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Inward Grace for Sale
A Podcast with Tianyu Fang about buying Caribbean Passport
The full transcript is available below.
In this episode of Caribbean Progress, Rasheed chats with Tianyu Fang, a Fellow of CPSI and a well-known tech journalist. This was a far-reaching conversation, from philosophizing on the ideological limits of selling citizenship to the practicality of fiscal policy constraints from reductions in passport demand. They explained why some Caribbean countries have become overly reliant on their Citizenship-by-Investment (CBI) sectors. They also get into the weeds about why so many Caribbean passports are purchased by Chinese citizens. Rasheed and Tianyu are working on a detailed report about Caribbean CBIs for the Caribbean Progress Studies Institute (CPSI).
[01:43] What are Citizenship by Investment Programs (CBI)
[04:00] Creation of CBI in the Caribbean
[07:22] The False Sanctity of Citizenship
[09:53] Gentrification through CBI Fallacy
[12:31] Non-Caribbean Citizenship and Residency Programs
[16:32] An Unspoken Dependence on Passport Sales
[17:34] Is The Revocation of Citizenship Possible?
[20:14] The US Misconception of Caribbean Reliance on CBIs
[22:28] Counter Arguments to CBI in the Caribbean by US organizations
[23:47] Alleged Involvement in Caribbean CBI Programs by the CCP
[26:18] Do Chinese CBI Applicants Move to the Caribbean?
[27:34] Why are Caribbean Citizenships such a Hot Commodity?
[33:25] Bad Due Diligence as an Argument Against CBI in the Caribbean
[40:34] CBI as an Economic Scapegoat
Ius Doni: The Acquisition of Citizenship by Investment by Dr. Christian H. Kälin
[00:05] Rasheed Griffith: Hi Everyone. Welcome back to Caribbean Progress, a podcast of the Caribbean Progress Studies Institute, CPSI. Today I am speaking with Tianyu Fang, a fellow of CPSI and an avid tech journalist. With his writings appearing in The Atlantic, Wired, Vice, South China Morning Post and others. Previously, he was a co founder of Chaoyang Trap House, a newsletter about life on the Chinese internet. He covered tech, politics and culture, as a freelance journalist in Beijing.
[00:40] In this episode, we discuss Caribbean citizenship by investment programs, or CBI’s. This is a topic gaining lots of attention recently from foreign government officials and public policy organizations across the world. But they seem to have a hard time sorting out the facts from fiction. So in this episode, we aim to lay the groundwork for a more serious conversation about CBI programs in the Caribbean. There is a lot to cover on this fascinating topic. So on to the show.
[01:18] Rasheed Griffith: Hi Tianyu, welcome to the podcast.
[01:19] Tianyu Fang: Thank you, Rasheed. I'm glad to be here.
[01:21] Rasheed Griffith: So I want to talk about this very fun topic, of course, in many circles, it is considered to be a very controversial topic, topic that kind of brings up anxiety on many sides of the table. And it's a generally fairly obscure topic. It's not a thing that people usually have podcast about in the first place.
[01:41] Tianyu Fang: It's a very nerdy topic, for sure.
[01:43] Rasheed Griffith: It definitely is. So before we even get into the nerdy details. I want to start with the general landscape of the citizenship by investment programs in the Caribbean. There are only five countries that do it. But before we kind of get into it, could you kind of give an overview of what these are, and actually where can you find them.
[02:03] Tianyu Fang: Sure. To start with, I think it'd be nice to give an overview of what exactly are these citizenship by investment programs, and specifically here we're talking about countries that have legal grounds to sell passports directly to foreign investors. Where a person from Russia or United States or China could pay somewhere between $100,000 to three or four times upwards, to acquire a passport from a country that they may or may not have ever been to. So in the Caribbean, we have five countries that does this, there is Antigua and Barbuda we have St. Kitts and Nevis, we have St. Lucia and then Dominica and Grenada. So these are the five countries that have been doing these programs legally, and St. Kitts and Nevis was the first country that started their program back in the 1980s. It's been around for quite a while.
[02:52] Rasheed Griffith: And you know, surprisingly, even in the Caribbean, we don't hear much about it going on in the Caribbean or just living in Caribbean. It's not a topic that comes up in politics conversations, I guess for the countries where I'm from Barbados, but sometimes let's say a scandal might happen. And it might come up in the news and then the prime minister or a senior government official might respond to the allegations in some country.
[03:18] And I remember very vividly I don't even know why this comes up so clear in my memory. But I remember a news report, an interview with the Prime Minister of St. Vincent and the Grenadines, Ralph Gonzales. He was talking about how St. Vincent will never do this passport sale, CBI system. And I remember he said a line that I will never forget. He said, “The passport is an outward representation of the inward grace of citizenship.” You know, a very elegant line, very graceful line, well, it's somewhat bullshit, but they do very odd things themselves, but I would never forget that line. And it was a very strong stand saying, Hey, we are not going to do this route.
[04:00] But it also gives me the impression that there is a seedy undertone that some people do get in their minds when they think about CBI programs. So why do you think that these CBI programs even came up as a rational economic policy action in the Caribbean? What's your view on that?
