THE STAR BUSINESSWEEK NOVEMBER 4, 2017
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FROM WESTPHALIA TO THE WEST INDIES CITIZENSHIP INVESTMENT PROGRAMMES OVERVIEW BY ED KENNEDY, STAR BUSINESSWEEK CORRESPONDENT
Hurricane Irma tests the catastrophe bond market
When Hurricane Irma tore through the Eastern Caribbean, laying waste to the island of Barbuda and advancing west towards Florida via the British Virgin Islands and Cuba, insurers were not the only financial institutions braced for heavy losses. Page 3
US visa-for-sale scheme set to stagger on
A couple of weeks ago, the Corporate Whistleblower Center, an American advocacy group, launched a striking appeal: it asked for information about malfeasance with EB-5 visas — or residency deals that are handed out to wealthy foreign investors if they fund development projects.
Citizenship has always been a fluid concept. While the Treaty of Westphalia signed in 1648 between Spain and the Dutch Republic is often flagged as the beginning of the modern nation state, only in 1914 did the modern passport, as we know it today, come into being. Page 4
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THE STAR BUSINESSWEEK
NOVEMBER 4, 2017
Angels & Golden Passports BY CHRISTIAN WAYNE – EDITOR AT LARGE
While for many years the Caribbean has remained an attractive host for domiciling corporations—regardless of whether or not the company’s operations take place there—reviews on founding and operating a business in the Caribbean have been, at best, mixed. Despite the admirable progress made over the years by the World Bank, their regional interlocutors, and local governments, the entrepreneurial ecosystem in the Caribbean remains as fragmented as ever. Access to finance, or the lack thereof, is still the most salient contributor to the chronic underperformance of the region’s private sector. Starting on page 2, The STAR Businessweek sits down with the directors of an innovative new programme that seeks to bridge the funding gap between promising Caribbean start-ups and muchneeded capital . . . see Attention Angels: Report to The Caribbean. Speaking of entrepreneurs, be sure to read this week’s cover story From Westphalia to The West Indies—a primer on Citizenship Investment Programmes—the first article in a STAR Businessweek series exploring global citizenship and the region’s latest lure for wealthy global investors. The STAR Businessweek Nothing Personal. It’s Just Business. Stay connected with us at: Web: www.stluciastar.com Social: www.facebook.com/stluciastar Email: starbusinessweek@stluciastar.com
ATTENTION ANGELS:
Report to The Caribbean BY CATHERINE MORRIS, STAR BUSINESSWEEK CORRESPONDENT
As Caribbean small businesses struggle to raise seed capital, many look to angel investors to bridge the gap between potential and profit.
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Every successful business starts with a great idea. But some entrepreneurs need help turning their passion into profit. Angel investors, those who provide financial backing for struggling start-ups, can help businesses bypass traditional lending routes to develop their potential and become players in the market. Traditionally, this form of investment has been underutilised in the Caribbean but that’s changing thanks to a new initiative jointly administered by The World Bank Group and the Caribbean Export Development Agency (Carib Export). These two organisations came together last year to launch LINK Caribbean, a US$1.6m project funded by the government of Canada to connect entrepreneurs and SMEs with High Net Worth Individuals (HNWIs) eager to share their wealth, time and expertise. Halfway into its two-year term, LINK has already awarded over US$500,000 to 14 Caribbean companies and laid the groundwork for what organisers term “an angel investment ecosytem” in the region.
SMES IN NEED
Organised angel investing is a rarity in the region but Caribbean businesses are in desperate need of it. In Saint Lucia, as in other Caribbean nations, the commercial banking sector has contracted in recent years. In 2016 the loans to deposit ratio dropped to 90.1 per cent, in comparison to 119 per cent in 2013. Risk averse banks are now less willing to fund start-ups and SMEs are frequently shut out of the market. In addition, financial projects are rarely tailored for their needs, using a one-sizefits-all template that overlooks the unique challenges that come with operating earlystage companies and start-ups. This makes these beginner businesses ideally suited to take onboard private investors who aren’t just looking for a return, but to see the company succeed. The benefits to using angel investors go beyond the financial. These investors not only offer funding but also their expertise, experience and contacts. They provide valuable mentorship to fledgling businesses who may not be fully aware of the pitfalls and opportunities that come with a new venture. Angels are motivated not just by balance sheets but by the chance to invest in their communities. “The term ‘angels’ aptly describes these guys,” says Christopher McNair, Manager of Competitiveness and Innovation at Carib Export. “They give up their time, their network and their expertise. They are really giving up much of themselves. At the very core of what they are doing is giving back.”
