The Golden Ticket? Exploring the World of Investor Visas

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CHAPTERS 

[00:00:00]: What investor visas are and why countries offer them 

[00:04:17]: Where in the world these programs exist and who is using them 

[00:08:36]: Do investor visas deliver the economic benefits governments promise? 

[00:15:59]: How Malta tried to sell citizenship and why the controversy never fully resolved 

[00:24:01]: Why investor visas are unlikely to disappear even as they lack benefit 

TRANSCRIPT

[00:00:03.19] 

Hello and welcome to World of Migration, a podcast from the Migration Policy Institute that delves into topics on immigration, immigrant integration, and humanitarian protection, with some of the big thinkers on these issues. My name is Kate Hooper and I'm a policy analyst with MPI's international program. On today's episode, we'll be talking about investor visas. These visas offer residency rights in exchange for a financial contribution, and they've attracted a lot of controversy in recent months. Following Russia's invasion of Ukraine in early 2022, there has been new scrutiny of who is applying for investor visas and why. Several European countries have decided to block Russian nationals from applying or to close their visa programs altogether, citing concerns about the potential for misuse. But these discussions also touch on a longer running debate about whether countries should be able to sell residency rights and under what conditions, and if so, what the potential benefits of these programs might be. I'm joined by Madeleine Sumption, who is the director of the Migration Observatory at the University of Oxford. Madeleine has been researching investor visas for the past decade, and we wrote a paper together on this topic a few years ago.

[00:01:18.19] 

So I'm delighted to have the chance to chat with her about investor visas today. Madeleine, let's dive right in.

[00:01:25.14] 

Thanks for inviting me along.

[00:01:27.14] 

I think we can start with the basics. What are investor visas and how do they work?

[00:01:33.12] 

Okay, so investor visas, there are lots of different designs, but the basic characteristic is that they give people immigration status in return for a passive investment. And the passive bit is quite important. They're not entrepreneur visas. They're often other sets of visas for people who would be actively involved in managing a business. Investor visas typically don't really require you to do anything specific after you get the visa. You don't necessarily have to have to work or manage a business. The other key piece of investor visas is that they require an investment, and this is investment of money either in—there are a number of different designs. Some of them require investments in some kind of government bond. Some require investments in the private sector. That's actually the most common model. There are models that reward investments in real estate, and then there are some that aren't really investments at all, where effectively the applicants are just making a payment and they're getting status in return. Most programs around the world are giving some kind of visa or residence permit that may lead over time to permanent status or citizenship. There are some programs that have given citizenship away either immediately or after a pretty short period, like in Malta or several Caribbean islands.

[00:02:47.15] 

But, you know, so kind of taking into account the fact, you know, there are lots of different models, but they all have these characteristics of people coming for a passive investment, of a finite, rewarding a financial transaction effectively. Now, the purpose of these programs, they basically, I mean, they have two main stated objectives. One is to attract money that or capital that will have beneficial economic effects. And the other one is to, to attract people. And different programs have, depending on how they're designed, different programs sometimes have different purposes. So if you ask policymakers in the United States, States, for example, they tend to emphasize the money more than the people. Whereas actually political rhetoric in other countries has focused more on the people that they would bring in and the benefits of the things that they're going to do once they've migrated. But I should say actually that it's not always totally clear why these programs exist. I think there's potentially some sort of bandwagon effect where you see program, you know, countries introducing programs because other countries have them and so they assume it must be a good idea. And there's also a really important political and messaging component to investor programs that they use not just to do what it says on the tin, but also more generally to send a message about their country to say, for example, that they're open for business.

[00:04:01.19] 

I really like that last point about the signaling effect of investor visas. So you mentioned that there are programs currently in the Caribbean. So whereabouts in the world are we seeing investor visas? And how do their sort of profiles vary according to region?

[00:04:17.06] 

I mean, there are a lot of countries that have investor visas. The last comprehensive review, I think was a few years ago and found that there were about 60 programs in 57 countries. It's a lot of them. I mean, traditionally there are ones that have been around for decades in high income traditional destinations, like for example, Australia and New Zealand. Some of those are actually, you know, there have been some. I think some of those governments are actually starting to rethink the programs a little bit and back off in some cases. So we saw a long standing program in the UK close at the beginning of 2022. But one of the interesting things about investor programs is it's not just countries in the global north that are running them. You also see places that are not traditional destinations for international migrants, like for example, places like St. Kitts and Nevis, which is, and Dominica in the Caribbean, which have also had programs now for decades.