[04:18] Tianyu Fang: First of all, to talk about this sort of controversy in the case that you discussed. There's always been sort of a holy type of language around the idea of citizenship and what it means to be a citizen of a nation state. You recommended a Christian Kaelin dissertation to me and Christian Kaelin for those who don't know is the CEO of this immigration consultancy called Henley and Partners and they were basically the pioneers in this business of citizenship by investment and they were the ones who basically were involved in the lobbying of the government of Malta or the government of St. Kitts to launch their own programs and Kaelin had this idea of views Jus Doni.
[04:53] Traditionally, you have two different types of citizenship acquisition mechanisms. One is Jus Soli and one is Jus Sanguinis right? So it's like blood by soil. You were born in the United States, you're a US citizen, you're born to German parents, you're a German citizen. So his justification was actually if you're donating money to a country, then that entitles you to some sort of economic reward. And you could probably be entitled to become part of that country. This is obviously extremely controversial idea in the first place to accept that somebody who's never been to your country even is a fellow citizen of yours.
[05:25] And one example that's not by donation is Olympics. This is something that people don't talk about that often a lot of countries allow people to naturalize as citizens of their countries, if they're an athlete. So China has been doing this outwards. For example, there are a lot of ping pong players, table tennis players from China that were recommended to acquire foreign citizenship in countries like Kazakhstan, in Singapore, in Canada. Because basically, a lot of the best income players in the world are Chinese. And the Chinese national team was very worried about the fact that they will just end up playing themselves. So by suggesting that their players nationalized in other countries, they're actually maximizing the possibility of Chinese gold medals. For, whereas the other country, the countries that are recipients on the receiving side are receptive to it. But the idea that you can just become a citizen of a different country, without any meaningful connection to it in the first place has always been quite controversial.
[06:12] The thing is, if you look at the countries in the Caribbean, that are offering CBI programs, these are the ones that are economically more vulnerable, right? We're not talking about Jamaica, we're not talking about even Haiti, we're talking about countries that have 30,000 40,000 people by population, and CBI, I think, offered a very clear pathway for these governments to acquire a lot of wealth very quickly. And these are the countries that generally have very good passports because they are small countries, obviously, the St. Kitts passport is better than a Haitian passport, because just by its sheer population, and sheer size, and these are mostly recently independent, and by recently, I mean, late last century countries from the British Empire, and generally that has grounds for easier and better passport visa free access.
[06:58] So we're talking about the five countries in the Caribbean that offers CBI programs, these passports usually have 150 countries that are visa free, including the Schengen zone and Great Britain. Canada used to be visa free for most of these countries. And I think they got rid of that for a while. I think that's coming back as well. But with a fine print in the terms and conditions. You had to have applied for Canadian visa before, or you have had a US visa before, to be qualified for the US visa free access.
[07:22] Rasheed Griffith: Yeah, you see you have raised a very good point about the let's say the sanctity of citizenship, that's a very latent intuition that most people have. And, you know, that's why I wanted to write a paper years ago and call it ‘Inward Grace for Sale’ based on that same quote I mentioned from the Prime Minister of St. Vincent, because he really framed it as if citizenship is this kind of holy grace from heaven.
[07:46] Tianyu Fang: I mean, it's biblical language, right?
[07:47] Rasheed Griffith: Yes, exactly. It’s very biblical language. And you can't really acquire it for money. And I think that's completely incorrect. In my view, I take the market viewpoint where anything that can be done morally good for free, can be done for money. And there's no reason why you shouldn't be able to, in theory, or in principle, acquire citizenship for just investment of any kind.
[08:10] I always give the example of a person born in St. Vincent that essentially doesn't do anything besides take money from the government, why should that person have more credible call to someone who actually gives the government $300 million and build some roads and it could go down the line about that kind of economic adjustment and economic measurements.
[08:30] But they always thought the simple idea of because money was traded, therefore, it's somehow tainted that kind of tainted good symbolic language, I think was always kind of incorrect. So usually, when people have this conversation about citizenship and that language, I'm like, No, let's stop there for a bit. There are other reasons that we'll get to for perhaps having some objections to the CBI programs, but simply by some kind of semiotic objection, that is what the philosopher Jason Brennan calls it. Simply saying, ugh, I don't like it, it's not a good enough reason to think something in principle, you should be against it. And that's always a problem with the conversation. That it always starts from this semiotic objection, and therefore people think it’s a valid argument for the conclusion of let's not have this CBI program.
[09:16] Tianyu Fang: I also think that there is this projection from countries that are sort of more major players on the global stage, the idea of say, global border regimes have become very consolidated in countries within the European Union, the UK, the US, China, Russia. The idea that actually we should have all these guardrails and these mechanisms to prevent you from becoming American to prevent you from becoming Japanese to become Russian, but that's being projected upon the region's Caribbean. This sort of nationalism or this sort of natural identity formed upon the idea of citizenship just doesn't exist as much in other parts of the world as it does in isonationalist superpowers.
[09:53] And at the same time, I think we'll probably expand on this a little bit more later on. People who buy these passports in St. Kitts, they are not going to move to St. Kitts, or very few of them will. So the impact on the ideas of gentrification, what if there's a huge immigrant population? What if people who are originally from there can not afford housing anymore, these are just not as big of a concern as immigration is in many other countries. So I think that's a very important sort of factor to it.
