Features

The Pearl of the Caribbean – PART 3

Image: Sod turning: Chairman of DSH Caribbean Star Ltd and China Horse Club, Mr. Teo Ah Khing, Prince Harry and Prime Minister Chastanet break ground for the project.
By Anderson Reynolds

The CIP Ecstasy.

COMING on the heels of the Citizen by Investment Programmes of several Caribbean Islands (St. Kitts, Dominica, Antigua, and Grenada) and learning from their mistakes, St. Lucia’s CIP was meant to be an elite and very exclusive one. Accordingly, qualification required a minimum net worth of US$3 million accompanied with a sworn affidavit financial declaration of said amount; applications per year were limited to 500, and the government allowed itself up to three months to subject applicants to a rigorous vetting procedure.

The St. Lucia CIP, as envisioned under the former government, offered four investment options—Government Bonds, National Economic Fund Contribution, Real Estate Investment, and Enterprise Investment. Under the bond option, a single applicant (an individual) is required to purchase US$500,000 non-interest bearing government bonds to be held for at least five years, while an applicant and spouse would purchase US$535,000, and more if dependents are involved. Similarly, under the fund option, a single applicant is required to contribute US$200,000 to a National Economic Fund specifically established to receive such funds, while a family of two must contribute US$235,000, and more if dependents are involved. Under the real estate option, an applicant must invest a minimum of US$300,000 in a preapproved real estate development, namely upscale branded hotels and resorts, and upscale boutique properties. And under the enterprise option, where the approved enterprises include specialty restaurants, cruise ports and marinas, agro-processing plants, pharmaceutical products, ports, bridges, roads and highways, offshore universities, research institutions and facilities, an individual applicant must invest at least US$3.5 million in an approved enterprise that would create at least three jobs. However, two or more applicants can jointly invest at least US$6 million that would create at least 6 jobs, with each individual contributing a minimum of US$1 million.

PLAGUED

CARICOM members’ CIPs have been plagued with problems. In some countries large amounts of CIP cash are unaccounted for, and quite a few CIP recipients have been found to be wanted for bribery, money laundering, and financial crimes. In one country diplomatic passports were being sold unbeknown to the public. Under the current administration, St. Lucia’s efforts to avoid the mistakes of its neighbours and to create an elite and reputable CIP have been undone. To facilitate the Pearl of the Caribbean and to increase the saleability of St. Lucian passports, the government has amended CIP regulations to allow an unlimited or indefinite number of CIP applications per year. It has removed the requirement of applicants providing a sworn affidavit to declare financial resources of at least US$3 million, and it has reduced the minimum required investment in the National Economic Fund for an individual applicant from US$200,000 to US$100,000 and for an applicant and spouse from $235,000 to US$165,000. Additionally, the regulations were also changed to allow the purchase of thoroughbred horses as an admissible CIP investment. With these changes, when both investment requirements and fees are considered, the St. Lucia CIP gained the unfortunate reputation of selling the cheapest passports in the region.

In the original CIP, government was responsible for the vetting, issuance, and management of the programme, and the proceeds deposited into an irrevocable escrow account managed jointly by the developer and the St. Lucia CIP Unit. But once again protocol or regulations will be bent for the Pearl of the Caribbean. DSH will be directly responsible for the selling of the citizenships, which can be an indefinite number, the proceeds of which will be placed in an offshore escrow account from which DSH will withdraw at its discretion; its only accountability to government is that it provides notice of each withdrawal. Any monies left in the escrow account at the completion of the project will go to the developer. Moreover, to expressly cover marketing and agent cost, the developer will be rewarded upwards of US$15,000 for every concluded investment (sale of citizenship).

Clearly, this agreement is tantamount to giving the developer the nation’s choicest assets (prime land, beach, and citizenship) to turn into a hustle for himself. The developer is taking minimal risk. In fact, most of the risk will be borne by the state, the affected communities and the investors who will at least be walking away with St. Lucian citizenships. Regardless of whether the development reaches completion or fails, the developer is assured of returning to Hong Kong with a pocket full of money (from sale of land, citizenship, and marketing and agent fees).

