IN­VEST­MENT MI­GRA­TION: A FU­TURE-PROOF­ING MECH­A­NISM FOR SMALLER STATES

The Star (St. Lucia) - Business Week - - EUROPEAN BANKS - BY DR. CHRIS­TIAN KALIN

In an epoch as un­pre­dictable and change­able as our own, it is no won­der that gov­ern­ments are look­ing for com­mon-sense ways in which to fu­ture-proof their coun­tries, and res­i­dence- and cit­i­zen­ship-by­in­vest­ment (RCBI) pro­grammes rep­re­sent a sen­si­ble means of do­ing just that. When the fu­ture is murky with un­cer­tain prospects and out­comes, the im­ple­men­ta­tion of eco­nomic, en­vi­ron­men­tal, so­cial, and tech­no­log­i­cal strate­gies that can en­sure the long-term sus­tain­abil­ity of a coun­try and its peo­ple is be­com­ing more at­trac­tive than ever.

This year has also seen the RCBI in­dus­try fac­ing in­creased scru­tiny from ex­ter­nal reg­u­la­tory bod­ies, how­ever, rais­ing im­por­tant ques­tions about due dili­gence prac­tices and the con­cept of cit­i­zen­ship in gen­eral.

Dubai, re­cently named a “model smart city”, with a spirit of in­no­va­tion and en­trepreneur­ship that is help­ing the UAE re­al­ize its Vi­sion 2021, is the ideal back­drop for these dis­cus­sions in no small part be­cause so many UAE-based ex­pa­tri­ates, who con­sti­tute ap­prox­i­mately 80% of the UAE pop­u­la­tion, are flock­ing to RCBI pro­grammes. In­deed, the UAE con­tains an ideal client base for coun­tries of­fer­ing se­cond cit­i­zen­ship and res­i­dence prospects. The most sought-after pro­grammes are those that pro­vide busi­ness and travel ac­cess to Europe’s Schen­gen Area, the US, Canada, China, and other in­ter­na­tional des­ti­na­tions that are val­ued by the Mid­dle East­ern and other ex­pats liv­ing in the UAE.

Emi­rati cit­i­zens them­selves are not el­i­gi­ble for dual cit­i­zen­ship, but they also hap­pen to pos­sess the fastest im­prov­ing pass­port in the world. The UAE pass­port has made a stun­ning as­cent on the Hen­ley Pass­port In­dex, from 62nd place in 2006 to 21st place world­wide in Q4 2018, and the UAE now holds the num­ber 1 pass­port in the Mid­dle East re­gion. The per­for­mance of the Emi­rati pass­port is a tes­ta­ment to the UAE’s (as well as Dubai’s) sta­tus as a grow­ing in­ter­na­tional hub of busi­ness, trade, tourism, and cul­ture.

FOR­EIGN DI­RECT IN­VEST­MENT: THE LIFEBLOOD OF ECO­NOMIC GROWTH

The sig­nif­i­cance of for­eign di­rect in­vest­ment (FDI) as a source of eco­nomic stim­u­lus has in­creased rapidly over the past decade.

FDI has tra­di­tion­ally taken place be­tween ad­vanced global economies. How­ever, since the early 2000s, the im­por­tance of emerg­ing mar­ket economies as a des­ti­na­tion for FDI has grad­u­ally been on the rise. It is now widely ac­knowl­edged that FDI is the lifeblood of eco­nomic growth for many de­vel­op­ing and re­cov­er­ing smaller economies around the world — and it is within this con­text that the si­mul­ta­ne­ous boom in the in­vest­ment mi­gra­tion in­dus­try ought to be seen.

The num­ber of RCBI pro­grammes has been in­creas­ing steadily in re­cent decades, from just a hand­ful in the 1980s and 1990s to over 60 ac­tive pro­grammes to­day, with Moldova and Mon­tene­gro — both small but fast-grow­ing Eu­ro­pean coun­tries — be­ing the lat­est to launch strong cit­i­zen­ship of­fer­ings ear­lier this year.