[10:18] Rasheed Griffith: I definitely agree with that. And there's another small nuance point about the Caribbean, that doesn't come up too often. So the Caribbean has always been a population whose geography is very much in flux. So for example, you have about half of the 3 million people living in Jamaica give or take that number. They're about another 3 million of Jamaicans living in the US and Canada, and Europe. About double, essentially, of the population. Half of the population is living on the outside. But those people still consider themselves Jamaican, and those people think of themselves as being from Jamaica, but they probably haven’t even been to Jamaica.
[10:54] Because of the various empire type structures and the geographical way of outward service migration, and those kind of things. The idea of the nationalism that's often associated with small Caribbean countries is actually that more of that cultural thing. So essentially, that's the Bertrand Russell version of nationalism. The only justified nationalism is that cultural affinity you have to a shared identity. Now, that's been kind of the Caribbean way for quite a long time.
[11:22] But the idea is nationalism based on border and based on the idea of that people kind of being born there is this really key part of the social identity, is not true in the Caribbean. Given that someone is born in the Bronx and have a Jamaican mother, Jamaican father and they consider themselves as Jamaican, as someone born in Kingston. That is really just how it is. So being born on a particular land population landmass has really been watered down in the Caribbean for generations as a signal of your kind of belongingness to that identity.
[11:57] Now, when you have the idea of people buying passports from St. Kitts, whose never been to St. Kitts, people in St. Kitts don’t really consider them Kittitians per se, they consider them to be a watered down version of something. It is a whole separate thing, it is just an economic, very clean economic transaction. There's no one kind of misunderstanding of what's happening. Of course, when it comes to the US people, as you mentioned they are the ones who misunderstand very clearly what happen. And that's where I think a big part of the philosophical difference for sure, comes in, in many aspects, given that the US in some ways also has an investment program.
[12:28] Tianyu Fang: I think that's a really great point.
[12:31] Rasheed Griffith: On that point, then, because there are other places that do not necessarily a direct citizenship application filing for economic gain, but they do have residency applications. Can you discuss some of that before we go on?
[12:43] Tianyu Fang: Sure. I think the bracket of citizenship by investment is big a term, it's a loaded term. So I think there are several different categories that will describe these kind of schemes in general. So there's citizenship by donation, right is what we're seeing in these Caribbean programs where you donate a set of money or you know, depending on how many people that you have in your family, within six months, you get a passport, that's the most direct program that we're talking about.
[13:03] But there's also sort of citizenship by investment. For example, you buy a house, seven years later you can probably sell it, but you can get the money back theoretically, and this is also popular in these Caribbean programs. And then there's sort of residency by donation. The most well known one would be the US EB five program, which is practically an investor visa. I believe it used to be $500,000. I think that's been raised to $800,000. I'm not exactly sure. But basically $500,000, you invest in one sort of project that's being accredited or certified by the US Citizenship and Immigration Services, and a few years later, you get a green card. And then a few years later. I think five years of living in the US, you can become a US citizen.
[13:43] That has been around for a very, very, very long time. And it's currently popular amongst upper middle class or wealthier immigrants to the US, because it's not a very expensive rate given chances are you're going to get your money back. And there's also programs like this in the EU, like Greece has done ever since their economic downturns back in well, I guess more than a decade ago, they have been doing this residency by investment program. I think they have specific fine prints to it, which is you're not allowed to work in the country, but you can travel in and out of the EU, you can be self employed, you can work on your business in a different country while you're living in the EU. And the other thing is, I don't think there's a very easy pathway to citizenship. There's also that.
[14:24] Those kinds of things are very popular. Thailand, for example, offers a long term visa for retirees. Malaysia has that program as well. These don't lead to citizenship and Rasheed where you are in Panama, there's the friendly nations visa. There's also all sorts of ways to get permanent residency in Panama and I mean, in a lot of Latin American countries as well. So that's always been around and more popular in these what we call like Western countries, I guess.
[14:47] And some of these countries themselves also offer citizenship by investment programs per se. Actually passport sales by donation. Malta in the EU has been doing that. Tsipras did that for a while, but they had to pause the program after giving a passport to Jho Low, the notorius Malaysian fugitive.
[15:03] Rasheed Griffith: Ah, did they?
[15:04] Tianyu Fang: Yes. And Jho Low had a passport from Tsipras and another passport from St. Kitts. I think both of them have been revoked ever since these acquisitions have been discovered by the media. Very controversial. And then there's Portugal. Portugal, did something that was very similar. But I think you have to go to Portugal a few times before, to actually get the citizenship. It's way more common than just a handful of countries. I think Montenegro tried to do it. But I think they're trying to tone it down because of objections from the EU, they are trying to join the European Union. It's kind of ironic given that a lot of these EU countries themselves have these programs.
