DIRECTORY
ONLINE: analysis // readbook
BULLETIN: about // accolades // current issue // schedule
RESOURCES: archives // collections // headlines


ISSN 2052-3122 (PRINT)
ISSN 2044-3811 (ONLINE)

SPONSORED SECTION

Hurst is an independently owned non-fiction publisher, specialising in books on global affairs, particularly religion, conflict, international relations and area studies in Europe, Africa and South Asia. Its sponsorship of this page makes it possible for Current Intelligence to provide readers with original analysis of current affairs from some of the sharpest minds in journalism, academia, and business.

FROM THE HURST BLOG:

HURST LINKS: website // facebook // twitter // blog

Wednesday
May302012

Banking Loopholes Between Gambia and Hong Kong

by Kit Dawnay

The role of West African states Gambia and Guinea Bissau in a Hong Kong investment scheme raises some interesting questions about China’s links with Africa. 

--

THE TIES CAME TO LIGHT when David Webb, an activist investor in Hong Kong, sought figures on the Special Administrative Region’s Capital Investment Entrant Scheme (CIES), a measure which requires mainlanders to have permanent residency overseas in order to obtain residency for investment purposes in Hong Kong.  Webb published the figures, which date from February 2012, showing that Gambia and Guinea Bissau were the official residencies for 75.1% of the 11,585 mainland Chinese now in Hong Kong under the CIES.  Gambia alone accounted for 57.3% of successful mainland applicants, Guinea Bissau for 17.8%, with Canada accounting for 8.8%, and Niger for 2.5%.  Intriguingly, many of the 50,000 mainland Chinese in neighbouring Macau under its now-suspended property investment scheme also had residency in Gambia, Guinea Bissau and Niger.  

The numbers highlight these states’ importance as providers of 'economic citizenship' packages to Chinese citizens abroad, offering rich mainlanders a means to move assets offshore.  This type of service is not new - St Kitts and Nevis has sold passports since 1984 – but Gambia is a recent entrant to the market.  Its appeal may be ease; some providers state that they can secure residency for clients in less than one month.  Another attraction to mainland Chinese, though, may be Banjul’s recognition of Taiwan rather than mainland China, limiting Beijing’s ability to directly influence the government in Gambia.

The risks are manifold.  Gambia and Guinea Bissau raise a wide range of money laundering concerns.  The Gambian political system is opaque, authoritarian and arbitrary.  President Jammeh has a reputation for brutality.  In 2009 he forced 1,000 suspected witches to ingest poisonous concoctions.  Political opponents routinely disappear.  Gambia also played a key, if quiet, role in the illicit diamond and arms trades which fuelled the conflicts in Sierra Leone and Liberia in the 1990s, and may still be active in exporting arms to Guinea Bissau and Senegal’s Casamance region.  Indeed, the 2010 seizure in Nigeria of Iranian weapons destined for Banjul prompted Dakar to voice fears of Gambian involvement in Casamance.  Gambia is also an important link in the cocaine trade passing through West Africa into Europe, and is hugely overbanked – it boasts 14 banks serving just 1.7 million people.  Needless to say, Gambia’s money laundering standards are questionable. In 2011, the US Treasury has imposed sanctions on Prime Bank Gambia, a subsidiary of Lebanese Canadian Bank, under Section 311 of the USA PATRIOT Act for fund-raising for Hezbullah.  Nigerian officials also privately raise doubts about Gambian standards.   

Guinea Bissau has an even worse reputation.  The country, geographically separated from Gambia only by the turbulent Casamance region, has by all accounts become a 'narco-state'.  Cocaine shipments come into the country routinely by air and sea.  The value of drug imports dwarfs the country’s GDP, facilitating graft, although some analysts have seen a decline in trade since 2008. Guinea Bissau is also politically unstable, with recent events including the assassination of the president by soldiers in 2009, military unrest in 2010, an attempted coup in 2011, and a (seemingly) effective coup in April 2012.  Much of this instability derives from efforts to monopolise drug revenues.   Interestingly, though, Guinea-Bissau has a tiny and weak banking system, meaning cash smuggling out of the country is rife, which may in turn account for Gambia’s overbanked sector as well as Dakar’s property boom.

There has been little actual indication that Chinese individuals who purchase residency in Gambia or Guinea Bissau visit either country or make use of their financial sectors.  Indeed, any putative links between Honk Kong and the West African cocaine trade may be circumstantial and contextual, having more to do with China’s presence in Africa than revealing a criminal foray into new markets.   However, Gambia and Guinea Bissau’s economic citizenship services still present risks for Hong Kong and Macau, and for China. President Jammeh, for example, maintains good relations with North Korea, which has historically maintained trading and financial links with Macau.  More generally, the system may facilitate capital flight from China, perhaps by making it easier to disguise the proceeds of corruption, a concern for a Beijing keen to control its capital account    

Accordingly, governments in Hong Kong and China, and the financial sector in general, need to ensure that this loophole does not evolve into something more than an intriguing footnote in the history of Beijing’s ties to Africa. 

Better that, than wait for a scandal. 

--

About the Author: Kit Dawnay is an analyst of international relations, politics and economics. He has worked as a newspaper journalist, for the House of Commons Foreign Affairs Committee, and for a defence services company analysing economic crime. He has undergraduate degrees in law and history, and an MPhil in international relations from Cambridge University. He lives in Hong Kong.

Email: kit_dawnay@yahoo.com

--

About Current intelligence:  Current Intelligence is a bulletin of current affairs published online and in print, featuring original, incisive comment and analysis from some of the sharpest minds in academia, journalism, business and government.

--

About Thesigers: Thesiger & Company (“Thesigers”) is a London-based research and advisory firm, providing a wide range of services to clients whose interests and activities demand in-depth knowledge of emerging and frontier markets.

Desk: +44 (0)20 3286 4871 | Mobile: +44 (0)758 134 1400 | Skype: Thesigers

Email: enquiries@thesigers.com, kit_dawnay@yahoo.com | Web: thesigers.com

Company registered in the United Kingdom. Registration number: 7234402