Solomon Islands mulls selling citizenship for Chinese investment

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Top Stories | May 1, 2020:

FORUM Staff

The Solomon Islands cabinet is evaluating a controversial scheme to sell citizenship in exchange for investment, according to the Australian Broadcasting Co. website, ABC.net.

The proposal has drawn criticism for potential problems with screening buyers and for weakening sovereignty and the value of citizenship in the Solomon Islands, according to the online magazine The Diplomat.

Security experts worry that the plan would enable the People’s Republic of China (PRC) to leverage the Solomon Islands to further the agenda of the Chinese Communist Party (CCP) much as it has in Vanuatu where a similar “cash for passports” program was introduced in 2014 and secretive Chinese investments, with undisclosed terms, have been widely reported.

In mid-September 2019, the Solomon Islands ended 36 years of diplomatic relations with Taiwan to switch its relations to the PRC. At the time, Taiwan’s Ministry of Foreign Affairs accused the PRC of resorting to “dollar diplomacy and false promises of large amounts of foreign assistance to buy off a small number of [Solomons’] politicians” to end ties with Taipei before the 70th anniversary of the founding of the PRC under the CCP on October 1, 2019, according to The New York Times newspaper.

By February 2020, the Solomon Islands was already considering a U.S. $100 billion loan from Chinese investors, an amount that is 66 times its annual gross domestic product of U.S. $1.47 billion, according to Reuters.

Solomon Islands lawmaker Peter Kenilorea, who was critical of the diplomatic shift to Beijing, said he was vehemently opposed to the loan proposal, which he said entailed an unsustainable debt load, Reuters reported.

Vanuatu launched its official passport investment program in 2014 and has since sold more than 4,000 passports, raising as much as U.S. $600 million for the Vanuatu government, according to The Diplomat. In 2018, the PRC secretly awarded Vanuatu a U.S. $60 million grant for a mysterious initiative known as the Container Inspection Equipment Project and issued another U.S. $70 million in loans to Vanuatu, ABC.net reported.

The passports, in combination with additional Chinese investments, are funding large Chinese-controlled development projects in Vanuatu. The passport fees range from U.S. $150,000 to U.S. $175,000, which often buys greater international mobility, ABC.net reported.

People from mainland China have bought most of the passports, despite dual citizenship being illegal in the PRC, The Diplomat reported.

Convicted criminals have been able to become citizens without even setting foot in Vanuatu because the program doesn’t require residence or additional investment in the country. Kim Wong, a Chinese national who resided in the Philippines and held a Vanuatu passport, allegedly stole U.S. $81 million electronically from the Central Bank of Bangladesh in March 2016.

Under the program, the Chinese government has also effectively invalidated Vanuatu citizenship when it suited the CCP. In July 2019, Chinese police officers flew into Vanuatu on a chartered flight and arrested six people residing in Vanuatu on Chinese charges, four of whom held dual citizenship. The Vanuatu government reportedly revoked their citizenship before the deportations without conducting any extradition proceedings.

In Vanuatu some observers have asserted that the passports sales scheme quickly became a “revenue trap” that is even worse than the “debt trap,” with which the PRC has also potentially encumbered Vanuatu, the Vanuatu Daily Postnewspaper reported in July 2019.

“By allowing the government to become dependent on passport-related revenues,” some observers told the Vanuatu Daily Post, “China can now demand favors in exchange for continued benign neglect of the program.”

Passport sales schemes are nothing new in the Pacific islands region. They flourished in Tonga from 1982 to 1996, the Marshall Islands from 1995 to 1996 and Nauru from 1998 to 2002, according to Anthony van Fossen, a senior adjunct lecturer at Griffith University in Australia, generating between 6.5% to 11% of these nations’ GDPs.

Vanuatu’s program, however, provides more than a third of its government revenues, according to the Vanuatu Daily Post. Since its launch in 2014, the program has been revamped four times, van Fossen noted.

Historically in the Pacific islands region, such programs have created instability and crisis. Usually lacking transparency and good governance, passport sales programs contribute to theft, fraud and corruption, van Fossen wrote in the online publication East Asia Forum.

“Most buyers of Pacific island passports have been ethnic Chinese seeking instrumental advantages, such as visa-free entry to particular countries, lower taxes and escape routes. In Tonga and the Marshall Islands, promoters of passport sales wrongly contended that purchasers would not want to settle in the issuing country,” von Fossen wrote. “In both countries, Chinese passport buyers quickly rose to prominence in local businesses — especially retail trade — marginalizing indigenous people.”

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