[15:35] Vanuatu has a program that's more controversial because I think the Schengen states have recently revoked their visa free access, given that their due diligence wasn't good enough, or something like that. These programs have been around for a fairly long time, and they're more common than the Caribbean countries. But I think what makes these five countries special, there are two things. One, people who get these passports do not want to live in these countries, they use it for backup purposes, they use it for tax purposes, they use it to travel more easily. If you're Chinese or Iranian, you don't have one of these Western passports, it's harder to travel around in Europe, in North America, I think that solves a lot of problem for a lot of people. And the other hand is gravity of these programs and local economies we're talking about in some countries, 50% of the government revenue in some years come from CBI programs. And that's huge, right that the Caribbean case is special because their economies are so dependent on passport sales themselves. So I think that's what makes it more interesting.
[16:32] Rasheed Griffith: Yeah, dependence on passport sales for government revenue is probably the most undertheorized, under discussed aspects of Caribbean economic diversification, in the last 50 years, at least for these five countries. People think it is a by the way industry that happens on the side with the main thing being tourism or exports and so on, but this is a substantial, in some cases, see, concurrently major industry in the economy.
[17:02] As you mentioned, there are some countries that are 50%, or even some that we looked at recently that is 60%, of non tax revenue is just from passport sales. That is a tremendous, tremendous proportion of your economy for this one industry. Essentially this a new monocrop industry, in some ways, except being even less stable. There's something you said in passing that I think should be highlighted. You said that when for example, Jho Low was involved in the whole 1MDB thing and all of that came out, that Tsipras and St Kitts revoked the passports.
[17:34] Now, as a Barbadian citizen, the government cannot revoke my citizenship if I were to do something highly unorthodox or illegal, because that's just not something you can do. But in this case, St. Kitts was able to do it. That kind of highlights to me one weird thing about the Caribbean CBI is that they are less deep in terms of the true normal utility or true normal interpretation of what a citizenship alots to somebody's person.
[18:00] For example, even in St. Kitts, people who acquired the passport via the normal economic contribution, don't have voting rights. Now, that's like the one thing, every citizen knows that they have. I can vote for the government because I am a citizen. That's one thing that’s across the board. But no, thats not the case for many of the Caribbean Programs. And the whole idea that you are able to revoke the passport under x and y, you know, persona non grata conditions. That's a very weird thing also. Where it seems to me that in many cases, when we are talking about citizenship by investment in the Caribbean, it really isn't the same kind of thing that citizenship is normally invoked, when it comes as [inaudible] intuition. And they think that really clouds a lot of the conversation because people think it is way more concrete than it actually is. In many realistic respects.
[18:49] Tianyu Fang: Yeah, totally. I think there are also precedents for this in other countries. For example, in most Western countries, there are legal clauses for the revocation or reversal of nationalization, denationalization, I think would be the right word. On grounds of say, you lied about something in your immigration application, your found out that you lied about what your parents did, or where you are actually from, you’re a terrorist. Naturalization application in Canada's, for example, I think there's legal ground for that, but it's very rarely executed, of course, and there's also international law conventions and regulations about whether you can or cannot make a person stateless. If a person is only a citizen of St. Kitts and he or she has renounced all other citizenships, I think it becomes trickier as to whether you can actually revoke that citizenship given that the individual will be effectively stateless, which is not good.
[19:36] But I think in Jho Low’s case was a lot clearer that you know, he was a fugitive he had Malaysian citizenship by birth, and he never renounced his Malaysian citizenship. And by the way, for those who don't know, Jho Low, is this like, I think we just assume that people know about these were sagas but he was involved in the corruption case of one 1MDB scandal where he helped the former Malaysian Prime Minister embezzle a lot of money and he funded The Wolf of Wall Street, the film.
[19:58] Rasheed Griffith: There is that yes.
[19:59] Tianyu Fang: Kudos to him in that particular regard.
[20:00] Rasheed Griffith: Yeah, there are some really fun images of him and DiCaprio on a boat party. Oh, my goodness what was going through their mind just letting a random Malaysian guy fund the entire movie? Anyway! That's a whole other thing, that we can get into it at some other point in time.
[20:14] Now a lot of the pressure on the CBI programs obviously comes from, I guess it's not obvious to most people, but a lot of pressure does come from the US government and various agencies involved as such. But I think that one of the things they don't get is the share economic contribution, we kind of mentioned it just now. But the sheer economic contribution that the CBI programs give to these small Caribbean countries. I don't know if there is anything else you want to add, to kind of emphasize this particular aspect of it, before we kind of go into why the counter arguments primarily from the US come up so often.
[20:53] Tianyu Fang: One thing before that is the fact that the US counter arguments doesn't seem to be about the economic reliance, they're more worried about the security side of it.
[21:02] Rasheed Griffith: No. I mean, in terms of the, because when you have to weigh the argument, at least from my conversation also with people from that side of the debate, they don't seem to understand how large of a part the CBI programs have in the economies. Let's say you have 2% of your GDP being part from CBI and we can say okay, so therefore guys, we can reform this, we can work with this, we can diversify from this, we can make moves quickly to get away from being with all of these CBI people, from mostly China is the argument, from in your country.
[21:35] But if the program is actually 40%, crudely of a GDP contribution, then to even start the conversation, it's a very different kind of converstaon pathway you have to have because the idea of diversifying 40% of your economy away from a thing that's almost a non starter in many, many cases. So that's what I kind of mean by how they don't get why it's such a large contribution. And therefore the start point for the conversation which is primary security base, is often a bit crude.