Now, one would think, after agreeing to give so much that the government would gain or be rewarded with shares or equity in the development, but the agreements make no mention of such. Neither is there any provision for local investors to acquire shares or equity.

So then, what is in this deal for St. Lucia? Well here is what the agreement states, “it is understood that the government has agreed to the foregoing on the understanding and expectation that the approved project is intended to develop the land significantly, and to lead to significant job creation and retention and shall be construed as a fundamental term of this agreement.” The statement suggests that the government isn’t even sure what’s in it for St. Lucia. The jobs created will go to whom: St. Lucians, Chinese? It is difficult to say, because the agreements spell out that the developer is free to source workers from anywhere he choses, local or foreign, without interference from government. The land development is to whose benefit? It isn’t for the use of St. Lucians. It isn’t even clear that St. Lucians will be allowed to access it. Clearly, no one can fault St. Lucians for believing they have been duped, for this is the only statement in the agreements that alludes to what the project has in store for them.

Image: Sod turning for the Pearl of the Caribbean project.
Sod turning for the Pearl of the Caribbean project.

MAGNITUDE

Before the DSH conversation, St. Lucians probably thought that the way the CIP works is that investors embarked on a development of a certain magnitude and in return received citizenship. They probably didn’t realize that it was the money raised in selling the citizenships that would constitute the investment. If that is the case, then why does the government need the developer? Why can’t government decide what development it wants where, and sell a sufficient number of passports to implement the development. And if government feels it isn’t qualified to establish and run the development, then it simply enter into PPP arrangements. So for example, if government wants to build and operate a horse racing enterprise costing US$6 million to establish, then government sells one enterprise passport to raise US$3.5 million, provide the land, and enters into partnership with a private party that operates horse racing. The third party puts up the other half of the capital, manages the enterprise, and shares the profits with government.

In opposition to Kenny Anthony’s Hewanorra International Airport Redevelopment PPP initiative, Allen Chastanet reasoned, why give or pay a foreign entity to do what the country can do for itself? Now, it is unclear whether he is aware that in all likelihood SLASPA isn’t running the operation at a profit, or that the trend all over the world is to turn over the management and operation of airports to companies specializing in such undertakings. However, if the policy of the Prime Minister is that the country should do it itself, and hold on to its resources, why is he so intent on giving a foreign developer so much for so little? The guess is that it is much easier to stop projects than to plan, conceptualize and implement them, and putting in place all the necessary safeguards.

Government has established Invest St. Lucia and the CIP Unit, housed them in plush offices, pay them healthy salaries, to do exactly that, i.e. bring in foreign investments. So if the developer is the one designing the developments, dictating all the terms, selling the passports and using the proceeds at his discretion with little oversight from Invest St. Lucia or the CIP Unit, why does the country need them? And to add insult to injury, St. Lucians are being told that it was Invest St. Lucia’s lawyers who drafted the initial DSH agreement. Of course, some would find that hard to believe. For how could any self-respecting St. Lucian citizen or organization draft an agreement giving away so much to a foreign entity, while asking for almost nothing in return? How could they include nothing to safeguard the interest of their country, while saturating the agreement with clauses protecting the interest of the foreign party? If indeed it was Invest St. Lucia who drafted the agreements, then most would agree that this wasn’t just an act of betrayal but an act of self-hatred.

In response to the question of why didn’t the former administration bring this project to the awareness of the public, the former Prime Minister, whom Vieux Fortians once thought would be the hero to take them to the promised land, has said that his government had spent 18 months negotiating with the developer, and he hadn’t closed the deal because there were several vexing issues, not least being the developer’s insistence of having full control of the sale of St. Lucian passports, an activity that should be the sole domain of government.

Now one has to always be cautious about what politicians say. For example, maybe what pained the Labour Party administration the most about losing the elections was that it would be UWP and not them who would fill their pockets with CIP monies. Because all how one looks at this CIP adventure, it lends itself to politicians filling their pockets. It is no wonder that, as noted above, in some CARICOM countries large sums of CIP funds have gone astray. And talking about disappointments, maybe some Vieux Fortians greatest disappointment with Labour losing the elections was not necessarily because they are fans of Anthony or that they are Labour Party diehards, but because instinctively they knew that Chastanet and the UWP would stop most of the projects on stream in Vieux Fort, including the government administrative complex and the airport redevelopment project.

