Bill strikes the heart of Samoa

EDITOR’S NOTE: This story is reprinted from the Samoa Observer archives of last year. The decision follows the popular debate about the controversial Citizenship Investment Bill, threatening to sell Samoan citizenships:

The Draft Citizen Investment Bill 2014 goes to the heart of what it means to be a Samoan. That’s the opinion of local lawyer, Lei’ataualesa Daryl Clarke.

He made the point during a public consultation facilitated by the Ministry of Commerce, Industry and Labour (M.C.I.L) yesterday.

The debate ran hot over whether or not the Bill as it stands now would be of any economic benefit for our country.

As members of the law fraternity, the business community, Samoans and foreign investors themselves deliberated on the economic benefits and legal ramifications of the Draft Bill, Lei’ataualesa said this Act was far more serious.

“As a broad brush comment, we have spoken a lot about economics and money,” he said.

“It goes well beyond money. “I think it is far more important than that, because it is talking about what sort of people have the right to call themselves Samoan.

“I think that is of interest to all of us here today. And in terms of the Bill, it does go to the heart of being Samoan.

“For instance, a significant concern that I would suggest arises from the Bill is that a person and their family, and there is quite an extended definition, need only be here in Samoa for six weeks over three years and then be entitled to call themselves Samoan.”

According to the Draft Legislation, within three months before the expiry of the investors permanent resident permit, the investor, including any family member, may apply in person, or through the person’s agent for citizenship by permanent residence.

The Bill defines ‘Family Member’ as the spouse of the investor, any unmarried children aged under 18 years or 26 years if they are attending a tertiary institution, any child aged over 18 years if they are physically or mentally handicapped, any parent of the investor or spouse or any grand parent of the investor or spouse.

That means four generations of one family can become citizens from one $1,000,000 investment.

“As a Samoan, I guess I have very strong feelings about that,” said Lei’ataualesa.“And given that this is open to worldwide application, we could have anybody from any country that will get that right.

“And there are significant rights that come with citizenship and I would just lend some caution in terms of that step.”

Tootoooleaava Dr. Aiono Le Tagaloa from Fasitoouta also spoke of how the Bill questions what it means to be a Samoan.

“My comments will be very ethnocentric,” she told the gathering. “But I am sure you will all excuse the ethnocentricity because whenever you raise citizenship that is what you actually stir up.

“Not only aspects of ethnocentricity but also just our patriotism and nationalism.” She said one of the questions that should always be at the forefront of any debate regarding citizenship is how Samoans view being Samoan.

“And that is that value of what it is, that in effect we are statutorily selling through this legislation,” she said. “So what is the value of being a citizen to a Samoan?

“That differs from person to person depending on the sphere and the area in which they participate and work.

“My comments are from my sphere are the things that I feel this legislation will affect with regards to what I see is being a Samoan citizen.”

She said in the legislation and in the policy paper that was provided and presented, one of the issues that was particularly noted was the fact customary land will not be affected.

“That was mentioned at the beginning of the policy document, it is mentioned in the Bill and it is also mentioned at the end of the policy document,” said To’oto’ooleaava.

“At the beginning of the policy document it says it will not disenfranchise the nationals of Samoa and also especially in relation to customary land.

“However, at the end of the document it says that we may go there if it is viable and if it is feasible.

“Now, I see that this is logical because as you know and we know Samoa has very little freehold and Government land.

“The last official figure I was given was five per cent freehold land and 15 per cent government land and then the remainder is customary land.”

She says in this regard, she sees that it was not a good study to look at the nations that were listed in M.C.I.L.’s policy document, because they do not have that large an amount of customary land.

The Document she speaks of is The Policy Guidelines Towards Development of Citizenship by Investment Programme for Samoa Consultation Draft (it is published below in full).

In the guidelines, M.C.I.L. say they looked at five other nations with similar legislation; these were Singapore, St. Kitts and Nevis, Australia, New Zealand and the Commonwealth of Dominica.

“Now if we have citizenship by investment through the purchase of property and you only have 15 per cent government land to lease or purchase and five per cent freehold land,” Tootoooleaava said.

“Then the question becomes where are you going to go when the investments that are supposed to flood in start flooding in what are they going to purchase?

“And in that regard, although a lease is permitted under the Alienation of Customary Land Act it actually opens us up to a vulnerability.

“And it is a vulnerability of something that I believe at the core of being Samoan, not in the statutory, but being a Samoan.

“Because our being a Samoa is based on the fact that we have land and titles, we have these matai titles and we have land that pertain to them and then we have our language that makes it the third pillar of our identity.

