FREEDOM, SECURITY and OPPORTUNITY the Past, Present and Future of Investor Immigration TABLE of CONTENTS

FREEDOM, SECURITY AND OPPORTUNITY The Past, Present and Future of Investor Immigration TABLE OF CONTENTS

01INTRODUCTION 02A BRIEF HISTORY 03GLOBAL CITIZENSHIP CONTROVERSIES 04 AND MALPRACTICE

Why become a resident or The pitfalls of poorly regulated citizen in another country? investor immigration programs and fraudulent agents and Who wants to become a advisors resident or citizen is another country?

Factors to consider as a prospective immigrant investor

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2 05ECONOMIC IMPACT 06CITIZENSHIP BY RESIDENCE 07 08THE FUTURE INVESTMENT BY INVESTMENT OF INVESTOR PROGRAMS PROGRAMS IMMIGRATION

How investor immigration St. Kitts and Nevis Canada done right can benefit Dominica U.S. destination countries Grenada U.K. Antigua and Barbuda Australia Cyprus New Zealand Malta Bulgaria Other programs Greece and canceled programs Hungary Latvia Portugal Spain Singapore Hong Kong (Suspended) Others

3 01 INTRODUCTION

4 FREEDOM, SECURITY AND OPPORTUNITY The concept of immigration dates back thousands of This report examines the history of investor immigra- years. Individuals have historically sought to leave their tion programs and seeks to explain the reasons why native countries in search of better employment op- wealthy investors choose to obtain alternative resi- portunities and standard of living, or to escape war, dences or citizenships. It also looks at the impact of persecution or political oppression. such programs and how they are perceived by politicians, the media and the general public. Today, many governments welcome skilled and pro- fessionally qualified migrants to live and work in their The major investor immigration programs are explored countries. Visas and residence permits are typically in depth, and, when available, statistical data is used available at different levels and with varying require- to show changes in uptake in investor immigration pro- ments dependent on the skills and background of grams and demographic information about applicants. migrants. Many of these migrants settle in their new country and eventually become permanent residents or naturalized citizens.

The notion of using personal wealth to make investments leading to foreign residency and citizenship is relatively new. Investor immigration programs have existed since the mid-1980s, and the last 10 years have seen significant growth in the industry, both in the number of applicants and in the number of jurisdictions offering such programs.

Investor immigration can be divided into two broad categories: Citizenship by investment and residence by investment. The former involves making investments to qualify for fast-track citizenship. The latter typically involves the granting of a visa or residence rights, which may eventually lead to the option of applying for citizenship after a number of years.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 5 02 A BRIEF HISTORY

6 FREEDOM, SECURITY AND OPPORTUNITY In 1984, Saint Kitts and Nevis, the smallest sovereign In the late 1980s and throughout the 1990s, Canada state in the Americas, passed a law offering citizenship was the dominant investor immigration program, driv- to individuals who “made a substantial investment in en by wealthy individuals seeking political stability. the state” and were of good character and not a threat to the country. In 1986, Canada launched its pioneer- Citizens of Hong Kong were motivated by risk associ- ing Immigrant Investor Program. Prior to this, several ated with the upcoming transfer of sovereignty from countries had offered immigration routes to business- the U.K. to China in 1997. From 1986 to 1996 the Ca- men looking to invest and grow their businesses. nadian immigrant investor program welcomed more than 57,000 immigrants, of which nearly half were from The Canadian program, however, could be said to be Hong Kong. the first true residence by investment program, as requirements were focused on investment of financial Another 20,000 were from Taiwan, which at the time capital rather than human capital, i.e. business exper- was undergoing democratic reform, with its political tise and active entrepreneurship or investment man- status resurfacing as a controversial issue and relations agement. with mainland China thawing. Applicants from the Middle East also grew in the period, amid the Gulf War The United States launched its EB-5 visa for immigrant and unrest in the region. investors in 1990. The United Kingdom opened a migration route for investors in 1994 and, in more recent The 1980s and 1990s also saw the emergence of citi- years, many European Union countries have intro- zenship by investment programs, led by St. Kitts and duced competing residence by investment programs. Nevis in 1984 and followed by Dominica in 1990 and Grenada in 1996. The demand for second citizenships also saw several nations introduce poorly planned and badly managed programs which ultimately failed.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 7 Demand for investor immigration cooled in the late The rise in popularity of such programs has created 1990s to mid-2000s. Successful applicants to the Ca- a growing advisory industry to help prospective and nadian program fell; from 1997 to 2003, 34,000 peo- current immigrant investors. Key services provided by ple were granted residence in Canada through the the industry include: personalized advice on availabil- program, down from 53,000 in the previous seven-year ity and suitability of various programs; legal advisory period. While Canada remained the most popular op- on tax, immigration, citizenship, real estate and private tion for immigrant investors, programs in the U.S. and law; investment advisory and management; represen- the U.K. were beginning to gain traction. tation and consulting with governments; administra- tive solutions; and due diligence. The last 10 years have seen another boom in investor immigration programs. Four Caribbean nations – St. Kitts and Nevis, Dominica, Grenada, and Antigua and Barbuda now offer citizenship by investment programs. Cyprus and Malta have also recently introduced programs, which require higher investment but offer the attraction of European Union citizenship.

Residence by investment programs are also booming in popularity and increasing in numbers. The U.S. EB-5 issued its full quota of more than 10,000 visas in fiscal year 2014, and now faces a large backlog, led by a surge in applicants from China. While the federal Ca- nadian program was closed in 2014, investors can still immigrate to Canada via Quebec’s program and various provincially run nominee programs. Programs in the U.K., Australia and New Zealand have continued to grow, while a number of countries in the European Union have introduced programs, with Bulgaria, Hun- gary, Latvia and Portugal enjoying notable uptake.

8 FREEDOM, SECURITY AND OPPORTUNITY MAJOR EVENTS IN INVESTOR IMMIGRATION

1984 | St. Kitts and Nevis opens Citizenship by Invest- 2004 | Singapore introduces Financial Investor Scheme ment program. for Permanent Residence.

1986 | Canada creates Federal Immigrant Investor Pro- 2009 | Bulgaria launches Investor Program for Res- gram with the intention of attracting high-net-worth idence and Citizenship, later amending program in individuals to raise investment capital. 2013 to offer fast-track citizenship to significant investors. 1988 | The Republic of Ireland offers naturalization and citizenship to significant investor under controversial 2010 | Latvia launches residency scheme for real estate program. investors.

1990 | The Unites States launches EB-5 visa for immi- 2011 | Cyprus introduces Criteria and Conditions for grant investors. Naturalization of Foreign Investors to allow citizenship by investment. 1993 | Dominica becomes the second Caribbean country to offer citizenship for investors with launch of 2012 | Singapore scraps Financial Investor Scheme Economic Citizenship Program. but leaves door open to immigrant investors through Global Investor Programme, launched in 2010 with 1993 | Immigrant investor numbers peak in Canada, more stringent requirements. with more than 12,500 residencies granted, of which more than 3,000 are principal applicants. Citizens of 2012 | Australia launches Significant Investor Visa. Hong Kong and Taiwan make up more than 83% of applicants. 2012 | Hungary, Ireland and Portugal open residence by investment programs. 1994 | The United Kingdom introduces visa scheme for individuals investing at least £1 million. 2012 | Antigua announces Citizenship by Investment Program. 1996 | Grenada modifies Citizenship Act to allow citizenship by investment. 2013 | Grenada launches new Citizenship by Invest- ment Program. Four Caribbean nations now offer sim- 1998 | Ireland ends citizenship by investment program. ilar programs.

1999 | New Zealand introduces Investor Category to 2013 | Greece and Spain become latest European business immigration policy, streamlining immigration countries to offer residence to investors. for high-net-worth individuals making significant investments. 2014 | Canada closes federal Immigrant Investor Pro- gram. Quebec continues its program, maintaining a 2001 | Grenada closes Citizenship by Investment pro- route to Canada for investors. gram amid risk concerns in the wake of terrorist attacks in the United States. 2014 | Malta launches controversial Individual Investor Programme for citizenship after negotiations with Eu- 2003 | Immigrant investor numbers in Canada and the ropean Commission. United States have been on the decline since the mid- 1990s. In 2003, both countries experience their lowest 2015 | Hong Kong indefinitely suspends Capital Invest- inflow of investors since their programs’ early years; ment Entrant Scheme. Canada grants residency to fewer than 1,000 primary investors, while the U.S. issues only 71 EB-5 visas. 2015 | The United States and the United Kingdom reveal record numbers of immigrant investors in 2014, 2003 | Hong Kong launches Capital Investment Entrant led by surge in Chinese applicants. Scheme.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 9 03 GLOBAL CITIZENSHIP

10 FREEDOM, SECURITY AND OPPORTUNITY Global citizenship defines the mindset of those that primarily identify as part of the global com- munity rather than as a citizen of a particular nation or place. For some, the citizenship and residence with which they were born restricts their freedom to be a global citizen. In the case of high- net-worth individuals, this may mean restrictions on their ability to do business or invest globally or limitations on where they can reside or visit freely.

Consequently, the last thirty years has seen a growth in wealthy individuals seeking alternative residence and citizenship options. Their varied backgrounds, motivations and factors governing the choice of programs are explored in this section.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 11 3.1

WHY BECOME A RESIDENT OR CITIZEN IN ANOTHER COUNTRY ?

The Global Investor Immigration Council identifies four main factors driving demand for investor immigration programs. Indeed, many individuals may be motivated by more than one of these factors.

MOBILITY SECURITY

The world we live in is becoming more and more con- Wealthy individuals may feel that their status and na- nected and businesses are increasingly looking across tionality makes them a target for terrorists or criminals. borders for new opportunities. However, many busi- They may also fear that political instability puts their ness leaders face restrictions on global mobility and asset security at risk, or that the legal system of their their citizenships of birth may render them unable to country could be corrupted and they may be incrimi- do business or reside in many jurisdictions. nated based on politically motivated charges. Thus an alternative residence or citizenship offers a safe haven Holders of certain passports, particularly those of the for both the individual and his or her assets. Middle East, Africa and parts of Asia, face restrictions on travel and must deal with red tape when planning In many cases, applicants for immigrant investor pro- trips abroad. Alternative citizenship provides a route grams may not want to emigrate immediately, but se- to visa-free travel to many more countries for these curing the rights to residence in another country offers individuals. Alternative residency may also suffice for an insurance policy in the case of political or economic many, as, for example, residents of Europe’s Schengen upheaval in their homeland. area can travel visa-free to other countries in the zone. TAX AND ESTATE PLANNING For businessmen and frequent travelers who must commit time and other resources to visa applications, Tax optimization is not a significant motivator for the some of which may be unsuccessful, alternative citi- majority of immigrant investors. However, an increasing zenship could be a very prudent investment. number of wealthy individuals from developed countries with high tax rates are considering alternative res- QUALITY OF LIFE idence or citizenship as part of their tax planning and wealth protection strategy. Citizenship in the Caribbean Many investor immigrants share the same motivations or in Cyprus or Malta offers attractive tax rates to many. as traditional immigrants – they want to move to a new Even in high-tax jurisdictions such as the U.K., residents country for improved quality of life. Investor immigra- under investor programs may be able to protect over- tion programs offer them a route to popular destina- seas earnings from excessive taxation. tions such as the U.S., Canada, the U.K. and Australia. Wealthy individuals may also be motivated by the needs of their children, and thus they seek to move to countries with higher quality education systems.

12 FREEDOM, SECURITY AND OPPORTUNITY 3.2

WHO WANTS TO BECOME A RESIDENT OR CITIZEN IN ANOTHER COUNTRY ?

Immigrant investors come from all over the world, with GIIC analysis of data on the New Zealand investor pro- varying motivations and goals. Thus it is impossible gram found that in the last five years more than 38% of to define the “typical” immigrant investor. Of course, principal applicants were aged 40-49, with the average those looking to pursue alternative residence or cit- age falling at around 48. izenship via investment need to have considerable wealth and investible assets. Further analysis of New Zealand’s data offers more insight into the motivations for immigrant investors: Chi- This is particularly true of programs that require busi- nese applicants, more likely to be looking for a better ness investments with no guaranteed return of capital. quality of life for young families, were on average aged Recent growth in many investor immigration programs 41, while applicants from the U.S. and the U.K., more can be attributed to demand from China, some back- likely to be looking to move for retirement, were on ground to which can be found below. average aged older than 55.

The Middle East has also contributed much demand in Other demographic factors for which some, albeit lim- the past, and applications from the region saw a spike ited, data is available are gender and family status. due to instability caused by the Arab Spring. Indeed, A study of a sample of U.S. EB-5 visa holders found political instability and uncertainty has long been a that 85% were married, of whom 92% had at least one motivation for investors to seek alternative residence child. Data from applications to New Zealand in the and citizenship options. last five years reveals that 69% of principal applicants were male, although this was 53% when considering Another demographic factor on which we can glean those from China, the main source of applicants to the some information is the age of applicants. While most program. governments do not habitually release such information with immigration data, some one-off studies offer Recent growth in uptake for investor immigration pro- insight. grams has been driven by wealthy individuals from dis- parate backgrounds with differing motivations. In par- A study of the Canadian program found that 52.5% of ticular, certain groups have accounted for much of this principal applicants were aged from 40 to 49 in the pe- growth; these groups and the possible reasons behind riod 1986 to 2010. A sample of U.S. EB-5 visa holders their demand for alternative citizenship and residence in the 2000s found that the median age of the investor are explored in this section. at the time initial investment was 44. A sample of U.K. Tier 1 cases from the 2011-2012 financial year the average age of overseas applicants was 43.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 13 14 FREEDOM, SECURITY AND OPPORTUNITY CITIZENS OF CHINA

Citizens of China are the leading applicants for most for many wealthy Chinese businessmen, China remains major residence by investment programs. While Chi- the hub of their business and they may be reluctant na’s economy continues to grow and strong business to commit to moving to a country thousands of miles opportunities remain, many Chinese who have already away. Thus many prospective immigrant investors face made their fortune are looking to move abroad or gain a conflict: Economic opportunity remains greatest in alternative residence or citizenship options. China but personal security and quality of life is greater somewhere else. For some, Hong Kong’s Capital In- According to Bain & Company’s China Private Wealth vestment Entrant Scheme may have offered an accept- Report 2013, 60% of 3,300 high-net-worth (more than able compromise, but this program was suspended in $1.6 million in investible assets) individuals surveyed January 2015. Even prior to this, many ultimately pre- said they had obtained or were hoping to obtain citi- ferred to take up programs in traditional destinations zenship or residence in a foreign country. This number in North America, Europe and Australasia. rose to 70% for those with more than $16 million in investible assets, with 27% of this category having al- Thus, the concept of the “astronaut family” was born. ready migrated. While in the past, this term may have described a situation where the main breadwinner moved abroad for For many, security and wealth preservation are key mo- greater economic prosperity while the family stayed tivations. Due to China’s strict restrictions on moving at home, in the current era of Chinese investor immi- money out of the country, a second citizenship or res- gration it can be the opposite. The main earner may idence opens up opportunities to diversify investment choose to spend most of their time in China or on portfolios. China’s tightening political climate has also business travel, while the spouse and children relocate led wealthy individuals to seek international options as in search of a higher quality of living and educational insurance should conditions in China deteriorate. opportunities.

