Investment Migration: Teetering On The Precipice Of Profound Transformation

As the year unfolded, many wondered if this marked the end of investment migration as we knew it. Change came swift and at times, bewildering, with policy announcements oscillating between implementation and reversal.

However, beneath the tumultuous surface, 2023 emerged as a pivotal year, prompting a critical re-evaluation of long-established norms in the thrilling world of investment migration.

A Look Back

For context, policy changes are somewhat inherent to investment migration. Throughout the years, various pathways opened, closed, and some even reopened. Investment migration traces its roots to St. Kitts and Nevis in the Caribbean, where the first modern citizenship-by-investment pathway was introduced in 1984 as a tool for economic advancement. The Republic of Ireland followed four years later, establishing a naturalisation programme, which was terminated the following decade.

The introduction of residence-by-investment started in 1986, when Canada introduced its Federal Immigrant Investor Programme, followed by the USA’s EB-5 visa in 1990. However, residence by investment became extremely popular after Portugal introduced its residency pathway in 2012. Five years later, nearly half of all EU member states offered similar routes to residency.

Today, investment migration is featured in immigration law in most UN-recognised countries, albeit in different forms and shapes.

2023 Policy Changes

However, there’s no denying that we have seen some important shifts and changes in 2023. The year was marked by the ever-evolving narrative that the days of investment migration as it was long known are numbered. The United States called for reform from Caribbean nations, while the European Union urged its member states to phase out existing pathways, and even threatened to revoke visa-free travel for countries providing citizenship through investment.

Malta now stands out as the sole EU country offering a direct path to citizenship in exchange for qualifying investment, but it’s under EU pressure, leading to uncertainty about its future. Ireland closed its residency pathway in 2023, and the Netherlands announced the discontinuation of its residence permit for foreign investors starting from 2024. Portugal initially proposed ending its residency pathway in February last year, but later reversed its decision, opting to eliminate the real estate option instead.

Interestingly, the likelihood that residence pathways would become obsolete sparked a surge in applications. Spain and Italy, among other countries, witnessed unprecedented levels of applications, a trend largely attributed by many service providers to ‘fear of missing out’ (FOMO).

Simultaneously, new residency pathways have emerged. Namibia has stepped into the residency arena, offering investors the opportunity to live, conduct business, and study in the African nation, in exchange for a minimum real estate investment of $316,000 USD. Meanwhile, the UK has introduced the Innovator Founder visa, and Canada has reopened the Quebec investor programme. In addition, Hong Kong is poised for a revival in investment-based immigration after a hiatus since 2015.

Too Big To Fail?

Some analysts describe investment migration as too big to fail. It is estimated to generate approximately €20 billion annually. In certain microstates and island economies, revenue from foreign investment and government gains through investment migration accounts for a substantial 10 per cent to 40 per cent of GDP. These injections of revenue play a crucial role, frequently offsetting deficiencies experienced in other economic sectors. Globally, investment migration has acted as a catalyst for substantial infrastructural enhancements, spanning resorts, harbours, airports, hospitals, office spaces, luxury residential developments, and even entire airlines. International bodies like the IMF, OECD, and FATF have acknowledged this economic impact.

Over the years, investment migration has had its fair share of scandals, mishaps, and controversies, which have made it a contentious topic. As early as 2018, Transparency International urged governments to implement robust governance and oversight mechanisms in their pathways. Since then, the sector has seen notable progress.

Caribbean Reform

In numerous nations, we observed the adoption of stricter regulations, enhanced transparency, and the establishment of a more rigorous due diligence procedure. These measures have notably bolstered the credibility of investment migration, mitigating the risks associated with money laundering and illicit activities. This shift aims to ensure that only genuine investors are eligible for residency and citizenship. For instance, the Caribbean’s investor citizenship routes have long faced scrutiny because of lax due diligence and transparency. However, in 2023, most Caribbean nations have taken proactive measures. These initiatives involved the restructuring of government units and a comprehensive overhaul of due diligence processes, aiming to significantly enhance transparency and credibility.

Corruption And Misuse

Undoubtedly, this evolution wasn’t solely driven by voluntary decisions within nations. External pressure played a pivotal role, particularly when visa-free travel privileges to the EU and UK were jeopardised. Moreover, in November, the FATF and the OECD unveiled findings from a joint report investigating the threats of money laundering and financial crimes associated with citizenship and residency by investment. The report argues that if appropriately managed, investment migration holds potential benefits for both host nations and individuals in theory. Yet, the practical implementation of such initiatives harbours substantial risks, encompassing money laundering, fraud, and various forms of misuse.

The report also provides a long list of recommendations to aid decision-makers and administrators in mitigating these risks. The IMC, along with other professionals, commended the report, highlighting that any measures leading to more robust standards are beneficial.

However, several professionals in the investment migration sphere emphasised significant shortcomings. They underscored how certain recommendations mirror existing practices, while simultaneously condemning the report for oversimplifying and generalising.

