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G20 Leaders’ Hangzhou Summit: Trade and Investment Takeaways

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“Our growth, to be strong, must be reinforced by inclusive, robust and sustainable trade and investment growth.”  –G20 Leaders’ Communiqué 2016

Alicia Nicholls

Against the backdrop of an uneven global economic recovery, subpar global trade and investment growth, trade disputes and the recently held Brexit referendum vote in the UK, trade and investment were top of mind for world leaders at the just-concluded Eleventh Group of 20 (G20) Summit held on September 4-5, 2016  in Hangzhou, China.

The G20 is the premier international forum for cooperation on global economic governance and its members account for 86 percent of global GDP and 78 percent of global trade. China currently holds the G20 presidency.

With the goal of providing political leadership to ensure “inclusive, robust and sustainable trade and investment growth”, G20 leaders endorsed the decisions taken by G20 trade ministers at their Trade Ministers Summit held in Shanghai in July this year. Among the key outcomes of that July meeting were the Terms of Reference of the new G20 Trade and Investment Working Group, the G20 Strategy for Global Trade Growth and the G20 Guiding Principles for Global Investment Policymaking.

Key Trade and Investment-Related Aspects of the G20 Leaders’ Communiqué

Below are some of the key trade and investment-related takeaways from the G20 Leaders’ Communiqué:

  • Reiteration of G20 leaders’ recognition that strong growth must be reinforced by “inclusive, robust and sustainable trade and investment growth”;
  • Commitment to strengthening G20 trade and investment cooperation;
  • Commitment to a “rules-based, transparent, non-discriminatory, open and inclusive multilateral trading system” with the World Trade Organisation (WTO) playing a central role;
  • Commitment to continuing the post-Nairobi work. It is instructive that the Doha Round was not mentioned, confirming that the Doha Development Round is effectively dead despite disagreement among WTO members on the round’s future in the communique to the WTO Nairobi Ministerial held December 2015;

  • G20 leaders also reiterated their support for the inclusion of new issues into the WTO negotiating agenda, another area on which WTO members saw strong divergences of opinion in the aftermath of the Nairobi Ministerial. The G20 leaders  noted that “a range of issues may be of common interest and importance to today’s economy, and thus may be legitimate issues for discussions in the WTO, including those addressed in regional trade arrangements (RTAs) and by the B20″;

  • Commitment to ensure their regional agreements and bilaterals complement the multilateral trading system;
  • Commitment to ratify the Trade Facilitation Agreement by the end of 2016;
  • Indicated their support for the importance of the role that WTO-consistent plurilateral trade agreements “with broad participation” can play in complementing global liberalization initiatives and mentioned the Environmental Goods Agreement as an example;
  • Reiteration of their opposition to protectionism on trade and investment “in all forms” and reiterated the commitments to standstill and rollback protectionist measures till the end of 2018 and to support the work of the WTO, UNCTAD and Organisation for Economic Development (OECD) in monitoring protectionism;
  • In recognition of the rising anti-globalisation and anti-trade sentiment in many western countries, G20 leaders “emphasize[d] that the benefits of trade and open markets must be communicated to the wider public more effectively and accompanied by appropriate domestic policies to ensure that benefits are widely distributed”;
  • Endorsed the G20 Strategy for Global Trade Growth, as well as the G20 Guiding Principles for Global Investment Policymaking which “will help foster an open, transparent and conducive global policy environment for investment”. These were decided at the G20 Trade Ministers Meeting held in July;
  • Indicated their support of policies encouraging firms of all sizes (particularly women and youth entrepreneurs, women-led firms and SMEs) to take full advantage of global value chains (GVCs);
  • Although China was not specifically identified, G20 leaders noted that global steel oversupply was a global issue requiring a collective response and increased information-sharing. They called for the formulation of a Global Forum on steel excess capacity to be facilitated by the OECD with the active participation of G20 members and interested OECD members.

For the tax-related aspects of the communiqué by FRANHENDY Attorneys, please visit  here.

