Did The Coronavirus Expose The Risks of CBI?

THE STAR BUSINESSWEEK MARCH 7, 2020

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IN THIS EDITION OF

DID THE CORONAVIRUS EXPOSE THE RISKS OF CBI? The emergence of the coronavirus in early January of this year has created immense anxiety globally, wreaked havoc on the tourism industry and driven home the immense difficulty for national governments in seeking to combat a threat within the modern international community.

BY ED KENNEDY, STAR BUSINESSWEEK CORRESPONDENT

SBW

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Small Island Developing States or Big Ocean Developing States?

For Small Island Developing States (SIDS), being surrounded by the ocean can be an asset or a liability.

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Continued on page 4

The relationship SIDS foster with the ocean around them will define their destinies as Big Ocean nations (Source: Pixabay)

The problem with Transparency International’s Corruption Index Global anti-corruption watchdog Transparency International (TI) recently released the 2019 Corruption Perceptions Index (CPI) and it was largely good news for the Caribbean.

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The coronavirus outbreak has redefined challenges for CBI in the Caribbean (Source: Pixabay)

Transparency International celebrated its 20th anniversary in 2013 with an event in Berlin, Germany (Photo courtesy Transparency International)

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BLACKLISTING/COMPLIANCE

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BLACKLIST RESHUFFLE: The Caribbean responds as the EU revises its tax haven list

BY CATHERINE MORRIS, STAR BUSINESSWEEK CORRESPONDENT

ALL EYES ON

AT TRINIDAD CARNIVAL 2020 Marketing Manager for Caribbean and Events and Brand Lead on CaribcationChristopher Gustave, flew over to Trinidad for the annual Trinidad Carnival celebrations where Brand Saint Lucia was prominently highlighted, thanks to the Saint Lucia Tourism Authority and the Ministry of Tourism.

Ahead of the highly anticipated parade of the bands, Caribcation joined the Ministry of Tourism to support our homegrown and International Soca Award Winner- Teddyson John, who was a prominent feature at “Kes Tuesday on the Rocks”- an event hosted by one of Trinidad’s most popular Soca Artists-Kes. This was the first time that a Saint Lucian band was featured at such an event.

Caribcation also teamed up with Just4fun Carnival Band from Saint Lucia for “Erupt” which took place on carnival Friday and featured numerous Saint Lucian artists namely; Motto and Hollywood HP, among others.

Additionally, Caribcation collaborated with world renowned Cricket Legend- Brian Lara to lend support to his annual carnival event and used this opportunity to display destination and Saint Lucia Carnival themed videos. Senior officials at the Events Company of Saint Lucia (ECSL) and the Cultural Development Foundation (CDF) joined Gustave and valued the many networking opportunities.

For the Parade of the Bands along the streets of Port of Spain, Caribcation collaborated with Yuma- one of Trinidad’s premium carnival bands to feature a Caribcation branded truck as well as Caribcation brand ambassadors.

Ending the trip, SLTA teamed up with ECSL and CDF and had interviews with the National Carnival Committee in Trinidad as well as Trinbago Unified Calypsonians’ Organization (TUCO) to gain insight into the production of their world-renowned product.

A giveaway was also launched on Caribcation’s Instagram platform in destinations that LIAT and Caribbean Airlines operate, which could see one lucky person and a friend win a 5-day trip to Saint Lucia for an unforgettable all-inclusive carnival experience.

stlucia.org caribcation.org

The European Union recently revised its list of so-called ‘tax havens’ (Photo courtesy the European Parliament)

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he European Union revised its dreaded tax haven blacklist last month and while many Caribbean countries were spared, others were caught in the crosshairs as the taxation watchdog sought to name and shame those it deems non-compliant.

The EU list of non-cooperative jurisdictions for tax purposes has four new additions: the Cayman Islands, Palau, Panama and the Seychelles. The Caymans may have suffered a blow but elsewhere in the Caribbean there was reason to celebrate as many countries made the welcome leap from Annex II, the so-called ‘grey list’, to full compliance.