Quality of life is another major motivation. Concerns In some situations “parachute kids” may live with over air pollution, water quality and food safety are friends or relatives in the destination country while driving many to seek to move abroad. Restrictions of both parents spend much of the time in China. Studies the Chinese passport also makes alternative citizenship have highlighted the trend in such arrangements with an attractive option for frequent business travelers. wealthy Chinese families, but have also shown the concept to be popular with families of origins elsewhere Finally, wealthy Chinese look to secure alternative res- in Asia. idence to provide better education options to their children. Programs in the U.S., Canada, the U.K. and Chinese business owners have also been known to Australia hold particular appeal for investors who are seek alternative citizenship to enable them to list their looking to ensure their children get a top class English company on a stock exchange. Those seeking to list in language education. Some may also plan ahead for China face high levels of scrutiny and often fail to get tertiary education, seeking to acclimatize their children approval, meaning many seek to list abroad instead, to their new environment and education system and with exchanges in New York, Hong Kong and Singa- provide a better chance of admittance to the university pore proving popular. However, under Chinese law, of their choosing. companies still need approval to list overseas. Con- sequently, a number of Chinese companies that have listed in Hong Kong have been led by directors and shareholders who are citizens of Caribbean countries that offer citizenship by investment.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 15 16 FREEDOM, SECURITY AND OPPORTUNITY CITIZENS OF THE MIDDLE EAST AND SOUTH ASIA

Investor immigration programs have long been pop- In additional to personal security, stability of asset se- ular with citizens of the Middle East. In particular, the curity is a key motivator for immigrant investors from opportunity to acquire an alternative citizenship is an the Middle East. Wealthy businessman may fear that attractive proposition, as the majority of passports regional turmoil could put the security of their assets from the region to not offer extensive visa-free travel. in jeopardy. Mistrust of legal and political systems also No countries in the region are on the U.S. Visa Waiver leads to fears that the wealthy could be unfairly pros- Program and only the United Arab Emirates and Israel ecuted or have their assets taken away. A second citi- enjoy visa-free travel to Europe’s Schengen. zenship mitigates this by offering a safe haven should such a situation arise. Security is another factor that could motivate wealthy individuals from the region to consider acquiring an For similar reasons to those from the Middle East, citi- alternative citizenship or residence. As investor immi- zens of Pakistan have shown strong demand for inves- gration programs grew in popularity in the 1980s and tor immigration programs. India, given its size, has not 1990s, there was much conflict in the region, signifi- been a major source of immigrant investors. cantly the Lebanese Civil War, the Iran-Iraq war and the Gulf War.

In more recent years, the Arab Spring and worsening political situations in Syria and Iran have created further unrest in the region. Such conditions create security risks and leave many with their lives in danger. While others may not be directly at risk, they may feel that their quality of life deteriorates as a result of unrest around them.

The wealthy in particular may seek to mitigate these risks and uncertainties. This could be via moving to another region with their family, or by acquiring residence and citizenship rights as an insurance policy should they need to move in an emergency at a later date.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 17 18 FREEDOM, SECURITY AND OPPORTUNITY CITIZENS OF RUSSIA AND FORMER SOVIET STATES

As with citizens of the Middle East, Russian passport For Russians seeking an alternative citizenship, the rel- holders suffer from limited visa-free travel. Visas are re- atively new programs in Cyprus and Malta hold great quired prior to arrival in North America, the European appeal, offering the right to live and work throughout Union, Australia and much of the Middle East and Af- the European Union. In April 2013, Cyprus announced rica. For international businessmen, this limits the abil- that it would offer citizenship to foreign investors, ity to do business abroad and travel at short notice. mostly Russian nationals, who lost at least €3 million in Another factor that applicants from Russia may have in state banks following the bailout and closure of Cyprus common with those from the Middle East is uncertain- Popular Bank. The most recent statistics from the Mal- ty over political climate. Recent years have seen sanc- ta program show that more than half of applicants are tions imposed against Russia following the Ukrainian from Russia or former Soviet states. crisis, while some wealthy Russian businessmen may be driven to seek second citizenship as an insurance policy for fears that they will fall foul of the government and be persecuted or face politically motivated criminal charges. Economic uncertainty and the decline of the ruble are also motivators to seek alternative options abroad.

The U.K. has long been a popular destination for Rus- sian immigrant investors, who are attracted by the country’s housing market, strong financial sector and high quality of private education. For those looking to invest at a lower threshold, Bulgaria and Latvia offer a gateway to the European Union while also being a good fit in terms of language, culture and proximity to Russia.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 19 WEALTHY INDIVIDUALS IN COUNTRIES FACING POLITICAL INSTABILITY OR UNCERTAINTY

As seen in the cases above, political instability has long been a key factor driving immigration. While the current situations in these countries mean that they have contributed to the majority of demand for investor immigration programs in recent years, any country that faces political uncertainty could follow suit. Indeed, the initial boom in popularity of investor immigration in the late 1980s and early 1990s was driven by wealthy investors from Hong Kong and Taiwan who faced uncertainty over the future of their financial assets and business and personal prospects due to relations with China. Early studies of Canada’s immigrant investor program found that 58% cited political stability as a key motivator in their decision, alongside higher standards of living and better opportunities for their children.

20 FREEDOM, SECURITY AND OPPORTUNITY RESIDENTS OF COUNTRIES WITH HIGH TAXES OR AGGRESSIVE AND INVASIVE FISCAL AND REGULATORY ENVIRONMENTS

While the majority of immigrant investors seek alterna- New tax regimes and increased burdens have also led tive options due to restrictions in mobility, security or a number of high-profile individuals to seek alternative quality of life associated with their existing residence citizenship and residence. Actor Gerard Depardieu or citizenship, many wealthy individuals from devel- became a Russian citizen after a bitter dispute with oped, stable nations are also exploring their options. French authorities over increased taxes on the wealthy, For many, the option of moving to a residence with a while sports stars Amelie Mauresmo, Michael Schum- milder tax regime is an attractive options. Others may acher and Boris Becker have found residences in more look to ways to protect their privacy in the face of inva- attractive tax climates. sive regulations and increased access to their personal information. While tax optimization alone should never be cause for seeking alternative citizenship or residence, the in- U.S. citizens who reside in another country or hold creasing number of investor immigration routes is like- much of their wealth outside the U.S. often face com- ly to see an increase in the number of viable options plicated and burdensome tax requirements. The intro- for those prioritizing estate planning and looking to duction of the Foreign Account Tax Compliance Act protect their wealth and privacy. (FATCA) in 2010, seen by many as a threat to privacy, has led to increased numbers of Americans renouncing their citizenship.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 21 22 FREEDOM, SECURITY AND OPPORTUNITY 3.3

FACTORS TO CONSIDER AS A PROSPECTIVE IMMIGRANT INVESTOR

The decision to move to another country or acquire another citizenship is one that requires much consideration. A prospective immigrant investor must first consider the costs, both financial and in terms of personal sacrifice and re- linquishment of certain rights. They must also assess the different countries and types of programs on offer and how they meet their needs. Below are some of the most important factors to consider for anybody looking to acquire an alternative residence or citizenship via investment.

CITIZENSHIP OR RESIDENCE COST

Investors must first decide if they plan to pursue fast Many immigrant investors are extremely wealthy and track citizenship, or whether a residence by invest- need only commit a small percentage of their net worth ment program better suits their needs. If the investor as part of their investment and fees. For others, the requires improved visa-free travel, then citizenship upfront costs may be represent a significant portion of programs are more attractive. For those looking to re- their assets, and they may place more importance in locate long-term, residence by investment programs expected returns from their investment. likely offer better options. For some, obtaining residence rights in one jurisdiction and citizenship in an- When examining the costs of the program, investors other may provide a complete solution to their busi- must look beyond the initial investment amount. $1 ness, travel and family needs. million invested in real estate may offer higher expected returns than $1 million in low interest bonds; some For businessmen and frequent travelers who must may prefer the former while others prefer the lower risk commit time and other resources to visa applications, of the latter. $500,000 invested in no-interest bonds or some of which may be unsuccessful, alternative citi- a $200,000 donation to a government fund will clearly zenship could be a very prudent investment. result in lost income for the investor.

COMPATIBILITY WITH EXISTING However, some may place higher importance in up- CITIZENSHIP AND RESIDENCE front knowledge of what their financial outcome will be. Some programs require various investments in various sectors. This may add additional costs in the form Many nations allow dual or multiple citizenships. In of time spent managing these investments or costs of other cases, acquiring an alternative citizenship means hiring someone to manage the investments. renouncing your current citizenship. Indeed, this is the case for citizens of several countries that are typically Risk should certainly be factored into cost calculations. a strong source of immigrant investors, such as China Business investments often have no guarantee of re- and several countries in the Middle East. turned funds, but may on the other hand also provide an opportunity for the investor to profit. Those with an In these cases investors must carefully consider the otherwise low-risk portfolio might find these options sacrifice they would be making in giving up their exist- more palatable, while those committing a higher per- ing citizenship, as it may, among other things, restrict centage of their net worth are likely to prefer lower risk their freedom to live and do business in their country investments. of origin. Investors holding multiple residences and citizenships may also face more complicated tax obligations, and thus must consider the long-term impact on tax and estate planning.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 23 VISA-FREE TRAVEL GEOGRAPHICAL LOCATION AND ACCESSIBILITY For many investors, the primary appeal of an alternative citizenship is gaining a passport that allows a far Many immigrant investors may have international busi- greater range of visa-free travel. Given an individual’s ness interest and be required to travel frequently. In expected travel needs, certain citizenships may hold some cases, the main earner may not relocate his or more appeal than overs. Residents of certain areas, her primary residence to the new country or residence such as Europe’s Schengen zone, may also benefit or citizenship. In these cases, the location and accessi- from regional visa-free travel. Applicants should also bility of the destination country are vitally important. A ensure they are informed of potential future changes location with convenient flight connections or in a re- in visa-free arrangements between nations. Political gion where the investor frequently does business may relations or perceived security threats may jeopardize hold more appeal to prospective immigrant investors. freedom of travel for certain passport holders. POLITICAL AND ECONOMIC RESIDENCE REQUIREMENTS STABILITY Applicants should be aware of physical presence requirements. For citizenship by investment programs, Investor immigrants should consider the stability of the these tend to be minimal, but many residence pro- government and political environment of their desti- grams require a physical presence for a certain number nation country. A change of government may bring a of days per year. If the investor feels they may not be change in immigration policy. Therefore it is important able to personally meet these requirements, they may to consider the residence or citizenship process and at want to consider whether an arrangement in which what stage it may be temporary or revocable, should their spouse becomes the main applicant is more suit- the rules be changed. able. BUSINESS ENVIRONMENT TAX, REGULATION AND LAW Many immigrant investors may not be interested in As discussed in other sections, tax is not a primary mo- setting up a business in their new country. Those that tivator for the majority of immigrant investors. However, do may also find that their preferred destination has applicants with other motivations must also consider an entrepreneur immigrant program that is more suit- if their new residence or citizenship exposes them to ed to their needs. For those that do have business higher tax rates, double taxation or tax on overseas or private investment aspirations, factors to consider earnings. They must also consider whether their exist- include ease of company incorporation, efficiency of ing set up of any businesses, assets or trusts does not corporate laws efficient, trade restrictions, protection fall foul of any new regulations they will be required to of copyrights and patents, stability of local curren- meet. Other factors that should not be overlooked in- cy, freedom from corruption and access to high-level clude laws on matrimonial property and rulings on di- banking services. vorce, inheritance law, rights to acquire property, rights to vote, and military service obligations.

24 FREEDOM, SECURITY AND OPPORTUNITY EXISTING TIES WITH DESTINATION thus the quality and availability of international schools COUNTRY is an important factor.Tertiary education is also an important consideration. Immigrant investors may plan years ahead so their children can have more affordable Immigrant investors may chose a destination to which access and better chances of admission to top univer- they already have ties. For example, they may have sities in their destination country. family members in the target country or do significant amounts of business in the country or region. PROCESSING TIMES QUALITY OF LIFE Processing times and waiting lists vary greatly by jurisdiction and may be affected by current demand and Immigrant investors, and indeed immigrants of all capacity for the program being applied for. For those classes, place heavy consideration on quality of life looking to acquire an alternative citizenship urgently, when deciding where to relocate. Factors such as this could be an important factor. For those looking crime rates, climate, pollution, education, healthcare, for an alternative residence, long or uncertain process- infrastructure, entertainment, culture and the arts, po- ing times can disrupt moving plans. Those applying for litical freedom and freedom of press, gender and mi- residence by investment should also consider whether nority equality, and religious tolerance may all be con- they ultimately want to become citizens of their new sidered. Other factors, such as access to luxury goods country and the timeline and process required. shopping and access to private banking and family office services, may also be considered by wealthier immigrants. CHANCES OF A SUCCESSFUL OUTCOME Immigrants must also consider what they are giving up and commitments they are making. Many will need Meeting the investment requirements does not always to learn a new language and adjust to a culture with guarantee that a residence or citizenship application which they are unfamiliar. For those who were educat- will be successful. Each jurisdiction has their own re- ed abroad or have done business international, this quirements and process of accepting or declining ap- may not be such a significant adjustment. Others may plicants. Programs may also be oversubscribed, and prefer a country with a more similar culture, for exam- applicants may be declined or waitlisted even if they ple a citizen of China moving to Hong Kong or Singa- have a strong business pedigree and are of demonstra- pore or a citizen of the U.K. moving to Australia or New bly good character. Prospective immigrant investors Zealand. should be aware of how their background and demand for a program may affect their chances before commit- EDUCATION AND PROSPECTS ting to an application. FOR CHILDREN

Many immigrant investors are in part motivated by seeking a better quality of life for their family. For their children, education is a major factor. Popular destinations such as the U.S., Canada, the U.K. and Australia all have excellent education systems, and thus it may come down to personal choice or other factors. For those considering emerging investor immigration destinations, educational options may need further consideration. Many will prefer the language of instruction to be English and for the school to follow recognized international curriculums,

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 25 04 CONTROVERSIES AND MALPRACTICE

THE PITFALLS OF POORLY REGULATED INVESTOR IMMIGRATION PROGRAMS AND FRAUDULENT AGENTS AND ADVISORS.

26 FREEDOM, SECURITY AND OPPORTUNITY Immigration, residence and citizenship have always been sensitive matters that have attracted strongly opposing views and generated debate and controversy. Investor immigration is, in many cases, more polarizing than general immigration.Poor planning, implementation and regulation of investor immigration programs in the past has severely damaged the industry’s reputation. With a maligned reputation, media and the public are drawn more to negative stories and details of program failures than they are to success stories.

In this section the Global Investor Immigration Council examines the mistakes the industry has made in the past in order to understand how such mistake can be avoided in the future.

It also looks at how many failings have been rec- tified and how ongoing reform continues to en- hance the long-term viability of the industry. All industry participants, including both service providers and governments offering investor immigration programs, should be aware of the lessons learned in both the successes and failures of the last 30 years.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 27 LACK OF REGULATION AND STRUCTURE OF PROGRAMS

The initial boom in demand by investors for alternative Little was known about the structure of the program, residence or citizenship was fueled by citizens of Hong or even how much needed to be invested. The deci- Kong and Taiwan looking to protect their assets and sion making process was reportedly overseen by only mitigate risk in the face of uncertainty around future a handful of ministers, who frequently overlooked re- relations with China. In the late 1980s and early 1990s quirements for residency prior to obtaining a passport. the leading program for investor residence was in Can- The lack of regulation and information about the pro- ada, while for citizenship it was in St. Kitts. These program’s structure led to public criticism which contribut- grams were both based on solid legal grounding and ed to the program’s demise. had a degree of regulation and structure. Recent years have seen the Caribbean nations offering However, as pioneers of the industry, they were not citizenship by investment make great strides in improv- without flaws. Canada’s program received negative ing regulation and structure. St. Kitts, Dominica, Anti- coverage due to cases of investors who lost significant gua and Grenada have all created government units sums in investment projects that were not regulated. dedicated to administering the program. Such units An early report on the program also criticized the ad- add an additional layer of oversight and specialization, ministration of the program, highlighting long waiting improving public confidence in the management of times for visas to be issued and poor regulation of ad- citizenship by investment applications and funds. In visors and agents promoting the program. Opposition 2015, the efforts of Grenada and Dominica in reform- in St. Kitts criticized the lack of transparency in its pro- ing programs were recognized, when both countries gram and expressed concerns over how much agents signed an agreement with the European Union to fa- were making out of it. cilitate visa-free travel for their citizens in Schengen countries. The programs in Canada and St. Kitts went on to im- prove transparency and introduce clear structure and The agreements were made following European Union regulation processes, consequently thriving and gain- investigations which included reviews of citizenship by ing support of future governments. However, pro- investment programs and the due diligence processes. grams that did not follow their lead ultimately failed. Of notable interest is Ireland’s citizenship by investment program which existed from the late 1980s to the late 1990s. The program was not based upon new legislation, but rather an existing clause that allowed the granting of citizenship to those with “Irish associations.”