The full communiqué may be read here.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

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Turning the Brexit lemon into lemonade for Caribbean countries

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Alicia Nicholls

In a non-binding referendum on June 23, 2016 the British public by a 52 to 48% margin voted for the United Kingdom (UK) to withdraw from the European Union (EU). Although the UK has not yet triggered Article 50 of the Treaty of European Union (Treaty of Lisbon), there is understandable concern among Caribbean countries about what implications the UK’s possible exit from the EU (Brexit) will have for their relationships with both the UK and EU. While I believe and have written elsewhere that Brexit will pose challenges to the small island developing states of the Caribbean, we need to think strategically and carefully about how we will turn this Brexit lemon into lemonade for our relations with both trading partners. 

The countries of the Commonwealth Caribbean and the UK have a longstanding relationship. Barbados, for example, was under continuous British rule from 1627 until gaining its independence in 1966 and retains strong diplomatic, historical and cultural bonds which will not necessarily change due to Brexit. Commercial bonds exist as well. The UK accounts for almost 40% of Barbados tourist arrivals and is our largest export market in Europe. According to data retrieved from ITC Trade Map, Barbados exported US $13,879,000 worth of goods to the UK in 2015 but imported US$68,198,000 from that country in the same year, reflecting a merchandise trade deficit in the UK’s favour of US$54,319,000.

Trade 
One of the early impacts of Brexit is the depreciation of Sterling against the world’s major currencies, including the US dollar to which most Commonwealth Caribbean countries’ currencies are pegged. At the time of writing, the exchange rate is 1 GBP to $1.31 USD. Weaker Sterling would make UK goods and services cheaper for Caribbean importers. The increase in the importation of British goods would likely widen Caribbean countries’ trade deficits with the UK. However, it will also provide cost savings for local businesses which import frequently from that country and for Caribbean consumers of UK services (e.g: education, travel) in all four modes of services supply.

Although Caribbean goods and services exports will be more expensive and less competitive to UK importers, one way our exporters could possibly mitigate this is by quoting their British buyers in British pounds. This would eliminate the currency risk for the British importer. The Caribbean exporter could build a small buffer into their pricing to mitigate some of the currency risk on their own end. We also need to use this opportunity to expand beyond the traditional exports to the UK by developing new and underdeveloped services exports such as in the cultural industries, consultancy services, medical tourism and the like.

Once the UK has concluded its withdrawal from the EU it will cease to be a party to any EU trade treaties, including the CARIFORUM-EC Economic Partnership Agreement. The EPA, which was signed in 2008, provides CARIFORUM countries (CARICOM plus the Dominican Republic) with duty-free, quota-free access to the EU market on the basis of asymmetrical reciprocity – reciprocity which takes into account differences in size between the EU and CARIFORUM. A major value added of the EPA, besides its development component, is the market access concessions it provides for CARIFORUM service providers, particularly under Mode 4 (presence of natural persons), the most restricted mode of services supply.

Until a withdrawal agreement with the EU has been finalised, the UK will continue to be bound by its obligations under the EPA. However, to safeguard their trade interests within the post-Brexit UK market, Commonwealth Caribbean territories , as part of CARICOM or CARIFORUM, should be proactive not only in monitoring the negotiations between the UK and the EU but also in lobbying for the negotiation of a new trade arrangement with the UK post-Brexit. Australia has already indicated its interest in negotiating a post-Brexit trade agreement with the UK. Although it is conceded that the Caribbean will unlikely be among those priority countries/regions with which the UK seeks to secure new trade deals, other interim arrangements could be found.

Investment
Caribbean countries’ existing double taxation agreements (DTAs) and bilateral investment treaties (BITs) with the UK also provide further opportunities to enhance investment promotion efforts in the UK, particularly targeting those UK companies which may be seeking to re-domicile post-Brexit. Commonwealth Caribbean territories like Barbados have many factors which would make it attractive to British companies as a domicile of choice for international business, including a common language (English), the common law legal system, political stability, a well-educated labour force and excellent professional services firms. Caribbean countries should continue to not only promote their attractiveness as a domicile of choice but continue to make reforms which will improve the ease of doing business.