Antigua and Barbuda, the Bahamas, Barbados, Belize, Bermuda, the British Virgin Islands, and St Kitts and Nevis all satisfied EU regulators with their revised tax regimes and were cleared from the grey list, leaving behind Anguilla and Saint Lucia who are still under scrutiny.

WELCOME NEWS The EU blacklist began in December 2017 as the bloc moved to expose and reform countries with permissive tax structures deemed liable to abuse from

tax evaders. With most of the Caribbean ensnared by the EU’s black and grey lists (some repeatedly hopping between the two), the region’s financial services industry has been under siege for several years, and many in the sector are now breathing a sigh of relief with this month’s revisions.

The Bahamas, whose financial services industry is the country’s second economic pillar after tourism, welcomed the news that it had satisfied the watchdogs, with Minister of Financial Services Peter Turnquest commenting: “Coming off this list was not an easy process. The Bahamas has worked diligently to demonstrate its commitment at the highest political level to international standards.”

Bermuda was similarly thankful, following extensive work to reform its funds regime, and St Kitts and Nevis’s Prime Minister Timothy Harris took time to credit his staff with a veiled comment on the punitive nature of the EU requirements, saying: “Commendations to the Ministry of Finance, our consultants and other stakeholders for their work leading to our compliance with strenuous and onerous EU standards.”

At the other end of the spectrum, Continued on page 6

MARITIME BOUNDARIES

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MARCH 7, 2020

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SMALL ISLAND DEVELOPING STATES OR BIG OCEAN DEVELOPING STATES?

How can Caribbean islands transition from Small Island Developing States to Big Ocean Developing States?

BY ED KENNEDY, STAR BUSINESSWEEK CORRESPONDENT

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or Small Island Developing States (SIDS), being surrounded by the ocean can be an asset or a liability. Sustainable development ensures that being encircled by sea is indeed a virtue, and nations must leverage the sea around them in order to make the transition from SIDS, via Big Ocean Developing States (BODS), to Big Ocean Sustainable States (BOSS).

But the path to becoming BOSSlevel is not easy, nor clear-cut, and involves a journey that is replete with pitfalls.

In the 2020s the push and pull factors driving SIDS to become BOSS are immense, and warrant an in-depth examination of what is required to progress through the BODS stage. An understanding of this provides a framework in which Caribbean SIDS can chart a course for their growth, and substantially improve a nation’s future and fortunes on land and sea.

AN EXCLUSIVE CLUB The progression from SIDS to BODS is often as much an economic transition as it is a psychological one. Many islands may be small if judged only by their land mass but, to use the words of a Seychellois diplomat, “We morph into large ocean states when our Exclusive Economic Zones are factored in.

Tuvalu’s EEZ, for example, is 27,000 times the size of its land.

The Republic of Kiribati, the largest small island developing state in terms of ocean territory, has the 13th largest Exclusive Economic Zone on Earth. SIDS are the custodians of no fewer than 15, or 30 per cent, of the 50 largest EEZs.” These figures evidence a simple but critical fact when assessing the future of SIDS and BODS: while the rapid advance of globalisation has embattled little states in many instances, as a result of the rate of growth in global trade and exchange, small states with huge EEZs have a rich bargaining chip within the international arena, and it is growing in value.

THE LAY OF THE LAND As a result of this dynamic, the Caribbean family’s ongoing use

“Notwithstanding their vast surface dimensions, this maritime space is today entirely divided between bordering states. These invisible yet real boundaries which cut up this liquid expanse afford the region an image as complex as, but very different from, the classic political map. The smallest island can suddenly take on an unsuspected dimension, the ambitions of certain regional powers reveal themselves, and the stakes in play change in both nature and scale.” (Source: Atlas-Caraibe, University of Caen Normandy)

and management of the EEZ for each respective nation is critical to economic performance today and into the future.

