GIIP (Grenada Individual Investor Program) is a new foreign investment incentive scheme now being proposed by the government of Grenada to raise some much need cash. For many Grenadians, though, because of the failed Economic Citizenship Program of the NNP government (1997 – 2001) that severely damaged Grenada’s world reputation, GIIP raises anxiety and skepticism.
Hints that the government might once again go down the citizenship by investment road again came in a Christopher DeRiggs (Director of Private Sector Development in the Ministry of Finance) letter, written to the chairman of the board of Touchstone Capital Partners Enterprise of China. In that letter, DeRiggs assures the chairman that “the government of Grenada hereby accepts your proposal” for resident status for potential investors, provided that “the applicants shall pay all applicable fees associated with their application.”
Subsequently, Minister of Tourism, Peter Hood, at a conference in late 2011 acknowledge that the government of Grenada had interest in a proposal for an Investment Incentive Package for qualified applicants. And in early February of this year Finance Minister Burke went on the Sundays With George Grant radio program to outline how a new economic citizenship program might work.
In the previous go around, full Grenadian citizenship for a family of five (spouses, plus 3 children under 25) could be gotten for a sum of US$50,000 – US$39,060 went to the Grenadian government and US$11,000 to an agent handling processing and administrative work. There were no residency requirement, except the need to reside in Grenada for six years to be eligible to vote and hold office (see requirements here).
The low threshold to attain citizenship gained Grenada notoriety for being one of the best country from which to attain a second passport. And this point was explicitly made in advertising campaigns of the numerous firms seeking to assist clients seeking second citizenship.
Among the key selling points boasted was: a hassle-free application process, relatively low investment requirement, favourable fee structure for families, and visa-free travel to a large number of countries, including Canada, The UK, Commonwealth Nations, and Latin American and Scandinavian countries. Click here to see advertisement for the previous Passport and Economic Citizenship program.
Canada saw little of positive value in Grenada’s Economic Citizenship Program, when it devalued Grenadian citizenship, adding Grenada to a list of countries whose citizens would need a visa to enter its border. In its view, Grenada’s Economic Citizenship Program posed a threat to its security and sovereignty, as it was deemed a means by which criminals could gain easy access into Canada. Of high concern was that Grenada had granted Economic Citizenship to a number of people that troubled Canada from a security point of view, or from a point of view of money laundering.
Susan Burrows, who at the time was Immigration Counselor at Canada’s High Commission in Port of Spain, Trinidad, noted that programs like the Grenada’s Economic Citizenship program “… attract the wrong kind of people, mainly people who sometimes are involved in organized crime, sometimes trying to avoid the tax regulations of their home country, sometimes trying to avoid Canada’s immigration determination system, in other words, enter Canada and make a claim to remain in Canada or go underground.” She also pointed out that “often the Economic Citizenship Programs are advertised as a way to circumvent visitor visa requirements.”
The program drew criticism from quarters other than Canada, with some saying the practice allowed criminals to effectively adopt new legal identities for a price.
In 2001, after September 11th and with mounting pressure from the US and Canada, Grenada’s NNP government suspended the Economic Citizenship Program.
But it was little too late. Because the program was suspended not terminated, and hundreds of Grenadian passports were already issued, Canada refused (even with strenuous petitioning by the NNP government) to reverse its decision, and today continues to impose visa restrictions on Grenadians.
The government of Canada notes that its “consistent view remains that, unless citizenship sold under the program are rescinded, it is impossible to sort out which potential visitors to Canada from Grenada are legitimate citizens, and which purchased their status. A review in early 2001 by the Grenada International Financial Services Authority found that a total of 545 passport were issued over the previous two years under the Economic Citizenship program.
Grenada’s reputation (the country was blacklisted as non-cooperative in combating money laundering) and the value of Grenadian citizenship suffered severe damage as a result of the Economic Citizenship program. The program resulted in Grenadian passports being in the hands of unsavory people; created inconvenience for Grenadians and much unflattering publicity for the country in the Caribbean and international media, and derived no clear benefit for Grenada.
In the 2008 election campaign, the now ruling NDC party made the Economic Citizenship program a key issue, lambasting the Mitchell government for the corruption and discredit it brought on Grenada. But Thomas’ NDC government, in the face of enormous financial pressure and a budget deficit estimated to be $EC100 million or greater, would like Grenadians to trust that they will do a better job implementing Economic Citizenship as GIIP.
Finance Minister Nazim Burke, describes the program as a legitimate investment tool that offers Grenada “opportunities to attract direct and indirect resources.” The program the Thomas government seeks to setup, he notes, will offer citizenship on the basis of fair and lasting contributions that is beneficial to the country as a whole.
GIIP will distinguish itself from the previous failed Citizenship-By-Investment scheme by:
- Modeling existing global programs.
- Establishing an independent oversight structure, lacking involvement of politicians or individuals.
- Implementing stronger due diligence and screening.
- Ensuring transparency through yearly parliamentary and independent auditing.
To remove any political influence on GIIP, the Grenada Individual Investor Program Authority (GIIPA) is to be established. This independent statutory panel body is to be headed by the Solicitor General and include the Permanent Secretary in the Prime Minister’s Ministry, Accounting General, Director of the Finance Intelligence Unit, Chief Immigration Officer, and a Representative from GIDC, NGO, Business Community, and the Conference of Churches.
The NDC government propose modeling GIIP on the Economic Citizenship program of St. Kitts and Nevis, where with a US$500,000 dollar investment in government identified real estate or US$300,000 in the Sugar Industrial Diversification Fund (SIDF), one can qualify for second citizenship.