A Focus On Emerging Markets

Meanwhile, new investment migration pathways are emerging in rapidly developing economies. Countries like Egypt, UAE, Jordan, Qatar, Bahrain, and Saudi Arabia, have initiated pathways aimed at attracting foreign investment. These avenues have effectively engaged Middle Eastern investors, especially from nations like Saudi Arabia, Kuwait, and the UAE. With investment migration becoming more accessible and economic conditions in many countries growing more challenging, there’s anticipation that these options might attract interest from a broader demographic beyond just millionaires. Furthermore, there’s a growing demand for similar pathways in Latin America and Africa.

While expectations abound for the emergence of more pathways, there’s also an anticipation of increased scrutiny. Crucial factors like compliance, trust in the process, and stringent regulation will significantly determine the sustainability and success of these initiatives. Additionally, concerns regarding democracy, governance, and how these states manage and oversee their pathways, could potentially impact their longevity.

From Mobility To Relocation

In recent years, investment migration has seen tremendous growth. Various global upheavals like Covid-19, the Russia-Ukraine conflict, and escalating conflicts in places like the Gaza Strip, have caused widespread social, political, and economic strains, prompting people to migrate across borders, and relocate businesses and assets swiftly.

What’s increasingly evident is that investor migrants aren’t merely seeking backup plans for increased mobility; they’re looking for pathways ensuring a stable future for their children, even if it entails relocation. This shift signifies a positive evolution for an industry that has been under scrutiny due to the perceived weak connections between investors and their adopted countries. Countless discussions have revolved around the issue of physical presence requirements.

Experts argue that obtaining a residence permit through investment migration is often just the initial step for investors in a new country. The real value lies in subsequent investments, taxes contributed, economic spending, and job creation. Yet, the industry still grapples with fully demonstrating how these factors can thrive without relying solely on physical presence as a benchmark.

Retirees, Start-up Entrepreneurs And Digital Nomads

Amid an uncertain economic outlook, the demand for migration persists, leading to a surge in interest surrounding entrepreneur and start-up visas. These initiatives focus on attracting active investment and highly skilled individuals, steering away from negative sentiments often associated with passive investment migration policies. There is a clear trend that traditional investment migration is following suit, with Portugal abolishing real estate investments after locals were priced out of the housing market.

Additionally, a multitude of countries has embraced the trend of introducing ‘Global Nomad’ visas, allowing individuals to work remotely while residing in different countries. However, these programmes have faced significant criticism due to poorly designed legislation and open questions about tax liability, and experts have long highlighted the need for improvement in this domain.

Retirement migration has caught the attention of migration professionals, with numerous countries that have existing residency pathways, or operated them in the past, also starting to introduce dedicated retirement visas. While retirees might not be investing directly in these jurisdictions, their spending on housing, services and other necessities generates positive net benefits for the local economy.

Economists also anticipate that countries dealing with high debt, slow growth, and ambitious net-zero climate goals, will continue to actively seek foreign capital. If conventional investment migration routes undergo reform or closure, alternative tax incentives may emerge in their stead. An example is Spain, which passed a law in January enabling non-residents, including digital nomad visa holders, to pay a flat 24 per cent tax rate on income up to €600,000 over six years— contrasting sharply with the 47 per cent rate for residents in higher income brackets.

Challenges and Prospects of Investment Migration

The realm of investment migration has often been shadowed by misconceptions and scepticism, primarily due to the 'golden visa' terminology. This phrase suggests a world accessible only to the affluent, obscuring the initiative's true purpose and the diverse benefits it brings. Far from being mere luxury access for the rich, investment migration plays a crucial role in driving economic growth and supporting the developmental goals of numerous countries. These programs are designed to attract foreign capital, contributing significantly to national economies and societal projects.

Stigma And Sustainability

Misunderstandings stemming from this terminology have impacted public perception, leading to concerns about the effects of foreign investments on local communities and economies. In response, nations have taken steps to ensure that investment migration contributes positively, mandating investments in sustainable and socially beneficial projects in return for residency rights. These measures aim to improve the perception of investment migration and highlight its constructive impact on host societies.

The journey towards refining investment migration extends beyond modifying existing frameworks. It requires a fundamental shift in perception, challenging prevailing myths, and promoting a culture of collaboration and mutual benefit. The concept of exchanging investment for residency or citizenship has sparked debates over fairness and the potential for preferential treatment. The industry is tasked with demonstrating the real value brought about by these investments, including economic benefits and social contributions.

Nothing To Hide

Key to reshaping the future of investment migration is the commitment to transparency, rigorous compliance, and thorough due diligence. Establishing uniform best practices and adhering to them is essential for cleaning up the sector's image and dispelling negative perceptions. By levelling the playing field and emphasising transparency, the sector can move towards a more trusted and equitable framework.

Despite the upheavals of 2023, there's optimism for the coming year. The anticipation is that 2024 will offer clearer insights and directions for the evolution of investment migration, marking a new chapter of growth and integration into global economic and social fabrics.

Bruno L’ecuyer
Bruno L’ecuyer is Chief Executive of the Investment Migration Council. Bruno leads the Secretariat and is responsible for all IMC operations. A regular contributor to international publications and conferences in Europe, North America, Caribbean, Middle East and Asia, he has held positions in London, Paris and Hong Kong. Bruno was previously head at a national financial services association, acting as a bridge between government, industry and international policy institutions. He has extensive expertise and experience in the management and expansion of a professional services association. A member of the Governing Board, Bruno acts as its Secretary and chairs the Advisory Committee.