Many industries, from maritime tourism to fishing and beyond, are facing unprecedented challenges owing to changing environmental conditions.

Consequently, nations will now have to examine how they have used their EEZs in the past, and rethink the situation going forward.

SUSTAINING A BIG VISION Small nations with big EEZs do indeed have assets, but also challenges that threaten to hamper their growth.

Beyond the commonly known issue of rising sea levels are other factors such as ocean acidification, overfishing and plastic pollution. Further, numerous SIDS lack a strong defence capability, like a sizable navy which will always outpace the capacity of a coast guard, so their ability to prevent maritime crime, like overfishing and illegal dumping, is limited.

HAZARDS ON THE HORIZON The framework is there for SIDS to progress their BODS goals but it would be a mistake to think it can be easily done, or could become standard practice. One issue is that there remain territorial disputes between certain nations that closely neighbour one another, and this has the potential for

disputes over the boundaries of their respective EEZs. Furthermore, in the backdrop to this optimistic vision is a brutal reality. The temptation of great powers to carry out their brand of ‘might makes right’ geopolitics has been tempered in the late 20th century and early 21st by strong

The progression from SIDS to BODS is often as much an economic transition as it is a psychological one. Many islands may be small if judged only by their land mass but, to use the words of a Seychellois diplomat, “We morph into large ocean states when our Exclusive Economic Zones are factored in.”

organisations like the United Nations, but there is the expectation that climate change will lead to a growing scarcity of resources.

Countries with a small land mass and population, bordering other states of a greater size, may find their EEZ is increasingly tested. Such disputes are already occurring, and can indeed arise absent of climate change as their key issue. Currently Asia is playing host to an immense squabble of this variety, with China, Vietnam, the Philippines, Taiwan, Malaysia, and Brunei (among others) all holding competing claims to territorial waters.

In theory, international waters should, by international law norms, be free of aggressive military manoeuvring. In practice, as a nation’s military power increases and/or the need grows to sustain its population with resources, new claims can emerge for the expansion of a country’s EEZ, accompanied by the signal that the nation’s military will enforce the boundaries on any foreign vessel sailing within them.

This should be a further incentive for Caribbean states to move swiftly towards clear and strong development targets that shore up their partnerships with friendly nations supportive of their aims, and enhance their own ability to protect their sovereign SBW interests.

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MARCH 7, 2020

CORONAVIRUS/CBI

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DID THE CORONAVIRUS EXPOSE THE RISKS OF CBI? Continued from page 1

J

ust as Bill Gates (whose Gates Foundation has donated billions to health initiatives) calls the coronavirus a ‘once in a century’ pathogen, so too does it represent a landmark moment in the history of CBI programmes.

Caribbean nations engaged in the business of selling economic citizenship or residency by investment may benefit because domestic instability elsewhere tends to be a stalking horse for increased interest in Caribbean CBI products. But in this case, the coronavirus is a doubleedged sword.

THE CORONAVIRUS SPREAD CONTINUES In recent days and weeks the coronavirus has continued to spread into new nations within the Americas and beyond. What’s more, deaths have also been recorded for the first time in the USA, Thailand and Australia.

Even though regional nations have applied a strict approach to the virus, such as in late February when several Caribbean islands refused entry to cruise ships, many suspect it is ‘just a matter of time’ before multiple countries in the region have outbreaks. At the time of writing, the Dominican Republic has reported its first confirmed case of the virus.

SIMPLY STATING THE FACTS When making any assessment of this issue, one must first acknowledge some simple truths. It is a fact that the Chinese have long been the leading nationality in the region’s CBI market. Suppose, for a moment, that in a country of 1.4 billion people, if even just 0.01 per cent of its population were to become Eastern Caribbean economic citizens, that would mean an additional 140,000 new passports being issued. Unfortunately, figures are unavailable for the total number of Eastern Caribbean economic citizens created since the inception of these programmes.

