Analysis of Investment Opportunities and Threats in Cayman Islands

This report provides a comprehensive analysis of investment opportunities and threats in the Cayman Islands. It begins with an introduction to the Cayman Islands, highlighting the importance of tourism and financial services to its GDP and the government's efforts to diversify its economy through investments in technology and healthcare. The report examines the economic status of the Cayman Islands as a developing economy and its role as a major tax haven, focusing on business opportunities in sectors such as tourism, construction, manufacturing, agriculture, and financial services. It explores the government's policies to attract investors, the financial service sector, and trade dynamics. The report also analyzes the effectiveness of investments, highlighting the dependence on imports and the need for increased foreign direct investment to balance the trade deficit. The report concludes by emphasizing the importance of improving the investment structure and developing international communications to enhance marketing activities and overall economic growth.

Running head: INVESTMENT OPPORTUNITIES AND THREATS AT CAYMAN ISLAND
INVESTMENT OPPORTUNITIES AND THREATS AT CAYMAN ISLAND
Name of Student:
Name of University:
Author Note:

1INVESTMENT OPPORTUNITIES AND THREATS AT CAYMAN ISLAND
Introduction
Cayman Islands is an autonomous British Overseas Territory that is located in the
western Caribbean Sea. The main source of incomes is the tourism sector and the financial
service sector which represents 50-60 percent of the Gross Domestic Product (GDP) of the
country. The economy is trying to improve its market conditions by diversifying its industries
and invest in technology and healthcare, apart from the traditional industries. Production of too
many goods is not possible as islands cannot produce enough goods. Almost 90 percent of the
goods are imported from other countries (Christensen, Shaxson and Wigan 2016). Although the
Cayman Island imports much of the goods, it has a high standard of living because the economy
has one of the highest output per capita. An agency named Cayman Islands Investment Bureau
was established in order to increase investment and promote economic development in the
economy.
Economic status of Cayman Island
The economy of Cayman Island is classified as a developing economy and lies among the
world’s top 20. It is included in the top 15 developing economies that is significant for outward
investment. Outward investment is a business investment that is followed by he most of the
companies at Cayman Islands such that domestic firms has significantly expanded its operations
in the foreign countries. It is a type of foreign direct investment where firms extract huge profits
by having a direct control of the firms from domestic economy (Fichtner 2016). This investment
structure can take the form of merger or acquisition and green field investment for existing
foreign facility. Outward investment works effectively in Cayman Islands as the markets are
saturated and better opportunities for business are available abroad.

2INVESTMENT OPPORTUNITIES AND THREATS AT CAYMAN ISLAND
Figure 1: GDP trend of Cayman island for a decade (2010- 2020)
Source: (Tradingeconomics.com. 2020)
The trend in the values of GDP for about a decade is shown in Figure 1. The trend is
rising over the years such that the value was about 3.2 in 2010 with reached near about 3.7 by the
beginning of 2020. A tree percent increase of GDP growth rate in the first quarter of 2019 was
evident in Cayman Islands. The rising trend shows positive growth in the economic activities
that effectively encourages investment in business and other development plans. This creates a
positive surplus fr the economy and enhances the level of business opportunities (Sassen 2018).
The economy acts as a major tax heaven as the most popular sector is the international financial
services which generates over 40 percent of the government revenue. The financial service sector
contributes about 55 percent of the total GDP. Tourism accounts about 30 percent of the GDP.
Business opportunities in Cayman Islands

3INVESTMENT OPPORTUNITIES AND THREATS AT CAYMAN ISLAND
The economy has a high standard of living which ensures that large portion of population
will have an immediate effect on the market will be able to buy goods and services. However,
the business set up must have a high standard as the living is basically very high which is mostly
contributed by the outward investment that has effectively changed the way gods are being
exchanged in the economy.
As the economy has blue green investment that provides financial services to the
investors, creation of a blue-green investment fund will effectively improve the business
conditions. This will effectively improve the level of foreign direct investment that serves as one
of the crucial parameters for running businesses (Sun and Shao 2017). The government of
Cayman Islands has understood the need for an investment department that will monitor,
coordinate and report about the new investment opportunities for businesses and investors. This
will effectively improve the market conditions and the investment structure in the economy that
will lead to a long lasting development and extraction of super normal profits.
The tourism sector in Cayman Islands has ample opportunities. Building holiday resorts,
hotels with superior facilities like pick and drop, boating, language translator, golf courses and
selling a range of souvenirs that will attract tourists. The most effective business in the island are
boat and Ship Cruise Companies and hotels that derives huge profits and facilitating investment
in this sector will lead to growing outcomes (Hers et al. 2018). This is linked to the construction
sector that is highly active. Building and road projects are actively supported by the government
and Cayman Island actively focuses on the infrastructure that is potential for generating huge
profits.
The economy provides a range of opportunities for the manufacturing sector as well,
although the sector is not quite popular and competitive in the economy (Nurse 2016). On the

