IM Yearbook 2020/21

A Changing Market
China has long been the dominant
market for the entire industry, accounting
for roughly 80% of applications to any
residence programme. In more recent
years, the industry has seen an increase in
business coming from new markets such
as India, Vietnam, Russia, South Africa
and Nigeria. In addition, a meaningful
shift is underway as applicants from firstworld
countries such as US and the UK are
showing interest in investment migration,
a remarkable development for an industry
that has traditionally zoomed in on highnet-worth
individuals from emerging
market economies. Surveys show that 17%
more British citizens per year have moved
to an EU country since the UK voted to
leave the EU. Meanwhile, 2020 also got
Americans consider moving out of the
US in ever greater numbers – many say
the unthinkable became thinkable due to
rising social instability and the country’s
poor coronavirus response. As a result of
travel restrictions, the US passport – once
one of the world’s strongest – has fallen
to the same level as some of the world’s
weakest. Southeast Asia is also developing
rapidly, both as a source market and as a
destination for high-net-worth individuals
from the region and beyond. Programmes
in Thailand, Malaysia and Singapore
are today attracting global interest.
The formation of a new international
mobility landscape is creating large
opportunities, particularly for companies
who understand how the dynamics of
global growth are shifting as the largest
emerging markets gain in importance.
In addition, regionalisation is a market
force the industry needs to be aware
of. An example of this trend is the
rise of citizenship-by-investment
programmes in the Middle East. The
programmes of Turkey and Jordan
mostly appeal to residents from the
region who are not charmed by visa-free
travel but by country-specific benefits
and commercial opportunities.
Full Transparency
In tandem with the growth of both the
demand and supply side, criticism of
the industry is intensifying. Fears of a
potential increase in security threats
and low consumer protection standards
reverberate across the entire sector.
Questions on transparency and adherence
to international standards on anti-money
laundering and compliance regulations
brought the sector into sharp focus
of other countries and international
organisations such as the EU, the IMF
and the OECD who have demanded
tighter controls across the industry and
tighter background checks on applicants.
Initiatives of the Investment Migration
Council, such as the development of
common due diligence standards and an
anti-bribery code, show that the industry
is recognising the need to either selfregulate
effectively or accept that rules
will be imposed on it. Recent scandals
and media reports, including Al Jazeera’s
investigations into the Cyprus programme,
are taken very seriously as they highlight
corruption as an area of vulnerability,
albeit this is not peculiar to investment
migration. A few bad actors can tarnish
the reputation of the whole industry. In
the presence of so much pressure, the
industry can only survive if every party
involved acts in a transparent manner.
It’s unfortunate that the sector still
remains largely unregulated, with only a
handful of countries having established
an independent regulator to oversee
the operation of their programmes. The
immediate challenge for the industry
is to get all industry stakeholders to
commit to the highest standards of
transparency and good governance.
Active versus Passive
A major task for programmes going
forward will be to find the right balance
between the needs of the country and
meeting the expectations of the applicants.
Up to now property investments of one
kind or another have featured prominently
in all programme offerings. Property
investment will always hold an appeal,
but it will be on a more equal footing
with other asset classes and investment
options. There are already alternatives
in the market that are resonating with
wealthy clients, including investing
in a property fund as opposed to
purchasing property, and loan provision
as opposed to equity investment.
There is also consensus in the industry
that in the future active investment will
play a much greater role than passive
investment as evidenced by the growing
number of entrepreneurial schemes which
are becoming ever more popular the world
over. The average age of multi-millionaires
in the world has decreased over the last
two decades. Service providers report
that in emerging market economies the
average age of applicants is between 35 and
45 years old, and many of them are young
entrepreneurs spurring demand for active
investment options as opposed to passive
alternatives. All the major destination
countries now offer entrepreneur visa
programmes, and the expectation is
that they will continue to experience
strong demand. Unlike traditional RCBI
programmes, they also often enjoy popular
support as countries seem to favour
immigrants who are actively engaged
in their workforce as opposed to those
who passively invest. Adopting elements
of these successful business and talent
migration programmes offers countries
various opportunities to build a lasting,
meaningful and substantive relationship
with their new residents or citizens.
Global Issues
Many argue that the most remarkable
side-effect of the Covid-19 pandemic has
been the pause. After years of exponential
growth, it gave the investment migration
industry a moment to breathe and
evaluate how it wants to evolve in the
future. In practice, emerging stronger from
the current situation requires forwardthinking
players who are taking steps to
own the solution, and over the past year
or so, sections of the industry have begun
developing new concepts. There is a
clear will to ensure that the sector works
for the greater good of all stakeholders.
Thus far, investment migration is often
overlooked as a factor within a country’s
overall sustainability and development
strategy. Aiming to lay a new foundation,
researchers are urging countries to align
their investment migration programmes
more closely to the United Nations’
2030 Sustainable Development Goals
(SDGs), highlighting that investment
migration can offer opportunities within
each aspect of the SDGs, most notably in
areas such as job creation, climate action
and health infrastructure. Meanwhile,
experts in the field of impact investment
are seeking to establish a new asset class
for investor migrants that aims to tackle
global issues such as climate change
and poverty reduction. Although it is
still early days for these initiatives, many
believe there is enormous potential in
questioning and challenging investor
preferences, as well as certain aspects
of the industry’s business model, so that
investment migration will unlock greater
economic benefit and societal value.
Future Outlook
Investment migration has gone through
enormous change since it started in the
1980s. It is today more diverse than ever
as illustrated by the growing number
of entrepreneur, start-up, innovator
and digital nomad visas available in the
marketplace that are competing with
the more traditional RCBI offering.
Like in every sector, business models
need to evolve over time. There is rising
awareness that the industry can reinvent
its business as one that is more socially
and economically attuned to today’s
societies. The Covid-19 pandemic, in
fact, offers the industry the ultimate
test scenario to find out what – beyond
visa-free travel and financial capital –
truly matters to investor migrants and
programme countries. Confronting and
responding to these dynamics should
provide a path to new growth.
12
Investment Migration Yearbook 2O2O/2O21