28 FREEDOM, SECURITY AND OPPORTUNITY FAILURE TO PREVENT ILLICIT ACTORS FROM GAINING CITIZENSHIP OR RESIDENCE

While the majority of immigrant investor applicants are What is not clear is whether these individuals were legitimate business people or have gained their wealth able to obtain citizenship or residence because in- through legal means, a small number of cases in which formation about criminal activities was not found or undesirable individuals have used alternative citizen- concerns over source of funds were not highlighted, ship to aid criminal activities has tarnished the reputa- or because such information was found but deliber- tion of the industry. ately overlooked. Fortunately, there has been much improvement with regards to preventing such cases in A report by the U.S. State Department in 1999 ex- recent years. pressed many concerns with the emergence of citizenship by investment programs in the Caribbean. The The Caribbean countries all use external due diligence report claimed that the programs were impediments providers to vet applicants, while most countries offer- to fighting international crime, adding that econom- ing residence by investment ensure all applicants are ic citizenships were being exploited by international subject to full security checks and background screen- criminals to conceal their identities and their illicit fi- ing, including proof that their funds were obtained nancial gains. Furthermore, the report expressed con- legally, prior to admission. While there have been far cerns that applicants could adopt new names on their fewer cases of criminals and undesirable individuals passports, allowing them to create multiple identities being found to have benefited from investor immigra- and to facilitate money laundering, fraud and other il- tion in recent years, both governments and immigra- licit activities. tion advisors must remain vigilant to ensure that this remains the case so that the reputation of the industry The Caribbean countries are not the only schemes can continue its recovery. through which illicit actors have been able to benefit. A former Justice Minister in Ireland estimated that up to half of the citizenships granted under his country’s former scheme were “given to unsuitable and improper people who have not fulfilled the necessary conditions.” Critics of residence by investment in Cana- da and Australia have also alleged that criminals and corrupt government officials from Greater China have entered those countries through investor programs.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 29 LACK OF TRANSPARENCY

By compiling clear annual reports covering such de- The final area of transparency to consider is approval tails, the public could better understand the benefits rates and the decision making process. Some of the these programs bring. At present, this is not done con- more established residence by investment programs sistently. The U.K., the U.S. and Canada, have all com- provide information on the percentage of applications missioned several one-off independent reports into that are approved, declined or withdrawn. While it is their programs, but these are infrequent and rely on commendable that such information is made available, samples of investors rather than tracking all success- it would be of interest to the public to know how such ful applicants. St. Kitts provides information on how decisions are made. Knowing that a certain number of its Sugar Industry Diversification Foundation, funded applicants were declined because, for example, they almost entirely by its citizenship program, spends its were deemed high-risk after due diligence screening income. While St. Kitts should be lauded for this, it or they could not provide evidence they had adequate has not released an annual report on its website since funds, rather than because of an arbitrary decision 2011, making it difficult to assess its effectiveness in making process, would increase public faith in the ad- recent years. ministration of the program.

Another area in which transparency is important is the due diligence and background checking process. Most governments claim to perform extensive due diligence on applicants to ensure that convicted criminals, potential money launders and otherwise undesirable individuals are not granted residence or citizenship. In- deed, evidence suggests that much improvement has been made in weeding out malevolent characters, particularly in the Caribbean citizenship programs. How- ever, public confidence could be improved by offering clearer insight into the process for due diligence and background screening. This is especially true for many of the residence by investment programs, for which due diligence is typically conducted by a government departments. While it is clear that governments will have access to the highest level of criminal background checks, it is often not clear how they screen against other potential risks or how they determine that funds were obtained legally and ethically.

30 FREEDOM, SECURITY AND OPPORTUNITY FRAUDULENT OR INCOMPETENT IMMIGRATION AGENTS AND ADVISORS

History is littered with examples of fraudulent financial In jurisdictions which requires applicants to make at-risk advisors and investment managers. In many respects, investments there are, inevitably, stories of investors the industry of investor immigration is even more ex- who lose their money. While this is the nature of invest- posed to the potential for advisors to misrepresent ment, there have been cases where those arranging or themselves or their investment projects. Frequently managing the investments were fraudulent or incom- there are significant language and cultural barriers be- petent. A notable case occurred in the U.S. between tween the investor’s countries of origin and destina- 2011 and 2013, when a businessman misrepresented tion, while significant differences may exist in the legal his credentials and led an alleged $156 million invest- and regulatory framework of the two jurisdictions. Thus ment fraud case, through which nearly 300 Chinese it is more difficult for the investor to choose an advisor, EB-5 applicants invested in a hotel and convention and having done so they must place huge trust in the center project in Chicago. Although the project never advisor’s counsel. came to fruition, around $147 million was successfully return to applicants following an investigation by the In the early days of the Canadian program, there SEC and USCIS. were multiple reports of investors losing much of their funds, despite assurance from agents and investment Investor immigration does not have a history of ma- managers that this would not be the case. Other con- jor cases of corruption involving government officials. troversies involved the illegal sale of passports on the The only story of concern in recent years occurred in black market, with agents relying on the existence of Portugal, when, in November 2014, police made 60 legitimate citizenship programs to fool investors. raids across the country, detaining 11 in a crackdown on suspected corruption. Among those detained were Fortunately, regulation has improved greatly since the head of the border agency and the president of then. Many individuals and firms who operate in the in- the registration and notary institute. Three days after dustry are now regulated by national organizations or the raids, interior minister Miguel Macedo resigned. government bodies. However, this level of representa- In February 2015, Deputy Prime Minister Paulo Portas tion and regulation falls short for two reasons. Firstly, said that he would ensure rules around the program these organizations are focused solely on the general were tightened to prevent corruption in the future. concept of immigration rather than investor immigra- These rules included the involvement of more people tion, a growing niche that faces differing challenges. in the decision making process and the introduction Secondly, these organizations are national bodies but of audits by a unit of the Ministry of Internal Adminis- many investor immigration advisors offer services in tration. several jurisdictions, many of which are not regulated. Consequently one of the GIIC’s foremost aims is to regulate investor immigration advisors on a global level.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 31 05 ECONOMIC IMPACT

HOW INVESTOR IMMIGRATION DONE RIGHT CAN BENEFIT DESTINATION COUNTRIES

32 FREEDOM, SECURITY AND OPPORTUNITY Despite the significant positive economic impact of investor immigration programs, media coverage tends to lean towards highlighting controversies surrounding the industry.

However, a number of independent studies have highlighted a wealth of benefits to countries op- erating effective investor immigration programs.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 33 DIRECT FINANCIAL BENEFIT INDIRECT ECONOMIC BENEFIT

The huge inflows of foreign capital as a result ofin- Investor immigration programs benefit the economy vestor immigration programs have benefit host coun- far beyond the impact of the initial investment. Of par- tries significantly. In the last 10 years, the U.S. EB-5 ticular interest is the impact on job creation. Immigra- program has attracted more than $9 billion in capital tion Canada estimated that in the first 10 years of Can- investment. An independent report on the Canadian ada’s program, 33,000 jobs were created as a result of program published in 2010 estimated that the pro- investments. Invest in the USA estimates that 181,000 gram provided an annual economic contribution of jobs have been created or saved as a result of EB-5 in- around C$2 billion. Prior to its cancellation in 2015, vestments in the last five years. An independent report Hong Kong’s residence by investment program attract- by the U.K.’s Migration Advisory Committee cited sured a total of HK$224 billion ($29 billion) in the 12 years veys that found that a significant number of investors it operated. who came to the U.K. through the Tier 1 Investor route had businesses that employed more than 10 people. In Cyprus, government officials say the program has contributed €2 billion to the economy. Programs in the Attracting wealthy immigrant investors also benefits U.K., Australia and New Zealand each attracted more host countries through the spending they bring to the than a billion dollars in investment in 2014, while pro- economy as well as tax income from their earnings. In grams in Hungary and Portugal attracted hundreds of addition, immigrants may go on to invest or manage millions. In Latvia, an independent report by the cen- business above and beyond what was required under tral bank estimated that the residency by investment the initial criteria for their admittance. program had within five years brought in more than $1.4 billion in foreign investment and added more than $40 million per year to the state budget. A separate report by Deloitte had even higher estimates of budget contribution.

The impact of investor immigration on small Caribbean countries has been even more significant. In St. Kitts, the program has been estimated to contribute 30% of government revenue, while in Antigua this figure is expected to be 25% by the end of 2015.

In St. Kitts in particular, the program has been vital to support an economy severely impacted by the closure of its sugar industry in 2006. The most popular investment route involves a direct contribution of at least $250,000 to the Sugar Industry Diversification Foun- dation (SIDF), a public charity aimed at rebuilding the economy and developing growth in new sectors. As of 2013, the fund had raised around $200 million, almost entirely from the citizenship program.

Expenditure from the fund has allowed St. Kitts to develop its tourism industry and invest in public interest initiatives. These include spending on employment and skills training that has created 600 permanent jobs, investments in agriculture that aim to provide food security by 2017, spending on school modernization and computer literacy meaning every high school student now has a government provided laptop, and investments in renewable energy that are seeing more homes fitted with solar panels.

34 FREEDOM, SECURITY AND OPPORTUNITY RAISING CAPITAL FOR BUILDING BUSINESS LINKS ENTREPRENEURS AND BUSINESSMEN ABROAD

Investor immigration programs that require invest- The majority of immigrant investors will fund their in- ments in businesses offer entrepreneurs and business- vestments from income from business endeavors run men a source of capital, often at a lower cost than by themselves or their family. Therefore they are like- other routes. In particular, the U.S. EB-5, through the ly to have strong business connections in their home Regional Center program, has successfully funded a country. By attracting immigrant investors, host coun- number of ventures. In New York, projects such as Hud- tries can build strong business links with other coun- son Yards, Pacific Park Brooklyn, the New York Wheel tries. and the Four Seasons hotel in the financial district have benefitted from EB-5 investment. Other notable projects funded in part by EB-5 contributions include SLS Las Vegas Hotel & Casino, Hunter’s Point Shipyard in San Francisco, Panorama Tower in Miami.

In Australia, new rules for the Significant Investor Visa require that 40% of the A$5 million investment go towards venture capital or small companies. Canada’s new Immigrant Investor Venture Capital Pilot Program also seeks to raise funds for start-up companies.

RAISING CAPITAL FOR ENTREPRENEURS AND BUSINESSMEN

Investor immigration programs attract wealthy individuals who have often earned their fortunes through entrepreneurial endeavors. Thus attracting immigrant investors creates an inflow of skilled businessmen who may go on to manage or invest in new ventures. Fur- thermore, an independent study of the Canadian program found that the children of immigrant investors were likely to go on to reach high levels of educational attainment.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 35 06 CITIZENSHIP BY INVESTMENT PROGRAMS

36 FREEDOM, SECURITY AND OPPORTUNITY ST. KITTS AND NEVIS DOMINICA GRENADA ANTIGUA AND BARBUDA CYPRUS MALTA OTHER PROGRAMS AND CANCELED PROGRAMS

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 37 ST.KITTS AND NEVIS

38 FREEDOM, SECURITY AND OPPORTUNITY The Federation of Saint Christopher and Nevis Today, there are two investment options, the first operates the oldest recognized citizenship by in- of which is to invest $400,000 in approved real vestment program in the world. In 1984, short- estate, while the second requires a contribution ly after gaining independence from the United of $250,000 to the Sugar Industry Diversification Kingdom, the National Assembly passed a law to Foundation (SIDF), a public charity aimed at sup- allow granting of non-voting citizenship to those porting the diversification of the St. Kitts econo- who had “made a substantial investment in the my and ending dependence on the sugar indus- state” and were “of good character and not a try. For the real estate option, the main applicant threat to the state.” must also pay government fees of $50,000, with an additional $25,000 per family member, bring- The program was primarily marketed at wealthy ing the total cost of fees to $125,000 for a fami- residents of Hong Kong who were looking to ly of four. For a family of the same size choosing hedge against the risks of the agreed handover the SIDF option, the contribution will increase from British to Chinese rule in 1997. Reports in $50,000, bringing the total to $300,000. 1992 indicated that the majority of the 3,000 citizenships initially on offer had been granted to in- St. Kitts does not release official statistics for the vestors in Hong Kong, who contributed $25,000 uptake of the program, nor does it reveal infor- each plus $11,500 per family member. Investment mation about the nationality or demographics thresholds were later raised. By 1998, prospective of applicants. The program is widely believed to St. Kitts citizens reportedly had to invest a mini- be the most popular citizenship by investment mum of $150,000 in real estate, a figure that later scheme. The government said in 2012 that it re- rose to $250,000, and again to $350,000, and fi- ceived 300 applications annually. Other reports nally $400,000. have suggested that number has increased significantly in the last few years.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 39 SUPPORT AND REFORM

The St. Kitts Citizenship by Investment program has In November 2014, the Canadian government an- existed for more than 30 years, with the support of nounced that it was revoking visa-free entry rights to three prime ministers representing three different po- citizens of St. Kitts. The decision was due to concerns litical parties in that time. over the issuance of passports and identity management practices in St. Kitts’ Citizenship by Investment Although the scheme was launched in 1984, it wasn’t program. Of primary concern was that it may have until the 1990s that it began to receive attention and been possible for individuals to use alternative names generate political debate. In 1992, with the program and not include former or other names on their pass- being heavily marketed in Hong Kong, opposition ports, thus offering a potential route to entry to Can- leader Denzil Douglas, who would later become Prime ada to those that would not otherwise be eligible. Minister himself, accused the government of launch- Another concern was that place of birth details were ing the scheme with excessive secrecy. When Douglas omitted on some passports. In December 2014, St. himself came to power in 1995, the program contin- Kitts announced that it would recall all passports is- ued to operate, but it was not until the mid-2000s that sued between January 2012 and July 2014, in order to it came to prominence. allay concerns from Canada and the U.S.

In 2006, the government launched reforms of the pro- In the 2015 general elections, Team Unity, an alliance gram. To reflect the focus on the promotion of invest- of the Concerned Citizens’ Movement, the People’s ment rather than citizenship, the Ministry of Finance Action Movement and the People’s Labour Party, de- was assigned responsibility for the program through feated Denzil Douglas and the Saint Kitts and Nevis the creation of the Citizenship Processing Unit. The Labour Party. Timothy Harris, the new Prime Minister, minimum real estate investment was increased again was quick to stress his commitment to the Citizenship to $350,000 and a previous option to invest in gov- by Investment program. Harris further pledged to take ernment bonds was terminated, while a new option steps to reassure the U.S., Canada the U.K. and several to contribute directly to the SIDF was introduced. The other governments that St. Kitts was willing to work reforms also strengthened the due diligence process, with them to ensure the program continued to meet with all applicants required to make a declaration and the highest levels of international acceptance. prove evidence of source of funds for the investment. Following a review of the program by security and Since the reforms, the program has enjoyed a spike in due diligence consultancy IPSA International, Timothy uptake, with strong year-on-year growth reported be- Harris and his cabinet announced in April 2015 that tween 2008 and 2013. they had agreed to adopt all 20 recommendations in the report. These included the establishment of a In March 2014, three Iranian national who had been commission to oversee the program, reviewing the conducting business in Georgia and the United Arab regulations for the establishment of escrow accounts Emirates by using St. Kitts citizenship were placed on and amending the policies accordingly, and reviewing sanctions lists, amid allegations that they had laun- previously approved applications and conducting pe- dered tens of millions of dollars on behalf of sanctioned riodic reviews of approved applicants thereafter. Harris Iranian banks. The U.S. government went on to pub- also revealed that the government would revoke any lically press St. Kitts to better monitor the citizenship passports that had been found to have been issued program. Of particular concern to the Treasury Depart- fraudulently or had been granted to undesirable in- ment was that more Iranian nationals could have used dividuals, commenting, “We shall make provisions to the program to evade sanctions and conduct business revoke the citizenship of any economic citizen who in the U.S. and Europe. within five years of the issuance of the certificate of registration, commits a serious crime like an act of terrorism, or appears on an international sanctions list, or on a wanted list of any country or international body, or is named in any scandal that might bring our country into disrepute.”