4INVESTMENT OPPORTUNITIES AND THREATS AT CAYMAN ISLAND
contrary, people can manufacture a range of item like insecticides, food items, clothes, soaps and
other consumable products. Firm shave the flexibility of considering OEM manufacturing
options which gives the benefit of manufacturing goods in other countries like China and
branding them with the business name (Pérez Ludeña 2017). They can them sell the goods and
export to whichever country they want, but the profits will be returned to Cayman island.
Agricultural sector provides with ample opportunities for the people of Cayman Islands.
People can easily consider vegetable farming and firm fishing that will enable them to extract
positive profits in the island. Food processing will be also be a good business provided the
increment in population and the need for consumption goods. Products like oils, jams, tomato
sauce, processed vegetables, processed fish and tomato puree can be sold in bulk amounts as per
the needs of the people (Neumann 2017). This will effectively improve the level of investments
as per the effective markets strategies and outcomes. Building materials can also be
manufactured such as iron, fittings, granite, cement and related construction products.
The economy does not have a tax structure that can lower the profits of businesses which attracts
investors and businesses. The government does not charge income tax and other capital gains for
the businesses. Moreover, the economy has high political stability with little government
interference that makes the economy an attractive place for generating huge amounts of business
profits that is crucial for generating positive profits (Peguero, Zapata and Sandoval 2019).
Investors does not have the fear of political instability that can hamper business growth and
extraction of huge profits.
The infrastructure of the economy is well developed and sophisticated that enables
business owner to set up businesses that can run smoothly. The banking operations are felt
strongly and active that makes it a string economy. International banking operations are smooth

5INVESTMENT OPPORTUNITIES AND THREATS AT CAYMAN ISLAND
and flexible that creates several opportunities in the economy (Guide 2019). Businesses does not
need to pay taxes and is free any obligation that might come up in the process of business. The
ministry of finance has effectively developed the trading system that can improve business
efficiency.
Financial service sector and trade structure
The financial sector is very vibrant and active. Business owners can easily set up
investment companies, mutual banks, and capital insurance companies in Cayman Islands.
Investors can also invest in the stock exchange market that will lead to generation of positive
profits with respect to effective market strategies and outcomes. Small businesses can be opened
in the financial service sector that will effectively improve the level of fund arrangements,
micro-lending services and other services in the investment sector (Pérez Ludeña 2017). The
financial sector is highly innovative as it supports wide range of business activities by providing
solutions to business problems. The government believes that the industry needs to have a good
position in the international market that can be attained through international promotion. As a
result, the government’s strategy to create an effective investment fund will be highly beneficial
in securing quality growth.

6INVESTMENT OPPORTUNITIES AND THREATS AT CAYMAN ISLAND
Figure 2: Trade deficit trend in Cayman Island from 2010 till 208
Source: (Tradingeconomics.com. 2020)
The economy of Cayman Island has a trade deficit of about 1026.30 KYD million. The
value of trade has kept growing at a slow rate due to rise in the level of imports. The value of
imports increased to about 274.80 KYD Million. This is because if the inflow is more than the
outflow then the balance of payments cannot be maintained and leads to a deficit in the
government balance (Vaudo et al. 2018). Therefore, creating investment opportunities will help
the businesses to monitor growth objectives and lead to a change in market effective outcomes
that is crucial for deriving positive profits.
Cayman Islands imports huge amount of goods from other economies, where US is the
supreme importer who accounts 90 percent of the total imports. The goods that are imported by
Cayman Island are coal, vehicles, aircraft, fuel, transportation, natural gas, jewellery,
transportation vehicles, soya beans and natural gas. Therefore, government actively encourages
foreign direct investment so that the economy can lower the level of imports and balance their
deficit level (Podhorodecka 2018). The government has included a number of forms in the

7INVESTMENT OPPORTUNITIES AND THREATS AT CAYMAN ISLAND
financial service sector that includes a range of intangible products like the real estate and
financial services to the companies. The Ministry will attract investment in infrastructure and
support the government led projects with the partnership of the public private relations that
directly supports investment. This is crucial for raising a level of economic profits for the
economy and help in the development of new businesses.
Effectiveness of investments in Cayman Island
Investment is an efficient tool in extracting positive profits and the growth of business
opportunities in Cayman Island. However, lowering the deficit level is very difficult as the
economy is widely dependent on imports from US. On the contrary, a rise in investment
opportunities will actively attract other investors who would like to extract the economic profits
to their own country. With no tax systems, businesses will try to control firms in Cayman Island.
These cases are likely to hamper much of the trading system because there are less opportunities
for production of goods in Cayman Island and therefore, businesses will effectively try to
improve the FDI and open firms in other economies. This will lower the inflow of goods and
balance the trade deficit of the economy.
An investment in international communications will improve the marketing activities at Cayman
Island. The government has actively identified the market policies and how an investment
improves the performance of private sectors.

