by World Citizenship Council
The World Citizenship Council welcomes the decision by Cyprus cabinet with new measures in strengthening the citizenship by investment scheme
New security measures imposed by Cyprus government such as
- Imposing the Schengen visa requirement, so that applications are first vetted through the EU member states in the schengen area first, secondly vetted through six month residency and then later on for citizenship.
- Introducing stringent process of vetting of applicants through specialized due diligence companies.
The Council also warns that more tightening of this scheme will cause decline in applications, or lack of interest among interest which would hit the real estate and construction industry.
Social Welfare Expansion
The Council also welcomes introduction of donation option for research projects but this must be expanded to other social welfare projects such as education, healthcare, transport, hospitals, subsidizing rents and housing etc..
Creating jobs
The government should also use the investment citizenship scheme to create more jobs through the investment scheme. Investment of millions of euros in residential properties wont even create a single job, except driving property prices up. Investment in commercial properties like IT parks, Hotels, Resorts contribute to job growth.
The citizenship scheme raised 6.6 billion euros from close to 2000 applications but contributed only 1.2% of GDP growth to Cyprus.
Scrapping of Government bonds
The scrapping of government bond option will drive more citizenship investments into real estate and construction sector leading to more boom of the property industry. According to the Finance minister, only 24% of the investments went into real estate and construction. This is expected to go up.
With large number of investments flowing into real estate, the property prices is expected to go up. The popularity of Airbnb and Citizenship/Golden visa schemes are responsible for driving prices in rental and sale market in several countries. The Government should keep the rising on check, else it will make hard for locals buying and renting homes.
Two agents for every client
Considering Cyprus issuing citizenship to 310 investors per month on average (out of 1,864 in 6 years since 2013). This is still a small amount of investors. Considering there are close to 600 passport agents promoting the scheme, this represents for every client there are 2 agents competing and the entire scheme is limited to 700 passports every year.
Aggressive marketing
The Council also welcomes ban on the aggressive promotion of the citizenship scheme. The Cabinet approved ban on advertising of the program both online and in public spaces with particular emphasis on the visibility of the Cypriot passport and the symbols of the Republic and the EU.
IMF recommendations
The WCC also further commends the government for making major steps in improving the transparency of the scheme such as publishing annual report. WCC calls for setting up a committee to analyze economic impact of the citizenship scheme.
IMF in its consultation report said, Cyprus Real GDP grew by 4 percent (yoy) in 2018:H1, following an increase of 4.2 percent in 2017. Growth was primarily driven by higher foreign investment in the construction sector, including through the Citizenship by Investment scheme (CBI), as well as continued strength in professional and tourism services.
IMF also called for recently strengthened 4-layer due diligence procedure, to continue to ensure compatibility with AML/CFT standards. The luxury segment is picking up more rapidly with the support of the CBI scheme as are investment fund flows into non-financial assets. Cyprus has limited luxury housing to 700 per year for citizenship. IMF outlined the risk of increaBusiness cycle becomes increasingly dependent on construction activity leading to excess supply of luxury properties until eventually the CBI scheme is further scaled down or delinked from investment in real estate.
For more information, please visit http://worldcitizenshipcouncil.org
