Minister for Tourism, Investment, Creative Industries, Culture and Information Dr Ernest Hilaire at the Investment Migration Forum, Dubai, April 2024.
I am delighted to be addressing you [today] especially given recent developments in the Caribbean. I want to start by congratulating the organisers of this Forum and to wish you the best and encourage you to further the work that you have been doing.
The citizenship by investment industry is a critical industry for the small island states of the Eastern Caribbean. You may have read recently that in some instances the contribution to national revenue is as high as 60 percent. In the case of Saint Lucia, it is below 10 percent but still is very significant. For some of you, this is a profession and others just another business venture. For us, it is livelihoods of thousands of persons, it is the financing of our national development, and the creation of civilized standards of living for our citizens. It matters to us.
As small islands we have been through an intense struggle for survival in an international system which is proving more and more to be insensitive to our challenges. We faced the destruction of our banana industry when we only produced less than 1% of global production, we faced the dismantling of our financial services sector when we were responsible for less than 1 percent of global financial transactions, we are facing historic climatic consequences due to global warming when we produce less than 1% of global emissions, now we are facing severe threats to our citizenship investment programmes when we are responsible for less than 1percent of global migratory movements. Think about it, the citizenship by investment programmes in our region account for less than 7500 persons annually. Compare that to one European country allowing 1m refugees into their country. And now there are whispers that concessions and incentives regimes that attract foreign direct investments must be reviewed as it distorts the movement of capital.
So it is with a sense of responsibility that I address you to update on happenings in the industry from the perspective of Saint Lucia. So if you are looking for a topic for my address it would be ‘Building Resilience and Sustainability in the Immigration Investment Industry: The Perspective of Saint Lucia”
By Dr Ernest Hilaire
The importance of the industry underscores the need for accurate information. This must be the basis for any resilient and sustainable industry. This industry has become notorious for salacious stories about countries, individuals and companies. I have learnt that in public life, you must ride the waves but remain unflinching in your focus and determination.
However, misinformation and inaccurate information can affect the image of sovereign countries to the detriment of its government and people. Having said so let me correct a story which was carried in a publication recently and has been widely quoted. In that story, it is suggested that the CIP in Saint Lucia had not met its stated objective of contributing to national revenue. For the record, these are the facts.In Saint Lucia, the National Economic Fund earned US$24m net of which US$16.9M was transferred to Central Government and used to pay debt. We received US$14.8M from CIP Bonds and a further US$6.5M was received as surplus operating revenue which were used to supplement funding for national security, healthcare, social development and infrastructural development. This means that Central Government received US$38.2M or total of EC$101.9M, more than what was budgeted.
Then I read a story, in the same publication, attributed to the lader of the opposition that Saint Lucia was selling a ‘secret’ infrastructure option. It is a bit bewildering that you can openly offer something and it still remains a secret. Truth is the new option was Gazetted, meaning it was publicly stated in the recognized publication which is the legal announcement of laws, regulations and other government business.
The new option was published by Extraordinary Gazette on December 20, 2023. A memo was then sent out on February 1, 2024, indicating a commencement date of February 5th. It meant that the Opposition had more than a month to table a motion in parliament requesting a parliamentary debate on the new option as published. This is how our system functions. If any parliamentarian opposes a change in the regulations of the CIP, they can table a motion for debate. None was tabled. So how secret is the new option?
Maybe it meant that the details of the contract with the developer involved was not publicized, of course my feedback would be that the commercial agreements are never printed for public dissemination. The story also claimed that Saint Lucia was ‘underselling’ its real estate options. I am sure and you will agree that no one knows better than you what goes on in this industry. You know it better than me. Whether it is ‘financing’ ‘buy-back’ ‘underselling’, you know of the practices and for how long it has been going on.