40 FREEDOM, SECURITY AND OPPORTUNITY IMPACT

Lack of official information on uptake for the program makes it difficult to fully assess its impact. Several third party reports, including economic reviews conducted by the International Monetary Fund (IMF), shed some light on economic impact. The IMF credits the Citizenship by Investment program with fueling St. Kitts’ recovery in tourism and construction, as well as contributing significant income to the government and narrowing the current account deficit. Revenue from the program is forecast to be around $37 million per year from 2015 to 2017, but the IMF has warned against reliance on the program to fund ongoing oper- ations, recommending that the funds instead be used to pay off debt, fund a major infrastructure project, or be put away in a “rainy day” fund.

Income from direct contributions to the SIDF have also had a major impact. According to a 2013 report by the Chief Executive Officer, the SIDF received income of approximately $200 million from successful citizenship applications between 2006 and 2013, with annual income growing from roughly $10 million in 2007 to more than $90 million in 2011. SIDF expenditure has been focused on resort development, critical government budget support, electricity subsidies, employment and skills training, home improvement and construction, tourism support, high school modernization, agriculture, new lighting at the Warner Park Sporting Complex, and renewable energy initiatives.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 41 DOMINICA

42 FREEDOM, SECURITY AND OPPORTUNITY The Commonwealth of Dominica launched its Dominica does not release statistics on applica- economic citizenship program in 1993, creating tions for its Citizenship by Investment program, a lower cost alternative to the St. Kitts program, and contradictory reports make it hard to accu- which had been growing in popularity. Prospec- rately estimate applicant numbers. In 1999, Dom- tive citizens were required to make a direct con- inica reported that it had around 1,000 economic tribution of $50,000 or invest $75,000 in govern- citizens. ment bonds. More recent reports indicate that more than The thresholds have since been raised: Appli- 2,000 families have received citizenship through cants can make a direct contribution of $100,000 the program, which, based upon typical numbers ($200,000 for a family of four) or invest $200,000 of spouses and dependents, would mean a total in real estate (with additional fees of around of more than 5,000 economic citizens. However, $115,000 for a family of four). conflicting reports from local attorney Stephen Isidore in 2013 suggested that 12,000 individuals had obtained citizenship through the program since 1993.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 43 SUPPORT AND REFORM IMPACT

Dominica’s economic citizenship scheme has existed In his budget address for the 2013/2014 fiscal year, for more than 20 years, surviving seven prime ministers Prime Minister Roosevelt Skerrit estimated that the cit- and three political parties. The program was created izenship by investment program contributed around by Eugenia Charles’ Dominica Freedom Party govern- $22.8 million to government funds in 2013, represent- ment and expanded by Edison James’ United Work- ing around 15% of total revenue that year. ers’ Party when they came to power in 1995. When Rosie Douglas led the Dominica Labour Party to election success in 2000, he immediately halted the program for review.

The program was re-opened less than three months later following changes to ensure that citizenship did not “fall into the hands of criminals.” The changes were partly in response to a U.S. Department of State report claiming that Dominica had issued 300 passports to Russian investors and significant numbers to individuals from China and Taiwan. The report further claimed that the program was loosely regulated and could be utilized for money laundering, while other reports claimed that new citizens could use alternative names on their passports.

Further controversy had surrounded the granting of Dominican citizenship to Christopher Skase, Australia’s most wanted fugitive.

Since the reforms, Dominica’s citizenship program has operated more effectively. In 2014, Roosevelt Sker- rit, Prime Minister since 2004, announced significant changes to the program.

These included the creation of the Citizenship by In- vestment Unit to create a more streamlined application process. In addition, due diligence process was strengthened and the option to invest in real estate was added.

In 2015, Dominica signed an agreement with the Euro- pean Union to facilitate visa-free travel for Dominican citizens in Schengen countries. The agreement was made on the back of European Union investigations which included a review of the Citizenship by Invest- ment program and its due diligence process.

44 FREEDOM, SECURITY AND OPPORTUNITY THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 45 GRENADA

46 FREEDOM, SECURITY AND OPPORTUNITY In 1996, Grenada amended its Citizenship Act to Grenada’s program was suspended in October create a program for citizenship by investment. 2001 due to fears that passports could mistakenly The Act was further amended in 1997 and 1998 be sold to terrorists after the September 11 at- to offer full citizenship rather than honorary citi- tacks. zenship. The program was reintroduced in 2013 with Grenada attempted to appeal to investors by of- new regulations, including strict “Know Your Cli- fering a more affordable program than St. Kitts ent” background checks. Investors may qualify and Nevis. Typical fees, which included a contri- through investing a minimum of $350,000 in an bution to the government and all legal costs, were approved real estate project, held for a minimum initially $45,000 for an individual and $55,000 for of four years. Another option, not yet ready to re- a family of five. By late 1999, Grenada reportedly ceive applications, is to make a non-refundable had 250 economic citizens. contribution of $200,000 to Grenada’s National Transformation Fund.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 47 SUPPORT AND REFORM

Grenada introduced and closed its first citizenship by In 2015, the Grenada Citizenship by Investment pro- investment program under Keith Mitchell’s first spell as gram received a significant boost when the country Prime Minister, which lasted from 1995 to 2008. Mitch- signed an agreement with the European Union to fa- ell and the New National Party were elected again in cilitate visa-free travel for Grenadian citizens in Schen- February 2013 after five years out of office, and the gen countries. Grenada also became one of the few plan to re-introduce a citizenship by investment pro- countries in the world to sign a visa-free agreement gram was one of the first announcements of the new with China. government.

The program was initially opposed by the ousted Na- tional Democratic Congress government, with concerns that it would devalue the Grenadian passport and claims that it would not provide a sustainable income source. The Grenada parliament passed legislation for the program in August 2013. Government officials pointed to success of similar programs in St. Kitts and Dominica and ensured that applications would be overseen thoroughly with the highest standards of due diligence.

48 FREEDOM, SECURITY AND OPPORTUNITY THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 49 ANTIGUA AND BARBUDA

50 FREEDOM, SECURITY AND OPPORTUNITY In 2012, Antigua announced it would launch a Upon officially launching the program in 2013, Citizenship by Investment Program, following a Baldwin Spencer, Prime Minister at the time, said taskforce study on potential benefits. the government hoped to generate more than $200 million over three years by attracting 1,800 To qualify for the program, investors must choose new citizens. Spencer also asserted that the all one of the following three options: Purchase a applications would be reviewed carefully and as- property with minimum value of $400,000 in a sured that the program would not jeopardize the designated zone, contribute $200,000 to the Na- integrity of the Antiguan passport. tional Development Fund, or make a business investment of $1.5 million. The government has so far not released statistics on applications for its Citizenship by Investment program.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 51 SUPPORT AND REFORM

The initial launch of the program was opposed by the In 2015, Prime Minister Gaston Brown announced that opposition at the time, the Antigua Labour Party. How- he expected the program to contribute around 25% of ever, after the party’s success in the 2014 election, cur- government revenue by the end of the year. rent Prime Minister Gaston Browne said the program would continue, following the introduction of a stat- utory board to oversee the initiative. Another major amendment to the scheme was to reduce the physical residency requirement from 35 days per year to five days per year.

In late 2014, it was announced that applicants from citizens of Afghanistan, Iraq, the Democratic Republic of Korea, Somalia, Yemen and Iran would not be accepted in order to safeguard the integrity of the program. However, the government added that citizens of these countries who reside lawfully as permanent residents in North America or Western Europe would still be considered.

52 FREEDOM, SECURITY AND OPPORTUNITY THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 53

CYPRUS

54 FREEDOM, SECURITY AND OPPORTUNITY

In 2011, Cyprus introduced Criteria and Condi- 01. Purchase at least €5 million in state bonds. tions for Naturalization of Foreign Investors to 02. Invest at least €5 million in financial assets allow citizenship by investment. Initially, invest- of Cypriot companies. ments of at least €25 million were required. 03. Invest at least €5 million in real estate, land development or infrastructure projects. The program was amended in 2013 and again in 04. Make an investment of at least €5 million 2014 to reduce the minimum investment require- in purchase or participation of a business ments. Current applicants can chose from one of in Cyprus. the following seven investment routes: 05. Make a fixeddeposit of at least €5 million, held for three years, in a Cypriot bank. 06. A combination of criteria 1 to 5 amounting to at least €5 million. 07. Invest at least €2.5 million in a special col lective scheme investing at least €12.5 in any of options 1 to 4.

Applicants are also requires to have a clear criminal record and hold a permanent privately-owned residence in cyprus, purchased for at least €500,000.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 55 In April 2013, Cyprus announced that it would offer citizenship to foreign investors, mostly Russian nationals, who lost at least €3 million in state banks following the bailout and closure of Cyprus Popular Bank.

Cyprus does not release information on uptake or approval rates for its Naturalization of Investors scheme. Many advisors and service providers report high approval rates, and some offer a money-back guarantee to investors whose applications for citizenship are declined. In 2015, interior minister Socrates Hasikos announced that the program had so far contributed €2 billion to the economy, but refused to go into further detail due to privacy issues and a desire to keep the program’s low profile.

56 FREEDOM, SECURITY AND OPPORTUNITY THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 57

MALTA

58 FREEDOM, SECURITY AND OPPORTUNITY

In late 2013, parliament in Malta introduced a bill In early 2014, the government announced that the to amend the Citizenship Act to introduce the In- implementation of the program would be indefi- dividual Investor Programme, granting citizenship nitely delayed in order to discuss amendments. “by a certificate of naturalization to foreign indi- The program was eventually launched after the viduals and families who contribute to the eco- government agreed to introduce a 12-month nomic development of Malta.” The move quickly minimum residency requirement, for which the drew controversy, with the opposition Nationalist onus of proof was put on the applicant. The gov- Party and Green Party offering strong criticism. ernment also announced that the program would follow the world’s strictest due diligence stan- The European Commission and Members of the dards. Successful applicants are required to make European Parliament also expressed concerns a non-refundable contribution of €650,000 to the over the program, through which successful ap- National Development and Social Fund. In addi- plicants would effectively become citizens of the tion, they must purchase a property for at least European Union with the right to live and work in €350,000 (or rent one for a minimum €16,000 any of its member states. per year) and invest €150,000 in government approved financial instruments. Thus the total investment requirement is €1.15 million, with additional fees for due diligence and processing applications of spouses and dependents.

In May 2015, the government revealed that there had been 573 main applications since the program opened, of which 56% were from Russia or former Soviet States. Of these 13 were confirmed to have already been granted citizenship.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 59 SUPPORT AND REFORM

Malta’s Individual Investor Programme has generated The concessionaire was also put in charge of due dili- much controversy and debate, perhaps more so than gence and backgrounds checks on applicants, as well any other citizenship or residence by investment pro- as making final recommendations on whether appli- gram. The program was created by Malta’s Labour Par- cants should be granted citizenship. This agreement ty in late 2013, the same year they came into power was questioned due to concerns that it would create a after ending the Nationalist Party’s 15-year tenure. conflict of interest due to the concessionaire receiving fees and commissions from approved applications. Of The plan drew several objections, in particular from the further concern was the lack of transparency around opposition Nationalist Party and Green Party, with the the agreement between the government and the con- youth wing of the former organizing protests outside cessionaire. parliament and the latter calling for a referendum to repeal the law. Other critics claimed the scheme would cheapen Malta’s and tarnish its reputation as a reputa- ble financial center.

The European Commission and Members of the Eu- ropean Parliament also expressed concerns over the program, through which successful applicants would effectively become citizens of the European Union with the right to live and work in any of its member states. Amid the objections, the government announced it would suspend the launch of the program. Eventu- ally it was launched in March 2014, following the introduction of a 12-month minimum residency requirement and confirmation that applicants would invest in real estate and government bonds in addition to the €650,000 contribution to the National Development and Social Fund.

Another amendment to the program concerned transparency over the names of individuals granted citizenship through the program. It had initially been announced that names would be published quarterly in the Government Gazette. This clause it the Citizen- ship Act was later removed, and it was revealed that the names of all those granted citizenship would be published in an annual list, but it would not differenti- ate between beneficiaries of the investment route and those who became citizens though other means of naturalization.

In addition to objections over the program itself, it has been strongly criticized for the manner in which it is administered. Malta appointed a concessionaire to de- sign and manage the program.

60 FREEDOM, SECURITY AND OPPORTUNITY THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 61 OTHER PROGRAMS AND CANCELED PROGRAMS

AUSTRIA VANUATU

Austria has provisions allowing for citizenship by in- In August 2013, Vanuatu introduced the Capital In- vestment, although does not run an official program vestment Immigration Plan (CIIP). To qualify for the and the requirements for investors are unclear. Austria’s program, applicants must invest $260,000 and pay Citizenship Act allows the government to confer cit- another $50,000 in various fees. In 2014, Vanuatu an- izenship on foreigners who render “exceptional ser- nounced that two Chinese citizens from Hong Kong vices in the interest of the Republic.” Reports indicate had become the first to benefit from the program. that a foreigner may be eligible through an investment Later reports in May 2014 indicated that a total of 20 of $10 million, although the Austrian government has Chinese nationals had obtained citizenship of Vanuatu denied such claims, saying that the Citizenship Act with a further 50 due to follow. provision has been under review since 2011 and no citizenships have been granted in this way since. The Chinese embassy in Vanuatu asked to know the names of all Chinese who take up the program in or- COMOROS der to revoke their Chinese citizenship due to China’s policy of single citizenship. Comoros offers citizenship by investment, although the island nation off the east coast of Africa does not In April 2015, following the destruction caused by Cy- provide much in the way of information about the pro- clone Pam, Vanuatu announced it would offer honor- gram. Government fees for the program are reported ary citizenship to up to 100 applicants who invested to be $40,000 for the main applicant, $20,000 for a $162,000. spouse and $10,000 per child. IRELAND (CANCELED IN 1998) While this makes it much more affordable then citizenship programs in the Caribbean, it offers considerably From 1988 to 1998, Ireland ran a controversial citizen- fewer benefits. The Comorian passport is not likely to ship by investment program. The idea for the scheme offer increased visa-free access internationally, and his- followed the visit of a trade delegation to Asia in 1986. tory of political and social unrest in the Comoros since Taoiseach (Prime Minister) Charles Haughey launched 1975 reduces its appeal as a potential safe haven. the scheme in 1988, despite objections from the De- partment of Justice. Citizenship of the Comoros has gained media coverage due to proposed arrangements with Gulf States to The establishment of the scheme was not made public offer citizenships to the stateless Bidun ethnic group. and no new legislation was introduced. The program In 2012, it was reported that at least 1,000 stateless was allowed through provision in the Naturalisation Bidun residents in the United Arab Emirates had taken and Citizenship Act of 1986 that allowed the grant- Comoros citizenship, with unconfirmed reports indi- ing of citizenship to those with “Irish associations.” cating that the Emirati government had paid for the Haughey’s statement of intent deemed that signifi- process. In 2014, a Kuwaiti minister said that Kuwait cant investments, reported to be 500,000 Irish pounds would make investments in schools and charities in the (around $750,000 at the time), would fulfil criteria for Comoros in exchange for the granting of Comorian cit- Irish associations. izenship to Bidun in Kuwait. The scheme became generally known to the public in 1994 after it was revealed that a wealthy Saudi businessman, Khalid Sabih Masri, had invested in C & D Pet Foods as part of a citizenship application two years earlier. C & D Pet Foods was owned by the family of Albert Reynolds, Taoiseach (Prime Minister) from 1992 to 1994.