There is also the opportunity for the private sector to forge closer links with businesses and private sector organisations in the UK and seek out new business opportunities. In this vein, the Caribbean diaspora living in the UK, while an important source of remittance inflows, is a still largely undertapped resource as an export market and source of foreign direct investment.
Most Commonwealth Caribbean territories do not have traditionally close relationships with most other EU countries. This is the opportunity to expand our level of trade and investment flows with continental Europe under the EPA, as well as continue to widen our DTA and BIT network with these countries. The consensus so far is that nearly 10 years after the signing of the EPA, most CARIFORUM countries have not realised the benefits expected. Simply put, market access does not guarantee market penetration. Sound market research will be needed to identify specific niches within the EU market which Caribbean goods and services providers could tap into. Business support organisations will continue to play an important role in assisting Caribbean exporters in their preparedness to enter the EU market.
By no means is this article meant to negate or downplay the serious implications that Brexit could have for the Commonwealth Caribbean countries nor does it aim to present an exhaustive list of the opportunities available. What it does argue is that although Brexit does pose challenges for the Caribbean region, we should use it as a catalyst and impetus not only strengthen the already strong bonds we have with the UK, but to expand and deepen our trade and diplomatic engagement with the remaining 27 EU countries with which we are yoked via the EPA.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Caribbean Countries Looking East for Trade and Investment

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Alicia Nicholls

This week the Barbados Chamber of Commerce & Industry (BCCI) signed a Memorandum of Understanding with the  Foreign Economic Relations Board of Turkey. Further north, Jamaica recently announced that it is appointing investment ambassadors to the Middle East and India and Europe to explore business opportunities for Jamaicans. A few weeks ago Antigua & Barbuda’s government announced plans to establish an embassy in Iraq. Caribbean countries are increasingly courting Asian and Middle Eastern countries, with the aim of unlocking business opportunities for Caribbean exporters and business persons in eastern markets.

Why is the Caribbean looking East?

Caribbean countries’ eastern turn has its genesis in three main factors: firstly, the need to diversify their trade partners in an effort to lessen their vulnerability to economic slowdowns in their traditional export partners (the United States, Canada and the European Union). Secondly, there is the desire to promote South-South economic and political cooperation as a conduit for development. Thirdly, there is the recognition of the growing shift in the global balance of power away from Western capitals towards the East. Asian economies are expected to account for two-thirds of the world’s population and half of global GDP by 2025, according to the United Nations.

China has already solidified its position as a major investment and development partner in the region. Lamentably, Caribbean countries’ overtures towards the East have drawn criticism from some elements in Caribbean societies, with some expressing wariness about the timing given the political instability in the Middle East, the seemingly limited cultural affinity between Caribbean countries and the predominantly Muslim countries of the East, and the diplomatic fall-out some believe would occur if Caribbean countries engage too much with traditional western foes like Iran. However, many of these criticisms are both misguided and myopic.

Firstly, Western countries themselves have recognised this shifting balance of power and have sought to expand their presence in eastern markets, with the Trans-Pacific Partnership Agreement being just one example. Secondly, Caribbean countries have had diplomatic relations with most Asian and Middle Eastern countries for years. What is new is there is now more meaningful efforts at deepening relations through the establishment of embassies and consulates, negotiating visa waiver agreements, open skies agreements and protocols for cooperation.

Thirdly, contrary to popular belief, there are some cultural and historical links between the Caribbean and the East.  As a result of the indentured labour system during the colonial era and successive waves of immigration, East Indians comprise a plurality of the populations in Guyana, Suriname and Trinidad & Tobago and there are also sizable Chinese, Syrian and Lebanese diasporic communities in those countries, as well as a 70,000 person strong Javanese diaspora in Suriname. Jamaica, Barbados and Antigua & Barbuda have much smaller East Indian populations.