We receive regular market intelligence reports and like you, we know what’s going on. I can assure you that we do try, ceaselessly and endlessly, to dissuade and discourage such practices but truth is, we are limited in what we can do. I can’t speak for others, but I know that we have included in our contracts the requirement that such practices are prohibited. In any event, for the record, Saint Lucia no longer has any real estate offerings, so I am not sure exactly what is meant. We have had only one and it is fully subscribed.
For the record and for the sake of building a resilient and sustainable industry, any promoter or agent who engages in offering citizenship through any of our options, below the regulated prices will be sanctioned and possibly barred from conducting business with Saint Lucia. Similarly, we do not support any promotion of Saint Lucia as offering visa-free access to the UK or EU or any country for that matter. Our offering of citizenship is not on the premise of any visa-free access to any country. It is very clear that these visa-free indexes are becoming a problem with our international partners.
But having said that, we all know how this industry is structured. It is commission-based which means that varied commissions are offered in private commercial agreements. Secondly, and more challenging, it is multilayered so that from the top the number of agents, promoters and contacts cascade downwards each level with less control and direction from the top. Thirdly, it is extra-territorial, so we can license authorized agents in Saint Lucia and monitor their conduct but how do we license and monitor a player in some distant city. So critical for resilience and sustainability, is how do we fashion a proper licensing and monitoring system that only allow legal and ethical players to be involved.
We have taken an approach that we don’t see the need to speak ill of any company, individual or country in the conduct of our business or management of state affairs. This is just not necessary. The business space for this industry is large enough for all countries, companies and individuals to conduct legal and ethical business and be profitable. As we struggle to regulate this industry to ensure that its business is conducted in an ethical and legal manner let us not denigrate or slander others. It only undermines the viability of the industry.
Memorandum-of-Agreement-CBIP-20-March-2024
Now let us turn to the historic action of the last few weeks – the signing of the MOA by four Caribbean countries but excluding Saint Lucia. From the onset, I want to state that Saint Lucia fully supports the actions of the four countries and we believe that such an action will augur well for the development of the industry. In no circumstances, should anyone find comfort in interpreting our non-signature at this time as a weakening of our commitment to regional cooperation and collaboration.
In fact, our selfless action is a reaffirmation of that commitment. We agreed with every single provision of the MOA except the immediate increase of the minimum investment level. Our view is that we have just signed contracts which will significantly enhance our infrastructure including roads, housing and community facilities. These contracts which required developers to secure financing for execution in advance of recouping their expenditure, was based on the existing prices. We cannot in good conscience, change the conditions of the contract in such a fundamental manner. We had no difficulty in our colleagues pursuing a path which they felt was necessary.
These countries have faced serious economic challenges in a difficult economic environment, where options for concessionary loans for national development have dried up, where grants to assist in financing our infrastructure are disappearing, and where inflationary prices are wreaking havoc on our quality of lives. Despite these circumstances, these islands have been able to build roads, build health centers, houses, build community centers and pay their debts with earnings from the citizenship by investment programmes.
We supported the move to secure their national interest. Likewise, we will always act to protect our national interest. We had hoped for a grandfather clause to allow us to fulfil our contracts and still be able to sign but that was not to be. We still believe that the best approach to solving our regional challenges is through collaborative action and will continue to work as a region to achieve such. Yet we have been chastised by some for not signing. Let me remind you of the history of the CIP in Saint Lucia and in so doing I will lay the elements of what we saw as needed to build a resilient and sustainable industry.
After reviewing the industry landscape in 2015, Saint Lucia was of the view that the future of the industry must be built on a robust and rigid due diligence foundation. It is for that reason that we have built a due diligence capability which is fit for purpose. Since 2021, Saint Lucia has taken further action to strengthen its capabilities. Our due diligence covers documentary verification, intelligence review, law enforcement review and financial review. Sometimes, we are criticized for taking too long for approvals, but we are satisfied that we must do whatever we can to ensure that our approvals are based on the most rigorous examination.
