7 Questions with Les Khan on the Hurricane Relief Fund
November 5, 2017 - Commentary St Kitts and Nevis
The Hurricane Relief Fund (HRF) was a third option that was created under the St Kitts and Nevis Citizenship by Investment Program in September to provide funds to the country – it was priced and presented as one that is most competitive in the marketplace at this point in time.
Having said that, the Hurricane Relief Fund is not lower than most of the other islands. For example, a single applicant under the HRF is $150,000 - which is $50,000 above two of the other countries offering citizenship. In terms of a family of 4, yes, I suppose it is more competitive. But it allows the client to decide on the best option available within the Eastern Caribbean. We hope that with a price and the value of our passport, that the client will decide on St Kitts and Nevis.
Most people don’t realise that the Hurricane Relief Fund was created and considered before the hurricanes. The idea was put out there before Hurricane Irma – we felt that we should have an insurance policy, and like most insurance policies you do not buy the insurance after the event, you buy your insurance before.
At the time it had to go through a whole process of discussing it with Cabinet members, the Attorney General and the Cabinet Secretary. But then Hurricane Irma came around and that delayed the process a little bit. At the same time, we were trying to determine how much cost the country had suffered as a result of Irma. And while we were going through that process, Hurricane Maria came around and again we had to look at it and say how much damage did the country incur? It came up to – as in this point in time – over $150 million of damage to the country.
Now it’s not to the magnitude of Dominica or Barbuda, but it is significant enough that the country does not have a ready source to fund the reconstruction of roads, buildings or public facilities. A lot of people are saying that maybe the timing of the announcement was wrong. Well you know you can’t predict when these things are going to happen and we had to announce it at the time that we did because that is when it was approved. We couldn’t announce it before.2. There have been some queries around whether citizenship issued through investing in the Hurricane Relief Fund is legal – can you clarify what makes this CBI route legal?
As most people may understand, the CBI program is created as a result of regulations passed in Parliament. But the government and the Prime Minister have the ability to amend those regulations through various instruments. One of those instruments is what you call an SRO, which is basically a signature of the Prime Minister on a change to the regulations. The process, as I mentioned earlier, has to go through discussions, go through Cabinet approval then go through the parliamentary lawyers to draft the amendment to the regulations. Once that was done the Prime Minister signed off on it, and the minute he did so it became the law - so it is legal.
There are also comments that the passport obtained through the HRF is not valid after 10 years. That’s not true because a person obtaining citizenship through the CBI is either obtaining it through the SIDF, the HRF or through the real estate investment option so there is no difference in any of those options in terms of citizenship.3. Do you have a limit on the number of applications you will accept under the HRF or a target amount of funds to reach? Is the HRF investment option likely to be extended after March 30, 2018?
No, we have no limits on in the number of applications that we will take as long as they come in before the end of March 2018. In terms of dollar value, we will take as many applications as we can process and that can be presented to us in that timeframe.
The SRO that was passed stipulated that the Hurricane Relief Fund will end at the end of March 2018, so it is our full intent to stop the HRF at that point in time.4. How will the HRF benefit those affected by the recent hurricanes? Will any of the other affected islands be assisted through the HRF?
As a result of the hurricanes, some roads became impassable, there were mudslides and those roads had to be cleared and temporary access provided. If another hurricane comes through these temporary roads will disappear again and we will go through the same process over and over, so there has to be a spend in infrastructure to rebuild a number of these roads. A number of police stations, other government buildings, schools and so on had their roofs were blown out, there were leaks, all these things need to be fixed and unfortunately St Kitts and Nevis is not in a position to have a ready source of funds that can be spent on this infrastructure - so that's where these funds are going to be used.
The fund as it was set up under the regulation calls for management through a separate Board appointed by the Prime Minister and that Board will make the decisions on how the funds are allocated. But there have already been commitments by the Prime Minister to give $2 million to Dominica which was already announced a couple of weeks ago, along with Barbuda and Anguilla which are examples of where some of these funds are going.
The PM has said openly that as the fund builds he will make recommendations on how the fund can be utilized on the other islands.5. Do you think the recent hurricanes will have an impact on the desire of CBI applicants to invest through the real estate route in the Caribbean?
No, I think we will continue to see a balance and our HRF is just a temporary option – so at the end of March 2018 that will disappear. Our SIDF will continue, the real estate option is one that will continue too.
I think it must be stated that an individual wanting to invest in real estate – be it in St Kitts or any other country – has already taken into consideration the fact that he can get citizenship at a cheaper price through the fund donation route so why would he want to do a real estate investment? Well, there are several reasons – he wants a rate of return, he wants to have an asset that he feels comfortable will appreciate, he wants to be able to sell that asset in five years - according to the St Kitts and Nevis laws for instance - so there are a number of reasons why clients will continue to choose real estate over an SIDF or even over the HRF.6. Do you think the value of the St Kitts and Nevis passport has been negatively affected by the lower investment entry threshold?
I don’t think so at all because the value of the passport is based on political stability, economic stability, the number of countries you can have visa-free access to on port of entry, the options a country may offer in terms of tourism, in terms of lifestyle and so on - so there are a number of factors that impact the quality of passport and St Kitts and Nevis continues to be ranked as one of the highest in quality of passports. It is the highest in the Eastern Caribbean and the second highest in the Caribbean, coming in just behind the Bahamas.7. What do you say to previous applicants who may be upset that the investment amount has been reduced by 60%?
Well, I would like to reiterate that the investment amount has not been reduced by 60% – a third option has been offered at a certain price for a certain period of time, so it has not been reduced. The SIDF still exists.
The second point is that there are some people who might say well, three months ago we paid $250,000 and it is now $150,000. Well, if you had a sale in a store 6 months from the day that you buy something, you can’t really go back and say give it to me at a discounted price because I bought it at a higher price, that doesn’t happen. So, I think individuals who are in that situation are a bit upset that they spent more money. But at the end of the day the country needed the funds and that’s why we created the HRF.
Have any more questions on the Hurricane Relief Fund route and how you can invest in it to obtain legal second citizenship of St Kitts and Nevis?
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