Many of these diasporic communities, whether immigrant or native-born, still hold on to cultural relics of their ancestral homeland, including music, religion, cultural norms and in some cases, language. After all, one of highlights of visiting Trinidad & Tobago is eating local Indian-based delicacies like roti and doubles. Additionally, walk into an East Indian owned store in the region and you are sure to find products which were  imported in bulk from the Indian sub-continent.

Another cultural link between the Caribbean and some Eastern countries is the love for cricket. Several West Indies players have played and/or are currently playing in the Indian Premier League (IPL). Some notable names include big names like Chris Gayle, Darren Sammy, Dwayne Bravo, Jason Holder, to name a few. It was also recently reported that seven Afghan players have been registered in the Caribbean Premier League draft. Bollywood star Shah Rukh Khan currently owns the Trinbago Knight Riders (formerly the Trinidad & Tobago Red Steel), Trinidad & Tobago’s franchise in the Caribbean Premier League.

Caribbean students are increasingly benefiting from scholarships offered by the governments of China, Taiwan, Japan, Korea and Malaysia to study in those countries.

Trade and Investment

While the limited data available shows that trade between Caribbean and Asian/Middle Eastern countries is minimal, the bilateral trade and investment relationship between Trinidad & Tobago and India is a good example of the potential which exists.

Data published by the Indian High Commission to Port of Spain (Trinidad & Tobago) shows that in 2014 India exported US $165.48m in goods to the twin island republic, and imported 68.42m. Examples of Indian FDI in Trinidad & Tobago include Bank of Baroda, the New India Assurance Co and Mittal Steel. Cultural industries trade also has huge potential. Trinidad & Tobago was one of the filming locations for the Bollywood film, Dulha Mil Gaya starring Shah Rukh Khan.

Barbados has signed double taxation agreements with the United Arab Emirates (2014) and, the Kingdom of Bahrain (2012), which are currently not yet in force but could be used as vehicles for Middle Eastern investment in Latin America and the Caribbean

Development Finance & Islamic Banking

Earlier this month, Guyana became the 57th member of the Islamic Development Bank (IsDB), joining Suriname to be the only two countries in the western hemisphere to be members of this multilateral development finance institution. Membership of the IsDB  will provide Guyana another means of access to concessional financing, including grants and interest-free loans. Guyana and Suriname also have full membership of the Organisation of Islamic Cooperation (OIC), a prerequisite to joining the IsDB. At the recently held 13th OIC Heads of Government Summit in Istanbul, Turkey, Suriname reiterated its intention to become  the hub of Islamic banking and finance in the Americas.

Tourism

The rising middle class in Asian and Middle Eastern countries represent a large untapped tourist market for both mainstream and faith-based tourism.  Halal tourism, which provides tourism and services meeting the requirements of Muslim religious rules and practices, is a growing niche in global tourism, not dissimilar to Kosher tourism which caters to persons of the Jewish faith. Several countries, including the predominantly Christian Philippines, have been repositioning themselves to benefit from the global rise in Halal tourism. It may be something which countries like Guyana, Suriname and Trinidad & Tobago, could explore given their greater familiarity with Halal customs.

Challenges

Exporting goods and services and promoting travel trade in a new market has its complications, from the need to conduct adequate market research so as to understand and meet consumer preferences, to familiarisation of regional exporters with cultural and business norms,regulatory standards and border requirements in the target market, as well as linguistic barriers. It might be easier at first to foster links with countries like India, Malaysia and Singapore where English is widely spoken and where there are some  cultural affinities.

Distance is also a major logistical factor in terms of both ocean freight and air travel. Open skies agreements would help promote greater travel and trade by freeing the air services framework from government interference. However, travel between the Caribbean and Eastern countries is currently time-consuming as it requires changing planes, and transiting through metropolitan hubs like London, Amsterdam or Miami. Nationals of some Asian and Middle Eastern countries require visas to transit through these hubs.  There is some hope, however. Air China commenced service from Beijing to Cuba via Montreal in Canada in December 2015. Although one still has to transit, there is only a three-hour stop over. As technological advancements improve the capacity and speed of long haul airliners, it is not unlikely that there could one day be direct non-stop flights between the Caribbean and Asian and Middle Eastern countries once there is sufficient demand, whether latent or effective.