DISAPPOINTED

The Labour Party would no doubt also be disappointed that it won’t be their administration that will preside over the period that so many of the CIP projects they initiated will commence, for with so many developments likely to take place at roughly the same time, the country’s employment and economic growth is sure to get a big shot in the arm. Therefore, whichever administration that would be in power during that period is likely to hold onto it for a while. It would appear that the Labour government did all the hard work, but it is the UWP government that will enjoy the fruits of that labour.

Notwithstanding, the former Prime Minister’s expressed concerns about the developer being in charge of selling St. Lucian citizenship is believable because one can rest assured that he would have liked nothing better than to have announced the signing of the DSH agreement well before the elections. After all, a better negotiated DSH agreement could have changed the course of the elections.

The author is a testament to some of the former PM’s misgivings about the project. Late 2015 he invited the author to represent the interest of the Southern Equestrian Association at a meeting that included government ministers, permanent secretaries, the executive director of the National Trust, Invest St. Lucia and the CIP Unit, at which the developer presented The Pearl of the Caribbean. It was a glossy, bewitching, mesmerizing, captivating presentation. The developer was all passion, all urgency. He gave the impression that he cared nothing about money, all he wanted to do was paint his masterpiece across the landscape and seascape of Vieux Fort. But when issues were raised about the people: their livelihoods, jobs, opportunities for them to invest in the project, opportunities for Vieux Fort jockeys and stables to participate, etc., one sensed that he had given no thought to the people on whose land he was to erect his dream. It was as if he had just happened to land in Vieux Fort and found it empty of people, empty of civilization, so his only consideration was how masterful would be his creation. Of course, when one reads the fine prints of the agreement (which wasn’t available at that time) one realizes that however much the developer is passionate about his project, he cares dearly about the bottom line, and leaves no stone unturned to safeguard his financial interest. After all, one doesn’t become a billionaire by not protecting one’s financial assets.

CONCERN

In brief conversations with the author both before and after the meeting, besides concerns about sovereignty, the former PM expressed concern of the negative social impacts of such a large development on Vieux Fort. He would have been aware of the social consequences of the American World War II military occupation of Vieux Fort, Trinidad, and other places. Even the ill-fated El Paradis caused a rise in prostitution in the Praslin area during its aborted construction. And he would have definitely been aware that notwithstanding the benefits of the Rodney Bay Marina, and Rodney Bay being the mecca of the St. Lucia tourism industry, Rodney Bay and surrounding areas harboured the highest incident of HIV/AIDS in St. Lucia, with Castries, Gros Islet and Babonneau ranking one, two and three, respectively.

The PM was also concerned that the Vieux Fort horsemen and stables would be left high and dry because they would be unable to upgrade their operations to profit from the DSH horse racing enterprise, yet they were the ones who had kept horse racing and horse culture alive in Vieux Fort for decades, ever since adopting the practice from the World War II American soldiers. Of course, as mentioned above, the Vieux Fort stables and horsemen and women are not that interested in the developer’s horse racing enterprise, they just want their own facilities, and are quite prepared to live and let live.

In such conversations, the former PM gave the impression that it was months he had been agonizing over the DSH deal, and he probably wished that DSH had never set foot in St. Lucia. The picture that came to mind was the devil visiting Christ when, after fasting for 40 days and 40 nights in the wilderness, he was at his lowest point, and tempting him with an offer of the whole world. Here was the PM being offered a development that potentially can transform not just his district but his whole country, and Lord knows his district needed some straw of hope, yet the deal was so flawed that to him signing the agreement would be tantamount to selling his soul, or committing an act of treason.

1 Comment

  1. This is esteemed testament for acknowledging you as the MOST RELEVANT AUTHOR of St lucia ;.beyond the austere limitations of Nobel Laureate or Pulitzer standards…
    Amen

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