EDITORIAL

Time To Lift The Liquor Moratorium For Good

Tuesday, August 10, 2004

News that the Cayman Islands Government will lift the moratorium on liquor licences for a three-month period in the near future is a step in the right direction to eliminate some of the abuses currently occurring as a result of the ill-advised measure.

By banning the issuance of new licences except in the hotel category, liquor licences become investment commodities sold to the highest bidder.

Exorbitant prices were paid for some licences, and in the end, it was the small-time local entrepreneurs who suffered because they were unable to raise the necessary funds to open a business that sold alcohol.

In a country that caters heavily to tourists on holiday, not being able to sell alcoholic drinks makes opening a restaurant difficult to rationalise economically.

There are other situations where the moratorium has created artificial competition barriers.

If one gas station can sell beer, why shouldn’t any other be able to do so if they desire? If one charter vessel can serve alcoholic drinks, why shouldn’t they all if they meet the requirements? Why should one business have an unfair advantage over another because of a simple piece of paper granted by the Government.

In the era of the liberalisation of the telecommunications industry and of the impending end to exclusive licensing in the electric utilities industry, it seems only consistent to expand the philosophy to liquor licences. If competition is good for one business segment here, how can it logically be argued that it is bad for another?

Certainly, those holding the precious liquor licences now, especially those who paid top dollar for them, would not like to see those licences available to all business that qualify. Especially in the restaurant business, it is hard enough to compete in Cayman today without the prospect of even more alcohol-serving restaurants opening up here.

However, Cayman is an open market society, and just like in the telecom industry, where every company that qualifies can be granted a licence, so it should be with liquor licences.

And just like the telecom industry, where the size of the Cayman market is too small to sustain so many licences, leading inevitably to some business failures, some restaurants and bars will also inevitably fail.

But this kind of economic Darwinism, where only the fittest survive, leads to a kind of natural selection which will raise the standards of restaurants and bars here, and raise the tourism product at the same time.

In Fort Lauderdale, Florida, which has one of the highest number of restaurants per square mile in the world, the restaurants that survive do so because they offer things that differentiate them from the competition. Sometimes it’s superlative service; sometimes it’s fantastic food, sometimes it’s ambience. Most often, it’s a combination of all three.

The fact is that competition usually brings out the best in people and in businesses. There is a reason why countries in the old European Communist Bloc countries were known for sub-par restaurants and consumer goods; there was no competition.

When businesses have to fight for their survival by being the best that they can be, it is the consumer that ultimately benefits, and when many of those consumers are tourists that support other aspects of our economy, the whole country benefits.

Lifting the liquor licence moratorium for three months was a step in the right direction; lifting it for good should be the final destination of that journey.

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