Describing the increased interest that

Shares of Carnival, Royal Caribbean and Norwegian have tumbled roughly 30% to multiyear lows since the end of January, losing nearly $19 billion in market value combined, according to Factset

Caribbean CBI programmes are receiving due to coronavirus anxiety, CS Global Partners, a CBI marketing firm, stated: “Our office in China, in particular, is reporting that one of the main reasons Chinese applicants are seeking to obtain citizenship by investment now more than ever before is to get their families to safety and security fast.”

According to official government data, Chinese nationals reportedly made up 19 per cent of Saint Lucian applications during the 2017-2018 fiscal year, accounted for 42 per cent of applications received by Grenada from January to June in 2017 and represented an estimated 98 per cent of applications in Grenada from January to April 2018.

APPEALING TO ALL CITIZENS For nations that maintain CBI programmes, there are difficult considerations ahead. It is clear that the coronavirus will drive new interest

If a Caribbean state positions itself to capitalise on new demand then the profits will surely flow, but it must also be ready for a situation where if a future crisis arises suddenly, a significant number of its citizens abroad may desire to permanently relocate.

from the Chinese in the investment migration sector, and possibly from other nationalities, but can this demand be met in a way that is secure and sustainable?

Ultimately, this is not just a challenge surrounding Chinese economic citizens, but economic citizens from countries around the world. As the World Health Organization explains, our vulnerability “is heightened by an increase in outbreaks occurring in complex humanitarian emergencies, as well as a novel convergence of ecological, political, economic and social trends including population growth, increased urbanization, a globally integrated economy, widespread and faster travel, conflict, migration and climate change”.

If a Caribbean state positions itself to capitalise on new demand then the profits will surely flow, but it must also be ready for a situation where if a future crisis arises suddenly, a significant number of its citizens abroad may desire to permanently relocate.

CORRUPTION

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MARCH 7, 2020

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THE PROBLEM WITH TRANSPARENCY INTERNATIONAL’S CORRUPTION INDEX

BY CATHERINE MORRIS, STAR BUSINESSWEEK CORRESPONDENT

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lobal anticorruption watchdog Transparency International (TI) recently released the 2019 Corruption Perceptions Index (CPI) and it was largely good news for the Caribbean.

The report, which ranks 180 countries and territories, placed most Caribbean nations towards the top of the charts with the region’s bestperformer, the Bahamas, ranked at 29. Saint Lucia was the fifth leastcorrupt country in the region, tying with Dominica in 48th place. Saint Lucia’s score (55 out of 100) has held steady for the past three years, but is this really an accomplishment worth celebrating? Flaws in Transparency International’s methodology and motives have long cast doubt on the accuracy of its flagship publication.

PERCEPTION VS. REALITY The first CPI was released in 1995 and has generated controversy ever since. Perhaps the most persuasive criticism is that the report artificially pits countries against each other, which can give a skewed measurement of success.

Each country is given a score out of 100; if one country should underperform, it can boost up others in the table by a few notches, without any improvement in their own score. Thus, a country can climb the rankings year after year without demonstrating any tangible success in fighting corruption.

In addition, it’s difficult, if not impossible, to reduce the wideranging topic of corruption to just one score (and it’s also worth noting that the CPI measures perceived corruption rather than actual investigations or successful prosecutions). Respondents in each country are asked for their experiences of bribery, misuse of public funds, use of public office for personal gain, protection for whistleblowers, anti-corruption legislation and more. This leaves plenty that goes untracked, including tax fraud, private sector fraud, money-laundering and the operation of the informal economy.

Denmark, which has been ranked the world’s least corrupt country by TI several times and took the top spot again this year, hit the headlines in 2017 and 2018 as news broke of a massive money-laundering scam involving Danske Bank and almost US$ 230bn in suspicious payments.