According to Finance Minister Nazim Burke, GIIP will seek to setup the same mix of direct and indirect investment, with an option to obtain Grenadian citizenship by direct contribution to private sector projects or indirectly to an independent fund that will be setup, separate from the country’s consolidated funds, and called the Transformation Fund.
While direct investments will likely target the tourism sector, funds collected in the Transformation Fund will go towards the development of the 5 economic sectors identified in the budget as critical to developing Grenada’s economy and public infrastructure – Financial Services, Information Communication technology (ICT), Tourism Services, Education Services, Cultural and Entertainment and Sporting Services.
In the February 26th, 2012 interview with George Grant, Minister Burke speaking for the Tillman Thomas government, said GIIP is viewed as a legitimate investment tool that offers opportunities to attract direct and indirect resources to Grenada; expand the national economy and increase the revenue base of the country, increase employment generation, and will be a source of foreign exchange for Grenada.
The framework of this new Investment Citizenship Program is being develop in consultation with the law firm of Henley & Partners, a principle player in St. Kitts and Nevis’ Economic Citizenship program. Registered in Jersey, an island in the English Channel known for its off-shore tax status in the United Kingdom, Henley bills itself as a “citizenship and residence planning” firm that manages and markets parts of citizenship programs.
Burke indicates that Henley & Partners will become the sole agent handling GIIP applications, with the firm handling the first phase of applicant screening and due diligence. It is not clear what fee structure will be established. But if structured as in St. Kitts, Henley & Partners can derive as much as $35,000 in fees per transaction, plus a share of the investment made into the Transformation Fund. In St. Kitts, developers indicate that the firm receives commissions (from developers) when clients buy property.
Aware of the anxiety and skepticism that lingers among Grenadians from the failed 1997-2001 Economic Citizenship scheme, Minister Burke seem to outline steps meant to address the list of concerns most associated with Economic Citizenship program. He points to the GIIPA as a way to eliminate corruption and secret deals and to avoid political controversies; internal and external audits for insuring transparency, and better due diligence meant to provide safeguards against Grenadian citizenship and passport being assigned to persons of ill repute.
Minister Burke did admit that there are no guarantees against things not going as planned. Two recent incidents that best exemplifies this occurred in Austria and Montenegro, two European countries that offers citizenship by investment. The affair in Austria triggered a parliamentary inquiry and court case that resulted in a jail sentence for corruption as a result of promises to facilitate Austrian citizenship for a Russian businessman at EU$5 million. In Montenegro, naturalization of Taksin Shinawatra – the former Prime Minister of Thailand who has been convicted of corruption – as a Montenegrin citizen created quite a stir with Montenegro and the EU when the Ministry of Interior refused to reveal the details of this issue, referring to the Law on the Protection of Personal Data.
Already there is a controversy stirring around GIIP as a result of the involvement of Mr. Wendell Lawrence, a St. Kitts businessman and political power-player, in advising Grenada in development of the program. It is asserted that Mr. Lawrence’s positions as a partner in the firm of Henley & Partners in the citizenship-by-investment group; member of the board of directors of the Eastern Caribbean Central Bank (ECCB) – the regional financial regulatory institution, and membership in the Caribbean Court of Justice’s Regional Judicial and Legal Services Commission represents a conflict of interest.
Grenada is facing enormous financial pressure with few options to quickly increase the island’s revenues to address economic challenges. So it probably should be of no surprise that the Tillman Thomas government which came in opposed to Economic Citizenship now embraces it as a savior for Grenada and its agenda.
When the 1997-2001 Economic Citizenship scheme was suspended in 2001, the government at the time estimated that approximately US$1.8 to US$2.1million in revenue would be lost. It is estimated that St. Kitts and Nevis processed approximately 1000 – 1500 applications in 2011, adding an estimated US$150 – 200 million to the country’s coffers. But for those thinking that GIIP is a cure all for Grenada’s economic whoas, closer inspection might help temper any future disappointments.
Though St. Kitts and Nevis has ran the longest continuous Citizenship-By-Investment scheme in the world, the country still faces formidable economic challenges. Currently, it has a debt of around US$3 Billion – nearly twice the country’s GDP and is ranked the 2nd most indebted nation in the world, a poverty rate of around 24%, and even with Citizenship-By-Investment, it has not experience buffeting from the global economic downturn and has seen increasing unemployment and economic contraction.
If St. Kitts and Nevis is any indicator, GIIP will likely have little impact on Grenada’s economic conditions in the near term. For example, even though St. Kitts and Nevis has processed over 1000 Citizenship-By-Investment applications in 2011, it is experiencing contraction in the construction sector of it economy. Because investments in the real estate component of St. Kitts and Nevis’ economic citizenship program are consider to carry greater risk (limited resale market), most are directed to the privately managed SIDF, resulting in limited increase in construction demand.
Because of the speed at which they can be implemented and the cash potential they represent, for developing, small state governments facing economic challenges and with limited revenue generating resources, Economic Citizenship programs like GIIP that commoditize citizenship/passports for quick cash infusion appear logical. But selling citizenship/passports brings controversy and raise numerous contentious questions in the global community related to tax, evasion, extradition, and corruption. They reduce citizenship to a trade for money and not for genuine ties with a country.
Prime Minister of St. Vincent, Ralph Gonsalves, summarized this recently when he expressed that Economic Citizenship programs “undermine our soul, our sovereignty and independence and sell our birth right of citizenship and our passport.”
As the 1997 – 2001 Economic Citizenship scheme proved, there are costs to bear when things go wrong. When suspended in 2001, the cost outweighed the benefits. If implemented, will the benefit of GIIP outweigh its costs?
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