Ethiopia's Soil Can Boost Forex Revenue
A retired African businessman planning to spend the remaining days of his life travelling the planet approached a consultant seeking advice on how he could manage his plan without the gruesome procedures of request and approvals of visas to different countries.
The consultant's proposal was simple and effective: buy citizenship of St. Kitts and Nevis - a small island country smart enough to monetize endowments. With a St. Kitts and Nevis passport, one can visit about 150 countries across the globe without the hustle of prior approval of visas. A non-refundable contribution of 150,000 dollars to an economic growth fund can enable one to obtain the passport of this Island nation.
The small Caribbean island is not alone in graciously granting citizenship for money. The beautiful island of Mauritius grants permanent residence for the purchase of a real estate property no less worth than at least half a million dollars.
Larger and much wealthier countries also exercise similar schemes to boost their foreign currency reserves. Spain's golden visa program, which can lead to citizenship, for at least 500,000 Euros investment in real estate can be cited.
This is not to mention global superpowers. Investment of at least half a million dollars in selected areas of the United States can be the way for conditional residence, which can trigger the much-coveted US passport. That commercial enterprise should be able to benefit the country's economy and create at least 10 permanent job opportunities.
Ethiopia's government should consider similar schemes to boost the scarce forex reserve. One simpler option is permission for acquisition of residential properties by non-nationals of non-Ethiopian origins.
The current regulation in Ethiopia prevents non-nationals individuals from acquiring residential homes for their private use. This can be modified to address global high net worth individuals who can acquire luxury homes north of a certain threshold, perhaps 300,000 US dollars. This is easier to control as property buying non-nationals can be required to present proof of transfer of the foreign currencies for the acquisition of the properties.
Pumping in of foreign currencies for the acquisition of properties is just one major advantage in this scheme. The practice can encourage global high net worth individuals to consider our nation as one of the destinations for their leisure and pleasure, thereby encouraging their peers to follow through also.
The cosmopolitan vibe of a city is among the major attractions of a country. The day-to-day spending of these wealthy individuals can also significantly increase the velocity of the economy, which, in turn, can create job opportunities for Ethiopians.
Such initiatives should be met by driving forward with initiatives to encourage remittances. As a quietly performing kid in a family may not attract much attention of the parents like the loud and rambunctious sibling, the quietly high-performing sector in terms of generating foreign currency for the country, personal transfers, has not attracted the governments' attention in terms of incentives and investment.
This is compared to the loud sibling, manufacturing industry, which the government has consistently incentivised but continues to perform much under expectations, contributing just five percent to the last fiscal year's gross domestic product (GDP) growth rate.
Having generated over five billion dollars last year, remittances finance about a third of the nation's entire cost of imports in goods, which signifies its vitality and importance.
Remittances can thus further be enhanced by increasing the source and the base to include non-nationals of non-Ethiopian origins on our land in addition to our people in foreign lands. With non-nationals having permanent residences here comes their increased engagement on our soil, resulting in much more money spent in Ethiopia.
Selling residential properties for personal use to high net worth individuals can, therefore, play its role in boosting our forex reserves as it is doing for other countries of the world.
Remittances can thus further be enhanced by increasing the source and the base to include non-nationals of non-Ethiopian origins.
By: Million Kibret, managing partner at BDO Consulting Plc.