Testing Times Ahead for the Booming Passports Trade

“THEY WANTED to destroy our industry,” says one of its insiders. “They” are European Union officials. The “industry” is the one selling CRBI schemes—Citizenship and Residence by Investment, that is, a travel document that allows you both to stay somewhere outside your homeland for as long as you want and to travel the world without too many constraints. In 2020 the future of this business will continue to be clouded by the EU’s suspicions and hostility. But the industry will also continue to grow.

Thousands of passports and hundreds of thousands of residence visas are bought every year. Around 100 countries around the world have schemes that offer residence—a “golden visa”—in return for a big investment. A dozen or so go further, and offer a passport, in effect selling citizenship. They include five Caribbean island-states, Vanuatu in the South Pacific, Jordan and several EU members: Bulgaria, Cyprus and Malta (Austria has a less formal, and very expensive, scheme). The prices range from $150,000 in Vanuatu to an investment of at least £2m ($2.5m) for a British “Tier-1” investment visa.

The EU’s sensitivities about the business are understandable. Few issues are more central to ideas of national sovereignty than who lives in a country and carries its passport. Yet the EU clearly has an interest if the passport is a European one. And a visa granted by a member of the Schengen internal-border-free area also allows entry to 21 other countries in the EU.

The suspicion is that the schemes are abused by crooks, money-launderers and tax-dodgers. They are dogged by repeated scandals. In 2018 a scam was revealed in Greece, where an entrepreneurial purveyor of residence visas bought properties at market value and sold them at a big mark-up to would-be Chinese migrants (and then partially reimbursed them). In 2019 Bulgaria withdrew the citizenship of a number of investors, either because they had lied about themselves or had failed to make the promised investment, or both.

The EU’s stance matters to non-European countries operating such schemes, since one of the attractions of, for example, Caribbean passports is that most offer visa-free access to the Schengen countries. Even a requirement, to be introduced in 2021, for visa-free entrants to the EU to pre-register online (to weed out undesirables) is a deterrent for some would-be purchasers.

To defend itself, the passport-and-residence industry deploys a number of arguments. The first is that it is performing stricter due-diligence checks on its customers and easing the lives of fewer criminals. The second is that it is, for some small economies in particular, a useful source of debt-free capital. In Vanuatu the industry is now the largest single source of government revenue. Even within the EU itself, in Malta, where the investment-migration industry comes closest to a simple passport-for-sale model, it claims some of the credit for strong recent economic performance.

The industry also argues that only a tiny minority seek a second national residence for nefarious reasons. Many do so because they fear political or economic unrest, want a foreign education for their children or are simply fed up with the difficulty they have in crossing borders with their own passport. And the number of investment migrants is trivial compared with the millions who cross borders in other ways.

None of these arguments probably weighs as heavily with EU officials as the sheer difficulty of meddling in sovereign countries’ passport and visa regimes. Indeed, 2020 will see demand for the industry’s services grow. China has long been by far the biggest source of investment migrants. But other Asian countries, such as Bangladesh and Vietnam, are also becoming more important markets. So is sub-Saharan Africa. “Through gritted teeth,’’ says the industry insider, the EU has accepted that this line of business is not going to disappear.

Source: economist.com – Simon Long
Published: December 2019

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