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President of the Investment Migration Council shares insight about booming CBI industry

EB5Investors.com Staff

 Dimitry Kochenov

By EB5 Investors Magazine Staff

Dimitry Kochenov, board chairman of the Investment Migration Council, says he has been fascinated with citizenships since childhood, studying comparative citizenship and the constitutional aspects of different residence statuses for nearly two decades.

"It is not difficult to be fascinated with citizenship, fairness and justice for anyone who, like myself, is a USSR-born scholar who has changed several citizenships already and has no intention to stop," he said.

Kochenov is also a professor, holding a chair of EU Constitutional and Citizenship Law at the University of Groningen in the Netherlands. He also lectures on citizenship and migration worldwide from Switzerland to Mexico and Japan. His research focuses on European citizenship and the principles of European Union law, with the emphasis on justice, democracy and the Rule of Law.

What is the role of the council and what does it hope to achieve?

The Investment Migration Council (IMC) is the worldwide association for investor migration and citizenship-by-investment, bringing together the leading stakeholders in the field and giving the industry a voice. The IMC aims to set the standards on a global level and interacts with other professional associations, governments and international organizations in relation to investor migration.

The IMC helps to improve public understanding of the issues faced by clients and governments in this area and promotes education and high professional standards among its members. The council has reached over 300 members since its inception in 2014.  

What are some new trends of global investment migration programs?

Not all the governments publish all the statistical data, but from what we know from our members and the data that is openly available, the industry is booming. This concerns not only the numbers of clients, but also the number of products each country offers. It is not uncommon to offer investment citizenship alongside residence-by-investment, for instance, which allows countries to tap into different groups of potential clients.

The most interesting recent development is the rising popularity of Caribbean citizenship-by- investment programs, which has to do with a certain uniformization in the quality of the Caribbean citizenships can offer. Over the last years, the majority of the countries in the region gained visa-free access to the Schengen zone, boosting the popularity of their passports.

The resilience and increased appeal of citizenship programs in the Caribbean pushes emulation around the world, making new countries in other regions enter the market, which particularly concerns residence by invesment. Besides, it also fuels adaptation among other programs around the world, leading them to reduce their requirement thresholds in an effort to retain their market share. Cyprus is the latest country to adjust to this increasing pressure, lowering the minimum requirement to 2 million euros.

Serious conversation about starting and reviving investment migration programs are on-going in the non-EU European countries with the quality of passports broadly similar to the Caribbean ones, including the Republic of Moldova and Montenegro. All in all, the interest in investment migration continues to be on the rise from investors and the providers alike.

Is the Council moving to implement an international standard for all investment migration programs?

The IMC has already firmly established itself as the go-to organization for governments, academia and professionals who seek unbiased information and services. Trust and reliability are essential ingredients the IMC adheres to, which is why the board and committee continue to include additional distinguished individuals from the global investor migration field.

The IMC’s main objective is not only to respond to industry needs, but to lead the investor migration sector by setting industry standards worldwide. The organization has produced the industry’s Code of Ethics and Professional Conduct policy, aimed at improving standards and transparency in a rapidly growing market. It also aims to help improve public understanding of the issues faced by clients and governments in this area. The regulatory environments in which investment migration professionals operate around the world is highly diverse and volatile. The council, which takes continued adherence to the Code of Ethics among all the members very seriously, has made the first step in the global investment migration industry's self-regulation, which we view as a crucially important beginning, which is for the benefit of all our members and the industry as a whole.

What kind of challenges are these investment migration programs facing in today’s world?

In recent years, the investor migration industry has attracted inexperienced and poorly regulated companies and agents who have been drawn by the financial rewards of these programs in an industry, which experiences strong growth worldwide. Unfortunately, not all of these companies apply best business practice. Citizenship and residence documents and passports obtained by illegal means, such as bribery, are unfortunately not uncommon. In some extreme examples, mostly confined to the Pacific region, passports have been effectively sold illegally, as published research shows.

The most important elements of any investor migration program are therefore transparency and due diligence, ensuring that the program conforms to the constitution and laws of the respective country. Also, strict adherence to the principle of the rule of law by all the institutions of the countries establishing investment migration programmes is key to make sure the clients’ money is not misappropriated and bribery or sloppiness does not lead to the lowering of due diligence standards. While the gains could be immediate, long-term implications of failing to be strict with the rule of law could through the shade on the whole industry and immediately affect in the most negative way the value of the travel documents of the country involved.

Not only Canada – as is sometime the case – but also the European Union can re-introduce visas virtually overnight: a move with detrimental effect for all the population of the country concerned, not only the investors, who obviously lose the value for money, when the nationality they invested into suddenly comes to be associated with a passport de facto unsuitable for international travel, as has been the case with the Kingdom of Tonga long ago, for instance. It is thus regrettable for the whole industry that Tonga is not the only example of local abuses affecting all those involved in this growing business in the negative light.

