What We Think
March 2, 2022
The economic importance of investment migration
Residence and citizenship-by-investment (RCBI) programmes enable individuals to acquire an additional residence or citizenship by making an exceptional economic contribution to another country. This is achieved by successfully completing the application process which comes with a RCBI programme.
These programmes are structured to attract much-needed foreign direct investment, and ensure that the investment contributes to the welfare, advancement and economic development of the country, primarily real estate development, business development and job creation. Interest in these programmes has accelerated in recent years thanks to a combination of factors including improved visa-free travel in many RCBI countries, business access to a new market, tax incentives, and more recently, the mobility issues brought about by the COVID-19 pandemic.
RCBI programmes must be run in a manner which is legal and transparent, in keeping with the constitution of the nation offering the residence and citizenship, and minimizing the risk of corruption and money laundering. Ensuring that the individual is also obtaining a sound legal right to their new permanent residence or citizenship.
High-net worth individuals from emerging market economies are driving the trend in the RCBI industry. Data from the US EB-5 programme, which allows foreigners to invest in real-estate projects in exchange for a fast-tracked green card application, highlights this shift in demographics. Whilst China is still the predominate source, making up about 80% of all applications, places like Vietnam, India and Brazil have been sources of growth in the past few years. European investment migration programmes are showing signs of the same trends, with applications from over 50 countries being registered. Furthermore, since Brexit there has been an interest from UK citizens for the first time.
Investment migration has forged new economic sectors and has enabled the development of cutting-edge infrastructure, start-ups and R&D programmes. Over the past few years, investment migration has been defined by growth and expansion, to reach an estimated global value of €20 billion. According to research conducted by the Investment Migration Council, almost 100 countries around the world now offer investment migration programmes, with some countries generating between 2 per cent and +30 per cent of their GDP from these programmes.
The COVID-19 pandemic is showing to have a far more devastating impact on the world economy than the 2008 global financial crisis, and has fostered a rise in individual interest in increasing the access to mobility by means of an additional residence or citizenship. Despite mobility being defined by travel restrictions, border closures and quarantine requirements, investment migration can be utilised to induce gains and add to economic recovery by attracting fresh capital and talent, and fueling much needed investment.
Investment migration is especially important for smaller countries, which are considered by international development agencies as economically and ecologically vulnerable. Revenues accruing to the RCBI programmes can substantially fund public infrastructure reconstruction, flows of foreign finance associated with investment migration have provided a significant contribution to public sector revenues, contributing to the improvement of health systems, bringing clean water, and an enhanced sanitation structure.
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