[00:05:09.22] 

And of course you also get the golden visas in countries like Spain and Portugal as well. So there are a few different models kind of floating around there. When we talk about investor visas.

[00:05:19.04] 

That's right. And I think, and different people use the different models in different ways. And this I think is quite interesting. So you have a group of people who are using them as, you know, who actually want to relocate and they're using them often as a kind of leisure visa. So they want to move to another country for quality of life. Often they're interested in getting their children an education in a high income country or just escape from things they don't like about their country of origin, like pollution or crime. And then you have this other category of people, it's often potentially attracted to different programs as well who are using them to avoid problems with other immigration statuses. So for example, in the United States one of the big groups of people using the investor program is not necessarily people coming from overseas, but Indian nationals who are stuck in decades-long green card backlogs and see this as a way to sort of escape from that. And then of course you have a third group of people who actually don't really want to relocate at all on the visa. So they're interested more in visa free travel rights that come with having a status.

[00:06:18.13] 

Because if you're a, you know, if you're a business person from Russia or China or Iran, your options can be really restricted for travel. You have to spend a lot of time applying for visas and business people find this really, really constraining. So, for them it can be helpful, you know, to have, if you have a residence permit in Portugal, for example, you get visa free travel in the, the Schengen area or even better, you know, a multi-use passport can get you very good visa-free travel rights around the world. So there's kind of different policy designs implicitly encourage different ways of people using the visas.

[00:06:50.15] 

And what do we know about the people who are using these visas? You've touched on the point that mobility actually varies with these visas. So in some cases people are permanently relocating to another country. In other cases they really may not go there at all. But what else do we know about the profile of people using these visas?

[00:07:08.19] 

So the statistics overall are not brilliant. We have some basic nationality data, but we often don't have a lot of data on economic activities, what people are doing. We do know China and Russia have traditionally been the top countries of origin for people using investor visas. You also have quite a few people from the Middle East. So typically it's wealthy people in developing countries where their passport doesn't necessarily get them the kinds of rights that they would like, or people who want to relocate or have their families move. One interesting thing I think, about the profile of people who use them is that there are a surprising number of women in some countries. You see that the main applicants, that's actually a majority of women using the visas. And part of the reason for that is that you have-okay, so if you've got wealthy people, often they will have, their wealth will come from running a business in somewhere like Russia or China. And those people don't necessarily actually want to move themselves. They're busy, you know, running their successful business in China, but they're interested in the opportunity for their children and their spouses to

[00:08:13.02] 

 move. So often what you have is a kind of split family model where it's the spouse and the children who move on the investor visa and then the main breadwinner in the family doesn't actually want to move at all. And they will either stay at home or maybe they'll sort of come back and forth for visits, depending on whether the, you know, the program has residence requirements effectively require them to spend a lot of time in the country.

[00:08:36.21] 

And so a second question for you is about the economic impacts of these programs. So you talked about how one of the goals of investor visas is to raise revenue, but what's the evidence on this? You know, what do we know about the impacts to date? And do they really live up to this hype?

[00:08:54.00] 

Yeah, if you look at the policy design, we can speculate about what they're for. Right. So you have real estate programs and we can say, okay, well that looks like maybe it's designed to boost the property market or encourage construction activity or renovations, or, you know, if you look at countries with models that incentivise investment and private sector businesses, you might plausibly assume that the goal of that is to have a lower cost of capital for businesses to encourage new economic activity and create jobs. I think what's really interesting is once you start to dig below the surface a little bit, it's actually quite unclear even just looking at the theory behind the programs, it's quite unclear how some of these benefits are even likely to arise. So we have some countries, for example, that have incentivized investments just in ordinary government bonds or buying shares in listed companies. Now, on paper, in most markets that the value of having a few hundred people buy some government bonds on the regular market is going to be pretty close to zero. So there's sometimes a disconnect between what the policy looks like it's designed to do.

[00:10:05.22] 

And then when you actually look at it in detail, what it, what it is doing. I think also, you know, when you talk to policymakers about what the programs are for, they will often emphasize the value of the people that they want to bring in. So kind of getting these entrepreneurial, go-getting people who will contribute to business life. But then if you look at the program, okay, is an investment a very good way to select those people? Not really, because the investment itself doesn't require any skill. That side of things is typically delegated anyway to professionals. And so, and actually there are certain reasons to think that someone who, people who are wealthy are in some cases actually it's harder for them to relocate. There may be more interest. If you're interested in attracting people who you know, just are going to pop in and out because they, they want visa free travel, then that's fine. If you want people who are actually going to relocate, it's surprisingly difficult to get wealthy people who are often by the time they have enough money to apply for these, maybe they're in their 40s or 50s, they, as I mentioned earlier, they're busy being successful somewhere else and that they don't actually necessarily want to relocate at that stage.

