Vanuatu CBI Post-Schengen: Down, But Not Out

After a delay of nearly a year, Vanuatu’s Ministry of Finance has released government revenue data covering 2023, as well as the first two months of 2024. The numbers indicate the country’s extended suspension from the visa-waiver agreement with the EU has driven a sharp decline (but not a full-blown collapse) of CBI revenue.

While the country doesn’t release any data for its citizenship by investment programs specifically, its monthly government revenue reports include figures revealing how much government income arose from the country’s three CBI programs.

The reports show that Vanuatu’s CBI revenue (from all its CBI programs) fell to US$68 million in 2023, a slight decline from the US$71 million recorded in 2022. Early figures for 2024, covering the period until the end of February, indicate program revenues are on a downward trend: The programs saw only US$7.2 million in income in the first two months of the year, putting it on track to raise some US$43 million this year.

As a share of total government revenue, the decline is more pronounced. Whereas CBI's proportion of total government revenue routinely exceeded 40% between 2019 and 2021, it fell to 29% in 2022. In 2023, CBI's contribution to government coffers accounted for only 21.8%. In the first two months of 2024, only 12% of government revenue came from CBI.

The chief cause of the diminished receipts is the European Council's suspension of Vanuatu passport holders' visa-free entry into the Schengen area. In March 2022, the Council implemented a partial suspension of Vanuatu's visa-waiver agreement over concerns about what it considered the program's inadequate due diligence procedures and the potential security risks associated with Vanuatu passports.

The lower CBI revenue share in 2024 suggests that the visa-free suspension continues to affect the attractiveness of Vanuatu's CBI programs to potential applicants.

But market observers will note that the loss of Schengen access, while unquestionably detrimental, has not altogether brought the program to its knees. While CBI receipts have fallen by about two-thirds as a percentage of overall government income, it has remained relatively resilient in absolute terms.

Daniel Agius, a Vanuatu Government Designated Agent for the DSP and architect of the CIIP-CNO Future Fund, believes that "the Vanuatu Government is adjusting to the suspension imposed by the EU" through several factors that have "contributed to the continuing – or even growing - viability and attractiveness of Vanuatu citizenship."

Vanuatu's programs also remain open to Russian applicants, while Caribbean programs have closed their doors to this demographic segment.

Agius points to Vanuatu's "staunchly non-aligned stance," which allows it to accept applications from Russian passport holders, albeit with enhanced financial due diligence, as a crucial factor in sustaining demand. He also highlights the growing global market for second citizenship through investment and Vanuatu's enduring appeal as "an almost tax-free, peaceful, safe, and environmentally pristine country."

While there has been a spike in applications from Russian nationals, Agius notes that there remains "a steady flow of applicants from the historically robust Chinese market plus South East Asia, the Middle East, and recently from India."

Even when considering the effects of the visa-free suspension, Vanuatu's CBI programs has shown resilience in terms of total revenue. While the 2023 figure of USD 67.73 million represents a decrease from 2022, it remains significantly higher than the pre-2018 levels, indicating that interest in the program, though diminished, remains strong.

Vanuatu's programs, going forward, will have a competitive edge in the market due to its minimum investment requirement of US$130,000, considerably below the recently increased minimums of US$200,000 for Caribbean CIPs and US$400,000 for that of Turkey.

Additionally, Vanuatu's program offers quick processing, in contrast to the Caribbean programs, which face considerable application backlogs that have impacted processing times. A recent survey in IMI revealed that Vanuatu currently offers faster processing than any other CIP: Agents reported an average processing time in the last 12 months of just 3.3 months, 2-3 times faster than its Caribbean counterparts.

Agius argues that "Vanuatu's citizenship appeal has grown organically rather than through concerted and coordinated big-spend global marketing."