[22:05] Tianyu Fang: Yeah, totally. That makes sense. I think a good example for the US officials I would imagine would be something like Turkey. The Turkish real estate market is actually a lot more dependent on passport sales, because it is the easiest way to buy a house in Turkey, in some parts of the country is very economic dependent, but it's nothing like if you just cancel the program, and you know, the economy's gonna take a hit, but not as much. Again, we're talking about countries whose government revenue primarily to some extent, it relies on these programs.
[22:28] Rasheed Griffith: So now what in your view constitutes the major counter arguments from the EU or from the US, because these are primarily the ones who makes the arguments about the CBI programs in the Caribbean in particular?
[22:41] Tianyu Fang: I think one major part will be sanctions. Which seems to be the first thing that comes to mind after the Russian invasion of Ukraine in 2022. And that's when I think a lot of CBI programs in the Caribbean started to stop issuing passports to Russians. And a lot of the EU programs were closed during that time. I don't know whether that was because of the US pressure. I assume that would play a big part, either explicitly or implicitly. And then, obviously, I guess, like the global war on terror is officially over now. But terrorism being a part of it? These are in the brackets of due diligence.
[23:12] And then of course, we're seeing, I think what I see is more paranoid reactions. Things like there are a lot of Chinese investors these days. Chinese people trying to buy passports, because for various reasons, partially because there's capital outflow, doesn't actually do that much by acquiring a foreign citizenship. There's things like international travel being more convenient with a foreign passport, etc. Of course, with the usual paranoia against what the US might think of as like mass Chinese migration, that becomes a huge problem. In their view. These are way more innocuous. And for reasons I think we probably will expand on later, but I think these are the sort of the bigger brackets.
[23:47] Rasheed Griffith: Yeah, so let's do that. There is a very pronounced view in many parts of the US establishment and in US think tank land they think there's a communist plot afoot, essentially, to get more Chinese people in the Caribbean for various potential reasons. Now, one reason, and we've both heard this reason recently is the Communist Party of China wants to get more Chinese people in the Caribbean because these people can therefore vote on policies that the CCP prefers, are more lenient to the CCPs ambitions in the Caribbean and the Americas. That is actually something we've heard very credible sources say.
[24:31] Tianyu Fang: It's frankly, ridiculous. So there's so many layers to this discussion. I don't even know where to start. But for starters, as we've mentioned earlier, you can just become a citizen and vote, right? In many cases, you will have to live there of some sort, establish residency, have an address, and then you can vote. Second of all, we're talking about mostly Chinese. These are people who are buying passports, to potentially leave the country leave China or to move their assets out of China. They're not the ones who want to go to the Chinese government and be like, hey, now I've acquired a foreign citizenship, I want to help you interfere with the politics of other countries. I don't think that's something that anybody would do.
[25:07] And just third of all, we're talking about countries again with 40/60,000 people, and you know this better than I do, that the politics themselves in a lot of Caribbean countries are not exactly impartial. There's a lot of explicit implicit corruption going on within the CBI program itself, of course, but also just in general. I think they're way easier and cheaper ways if the Chinese government wanted to interfere with local politics. And in fact, I was in talking to a lot of Chinese sort of passport agents, and they sort of advertise the fact that St. Kitts and Nevis and I believe…
[25:39] Rasheed Griffith: St. Lucia
[25:40] Tianyu Fang: St. Lucia?
[25:40] Rasheed Griffith: Yeah, St. Lucia
[25:41] Tianyu Fang: Doesn't have diplomatic relationship with China. They advertise these as selling points, because they're not in touch with Beijing, and they have diplomatic relationship with Taiwan, the Chinese government doesn't have to know that you have this passport. And by the way, because of the Bandung Conference in the 1950’s, China does not allow dual citizenship, it's a little bit more complicated than that. But if you nationalise as a foreign citizen, then in most cases, you're not allowed to keep your Chinese citizenship. Even though this is actually enforced very loosely. It's like a situation where it depends on where you're from in China and like where you enter the border and what passport you use. So it's very easy to keep both passports, most people do it by not entering China using a foreign passport.
[26:18] Rasheed Griffith: So there's a point you mentioned, I guess we said it several times, but lets expand on it, people don't typically live in the Caribbean countries. That is, because growing up in the Caribbean it is obvious, of course. But there's a point that escapes a lot of the conversation, people seem to don't even visit ever, the Caribbean countries. Where are these people buying the passports and going to?
[26:40] Tianyu Fang: Well actually, I think mostly are just in China, we're talking about people who are paying money to acquire citizenship. If they were moving to the US, or if they're moving to Europe, I think there are other ways for them to spend a few years there and just be a citizen. There are many pathways to do so. As I mentioned, the EB five program, the a Greek program and these people are rich enough. That's not particularly hard. And I think that the appeal to the Caribbean programs is exactly that they don't have to go anywhere.
[27:03] This is what the Chinese passport agents will call [Mandarin], to immigrate but not to actually emigrate. You're acquiring a different citizenship, but you're not actually leaving the country, they keep it in their vault in their back pocket or something like that. And when they need to open a bank account, for example, for receipts, or they're trying to go to the Schengen area, which is notorious for granting very short term visas, where you can be a billionaire, and they will give you like a three months long, single entry visa to Malta, which is very odd. But you know, that's usually been a problem I've been hearing, you know, that's what they do. They don't leave the country, they are just in China.