We were also of the view that the programme should never be presented as a transactional but rather as an interactional engagement. A transactional approach would simply reinforce the view that we were just ‘selling passports’ instead we felt we should present the industry as ‘securing investments through citizenship’. We still believe that we do not ‘sell passports’. Part of the negative perception of this industry is derived from the language used by its stakeholders. The sustainability of the industry will rest on developing it as a well-regulated interaction-based industry which provides financing and investment for the countries which offer citizenships through investment. So maybe the IMC can take the lead in rebranding the image of the industry and working to get rid of the language and perception that we are simply involved in ‘selling passports.’
When we opened our offices in January 2016, we employed a Citizens Relationship Officer whose duty was to contact every new citizen and outline a programme of engagement to build a sense of belonging and connectedness to Saint Lucia. We felt that new citizens should be aware of the history of and knowledgeable of the happenings in Saint Lucia. We described this approach as ‘beyond the passport’. I recall someone teasing me that they did not have time for that, people just wanted a passport. With a change of direction after 2016, this was removed as a feature. Why was there a change in direction? Well, the new government then felt that we needed to be more like the other offerings and removed the ‘beyond the passport’ concept.
We also felt that the structure of the programme should make it highly selective and managed to allow only the most attractive persons to apply and become citizens. We did not believe that programme should be about numbers, and we should have to rush to earn as much as possible and as quickly as possible. We felt that such was not sustainable. Today, the chickens are coming home to roost and we will need to recalibrate.
So, what did we provide in the legislation and regulations of October 2015?
1. That the minimum investment level would be through donation and at USD$200K. This is what is being proposed now.
There shall be an annual quota of 500 applications. This has not been proposed.
That principal applicants must have a net worth of USD$3M. This has not been proposed.
The list of all persons approved and rejected would be published. This has not been proposed.
That Escrow accounts must be held locally. This has not been proposed.
That all appointed service providers – marketing agents, promoters, authorized agents, etc., must be licensed and Gazetted. This has not been proposed.
Annual Reports of the functioning of the Unit including Financial Statements had to be tabled in parliament.
That no commissions were paid to any promoter or developer.
I am not stating these provisions to highlight any deficiencies of any programme but to highlight the extent to which we had provided for a resilient and sustainable programme. All of these provisions except one were sadly removed in the change of direction which took place in 2021. Again, it was felt then, rightfully or wrongfully, that Saint Lucia had to change to be aligned with other countries.
Noting the above, you can see why Saint Lucia has no problems with the provisions of the MOA except for pricing for reasons which I have previously outlined. But the question is – if we are to build a resilient and sustainable industry should we not consider collectively introducing some of the 2015 provisions?
Allow me some final thoughts on building a resilient and sustainable industry. Firstly, I sometimes wonder why pricing has become the major issue of the day. If countries receive their stated fees and receive their donation amounts or bond value and hotels, houses, roads and health centers are being built – then what is the issue? This is our citizenships which are being offered. So who is really losing out? Then I wonder is it possible that the payment of commissions the real problem? And that the payment of commissions, and high commissions at that, is what is driving the underpricing?
Think about it! Secondly, why is there not an equal preoccupation that the quality of due diligence and adherence to its requirements is more important than pricing? Surely, our international partners in Europe, UK and the US are more concerned about the abuse of the programmes by undesirable elements causing threats to their national security than they are with pricing. If we can satisfy them, which we may never be able to do, that our due diligence and processes will eliminate their concerns do you think they will be worried about price?
Moving forward, we believe that we can build a mature and well-regulated industry that brings maximum returns to respective islands. This industry is important to all of us and we will work with you and other stakeholders to get it right. We must always be cognizant of the concerns of our international partners who rightfully are concerned about international migration challenges and the possibility that the programme can be used for undesirable purposes. We have pledged a commitment to work with our partners in an open and transparent manner to address any concerns. Let us continue to dialogue among ourselves and with our partners to ensure that all concerns are addressed.
So let us move forward focusing on the challenges we face with pricing, commissions, due diligence processes, branding and perception, quotas, transparency and accountability of promoters and agents. We are at a historic moment, let us make it count.
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