Map showing how Caribbean countries performed in the Corruption Perceptions Index 2019 (Courtesy Transparency International)

More recently, the Group of States against Corruption blasted Denmark for “too little emphasis on measures to prevent corruption”, specifically in terms of political donations.

One of the inherent problems with the CPI is that statistics are only as good as their source. Perception is not reality, and survey respondents are motivated by their own biases and background. In small, insular populations, such as those in the Caribbean, where there are strong familial and political ties to consider, the potential for misinformation is huge.

CHANGING THE CONVERSATION TI’s Corruption Perceptions Index has its shortcomings, but that doesn’t necessarily mean that the report is worth dismissing entirely. In fairness, TI researchers have a difficult task as, by its very nature, corruption operates in the dark. To counter claims of inaccuracy, the NGO has stated: “There is no meaningful way to assess absolute levels of corruption in countries or territories on the basis of hard, empirical data.

Possible attempts to do so, such as by comparing bribes reported, the number of prosecutions brought or studying court cases directly linked to corruption, cannot be taken as definitive indicators of corruption levels. Instead, they show how effective prosecutors, the courts or the media are in investigating and exposing corruption.”

The report’s biggest value lies in its visibility. As a useful tool in promoting and publicising anti-corruption measures, it subjects governments in areas like the Caribbean to some degree of international scrutiny. The more public sector corruption is forced into mainstream conversation, the more pressure on

The first CPI was released in 1995 and has generated controversy ever since. Perhaps the most persuasive criticism is that the report artificially pits countries against each other, which can give a skewed measurement of success.

Each country is given a score out of 100; if one country should under-perform it can boost up others in the table by a few notches, without any improvement in their own score

national watchdogs to develop a transparent and effective system of sanctions and deterrents.

After 25 years in the business, the CPI is still the best-known and most cited record of global corruption but perhaps it’s time for that to change. The organisation itself has come under fire for several high-profile mis-steps such as handing an Integrity Award to Hilary Clinton in 2012, even as the Clinton Foundation was being investigated by the US State Department, or failing to support whistleblower Edward Snowden. It is telling that in 2009 the original creator of the CPI, Johann Graf Lambsdorff, said he would no longer be involved with the work and abdicated all responsibility for its findings.

Public trust in TI and its report appears to be waning, leaving a gap for other anti-corruption NGOs, such as Global Integrity, to fill. And alongside these international groups, there’s room for the Caribbean to step up. The Commonwealth Caribbean Heads of Anti-Corruption Agencies met in summer 2019 for a summit that was largely ignored by the media, and information on the groups’ activities and plans is difficult to find. More visibility for regional and local bodies can help reframe the concerns around regional corruption, add more oversight and present a more balanced and accurate picture than that drawn SBW by the CPI.

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BLACKLISTING/COMPLIANCE

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BLACKLIST RESHUFFLE: The Caribbean responds as the EU revises its tax haven list Continued from page 2

the Cayman Islands – blacklisted for not having ‘appropriate measures in place relating to economic substance in the area of collective investment vehicles’ – struck a confrontational note. The British Overseas Territory has already petitioned the EU for its removal, pointing to the fact that, at the EU’s behest, it has adopted more than 15 legislative changes since 2018.

The Cayman Islands’ Premier Alden McLaughlin said it was “deeply disappointing” and suggested that it was simply down to poor timing as the country’s new Private Funds Law and Mutual Funds (Amendment) Law only came into force on February 7, just days after the Code of Conduct Group met to advise EU Finance Ministers on blacklist revisions. McLaughlin says he will continue to push for removal, but he may have to wait as the next update to the list isn’t expected until October.

THE SAINT LUCIA SITUATION All the jurisdictions under EU review were assessed by the Code of Conduct Group for their particular weaknesses and commitments made to implement changes by the end of 2019. Those that failed to make any headway were blacklisted; those who were in the process of making the necessary amendments but needed more time made the grey list; and those who did everything by the book were removed from all lists. Saint Lucia falls into the second category.

