulation on investment. There are no strict restrictions on capital while offshore banking institution operations attract minimal restriction.
Apart from tax relief, building materials imported purposely for hotel construction are exempted from import duty. In early 1990s the island tax regime was harmful to investments. But due to pressures from her mother country (Britain) her tax regimes have been improved creating room for investments to thrive. As at now companies operating in the Cayman Island are not directly taxed. 20 per cent duty is imposed on imports while 40 per cent on automobile depending on the quality of the make. All financial institution located within the island attract equal trading license fee. Also growth of companies and investments within the Island has been fueled by availability of both corporate and commercial infrastructure.
Communication and transportation sectors are essential to growth of commerce. Roads, railways, bridges and ports are needed to move people, inputs and finished goods from one place to another. Efficient postal services and phone, water supply are essential elements towards economic growth. The Cayman Island has enlarged and impressive communication and transport sectors and have been credited for growth of her financial and tourism sector. Lack of trust worthy financial institutions is a barrier to economic development. Her sound and adequate financial services coupled with tax incentives by the government have encouraged development. Any economic progress relies on investment level and the source of funds for invest is the house hold saving. When banking and other financial institutions fail to function, the link between investment and saving is broken resulting to lack of funds for investments. Cayman Island is known for long time as financial center. As result many international investors have found it easier to invest in the highlands because there is availability of cheaper capital. According to the international monetary fund report in 2005, Cayman Island has well development financial system run by internationally recognized and qualified labor force.
Because of the need to diversify from her traditional reliance on tourism and financial sectors, the Cayman government has completed doing research on potential of other sectors. The island is looking forward to establish more investments to expand already existing business through adoption of new technologies in order to provide employment for grandaunts. “The island is considering venturing in export and import substitution sectors aimed at reducing imports.” (Gale group) Cayman Island imports more that 90 per cent of food consumed by her citizens and all the visitors who arrive in that country everyday. The island expects to expand on the existing fresh fruit and vegetables, dairy products and meat production. Again she expects growth in “household fittings and furnishing and tourism market products.”(Gale group)
In services sectors, investment will be geared towards creation of medical treatment center, genetic research center, technical training centers and center for tropical livestock breeding. The island also wants to bring in industries which produce cosmetics, computer software, seeds of hybrid nature as well as aquaculture products. Her continuous political and economic stability, lack of direct taxation on companies or individuals, persistent democracy and skill are expected to play key role in attracting more investors into the island. The cooperation between the government and the Cayman chamber of commerce in promoting leakages between private and public sector has resulted to Cayman’s vibrant business community.
Conclusion
Despite lack of agricultural resources and her small size, she has maintained high living standard for her citizens believed to be among the world best. The current economy is the strong among the Caribbean driven by the sound financial and offshore tourism. Trustworthy financial institution coupled with tax relief and less restriction has seen more foreign investment trickle in the island. As result the Cayman’s economy has thrived more than countries blessed with all resources.
Opinion
Most thriving economies in the world are driven by the availability of factors of production. Some countries have abundance of all factors of production while others lack some of them. Despite the deficiency either of the factors, some countries have managed to attain highest per capita income. Utilization of the few available factors of production and encouraging government investment policies has seen many economies grow beyond expectation. The Cayman Island for long time has had no strong resources, but utilization of few available natural resources and much emphasis on investment has seen her economy grow to higher heights
Works cited
- Bureau of European and Eurasian Affairs, 2008. Background Note: Cayman Islands.
- Gale Group, 2004. Cayman Islands; this thriving tiny economy is in the enviable position of being able to pick and choose foreign investments – Business Outlook Abroad. Web.
- Morton Phillip, 2007. Cayman Economy Strengthens as Banking Assets Grow. Web.