As an es­tab­lished form of FDI, in­vest­ment mi­gra­tion rev­enues bring a ta­pes­try of ben­e­fits to na­tions with pro­grammes in place —

ben­e­fits that can be mo­bi­lized and de­ployed to stim­u­late pro­found yet sus­tain­able do­mes­tic growth. Coun­tries that have a clear strat­egy for how to at­tract FDI and uti­lize its po­ten­tial are in a bet­ter place to deal with eco­nomic, so­cial, or en­vi­ron­men­tal is­sues that may arise now or in a few years to come. For this rea­son, RCBI is an op­ti­mal form of fu­ture-proof­ing, if man­aged ef­fec­tively.

IN­VEST­ING IN A SUS­TAIN­ABLE FU­TURE

Malta is a good case in point. The Malta In­di­vid­ual In­vestor Pro­gramme (MIIP) has emerged as a model cit­i­zen­ship-by-in­vest­ment (CBI) pro­gramme in the years since its launch in 2014, with the Malta Res­i­dence Visa Pro­gramme also gain­ing trac­tion among high­net-worth-in­di­vid­u­als (HNWIs) seek­ing EU res­i­dence. The rev­enues from the MIIP in par­tic­u­lar have helped the coun­try re­verse a decades-long fis­cal deficit trend, re­sult­ing in a sur­plus of 3.9% of GDP in 2017 — the high­est per­cent­age of any EU mem­ber.

How­ever, it is not only Malta that un­der­stands the ben­e­fits of in­vest­ing in a sus­tain­able fu­ture and of lay­ing the ground­work for pos­i­tive, long-term mo­men­tum. In Greece, the Per­ma­nent Res­i­dence Per­mit pro­gramme has raised over EUR 1.5 bil­lion and has helped halt a nine-year de­cline in real es­tate prices. Even more dra­mat­i­cally, fig­ures com­ing out of Cyprus in­di­cate that, in 2016, the FDI re­ceived through the coun­try’s CBI pro­gramme was the dif­fer­ence be­tween re­cov­ery from the 2013 sov­er­eign debt cri­sis and what would oth­er­wise have been an eco­nomic con­trac­tion that year.

In the Caribbean, in­flows from St. Kitts and Ne­vis’s pi­o­neer CBI pro­gramme ex­pe­ri­enced a surge in 2010, which led to pro­gramme rev­enues grow­ing from less than 1% of GDP in 2008 to 25% by 2014. Ac­cord­ing to the In­ter­na­tional Mone­tary Fund, the ro­bust in­flows that re­sulted from the pro­gramme “have sup­ported eco­nomic re­cov­ery, im­proved key macro-eco­nomic bal­ances and boosted bank liq­uid­ity”.

How­ever, the key el­e­ments of fu­ture-proof­ing fa­cil­i­tated by RCBI are not sim­ply lim­ited to its di­rect eco­nomic ram­i­fi­ca­tions. The ar­rival of HNWIs in a host coun­try also brings new in­no­va­tions, tal­ent, and en­trepreneurs who can foster ef­fi­ciency through in­creased com­pe­ti­tion.

A BRIGHT AND BUR­GEON­ING IN­DUS­TRY

Ul­ti­mately, when prop­erly ex­e­cuted, in­vest­ment mi­gra­tion is a highly de­sir­able, prof­itable, and so­cially ben­e­fi­cial form of in­vest­ment. How­ever, just as the in­dus­try can as­sist coun­tries and in­di­vid­u­als with pre­par­ing for fu­ture un­cer­tainty, it must also en­sure that it fu­ture­proofs it­self. While the main play­ers in the in­dus­try are con­sis­tently ap­ply­ing stren­u­ous ef­fort to en­sure that thor­ough back­ground checks and due dili­gence pro­cesses are al­ways ap­plied, these ef­forts need to be con­stantly re­in­forced and re­plen­ished. If the in­dus­try can do this, its fu­ture prospects look bright, as do the prospects for global cit­i­zens and host na­tions alike.

Ac­cord­ing to an in­dus­try sur­vey pub­lished by In­vest­ment Mi­gra­tion In­sider, the Mid­dle East ac­counts for the largest source mar­ket for RCBI con­sul­tancy firms (sur­vey did not in­clude EB-5 con­sul­tancy firms)

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