8INVESTMENT OPPORTUNITIES AND THREATS AT CAYMAN ISLAND
Figure 3: Trend in the level of foreign direct investment in Cayman Island
Source: (Tradingeconomics.com. 2020)
The level of foreign investment was very low in the early years of 2006 till 2012. The
value fluctuated in the years, although the level remained significantly lower in the years. This
has effectively lowered the rate of the production and sale in the economy (Tavares et al. 2019).
Therefore, raising the level of investment will act as the most effective tool for shifting the
economy for generating positive profits and enhancing the level of growth. This will adequately
change the way goods are being produced and served with respect to falling imports.
An increase in the level of domestic consumption is needed to run the business and
effectively improved the level of international trade and development. The government has
actively supports the tourism sector and financial service sector by providing them with a high
level of investment and monitoring their growth and tracking the business opportunities on a
daily basis. The plan to participate in international events will actively improve quality relations
with other economies and understanding their business and investment model by 2023 (Tavares
et al. 2019). Investment of Cayman Islands can be an important gateway between America and

9INVESTMENT OPPORTUNITIES AND THREATS AT CAYMAN ISLAND
Asia as it links southern Asia and Caribbean. Increased business opportunities in Cayman Island
help in the development of new cargo facilities and broaden the growth rate by lowering the
growth rate by significant proportion.
Conclusion
Therefore it can be concluded that Cayman island has ample trade opportunities if can
improve the investment structure. The strategy of government to raise the level of investment by
creating new investments, fund systems and provision of blue green investment will adequately
raise the level of business opportunities and foreign direct investment. The strategy to lower
trade deficit by increased FDI has more opportunities than threats because production of goods is
very difficult in Cayman Island. As a result, foreign firms will not set up firms in Cayman Island.
However, domestic producers can easily regulate firms in other with the usage of new
investment schemes that supports the tourism sector, financial service sector, international trade
and private companies.

10INVESTMENT OPPORTUNITIES AND THREATS AT CAYMAN ISLAND
Reference List
Christensen, J., Shaxson, N. and Wigan, D., 2016. The finance curse: Britain and the world
economy. The British Journal of Politics and International Relations, 18(1), pp.255-269.
Fichtner, J., 2016. The anatomy of the Cayman Islands offshore financial center: Anglo-
America, Japan, and the role of hedge funds. Review of International Political Economy, 23(6),
pp.1034-1063.
Guide, G.P., 2019. Investment Analysis of Turks & Caicos Island Real Estate Market.
Hers, J., Witteman, J., Rougoor, W. and van Buiren, K., 2018. The Role of Investment Hubs in
FDI, Economic Development and Trade. Brussels: SEO Amsterdam Economics.
Neumann, P., 2017. Cayman Islands/British Virgin Islands 2017–a year for cautious optimism in
Latin America?. In Latin American Regional Forum (p. 43).
Nurse, K., 2016. The diasporic economy, trade and investment linkages in the Commonwealth.
Commonwealth Secretariat.
Peguero, F., Zapata, S. and Sandoval, L., 2019. Agricultural Production of Central America and
the Caribbean: Challenges and Opportunities. Choices, 34(316-2019-3256), pp.1-10.
Pérez Ludeña, M., 2017. Chinese Investments in Latin America: Opportunities for growth and
diversification.
Podhorodecka, K., 2018. Tourism economies and islands' resilience to the global financial
crisis. Island Studies Journal, 13(2), pp.163-184.
Sassen, S., 2018. Cities in a world economy. Sage Publications.

11INVESTMENT OPPORTUNITIES AND THREATS AT CAYMAN ISLAND
Sun, C. and Shao, Y., 2017. The effect of economic cooperation on China’s outward foreign
direct investment—A spatial panel data approach. Emerging Markets Finance and Trade, 53(9),
pp.2001-2019.
Tavares, S., Fahy, S. and Carlson, D., First Data Corp, 2019. Financial data normalization
systems and methods. U.S. Patent 10,332,135.
Tradingeconomics.com. (2020). Cayman Islands Imports | 1971-2019 Data | 2020-2022 Forecast
| Historical | Chart. [online] Available at: https://tradingeconomics.com/cayman-islands/imports
[Accessed 9 Mar. 2020].
Vaudo, J.J., Wetherbee, B.M., Harvey, G.C., Harvey, J.C., Prebble, A.J., Corcoran, M.J.,
Potenski, M.D., Bruni, K.A., Leaf, R.T., Henningsen, A.D. and Collie, J.S., 2018.
Characterisation and monitoring of one of the world’s most valuable ecotourism animals, the
southern stingray at Stingray City, Grand Cayman. Marine and Freshwater Research, 69(1),
pp.144-154.