The international component of ifcs the role of immigration and foreign captial in ifc development

Panel 7: The “International� Component of IFCs: The Role of Immigration and Foreign Capital in IFC Development- by Keinya Blake Gordon, Attorney at Law, BlakeFerguson-Presentation

Introduction: In the new era of globalization, St. Kitts & Nevis has evolved with our more interconnected world, by utilizing its well established Citizenship by Investment Programme to attract significant foreign direct investment to boost its economy.

The St. Kitts & Nevis Citizenship by Investment Programme was established in 1984 by virtue of the Citizenship Act S.3.5, just one year after its independence. It is the oldest and most respected immigration through foreign investment program of its kind in the world. Essentially, the program allows the Government to grant citizenship in exchange for major contributions to its economy, society and culture and other interests of the nation.

Interested Applicants: The program is designed to attract High Net Worth individuals who are seeking: 1. Security of a second citizenship and passport in a democratic society where dual citizenship is allowed; 2. Alternative investment and tax planning options; 3. A passport that has visa free travel to over 120 countries including the United Kingdom and Canada; and 4. To relocate to a tropical climate to build a life now or at retirement.

Advantages: The benefits to the investor immigration program are: i. ii. iii.

Being a citizen of a nation that allows Dual citizenship; No tax on income; No withholding tax applied to companies conducting a business activity and transactions solely with non-resident entities; 1

iv. v.

No worth, gift, inheritance tax or estate duties; Privacy as an applicant. The Citizenship by Investment Regulations No. 52 of 2011 provide that: “There shall be no information, promotion, advertisement or publication in relation to the Citizenship by Investment program published or disseminated publicly, by any media or by any person unless in compliance with the guidelines issued by the Citizenship Unit or specifically mandated by the Government”.

There are actually THREE options for persons making foreign investment under the Citizenship by Investment Regulations although only two are promoted, namely: 1. The Sugar Industry Diversification Foundation (or “SIDF”): which offers foreign investors the right to apply for a citizenship through a cash investment of between US$250,000 and US$450,000 depending on the number of applicants; 2. The Real Estate Option: which permits a foreign investor to purchase and hold real estate for a mandatory period of five years in a citizenship approved project of a value of at least US$400,000 plus payment of various registration and other fees; and 3. Government Approved Project – Although rarely used, this option allows prospective citizens to invest in projects that are approved by the Government that targets a specific area identified by Government as being in the interest of the people.

The SIDF Option: Immigration Investment through the SIDF has played a critical role in the economic and social development of St. Kitts & Nevis. This aspect of the citizenship program was developed in 2006 with the primary purpose to: a. provide budgetary support to the Government of St. Kitts & Nevis;

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b. diversify, grow and/or develop the national economy; c. maintain economic stability following the closure of the sugar industry; and d. support, finance or undertake the development of new and existing industries, projects or enterprises.

According to a 2013 report by the Chief Executive Officer of the SIDF, from 2006 to 2013 the SIDF has had income from successful citizenship applicants of approximately US $200 million. This income showed that there was an increase of approximately US$10 million in 2007 to over US$90 million in 2011. As such, the SIDF experience almost 100% growth in revenue year in year during this period.

The astronomical growth in direct foreign income through the SIDF option has been utilized to finance some major public sector projects and generally provide economic stimulus in the midst of an IMF program.

As at October 2013, the SIDF has expended approximately $160 million US Dollars in the following areas: (i)

$39 million in Resort Development. The sum of US$16 million was invested in the Kittitian Hill Resort development. Kittitian Hill the first five star resort on St. Kitts located in the heart of the sugar belt. It was specifically targeted to transform the area and provide skills training for persons who were previously employed in the sugar industry. The SIDF has since received a return on that investment and used it to purchase a 30% ownership stake in Christophe Harbour, a 2500 acre Resort Development on the South Eastern Peninsula, St. Kitts. The sum of US$5million was also invested in Ocean Terrace Inn to facilitate the refurbishment and upgrade of the oldest indigenous hotel on St. Kitts;