If one includes China and India, eastern markets include a population of over 3 billion people which is ripe for tapping. As the middle class in Asia and Middle Eastern countries continues to rise, there will be greater demand for travel, and also greater scope for trade and investment between these regions. I believe there are also opportunities for greater engagement, exchange and learning between the Caribbean and eastern countries, particularly in areas like culture, education, technology and sports. Critically, there will be the need to foster linkages between private sector associations and educational institutions in both regions. The countries of the Caribbean Community (CARICOM) would also need to consider the feasibility of negotiating formal agreements for facilitating trade and investment with individual eastern countries or trade blocs like the Association for South East Asian Nations (ASEAN).

There is also the need for language training and cultural awareness between the peoples of the Caribbean and eastern countries. A good start is the Confucius Institutes at the University of the West Indies’ Mona, St. Augustine and Cave Hill Campuses which would assist in this process in so far as Chinese-Caribbean relations are concerned.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Cuban and Virginian port authorities sign trade cooperation MOU

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Alicia Nicholls

According to the website of the Office of the Virginia Governor, the port authorities of Cuba and the Commonwealth of Virginia in the United States have signed a Memorandum of Understanding to “evaluate commercial opportunities between the Port of Virginia and Cuba’s newly opened Port of Mariel Special Development Project”.

The MOU is one of the outcomes of a three-day trade mission led by the Governor of Virginia, Terry Auliffe, to Cuba as part of a thrust towards strategically positioning Virginia to benefit from the normalisation of US-Cuba relations. According to the Governor’s website, the signed MOU “establishes a platform for cooperation and information sharing aimed at developing links between Cuba and Virginia to support waterborne trade and investment, improve customer service, enhance collaboration to achieve improved business practices, and increase the level of vessel services available between the two entities”.

This latest move comes against the backdrop of a thawing of US-Cuba relations under the Obama administration, including the rescission of Cuba’s State Sponsor of Terrorism designation, the re-establishment of diplomatic ties, amendments to the Cuban Assets Control Regulations (CACR) and the Export Administration Regulations (EAR) and the signing of a commercial air services agreement for the eventual resumption of commercial aviation service between the two countries last year.

Despite a growing groundswell of US companies chomping at the bit to enter the Cuban market, the US’ illegal embargo on Cuba remains. Late last year the US Government once again voted against a UN General Assembly resolution introduced at Cuba’s request condemning, and calling for the end of the embargo. The US embargo on Cuba which has been in place since 1960 has sought to economically and financially isolate Cuba by banning most American trade to and from the island, with stiff penalties for US companies and individuals who infringe these laws. US companies are also prohibited from selling goods to Cuba on credit. Although some agricultural trade currently exists between Cuba and Virginia, it has been recognised that full trade potential will not be realised until the economic, commercial and financial restrictions imposed by the US Federal Government are removed completely.

The fourth US governor to visit Cuba since 2014, Governor Auliffe was one of the nine US governors who penned a bi-partisan letter dated October 9, 2015 to the US Congress advocating for an end to the restrictions impeding trade between the US and Cuba.

Further information on this development may be obtained from the press release on the Governor of Virginia’s website.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Economic Citizenship Programmes in the Eastern Caribbean: A Brief Look

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Alicia Nicholls

In a world of eroded preferences for traditional Caribbean exports, the small island states of the Eastern Caribbean have had to find non-traditional ways to bolster their small open economies. There is growing global demand for alternative and second citizenship by mobile High Net Worth Individuals (HNWIs), a phenomenon on which an increasing number of states have sought to capitalise. At the Global Citizen Forum 2015 in Monaco last week, Prime Minister of St. Lucia, the Hon. Dr. Kenny Anthony announced his country’s intention to become the latest Caribbean state to offer economic citizenship. St. Lucia will join four other Caribbean countries: St. Kitts & Nevis, Antigua & Barbuda, Dominica and Grenada which operate direct citizenship by investment programmes. This article explores the current programmes in the Eastern Caribbean and whether the offering of economic citizenship is worth the risks involved.