“So when these things are made vulnerable, then I do not think that it is wise nor is it favourable and as this has a very strong focus on that.

“That is where my fears come from.”

To’otoooleaava said the policy document lists a number of pieces of legislation to be considered in relation to this legislation, including the Village Fono Act.

“The Village Fono act doesn’t have anything to do with the leasing of customary land,” she said. “Instead it is the Alienation of Customary Land (Act) that should be considered.

“Furthermore, there was recent amendment to the Land and Titles act 1981 which emphasises the position of this Government that customary land should be protected.”

She says in this regards she belives the Draft Citizenship Investment Bill 2014 is inconsistent with not only the Government’s stance but also the prohibition in the Constitution on the of customary land.

“And so that is where my concerns are coming from,” she said.

The Ministry of Commerce, Industry and Labour presented a paper called “Policy Guidelines Towards Development of Citizenship by Investment” during the consultation yesterday. It is published here in full for our readers’ information:

1.0 Background Citizenship by Investment is the granting of citizenship status to an individual (and immediate family members) contingent upon a specified and quantifiable investment in the country. Alternatively, residence rights may be offered, in which case this is often referred to as investor immigration. While residence is granted to investors and wealthy individuals in most countries, there are only a few countries now which have clear provisions in their laws that grant citizenship for economic considerations and without residence requirements. The United States of America (USA), Canada, Australia, Austria, Switzerland and Great Britain are countries which offer residency and /or citizenship to Wealthy individuals and investors.

In this category of developed countries, for one to qualify for eventual citizenship there is duration of time in which they are granted residence pending qualification towards eventual grant of citizenship. This duration often in the range of 2 to 5 years, gives the prospective applicant time to satisfy set requirements set by relevant national authorities which include, proof of networthiness of business and personal assets, transfer of funds, establishment of business or exploration of areas they wish to make long term investments among others.

In the developing country category, within the region, a review of l4 Pacific Island Countries (PICs) reveals that none of the countries offer citizenship based on investment or wealth of applicant individuals. Similar to current practice in Samoa, citizenship can only be obtained through birth, descent, marriage, registration, and Permanent residence.

However, within the Caribbean, a region with similar geographical characteristics as those of the Pacific and compromising of Island countries with similar populations, Economic and climatic challenges similar to countries in the Pacific, some countries and specifically St. Kitts and Nevis, Commonwealth of Dominica, Panama and Antigua and Bermuda are or in the process of implementing a citizenship by investment programme as a means of boosting investment, income generation for development of critical sectors, employment creation and overall economic development. Investor citizenship has been a long established practice in- St. Kitts and Nevis and the Commonwealth of Dominica.

Both countries have developed programs targeting specific branches of economic activity. Given the geographical position of these two states, their low level of GDP per capita, and the lack of competitiveness on the global market, investor citizenship programs aim to improve their overall economic performance. In St. Kitts and Nevis and the Commonwealth of Dominica the naturalized investor is presumed to have established strong economic ties with the new community of membership.

However, since the investor is in possession of the passport of St. Kitts and Nevis or the Commonwealth of Dominica, but is not bound to reside therein, his or her level of political engagement in these polities is lower than that of an ordinary citizen (or a transnational migrant)2. This novel initiative to those countries implementing it also poses both benefits and challenges detailed in this paper and which are worth taking into consideration should Samoa consider initiating a similar programme. Hence, this paper containing guidelines towards development of Citizenship by Investment Programme for Samoa specifically takes into consideration the Caribbean Small Islands country perspective.

A review of developments and trends in the 2010 Asia-Pacific Trade and Investment Report indicate that the amount of FDI inflows to the Pacific islands have been considerably lower compared with those of other sub regions however the FDI inward stock has increased steadily. From 2005 to 2009, the Pacific’s FDI inward stock as a percentage of GDP increased on average at 14% annually to reach a 44% share in 2009. In particular, Samoa has shown a high exposure to FDI as its share of FDI to GDP reached 133% (UNCTAD, 2010b).

This is an indication that Samoa like other similar Pacific Island countries rely heavily on FDI for its growth and that it has managed to successfully promote its economy as an attractive destination for FDI inflows, although its markets are small. Major sectors attracting FDI in the Pacific islands include natural resources, primary industries (agriculture, fishery), food processing, tourism, electronics and light manufacturing (ITC, 20l0)3.

