February 4, 2022
For many small nations, citizenship by investment (CBI) programmes have been crucial in funding projects that make reaching sustainable development possible. With climate change accelerating natural disasters, small countries use CBI revenue to create sustainable economic growth to build back stronger.
The benefits of CBI for economic citizens are well documented. From opening doors to higher education and attaining a safer future for one’s children, in addition to tax planning and wider business flexibility, the popularity of these programmes among high-net-worth individuals (HNWI) is recognised proof of its value.
A number of countries, especially in the Caribbean, offer opportunities to obtain citizenship or residency in exchange for a substantial financial contribution to the domestic economy. There is no denying that CBI programmes offer a much-needed injection of foreign direct investment for these small nations, often in a way that can make a significant developmental difference.
Here are four key areas of impact CBI programmes have on Caribbean nations:
Economic growth with less reliance on international aid
In small states, the inflows to the private sector can have a sizable impact on economic activity. In St Kitts and Nevis and Dominica, the inflows have improved fiscal outcomes, facilitated debt repayment, and spurred economic growth.
Research by the International Monetary Fund (IMF) has brought to light the significant macroeconomic impact of CBI programmes on many small states. In the Caribbean region, where five small states offer economic citizenship, the industry jumped from zero per cent of regional GDP in 2007 to a substantial 5.1 per cent in 2015.
The figures are even more impressive at a country level, with the industry contributing more than 30 per cent of GDP in St Kitts and Nevis in 2020. According to the CBI Unit Head Les Khan, the Programme’s revenue was a “main driver” during lockdown when tourism was at an all-time low. In Dominica, the IMF said that “strong growth” in the construction sector was “financed with record-high CBI revenue of 30 per cent of GDP” in 2021. Meanwhile, in Antigua and Barbuda, CBI accounted for 20 per cent of the nation’s GDP in 2017. This shows that this influx of money can make a major difference in the government’s performance for smaller countries that face major natural catastrophes like annual hurricanes.
Greater tourism inflows
In Dominica, which is considered one of the most beautiful places in the world and is known as the Nature Isle of the Caribbean, tourism continues to generate a substantial portion of the island’s income from target markets in Europe, the US and Canada. To further boost the sector, the CBI Programme offers an incentive for direct investment in the country through pre-approved real estate investment options. This option causes an increase in hotel room supply, resulting in greater tourism inflows and spending benefits for small businesses.
The growth of CBI funded resorts and hotels is also in line with the UN’s Sustainable Development Goals, a feat taken to heart by small nations like Dominica. All the CBI built hotels on the island channel a sustainability ethos and are pre-approved by the government. These retreats, backed by trusted brands like the Hilton and Marriot with local boutique resorts like the Secret Bay and Jungle Bay, offer visitors a getaway that’s intertwined with nature, with locally sourced foods, climate-resilient construction, and opportunities to winddown close to nature.
The increase in tourism demand in Dominica has also led to greater interest in airlift to the country. In late 2021, American Airlines announced the expansion of its daily service to the island and talks of increasing connectivity with Air Canada are also on the table. The new flights “will be a major factor in establishing better relationships with US tour operators and travel agents, which will result in more business for the hoteliers and service providers in Dominica,” said Colin Piper, CEO and Director of Tourism at the Discover Dominica Authority.
The link between tourism and the real estate investment option of Dominica’s CBI Programme, in particular, provide an alternative for applicants wanting a return on investment.
Employment creation
Dominica’s CBI Programme has helped fund a series of development projects on the island, creating jobs. One of the critical areas attracting local and foreign workers is Dominica’s construction sector. With a host of internationally branded hotels set to debut on the island, alongside the ongoing construction of over 5,000 hurricane-resistant homes, Dominica was compelled to diversify its workforce and even source specialist labour from neighbouring islands. This goes alongside hoteliers training the local workforce to learn new skills, especially those needed for the smooth operation of the new resorts.
To support this economic boom in the long term, Dominica prioritises its local workforce and invests in diversifying and professionalising certain career fields. This requires close collaboration with the CBI real estate developers.
In a five-part documentary from UK-based FT Specialist PWM magazine, the Minister of Foreign and CARICOM Affairs Francine Baron explains: “Part of the agreement with the developer is that they must have a certain percentage of local labour involved in the project. We want to make sure these projects benefit the economy as much as possible.”
The CBI Programme made the construction of most of the new hotels and resorts in Dominica possible. As a small developing island, raising capital to finance such luxurious hotels would have otherwise been more difficult in such a short space of time. CBI is key in sourcing funds for the new hotels while ensuring that they are built under the close supervision of the government, with sustainability in mind.
Sustainable development through construction
CBI has helped build countless much-needed projects in small nations like Dominica. These ventures have focused heavily on constructing housing units that can stand the tests of harsh weather so residents can feel safe and not worry about building new homes every storm season.
These projects contribute to the education sector, healthcare initiatives like state-of-the-art hospitals and health centres, hurricane-resistant homes and environmentally friendly resorts and villas. CBI proves time and time again to support the island’s commitment to give its citizens a climate-resilient future.
A CBI programme is indeed a legitimate response by governments to the need to raise revenue through direct foreign investment. These programmes constitute a creative and valid strategy to change the economic landscape. It is now a fact that many countries have CBI Programmes in one form or the other with different levels of qualification.
For these reasons, CS Global Partners, the world’s leading government advisory, works to harbour the sustainability and legitimacy of CBI programmes. The firm caters to the increasing trend for investors to obtain second passports to diversify their investment and citizenship options while reducing real or perceived risk for small nations to maintain their economic freedom.