The concept of citizenship, that is, the status of holding the nationality of a State, is imbued with a whole package of legal, political and other rights and duties. All states of the English speaking Caribbean have citizenship on a jus soli basis, that is, the right to citizenship by virtue of being born in the territory, as well as citizenship through descent and naturalisation. Those states which offer economic citizenship stretch the notion of citizenship to give qualifying investors the right to full legal citizenship and the right to hold a passport for themselves and their families through making a qualifying investment into the local economy.

Many of these mobile HNWIs are from China, the Middle East and Russia, seeking economic and political security, a more favourable tax climate, and the benefits of hassle free travel a good second passport could bring. According to The Wealth Report 2015, “it is estimated that 76,200 Chinese millionaires emigrated or acquired alternative citizenship over the 10 years to 2013”. Additionally, the US’ system of nationality based taxation and the onerous reporting requirements under FATCA have caused many Americans living abroad to renounce their American citizenship in record numbers (1,335 in the first quarter of 2015 according to this article).

Economic citizenship and residency programmes are not unique to the Caribbean. Several countries such as Malta and Cyprus operate direct Citizenship by Investment programmes. Some countries offer Immigrant Investor Programmes which use the prospect of citizenship or permanent residence to attract highly skilled HNWIs. The US’ EB-5 visa is a prime example. Similar programmes are also offered by the United Kingdom, Australia and New Zealand. Outside of this, there is a whole wealth and tax planning industry which has built up around advising HNW clients and their families on how and where they can get the best passport for their buck.

As countries known for their high standards of living, democratic principles, political stability, respect for the rule of law and healthy reputations internationally, it is little wonder several Eastern Caribbean countries have sought to leverage these pull factors and seek to get their share out of the second passport pie. The expected benefits to the host economy include foreign direct investment through purchasing real estate, funding for infrastructure development and the other economic benefits to be derived from HNWIs and their families spending in the economy.

The investor must meet the application requirements and go through stringent application procedures and invest in one of the options available which differs by country. In return, investors which take advantage of economic citizenship offered by one of those Eastern Caribbean states gets visa free travel to over 100 countries, a second passport, no requirement for residency, as well as second citizenship for themselves and their spouse and dependents. They also can take advantage of the tax benefits offered by a low tax jurisdiction, including no capital gains, wealth or inheritance taxes.

Below is a brief description of each programme:

St Kitts & Nevis – It is the oldest continuously operating citizenship by investment programme and has been in existence since 1984. Two options for investment: (1) making a non-refundable donation to the Sugar Industry Diversification Programme of a minimum of US$250,000 plus processing fees or (2) by investing in an approved real estate project worth at least US$400,000 plus registration and other costs.  While the investment in real estate is recoverable, the investor must hold the property for a minimum of 5 years. The next buyer also qualifies for citizenship. For further info: http://stkitts-citizenship.com/

Antigua & Barbuda – Three methods of investment: (1) Investment of at least US$400,000 in  an approved real estate project to be held for a period of no less than five years, (2) contribution of at least US$200,000 in the National Development Fund, (3) An investment of a minimum of US$1,500,000 directly into an eligible business as a sole investor or a joint investment involving at least 2 persons in an eligible business totalling at least US$5,000,000 and each of those persons individually invests at least US$400,000. For further info: http://cip.gov.ag/citizenship/

Dominica – Dominica’s programme requires the smallest minimum investment. Citizenship can be obtained through investment either in the Government Fund or the Real Estate Option. According to the website of the CBIU, the generated funds are utilised for public and private sector projects where a need is identified. To qualify for citizenship under the Government fund there are four investment categories with different contribution amounts, based on the number of dependents included in the application. For a single applicant, there is a non-refundable contribution of US$100,000 required. The contribution required increases where a spouse and dependents are involved. To qualify for citizenship of Dominica under the Real Estate Option under the Citizenship by Investment Program, an applicant must purchase authorized real estate to the minimum value of US$200,000 plus government fees which dependent on whether a spouse is included and number of dependents. For further info: http://cbiu.gov.dm/

