Govt. comes under fire

The government has come under fire for its apparent lack of evidencebased research into a new law proposing to offer citizenships for cash.

The President of the Chamber of Commerce and Industry (C.O.C.I.), Klaus Stunzner Jr., said based on the information provided by the Ministry of Commerce, Industry and Labour (M.C.I.L.), the Chamber is not convinced that the proposed law will benefit Samoa.

Mr. Stunzner Jr. was speaking during the first public consultation about the Draft Citizenship Investment Bill 2014.

“I will start by saying that from the Chamber's perspective, we always support any initiatives to promote Samoa as a viable and safe economy and country for business,” he said.

“The Chamber also supports any new initiatives that we believe will be substantive or beneficial for the economy. “In considering any new policy initiatives one of the key guidelines that the Chamber looks at has to be evidence-based.

“And in this case, based on information available to us, we would like to say that we are not convinced that this new initiative will generate the desired benefits that we expect from Foreign Direct Investment (F.D.I.).”

His comments were supported by former Chamber President and businesswoman, Lemalu Sina Retzlaff. She questioned one of the figures in the report.

“There are a few things in the background information,” she said.

“One that jumps out is that Samoa has shown a high exposure to foreign direct investment and it shows that it is…133 per cent.”

The M.C.I.L Consultation Draft handed out at the meeting claims that the F.D.I stock has increased steadily in the region.

“From 2005 to 2009, the Pacific’s F.D.I. inward stock as a percentage of G.D.P. increased on average at 14 per cent annually to reach 44 per cent share in 2009,” the Consultation Draft reads.

“In particular, Samoa has shown a high exposure to F.D.I. as its share of F.D.I. to G.D.P. reached 133 per cent.”

It is an odd number, considering the F.D.I. is reported on an annual basis, the Global Economy Website reports.

“F.D.I. is reported on an annual basis, i.e. how much new investment was received in the country during the current year,” the website states.

“It typically runs at about 2-3 per cent of the size of the economy measured by its gross domestic product.

“If a country routinely receives F.D.I. that exceeds 5-6 per cent of G.D.P. each year, then this is a significant success.” Lemalu said that it would be great if that happened, if that was true.

“I just wanted perhaps some clarification, just in general, where that comes from and if in fact that is true that 133 per cent of our G.D.P. (Gross Domestic Product),” she asked.

Consultant Stephen Musubire, a Trade Policy Analyst attached to M.C.I.L., said the F.D.I. to G.D.P. ratio figure was based on just one report.

“In specifically responding to first the issues raised by Sina, the reference to F.D.I. G.D.P. ratio of 133 per cent the origin that and also supported within the committee was a result of a U.N.C.T.A.D. (United Nations Conference on Trade and Development) compiled report (in) 2010,” he said.

“And that was basically the basis for evidence to prove that Samoa heavily relies on foreign direct investment and it is crucial of income for Samoa as an economy.”

But Lemalu could have a point. On reading the section of the unnamed report mentioned in the M.C.I.L.

Consultation Draft, it appears that the share of F.D.I. to G.D.P. ratio had increased by 133 per cent might be closer to the truth, not that the F.D.I. was 133 per cent of G.D.P as a ratio.

The more correct ratio F.D.I. to G.D.P for the same year is presented in a report by Simon Feeny, Sasi Iamsiraroj and Mark McGillivray titled Growth and Foreign Direct Investment in the Pacific Island Countries offers up data for the net inflows of F.D.I. to G.D.P. as a percentage.

For the period 2000-2009 Samoa had the lowest F.D.I. to G.D.P. ratio in the region coming in at just 0.87 per cent.

Looking at U.N.C.T.A.D. its Least Developed Countries Report 2012, it says that Samoa made US$12,000,000 from F.D.I. That equates to 1.7 per cent of G.D.P.

As a result of the alleged lack of evidence that this proposed legislation would indeed boost Samoa’s economy, Mr. Stunzner said the Chamber did not have any comments on the actual provisions of the Bill.

However, he made several recommendations along the lines of evidence-based framework.

“It is the Chamber’s position that for recommendation that this Bill be put on hold,” he said. “Until extensive due diligence and an extensive scrutinising process has taken place or been undertaken to identify and justify the need for the bill.

“At this point in time what we are seeing is very much talking about prospective benefits. What the Chamber would like to see if this can be quantified and to actually substantiate the need for this Bill.

“The Chamber would also like to recommend that in this process that maybe a holistic review of the investment achieved over the last 10 years also be undertaken.

“To see how it has benefitted Samoa and to identify areas where foreign investment could (be) further developed and also to identify barriers that are in place.

“The comments that we have put forward at this point in time is very much based on information that has been made available. So at this point in time that is very much the position of Chamber.”

M.C.I.L. C.E.O., Auelua Samuelu Enari, defended the research conducted into the Bill, before conceding the proposed legislation did have its “shortcomings”.

“Those (views) are fair,” he responded to Mr Stunzner. “And we also welcome your remarks and we will await your submission.

“At the beginning when we first started or commenced into researching this type of initiative, we the Ministry as well as the Committee have made extensive research.

“We looked into what New Zealand was doing, we looked into what Australia was doing and we looked at the model of Singapore and the model of Saint Kits (and Nevis), and the model being used by Canada.

“These are all the models that we were exploring and then we looked into what would be possible tailormade for Samoa. So this is how we arrived…at this initiative.”

He said the best way to address the challenges of the legislation was simply to implement it.

“We have the belief that most of all the challenges and shortcomings of this Bill can only be realised when we implement something,” said Auelua. “When we implement, we improve and of course the country, the Government also has the right to uphold or to suspend if there are some issues that arise.

“We looked into some other countries that undertook this type of initiative also and in some time during the process of their law they suspended it before they recommenced while they were improving.

“So I believe all the fears and concerns and the worries can be looked into if we started to implement something.

“And then when we know what is the problem, what the challenges are and what the shortcomings are that when we start to develop, we can address it as we go along.

“Because as we all know that in any initiative development it can only evolve for betterment from starting to implement something.”