[00:11:08.22] 

So the people who are really entrepreneurial, the people who policymakers appear to want to attract are often actually younger people who don't necessarily yet have the kind of wealth that you would need to buy into an investor visa. Unless of course their parents are very wealthy and they've inherited it. So I think these sort of, these conceptual challenges in the program, I think there's reason to believe that some of these programs just haven't been that well thought-through in terms of how they're going to generate the benefits. And one result of that is where there have been evaluations or research on the, on the programs and what their impacts are, they have really often found that the economic results are quite disappointing.

[00:11:49.23] 

And where do you think that the economic argument is most strong then when we're talking about the benefits of these programs? Because we talked about a couple of different models here. One is the government bonds, which you say the evidence is a bit weak, but there are other models like golden visas where you're investing in property or businesses, or ones where you're giving donations to a government fund. From a strictly economic sense, where do you think that the argument is strongest for these investor visas?

[00:12:18.23] 

So this is where it gets controversial because certainly if you look at the theory, the most compelling option is just having a non-refundable payment where people hand over the money and, and they don't get it back. It's very difficult in practice to get really convincing economic benefits out of something that's a genuine commercial investment. And the reason for that is primarily because if the investments are attractive enough to be, to be proper investments that would survive on the regular market, then if you have, if you effectively tell people you can get an investor visa, if you buy into this, it's most likely just displacing other investment that would have gone into the same types of activity. And so I think policymakers are often interested in the idea that maybe the money will go to businesses who in the case of private sector-based programs, the money will go to businesses that couldn't otherwise have raised the funds. The problem is that applicants don't want to invest in those things. They're not investing because they're venture capitalists interested in the next exciting high risk startup. They're investing because the immigration system is telling them to.

[00:13:22.24] 

And so they tend to gravitate to low risk projects that are, that are attractive enough to actually be able to attract capital even in the absence of an investor program. So I think if you kind of follow that logic through, where you get to is that actually from a purely economic perspective what makes sense is to take a non-refundabledable donation. Of course, the problem is this is horribly controversial. And it makes, it's controversial because it's, it makes it obvious that what's going on is not actually a genuine investment, but just a payment for status which tends to be very unpopular. Makes that transactional nature of the relationship between the government and the applicant much more transparent. So there are a couple of ways in practice that from a policy perspective that this gets resolved. One is to say, okay, well, we're not going to take payments. We're going to go for something like a private sector investment or a real estate investment. And as I explained, that's typically going to be less economically beneficial or in some cases the investment itself will have no benefit. There's a lot of research on the kind of ethical implications of investor visas that suggest that effectively governments are sort of selling their souls in order to get this useful money.

[00:14:35.05] 

But actually I think in many cases they're giving away their souls for free because there isn't actually that much benefit. And then so that's one way of doing it. You say, okay, well we're just not going to get that much benefit out of the investment and that's fine. Maybe the benefit is the people instead or the other option that's sort of interesting is say, okay, well we're going to sort of disguise this investment. So maybe you have, instead of just taking a certain amount of money, maybe you have an interest free loan where effectively the person is, it's the same thing, they're making a transfer of cash, but they're just losing their money more slowly over a period of time because they're not getting any interest on it. Or in the case of the U.S. EB5 investor visa is really interesting because what's effectively happened, and this wasn't, I don't think explicitly a policy intended to disguise a payment, but in practice what happens is that the way that it's been structured effectively creates a subsidy that's provided by the applicant to the business because the applicant tolerates very low rates of return over a number of years in order to get their visa.

[00:15:40.19] 

And the business is effectively making a profit from that because otherwise they would have had to get maybe an expensive bank loan at more than a 10% rate. So what you end up having is something that looks on paper like an investment, but actually is a payment from the applicant in this case to the business.

[00:15:59.09] 

I know that Malta and the European Commission have gone back and forth over the years about how to structure the citizenship by investment program that they launched because of this question, right, about how to put a price on residency rights and what other sort of, what other requirements you might set for potential investors to demonstrate links to Malta and to address this sort of ethical issue around selling residency rights and the ethics of doing so. Could you maybe talk a little bit about how that controversy played out and where they landed in terms of balancing simplicity of the program, economic benefits and then also the sort of broader ethical considerations and other sort of political priorities.

