Natural disasters are frequently rising on a global scale. These disasters arrive in various permutations, and so do their economic, social as well as geographical effects.
Small island developing states (SIDS) undergo the world’s highest frequency of natural disasters such as hurricanes, cyclones and several other violent storms that result in severe flooding and, in the worst cases, cause deaths and destruction of homes and infrastructure.
The repercussion of natural disasters necessitates reconstruction and repairs, which all cost huge money. Inward investment injections from citizenship by investment programmes are a requirement for small island nations like Dominica, St Kitts and Nevis, and Saint Lucia, as they support natural disaster preparedness.
For small nations, the expenses of post-disaster reconstruction can be excessive. On average, natural disasters result in damage equal to 2.1% of GDP every year in SIDS. As per the Emergency Events Database (EM-DAT), a natural disaster’s economic effect is calculated on a per-capita basis. The most extreme storm ever, evaluated on a per capita basis, hit Dominica in 2017, resulting in damage equal to 280% of the island’s GDP, as per the EM-DAT.
Without access to funds, SIDS like Dominica faces the challenge of not being able to build resilience against threats of destruction.
SIDS were also heavily impacted by the Covid-19 pandemic which left a tail of economic destruction globally. Caribbean countries are faced with a looming debt crisis in the aftermath of the pandemic as their tourism-dependent fragile economies were pummelled by travel restrictions. It is against this background that the United Nations (UN) projected a 9% fall in Gross Domestic Product (GDP) for SIDS in 2020, the year that the pandemic hit. According to the same source, this 9% decline in GDP was 3% more than other economies. Additionally, the severe shortfalls in tourist expenditure led the International Monetary Fund (IMF) to anticipate a steep increase in the current account deficit of SIDS to 12.1% of GDP in 2020. The GDP and current account deficit dynamics add another layer to the funding difficulties that SIDS are grappling with.
Although the IMF provides emergency financing tools such as the Catastrophe Containment and Relief Trust (CCRT) which are important for debt relief, other sources of funds are useful for effective disaster management. According to the UN, only 6% of the COVID-19 funding by the international community for developing countries has been spent on SIDS.
Evidently, rescue packages provided by international agencies like the IMF and World Bank are often inadequate to meet the financial needs of SIDS, thereby making funds from CBI programmes useful. Greater access to financial support and better disaster debt management is a critical part of a toolbox for resilience for SIDS.
SIDS also face unique challenges which emanate from their small geographic size, remoteness from trade partners and international markets, a lack of creditor trust and weak economic diversification, which compound their ability to bounce back from disasters. Interestingly, the connection between SIDS and the ocean is ambiguous: it is a tourist attraction asset and at the same time, it puts these countries on the frontlines of climate change. These structural issues increase the vulnerability of SIDS to natural disasters, putting them in need of funding compared to other countries which offer CBI programmes.
Dominica, St Kitts and Nevis together with St Lucia are some of the SIDS which offer CBI options to investors. These three countries were also ranked high in terms of benefits from their CBI initiatives in the CBI Report of 2021.
Dominica’s CBI Programme plays a major role in promoting social and environmental causes, particularly sustainable development. The Programme offers two investment opportunities: a one-time contribution to the government, commonly known as the Economic Diversification Fund (EDF) option, or an investment in government approved real estate. Funds transferred to the EDF have been instrumental in Dominica’s national development, particularly through the reconstruction of key infrastructure, sustainable housing and the agricultural sector.
As pioneers of the CBI industry, St Kitts and Nevis is recognised as a Platinum Standard brand and appeals to investors seeking the most straightforward application processes, enabling applicants who can successfully pass the stringent due diligence process with a receipt of citizenship within three months.
Established in 1984, St Kitts and Nevis‘ CBI Programme is the world’s longest-standing in the investment migration realm. The programme enables American families a secure nation to call home in exchange for an investment into its Sustainable Growth Fund. The fund utilises revenue generated to support different sectors of society, including tourism.
The St Lucia CBI program has the main option, the first and fastest is a contribution to St Lucia’s National Economic Fund (NEF). Funds deposited into the NEF are intended for progressive local development projects selected by the Minister of Finance.
In conclusion, the macroeconomic impact of citizenship by investment programmes is significant, especially in the areas of natural disaster management and economic development. CIB programmes are better viewed as an economic lifeline for SIDS.
From hurricanes to health emergencies, CBI programmes have proven to be a reliable lifeline to countries in need. For SIDS seeking to rebuild pandemic-stricken economies, CBIs are a viable option to secure revenue and investment. CBI arrangements will continue to generate large capital inflows, which consequently have a significant economic and fiscal impact.