PERFECTING THE PITCH
Across the Caribbean, a number of HNWIs are signing up to become angels. The LINK project is supporting the development
of a Regional Angel Investment Network (RAIN), hoping that it will draw existing angel groups and new angels together to pool their resources, diversify their risk and find suitable beneficiaries. “It is hard for angel groups to sustain themselves by just operating locally,” says Aun Rahman, Head of InfoDev at the World Bank Group’s Access to Finance programme. “It is good to build a regional perspective by building this infrastructure that brings them under one umbrella.” According to Rahman, an organised programme such as RAIN can help overcome one of the most common obstacles to angel investing - lack of trust. “Angel investing is extremely new to the Caribbean and the reason why it did not start before comes down to trust between entrepreneurs and investors, and whether investors felt comfortable investing with strangers,” he says. “There is value in organised networks that they will trust.” There are currently five active angel investment groups in LINK’s network and RAIN had its first official meeting in May. Early stage companies can get their ideas in front of these potential investors through LINK’s online platform. If the idea is approved by Carib Export, it is sent to every angel in the system and the investors take it from there. The average investment is around US$150,000 but can go as high as US$500,000. But SMEs shouldn’t assume it’s an easy sell. They have to be at the top of their game if they want to attract funding. Part of the LINK programme is devoted to helping businesses become ‘investor ready’. Since its inception the scheme has awarded 11 Investment Readiness grants which help SMEs and entrepreneurs draw up viable business plans so they can pitch effectively. LINK has also awarded three Co-Investment grants whereby they invest alongside angels to reduce their risk (these grants are capped at US$100,000 each). So what are HNWIs looking for? According to McNair, angels are drawn to areas where they can share knowledge. “Angels tend to like projects that are aligned with their own background and experience.” He is quick to stress, however, that SMEs from all sectors can attract this type of funding. Rahman agrees, saying: “Angels are sector agnostic. We have had ICT businesses, as well as bricks and mortar businesses like agricultural machinery. We’ve also had an organic food company. Ultimately what angels are looking for is a good growth opportunity.” While angels are primarily involved to make money, they tend to have a less rigid approach than formal lenders. “The investors are looking for projects that have legs. It is a long-term investment; they do not expect to put their money in today and get a result tomorrow,” says McNair. “They are looking for great ideas and great people to execute
those ideas.” For an idea to have legs, it needs to be scalable. Caribbean investors know that the best chance of generating big returns is to target international markets. “Investors are taking a tremendous risk so they are looking for projects that give them a return on that risk, and those are companies that have the ability to scale,” says McNair. “ So for a company in Saint Lucia, the investor will evaluate that company based on its ability to move beyond Saint Lucia’s borders.”
ENCOURAGING UPTAKE
One of the biggest challenges with an initiative such as LINK is simply getting the word out. McNair says LINK is particularly keen to reach entrepreneurs in Saint Lucia and other Eastern Caribbean nations and is planning more training sessions in the area in early 2018. “We are trying to see if we can drum up as much awareness as possible [by] making a lot of noise about the project. We are really pushing for Saint Lucia and the Eastern Caribbean in general to be involved. There are a number of really great entrepreneurs there with really great ideas and we want to get them onboard as soon as possible.” Although originally slated as a two and a half year project, LINK has the potential to carry on indefinitely if it continues its success. The World Bank’s involvement ends next year but it will then pass the mantle onto Carib Export, who will manage it alone. Rahman says: “Over the long-term, as we see more traction, it is going to get stronger and it will evolve. It is going to be an organic process.” For McNair, the ultimate goal is to develop an angel network that becomes so active and efficient that it functions almost independently. He also says there is room to broaden the pool of potential angels by reaching out internationally. “We have a plan to see if we can get the disapora involved. Part of the reason we want a network of angels is that it allows us to put the Caribbean out there on the international scene and bring investors into the region.” Given that SMEs are the lifeblood of the Caribbean economy, it is vital that they get the support they need. “We are a small region. One of the problems is we do not do enough to support entrepreneurs,” says McNair. “We have to understand that in order for us to compete globally, we have to innovate constantly. We have to allow new ideas to come to fruition, to be supported. At the very core of LINK is to create the kind of ecosystem that supports earlystage growth companies and, by doing so, create an environment for sustainable economic development.”
