What The Ideal Citizenship by Investment Program Might Look Like


Anatoliy’s Analysis
With Anatoliy Lyetayev

Anatoliy Lyetayev covers topics that help industry professionals be more efficient, do more business, and make more money.


Saying one citizenship by investment (CBI) program is better than another will always be a controversial matter because the definition of “best” is bound to perspective. In this article, therefore, I will not be discussing which passport is stronger or which program is better than its closest counterpart. Rather, I will be exploring the makings of the ultimate CBI program.

Before we can begin that, we must take a look at what is currently on offer and work from there; The five Caribbean countries of St. Kitts & Nevis,  Dominica, Grenada, Antigua & Barbuda, and St. Lucia all offer straight-forward CBI programs, while – across the Atlantic – Turkey and Montenegro have their own versions of CBI. We mustn’t forget Vanuatu’s rise to prominence on the CBI stage either.

A reduction in European options, now that Cyprus has suspended its program, is regrettable. The CBI programs that remain, however, are prospering; focusing mainly on real estate investments from foreign investors to bolster their economies and create an influx of cash into their markets. Nevertheless, real estate is not always the best choice for CBI programs, especially viewed in light of the economic externalities they can give rise to.

White elephants
Take Cyprus, for example. The Mediterranean island nation is now filled to the brim with luxury skyscrapers that are beyond the reach of locals – who number just shy of a million people – and, now that its CBI is suspended, there are no active clients to take on these huge property investments.

Situations like that are the reason it’s important for prospective applicants to ask the right questions about their real estate investment in a CBI country.

  • Will the asset appreciate?
  • Are the returns commensurate with the risk?
  • Is there a clear path to liquidation of the assets once the minimum holding period is over?
  • Can I sell this asset in a secondary market?

We need look no further than to the statistics of the Caribbean CBI programs to understand to what degree of satisfaction investors have been able to answer those questions. In the Caribbean, a region that offers a set of more or less homogenous programs that lend themselves to an apples-to-apples comparison, three programs have published data on applicants’ contribution type preferences for 2019.

In Grenada, nearly four in ten investors picked real estate investment, while only four in hundred did the same in Antigua & Barbuda. In Dominica, the social-housing donation option has driven falling interest in both the conventional donation route and in real estate investment; only one in five investors picked property. Antigua & Barbuda’s program, meanwhile, has received only a handful of CBI real estate investment dollars since 2017.



The above numbers are an indication that, when structured correctly, donation options are extremely popular with applicants and often preferred by the countries.

So, considering the investment type itself is a demand driver, what are other major elements of a successful CBI program?

  • Visa-free travel to in-demand countries
    A passport granting access to major travel destinations such as the Schengen zone and the UK is a great feather in the cap for any CBI, as applicants who travel to these countries for business, leisure, or otherwise want to forgo the hassle that accompanies applying for visas.
  • Favorable tax regime
    No investor wants to spend money on something that will cost them more money. Low taxes may, in and of themselves, bring remarkable numbers of applications from investors wishing to ease their tax burdens.
  • Limited bureaucracy
    The ability to smoothly issue a driver’s license, open a bank account, get utility bills, and obtain civil documents can go a long way in convincing investors to consider any given country as their second home.
  • A strong banking system
    Investors want a country where they can easily deposit large sums of money, say a million dollars, without having to worry about big brother scrutinizing every single transaction. A banking system that works efficiently with major currencies represents massive allure helps the client avoid situations where they need to wait three weeks for a transaction to go through, as is the case in some Caribbean countries.
  • Digitized services
    Being able to do most activities online without the need to travel to the country is a great plus; be it registering a new company, opening a bank account, paying taxes, or otherwise. The more digital services available the better.
  • Cryptocurrency-friendly regime
    Malta was, when its MIIP was still operational, a great destination for those holding cryptocurrency. As more nations, companies, and individuals are shifting to blockchain technology, nations offering CBI that accept cryptocurrencies may yet find an edge over other destinations. Now that Malta is back in the CBI-market with its MEIN policy (don’t call it program!), it’s likely to become a favorite destination among “hodling” CBI investors once more.
  • A wealth of business opportunities
    CIPs that offer visa-free travel to jurisdictions part of large economic blocs, like China, the EU, and the US are of tremendous value for global investors. Countries that go a step further and open new business-immigration routes in addition to offering a new passport – as Grenada and Turkey do with the US E2 visa – are even better.

An example of an “ideal” program
I will list some factors that, when interwoven, can produce the ideal program for both investors and granting nations; any government officials reading this are free to take notes:

  • Cost: The ideal cost should stand at USD 90,000 for a single applicant along with an additional USD 10,000 for each added dependent.
  • Processing Time: Four months. And I mean four months, not just on paper. That is ample time for a CIU to process a file, and it’s an acceptable wait time for an investor. You could offer expedited processing for a 20% bump in the investment amount.
  • Electronic filing: Leveraging technology to simplify the process for CIU officials, investors, and international agents is the key to lowering processing time and getting more clients.
  • Keep it remote: No need for the investors to travel across the globe for oaths or visits, it can all be done remotely. Simplify the process, no need to make it harder.
  • Bring along the family: Include the ability to add children and parents to the application regardless of age.

A program of this nature would prove extremely profitable to the granting nation. At just 1,000 applications per year (though a program like this would get far more applications than that), we are talking about average annual revenues of 100 million (of which approximately 20% would be distributed to providers). 

This figure is huge for small, developing nations. Consider if Tonga, for example, a tiny country of around 100,000 inhabitants could raise a hundred million in unencumbered funds each year. That’s a quarter of the country’s GDP, a proportion that’s not without precedent. Keep also in mind that CIPs bring in more cash along the road, so we can safely assume one successful year will also yield US$10 million or more in services bought locally by new citizens, like bank account openings, company formation, tax consulting, and so on.

Which Nations Could Join the CBI Club?
Taking the above factors as a baseline for a successful CBI, and considering the political, financial, and socioeconomic landscape of smaller countries across the globe we can see great candidates for a strong CBI program to rival the prominent few currently available. In 2018, an analysis in IMI identified 33 countries as highly suitable for a CIP. Countries such as the aforementioned Tonga, Marshall Islands, Micronesia, Guadeloupe, and Kiribati all fit the bill.

Even if new programs don’t open, many existing ones would do well to consider a makeover that takes into account some of the above suggestions. The successful CBI programs of tomorrow will be the ones that “shop around” for the best elements of each existing program, adopt best practises while discarding what demonstrably doesn’t work, or set new, higher standards altogether.

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Anatoliy Lyetayev AuthorSubscriber

I am a former human rights lawyer turned founder of global citizenship and residence advisory company Migronis Citizenship

We can choose where to live and do business. I have been living in different countries, such as the USA, Brazil, Portugal. I test countries and evaluate them according to my criteria. Therefore, I know what to offer my clients.

I appreciate the freedom of movement. That is why I help others get it.
 

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