A passport to save the economy
Several countries in the Caribbean now operate a Citizenship by Investment Programme (CIP) under which high-worth foreigners can obtain citizenship and passports of these countries.
The CIP has detractors both domestically and internationally, but is their derision fully justifiable, or do the benefits outweigh the unease?
Citizenship is a jealously guarded entitlement. Persons born into a country in which they also grow-up naturally feel a strong bond with it. Their personal identity is defined by their birth, their culture, their values and traditions. The inclination to preserve the sanctity of citizenship and the standing of their passports are understandably important to them. Therefore, the idea that these birth rights of citizenship and passports could be purchased somehow devalues them. It is this perceived devaluation of birth rights that most informs the resistance of native-born persons to CIPs.
Additionally, there is a worry among native born citizens that the strength of their passports could be degraded if they fall into the hands of internationally undesirable persons. In turn, native born persons could be subjected to higher levels of scrutiny or may even be denied visa-free entry into other countries if their country's passports fall under suspicion. Certainly, there is evidence to support the latter concern. For instance, Canadian authorities imposed visa requirements on all citizens of St Kitts-Nevis when that country's passport was abused for an attempted entry into Canada by a foreigner. The people of St Kitts-Nevis must now be in possession of a visa before they can enter Canada – a restriction that native born Kittians and Nevisians resent and for which they blame their government's CIP.
The international community – particularly the developed countries of North America and Western Europe – are also concerned about CIPs. Their concern relates to security principally, although some of them that also operate CIPs might fear competition.
Countries such as Canada and the United States could decide that the most effective and cheapest way to eliminate the security risk would be to apply visa requirements on all passport holders of CIP countries, as happened in the case of Canada with St Kitts-Nevis.
Apart from the political disenchantment that the need for a visa to travel to Canada causes among the people of St Kitts-Nevis, the desirability of its citizenship and passport under the investment programme is diminished by the elimination of Canada from the number of countries for which entry does not require a visa.
These are very strong reasons why the CIPs have to be managed at a very high standard and with the most thorough investigation of the persons who apply for citizenship and passports. Governments that fail to enforce high standards that satisfy the border authorities of North American and Western European countries will face visa restrictions, the erosion of their CIPs and the embitterment of their electorates. In other words, they would lose all round.
The terms of the CIP differ from country to country but the underlying basis is the same – citizenship and passports are granted in exchange for a significant financial investment. In Antigua and Barbuda, Dominica, Grenada, St Kitts-Nevis and (recently) St Lucia, there are two options – either a large contribution to a national development fund or a prescribed investment in real estate. Typically the latter means buying land and building homes.
Some countries have been criticised for not requiring residence by successful citizenship by investment applicants. However, contributions to a national development fund, as distinct from buying land and building personal houses, maintain land for ownership by native born citizens and eliminates negative repercussions such as pushing up land and construction prices.
In St Kitts-Nevis, where the programme has been operational since 1984, considerable sums have been earned and the country has undoubtedly been saved from collapse by it. The CIP in Antigua and Barbuda, which started in 2013, has also helped to avert an economic meltdown, particularly over the last 18 months when the present government streamlined the programme, launched an aggressive and high-level marketing campaign, and enhanced the quality of its investigations into citizenship applicants.
All of the Caribbean countries involved with citizenship by investment programmes have come to them by necessity. Poor terms of trade, vulnerability to financial down turns in North America and Europe from where most of their tourists come, declining aid, persistent natural disasters and no access to concessional financing from international financial institutions, have forced them to be creative in raising revenues. They are all faced with fiscal deficits, high debt and an international environment that is unresponsive to their predicament. Only China and Venezuela offered them concessional financing.
There is an argument that the CIPs will be short-lived. It is dependent on wealthy persons seeking an alternative to insecurities in their homelands caused by wars, internal strife and government disregard for human rights. Therefore, it is suggested that countries should place the proceeds into a sovereign wealth fund or some other sort of savings. Ordinarily that proposal would make sense, but not in countries with fiscal deficits, high debt and high unemployment. The revenues from the CIPs have to be used for financial and social stability now. Saving makes little sense if provision is not made for preserving and enhancing the capacity of the country to survive. No point in saving for tomorrow and starving today.
The CIPs should serve Caribbean countries well for a few years to come, unless the developed countries, which themselves run citizenship programmes, feel sufficiently threatened to want to close out the competition. In one way or another, Citizenship by Investment programmes are operated by European Union countries such as Britain, France, Malta, Cyprus, Portugal and Spain as well as by the United States, Switzerland, New Zealand and Australia amongst others.
To maintain their share of the benefits of CIPs, Caribbean countries have to administer their programmes at a high standard – a point frequently made by Antigua and Barbuda Prime Minister Gaston Browne. So far, the CIPs have provided governments passports to save their economies.
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(Sir Ronald Sanders is Antigua and Barbuda's Ambassador to the United States and a Senior Fellow at the Institute of Commonwealth Studies at the University of London and Massey College in the University of Toronto. The views expressed are his own)