The Citizenship by Investment (CBI) industry is 35 years old this year, having been pioneered by St Kitts and Nevis in 1984. Since then, it’s grown to become a significant money-maker for small islands looking to trade passports for investments and bolster their economy with foreign funds.
In an era of increasing globalisation, where many high net worth individuals consider themselves world citizens, it’s not surprising that CBI is on the rise. For the individual, a second passport can mean greater security, freedom of movement and a way to legally hold assets offshore. For the country handing out citizenship, a CBI programme is a relatively risk-free way to plug gaps in infrastructure or tourism development. But, like all industries, CBI is subject to current trends and there are a few disruptive forces worth noting as the sector moves forward in its fourth decade.
CBI in the Caribbean
At time of writing, there are thirteen CBI jurisdictions around the world and five of them are in the Caribbean: Antigua and Barbuda, St Kitts and Nevis, Dominica, Grenada and Saint Lucia. CBI is a huge contributor to the economy of these nations, providing between 10 and 20 per cent of GDP.
St Kitts and Nevis and Dominica operate the most successful CBI programmes in the region. The latter, in particular, has flourished. Sustaining almost catastrophic damage from the 2017 hurricane season, Dominica used CBI funds to rebuild and repair. It has also channelled investments into real estate with four out of seven approved hotels and resorts opened or planning to open this year. The island, which launched its CBI programme in 1993, is focused on ensuring investments are exploited for maximum economic and social benefit, and has also used CBI funds to further sustainable initiatives such as a geothermal plant and hurricane-proof housing.
The FT’s CBI Index 2019 ranked Dominica top of the world’s CBI jurisdictions with a score of 91 per cent for its performance in seven areas: freedom of movement, standard of living, minimum investment outlay, mandatory travel or residence, citizenship timeline, ease of processing and due diligence. This was the highest score ever achieved on the CBI index. St Kitts and Nevis came a close second with 89 per cent while Grenada and Saint Lucia filled out the top four with 87 and 84 per cent respectively.
Saint Lucia is the new kid on the block. The island’s Citizenship by Investment Programme (CIP) began in 2016 and is steadily growing. The CIP generated EC$66.4 million for the fiscal year 2018-2019 — more than double the EC$27.8 million collected the year before. The initiative gives investors the opportunity to invest in real estate and has approved one such project so far — phase three of the Resort and Residences at Honeymoon Beach in Canelles, developed by the Galaxy Group.
Saint Lucia was recognised by the CBI Index as one of the top performers in the minimum investment outlay category and singled out as providing the most affordable investment options. It also came top in terms of citizenship timeline and mandatory travel or residence. Lowest scoring areas for the country were standard of living, which looks at factors such as security, education and life expectancy, and due diligence processes, although Saint Lucia did gain recognition for introducing new measures that exclude applications from jurisdictions that cannot be properly vetted.
Market forces
The Caribbean continues to outperform its global competitors in the CBI space with all five nations taking the five top spots on the current CBI Index. If it wants to maintain its position, the region must keep abreast of global forces which will make CBI a sector to watch in years to come.
One of the most apparent trends has been the emergence of China. In 2018 China had 285 billionaires, worth a total US$996 billion, according to research group Wealth-X. As the Asian superpower continues to create high net worth individuals, these one-percenters are looking for options. Chinese applicants account for around 45 per cent of Caribbean CBI applications, according to the FT’s CBI Index 2019. Given China’s already considerable links with the Caribbean in terms of infrastructure investments and diplomatic overtures, it is likely that interest from Chinese HNWIs will continue to grow.
As demand grows, so too does supply. Greece is reportedly launching its own CBI programme next year and trade journal Investment Migration Insider predicts that five or six new jurisdictions will be onboard by 2027. A bigger market will require more co-operation and collaboration to ensure the necessary due diligence takes place and CBI schemes maintain their integrity.
The Caribbean is building on work already done in this area with plans to supplement the existing CARICOM Joint Regional Communications Centre with an OECS-only initiative that would establish uniform legislation and an oversight committee.
The CBI sector has come a long way since it began 35 years ago, gaining new legitimacy as it evolved from a ‘passports for sale’ industry to a legitimate, respected scheme that benefits both host countries and their new citizens. As misconceptions about the market fall away, and security fears are allayed by modern infrastructure, harmonised regulation and global co-operation, the sector is set to strengthen, and the Caribbean is expected to hold on to first position.
According to the CBI Index: “The Caribbean countries operate far-reaching, strict and rigorous due diligence programmes – for which they have since become internationally recognised. The Caribbean will likely maintain its dominance, using its lengthy experience to provide certainty and, where necessary, refine processes.”