THE STAR BUSINESSWEEK
NOVEMBER 4, 2017
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© The Financial Times Limited [2017]. All Rights Reserved. Not to be redistributed, copied or modified in anyway. Star Publishing Company is solely responsible for providing this translated content and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation
HURRICANE IRMA TESTS THE CATASTROPHE BOND MARKET BY FT CORRESPONDENT
View of the aftermath of Hurricane Irma on St. Maarten
When Hurricane Irma tore through the Eastern Caribbean, laying waste to the island of Barbuda and advancing west towards Florida via the British Virgin Islands and Cuba, insurers were not the only financial institutions braced for heavy losses. As the category-five hurricane — the most destructive level — approached the coastal cities of Miami and Tampa, pension funds and asset managers also watched nervously for the fallout from what one portfolio manager described as “the catastrophic combination of wealth and peril”. Their concerns were much greater than in 2005, when Hurricane Katrina swept a path of destruction through the sunshine state and beyond. In the 12 years since that disaster, which cost the insurance industry US$82bn, an alternative insurance-linked securities market has also put mainstream asset owners in the line of fire. The catastrophe bond market, where investors trade the risks of large natural disasters, has attracted portfolio managers eager to diversify their holdings with assets that are uncorrelated to broader markets. Fifteen per cent of total reinsurance capital now comes from pension funds, endowment
funds and sovereign wealth funds, mainly through asset managers, according to Aon Benfield, the insurance broker. Hurricane Irma is the first significant catastrophe since the market gained traction with investors. “This is a market-changing event in terms of pricing, but also in terms of dynamics,” says Daniel Ineichen, fund manager of insurance-linked securities at Schroders, the UK’s largest listed asset manager. “We are coming out of a 10-year period with hardly any hurricanes. This season [we have] already see[n] two category-four hurricanes, which is exceptional. “The catastrophe bond market has been tested for the first time,” he says Before Hurricane Katrina, the risk from natural disasters in the developed world was almost entirely borne by insurers and governments. Companies providing cover for the destruction of homes and businesses during the Atlantic’s notorious 140,000 hurricane season sold parcels of this risk on 120,000 to reinsurers, but the fallout from a “onein-200 year” catastrophe — as described100,000 by regulators — was expected to be severe. 80,000 Hurricane Katrina, which hit the US with 60,000
its largest-ever insurance bill, prompted a rethink. Insurers and reinsurers such as Swiss Re, Munich Re and Allianz began to issue more insurance-linked contracts and securities, or catastrophe bonds, to offload the risk from improbable but devastating catastrophes. The bonds, which are relatively liquid, pay an attractive interest rate and can be triggered in the event of a severe natural disaster, forcing holders to shoulder heavy losses. After the financial crisis, which pushed interest rates to record lows, pension funds, endowment funds and sovereign wealth funds hungry for returns ploughed money into the sector. The alternative market for insurance ballooned from just US$17bn in 2006 to $89bn in the first half of this year, according to Aon Benfield. “There were a handful of catastrophe bonds around in the late 1990s, but they were unusual as a form of cover,” says Ben Brookes, vice-president of capital markets at RMS, the 6% catastrophe modelling group. “The influx of capital from pension funds and big investment funds has changed the dynamic of the market.” Asset managers rushed to grab a slice of the growing pie. Last year, Schroders became a 8% 10%
majority shareholder in Secquaero, a Swiss-based asset manager specialising in insurance risk, after first taking a 30 per cent stake in 2013 with the aim of “cementing its commitment to the insurance-linked securities business”. Nephila and Credit Suisse Asset Management are among the largest holders of insurance-linked securities, according to a list compiled by InsuranceLinked, an industry website. “This is a proof point for the market. It will and should be a demonstration to investors that the market has done what it was designed to do,” Mr Brookes says. Now they will be watching to see how many catastrophe bonds cause losses. Zeba Ahmad, investment director of insurance-linked securities at Schroders, expects Hurricane Irma to trigger between seven and 15 of its bonds, causing losses of between £52m and £78m, but a positive return overall this year. Analysts at RMS estimate that two-thirds of expected losses to catastrophe bonds in a given year come from US hurricanes, with half of that from Florida alone. Pension funds are also on the line. The Royal Bank of Scotland invested £378m in reinsurance through Nephila last year — an increase of 46 per cent on the previous year. PKA, which manages the retirement income of 300,000 Danish workers, owns 23.6 per cent of the Yderst Catastrophe fund and 23.4 per cent of the ILS CO2 Segregated Portfolio. Losses for the wider market are expected to be greater than after Harvey last month, according to analysts, because that hurricane caused most of its damage through flooding. In the US, flood protection is covered by the government-run National Flood Insurance Program and is usually excluded from reinsurance contracts and catastrophe bonds. “Some of these investors who are naive investors haven’t really understood the risks that they were standing for when they invested their money,” says Antonello Aquino, associate managing director of financial institutions at Moody’s, the rating agency. “If something big happens, then there will be part of this alternative capital that will be hit. But then the traditional reinsurance companies would say, ‘We are seeing big claims coming in, so we need to raise prices’. “Irma is the first test for alternative capital,” he says. 13%
