By Nicolas Nicolaou
The Citizenship-By-Investment program enacted by Cyprus is perfectly legal and many countries enact similar programs to attract foreign capital. The Cyprus government did the right thing in enacting such a program to help with the economic recovery. The problem however, is in some of the program details and in how the program is executed. In general, these types of programs only offer permanent residence, the foreign investment is directly related to job creation and there are limitations as to how many permanent residences are issued per year.
Let me explain
Citizenship should be a sacred possession. It shouldn’t be for sale. It should be a birthright or earned through hard work. That is why most countries only offer permanent residence and not citizenship for these types of programs. In the EU, only Austria, Malta and Cyprus offer citizenships. Additionally, in many countries there are annual quotas. For example, the United States allows only 10,000 of these special types of permanent residences per year. If we were to extrapolate, Cyprus should only give 26 citizenships per year based on its population size. Even though the 2 million Euro investment requirement under the Cyprus program may sound high, it is immaterial for a billionaire who wants access to the EU.
The other part that is very troublesome is the how the program is executed. According to reports, the program has generated 4 billion Euro in foreign investment since its inception, which is impressive. However, the beneficiaries are a few law firms and developers. The investment has not created any new jobs but rather mostly helped move some old housing inventory at exaggerated prices. These crazy prices are driving real estate market prices so high that owning a house will soon to be just a dream for the average Cypriot. It sounds like a real estate bubble and the Cypriots are being squeezed out of the real estate market. Additionally, the program is being marketed on the internet very aggressively and it gives the appearance that we are just selling citizenships for profit.
The government needs to take immediate action to address the above issues to prevent things from getting out of control. The actions could include:
a) Instead of immediately granting someone a citizenship, investors should get a permanent residency with a path to citizenship after a few years.
b) The foreign investment should be used for projects that create jobs.
c) Enact annual quotas. How about 100 per year.
d) Stop the crazy advertising on the web. It really gives the appearance that Cyprus is for sale.
In a very typical way, the Cypriot political and business establishment has managed to design a program to serve themselves, and hiding behind its ‘legality’to reap huge personal benefits while at the same time putting Cyprus’s reputation at risk and creating a real estate bubble. Most law firms and developers benefiting from this activity are directly or indirectly associated with politicians. The program as currently structured and executed gives the appearance of mismanagement, abuse, and will expose Cyprus to its international partners unless corrective actions are taken soon. The recent Guardian article is just the beginning.
The Cyprus economy has improved and the urgency of extreme measures has subsided. The government needs to take a step back, reevaluate the program, protect Cyprus’s reputation and avoid the mistakes and abuses of the past. We need strategy and vision for the good of all Cypriots. For a country that’s partly occupied by Turkey, we should know better. Cyprus should NOT be for sale.