[00:16:45.05] 

Yeah. So the Maltese scheme was first developed in 2013/14. And what I think is really interesting about it is that it had all of the ingredients of the most controversial program you can imagine. In the sense that firstly it was taking a non-refundable payment, but also it was giving away citizenship rather than resident status on the way to citizenship. Now in other cases, I think especially on the point of taking a non-refundable payment, I actually think that the lines are much fuzzier than people realize in that applicants, even to programs like the U.S. One, which appears to be an investment, or many other programs around the world, applicants actually often see this as a payment for status anyway. They see it as sort of immigration money that they have to dedicate in order to be able to attain the status. So I think that the relationship is always inherently transactional, even if it's not just a blunt payment, it's just that it looks much more payment like when there's just this obvious price tag on it. On citizenship, I think for a whole host of reasons, citizenship, it has a lot of symbolic and emotional content that a residence permit doesn't have.

[00:17:56.08] 

And so people care much more deeply about citizenship policies typically than residents pay, because citizenship also symbolizes membership in society. And so there's something particularly sensitive about a program that gives away citizenship. Now, in the end, the way that this was resolved, Malta didn't back down on the core principle of the program, which is that they would give away citizenship and they would receive a payment in return, but they added a bunch of other things, things that sort of created the impression that it was more than just a payment for citizenship. And so there was a delay of a year before you could get the citizenship. And you have to show that you have a genuine link with Malta through things like maybe being a member of a club or making some charitable donations, renting a property, having a mobile phone. There are various, you know, there's no sort of set list of things. But what's interesting, of course, you go on the Internet and you can find professional services, you know, people are marketing services like, yeah, we'll set up your club membership and your mobile phone and all of this kind of stuff.

[00:18:54.15] 

So it's very difficult. This idea of what a genuine link is is of course, it's incredibly slippery concept. And unless you're going to have an incredibly discretionary system where some official sits down and has a chat with the person and then makes a probably quite unpredictable and arbitrary decision about whether they think a genuine link is there. I don't think that it's really something that immigration systems are very good at identifying.

[00:19:22.07] 

And what are some of the other controversies that we've seen in investor visa programs?

[00:19:27.24] 

Yeah, they have. So, you know, the citizenship and the non-refundable payments have been one of the sources of controversy. I guess the other would be grouped together broadly as integrity concerns. And this is either the integrity of this system. So is there fraud, is there compliance with the immigration rules or concerns about the backgrounds of the people who apply to them? Now, on the issue of people's backgrounds, there are rules. You know, almost all programs will have requirements effectively saying you have to have earned your money in legal ways. You can't use the proceeds of crime to buy into the investor program. In practice, actually due diligence is quite, is quite difficult. So there are countries like for example, if you made your money in 1990s Russia, they weren't giving out receipts. There was, you know, there was a lot of, it was a sort of wild west and the record keeping is not very good and there's all sorts of questions about what was legal and what wasn't legal anyway. And so trying to work out, you know, how this money was, was earned is actually a real, real challenge. And that actually the concerns about the backgrounds of investors was, was the main reason that the UK Home Office gave at the beginning of 2022 for shutting down their investor program there entirely.

[00:20:47.05] 

The other issue is, is fraud. And this depends a little bit on the kind of system that you have. But if you have one, that's where effectively you've got this decentralized web of private sector transactions either in real estate or, you know, like in the U.S. With the U.S. EB5 investors visa. I think there's, there's a lot of, there's quite a big oversight challenge for, for governments making sure that the investors themselves are not defrauded. And one of the interesting things there actually that we've seen in the U.S. Context is that sometimes the businesses that most need the money, the ones where you say oh, these are the people who really wouldn't have been able to get investment without this, this program, are often the ones that are actually less professionalized and less well-equipped to handle the compliance requirements and where you, where you tend to get more violations either as a result of a deliberate fraud or just because of incompetence.

[00:21:39.17] 

So we've talked about some of these compliance and integrity issues. Are there any examples of governments who have managed to address these challenges well in their programs?