62 FREEDOM, SECURITY AND OPPORTUNITY Another controversy emerged after it was revealed BELIZE (CANCELED IN 2002) that, in 1990, 11 passports had been issued to Sheikh Khalid bin Mahfouz and his family following an invest- Belize opened a citizenship by investment program ment of £20 million (around $39 million at the time). in the 1980s. The program, which required a $50,000 Mahfouz was a Director and major shareholder of Bank contribution to an economic support fund, was contro- of Credit and Commerce International (BCCI), which versial for its lax regulation and openness to abuse by collapsed amid convictions for money laundering, money launderers and other criminals. bribery, support of terrorism and arms trafficking. Mah- In 2002, the government canceled the program as a fouz was indicted for fraud by a New York grand jury; result of fears of abuse by international criminals in the the charges were dropped in 1993 after he agreed to wake of the September 11 attacks. pay $225 million, including $37 million in lieu of fines. The program appear to have been relatively popular due to its low cost. While official statistics are not avail- In 1995, Czech financier Viktor Kozeny received an able, reports and statements give an idea of the scale Irish passport. Kozeny, known as the “Pirate of Prague” of the program. Prior to 1989, citizenship was report- for running an investment scam in the 1990s, later fled edly issued to around 570 foreigners. In 1999, Belize to the Bahamas. He remains on Interpol’s international most-wanted list but continues to fight extradition to officials stated that the nation granted 278 economic the Czech Republic on fraud charges. citizenships from March 1995 to April 1998, of which 50 were to Russian citizens. Ireland’s citizenship scheme was canceled in 1998. A review found that 143 people, of which 48 were spous- NAURU (CANCELED IN 2003) es or children of applicants, were naturalized through the program. Total investments exceeded 90 million The tiny nation of Nauru in Micronesia operated a cit- Irish pounds (around $125 million at the time) and the izenship by investment program until 2003, when it number of jobs created was estimated to be “in the closed under pressure from the U.S. to institute broad thousands.” Des O’Malley, former Minister for Justice, reforms of its offshore finance system. estimated that as many as half of the passports granted had been “given to unsuitable and improper people who have not fulfilled the necessary conditions.” MONTENEGRO (PROPOSED, FAILED TO MATERIALIZE) ST.VINCENT AND THE GRENADINES In August 2010, Montenegro announce plans to of- (CANCELED IN 2001) fer citizenship to foreigners willing to invest at least €500,000 (around $665,000 at the time), part of which St. Vincent and the Grenadines had a short lived citi- would be donated to the state budget. zenship by investment program that was repealed in 2001, when Ralph Gonsalves and the Unity Labour Par- The proposal brought controversy, with opposition ty came to power. Prime Minister Gonsalves has since politicians claiming it would add weight to Montene- resisted proposals to reintroduce a program, while gro’s reputation as a haven for organized crime and Arnhim Eustace, leader of the opposition New Dem- money laundering. The government countered by de- ocratic Party, has on several occasions spoken in favor claring that all candidates would be verified according of a program, highlighting their success and economic to strict international standards and only those with impact in St. Kitts and other countries in the region. credible business biographies and financial means would be granted citizenship. In November 2010, less than three after announcing the program, the Montenegrin foreign ministry announced that it had halted the economic citizenship incentive as per recommendations of European Union officials.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 63 07 RESIDENCE BY INVESTMENT PROGRAMS

POPULAR IMMIGRATION DESTINATIONS.

64 FREEDOM, SECURITY AND OPPORTUNITY Canada, the U.S., the U.K., Australia and New Zealand have long been popular immigration destinations, for both immigrant investors and those applying to migrate through other routes. These programs can be differentiated from others in that the primary motivation involves the investor or the investor’s family looking to relocate and spend much of their time in the destination country.

Indeed, these countries stipulate a significant minimum physical presence, a requirement not present in many other residence programs. Pro- grams in other European countries, most of which have been introduced in the last five years, tend to have lower or non-existent physical residency requirements for investors, and thus offer appeal to those not looking to permanently relocate.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 65

CANADA

66 FREEDOM, SECURITY AND OPPORTUNITY

Canada, a pioneer of residence by investment, Uptake for the program was lower from the mid- launched its Immigrant Investor Program in 1990s to the mid-2000s, averaging around 1,350 1986. The initial criteria required applicants principal applicants and 3,680 family members to have a minimum net worth of C$500,000 per year. Applications from 2005 have been high- (around $360,000 at the time) and invest at er, with an average of around 2,630 main appli- least C$250,000 in new or existing small or me- cants and 6,880 family members per year. dium-sized business for at least three years. In the late 1990s the minimums were increased to In July 2012, the federal government suspend- C$800,000 net worth and C$400,000 investment ed the program, and, in February 2014, having and in 2010 they were doubled to C$1.6 million cleared only part of the backlog of applications, net worth and C$800,000 investment. announced it was closing the program, eventually canceling 65,000 backlogged applications and In its early days, the program became popular refunding application fees. with wealthy residents of Hong Kong, many of them anxious about the agreed 1997 handover Introduced in its place was a business skills pro- from British to Chinese rule. Canada held particu- gram and a venture capital program, of which lar appeal to investors from Hong Kong; the two only the latter could be close to being deemed countries had long held strong business and social to be a true investor immigration program. Even ties, and many Canadian cities already had large then, the program, known as the Immigrant Inves- Chinatowns. In 1993, a record year, Canada wel- tor Venture Capital Pilot Program, is prohibitive to comed more than 3,000 principal immigrant in- many prospective immigrant investors. Investors vestor applicants, and a total of more than 12,500 are required to be proficient in English or French, individuals when including spouses and depen- have a tertiary education, have proven business dents. Of these, more than 5,200 were from Hong experience, have a net worth of C$10 million, and Kong. The program was also extremely popular be willing to invest C$2 million in a non-guaran- with citizens of Taiwan, themselves wary of rela- teed 15-year venture capital fund. tions with China.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 67 Initially the program sought to approve 60 investors, The requirements of the Quebec scheme are the same opening for applications for two weeks in early 2015, as for the former federal program – C$1.6 million net or until 500 applications were received. The outcome worth and C$800,000 investment, but Quebec may of this application period is unknown. In May 2015, Cit- also consider education, business background and izenship and Immigration Canada said that they were language skills in deciding whether to approve appli- reopening the program until the end of the year and cations. Since 2012, the program has opened for short would accept a total of 120 applications, with 60 to be windows with pre-determined quotas of applicants that processed and 60 to be put on a waiting list. will be accepted. While these were oversubscribed in 2012 and 2013, reports in 2014 indicated that the pro- While the Immigrant Investor Venture Capital Pilot gram had failed to meet its quota despite the dead- Program may not be a viable option for many, there line being extended three times. From August 2015 is another route to Canada for immigrant investors. to 2016, applications will re-open for a further 1,750 Quebec’s Immigrant Investor Program remains open, main applications, of which no more than 1,200 will be as the province has had autonomy over its immigration allocated to citizens of Greater China. policy since the Canada-Quebec Accord was agreed in 1991. Additionally, other provinces offer various resi- Around 185,000 people have been granted residence dence by investment programs whereby the provinces under Canada’s Immigrant Investor Program, of which issue nomination certificates and applications are then around 50,000 were principal applicants. Of the total made to the federal government to issue Canadian number, around 30,000 were from Hong Kong, most residence visas. of whom arrived in the late 1980s and the early 1990s, while 67,000 were from Chinese nationals, who have dominated the program since the turn of the century. The chart below illustrates total applications by year, broken down by principal applicant and family members.

68 FREEDOM, SECURITY AND OPPORTUNITY IMMIGRANT INVESTORS ARRIVING IN CANADA BY YEAR

14000

12000

10000

8000

6000

4000

2000

0 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

PRINCIPAL APPLICANTS FAMILY MEMBERS

The next chart illustrate total immigrant investor arrivals by country of origin, broken down by the three major source countries, China, Hong Kong and Taiwan. It should be noted that Hong Kong was not one of the top 10 countries of origin from 1997 onwards and data is not available from that point. Other countries that made up a significant portion of applicants were South Korea, Iran, Egypt, Turkey, Pakistan, India, Saudi Arabia and Iraq.

IMMIGRANT INVESTORS TO CANADA BY COUNTRY OF ORIGIN

14000

12000

10000

8000

6000

4000

2000

0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1986 1987 1988 1989

OTHER HONG KONG TAIWAN CHINA

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 69 In 2012, Citizenship and Immigration Canada released The table below shows that historically around half of a detailed report on the Immigrant Investor program all immigrant investors to Canada have moved to Brit- with data from the Longitudinal Immigration Database. ish Columbia, where there is a notable Chinese pop- The depth of information in the report exceeds that of ulation in Vancouver. Ontario, with significant Chinese reports released by other countries. The GIIC believe populations in Toronto and Ottawa, has also grown such reports offer transparency and insight that stand in popularity with immigrant investors. However, it to benefit the industry and its reputation. Of particular should be noted that Ontario has a much greater Chi- public interest is information on province of destina- nese immigrant population than British Columbia, and tion, age and income of applicants. thus British Columbia can be seen to have a particularly strong appeal to investor-level Chinese immigrants.

IMMIGRANT INVESTORS TO CANADA BY PROVINCE OF DESTINATION

14000

12000

10000

8000

6000

4000

2000

0 0 1 0 1988 1989 2 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1990

BRITISH COLOMBIA ONTARIO QUEBEC OTHER

Age distribution has generally remained consistent over time, with more recent principal applicants being slightly older.52.5% of principal applicants were aged from 40 to 49 in the period 1986 to 2010. In 2006 to 2010, 55.7% were in this range.82.8% of principal applicants were aged 35 to 54 and 94.8% were aged 30 to 59.

70 FREEDOM, SECURITY AND OPPORTUNITY AGE DISTRIBUTION OF PRINCIPAL IMMIGRANT INVESTOR APPLICANT

35%

30%

25%

20%

15%

10%

0-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75+

1986 - 1990 1991 - 1995 1996 - 2000 2001 - 2005 2006 - 2010

Data captured from 1986 to 2008 shows that immi- The income statistics should not be used to reflect grant investors in Canada actually earn less than other upon immigrant investors’ impact on the Canadian economic immigrants, and less than the Canadian av- economy. In addition to the impact of their initial in- erage. This is likely due to fact that many investors do vestments, immigrant investor are likely to spend sig- not have their principal business interests in Canada nificant amounts of their wealth in Canada, thus sup- and thus the majority of their income is counted in an- porting Canadian economic interests. other country.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 71 SUPPORT AND REFORM

Canada’s Immigrant Investor Program has long divided The program was suspended again in July 2012, while opinion. While many were quick to acknowledge the a backlog of applications from before that date con- positive impact of the program, it did not take long tinued to be processed. In February 2014, the govern- before it came in for criticism. In 1988, Ontario’s In- ment announced that the program was officially be- dustry Minister Monte Kwinter voiced objections to ing closed down, with officials citing lack of evidence the program, expressing fears that it could be seen as for its economic benefit. While applications fees and selling visas. deposits were returned to backlogged applicants, a group of more than 1,300 Chinese investors took Can- The 1990s saw the program grow in popularity with cit- ada’s immigration authorities to court, claiming “the izens of Hong Kong and Taiwan, bringing in significant immigration authorities unfairly slowed the process- sums to the Canadian economy, with provinces coming of applications well ahead of its cancellation.” The peting for investors. Early research found that in the case was rejected. first five years of the program, applicants deposited C$1.2 billion in various funds offered by the program, Vocal critics of the program have included Ian Young, leading to projects that created 10,000 jobs. Reports Vancouver correspondent for the South China Morning also acknowledged criticism of the program, but high- Post, and Terry Glavin, currently a columnist with the lighted that it had the support of business leaders and Ottawa Citizen. Young has highlighted data demon- provincial officials across the country. Much of the crit- strating that investor class immigrants report lower icism stemmed from lack of regulation of the indus- taxable income than other immigrant classes, and crit- try and its advisors, with several reports of discontent icized the system for allowing investors granted resi- among investors who lost money and feel they were dence through Quebec’s program to live elsewhere, misled. primarily Vancouver. Glavin has insinuated that investor immigration has attracted corrupt officials from China. A change of government in 1993 saw Jean Chretien’s Liberal Party government continue to expand the pro- On the other side, many bemoaned the closing of the gram, although applicants fell in the later 1990s and program. Immigration lawyers and advisors claimed early 2000s as the wave of demand from Hong Kong the government had neglected to consider the long- and Taiwan subsided. The mid-to-late 2000s saw an- term positive impact of the program. In particular, other boom in the program, led by demand from Chi- proponents of the program highlighted that investors nese investors and increased interest from the Middle helped develop strong business links between Canada East. Regulation of advisors also improved in Canada, and their homeland, while another argument was that with the introduction of the Canadian Association of investors created significant economic impact through Professional Immigration Consultants and the Immi- personal spending. Others stressed that the program gration Consultants of Canada Regulatory Council. only accounted for around 2-3% of total immigration and did not place undue stress on Canada’s public sec- In 2006, Stephen Harper led the Conservative Party tor. to election victory. For the first few years of Conserva- tive rule, the Immigrant Investor Program continued to grow without receiving much political attention. Since 2010, however, there have been a number of funda- mental changes. The program was suspended in June 2010 and re-opened five months later with the investment threshold doubled to C$800,000.

72 FREEDOM, SECURITY AND OPPORTUNITY INDEPENDENT STUDIES

The first major studies of the program came in the early The report found that, on average, immigrant investors 1990s. A report by the Economic Council of Canada in spend more than $700,000 on asset purchases and 1991 gave a mixed account of the program, conclud- contribute around $2 billion per year to the economy. ing that the economic benefits of the program were Other intangible impacts highlighted were personal not obvious. In 1992, Louis Ferguson, former director consumption spending, productivity, human contribu- of the Immigrant Investor Program, led the creation of tion, and integration of a talented second generation. a report on the program for Immigration Minister Ber- The authors recommended that the program be main- nard Valcourt. The report found the program to have tained and expanded, and advised that immigration had a positive impact and urged the government to authorities should prepare annual reports on the over- reform the management of the program so it would all economic impact of the program with details on continue to attract investors. Among the findings was investments made, projects funded and jobs created. that, in the first five years of the program, applicants Further insight into the program and its impact can be deposited C$1.2 billion in various funds offered by found in the book Millionaire Migrants, written by Da- the program, leading to projects that created 10,000 vid Ley, professor at the University of British Columbia. jobs. The authors warned, however, that the appli- Ley calls upon nearly 20 years of research to follow the cation process was inefficient and increasing waiting lives of immigrant investor families and examine their times were deterring potential investors. The report economic success in Canada. also recommended that more investments were made in businesses of obvious value, highlighting that too many applicants were leaning towards real estate investments.