This trend lends merit to the need to explore and encourage initiatives that can position a country as a unique investment location. In Samoa’s case, the graduation in 2014 from LDC status poses macro economic and financial policy challenges due to the implications of graduation on continuing access to current levels of grant aid and soft loans from development partners (grants currently represent 25 percent of Government revenues). It also means Samoa will be in a position where it needs to fasttrack other avenues for income generation in a bid to offset the eventual outcomes resulting from a deduction of donor aid.

A medium term strategy to progressively increase domestic resource mobilisation, maintain current levels of external assistance, and to enhance efficiencies in budget spending to avoid any recourse to commercial market borrowings is crucial. Further, leveraging the potential use of remittances for development and investment purposes will become increasingly important in the post graduation period. Remittances represent 25 percent of Samoa’s GDP4.

In moving towards remedying the shocks that will result and in a bid to further boost foreign direct investment, the Cabinet Citizenship Committee made recommendations for the need to develop this policy paper containing guidelines towards initiating the implementation of a Citizenship by Investment Programme for Samoa. In the absence of a background report examining economic benefits which may result from Citizenship by investment/ permanent residency programme, this policy paper contains basic policy guidelines based on international best practice towards considerations for the development of a Citizenship by Investment Programme for Samoa.

The paper also presents some comparative analysis from countries across the World applying programmes that award citizenship/permanent residence based on investments made by prospective applicants.

1.1 Utilizing Citizenship as a tool to enhance Foreign Investment. The benefits of dual or multiple citizenship range from ease of movement, where there is political strife in one’s own country to investment planning and personal security. Categorically such benefits that will prompt different nationalities to seek citizenship in other countries and is also crucial for Samoa’s proposed Citizenship by Investment initiative include the following:

i. Convenience: High net worth citizens of some countries have to invest considerable time to obtain visas from many countries.

In addition to the time involved in the process, and uncertainty, is the fact that some countries only offer single entry visas. Where travel may be required on short-notice, access to another passport may be crucial such as in the case of civil unrest. Additionally, a second passport may afford the holder visa-free travel to jurisdictions not available to his country of birth;

ii. Tax Planning: Several countries levy income tax on non-resident citizens.

Alternative citizenship has therefore become increasingly important as an effective tool for international tax planning. As a national of two or more different states, an individual generally has more planning options as well as more privacy in banking and investment; iii. Personal Security: Citizenship and a passport from a small, peaceful country is considered by some as protection when travelling, particularly in times of political unrest, civil war, terrorism or other delicate situations. Many international business executives consider an alternative passport as the best life insurance; and iv.

Investment in the future: In a dynamic political and economic environment, acquiring a second citizenship may be considered an investment for the future and in many instances, there is need to give up one’s present nationality while they, along with their family, enjoy the benefits of a legal second passport.

1.1.1 Prospective Country Benefits.

On a country specific basis, implementation of a Citizenship by Investment Programme can be a mutually beneficial arrangement for applicants and the host country. Among the gains to the country can be:

i. Economic Development: Samoa is heavily indebted with very little fiscal space for infrastructure and investment; ii. Capital mobilization: The revenue stream generated by investments and processing fees can be considerable;

iii. Liquidity Replacement: Effect of grant money lost as for instance a result of Samoa’s graduation from LDC status in 2014 can be diluted through devising of other revenue generating initiatives such as a Citizenship by Investment Programme;

iv. Improve Foreign Reserve Position:

Fees and incomes generated from the implementation of such initiative can play a crucial part in boosting the foreign reserves of the country.

v. Increased Foreign Direct Investment: The more applicants that satisfy the set requirements of implementation of such an initiative the more FDI for Samoa;

vi. Increased Economic activity: In most instances where the citizenship by investment programmes are implemented, the new breed of investor citizens introduce innovative Ways of doing business hence resulting in increased economic activity.

vii. Investor Confidence: The assurance of citizenship in an economy through investment boosts confidence of prospective investors and creates a sense of security towards their investments hence motivating them to even invest more in the development of their businesses.

ix. Impact on Tourism: The presence of a new breed of investors as a result of implementation of the proposed Citizenship by Investment Programme is likely to have positive impact on tourism with increased presence of high net worth individuals.

ix. Impact of presence of a network of high net worth individuals: The presence of Investors through the initiative is likely to open avenues where such individuals could be encouraged to support community development projects through charitable contributions.

1.1.2 Risks Despite the above prospective benefits that the Citizenship by Investment Programme could present to the country, there are inherent risks in venturing into such an initiative.

These include;

i. Management and Employee Selection: ii.

To be continued ......