40,000
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T O U R I S M P U L S E ! SLTA records the highest numbers of visitors over each month this year 20,000
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All markets are up ytd with an overall increase of
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THE STAR BUSINESSWEEK
NOVEMBER 4, 2017
FROM WESTPHALIA TO THE WEST INDIES
CITIZENSHIP INVESTMENT PROGRAMMES OVERVIEW BY ED KENNEDY, STAR BUSINESSWEEK CORRESPONDENT
Citizenship has always been a fluid concept. While the Treaty of Westphalia signed in 1648 between Spain and the Dutch Republic is often flagged as the beginning of the modern nation state, only in 1914 did the modern passport, as we know it today, come into being. World Wars I and II may have illustrated powerfully the divisions between nations in Europe and around the world but it was only in the post-war era, and with the end of old colonial empires, that strong conceptions evolved among many New World nations regarding their unique identity. No longer chiefly an allegiance to an empire or monarch, but instead to their own state and people first. With the notable exception of the European Union, and its relationship to Europeans across its continent (and notwithstanding the existence of dual citizenship), to be a citizen of a nation state today is to belong exclusively to that nation state. This modern understanding is how citizenship has chiefly operated in the post-war world. It is now set to dramatically change in the years ahead, as Citizenship by Investment Programmes (CIPs) grow.
OVERVIEW
CIPs have long been forecast as an evolution in our global world. Just as the Treaty of Westphalia laid the foundations for the modern passport, so too did the potential for rapid global trade possible by airplanes, in tandem to the speed of communications in the online era, draw us closer and closer to the concept of a truly ‘borderless world’. One need only take a cursory look at the current list of territorial disputes around the globe to know any geographical recognition of such a world remains far away. Especially so in a post-9/11 world that has seen higher
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Ratification of the Peace of Münster between Spain and the Dutch Republic in the town hall of Münster, 15 May, 1648. Gerard ter Borch, public domain
walls erected once more. At times literally, as seen with US President Donald Trump’s plan for a US-Mexican border wall, and in other instances via the ballot box, as seen with the UK’s Brexit vote to leave the EU. Yet, notwithstanding the ongoing divisions in politics and security, Earth is economically closer to a global citizenry than ever before. So much so that free trade agreements once held to be a blue ribbon item that signified a ‘special relationship’ between two trading nations - is now seen as increasingly pedestrian and unexceptional in the global economy. This has been supercharged by the online era and digital economy, ensuring we not only trade around the world more freely than ever before, but do so in a real time 24hour economy. This is even apparent in culture and entertainment. Once TV footage would be shipped or flown from one country to another - and music albums and movie premieres released months apart - but today it’s a pop culture scandal if a blockbuster movie doesn’t have a simultaneous worldwide release. Sure, territorial disputes may remain in the Middle East, in the South China Sea, and along the Northwest Passage - but economically and culturally the world did away with borders long ago. With this understanding, the contemporary phenomenon of CIPs cannot be seen as a new development, but rather an overdue occurrence.
millions to a regional nation, often enjoy considerable flexibility surrounding their weekly schedule. Regularly decamping here in a tropical climate to wait out a chilly winter back home (if not staying longer) was often previously made possible only by seeking out a permanent residency or citizenship.
THE EFFECT ON LOCALS
While at face value CIPs may not seem such a great issue - ‘wealthy tourists and global entrepreneurs have always visited the Caribbean, so how is a longer stay different?’ one might wonder - the permanency of citizenship, and the privileges it accords are huge factors here. Within this dynamic three issues are especially prominent, the first as seen in the leaks of the Panama Papers. Notwithstanding the sovereign right of Panama and other like-minded nations to tax at any rate desired, other nations around the world are increasingly targeting global tax minimisation strategies of their most affluent citizens. The potential for a CIP to be used solely as a means of avoiding taxation is a live issue in a world with a growing rich-poor gap. Many nations have begun placing tighter restrictions on the ownership of property. This is done not to discourage foreign
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Though the world may be more interconnected than ever before globally, this does not mean economic prosperity has been shared evenly
The evolution of citizenship and the issues raised surrounding CIPs serve as an overview of the environment as it exists today. While these issues are real and ones that warrant ongoing public dialogue, it would certainly be a mistake to misread CIPs as uniquely bad or ill-advised. Rather, like any government policy or investment programme, the chief concern is ensuring they are utilised effectively: to fairly attract and incentivise foreign investors - especially those with a feeling of kinship or ongoing links to a nation - while also avoiding the risk that citizenship of a sovereign Caribbean nation could come to be seen as a ‘revolving door’, always available to a wealthy buyer. This piece has been a general examination of CIPs as they exist today around the world. Keep an eye out for our next edition as we begin to examine this issue in-depth within the Caribbean, and the unique pros and cons that exist surrounding CIP programmes locally.