In 2010, Analysis Group, one of the largest economic consulting firms in North America, authored are- port entitled The Economic Impact of the Immigrant Investor Program in Canada. Roger Ware, Professor of Economics at Queen’s University, and Pierre Fortin, Professor of Economics at the University of Quebec at Montreal, were co-authors.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 73

UNITED STATES

74 FREEDOM, SECURITY AND OPPORTUNITY

The U.S. Immigration Act of 1990 led to the cre- The EB-5 program has not yet been made perma- ation of the EB-5 visas for immigrant investors. In nent. However, it has been consistently reautho- 1992, Congress created the Regional Center Pilot rized and maintains bipartisan support. In both Program to increase interest in the program. Re- 2009 and 2012, President Obama authorized gional Centers are business entities that receive three year extensions to the program. The Ameri- special designation from United States Citizen- can Entrepreneurship and Investment Act of 2015 ship and Immigration Service (USCIS) to adminis- aims to make the program permanent and intro- ter EB-5 investments and create jobs. duce several improvements.

In 1998, USCIS issued changes to EB-5 that required investors to prove that that investment funds originate from lawful sources. New rules also created further specification on the types of commercial entities that could take EB-5 investments and how the investment was administered. Congress passed the Basic Pilot Program Exten- sion and Expansion Act in 2003, aimed at revitalizing the program, which had seen applications fall. The creation of the Investor and Regional Center Unit (IRCU) in 2005 led to better coordination and reliability in the EB-5 program.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 75 INVESTMENT OPTIONS REGIONAL CENTERS

The investment requirements for the EB-5 visa have Regional Centers are organizations, designated and remained unchanged since the program’s inception. regulated by United States Citizenship and Immigra- The minimum investment is $1 million for investments tion Service (USCIS), which pool EB-5 capital in ap- in most of the country, but $500,000 in Targeted Em- proved economic development projects within de- ployment areas. Investors can either manage their in- fined regions. vestment personally or invest passively in a Regional Center: Regional Centers can be publicly owned, privately owned, or a public-private partnership. By pooling foreign capital, they facilitate investment in large-scale 1. CREATION OF A NEW U.S. ENTERPRISE projects, often in coordination with regional economic development agencies. • Invest either $1 million or $500,000 in capital ac- quired through lawful means. The general minimum As with all EB-5 investment options, Regional Center requirement is $1 million; for Targeted Employment investments must be proven to have created 10 jobs. Areas, the minimum is $500,000. Targeted areas in- However, with Regional Centers the job creation may clude areas with unemployment of at least 150% of the be indirect, so long as it is demonstrated through eco- national average. Rural areas, defined as those outside nomic analysis that the minimum requirements have a metropolitan statistical area or outside the boundary been met. of any town having a population of 20,000 or more, are also included in the $500,000 minimum. The number of Regional Centers has grown with the popularity of the EB-5 program. In 2006, there were • Create full-time employment for at least 10 qualified only 25 Regional Centers. As of May 2015, USCIS had U.S. workers, who must be direct employees of the en- approved 652 Regional Centers. All investment offer- terprise. ings made by EB-5 Regional Centers are subject to U.S. securities laws, enforced by state securities regu- • Actively manage the day-to-day activities or policy lators and the U.S. Securities & Exchange Commission. of the enterprise.

2. INVEST IN A REGIONAL CENTER

• Make an investment of $500,000.

• Create full time employment for at least 10 qualified U.S. workers, directly or indirectly.

• Active management of the enterprise is not required.

Investments in Regional Centers are by far the more popular option, with investors seeking a higher likeli- hood of meeting job creation requirements, while also looking to invest passively and live in areas other than those of their investments.

76 FREEDOM, SECURITY AND OPPORTUNITY With the demand for investor immigration from Hong In 2005, Invest in the USA (IIUSA), a trade associa- Kong and Taiwan, the EB-5 program grew in the mid- tion for EB-5 Regional Centers, was founded. This led 1990s. However, uptake was much lower than in Can- to improved oversight and the creation of many more ada. In the late-1990s and early 2000s, with demand Regional Centers, offering increased investment op- from Hong Kong and Taiwan falling, the program fell portunities for prospective immigrants. Consequently, into obscurity. The mid-2000s saw the emergence of the program grew steadily, led by increasing demand better management and regulation of the program. from China. In 2014, for the first time in the program’s The Investor and Regional Center Unit was created at history, the quota of 10,000 was met, with more than USCIS to oversee the EB-5 program. 9,000 Chinese citizens receiving visas.

EB-5 VISAS GRANTED ( INCLUDES FAMILY MEMBERS )

12000

10000

8000

6000

4000

2000

0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

CHINA OTHER

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 77 PROCESS AND APPROVAL

Prospective EB-5 recipient must file an I-526 petition for classification in the EB-5 category. Upon approval from USCIS, the investor is granted conditional residency for two years. The conditions for residency may be removed at the end of this period by filing of form I-829 to USCIS. This must be accompanied by evidence that the investor has fulfilled the requirements of the EB-5 program, including provision of payroll records and tax records to prove job creation, and proof that the investor has continuously maintained the investment during the two-year period.

PERCENTAGE OF RESOLVED I-526 APPLICATIONS APPROVED

90%

88%

86%

84%

82%

80%

78%

76%

74% 2008 2009 2010 2011 2012 2013 2014

Application approval rates for I-526 petitions peaked at 89% in 2010 and have been around 80% for the last four years. However, analyzing recent quarterly information reveals that approval rates have been higher recently.

78 FREEDOM, SECURITY AND OPPORTUNITY PERCENTAGE OF RESOLVED I-526 APPLICATIONS APPROVED BY QUARTER

100% 95% 90% 85% 80% 75% 70% 65% 60%

Q1 FY 2014 Q2 FY 2014 Q3 FY 2014 Q4 FY 2014 Q1 FY 2015

The conditions for residency may be removed at the end of the two-year period by filing form I-829 with USCIS. This must be accompanied by evidence that the investor has fulfilled the requirements of the EB-5 program, including provision of payroll records and tax records to prove job creation, and proof that the investor has continuously maintained the investment during the two-year period. With growing numbers of Regional Centers and improved regulation and clarification of requirements, the success rate of I-829 applications has increased considerably, peak- ing at 96% in 2011 and remaining above 90% thereafter.

PERCENTAGE OF RESOLVED I-829 APPLICATIONS APPROVED

100%

95%

90%

85%

80%

75%

70%

65%

60% 2008 2009 2010 2011 2012 2013 2014

The majority of I-829 denials and requests for evidence are due to issues with job creation and the applicant sus- taining the investment.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 79 SUPPORT AND REFORM

The EB-5 program has bipartisan support and has The program also has the support of business leaders. been renewed without fuss under both Republican In 2014, Sheldon Adelson (major Republican donor), and Democratic governments. While the investment Warren Buffet and Bill Gates (both Democratic sup- amounts have remained unchanged in this period, var- porters) wrote an op-ed on immigration reform in the ious aspects of the program have been amended and New York Times. They suggested expanding the EB-5 improved. program to support further economic impact, but also warned that the program should be reformed to pre- The most significant changes have been around the vent fraud and abuse. Regional Center investment option, introduced by Congress in 1992. However, this route did not really Invest in the USA (IIUSA), a trade association for EB-5 take off until the mid-2000s, following the passing the Regional Centers and strong proponent of the EB-5 Basic Pilot Program Extension and Expansion Act in program, estimates that from 2005 to 2014, the pro- 2003, aimed at revitalizing the program. Additionally gram has brought in $9 million in capital investment the 2005 formation of Invest in the USA (IIUSA), a trade and supported more than 181,000 jobs. association for EB-5 Regional Centers, led to the creation of many more Regional Centers, offering more investment opportunities and increased oversight.

Government oversight of the program through US- CIS has also been reformed over time. In 1998, USCIS issued changes that required investors to prove that that investment funds originate from lawful sources. Despite these changes, there have been criticisms that the program may be exploited or create conditions for fraud.

80 FREEDOM, SECURITY AND OPPORTUNITY INDEPENDENT STUDIES

In 2005, the U.S. Government Accountability Office The study also offered insights on how wealthy immi- (GAO) issued a report to Congressional Committees grants prefer to invest. Real estate was by far the most addressing the reasons for falling demand for the EB-5 popular industry, accounting for 35% of investments, program. Among the reasons cited for the decline in while dairy cattle, hospitals, aircraft manufacturing le- applications were uncertainty among investors, the gal services and crop farming were also common. In- onerous application process, lengthy adjudication pe- formation on ownership structure revealed that 56% riods, and the suspension of processing of more than owned less than 10 percent of the business in which 900 EB-5 cases in relation to changes in USCIS reg- they invested, indicating a preference for taking mi- ulation. The study also looked at trends among past nority stakes in larger or more established companies. applicants, finding that immigrants primarily invested However, 24% owned 100% of the business, suggest- in hotels or motels, manufacturing companies, real ing that a significant number preferred to fully acquire estate companies, domestic sales companies, farms, small businesses or establish their own. Finally, the import/export companies, restaurants, and technolo- study looked at investment amounts, finding that 73% gy companies. The authors also estimated that 38% of of visa holders invested $500,000 through the Region- approved immigrant investors had so far applied for al Center program. Interestingly, 8.5% invested more U.S. citizenship. than the upper threshold of $1 million.

In 2009, USCIS commissioned policy consulting firm More recent studies of the program have been com- ICF International to undertake an independent study missioned by IIUSA. While the organization’s support of the EB-5 program and its impact. The report found for the EB-5 program means it cannot be described as that EB-5 participants had had a substantial impact on independent, its studies were conducted by economic GDP and job creation. Between 2001 and 2006, a pe- impact analysis company IMPLAN and peer-reviewed riod in which the program suffered from a lack of up- by the Association for University Business Economic take, estimate average impact on GDP was $117 mil- Research. The most recent report estimates that the lion per year. Over the same period, an estimated total EB-5 program contributed $3.58 million to GDP and of 12,000 jobs were created directly and indirectly as a supported more than 41,000 jobs in fiscal year 2013. result of EB-5 investments, at an average of 2,000 per Spending by EB-5 investors was estimated to have year and 21 per investment. Impact on federal tax rev- contributed $520 million to federal government tax enues was estimated to average $17 million per year, revenues and $285 million to state and local govern- while state and local government were estimated to ment tax revenues in the same period. have seen increases in tax revenues of more than $10 million per year as a result of the EB-5 program.

The USCIS/ICF study found that, based on a sample of 295 individuals who received their visa between 1992 and 2007, the median age of the investor at the time initial investment was 44. The survey also found that 85% were married, of whom 92% had at least one child.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 81

UNITED KINGDOM

82 FREEDOM, SECURITY AND OPPORTUNITY

The U.K. has operated an immigration route for In late 2014, the government announced the min- investors since 1994. Until 2004, investor appli- imum investment would be raised to £2 million, cants had to make the U.K. their main home and all of which was now required to be invested in in- were required to hold at least £1 million in the vested in U.K. companies or government bonds. U.K. and to invest £750,000 in U.K. government For the first four years of its existence, there was bonds, stocks or corporate bonds. little interest in the UK’s investor visa. In 1995, the first full year of the program, there were only 10 In 2004, a change in regulations permitted invest- people admitted. In 1996, the number was 30 ment funds to be sourced through a loan from a and in 1997 it fell to 20. Statistics up until 2008 U.K. regulated financial institution, provided that are not readily available, as investor numbers are the applicant had a net worth of at least twice the included with other categories of immigration for value of the investment. Significant changes were business and independent means. made to the program in 2008, with the introduction of a points-based system. The Tier 1 (Inves- In 2008, the Tier 1 Investor route had a very low tor) route was established for high-net-worth in- uptake: 43 investors and 95 dependents. Since dividuals wishing to invest at least £1 million in then, it has grown rapidly. In 2014, there were the UK. 1,173 main applicants and 1,827 dependents, roughly double the numbers of 2013. From 2008 In 2011, the government introduced provisions to the end of 2014, more than 8,000 people came to for accelerated settlement for those investing to the U.K. on the Tier 1 scheme, of which nearly larger sums. For the standard £1 million thresh- 3,000 were main applicants. old, investors could settle after five years and apply for citizenship after six years. The settlement qualifying period was reduced to three years or two years for those investing at least £5 million or £10 million respectively; investors on these schemes could apply for citizenship after five years. Residence requirements were also relaxed in 2011, permitting up to 180 days of absence per year for investors.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 83 UK TIER 1 INVESTOR VISAS

3.500

3.000

2.500

2000

1500

1000

500

0 2008 2009 2010 2011 2012 2013 2014

MAIN APPLICANTS DEPENDENTS

Growth has been led by Russian and Chinese citizens. Chinese applicants made up 48% of main applicants in 2014, compared to just 9% in 2009.

UK TIER 1 INVESTOR VISAS - MAIN APPLICANT NATIONALITY

1400

1200

1000

800

600

400

200

0 2008 2009 2010 2011 2012 2013 2014

CHINESE RUSSIAN OTHER

Since 2008, the success rate for main applicants has averaged around 91%, fluctuating quarter-on-quarter but not changing significantly over time. For dependents, the approval rate has averaged around 88.5%.

84 FREEDOM, SECURITY AND OPPORTUNITY APPLICATION SUCCESS RATE FOR TIER 1 INVESTOR VISA

100% 95% 90% 85% 80% 75% 70% 65% 60% 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4

APPLICATION SUCCESS RATE - MAIN APPLICANT APPLICATION SUCCESS RATE - DEPENDANT

Available statistics do not include information on the age of applicants. However, a study by the Independent Chief Inspector of Borders and Immigration found that from a sample of 48 cases from the 2011-2012 financial year the average age was 34. It is worth noting that the average age was 43 for those applying from overseas, while it was only 24 for those applying from with the U.K., many of whom had originally been granted residence rights as students.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 85 INDEPENDENT STUDIES OPERATIONAL REVIEW

The levels of transparency and oversight of the U.K. In 2013, John Vine, Independent Chief Inspector of Tier 1 (Investor) visa should be seen as a fine example Borders and Immigration released a report following to other investor immigration programs. In particular, an inspection of the Tier 1 Investor and Entrepreneur two independent studies in recent years have ensured visa categories. Both programs were praised for use of that the program continues to operate at a high stan- security checks and risk assessment networks. dard and established reforms to ensure the program continues to provide economic benefits. The decision making process in the investor route was deemed to be working well – 91% of all decisions were found to be reasonable, compared to 62.5% for the entrepreneur route. Decisions that were deemed to be unreasonable were down to applicants failing to demonstrate that they had requisite funds and failing to demonstrate evidence of the source of funds.

The report also highlighted security deficiencies in the storage of personal data; the Home Office accepted and implemented recommendations to move in line with Data Protection Act requirements. The report also found that, due to an unexpectedly high number of applications, many were not resolved within an accept- able time period. To this end it was recommended, accepted and implemented that future intake fore- casts better reflect potential consequences of policy change.

86 FREEDOM, SECURITY AND OPPORTUNITY IMPACT REVIEW

In February 2014, the Migration Advisory Committee, a non-departmental public body of economists and migration experts, issued a report assessing the investment thresholds and economic benefits of the Tier 1 (Investor) route.

The report found gave a mixed assessment of the program, concluding that there program did benefit the U.K. but many of the claims of positive impact made by proponents of the program were exaggerated. Of particular note was that the benefits of the program were limited due to the fact that applicants invested mainly in U.K. gilts, for which demand was already suf- ficient from other sources.

Several reforms were suggested, primary of which was to double the investment threshold from £1 million to £2 million. This suggestion was implemented in late 2014. More controversially, the report suggested that a number of visas be auctioned, with the surplus above the £2 million threshold to go to a good causes fund. In order to encourage investors to enter the auction, it was recommended that successful bidders benefit from accelerated settlement and relaxed residence requirements.

The proposals were criticized by immigration consultants, who warned that such a system would send out the wrong message to the public. To date, plans to auction visas have not been implemented.

