Tag Archives: golden visa

The Economic Benefits of Golden Visa and Golden Passport Programs: A Response to Professor Stephenson

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In the past few months, there has been a healthy debate on this blog about “golden visa” and “golden passport” (GV/GP) programs, following reports by Transparency International-Global Witness and the European Commission on the corruption risk associated with these programs. In his post a few weeks ago, Professor Stephenson goes even further, contending that such programs carry no economic benefit and should therefore be abolished. I respectfully disagree. Even taking the status quo as is, the $28 billion these programs have brought in over the past decade make them a savvy tool for nations seeking to attract investment. All GV/GP programs are not equal, and there are vast differences in the transparency and potential for abuse across countries. Reforming GV/GP programs with high degrees of risk, as discussed previously on this blog, is a better answer than abolishing them, since the concerns raised are straightforward and addressable.

Professor Stephenson’s post focused only on the economic aspect of GV/GP programs, so my response will do the same, but it is worth noting that a lot of the criticism of these programs comes from the ethical questions they raise over whether one should have the “right to buy citizenship.” Though this objection is not my main focus here, I can’t help but point out the irony of worrying about the unfairness of a system that allows the wealthy to buy citizenship against the background of a system that confers the privileges of citizenship simply by an accident of birth, and in which immigration systems are so badly broken that, for example, immigrants to the US face a 150 year-long waiting time for a green cardthrough routine channels. But my main focus here is on Professor Stephenson’s argument that GV/GP programs lack a sufficient economicbenefit to justify the corruption risk, and on this question, I believe he is mistaken. 

Let’s start with some top-line numbers: The sale of EU passports accounted for as much as 5.2% of Cyprus’s GDP in 2017. Portugal’s scheme has delivered close to €4 billion to the economy. Malta enjoys a budget surplus because of its growing trade in residency and citizenship. Over in the Caribbean, income from GV/GP programs has contributed up to 25% of the GDP, and even the majority of government revenue. The outsized impact of these programs is hard to deny. Professor Stephenson does not contest the accuracy of these or similar statistics, but he denies their significance for several reasons, each of which is flawed:

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Golden Visa/Passport Programs Have High Corruption Risk and No Demonstrated Economic Benefit. So Let’s Abolish Them.

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We’ve had a couple of posts recently (from regular contributor Natalie Ritchie and guest poster Anton Moiseienko) about the corruption-related problem associated with so-called “golden visa” and “golden passport” programs (GV/GP programs), which grant either residency (golden visas) or citizenship (golden passports) in exchange for “investments” (or sometimes simply direct payments to the government) that exceed a certain threshold. Both Natalie and Anton reference recent reports by Transparency International-Global Witness and the European Commission, both of which focus in particular on the EU, and which are both very useful in documenting the risks associated with these residence/citizenship programs—including though not limited to corruption and money laundering risks. That said, the solutions proposed, while certainly helpful, feel a bit thin, in part because both the TI-GW and EC reports assume that these programs have at least some legitimate uses, or at the very least that it would be overstepping for outsiders (be they international bodies, other countries, or NGOs) to try to coerce states into abandoning these programs altogether.

My inclinations are somewhat different, and a bit more radical: I’d push for abolishing these programs entirely—certainly the golden passport programs, but probably the golden visa programs too. The risks associated with GV/GP programs are well-documented in Natalie and Anton’s posts, as well as the TI-GW and EC reports (and other sources), so I won’t dwell on them here. In short, as these and other sources convincingly demonstrate, GV/GP programs may provide safe havens for wealthy criminals and their money, often produce corruption in the programs themselves, and may also have more diffuse pernicious effects associated with the commodification and marketization of membership in a political community. I acknowledge that the risks associated with well-run programs may not be huge, but they’re not trivial, either. And I can’t for the life of me figure out what benefits these programs could have (to society, not to the governments that run them) that could possibly justify those risks.