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investment as a whole but chiefly to see housing remains affordable to buy for permanent residents and citizens who primarily live and work in the nation. Erecting such barriers while leaving the door ajar for quick access to citizenship via a CIP could greatly undermine such policies. What’s more, the risk of individual nations creating a ‘two tiered’ citizenship is growing. Affluent nations like the United States and the UK have always had an internationalist culture, and may well adapt to a new world where citizenship is not only the sovereign right of native-born residents but also available for purchase to a wealthy buyer. Yet, within developing nations there is a far greater risk that CIPs could erode confidence in public institutions, as governments focus on growing a CIP to lure foreign investment, to the detriment of working on resolving issues and delivering services to native-born and resident citizens of the country. This risk goes beyond confidence in a government’s operations, to also include national security, as the risk of a wealthy foreign government seeking to influence local affairs via citizenship programmes grows. The difference between a CIP requiring a US$500,000 fee in the United States but only $5,000 in Paraguay is a core example of the potential of the risk that foreign policy could increasingly be pursued via a CIP when not properly regulated.
CONCLUSION
WHY NOW?
Though the world may be more interconnected than ever before globally, this does not mean economic prosperity has been shared evenly. A discussion of this issue in-depth, as it impacts in the Caribbean, is best explored in a future piece but its core element applies to any CIP discussion: CIPs seek to attract affluent global investors with cash to spare. Where economic prosperity has seen a direct impact on the Caribbean economy is the attractiveness of the region as a safe haven for affluent citizens of the world who’ve first acquired their wealth in a nation with an unstable or controlled economy. A fortune may have been made in this setting but the odds of maintaining it long-term are often held to be uncertain. In tandem with the attraction of stable government, a free market economy and a transparent legal system across many Caribbean nations, there is, of course, the appeal of the broader lifestyle. Entrepreneurs and investors who are able to allocate
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EU provides additional €500,000 in humanitarian aid to Dominica The European Union is providing an additional €500,000 (EC$1,600,000) in humanitarian aid to Dominica, following the severe destruction caused by Hurricane María on 18 September 2017, via the European Commission’s DirectorateGeneral for European Civil Protection and Humanitarian Aid Operations (ECHO). María, a category 5 hurricane, hit Dominica leaving more than 70,000 people in need of urgent relief. “We aim to increase our support to families who are displaced and living in collective centres or with host families since the hurricane, and are in need of shelter, food and water,” said Androulla Kaminara, ECHO’s Director of Operations for Latin America and the Caribbean. . The additional aid will provide immediate shelter and household material for 5,000 vulnerable families in Dominica. Shelter kits, as well as housing repair materials, training and technical support will be
provided to the most vulnerable whose homes have been damaged. Daniela Tramacere, EU Ambassador to the Organisation of Eastern Caribbean States, said, “The EU has been committed since the very beginning to support Dominica after the tragedy. We are now committed to further assist Dominica in early recovery and reconstruction.” This additional humanitarian aid complements an initial grant of €250,000 (EC$800,000), which was allocated in September to alleviate the affected population’s most urgent needs (basic kits for survival, clean water and food, shelter material and fuel, as well as logistical support to reach isolated communities). Since 1999 the European Commission has provided €2,919,216 in humanitarian aid to Dominica, including emergency relief after Tropical Storm Erika severely damaged the island in August 2015, leaving 30 people dead.
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The Saint Lucia Government Gazette
Company Registration
Tourism Incentives
Name: HOBLER Inc.
• Approved Enterprise: Joy Adventure and Coastal Cruise Company Ltd. • Tourism Product: water-based tours and excursions • Tourism Project: procurement of a catamaran and equipment. • Benefit to Import Duty & Excise Tax: (A)100% waiver of import duty on a catamaran and safety equipment. The declared benefits terminate on May 31 2020.
