Opinion February 5, 2016 | 9:25 am

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Citizenship programmes – more work to be done

Last July, theFinancial Times contained as a paid for insert, a glossy brochure offering citizenship-by-investmentin the Caribbean. It was little different instyle to the advertising one sees for mega yachts, expensive real estate, private jet charters, and other expressionsof the so called ‘good life’.

The document wasproduced by one of the many companies now selling Caribbean citizenship to thevery wealthy, aiming to draw their attention, by suggesting how they might become‘a citizen of the world’, and obtain a ‘life saving insurance policy’ through asecond nationality.

It was about a paralleluniverse, far from the gritty reality of everyday life for most citizens of theislands concerned.

Despite this, suchschemes have become an economic lifeline for most OECS nations, raisingsubstantial revenue for the governments concerned. This is especially the caseas most have begun to mature and be better policed as a result of internationalin relation to the security issues involved, and because experiencedinternational selling agents want probity and better control to ensure commercialsustainability.

That said, citizenship-by-investmentprogrammes remain controversial. Many in the region object in principle to theidea that nationality is something that can be sold; finding unacceptable the grantingof rights or freedoms to those who have no historic or cultural affinity withthe Caribbean.

Such concerns have,however, largely been set aside as the need to find rapidly new sources ofrevenue to fund budgets has now driven the development of such programmes inevery independent OECS nation other than St Vincent.

The schemes, with somevariations, revolve around the granting of citizenship and a passport for aninvestment of around US$0.4m plus fees in property, government bonds, or by wayof a donation. There is usually no residence requirement. They provide aCaricom passport enabling visa-free travel to many parts of the world,including in most cases the UK, the EU’s presently borderless Schengen area,and Canada.

In the past those mostinterested in Caribbean citizenship werewealthy Chinese and Russians, but as a result of growing pressure from theauthorities in both countries there are signs that their numbers may now be diminishing.More recently the interest has been coming from an increasingly unstable MiddleEast, the former Soviet Republics, and Africa.In addition some OECS countries have begun to market to high net worthindividuals in nations like Malaysia, Indonesia or other fast growing advanceddeveloping economies.

For the CaribbeanGovernments concerned the sums can be substantial. In a recent statement toParliament, St Kitts’ Prime Minister, Dr Timothy Harris, said that he expectedthe country to earn some 33% or around US$74m of its annual revenue from such programmes.He also revealed that since 2005 when just 6 citizenships were granted, thenumber has risen steadily, with 2,296 citizenships granted in 2015. There were, he said, now 10,777 foreignnationals who hold St-Kitts Nevis Caricom passports, who either made a minimumcharity donation of US$0.25m, or a real estate investment of US$0.4m, plusfees.

Antigua’s programme is reported to now generate annually 25%of all government revenue and it is considering allowing citizenship to bepassed on by adults to children without charge after five years. It says thatit denies about 2 to 2.5% of applications.

OECS programmes have inthe past been the subject of public criticism from the US and Canada inrelation to the ability of nations to undertake the necessary due diligenceabout the background of individuals to whom passports are to be issued; amatter not helped by separate but continuing scandals about the issuing ofdiplomatic passports to individuals involved in alleged illegal activities.

Since then, mostCaribbean citizenship programmes have put in place, usually with externalsupport, mechanisms to address these issues, but there remain clear variationsin the way programmes operate.

While officials inNorth America and Europe make clear they have no objection to well runcitizenship-by-investment schemes given they have ones of their own, they saythey remain concerned, suggesting the possibility of sanctions against any nation unable to ensuretheir programmes meet international requirements.

Notwithstanding, other conceptualand practical problems remain.

At a purely economiclevel, it is hard to understand why such schemes are not designed to besustainable in ways that bring continuing income to the country concerned.Without any residency requirement there is no long term gain in the form ofother taxes or fees. Moreover, in the absence in some cases of the equivalentof an independently controlled sovereign fund able to receive fees fromcitizenship, one-off income remains unrelated to long-term infrastructural,education or public health care needs.

Secondly, thewillingness of some countries to grant citizenship to future generations aswell as the applicant means that not only is there no long term benefit fromthe passport holder’s descendants, but the issuing nation concerned has little or no idea about the identity ornature of growing numbers of future citizens.

Thirdly, the realdanger remains that should it be discovered that a passport has been issued tosomeone who is on a criminal or terrorism watch list, ordinary citizens mayface blanket requirements for visas where none previously existed.

There are also otherproblems requiring resolution. There isa lack of clarity in some nations about what donations – the preferred routefor most applicants – are applied to; there is a plethora of sales agentsglobally and a need for the regulation of their activities; some countries donot have the capacity to deal adequately with the number of requests beingmade; few governments join up their promotional efforts with developers to tryto encourage investments into productive real estate or tourism projects; highrisk investment vehicles are being approved; in some nations opposition partiesallege impropriety in relation to who benefits; and most schemes still lack realtransparency.

As international viewson monitoring money laundering and transparency evolve, and concerns grow aboutglobal security, it is likely that countries offering economic citizenship withoutgreater transparency could become the subject of more intense international scrutiny.

It would be wise forthe region as a whole to consider carefully how best to balance theunderstandable desire to create new sources of government revenue, with thewider implications and reputational risk inherent in citizenship-by investment-programmes.

David Jessop is theDirector of the Caribbean Council and can be contacted at [email protected]

Previous columns can befound at www.caribbean-council.org

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