[00:21:50.22] 

So I often get asked what are the best designs for investor visas? And I think it's very difficult to point to a single example and say this is the right way to do it just because there are always trade offs. So I mentioned already that you've got a trade off between the economic benefits and the political impact of the program in that the non-refundable donation model, which is the one that's likely to be most economically beneficial, is also the least politically acceptable. There's another trade off, I think when it comes to compliance that in theory you might want an open program where there's a market of people of organizations competing for investments, whether that's in real estate or in private sector businesses. But the monitoring challenge when you've got this kind of sprawling network of different organizations receiving funds is much greater. And so I think there's potentially an argument to have a more, slightly more centralized model where you're sort of limiting the number of organizations that can compete in this market so that you can oversee them properly. That of course, also brings challenges. You've got, someone's got to decide then, well, who are, who are going to be the beneficiaries of this, of this money.

[00:23:00.23] 

And is the way that those beneficiaries chosen, you know, is that transparent? Will there be allegations of corruption? I actually think, I mean, I'm intrigued by some proposals to basically look at existing programs that, that many countries have for example, giving loans to small businesses or supporting entrepreneurship or any number of, you know, often there are structures that already exist, totally unrelated to the immigration system to try and help particular beneficiaries. And I think that you could probably structure investor visas so that the funding went into a centralized place and then was dispersed. And it could be legitimate, you know, private sector investment that then the person is getting back after some time, you know, possibly with interest. It doesn't necessarily have to be, you don't have to turn it into a cash payment. But I think probably if you're really serious about trying to get an economic benefit out of the investment, I think probably you end up moving towards some kind of centralized system that has a bit more oversight.

[00:24:01.04] 

And final question, because I know we're running a little short on time, is what do you think the future holds for investor visas?

[00:24:08.17] 

So this is obviously quite difficult to say. I think that the demand among applicants is not going to go away. We still have large wealthy middle and upper classes in developing countries. And this is, you know, this has been the market for investor visas. And those people, they continue to be there, they continue to be interested in having these options for travel or for residents in other countries. So I think in some ways the question is not will people still want investor visas? Which I think unless something very strange happens, they probably will, but will countries still offer them? Now we've seen over the last few years a few high income destination countries rethinking their strategy a little bit. You had Canada closing its program a number of years ago, the UK in early 2022, Australia reducing the number of people coming who could come on investor visas. But overall, I think I wouldn't necessarily expect a massive reversal. I think the programs will probably continue to exist for a couple of reasons. One is that often in many countries this is quite a niche area of immigration policy and it just doesn't get revisited that often, a lot of governments, they just have much bigger fish to fry.

[00:25:36.09] 

And so unless there's a sort of big scandal blowing up or there's some reason that it really becomes the center of, of public attention, I think a lot of these programs just sort of chug along in the background with no one paying that much notice to them. And then the other reason is, I do think that some policymakers are concerned about the optics of closing a program. We know, like in public policy in general, there's a bias against closing programs because governments don't like to admit that the policy hasn't worked or they can feel like, well, no, this is you, we should just retool it. We shouldn't necessarily close it. Let's not give up on the whole thing entirely. And more generally, I think closing something that has the label investor on it might, you know, policymakers sometimes worry that it will make it look like they're shutting themselves off from the world or they're not open for business. So in that perspective, I think that those kind of symbolic and political benefits will probably still be there, even if you have the occasional scandal related to specific people who are, are using the programs, in which case, you know, the benefits of the programs can be a little, the political benefits can be a bit fragile.

[00:26:46.22] 

And so you, you know, you've got the, you've got benefits of saying investors are creating jobs. And this sounds very attractive. People like that. But then of course, you have this other narrative that is actually much more attractive, I think, probably to the media that, well, these programs are admitting shady kleptocrats. And so you've always got this tension between the two things that I think makes the investor programs potentially a bit unstable. You see programs kind of suspended and then reintroduced. But I don't, in terms of the overall concept, I suspect that it will persist.

[00:27:19.05] 

Well, Madeleine, thank you so much for joining the podcast today and sharing your brilliant insights on this topic. Madeleine is the director of the Migration Observatory at the University of Oxford, and you can follow her work at migrationobservatory.ox.ac.uk or on Twitter.

[00:27:36.20] 

Thank you very much.

[00:27:37.23] 

Thanks, Madeleine. Thank you for tuning in to World of Migration. If you enjoyed this conversation, please check out our other episodes. You can find World of Migration wherever you get your podcasts. And while you're there, please leave us a review. You can find all the episodes for this and other MPI podcasts at MPI's website migrationpolicy.org/podcasts. This episode was produced by Yoseph Hamid and made possible with help from Michelle Mittelstadt and Lisa Dixon. Our theme music is called Bright Idea by Geographer. I'm Kate Hooper. Thank you again for listening, and see you next time.