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• Approved Development: Construction of a boutique hotel by Bay Gardens • Benefit to Value Added Tax & Import Duty: 100% waiver of VAT and Import Duty on: (A) all building materials and operating equipment used for approved development; (B) furniture, fixtures, soft furnishings, finishings, electronics, kitchen and bar supplies, linen, appliances, laundry equipment, dryers, washers, cutlery, glassware, artwork, pool accessories imported or purchased locally for equipping the approved development. The declared benefits terminate on August 30 2021. • Benefit to Import Duty: (A)100% waiver of import duty imports of alternative energy and energy saving equipment used for the approved development. The declared benefits terminate on August 30 2021. • Benefit to Property Tax & Alien’s Landholding License Fee: 100% waiver of Property Tax & Alien’s Landholding License Fee. Terminating on October 15 2027. • Benefit to Stamp Duty & Vendor’s Tax: 100% waiver of Stamp Duty and Vendor’s Tax on the initial sale of property for the boutique hotel.
Description: Small Business Marketing Directors: Jonathan Gillmor Date Filed: 18-Oct-17
Name: Wildlife Trading Company St. Lucia Ltd. Description: Giftshop Directors: James Ward; Linda Trudel; Rhory McNamara Date Filed: 18-Oct-17
Name: Health and Wellness Solutions Inc. Description: Health and Wellness Directors: Anna Antoine Date Filed: 19-Oct-17
Name: Exotic Flooring Inc. Description: Residential & Commercial Tile Flooring Directors: Oswin Joseph; Michelle Charles Date Filed: 26-Oct-17
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© The Financial Times Limited [2017]. All Rights Reserved. Not to be redistributed, copied or modified in anyway. Star Publishing Company is solely responsible for providing this translated content and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation
US VISA-FOR-SALE SCHEME SET TO STAGGER ON BY FT CORRESPONDENT
visa programme was created back in 1990, supposedly to bring finance to deprived US regions; it enables non-American investors to receive a visa if they invest $500,000 or more in economic projects which create at least 10 jobs. During much of its 27-year existence, the programme has only attracted sporadic public attention. But it shot into the spotlight five months ago, when it emerged that Nicole Meyer, the sister of Jared Kushner, Donald Trump’s son-in-law and adviser, was trying to raise finance in China for Kushner buildings in Jersey City by pledging EB-5 visas to wealthy Chinese. Ms Meyer’s presentation in China featured a shot of the president. This sparked outrage. So much so that Kushner Companies subsequently announced it would not use EB-5 financing for Jersey City. But the political furore about the Kushners obscured an important point: their sales pitch was not remotely unusual. Far from it. Away from the spotlight, the EB-5 programme has quietly been exploding in
A couple of weeks ago, the Corporate Whistleblower Center, an American advocacy group, launched a striking appeal: it asked for information about malfeasance with EB-5 visas — or residency deals that are handed out to wealthy foreign investors if they fund development projects. “We know that Chinese broker middlemen are accepting bribes or kickbacks to steer clients to specific US real estate projects,” the appeal went, citing “overbuilt luxury apartment markets on the US West Coast [and] franchise motel projects” among the areas of particular suspicion. It is not clear (yet) whether whistleblowers answered the call. But the appeal highlights a peculiar saga now bubbling around the White House that investors — and political pundits — should watch, not least because it shows the seamy and contradictory way that government regulation can work, particularly in the world of real estate. First, however, a bit of history. The EB-5
importance in the past decade, as real estate developers of all stripes have raised many billions of dollars for projects which seem to have little — or nothing — to do with economic “distress”. Projects funded by Chinese and Indian developers include Pacific Park in Brooklyn, the New York Wheel in Staten Island, the Hudson Yards in Manhattan and developments in Florida and California. This horrifies some observers, who say the programme has turned into a visa-forsale system. This year Dianne Feinstein, a Democratic senator, and Chuck Grassley, a Republican, drafted bipartisan legislation calling for the end of EB-5. But the real estate industry retorts that the programme is simply a way to plug a funding gap that has been created by the government itself. One reason developers have been rushing to use the EB-5 programme in recent years is that financial reforms introduced after the 2008 financial crisis have made it difficult for banks to extend large real estate loans. If it was not for the dearth of financing, the argument goes, developers would not be using this system, which is old-fashioned and inefficient — quite aside from the political risk of making pitches to wealthy Chinese. To some degree, this is self-serving. But not entirely: the post-crisis reforms have indeed made it harder for the real estate world to raise finance in a rational manner. So what is badly needed now is for the US government
to initiate a review of EB-5 and the wider impact of the post-crisis reforms, to devise a more sensible — and transparent — financing system. And, as luck would have it, Congress has the perfect opportunity to do this right now since the legal framework that supports EB-5 is part of a so-called continuing resolution that must be renewed in December, or expire. Indeed, Mr Grassley is already working with Republican colleagues to draft a reform bill. But don’t bet on Congress taking this sensible — overdue — step. Most lawmakers have little appetite for grappling with this now. Nor does the White House. On the contrary, soon after his inauguration, Mr Trump, the former real estate developer, signed an executive order granting a short-term extension to the EB-5 programme. So the most likely scenario is that EB-5 will simply stagger on, as symbol of the unintended — and sometimes murky — consequences that can materialise when badly drafted government rules become entangled with entrepreneurs and power. Unless, of course, another big EB-5 scandal arises to put the programme back in the political spotlight. All eyes on that corporate whistleblowing group.
