Letters & Opinion

Economic Citizenship – A Solution Waiting For A Problem?

By Clement Wulf-Soulage
By Clement Wulf-Soulage

I remember having an animated discussion the other day with a Maltese friend of mine about his country’s recent initiative to attract foreign direct investment through a programme of economic citizenship. Citizenship, he quipped quixotically, should have nothing to do with economics. In laying out his case against what he called “citizenship for sale”, he maintained that a nation’s character should be formed and guarded by its shared social values and cultural identity; and that both the gift and privilege of owning a national passport are sacrosanctities. The rhetoric grew more heated when I mentioned that my cash-strapped island St. Lucia may be considering the possibility of marketing itself as a Caribbean paradise with the promise of sea water, sand, sun and interim passports, by introducing investment citizenship in tandem with initiatives taken by sister nation-states like St. Kitts and Nevis, and Dominica.

Indubitably motivated by economic stress, Malta has embarked on a programme of economic citizenship where foreigners from outside the European Union can now buy Maltese citizenship for 650,000 euros. The controversial law also gives buyers the right of free movement within Europe, much to the chagrin of other European states. According to Prime Minister Joseph Muscat, the programme’s goal is to raise revenue for the country and attract “high-value” people who will invest there. Predictably, critics have accused the government of pawning the national birthright and surrendering to the destructive forces of “nomad” capitalism.

With our collective backs already against a tenuous wall of economic vulnerability and insularity, should St. Lucia and the rest of the Caribbean be concerned about this new economic doctrine and investment model? I ask in earnest dear reader, should the Caribbean region become island havens for investment citizenship?

For opportunistic global high-flyers who wish to open offshore financial accounts or expatriate in a given tax year, economic citizenship can make some sense. The principle is quite simple: wealthy foreigners can obtain a passport for a financial investment with no residency requirement. Based on current policy guidelines, the economic contribution takes the form of a direct non-refundable payment made to the Government. In exchange, investors and their families are granted full citizenship. They’ll have the same rights as natural citizens, the right to establish business, and work and live how they want. In effect, just like they have diversified their investment portfolios, they can also diversify their passport portfolios.

Still reeling from the impact of the global financial and economic crisis, several countries are now developing strategies to help mitigate the effects of the global economic slowdown. While a few Caribbean governments have decided that the heft of the applicant’s wallet is the answer to their economic woes, several economists view economic citizenship as the bastard children of economic policy. Indeed, there is much consensus out there that foreign direct investment and economic citizenship make strange bedfellows. The question I suppose that reverberates in the corridors of our minds is whether or not it would be far better and sustainable building capacity for the trading of goods and services rather than engaging in the practice of trading passports.

Alas, much controversy has been stirred in proffering the “cash for citizenship” concept as a way of raising revenue to either fix government budget deficits or attract investment capital into a country. According to research done by the British Broadcasting Corporation (BBC), by far the cheapest deal for citizenship is on the tiny Caribbean island of Dominica. For an investment of $100,000 plus various fees, as well as an in-person interview on the island, citizenship can be bought.

As much as the current debate on investment citizenship is essential and opportune, the fundamental question we need to ask ourselves is what precisely does citizenship mean today for a society and what values are associated with nationality. In order to own a St. Lucian passport in the future, will it no longer be necessary for a person to be born here or become a naturalized citizen; or could the requirement be met by simply being able to afford and purchase a passport? Sharing citizenship with people you have nothing in common with sounds like a sardonic business model and “nomad” capitalism. Maybe I’m a bit conservative or simply at odds with the new economic zeitgeist, but I see nationality as a derivative of social and cultural circumstances and cannot be sacrificed on the altar of economic opportunism and commercial expediency. Citizenship is the character of an individual viewed as a member of society, with all the duties, obligations and functions that accompany these rights. Many other freedoms inhere in humanity and in citizenship, and neither economics nor commerce should interfere with them. That notwithstanding, I do sense that St. Lucians are fickle about allowing express entry to questionable high net-worth characters, owing to the fact that they may be able to create a few menial jobs and seemingly generate some economic momentum in the place.

Basically, there are three big snags with the idea of economic citizenship. Firstly, issues of transparency and accountability are still cast in a cloud of suspicion. Secondly the question of whether these islands will and can attract the right people is disquieting. And finally, how do we reconcile the putative economic gains with the resulting social costs?