Grenada – After a thirteen year hiatus, Grenada restarted its Citizenship by Investment programme in 2014. Application is by invitation only. Citizenship can be obtained by investment of a minimum of US$ 350,000 in an Approved Real Estate project plus fees and costs. The investment is subject to a minimum holding period of four (4) years. The second option is a non-refundable donation to the Island Transformation Fund which is not yet open. For further info: http://www.citizenship.gd/ 

St Lucia – St Lucia has indicated its programme will begin from January 2016 and details about the programme are not yet available.  It has stated that they expect significant economic benefits from the programme.

There is little data publicly available on the success of Caribbean CbI programmes. It would be interesting to know the number of applications received and approved on a yearly basis, the countries from which most applicants have come, and what have been the tangible benefits to the host countries. However, the IMF Staff Report  on St Kitts & Nevis noted the citizenship by investment programme in St. Kitts & Nevis, the region’s most successful CbI programme, is bearing fruit. It notes as follows:

Continued rapid inflows under the Citizenship-By Investment (CBI) program have led to a surge in construction activity, and supported a large increase in government and Sugar Industry Diversification Fund (SIDF) investments and spending, including on the People Employment Program (PEP). These factors, together with the ongoing recovery in tourist arrivals fueled rapid GDP growth of about 6 percent in 2013 and 2014.

Entangled in the notion of economic citizenship are a whole set of moral and legal issues. For one, the definition of ‘spouse’ in the legislation of these Caribbean countries still means either of a man or woman who are married to each other. In light of competition from other CbI programmes, will this definition eventually be amended to allow gay HNWIs and their spouses to take advantage of these programmes?

There are also regulatory and national security implications, including concerns about the potential use of second passports to facilitate money laundering, organised crime and terrorist activity. Of course, there are stringent screening methods, including requirements of police certificates of character. After all, all countries prefer to attract investors of good character who are self-sufficient, and willing to make a significant economic investment to the country in which they are seeking citizenship. Under the Antigua & Barbuda programme for example, a person can be deprived of citizenship in several instances e.g: fraud, conviction or failure to spend at least 35 days in Antigua & Barbuda during the period of five calendar years after his registration. There is the potential for attracting ‘undesirables’, even with a rigorous programme.

A few countries worldwide have found that the potential investment inflows were not worth the risk or they could not cope with the volume of applications. Canada cancelled its Immigrant by Investor Programme, while Hong Kong has suspended its CIES programme. Barbados has clearly stated that for policy reasons it will not go the route of economic citizenship. It currently offers the Special Entry and Reside Programme (SERP) for qualifying HNWIs and their spouses/dependants. In order to qualify as an HNWI in Barbados, the investor must have assets of at less than US$ 5 million. In spite of this, Eastern Caribbean CbI programmes not only have to compete amongst themselves but also face increased competition globally from potentially more attractive CbI and residency programmes worldwide.

Moreover, countries which offer economic citizenship programmes do open themselves to reputational risks, especially if other States have doubts about the rigor of their screening procedures. The US Treasury has accused persons obtaining St Kitts & Nevis passports for financial crime  and Canada imposed visa requirements on St. Kitts & Nevis nationals on November 22, 2014. The merits of these actions are debatable. However, these are the kinds of risks which countries operating these programmes face. Moreover, they may result in holders of those passports, including natural born citizens, being blacklisted or subject to more scrutiny by foreign jurisdictions, which may redound to more harm than good for that State and undermine the very programme itself.

In light of the foregoing, any Caribbean state considering a Citizenship by Investment programme must not only consider the possible investment inflows but weigh them carefully against the potential reputational, security and other risks, as well as the sustainability of such a programme.

Disclaimer: This article is NOT intended to provide investment advice and the Author is not accountable to anyone who relies on the information in this article. The information was taken from sources deemed to be accurate and correct at the time of publication. For further information on the respective CbI programmes stated above, please contact the relevant authorities in the respective countries.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, public international law and trade.