FINANCIALLY SPEAKING Financial Literacy 101 presented by Bank of Saint Lucia
SMEs & CONVENIENCE BANKING SERVICES The month of November is Business Month in Saint Lucia as declared by the Department of Commerce, International Trade, Investment, Enterprise Development and Consumer Affairs. The main objective is to support efforts at improving the commercial landscape of Saint Lucia and increasing capacity within the Small and Medium Enterprise (SME) sector. The theme for 2017 is “Promoting an Entrepreneurial Culture –Innovation & Creativity.” Over 80% of Saint Lucian businesses are classified as SMEs, a statistical testament to the critical role that these businesses play in the economy. SMEs are a major source of employment, vital to the alleviation of poverty as well as the social and economic stability of our island. They span a diverse range of sectors such as hospitality, cosmetology, construction, transportation, manufacturing and agriculture, to name a few. Entrepreneurs will testify that SME businesses have their own unique needs that require specifically tailored solutions. A number of banks and financial institutions provide exclusive SME banking services which typically include:
Chequing, Current and Savings Accounts Credit Cards and Overdraft Facilities Letters of Credit, Lines of Credit and Term Loans Cash Management Services Local and Overseas Remittances Apart from these offerings, there is another aspect of services which can add significant value to the SME operators – Convenience Banking Services. The truth is that the very future of banking lies with digital services, which reduces the need to visit a branch or eliminates the need altogether. Convenience Banking Services can support improvements in SME business operating efficiency and save valuable time. SMEs can avail themselves of these services currently used by larger corporations, some of which include: Electronic Payroll Services Cash Breakdown Services Merchant Services - Wireless Point of Sale Services Mobile Banking Services Online Cash Management Services Faster, safer, more convenient
Inquire about these services with your preferred financial institution and discuss the many benefits to your SME. The ability to manage your business on the go, simply makes sense. Convenience Banking Services are designed to be functional and fit seamlessly into the daily routine - to save customers time and money. As technology continues to evolve, new products and services will emerge to create even greater added value for SME customers.
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8
THE STAR BUSINESSWEEK
NOVEMBER 4, 2017
MAKING
WWW.STLUCIASTAR.COM
MOVES
LEATHON KHAN: “THE FUTURE OF INSURANCE IS STRONG”
L
BY KAYRA WILLIAMS, STAR BUSINESSWEEK CORRESPONDENT
eathon Khan started his career in banking in Jamaica in 1980. The unexpected opportunity was presented to him by his Economics teacher back in the sixth form, while he was studying for his A-levels. Even then, Leathon knew without a doubt his future would be rooted in the financial sector, and he didn’t hesitate to jump at the opportunity. As soon as he finished school, he left home and moved in with family friends who lived in Kingston, Jamaica to begin his new career. His path deviated to insurance as interesting opportunities presented themselves in the industry. He’s worked with Life of Barbados (Trinidad); as the Underwriting Manager at Western General Insurance Co. (Trinidad); with Eagle Insurance Brokers (Jamaica); as Managing Director of Agostini Insurance Brokers, and with EC Global Insurance Co. Ltd. as CEO and, later, as a consultant. He is presently the General Manager and Principal Representative for Sagicor Life Inc.
Leathon Khan, General Manager and Principal Representative for Sagicor Life Inc.