The usual story is that these programs attract necessary foreign investment, stimulate the economy, and create jobs and raise government revenue. I’m no macroeconomist, and so I may be about to reveal my ignorance in embarrassing fashion, but I have yet to hear a convincing argument, let alone see a persuasive study, that establishes that these programs indeed have substantial economic benefits. Let me explain my puzzlement, and if I’m obviously misunderstanding some crucial point, either about how the programs work or about the economics, I hope some readers out there will correct me. Continue reading →

Passports for Sale: Why We Should Worry about Golden Visa Programs

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In 1984, the government of the small Caribbean island state of Saint Kitts and Nevis had a bright idea for attracting foreign capital: the country would grant permanent resident status to any foreign national who invested a sufficient amount in the country. The idea caught on, and now dozens of countries around the world—including not only small island states, but also major developed economies like the United States and the United Kingdom—have so-called “golden visa” programs. Golden visa programs have proven especially attractive during times of economic hardship, as demonstrated by the spread of these programs across Europe in the wake of the 2008 recession. These European programs are especially notable, as getting a visa in one country in the Schengen visa zone provides access to the other 25 as well. Some states—including EU members Austria, Bulgaria, Cyprus, and Malta—even offer investors outright citizenship, rather than simply residency status, in exchange for sufficiently large investments. And due to pre-existing visa waiver agreements, these “golden passports” may allow access to other countries as well. Those with Maltese passports, for example, can travel to the US visa-free.

According to a recent Transparency International-Global Witness report, in the last decade alone, countries with these sorts of programs have “sold” (that is, traded for investment) more than 6,000 passports and nearly 100,000 residency permits. Yet these policies have always been controversial, and are becoming more so. Canada terminated its golden visa program in 2014 (though it continues in Quebec). Last June, the Trump Administration demanded that Congress either terminate or reform the US investor visa program. And the UK abruptly announced it would suspend its program on December 6th, although it reversed course six days later.

Part of the reason for the growing disillusionment with golden visa programs is that their supposed economic benefits haven’t lived up to expectations. Rather than stimulate economic growth and job creation, the investments used to qualify for golden visas are often passive, such as government bonds or real estate. In Portugal, for example, 95% of total investment has been in real estate—6,141 investments compared to just 12 in employment creation. Real estate investments not only offer limited benefits, but may also distort housing markets. In the US, investments have been, in the words of US Senator Chuck Grassley, funneled towards “big moneyed Manhattan interests” rather than “direct investment to rural and high unemployment areas.” Hungary even managed to lose money on its program—$221 million—as it offered investors discounted bonds that were then fully repaid after five years with an additional 2% interest.

But the bigger problem with golden visa programs is their potential to both facilitate and stimulate corruption and money laundering. This problem, which was highlighted both by the TI-Global Witness report mentioned above, as well as another report from the European Commission, takes several forms. Continue reading →

Guest Post: The European Commission’s Response to “Golden Passport” and “Golden Visa” Programs

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Today’s guest post is from Anton Moiseienko, a research analyst at the London-based Centre for Financial Crime and Security Studies of the Royal United Services Institute.

 Investor citizenship and investor residence programs, known colloquially as “golden passport” and “golden visa” schemes, have a less than sterling reputation. Much of the disapproval comes from anticorruption organizations like Transparency International and Global Witness. Those two organizations published a joint report last year that criticized these programs for offering a “safe haven” to figures associated with corruption.

The European Union has also expressed concern about these programs in several of its Member States. For example, back in 2014 the European Parliament adopted a resolution that accused some Member States, in particular Malta, of an “outright sale of EU citizenship [that] undermines the very concept of European citizenship.” And this past January the European Commission published a report on golden visa and golden passport schemes that will do little to improve their battered reputation. The Commission report raises a number of worries about these programs, and expresses particular concern about golden passport programs, since citizenship in an EU Member State automatically confers EU citizenship with its attendant rights, including free movement.

There are at least three ways in which golden passport and golden visa programs threaten to undermine the fight against corruption. Continue reading →