by Kevon Browne
St. Kitts and Nevis (WINN): Projects that form part of the CBI program’s investment offerings are under scrutiny; most recently, the former Deputy Prime Minister Shawn Richards focused on the new correctional facility being built on St. Kitts in Estridge.
The capital project has been used as a campaign topic that questions the current make-up of the government running a Cabinet with three of 11 elected officials and three appointed.
“A decision has been taken to build a prison as an approved CBI Project but let us ask some questions. Why would a prison cost almost $2 billion? The project has been approved through the sale of 5,000 passports at a cost of US $175,000 per passport. That equals to US $875 million,” said Shawn Richards.
The CEO of the St Kitts-Nevis Citizenship by Investment Unit (CIU), Les Khan, addresses the claims made by the leader of the People’s Action Movement (PAM) during an interview with Ian “Patches” Liburd on his show Straight Talk on June 27.
Khan said the situation from the CIUs perspective needs clarifying and that the numbers shared by Richards are taken out of context.
The correctional facility is a CBI project that falls under the Alternative Investment option of the program within the initiative of privately funded/state-owned projects, the first of which is the new correctional facility.
“Based on the information in the clip that I heard just there, the thought is that there was an allocation of 5,500 shares and that it’s equal to EC$2.2 billion. There’s an assumption here that EC$2.2 billion is being taken away from the people of St. Kitts and Nevis. There is no $2.2 billion; there is 5,000/5,500, whatever the number is in terms of the number of shares that have been allocated to assist the developer in recovering the investment.”
He continued, ” to quote a number like $2.2 billion is basically misleading in the sense that it’s assuming that the developer is selling at US$175,000. Now the difference between the privately funded and the state-owned the privately funded is at US$200,000. The state-owned is at US$175,000 for a family of four. In both initiatives, the developer, regardless of which side of the fence it is, pays government fees. So if we were to truly look at the new Correctional Facility and we look at how much money the country would actually get from that, it will be hundreds of millions of US dollars; multiply that by 2.6. And that would be over a period of one, two [or] three years, whatever it takes for the developer to be able to sell those, let’s call it [a] unit of investments because they’re not really shares. So $2.2 billion doesn’t exist. It’s never coming out of the government’s coffers. Actually, there’s money going into the government coffers. In the alternative investment option for the new correctional facility… the country gets an asset, an infrastructure asset and one that they would not have been able to finance over a period of time.”
According to the St. Kitts and Nevis Citizenship by Investment Unit, “upon submission of an application, non-refundable due diligence and processing fees must be paid; US$7,500 for the main applicant, and US$4,000 for each dependant of the main application who is over the age of 16 years.”
The CEO suggests that the market currently determines the price per unit of investment as it is a competitive market, meaning that the developer of various projects with CBI options would have to cut sales prices to receive revenue for construction.
“You know, I’ve been hearing the clips, I’ve been hearing the statements about the prison, the new Correctional Facility is costing $2.2 billion. We need to break down the numbers to understand what is really happening. When a developer gets a share, be it on the real estate side or e it under the alternative investment option, there are a number of factors that have to be taken into consideration. Number one is, what is the market condition, where is he selling or he or she is selling, and what price can he sell at? I can assure you that it’s not $175,000, and it’s not $200,000. So there are market conditions out there in the Middle East, in Russia when Russia is open, in China, and it’s a very competitive market. We are competing with the likes of Dominica, Antigua, St. Lucia [and] Grenada, where the pricing is so tight that the developer has to take a deep discount on his sale price just to be able to sell and get some revenue for construction.”
Khan reminded the public that the CBI Unit does not approve projects; that decision comes from the Cabinet with advice from the St. Kitts Investment Promotional Agency (SKIPA) on behalf of the developer.
Citizenship by Investment continues to be a highly debated policy in St. Kitts and Nevis going into the snap election where the people will choose a new administration after seven years under the Team Unity Coalition.
Many countries worldwide offer Citizen By Investment (CBI) Programs, including Spain, Portugal, Malta, Greece, Vanuatu, Grenada, St.Kitts and Nevis, and Dominica.
The programs offers applicants a chance to gain all rights of a country through citizenship for investment in the country.
Whether through privately funded/privately owned or privately funded/state-owned opportunities like in St. Kitts and Nevis, the CBI programs offer developmental options for the country.
While the economic benefits to a country have been lauded as the main reason for keeping the CBI programs going, other countries feel this may give unsavoury foreign characters unfettered access to certain countries.
On February 20, 2022, when Russia began its invasion into Ukraine, shortly after, the United Nations and singularly the U.S issued warnings to countries which offered the CBI program to stop the program or face tighter or new VISA restrictions.
The suggestion was not welcomed by CBI countries, especially Caribbean countries, that rely on the revenue gained from the program as a significant economic driver.
Prime Minister of Antigua and Barbuda wrote to the EU about the negative impact the move would have on Caribbean countries, sharing that 10-15 percent of his government’s revenue comes from CBI revenues.