HOW DID YOU START YOUR CAREER? LEATHON: All my life as a student in
high school, I wanted to be a bank manager. That was just where my focus was. My first job was with the National Commercial Bank in Halfway Tree, Kingston, Jamaica. I worked there for two years and then I decided it was time to go to university. Working at NCB opened the door for me to truly pursue a career in banking. After two years at the bank I applied to the University of the West Indies (Mona Campus) to pursue a degree in Management Studies. While attending UWI I went back to the bank to work during Christmas break and summer vacations. There was an understanding that after I graduated from UWI, I would return to the bank as a Management Trainee, to fulfill my dreams of being a banker. When that time came, however, my plans changed. I got married one week after my final exam and decided to take off to Trinidad in 1986 with the hope of getting into banking but I was not able to secure a job in any of the banks there. It took me a few months before I got the next closest thing, which was in life insurance. I thought, well okay, it’s still financial services. I accepted the job and my insurance career began shortly after. I’ve remained faithful to insurance ever since and have had the rare opportunity to head-up an insurance broking firm, a general insurance company and, currently, a life insurance company, all in the same territory.
WHAT CHALLENGES DO YOU FACE? LEATHON: Managing people. Managing the expectations of people, including customers. This insurance business is not one that is really understood by the public. You have to really educate your clients and get them to understand that, just because you have ‘comprehensive’ insurance on your car, does not mean every single thing is covered. The word comprehensive is a bit of a misnomer.
I’d say managing relationships and expectations of people can be a challenge but those are challenges you can easily overcome if you know how to relate to people. One of the things I’ve learnt over the years is to build good relationships with people generally, and my clients. I’ve experienced my share of personal tribulations as well but, if you are stubbornly determined and grounded in the belief that “this too shall pass”, then you will pull though, by the grace of God.
TELL US ABOUT SAGICOR. LEATHON: For 177 years Sagicor has
been a provider of insurance services in the Caribbean. The company has evolved over the years to become the leading indigenous financial services company in 22 countries throughout the Caribbean region, Latin America and the USA. At Sagicor we are guided by a philosophy and a business strategy focussed on establishing enduring and meaningful relationships with all our customers, investors and employees, as well as the communities in which we operate. We aim at improving the lives of the people in the communities we serve. We do this through very well-crafted insurance products and services, wise financial thinking, prudence in governance and a strong commitment to corporate social responsibility. This is what has made us the great company that we are today. We remain committed to providing the Saint Lucian public and customers across all markets we serve, with pathways to a secure financial future.
PLEASE EXPAND ON THE PRODUCTS AND SERVICES. LEATHON: Our main products and
services include Life Insurance solutions: endowment plans, term life, whole life, group life and health, disability, pension products, limited underwriting plans; investments: Sagicor mutual funds; retirement planning; home ownership: mortgages; money management; financing: loans, lease financing, deposit investments; General Insurance solutions: property and casualty.
HOW IS SAGICOR KEEPING PACE WITH THE GLOBAL INSURANCE MARKET? LEATHON: Sagicor leads the way
throughout the Caribbean in embracing new and emerging technologies to drive our business growth and expansion. Through a robust digital marketing strategy, we can digitally transform our relationship and engagement with our clients by getting closer to them. By utilising mobile technology and social medial platforms, we can converge our many interactions and communication with our customers, and particularly millennials. Global financial markets are trending towards digital platforms at a very rapid pace as these are the new tools being used to construct and sustain a dominant market position. We at Sagicor recognize that a robust digital marketing strategy is critical to maintaining our place in the insurance world.
HOW WILL LIFE INSURANCE EVOLVE LOCALLY? LEATHON: Life insurance generally has
been very slow in evolving with some of the social changes that have been taking place. Our society has been rapidly evolving, with new technologies and lifestyles, and things
just moving at a more rapid pace. These developments bring with them new risk exposures and additional concerns for security and protection in various forms. The future of insurance is strong. People are entering the work force while foreign and domestic investments remain ongoing. Once society is progressing, there’s a need for insurance. The Caribbean’s recent catastrophic weather experiences have also generated a greater awareness among Saint Lucians about the importance of insurance, and I expect society as a whole will come to appreciate it more.
WHAT LESSONS CAN WE LEARN FROM THIS YEAR’S HURRICANE SEASON? LEATHON: The region and its people
face tremendous risk exposure challenges ahead. Our vulnerability to natural disasters is real, and we all have seen over the last couple of months how destructive and disruptive weather disturbances can be. If we accept the findings of various disaster risk models that the frequency and intensity of wind storms in the Caribbean will increase, then this should drive every right-thinking person to seek out insurance protection as much as they can. Insurance remains the most effective and cost-efficient way to manage the risks we face. Despite this, the penetration of general insurance protection, or the extent to which people insure, remains relatively low. Unfortunately, the price and availability of general insurance is likely to be adversely affected going forward. This only raises further concerns as to whether our people in the region will be able to access the insurance protection they will so badly need.
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