It is essential for a small nation to assess its political dynamics thoroughly before proceeding to offer economic citizenship. Not only does St. Lucia lack the structural and capital resources to countenance a socio-economic backlash, it also lacks the legal efficiency and institutional support necessary for the functionality of economic citizenship. According to which criteria will we determine who qualifies for an investment passport? Who decides how and when passports should be issued and under what circumstances are exceptions made? Who will conduct the necessary and crucial background checks? Will a future government be able to repeal the economic citizenship programme, or indeed revoke any citizenship granted by its predecessor?

In an age of money laundering and international terrorism, how will we ensure that we attract the right investors to the country and in the process not jeopardise the safety and security of our beloved island. I’m sure that worldwide there are enough millionaires who St. Lucia would love to pay court to, and who would wish to protect their assets from tax collectors, but at what price? With the passage of time, I fear that the screening process will be short-changed, and criminals and terrorists will use the system to circumvent immigration rules, resulting in diplomatic conflict with the EU and the US, and the potential danger of facing sanctions. In St Kitts and Nevis, the programme has recently been singled out by the US Treasury, which cautioned that “Iranian nationals could be obtaining passports and then use them to travel to the US or make investments, which could violate US sanctions.”

Furthermore, how do we hope to address the questions of social injustice and inequality that have hitherto failed to indulge our nation’s attention? Doesn’t economic citizenship have the potential to threaten the already tenuous social harmony and exacerbate the economic inequality in this country? Our size, geography and acute limited resources cannot help us buffer the impact of any economic policy mistakes. At a time when the wealth gab in St. Lucia is widening, I dread the fragmentation of social coherence that may ensue; perpetuated by a new rich elite who may not likely be Caribbean nationals but probably Russians, Chinese or even Arabs. Against the current backdrop of frivolous political exchanges and societal naval-gazing, I fear that our nation may allow real estate St. Lucia to be gobbled up (if it hasn’t already happened) by some wealthy foreign elite who are socially disengaged and show a theological devotion to wealth and profit maximization.

Experts are predicting that the sale of passports will increase dramatically in the coming year. This particular model seems to be so promising meanwhile that several large firms have now introduced “Investor Immigration Services” where they render passport mediation services to “high value” individuals in exchange for huge commissions. The International firm Henley and Partners, for example, advise clients on the best place to spend their money and estimates that every year, several thousand people spend a collective $2bn (£1.2bn; 1.5bn euros) to add a second, or even third, passport to their collection.

Despite the many empty exhortations and banal platitudes, there is scant hard evidence that the idea of economic citizenship actually works. Without structural reforms and outward-oriented trade policies, economic citizenship cannot provide the region with the conceptual and practical rigour necessary to reverse the current downward economic trajectory.

For comments, write to Clementwulf@hotmail.com – Clement Wulf-Soulage is a Business Economist and Author.

4 Comments

  1. Your friend is right. Selling passports for money is a dirty dirty business. The EU one is particularly offensive for other countries who are part of Europe.

    St lucia will not benefit because lucians can’t compete internationally on any metric whatsoever. If you start introducing increased demand for land, services, the locals will be displaced. How can they compete with foreign money? There is only so much land available and lucians are big importers of food so agriculture decreases too. Please square the circle Clement….

    You can’t.

  2. Malta is full of crims now. Same as Cyprus. I used to visit an uncle there in the late 80s and 90s just as the first Russians were arriving. Now it’s just a hub for them to move their money and drive their garish wives around.

    The Caribbean ‘leaders’ need to stop trying to play god by promising gold over the rainbow. Life is tough, no-one can promise economic riches. To be truly independent is to own your own problems. I don’t see how selling passports will benefit – who really wants a lucian passport? Where does it allow you that a Canadian one doesn’t, for example? How is the quality of applicant monitored? (It isn’t)

    Where I think Lucia could benefit is by giving, say 100 places a year to near retired Doctors, Dentists, Engineers. These people have their own money and years of experience to bring. They will not be competing for jobs with young people. They could maybe be encouraged to set up a practice, and train some young people to take over. That would be more of a true partnership because there will be a transfer of knowledge.

  3. I agree with MM comments 100 percent only difference is i would be far more ambitious and invite 5000 per year .A St lucian passport is useless these days plus the wealthy has so much choice from Europe to America and now Cuba ,our lack of good governance have led to this mess we are in ,We have had a constant stream of what i call shirt jack politicians unmordernise in their thinking and politicly bankrupt.St lucia has an insular culture created by the so call political elite and now well entrench in the masses .

  4. Perhaps the PM’s army of wise advisors read somewhere that when you have a current account deficit on your balance of payments, you must sell assets. They appear to consider passports as qualifying as one such.

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