A blog by Heather Cover-Kus, Technical Research Officer - Commonwealth Secretariat
Recent research by the International Monetary Fund (IMF) has brought to light the significant macroeconomic impact of citizenship by investment programmes on many small states. In the Caribbean region where five small states offer them, the industry jumped from 0 per cent of regional GDP in 2007 to a substantial 5.1 per cent in 2015. At a country level, the figures, are even more impressive, with the industry contributing 14 per cent of GDP in St Kitts in 2014 and 9.5 per cent in Dominica in 2015-16.
Noting these impressive figures, I think my last blog – which discussed the strengths and weaknesses of citizenship by investment – understated its economic importance to the small states that have these programmes.
The impact and challenges of the citizenship by investment industry deserve an in-depth look.
Simultaneously, the governments tend to use the income of these programmes to address the issues that arise from their vulnerability as a small state.
In Dominica, funds from the programme have been used to aid the recovery from devastating hurricanes and tropical storms. Similarly, in Antigua and Barbuda, the income is being used in the reconstruction of Barbuda, which was badly damaged by hurricane Irma. In Grenada, 40 per cent of the income is put into a contingency fund to clear debts or deal with natural disasters.
However, the income from citizenship by investment programme is volatile. There are upcoming challenges to the industry which need to be handled with care if it is to be sustained. These challenges can be classed into three categories - international, regional and national.
I recently gave a presentation at the Global Investment Immigration Summit and highlighted these critical challenges. I noted the Commonwealth’s continued support for small states in finding innovative ways to obtain development funds and its assistance to help them keep this revenue source open and sustainable. Given the importance of this economic lifeline for many small states, they were receptive to the offer of support.
Perhaps, there is a role for the Commonwealth in helping the industry to define parameters and standards. But is that enough for small states? Beyond setting the parameters to achieve true sustainable benefits of these programmes, countries should think carefully about how the revenue can create jobs and boost economic growth.
For me, this economic lifeline should not be held forever, but rather, should be used to help countries get back on a sustainable path.
What are your views? Join the conversation. Email me at [email protected]