Governments looking to set up investor migration programs should very carefully examine their own institutional and rule of law capabilities before establishing an investment migration programme. The same applies in the cases where an external company is hired. It is equally critical that the process of selecting external government advisors and industry partners is completely transparent and conducted with integrity.

What are some of the benefits these programs provide to the various countries that launched them?

More and more governments are seeing these programs as an innovative way of driving economic growth, securing much-needed foreign investment as well as enriching their own nation by attracting people to their shores who have proven business success, diverse talents, and valuable networks.

Traditionally, developing countries with relatively lower GDPs have benefitted the most from the economic growth that citizenship-by-investment programs offer, and over the last decade we have seen a growing number of governments interested in developing these programs as they become aware of the advantages. The same came to be associated with residence by investment, which has been very effectively used by several European governments to repair their economies, and, in particular, their housing market, following the global economic crisis.

The most often-cited example of a hugely important success in the citizenship-by-investment is St Kitts and Nevis of course: the GDP of this tiny federation has grown exponentially over the last decade since the country’s citizenship-by-investment program was revised and relaunched. The program accounted for just under 5 percent of the country’s GDP when it was relaunched in 2007. Today, the program accounts for just under 25 percent.

In Europe, Malta would be the reference point: the country’s economy rose by 3.8 percent in 2014, the same year its citizenship-by-investment program, the Malta Individual Investor Program (MIIP) was implemented — a significant growth when compared to the Eurozone’s year-on-year economic growth of 0.8 percent. The program has moreover secured more than 1 billion euros in new capital for the country since its inception.

Which are the most popular programs out there? Why?

Investors and their families are looking to acquire citizenships that can provide them with greater travel freedom and mobility, as well as better security, quality of life, education and business opportunities. Obtaining an alternative residence or citizenship is a significant, very personal and multifaceted decision for any individual, and is often dependent on the country or region from which they originate. While this decision may have a direct impact on the applicant’s personal situation and business interests, a range of social, political, economic and family issues are typically also considered to determine the best jurisdiction in which to reside or hold a residence permit. This being said, it is crucial not to view different investment migration programs around the world as exclusive options: they are not, in the sense that they can of course be combined with each other to ensure that every investor achieves the specific goals in terms of investment migration: education of the children, healthcare, hassle-free travel around the world, comfortable and safe environment: all this could be attained via one passport, but also through a combination of several citizenship and/or residence permits.

This being said, obtaining a European passport remains one of the top aspirations for high net worth individuals seeking to provide their family and future generations with safety and future security and access to greater education, lifestyle and business opportunities. Cyprus, Austria and Malta are in the lead.

The Maltese IIP remains one of the most exclusive and sought-after programs in the world and also the only one of its kind to be endorsed by the EU. Although extremely efficient, the application process applies the world’s strictest due-diligence standards and applicant vetting, which is not surprising, given that Maltese citizenship entitles the holder for visa-free access to the United States under the visa-free ESTA program alongside with a handful of the world’s most elite citizenships. The MIIP’s exclusivity, coupled with the sustained growth of Malta’s real estate market provide an added lure for international entrepreneurs and businesspeople to base themselves in one of the most stable, secure countries in Europe.

The interest in Southeast Asia’s investor migration programs has also increased rapidly over the last year. Singapore’s residence program is especially popular with the wealthy expat community, which includes Russian, Indian and Chinese nationals who desire the enhanced travel freedom that an alternative residence can provide. Another thriving residence program in Southeast Asia is  Malaysia, which was initiated in 2002. The Malaysia My Second Home (MM2H) program has approved more than 32,000 applications since its start. Continued industrial growth and political stability have made Malaysia one of the region’s most vibrant economies, boasting an open, upper middle-income economy that is the third largest in the region.

What can we expect when it comes to these programs in the future?  

As we look towards the future, there is one definite reassurance for the world’s wealthy and talented individuals seeking more security, greater opportunities and financial freedom: it's unlikely that the thriving investor migration industry is going away anytime soon. Countries offering these programs keep reinventing and adjusting their requirements and options to stay competitive and provide applicants with benefits that optimize their global presence. These programs, especially when there are more of them around, offering different options and opportunities that mean one thing: freedom. Acquiring an additional nationality as opposed to the ones one holds from birth increases the horizon of opportunities and grants all of us an additional tool to control our future and actively build it as opposed to relying on pure chance of the ‘birth-right lottery’ which citizenship otherwise is. Some win in lotteries and others lose – and naturalizations and options to obtain residence abroad, including investment migration options, are fundamentally important to break the quasi-feudal fabric of today’s citizenship and residence world.

It is not surprising that alternative residence and citizenship programs offer many exciting opportunities. In many respects, citizenship has become a valuable and strategic asset for skilled and wealthy individuals and their families who want to operate globally, reduce their exposure to external threats, increase their international flexibility and open up new opportunities for growth.

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