The Role of Citizenship By Investment in a Growing Economy
From hurricanes to health emergencies, CBI proves its worth to countries in need
When Hurricane Maria wreaked havoc in 2017, the Caribbean nations that were greatly affected by the catastrophe found a silver lining in their Citizenship by Investment (CBI) programmes.
There are five Caribbean countries offering this type of investment: St. Lucia, Grenada, Dominica, St. Kitts and Nevis, and Antigua & Barbuda. Of these countries, it was the last three that endured the category-five hurricane, according to the Caribbean Disaster Emergency Management Agency’s situation report.
The Commonwealth of Dominica was the most devastated. Hurricane Maria left the country in ruins, with 15 casualties and 90 percent of the buildings on the island destroyed. Prime Minister Roosevelt Skerrit said “not a single street island-wide was spared.” Heavy rains caused massive landslides and left a severed agriculture sector, while its howling winds downed cell sites and uprooted water pipes. It was almost impossible to foresee a quick recovery.
Yet Roseau managed to bounce back immediately. Along with generous aid from other countries and international bodies, the almost-three-decade CBI programme also proved to be a reliable “lifeline” to the 72,000-strong Carribean nation.
In a 2018 report of the International Monetary Fund (IMF), Dominica “had deposits in the banking system equivalent to 24 percent of its Gross Domestic Product (GDP)” that is “largely from their Citizenship-By-Investment program.”
This enabled the Skerrit’s government to fund the “rehabilitation costs, public investment, and wage advances to public employees,” the report continued.
Two years later, after Hurricane Maria’s onslaught, Dominica’s CBI programme is lending a hand at easing the financial burden in the island’s different sectors.
Dominica moves forward
In 2019, it was slated to beef up and upgrade the country’s healthcare facilities.
“In respect to the new Marigot hospital… the source of financing and process for eventual drawdown had become too protracted, so we have therefore decided to fund its construction utilising our own resources, raised from the Citizenship By Investment Programme,” said Prime Minister Roosevelt Skerrit in his recent budget address.
The CBI programme will also continue to fund the government’s housing projects for the people of Dominica.
“Collections from non-tax sources are estimated at $438.7 or 53.6 percent of the total. This category is primarily driven by proceeds from the Citizenship by Investment Programme (CBIP), which is expected to bring in $417.5 million,” Skerrit said.
One of the authorized agents of Dominica’s Citizenship by Investment Unit—the UAE-based consultancy firm Montreal Management Constultants Est. (MMCE)—has been working closely with the government in developing the climate-resilient houses since 2016, after the devastation caused by tropical storm Erika.
The firm has helped the Dominican government build more than 1,500 houses, which are now inhabited by the citizens of Dominica. MMCE has also been tasked to be one of those trusted entities to commission the new hospital.
Worldwide orgs sees potential in CBI revenues
In one of its country report on Dominica, the International Monetary Fund revealed that “Dominica’s Citizenship by Investment (CBI) inflows have reached near 10 percent of its gross domestic product (GDP), increasing the country’s reliance on these revenues.”
Since then, the international governing body had advised its government to be “should be used prudently” given their volatile and unpredictable nature and use the revenues for “capital expenditure, debt reduction, and saving.”
This was reiterated in a 2019 report: “While building self-insurance funds—with strong institutional and governance arrangements—may be easier in countries benefiting from sizeable windfall revenues (such as from natural resource rents or “Citizenship by Investment” programs), most disaster-vulnerable countries will need sustained fiscal effort to build a fund of adequate size.”
In a nutshell, countries are urged to allot a savings funds from the CBI revenues equivalent to: (1) the expected value of annual damages from disasters; and/or (2) the deductible under existing parametric insurance schemes.
However, the IMF warned that “a sudden stop” in the citizenship revenue “could create a financing gap.”
Another international body, the World Bank, also acknowledged the potential of the CBI programmes in economy growth.
“The population that arises from these programs could be an interesting source for investment, particularly for larger infrastructure projects,” it said in its massive April 2016 report titled Investing Back Home: The Potential Economic Role of the Caribbean Diaspora.
“Assessing the potential for CBI involvement in infrastructure investments should be part of a broader feasibility study for a regional infrastructure public private partnership (PPP) facility designed by the World Bank and [Caribbean Development Bank] CDB,” it continued.
CBI in the time of COVID-19
Clearly, the CBI programme has provided enough cushions to its Caribbean states during natural calamities. This year, in an unprecedented turn of events, the unique programme will be put to test with a contagion.
The World Health Organization has already declared a SARS-related respiratory illness called COVID-19 a pandemic.
The Commonwealth of Dominica reported its first case of the novel coronavirus on March 22.
The Executive Secretary, Economic Commission for Latin America and the Caribbean, Alicia Bárcena, had already expressed her concern that the region’s economies will suffer the pandemic’s negative consequences via numerous channels.
Meanwhile, the International Labour Organization (ILO) has also released its preliminary assessment on the possible impacts of COVID-19 on the workforce.