The report also warned that the U.K. should not be drawn into a “race to the bottom” as a result of the introduction of several other global residence and citizenship programs offering lower investment thresholds.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 87

AUSTRALIA

88 FREEDOM, SECURITY AND OPPORTUNITY

Australia has had provisions for entrepreneurs to From its inception in November 2012 through to migrate since 1976 and introduced a business mi- the end of March 2015, 751 primary visas have gration scheme since for those investing at least been granted under the Significant Investor pro- A$500,000 in 1982. Program types have varied gram. In the most recent five quarters, there has greatly over the years, and often factors such as been steady growth in the number of visas grant- age, language skills, and business background ed, and applications lodged continues to exceed taken into consideration, and consequently they the number of visas granted. may not be defined as traditional investor immigration programs.

From 2007 to 2012, Australia averaged an intake of more than 7,000 people per year under its business skills visa. However, this includes all business visa sub-streams, and the number who of beneficiaries of investor schemes is unclear. In May 2012, the Minister for Immigration and Citizenship announced the introduction of the Significant Investor Visa, which was later opened in November 2012. This scheme represents a more traditional investor immigration program, with clear requirements and investment thresholds. Under the program, immigrant investors are required to invest A$5 million in complying investments for a minimum of four years.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 89 RECENT TRENDS IN SIGNIFICANT INVESTOR VISA APPLICATIONS

300

250

200

150

100

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

PRIMARY APPLICATIONS LODGED PRIMARY VISAS GRANTED

Of notable interest is the growing gap between appli- Australia also provides information on the top five cations lodged and visas granted. 1,679 applications source countries for applicants and the state or terri- have been lodged while only 751 visas have been tories in Australia to which they apply. China makes granted. If the number of applications continues at its up more than 90.2% of applicants and 88.7% of visas current rate, it will likely create a large backlog of ap- granted. Thus it can be seen that Chinese applicants plications. This will either result in a lower acceptance have a lower application success rate than other lead- rate for applications or delays in processing times for ing source countries: Hong Kong, Malaysia, South Afri- applicants. ca and Japan represented a greater proportion of visas granted than visa applications.

90 FREEDOM, SECURITY AND OPPORTUNITY APPLICANTS FOR TOP PERCENTAGE OF TOTAL VISA GRANTS FOR TOP FIVE PERCENTAGE OF TOTAL FIVE SOURCE COUNTRIES APPLICATIONS SOURCE COUNTRIES VISAS GRANTED

China 90.2 China 88.7

Hong Kong 3.0 Hong Kong 3.3

Malaysia 1.2 Malaysia 1.5

South Africa 0.8 South Africa 1.1

Vietnam 0.5 Japan 0.7

More than half of investors move to Victoria; the next most popular state is New South Wales.

SIGNIFICANT INVESTOR VISAS GRANTED BY STATE

VIC 428

NSW 245

QLD 38

WA 24

SA 16

This is perhaps surprising, given that New South Wales receives more immigrants in other categories and its capital, Sydney, has a higher population than Melbourne, the capital of Victoria. Thus it can be concluded that Melbourne is likely to hold significant appeal to immigrant investors coming to Australia.

SUPPORT AND REFORM

In April 2015, the Significant Investor Visa program This was met with mixed reactions from industry stake- was briefly suspended in order to create a new frame- holders. Critics claimed the changes would put off work to reduce indirect investment in real estate and risk-averse Chinese investors, while proponents said it cool the property market. The program later reopened would boost the fledgling venture capital market and with new requirements: Investors must now invest lead to more tangible benefits than other investments. A$500,000 of the A$5 million total in venture capital of growth funds, and A$1.5 million in ASX-listed small companies.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 91

NEW ZEALAND

92 FREEDOM, SECURITY AND OPPORTUNITY

New Zealand’s Immigration Act of 1987 creat- The program has grown in popularity over the ed a route for migrants willing to invest at least last five years, but remains a small program when NZ$150,000. However, due to requirements for compared to the U.S., the U.K. and Australia. English language ability and proven business background, the scheme was more like an entrepreneur immigration rather than investor immigration program. The Business Investment Cate- gory, created in 1991, introduced new flexibility in investments, and reform in 1999 introduced the Investor Category, akin to typical investor immigration programs.

Today, there are two routes for investors looking to migrate to New Zealand. The most popular category, the Investor Visa (also known as the Inves- tor 2 Category), requires investments of NZ$1.5 million in bonds, equity or residential property development. The Investor Plus Visa (also known as the Investor 1 Category), requires investments of NZ$10 million, but has more relaxed physical residency requirements and has no requirements on age, proficiency in English or business experience.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 93 NEW ZEALAND INVESTOR VISAS GRANTED ( MAIN APPLICANTS)

200 180 160 140 120 100 80 60 40 20 0

2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 TO DATE

INVESTOR INVESTOR PLUS

Since financial year 2009/2010, around 51% of suc- New Zealand’s immigration routes for investors also cessful applicants have been from China, a signifi- have notably lower success rates than other programs: cantly lower proportion than for Australia (89%). One 67% for the Investor Visa and 77% for the Investor Plus possible reason for this is the language and residence Visa. requirements for the lower cost Investor 2 Category in New Zealand. Consequently, the New Zealand program is more popular with those that intend to fully relocate for lifestyle reasons. This can be seen by the higher than average percentage of investor immigrants for the U.K. (8.7%) and the U.S. (11%).

94 FREEDOM, SECURITY AND OPPORTUNITY INDEPENDENT STUDIES

Research of the reasons behind choosing New Zea- In 2002, NZ Immigration Service released an in-depth land revealed that primary motivators were climate, evaluation report of business immigration since 1999. lifestyle, political stability and ease of meeting re- It found that, in less than three years since reforms to quirements, while promising investment returns did immigration policy in 1999, there had been 1,822 pri- not tend to be a primary motivator. It was found that mary applications approved in the Investor Category, generally investors’ expectations were met, particular- through which a total of 6,216 individuals received res- ly around lifestyle, taxation and opportunities for in- idence rights. vestment. However, only 62% of applicants said their expectations of financial and business gains had been A survey of these applicants found that the average met, and only 31% felt that New Zealand made the age of the principal was 40, the average family size most of investors’ talents and networks. was 3.4 people, and 31% of principals were female. It also found that investor applicants had higher rates of Applicants were found to have long-term commitment being absent from the country than applicants in other to New Zealand, with 40% revealing that they intend- categories. While the majority of investors opted for ed to apply for citizenship, while only 4% defined their passive investments, the survey found that many were commitment as short-term. However, only 54% said considering diversifying and establishing businesses. they currently spent or were planning to spend more The three most important factors for applicants in the than half their time in New Zealand. investor category were lifestyle, education and climate/physical environment. Half of investors opted for passive investments (generally bonds), 30% had a balance/mixed portfolio, and Assessing the effectiveness of the program, the 2002 20% chose active investments in shares, company eq- NZ Immigration Service report concluded that the In- uity or venture capital. Those who opted for passive vestor route, along with other business immigration investment did so because of a lack of knowledge routes, was having the desired effect on bringing in- and networks in New Zealand, as well as a desire to vestment, human capital and job creation to New keep risk low. However, 60% of respondents said they Zealand. However, several areas of concern were high- planned to make more active investments after they lighted. Firstly, there was a high absence rate among had met compulsory requirements and become more investors. Secondly, investments were largely passive familiar with New Zealand. deposits in bank accounts, thus having limited impact on business innovation and job creation. The report concluded that there was significant untapped potential among immigrant investors, and Thirdly, the report recommended that more be done the approach to realizing their potential contribution to encourage business migrations to regions other needed to be tailored to investor circumstances. than Auckland, in order to spread the benefits of the program more evenly.

More recently, the Ministry of Business Innovation & Employment released a report entitled Investor Mi- grant Research 2013/2014, based on research on investor immigration since 2009. The report was based on a quantitative online survey of applicants to the program and qualitative research through interviews with 20 investor migrants and five immigration agents/ lawyers.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 95

OTHER PROGRAMS IN EUROPE

Several investor immigration programs BULGARIA have been introduced in Europe in recent years, the most notable of which are examined in this section.

96 FREEDOM, SECURITY AND OPPORTUNITY

Bulgaria launched its immigrant investor program in 2009, as part of reform to create a more attractive business environment. The program is based upon the successful Canadian model, with applicants qualifying through investing around €500,000 in government bonds. Investments must be held for five years, at which point they will be returned without interest. Since amendments to the program in 2013, those that double their investment are eligible to be fast-tracked to citizenship within two years.

The Bulgarian program does not require that investors maintain physical presence in the country. Thus it may be of particular interest for investors who are not looking to permanently relocate, but looking to travel freely around Europe for business or seeking an affordable alternative residence option as a risk mitigation policy.

Little data is available regarding Bulgaria’s residence by investment program.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 97

GREECE

98 FREEDOM, SECURITY AND OPPORTUNITY

Greece has offered residence to investors since 2013. Applicants are required to invest €250,000 in real estate or in a business. A review in Oc- tober 2014 revealed that 436 permits had been granted; investors were mainly from Russia (185), China (119) and Egypt (33). Stefanos Isaias, chief executive of Enterprise Greece, the country’s official overseas investment promotion agency, says the program has been a success. Isaias continues to promote Greek residence to investors in China, and says that Greek and Chinese immigration officials have met to fine-tune the program.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 99

HUNGARY

100 FREEDOM, SECURITY AND OPPORTUNITY

In 2012, Hungarian parliament passed a law to create a Residency Bond allowing non-European Union investors to acquire permanent residence status through investing in special government bonds with a five-year maturity. The investment threshold was €250,000. In January 2015, it was raised to €300,000, while the application fee was increased to between €55,000 and €65,000.

The program has had as steady uptake. 430 bonds were sold in 2013 and 672 were sold in the first eight months of 2014. The final four months of 2014 saw more than 1,100 bonds sold. Since, the increase in investment threshold and fees in January 2015, there has been lower uptake. As of the end of April 2015, the government had issued 2,754 residency bonds.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 101

LATVIA

102 FREEDOM, SECURITY AND OPPORTUNITY

In 2010, Latvia introduced a residence permit As of late 2014, Latvia had issued more than scheme for non-EU investors, following a narrow 13,500 residence visas to investors, of which more majority voting in favor of the program in parlia- than 5,500 were to primary applicants. ment. The program has proved popular with Russians Investors were eligible for a five-year residence and former citizens of the Soviet Union, who to- permit if they invested 25,000 lats (around gether make up more than 90% of applicants. $43,000 at the time) in a local company, or pur- Chinese applicants make up much of the remain- chased property worth at least 100,000 lats in ur- der. Real estate is the most popular investment ban areas or 50,000 lats in rural areas, or if they choice, accounting for more than 80% of appli- deposited 200,000 lats in a Latvian bank for five cants. years. Latvia has an approval rate of around 95% for The program grew in popularity, with thousands investor residence permit applications, with the of investor residencies granted annually. In 2013, amount of declined applications rising in 2013 the ruling coalition announced plans to set an an- and 2014. One notable applicant whose applica- nual quota of 700 permits. This was opposed by tion was denied is Yury Luzhkov, former mayor of the Corruption Prevention Bureau, who warned Moscow. that a situation where demand vastly exceeded supply would lead to favorable conditions for corruption.

In 2014, the proposal to impose permits was abolished. The minimum investment in real estate was raised to €250,000 and a 5% duty was added. Since then, the number of applicants has dropped considerably.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 103 SUPPORT AND REFORM INDEPENDENT STUDIES

Latvia’s residence program was introduced following An independent report by the central bank in 2015 es- a narrow parliament vote in its favor. Prior to the pro- timated that the residency by investment program had gram’s launch in 2010, two nationalist parties orga- within five years brought in more than $1.4 billion in nized a 200-person protest against the scheme. Na- foreign investment and added more than $40 million tionalist parties have since unsuccessfully proposed to per year to the budget. A separate report by Deloitte ban Russian citizens from the program. had even higher estimates of budget contribution.

Since 2014, Latvia has been governed by a coalition of The central bank report also estimated that the pro- three parties, Unity, Union of Greens and Farmers and gram directly contributed 0.4-0.5% of GDP a year to the National Alliance. Unity has always offered strong Latvia’s economic growth, but estimated this figure support for the program, while the Union of Greens was closer to 1.5% when indirect impact was also con- and Farmers also voted in favor of the program. The sidered. National Alliance, the party with the least represen- tation in the coalition, opposes the program due to The report concluded that conditions for the program the influx of Russians it has attracted. The center-left should be relaxed in the short term in order to further Harmony party, which won more votes than any party stimulate economic growth. It was also advised to re- in the 2014 election but lost out to the coalition, sup- view investment thresholds to encourage more invest- ports the program but wants the government to do ment in companies rather than real estate. more to prevent foreign ownership of rural and forest land.

104 FREEDOM, SECURITY AND OPPORTUNITY THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 105

PORTUGAL

106 FREEDOM, SECURITY AND OPPORTUNITY

In 2012, Portugal announced it would begin to offer residence permits for investors under a scheme that became known as the “Golden Visa” program.

There are three possible investment options. By far the most popular is to invest €500,000 in property. Second most popular is to transfer €1 million to invest in Portuguese companies. The least popular option is to make an investment that can be proven to create 30 job positions.

As of the end of April 2015, Portugal has issued investor visas to more than 6,000 individuals, of which 2,378 were principal applicants and 3,632 were family members. Over the same period, the program has brought in more than €1.4 billion in investment, €1.3 billion of which was in real estate.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 107 RESIDENCE PERMITS GRANTED BY MONTH

800

700

600

500

400

300

200

100

JUL -14 SEP -14 NOV-14 JAN-14 MAR-14 JUNE -14 AUG -14 OCT-14 DEC-14 FEB-14 APR-14

MAIN APPLICANTS FAMILY MEMBERS

Growth has been led by Russian and Chinese citizens. Chinese applicants made up 48% of main applicants in 2014, compared to just 9% in 2009.

RESIDENCE PERMITS BY NATIONALITY

CHINA

BEAZIL

RUSSIA

SOUTH AFRICA

LEBANON

108 FREEDOM, SECURITY AND OPPORTUNITY SUPPORT AND REFORM

Portugal’s Golden Visa program is regarded as one of the more successful offerings in Europe. Despite this, the program has attracted unwanted attention due to alleged corruption by officials administering the program.

In November 2014, Portuguese police made 60 raids across the country, detaining 11 in a crackdown on suspected corruption. Among those held were the head of Portugal’s border agency and the president of the country’s registration and notary institute. Three days after the raids, interior minister Miguel Macedo resigned.

In February 2015, Deputy Prime Minister Paulo Portas said that he would ensure rules around the program were tightened. New rules included the involvement of more people in the decision making process and the introduction of audits by a unit of the Ministry of Inter- nal Administration. Portas also said the government planned to open the Golden Visa to individuals who invest €350,000 or more in scientific research or the arts in Portugal.

The program divides opinion in Portugal. The ruling Social Democratic Party has repeatedly supported the Golden Visa scheme, crediting the program with sav- ing the country’s property market and bringing significant foreign investment that has helped the country out of recession.

Ana Gomes, Member of Portugal’s Socialist Party and Member of the European Parliament, is an outspoken critic of the program and other investor immigration schemes in Europe. Her criticisms focus on fears that the program could attract criminals and stoke corruption.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 109

SPAIN

110 FREEDOM, SECURITY AND OPPORTUNITY

Spain launched its investor residence program, commonly known as the Golden Visa, in Septem- ber 2013. As part of laws aiming to attract inward investment, visas were made available to those investing at least €500,000 in real estate, €1 million in Spanish companies or deposits in Spanish banks, or €2 million in Spanish bonds.

Initial reaction to the program was slow. After the first eight months the government announced it had issued 81 visas, 72 of which involved property purchases. Almost half of the new residents were Chinese or Russian, with the remainder coming from, among others, Ukraine, Lebanon, Ecuador, Qatar, Egypt and Iran. The government also revealed that all applicant were subject to police checks, and 14 had been turned down.

