Thought Leadership by Kevin Hosam, Managing Director & Licensed Agent, Exclusive Concierge
More than any period in the life of CIP/CBI programmes, the last two years have emphasised the need for this significant non-tax revenue source for Caribbean economies. The five countries in the region which offer citizenship by investment programmes primarily rely on tourism receipts to fund government operations. However, for most of 2020, commercial aircrafts were grounded globally with the consequence that tourism revenue was zero. For these small island nations, the governments were able to meet most of their financial obligations from the revenue generated through their respective citizenship by investment programmes.
Over the past seven years, in the case of Antigua & Barbuda and Grenada, and for more than a decade in the case of Dominica and St Kitts & Nevis, CBI programmes have played an increasingly vital role in the fiscal life of these countries. It is estimated that CBI contributes upwards of 40 percent of Dominica’s and St Kitts’ GDP and 10 to 15 percent of Antigua’s, Grenada’s and St Lucia’s. The funds are also used to support much needed social programmes and the budget of some government departments, including social security and pension disbursements.
Apart from the direct cash that flows to the government, the programmes also contribute to the economy through real estate and construction projects, supporting the maintenance of existing jobs and creating new ones in those sectors. Following the 2008 global meltdown caused by the collapse of the USA sub-prime mortgage fiasco, financial institutions shifted away from lending to hotel projects in the Caribbean region. Financing for such projects largely dried up as a result. Currently, 99 percent of hotels being constructed, renovated, refurbished or expanded are doing so under CIP/CBI. In St Kitts, there are over 120 approved developments, whilst in Antigua, that number is more than 40. In Grenada, there are more than 20 approved developments; in Dominica, ten, and in St Lucia two. It is reasonable to deduce that these projects would not have been possible without the existence of citizenship by investment.
“It is undeniable that the hundreds of millions of dollars generated by the CIP/CBI programmes provide vital support to governments to assist with recurrent expenditure, meet loan payments, and support infrastructure development and capital projects.”
Additionally, these small island developing states (SIDS) do not have raw materials or commodities that they can trade; hence, their economies are largely dependent on tourism, together with the service sectors. For several years, Antigua & Barbuda had a thriving online gaming sector, employing thousands of locals in full-time and part-time jobs, which fostered a budding middle class. In time, the US enacted legislation making it illegal to use US-based financial services such as credit cards to pay for online betting. This caused the industry’s demise, with some operators closing their businesses and others moving to different jurisdictions outside of the Caribbean. Needless to say, many individuals lost their primary income or secondary income. Antigua & Barbuda, for instance, was able to provide more than 3,000 relatively high paying jobs during the peak of the gaming industry; more than 90 percent of these jobs were lost, resulting in a severe impact on the middle class. Another service sector that was for the most part wrecked by the actions of external forces is the offshore banking sector. Here again, thousands of families relied on the income from full-time jobs, which disappeared over an abbreviated period of time. Currently, there are only a handful of offshore banks operating in Antigua & Barbuda.
There are few options available to these SIDS to support a burgeoning government budget deficit. If not CIP/CBI programmes to attract foreign direct investments and raise government revenues, then what? There is no fossil fuel, diamond, gold, silver, copper or bauxite to mine. There is no competing with Chiquita, Dole or farmers in the USA, Central and South America. We just do not have the landmass, population size or farming technology to produce at a competitive rate.
It is undeniable that the hundreds of millions of dollars generated by the CIP/CBI programmes provide vital support to governments to assist with recurrent expenditure, meet loan payments, and support infrastructure development and capital projects. I am willing to listen to alternative solutions to meet this funding gap. Given the above, it should become evident that the survival of these programmes is essential to the viability of these economies. As such, in the face of the threat of the end of the Schengen visa waiver, it may be time to restructure the programmes and approach the problem as a united front in an effort to retain access to the Schengen area. After all, all citizens of these CIP/CBI countries will suffer the inconvenience of having to apply to each EU country they wish to visit.
It is important that we lobby the EU to ensure that the visa waiver is maintained. It is instructive that as of the end of 2022, the EU will be implementing the ETIAS (European Travel Information and Authorisation System). This new compulsory visa waiver will become a mandatory requirement for visa-exempt citizens to visit the Schengen area. This in itself will provide a level of security guarantees and, at the same time, afford OECS countries to maintain the privileges of the visa waiver.