(ii)

$33 million in critical Government budget support. The funds were utilized to assist Government in being able to continue with the stabilization of the economy through job investment in Public Sector Improvement Programs (PSIP) ;

(iii)

$29 million in Electricity subsidies of $3 million each year for 3 years and a power generation upgrade. Anyone who has been in St. Kitts in the 3

past 10 years know that if the breeze blows too hard we experience a power outage. This SIDF investment has been welcomed and appreciated by all; (iv)

$12 million in employment and skills training through the People Employment Program (PEP) where over 3,000 young people are currently employed. PEP is a critical job training to work program that has already seen over 600 employees being assimilated into the island’s work place in permanent jobs;

(v)

$11 million in home improvement and construction. There are two loan programs where the SIDF, in conjunction with the local banks and credit unions, have offered loans to its citizens to either complete their existing home (HELP) or construct a new home (FREESH) at guaranteed fixed interest rate of 5% for the life of the Mortgage;

(vi)

$8 million in airlifts support, cruise tourism and other national attractions. This support assures daily flights on American Airlines into St. Kitts from Miami and twice weekly from New York with a weekly service on British Airways out of Gatwick;

(vii)

$7 million in High School modernization and computer literacy program.

Each child at high school level in St. Kitts & Nevis has a government provided laptop;

(viii) $4 million in Agriculture. Capistere farm which a project that is aimed at providing food security for the nation by 2017; (ix)

$4 million in Warner Park stadium lighting. Now we can “see” cricket and other entertainment at night. The investment has already paid dividends with the grounds being one of only five with the standard lighting appropriate for night cricket and St. Kitts was awarded the semifinals and the finals of the Caribbean premier league Cricket (CPL);

(x)

$2 million in renewable energy. There are presently 300 homes that were fitted with solar panels.

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Real Estate Option: Immigration investment through real estate provides an investor with: (i) (ii) (iii) (iv)

the option of a second home and address; a vacation unit or annual income through property rental; an opportunity for capital appreciation on the resale of their property after the five years must hold period; and transparent and secure investment opportunity to fund projects.

The Real Estate option has also created a novel financing structure for potential developers to finance their resort projects. Resort Development has been significantly boosted and now visitors have staying options beyond the existing Marriott in St. Kitts and Four Seasons in Nevis.

Some real estate developments approved for citizenship to date are: (i)

(ii)

(iii) (iv) (v)

The Range Development through the branded Park Hyatt Resort. Range has appointed Kier Construction as their main contractor on October 26, 2013 and schedule to complete construction in 24 months. Range is committed to spending $185 million in St. Kitts; KRLS Hospitality which is projected to invest $180 million in Koi Resorts Development located in Half moon, St. Kitts. This project has already broken ground and commenced construction; Christophe Harbour on the South East Peninsula has invested $100 million in its project; Pelican Bay Resort, St. Kitts is a 90 million dollar investment; Golden Rock, near the airport in St. Kitts is carded to invest $78 million in its project.

Employment: Resort Development has boosted short and long term construction employment, trucking services and product supplies. There has also been the creation of professional jobs such as: a. project management; 5

b. accounting services; c. legal and financial services (through purchase and sale of property and units, financing, the establishment of the various regimes to facilitate such transactions, company incorporation, processing of citizenship applications); and d. other administrative services.

Conclusion: Investment immigration through the Citizenship by Investment vehicle has played a strategic role in sourcing foreign direct investment which has and continues to boost the economy of St. Kitts & Nevis thereby softening the impact of the global fiscal challenges. The success of the investor immigration program has encouraged other islands like Antigua, Grenada, Dominica and St. Lucia to consider it as a viable option for their nations’ economy.

Interestingly enough, external determinants like the continued visa free entry to United Kingdom and Canada and the credibility of the program which is a function of the rigidity of the due diligence process are key components if not the underpinning of its success .

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