By September 2014, the program had picked up, with a total of 354 successful applications, 324 of which were through real estate purchases. By the end of 2014, the program had attracted 530 investors, with an estimated €700 million having been invested.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 111

ASIA SINGAPORE Hong Kong and Singapore have long been leading financial centers in Asia, and have thus been popular options for immigrant investors in the region.

However, since 2012, the requirements for Singapore have become much stricter. Hong Kong suspended its program in 2015.

112 FREEDOM, SECURITY AND OPPORTUNITY

Singapore has offered routes to permanent res- Singapore’s monetary authority ended the FIS idency for investors since the 1970s. In 1979, a scheme in 2012, amid concerns of the impact of new ruling allowed foreign investors to quali- the influx of wealthy immigrants on asset prices fy to become permanent residents by investing and the property market. S$500,000 (around $225,000 at the time) in the manufacturing industry. In 1981, this was doubled Permanent residence in Singapore remains avail- to S$1 million and in 1996 increased to S$1.5 mil- able under the Global Investor Programme, which lion. These programs were offered through Sin- has much stricter requirements for the investor’s gapore’s Economic Development Board and were background. Applicants must have a successful specifically targeted at proven investors who entrepreneurial background and must own at could boost Singapore’s economy. least 30% of a company with revenues exceed- ing S$50 million ($37.5 million) on average over In 2004, Singapore launched the Financial Inves- the previous three years. Applicants must invest tor Scheme (FIS). Unlike previous schemes, the S$2.5 million ($1.87 million) in Singapore. This FIS allowed investments in financial assets such can either be in forming a new business or ex- as bank deposits, capital market products and panding an existing one, or in an approved fund collective investment schemes. While the option that invests in Singapore-based companies. to invest passively made the new program more appealing, the requirements for the scheme were Singapore has not released statistics on the up- higher than existing programs at the time. Inves- take of its investor immigration programs. The tors were required to have a net worth of S$20 current program’s strict criteria may make it an million (around $12 million at the time) and invest unattractive options for many. However, for those S$5 million ($3 million at the time). The scheme wishing to relocate or form a family base in Singa- was later modified to allow S$2 million of the S$5 pore, particularly those from less stable Southeast million to be invested in selected real estate op- Asian countries, it may remain a serious option for tions. In 2010, the minimum total investment was prospective immigrant investors. doubled to S$10 million.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 113

HONG KONG (Suspended in 2015)

114 FREEDOM, SECURITY AND OPPORTUNITY

Hong Kong launched its Capital Investment En- trant Scheme for wealthy investors in 2003. The program was introduced to boost the country’s ailing economy. Applicants were required to invest HK$6.5 million in permissible investments. In 2010, the threshold was raised to HK$10 million ($1.3 million). Real estate purchases were removed from eligibility, in a bid to curb rising property prices.

In January 2015, the scheme was suspended indefinitely. An Immigration Department spokes- man said the move was made in an attempt to attract more professionals and “innovative entrepreneurs.”

In total, the scheme has brought more than HK$224 billion ($29 billion) in investment, through the granting of residency to 26,341 individuals.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 115 APPLICATIONS GRANTED

6000

5000

4000

3000

2000

1000

0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Almost 90% of entrants were Chinese nationals with As of early 2013, 9,050 successful applicants for Hong permanent residence overseas. Due to political con- Kong’s Capital Investment Entrant Scheme were Chi- cerns and in order to limit the volume of applicants, nese nationals who were permanent residents of Guin- only Chinese citizens who already had permanent ea. This represented nearly 60% of Chinese applicants residency in a foreign country were eligible to apply. and more than 50% of all applicants. A further 2,931 To work around these restrictions many Chinese na- Chinese applicants cited Guinea-Bissau as their coun- tionals sought permanent residence elsewhere before try applying under the Hong Kong scheme. Due to speed and low cost, many obtained permanent residence in Gambia, a country which does not recognize the Peo- ple’s Republic as China’s legitimate government and instead maintains relations with Taiwan.

116 FREEDOM, SECURITY AND OPPORTUNITY OTHERS

Several other countries in Europe offer residence by investment. Malta’s Global Residence Programme provides residence permits to those who purchase prop- erties with a minimum value of €220,000 to €275,000, depending on the region. Non-EU citizens can gain temporary residence in Estonia by investing around €65,000 in a business. Ireland’s Immigrant Investor Programme is available through several routes, including investments of €500,000 in business, €1 million in 0% interest bonds, or €2 million in real estate investment trusts. France offers 10-year residence permits to those who invest €10 million. Austria, Belgium, Cy- prus, Jersey, Monaco, the Netherlands are among the other countries in Europe to offer residence options to investors.

In Asia, Singapore and Hong Kong have always had popular programs, although new criteria of the former and suspension of the latter means the region has fewer options for immigrant investors. Malaysia has a residence program for high-net-worth individuals with at least $2 million in a fixed deposit account with a Ma- laysian bank for five years. Jeju Island, a Special Auton- omous Province of South Korea, offers residency in exchange for investments of 500 million won ($450,000) in real estate; the island has more than 1,000 immigrant investors, the majority of whom are Chinese.

The Seychelles and Mauritius offer residence to those who invest significant sums in business or real estate. Investor immigration also exists in mainland Africa, although there is little official information on programs, and their main purpose seems to be as a conduit to residence or citizenship in another country. This can be seen through Chinese applicants to Hong Kong’s program, a large number of which obtained residence by investment in Gambia or Guinea-Bissau prior to application in order to work around restrictions that only allowed Chinese nationals who were permanent residents in another country to apply.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 117 08 THE FUTURE OF INVESTOR IMMIGRATION

118 FREEDOM, SECURITY AND OPPORTUNITY THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 119 It is clear that we are in the middle of a surge in popularity for investor immigration programs. Looking at trends over the last five years, we can begin to understand what the future may hold for residence by investment programs. The table below contains available data on residence visas granted in eight of the most popular programs over the last five years. It should be noted that the data does not always reflect statistics for the calendar year, as some countries report data for their differing financial years. Where available, numbers are included for both main applicants (“Main”) and total visas granted to main applicants and family members (“Total”).

2010 2011 2012 2013 2014 TOTAL 2010-2014

Main Total Main Total Main Total Main Total Main Total Main Total

U.S. N/A 1,885 N/A 3,463 N/A 7,640 N/A 8,564 N/A 10,692 N/A 32,244

Canada 3,223 11,715 2,980 10,586 2,615 9,356 2,359 8,393 N/A N/A 11,177 40,050

U.K. 211 583 331 860 470 1,390 560 1,603 11,733 3,000 2,745 7,436

Australia N/A N/A N/A N/A N/A N/A 88 N/A 663 N/A 751 0

New Zealand 13 93 42 128 58 184 120 374 185 593 418 1,318

Hungary N/A N/A N/A N/A N/A N/A 430 N/A 1,783 N/A 2,213 N/A

Portugal N/A N/A N/A N/A 2 2 494 1,070 1,526 3,921 2,022 4,993

The graph below visualizes the scale and growth of the programs. The numbers reflect main applicants only, and the numbers for the U.S. have been estimated based on the total number of investor visas granted.

INVESTOR IMMIGRATION PROGRAMS COMPARED

5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

HONG KONG U.S. CANADA HUNGARY PORTUGAL U.K. AUSTRALIA NEW ZEALAND

120 FREEDOM, SECURITY AND OPPORTUNITY It is clear that the U.S., Canada and Hong Kong have Those with requisite funds may also look towards cit- long had the most popular immigrant investor pro- izenship programs in Malta and Cyprus, which offer grams. However, all three face uncertain futures. The greater visa-free travel options and coveted residence U.S. program reached its limit in 2014 and now has in Europe’s Schengen zone. For Chinese nationals, a large backlog of applications; without changing the however, single citizenship policy would force a diffi- visa limit, it cannot continue to grow. Canada canceled cult decision, as giving up Chinese citizenship may be its federal program in 2014. While the Quebec pro- an impediment to their business interests in China. gram continues to operate, it will not have the capaci- The citizenship programs in Malta and Cyprus may ty to meet existing demand and backlog applications. also attract investors who would previously have cho- The investment thresholds and other requirements of sen an option in the Caribbean. However, the lower Canada’s new Immigrant Investor Venture Capital Pilot investment costs in the Caribbean should ensure they Program rules that route out for the majority of pro- continue to enjoy strong uptake. In particular prospective Canadian immigrant investors. Hong Kong grams in Grenada and Dominica will grow in appeal, suspended its Capital Investment Entrant Scheme in with both nations having recently agreed visa-free trav- early 2015, and does not look set to reopen it. el arrangements with the European Union.

The status of the U.S., Canada and Hong Kong programs has left many prospective immigrant investors in limbo. The situation particularly effects Chinese nationals, who are the major applicants to all three programs. Experts predict that Chinese nationals could face two or three years of waiting and uncertainty before their U.S. EB-5 visas are approved. In Canada, there were around 65,000 unprocessed applications when the federal program was closed; around 70% were Chinese. In Hong Kong, there were an average of more than 4,000 visas approval for principal investor applicants in each of the last four years of the program. Thus many prospective immigrant investors will be forced to look to other destinations.

The U.K. program still has capacity to grow, but the recent doubling of the investment threshold may restrict it to the wealthier end of applicants. Likewise, Australia’s Significant Investor Visa and New Zealand’s Investor Plus category have capacity, but require significantly more investment than the U.S., Canada and Hong Kong programs. For high-net-worth individuals looking for alternative residence, emerging programs in Bulgaria, Greece, Hungary, Latvia, Portugal, Spain are more affordable and will grow in appeal.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 121 IMPACT OF CHANGES DEMAND FROM INVESTORS IN GOVERNMENT AND POLICY

Evidence shows that provision and uptake for investor The countries offering investor immigration programs immigration programs often transcends the political has varied greatly over the last five years, with many ideologies of ruling parties in destination countries, new programs being introduced but several major and is driven largely by external factors and specific ones being closed, suspended or restricted in capaci- government policies. ty. Although this leads to some uncertainty around the availability of programs in the future, there is a grow- As a case in point, the U.K. Tier 1 program was in- ing awareness among policymakers of the benefits of troduced by the center-right Conservative Party and attracting high-net-worth foreign investors as residents has thrived since David Cameron led the Conservative or citizens. Therefore, it is likely that several new pro- party back to power in 2010. In the U.S., uptake for grams will emerge in the coming years, and successful the EB-5 program has been lower under governments existing programs will continue to be supported. Their of the right-leaning Republican party, but much higher success is largely dependent on demand from wealthy under the Democratic governments of Bill Clinton in global citizens. the 1990s and Barack Obama since 2009. Over the last five years, growth in demand has been For the Caribbean countries offering citizenship by led by investors from China. According to research by investment, support and opposition for the programs Bain & Company and China Merchants Bank, there has fueled political debate. However, the long-existing are more than one million high-net-worth individuals programs in St. Kitts and Dominica have survived sev- (investible assets of more than $1.6 million) in Chi- eral changes in government. Indeed, in St. Kitts, Denzil na. According to a report by the same companies in Douglas and Timothy Harris were both vocal critics of 2013, around 60% of these individuals were consid- citizenship by investment during their time in oppo- ering or had already completed an investor immigra- sition, but both went on to support and protect the tion program. However, only around 10% had already program upon becoming Prime Minister. migrated, with around 50% saying they may migrate in the future or had considered but not decided yet. However, investor immigration programs remain sub- It is clear, therefore, that there is still huge potential ject to the risk of being abolished or restricted follow- demand from China. As private wealth continues to ing changes in government or policy. In recent years, grow, demand for investor immigration programs from Malta’s introduction of the Individual Investor Pro- wealthy Chinese individuals is likely to increase over gramme for citizenship has generated much political the next decade. opposition. Aside from China, much demand for investor immigra- The country’s opposition Nationalist Party has gone as tion has been led by the Middle East and Russia and far as to vow to revoke the citizenships of beneficiaries former Soviet states. While this demand is partly due of the scheme should it come to power. While there to political instability or uncertainty, many investors are are doubts over whether this may be legally possible, largely motivated by visa-free travel and internation- such threats are likely to spook prospective applicants al mobility. Thus, demand from these regions should to the program. In other cases, changes in government remain strong regardless of changes in political situ- may not directly impact investor immigration pro- ations. grams, but other changes in policy may impact upon the appeal of programs to overseas investors. Other countries and regions with potential for growth include Africa, South Asia, Southeast Asia and Latin For example, had the U.K. Labour Party been suc- America. While Africa has a lower percentage of high- cessful in the 2015 elections it would likely have led net-worth individuals than the rest of the world, private to changes in tax rules for non-domiciled residents, wealth is growing and investors are likely to look to making the U.K. far less attractive to wealthy foreign- diversify their asset abroad and expand their options ers who were looking to migrate through the Tier 1 for global mobility. Investor route.

122 FREEDOM, SECURITY AND OPPORTUNITY Citizens of Nigeria and South Africa in particular are Finally, there are signs of growth in demand from Latin showing an increased appetite for investor immigra- America. Immigration agents in the U.S. have report- tion programs. The U.S. EB-5 program has seen more ed significant increase in inquiries from Brazil, spurred applications from Nigeria in recent years, while South by an unsettled political climate and a stagnating do- Africa is the country with the fourth most applicants for mestic economy. Applications from Brazil to Portugal’s programs in Portugal and Australia. Golden Visa program are also increasing, and it is now behind only China in terms of applicant numbers. Else- In South Asia, there is still untapped potential for de- where in the region, economic crisis in Venezuela has mand for investor immigration programs. India, de- also seen an increase in wealthy individuals seeking to spite its size and considerable high-net-worth popu- obtain residence in the U.S., while there has also been lation, has never been a major contributor to uptake growth in applicants from Mexico. for residence and citizenship by investment. This is all the more surprising given the number of wealthy Indi- ans domiciled abroad and the fact that Indian passport holders face restricted international mobility, requiring visas for North America and Europe among others. One possible explanation is that Indian citizens typically prefer and are eligible for other migration routes. In 2014, 23% of all immigration visas issued by the U.S. to citizens of China were through the EB-5 route; for citizens of India it was less than 1%. In the U.K. in 2014, Indians made up 1% of all investor visa applicants, but 8.5% of entrepreneur visa applicants. Despite the current lack in demand, there is huge potential for India to become a major source of immigrant investors. As understanding of the benefits of residence and citizenship by investment programs rises, it should be expected that India will emerge as a leader of demand in the coming years.

In Southeast Asia, applications from Vietnam are on an upward trend, with an increase in demand for programs in the U.S. and Australia. The rest of the region, however, has very low uptake. With economic growth expected to continue and the high-net-worth population predicted to expand, there is definite potential for demand to increase. As businesses in the region expand to European and North American markets, business leaders are likely to have increased need for residence options and mobility in the region. Meanwhile, political uncertainty in Thailand and Myanmar could also fuel demand for investor immigration programs.

THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 123 PERCEPTIONS OF INVESTOR IMMIGRATION

The concept of investor immigration does not sit well with many. Negative media coverage continues to damage the reputation of the industry and places the future of several programs in jeopardy. The Global Investor Immigration Council recognizes that the en- hancing the reputation of the industry is crucial to its long-term viability and opportunities for growth.

However, it also recognizes that reputation cannot be improved solely through advocacy and positive PR. Thus, the GIIC aims to serve as a solid ground for the development and maintenance of industry best practices. Through enforcement of its Code of Conduct, the GIIC will ensure that advisors, agents and lawyers in the investor immigration business are held to a higher standard and operate in a manner conducive to long-term stability for the industry. Through its research, the GIIC will highlight the positive impact of investor immigration and serve as a voice to promote the industry.

Finally, the GIIC will advocate transparency and ethical conduct in the industry, and, through its research and the knowledge and experience of its members, promote policies that offer maximum benefit to governments offering investor immigration programs.

124 FREEDOM, SECURITY AND OPPORTUNITY THE PAST, PRESENT AND FUTURE OF INVESTOR IMMIGRATION 125