[27:34] Rasheed Griffith: So what else? Because it seems even to me that spending at minimum 100,000 US dollars for the potential of you know, I guess potentially, if you are that rich that means you probably go to Europe pretty often. But essentially, for a free visa, an easy visa access to some countries, I assume, primarily Europe and so on, it seems a lot of money just to spend for that purpose. What other reasons do you think are people primarily buying these and overwhelmingly a large portion from China? What other reasons are Chinese people buying the passports in the Caribbean so much?
[28:08] Tianyu Fang: First of all, and I think the most obvious case is beyond sort of the China example, even the US quote unquote digital nomads are buying Caribbean passports, or trying to get foreign residencies. I think there's just a whole movement that is anti taxation, libertarianism of some sort, that's our push for this idea that well actually I need to have as much economic freedom as I want to, or as I should be, is primarily for optionality and safety. I think that's a very big part of this. And in the Chinese case, its basically like, I might be staying in China right now, but I might not in a few years, when that happens, that's a Plan B. That’s a backup plan.
[28:44] Another thing is, there's a lot of false advertising going on in this business. And by that I mean, for instance, in the past two or three years during COVID. A lot of Chinese business elites are very angry that the Chinese government was trying to keep everybody at home. Obviously, that was a very controversial, I mean, it was widely supported policy in 2020 and 2021. But towards the end of 2021/2022, the sentiment became sort of much more antagonistic, because people weren’t sure why they were stuck at home for like three months, and nobody could leave. So there was a lot of paranoia in many ways justified in the Chinese population. They're like, get off this place. We have to have other plans, but this is what they call like [Mandarin] to run away from the country.
[29:23] And at the same time, the Chinese government was limiting who could leave the country during COVID, which was very funny because they do it on two grounds. One is public health. They're saying, Oh, you shouldn't be doing it essential travels and that being implemented in the Chinese political system, unless you can prove that you have to travel, then chances are the border agents gonna block you from leaving the country. And I just think part of this, is just a lot of people suspect there's political undertone to it. People in China aren't allowed to leave anymore. The Chinese government's actually going to close down the country. I'm very skeptical of it as COVID is now over, I've been crossing Chinese borders, these cases are completely gone.
[29:57] I think there's a much more charitable view of it or an interpretation of it, which is they're just really bad at their jobs. And they're just just how Leninist system works in many cases doesn't work that well. But people have been worried like it What if I can't leave the country, should I get a different passport actually alot of passport agents started selling that point is to say, if you don't have a second passport, there's a chance we might not be able to leave China.
[30:18] But of course, the truth is that even if you had a second pass for you wouldn't be able to leave China either. Because unless you renounce your Chinese citizenship, you will not be able to leave China on a different passport. And when you leave the border, you're still seen as a Chinese citizen. The whole thing about a second passport, could help you avoid an exit ban, which is increasingly common in China, unfortunately, but that's just not how this entire system works. And there's a component of false advertising that plays on this business elite paranoia and sort of fear that the Chinese government will be very unfavorable to their departure.
[30:50] Rasheed Griffith: I do wonder when we check the numbers, if we will see the uptick or a dramatic decrease in numbers of sales pre-posts during COVID. I'm curious what those will be. Because I also know that some countries like St. Lucia, they added in a new route to passport sale, which they call a covid relief bond, I believe it's called.
[31:13] So you can donate directly to the Covid bonds. Such flexible terms. But you can qualify for the passport. So we definitely have to check numbers on that for sure and see how that kind of checks out pre and post. But one thing you said that really strikes true, essentially conflicted, the idea of the libertarian movement, when I say movement, I mean lets say this expansion of people having these thoughts and in terms of more security, more freedom, more flexible for that ideal cosmopolitan lifestyle. And of course I think if you are, for some people they can perceive themselves to be under more security risk. If they live in a particular kind of country and they actually have the money, then they may actually, in large numbers, take the option to buy a different passport.
[31:58] I remember there was a advertisement for the Antigua passport program. It was targeted to Nigerians and it had like a Nigerian family that they were interviewing and they were saying, yeah, you know, my country is not very stable, it's corrupt and so on. So what they're saying is mostly true and they wanted that stability that outside [inaudible] to get out country and so on. So of course, now if you have a lot of money and you live in a communist country, yeah, there are some details there. You may want to have a backup plan. It's very easy to understand. Essentially. It's what I think people keep missing.
[32:32] Tianyu Fang: I think there's a very good example of that, which is there's this YouTube channel called Yes Theory. I sent you the link sometime earlier, but one of the posts of the YouTube channel is an Egyptian national, and the thing about that is you have to do military service, but he left the country when he was younger, so if he goes back to Egypt, he would have to do military service, but because he hasn't done military service, he was denied passport renewal. So he couldn't travel for the longest his time. So he bought a St. Kitts passport and that solves the problem.
[32:57] We've been looking at the list of applicants and successful applicants in Dominica, for example, right? The names of these applicants are being published by their official Gazettes. Well, sometimes it's a poor record keeping, but sometimes, occasionally they publish the list of everybody that's been naturalized in the past six months.