First blacklisted by the EU in December 2017, Saint Lucia was quick to act and had transitioned to the grey list by March 2018. In early 2019 the EU still had concerns, relating to certain tax exemptions on foreign income. Following a series of amendments, Saint Lucia now has until August 2020 to fully satisfy EU regulators that it deserves to be whitelisted.

REPAIRING THE REGION As of last month, the only Caribbean territories left on the EU blacklist are the Cayman Islands, the US Virgin Islands and Trinidad and Tobago. But it’s been a long and difficult road for the region that is still recovering from the impact of repeated censure and scrutiny.

Being blacklisted by the EU not only affects funding from the bloc, it also sends a powerful signal to the global

The Cayman Islands could face a long wait to get off the EU blacklist

community that a nation cannot keep its financial house in order. The reputational damage to the Caribbean over the years as islands move from blacklist to grey list and back again cannot be overstated. It has directly contributed to the de-risking crisis facing the banking industry as international providers view Caribbean jurisdictions as too high-risk and compliance measures too costly. The EU’s punitive actions have also had a dampening effect on foreign investment and cross-border business. As the sector begins the hard work of putting the worst of the de-risking crisis behind it, this latest whitelisting of much of the Caribbean is an early step in repairing the damage done.

Any real recovery, however, is dependent on stability and good faith.

Critics of the EU claim that the bloc is constantly shifting the goalposts, with countries unable to keep up with escalating demands. And, as Antigua and Barbuda’s Prime Minister Gaston Browne recently pointed out, there is little consistency with jurisdictions winding up on the EU’s blacklist even when deemed compliant by the Financial Action Task Force and the OECD Global Forum.

The integrity of the EU lists has long been questioned because large tax

havens, such as the United States, are overlooked in favour of squeezing less developed countries. Each time the EU revises and updates its blacklist, critics accuse the bloc of playing politics – an accusation that’s particularly hard to refute this time around.

Less than a month after the UK

formally left the European Union, the bloc’s Finance Ministers targeted the Cayman Islands, making it the first UK territory to ever appear on the blacklist.

Bavarian MEP Markus Ferber suggested the timing was not a coincidence, commenting: “This sends a clear signal that the idea of turning the UK into a tax haven will not be acceptable to the EU.” At the same time that the EU was sanctioning the Caymans, the European Parliament formally added a new amendment to its post-Brexit negotiations, warning the UK that it should address the situation of its Overseas Territories and Crown Dependencies and their noncompliance with EU good governance criteria.

With such obvious political machinations behind the scenes, it’s difficult for the EU to maintain the neutrality of its blacklist regime. The reality for the Caribbean, however, is that it has no choice but to comply if it wants to remain a player in financial services markets. In the meantime, CARICOM is on the offensive, calling blacklisting “an existential threat” and adding: “The measures have the potential of causing devastating economic, social and political consequences as a result of the harm inflicted on our global image, our economic competitiveness and resource mobilisation.”

The Saint Lucia Registry of Companies & Intellectual Property Company Incorporations Name: CANLUC Trading Inc.

Name: Aries Investments Inc.

Description: Importing, Trade & Retail

Description: Sales and marketing

Directors: Hassan Mohamad

Directors: Javid Derby

Date Incorporated: 12/2/20

Date Incorporated: 19/2/20

Chamber: Self-incorporated

Chamber: ACE Corporate Services

Name: Unicom Caribbean Limited Description: Construction and interior outfitting

Name: Anassagora Caribbean Ltd.

Directors: Neela Sewnath-Labban,

Description: Construction

Lawrence Labban, Aaron Labban

Directors: Gabriele Bilello

Date Incorporated: 18/2/20

Date Incorporated: 21/2/20

Chamber: Amicus Legal

Chamber: Amicus Legal

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