The Commonwealth has published SWOT report on Citizenship by investment schemes.
The SWOT (is a useful technique for understanding Strengths and Weaknesses, Opportunities and the Threats the CBI industry currently faces.
Strengths
CBI programs have a significant macroeconomic impact in small states, within eight years growing from no impact to account for substantial budget inflows, led by St Kitts contributing 3% and in Antigua around 1%. CBI has become important source of income for Grenada and St Lucia.
In many countries CBI funds, were used for clear debts, support government budgets, free up fiscal space for development and growth
St Kitts has reduced its debt from 185% in 2009 to just 60% in 2018.
In Grenada legislation requires 40% of income from CBI to be used for general budget and financial purpose including contingency spending, natural disaster and reducing debt.
Dominica used CBI income to recover from Hurricane Maria. Further CBI program funded hotel developments, tourism projects and agriculture. 5000 new homes built in Dominica funded by CBI.
Threats and Weakness
The SWOT report said there are three big threats faced by the CBI industry
- Pressure from international regulators
- Increased competition
- Reputational damage
The report said CBI schemes suffer from fraud, mismanagement.
Some of the risks presented by CBI schemes are
- The Influx of private investors inflates property prices weakening the property market. Such superflous price increases makes it difficult for locals to afford property. To combat this issue, governments limit property purchases for foreigners to certain areas and only to certain approved developments.
- CBI schemes can also damage relations between two countries or peers (eg. visa waivers)
The paper warned that visa free access has been promoted as major marketing point of the CBI industry. If countries begin to impose visa restrictions, the market for CBI would shrink substantially.
Due diligence and security checks
As with due diligence, there is a Negative image on CBI, where people gaining second passports to escape criminal prosecution are fixed on the minds of public. The report called for lot of work to be done to remove this image with public, by strengthening the security checks and due diligence on applicants.
Commonwealth to facilitate dialogue
The Commonwealth secretariat is willing to play a role facilitating dialogue between CBI jurisdictions and regulators, said the paper.
“We believe the Commonwealth can work with member countries to support the good governance and integrity of the programmes.” said Commonwealth’s head of economic policy and small states, Travis Mitchell
The publication argues that cooperative measures for strengthening due diligence checks and for improving governance can help overcome the weaknesses and the threats of the industry.
Citizenship by Investment programme (CBI) is a vital source of income, accounting for 16 per cent of total government revenues in some countries, is particularly popular among small states, as two-thirds of the countries offering this programme have a population of fewer than 1.5 million people, said the report
About the Commonwealth
The Commonwealth of Nations, normally known as the Commonwealth, a is a unique political association of 53 member states, nearly all of them former territories of the British Empire.
The Commonwealth is home to 2.4 billion people and includes both advanced economies and developing countries. Thirty-one of our members are small states, many of which are island nations.
The Commonwealth Secretariat, established in 1965, supports Commonwealth member countries to achieve development, democracy and peace. The secretariat helps to strengthen governance, build inclusive institutions and promote justice and human rights. Our work helps to grow economies and boost trade, empower young people, and address threats such as climate change, debt and inequality.
The full SWOT report is available here.