[33:13] And what we're seeing is like a lot of these are Chinese names, but a lot of them are Middle Eastern names. That's a lot more common than both of us, expected. There are a lot of Middle Eastern applicants as well, and North Americans, Europeans, they don't specify nationality, but they do have lists of names. So I'm just guessing.
[33:25] Rasheed Griffith: Yeah, I can do some natural language processing to kind of guess better about that. It just seems to be the case that a lot of large numbers issue where there are just so many wealthy Chinese people. So if they're doing the thing, it shows up more pronounced. Just seems that that's a big factor. Especially when it is a small country. Of course, we are even more pronounced in that sense. Just because there's so many people.
[33:47] Tianyu Fang: And then Russia is no longer allowed.
[33:49] Rasheed Griffith: Exactly. It's unfortunate. I think that's a very unfair recommendation from the US and EU to just trap people who have nothing to do with the war. Even though they have money, they can't get out. One of these other examples where you should be able to acquire citizenship if it is allowed for free, it should be allowed for money. And it's usually, in most cases, is hey, people are innocent until they're proven guilty of any kind of potential issue. And that's why you have the due diligence problem. You know, the same thing with Venezuela. Many Venezuelans also buy, I would assume should or if they could buy different passports as well or I guess in that case a lot of Venezuelans actually just move to Spain.
[34:27] Tianyu Fang: And by the way, the due diligence problems I think should be noted that are not due diligence done by these governments. They're third party due diligence. They're actually very expensive. Because if you look at the market prices for these passport passports, about a hundred thousand dollars. Dude, due diligency added, you're looking at like 110, 120. It becomes a lot more expensive. These are not cheap services.
[34:45] Rasheed Griffith: Yeah, the applicant also has to pay the due diligence fee. The diligence is done by a third party, usually some kind of law firm. Which in turn would outsource to some, essentially record keeping firm and due diligence firm. Which I assume the law firm also gets some portion of the revenue in some way, I'm sure, and that is how it's done.
[35:05] And of course, there are ways to get around that to be less diligent in the due diligence. They are ways to do that. And that's how people can kind of skirt some of these issues. But again, I think people, not I think, we know it firsthand, people over index on the issues when it comes to the people who slip through due diligence.
[35:26] And unfortunately, I don't think it's a slip like any other system, that as we mentioned kinda before, earlier in the show, that Caribbean governments actually have a streak of corruption. And you can always pay a little extra to get things done. And that is just a small country government mentality across the board with very, very few exceptions. So people kind of over index on it, and then therefore the program is bad, but that's nothing on the program. That is a you are. In my view implicitly saying, well, Caribbean governments can't govern. We can debate if that's true or not. Obviously, you know, that can go in any direction, but that's not a CBI problem. That's a Caribbean governance problem in general. And I think that kind of overin indexation on the CBI issue risk of due diligence is to often brought up in this conversation unfortunately.
[36:13] Tianyu Fang: I think it's important to note that last of, I think last year or this year, if you fail the due diligence in one country, say if you fail your due diligence in Antigua, You're not allowed to actually file an application in any of the four other countries. Right. You can't apply for a passport in Grenada. So that's a little bit tricky.
[36:29] And you know, speaking of corruption, a lot of the most prominent cases that we've been seeing of say, Jho Low, but also say Justin Sun, who was the, uh, founder of Tron, is a Chinese born crypto quote unquote entrepreneur. I think that's a liberal use of the term. Well, he acquired Grenadian citizenship and he became their representative to the WTO. So, It's very unclear to me if that was part of the Citizenship by Investment program, even though people attributed to that because he got a diplomatic passport and that he got, a political appointment that was very, very prominent, like high visibility.
[37:03] ]I'd say. The other person I have in mind is Xiao Jianhua, who was the Chinese Canadian entrepreneur slash I think he was like investor or something. He was a real estate developer that had ties to certain Chinese government officials. He was living in the Four Seasons Hotel in Hong Kong for many years before he was kidnapped to mainland China, and then he was detained from there onwards.He had a diplomatic passport from Antigua and Barbuda, so how did that come about? You know, you can't just go out there and buy a diplomatic passport from the citizenship by investment programs. So it must have been some other sort of story. We don't know.
[37:33] Rasheed Griffith: Yeah, exactly. And there's this other example. I'll give this point first. One of my favorite stories is not well known in Caribbean either, but there is a program called the Antigua and Barbuda Special Economic Zone. And it essentially is a SEZ, a Special Economic Zone being developed by the Antigua government in conjunction with a Chinese quote unquote billionaire Yida Zhang.
[37:58] And I certainly cannot find any information about him online. But any case, he's now an Antiguan citizen and he's the chairman, Zhang of the Antiguan and Barbudan Special Economic Zone Commission, of course. And he's also buying a lot of land in Antigua to build these resorts and build these medical schools and essentially a large laundry list of amazing projects that almost none have actually materialized and of course caused a lot of tension in the country.
[38:28] And, but that's an example, he didn't just do that because he paid for the money and just bought an Antiguan passport and that was it. He just magically became all these things. He bribed. Likely, of course I have no proof of this. He bribed in some way the government and that is how these things happened. And that's, that's my speculation of course.
