NASSAU, BAHAMAS — On April 18th, 2011, then Prime Minister, the Rt. Hon. Hubert Ingraham tabled ‘The National Investment Policy’ in the House of Assembly. While presenting the document, PM Ingraham noted then that parts of this policy were not new and in fact “some aspects…date back to the 1960s”.
In his statement, PM Ingraham reminded his colleagues that an investment policy was “first articulated and published in a formal way in 1993 as [his] government sought to bring increased certainty and transparency to our business and investment environment, thereby enhancing the country’s attractiveness to the foreign direct investment required to foster economic growth.”
The updated version of the policy tabled in 2011 increased the minimum dollar requirement for direct foreign investment in a commercial undertaking from $250,000 to $500,000.
It also increased the minimum required value of a residence acquired by a foreign person for the purpose of seeking the accelerated consideration of permanent resident status from $500,000 to $1.5 million.
While the minimum dollar requirement for direct foreign investment in a commercial undertaking has remained the same, the value of a residence acquired by a foreign person for the purpose of seeking the accelerated consideration of permanent residency status has changed over time.
The most recent change was proposed in the draft Nationality, Immigration, and Asylum Bill, 2018, which would see an increase to that minimum requirement from $500,000 to $750,000.
Section 59, sub-section one of the bill proposes that, “Any person who is not a citizen of The Bahamas, is not the holder of a permanent residence certificate and who – (a) is financially independent; (b) has purchased a residence in The Bahamas valued at seven hundred and fifty thousand dollars or more, or otherwise invested in The Bahamas in that amount; and (c) intends to permanently reside in The Bahamas, may apply to the Board for the grant of an economic permanent residence certificate and may be granted an economic permanent residence certificate permitting him to reside permanently in The Bahamas”.
Whether $500,000 or $1.5 million, if the purpose of such an incentive is to enhance the country’s “attractiveness to the foreign direct investment required to foster economic growth,” as PM Ingraham articulated almost a decade ago, why should such an incentive be tied only to the purchase of real estate?
First, consider the limited impact of such transactions.
In many cases, those purchasing real estate for $750,000 or more with accelerated consideration of permanent residency in mind, are doing so from a foreign seller. In this instance, it is likely that the most significant economic benefit is the collection of 10 per cent VAT (value-added tax) on the real estate transaction.
I know of occasions where real estate valued above the threshold for accelerated consideration of permanent residency was purchased, and residency was granted. A few years later, the purchaser then sold that property, but was able to retain the permanent residency.
A study of the impact of citizenship by investment (CBI) and residency by investment (RBI) conducted by the European Parliamentary Research Service (EPRS), lamented that such schemes could artificially increase housing market prices. According to the report, this kind of RBI strategy contrasts with how we commonly understand foreign direct investment (FDI) by corporate entities. In the case of corporate FDI, typically, “investment decisions are strictly based on competitive rates of return and contribute to economic efficiency.”
In the case of the United Kingdom’s (UK) Tier 1 (Investor) visa category, prior to March 29, 2019, the eligibility to obtain a residency permit through investment allowed for investment in government bonds, but excluded investment in personal real estate.
Following the UK Tier 1 reform measures that came into effect on March 29, government bonds are no longer an eligible investment for Tier 1 (Investor) status either.
In fact, the UK government reversed this policy because the economic impact of an investment in government bonds is not substantial enough to warrant the benefits that come with the Tier 1 (Investor) visa.
FDI has consistently been an essential part of the national development and economic success of The Bahamas. But here, we think of that FDI mostly in terms of mega-resorts or large industrial projects.
Perhaps it is time we look at expanding the eligibility for accelerated consideration of permanent residency to incentivize more substantive and meaningful forms of investment.
What would it mean to incentivize investment in small and medium-size Bahamian business or local developments by offering accelerated consideration of permanent residency as a benefit, especially given this administration’s focus on growing entrepreneurship?
Could we attract angel investors, venture capital, or other forms of financing, instead of relying on government grants or government-backed loans to help entrepreneurs start their business or assist existing business owners in growing their operations?
This change in policy could be especially valuable if predictions of an impending recession turn out to be true.
Finding ways to stimulate our economy beyond relying on tourism or the financial services sector — both industries which tend to be disproportionately affected by economic downturns — will become vital for the continued growth of our economy.
When PM Ingraham tabled the National Investment Policy in 2011, he noted that the policy “evolved” in comparison to its original articulation in the 1960s.
Given the growing interconnectedness of the global economy, the increasing opportunity for entrepreneurship in The Bahamas and the lack of capital available to businesses of all sizes, I think it is time for this policy to evolve yet again.
Including accelerated consideration of permanent residency as an incentive to invest in Bahamian businesses and development projects as a part of an expanded national investment policy could go a long way to building a more vibrant economy.