[38:48] And people would say, oh, therefore this is their CBI program. No, CBI program worked well. He probably has a clear record, I don't know, but let's say he does have a clear record, he passed the test, but that doesn't actually mean anything when it comes to these other things. The same thing with Justin Sun. The same thing now with Yida Zhang. The samething with many other situations like this.
[39:08] Antigua in particular has a situation where they have their very loose definition of what counts as a diplomatic post in the sense that they have a thing called commercial diplomats. Where the government grants people diplomatic status. In reciprocation, those people kind of be in these foreign countries and essentially tries to drum up more business for the government. In my view, I don't actually see a reason why that's wrong in principle. I think that's fine.
[39:38] These are small economies. We can't afford to have a really well linked ambassador in the Middle East. If you're a very rich person in the middle East that knows all of the people that actually wants to do some business in the Caribbean on a up and up way. Why not give him a diplomatic passport and say, Hey, bring some money to here. You get this extra benefit. Okay. I think that's actually fair. There are examples that people don't call because they're, they have been no scandals of that being the case. And I think it's a fine in principle, but it's just that to point out that this just happens all the time.
[40:09] The Yida Zhang thing in Antigua, the Justin Sun thing in Grenada. As far as I can tell the Justin Sun thing in WTO didn't produce any scandals. He essentially did everything well enough. Of course, he had his, he used it for his own personal gain. That's fine. I'm fine with that too. But to say therefore it is some issue with CBI, it's not clear to me that you can make that link so forcefully as what others have done very recently.
[40:34] Tianyu Fang: That's exactly right. Even though I disagree with a lot of the conventional concerns about CBI programs in the Caribbean, I think I do have some concerns about the economic overdependence that we're seeing right now. And there are a few risk factors, right? One example would be the value of these passports are, in part, predicated upon the fact that there's visa free access to these places that you usually don't get Visa free access to. What if that goes away? And we are seeing that in Vanuatu when the Schengen area revoked their visa free access. What happens next? Your passport becomes, it is worth less than it used to.
[41:06] Another example would be, what if the Chinese government, for example, says, we should start cracking down on this sort of stuff. We should start cracking down people who have like two. I don't think it's likely, but not impossible. What if, say the US government bans Chinese citizens from applying to these passports the way that they ban Russian citizens? I don't think it's that likely, but still possible.
[41:23] So there are all these risk factors that if any of these happen, they could slash these passport applications by like 30, 40%. And when 30, 40, 40% of 50% of your government revenue is slashed, then that's a pretty big deal. These are some valid concerns that I think should be raised in this context.
[41:38] Rasheed Griffith: Or it could be something as innocuous of European Union making it easier for Chinese to get long-term residencies or visas. That could be a thing. I don’t know what condition that would prevail, but that could be a thing as well. That could also cause substantial decline in demand for Caribbean passports. And yeah, it's a very good point.
[42:00] It's close to my view as well. On the core critique of the CBI is that when you rely so much on a precarious demand, you are in a very odd position because you now don't have a way to reconstruct that demand in some other industry quickly enough to prevent a very large economic shock. External shock as it were. And that is to me, the constant problem of Caribbean economic development policy. Governments successively do not plan policy in a way that actually makes it more optimal for long-term growth and long-term sustainability. And there are many examples of this across the Caribbean countries. Unfortunately, I think CBI is essentially used as a cash cow without much long-term planning.
[42:48] Tianyu Fang: Sure, yes, exactly.
[42:50] Rasheed Griffith: And it's not apparent to me either that the revenue that is being generated from CBI is actually reinvested into capital projects that can generate more revenue in the future and actually can lead to better foreign currency inflow than all that kind of stuff. It seems to be like a crutch to do current account support.
[43:11] Now, as we kind of go into this topic a bit more in our research, maybe that might not be the case. But at least from the cursory inspection, that does seem to be the case. That's a problem. But again, this is to me not a unique CBI issue. This is an issue of Caribbean growth policy in general. And once I think you contextualize it in that sense, then the oddness, I don’t want to use that term, of the CBI revenue and the CBI revenue reinvestment does not actually seem so odd at all. I think that's one of the major issues I see when people kind of bring this up in different contexts. They always use CBI as some aberration, some economic aberration. I'm like, no, this is a properly contextualized Caribbean developmental story that just isn't optimal and that is actually part of the course, when it comes to Caribbean policy.
[44:00] Tianyu Fang: I think that's exactly right. And then part of that is against the sort of moralistic story of it, right? It's like, oh, should citizenship actually be a commodity? And you know, I think we can have an hours long debate about that. I do think that that idea is being challenged. One of the main crutches of the issue.
[44:13] Rasheed Griffith: Exactly. So Tianyu, I think this is a good place to stop our preliminary discussion and we're definitely going to have another one of these conversations when we go into the report a bit more and have some results and to share with everyone.
[44:28] But thank you. Thank you, so much for coming on the show today. It's been a very fun conversation.
[44:33] Tianyu Fang: Yes, thank you so much for having me, and I'm glad we had the chance to have this conversation. Thanks, Rasheed.
[44:38] Rasheed Griffith: Perfect.