On today’s show, we welcome back James McKay, from McKay Research, who developed the CBI Index
. The fourth edition of the CBI Index was released this summer. James walked us through the newest edition’s methodology and what makes the CBI Index such an effective tool for investors looking to attain second citizenship.
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Aisha Mohamed: The CBI Index is a guide that provides accurate, up-to-date information on all active citizenship by investment programmes. Was it difficult to work on the 2020 edition of the Index because of the many changes to the CBI industry, some due to the ongoing pandemic?
Well, I think you’re absolutely right to point out that the CBI industry’s rapidly evolving nature does reflect the many changes that we see in the report and the world around us both economically and politically.
Every year we undertake a comprehensive primary and secondary research and analysis from relevant industry sources, including legislation government circulars, application forms, interviews with industry stakeholders, as well as a macro-economic statistic. Indeed, much of this process was already underway before the large impacts of COVID-19 made themselves felt.
But at the same time, because the government responses to the pandemic evolved so quickly to some degree, they did have quite an immediate impact on the CBI programmes themselves. In the 2020 addition, we have included analysis of these developments both in terms of the measures taken by the governments and how well the different programmes sort of adapted to the unprecedented circumstances. Things like border closures and changes to the application, including online submissions, and how the CBI funds themselves were being used for the pandemic to battle disease, were all factors that were reviewed in the Index.
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AM: For a fourth year, Dominica received the highest score in the CBI Index. What are the main reasons Dominica continues to find its way to the top?
Yes, it’s true. Dominica
has been a consistently strong performer since the CBI Index was first created. It’s important to remember that the different investor and businesspeople will always have different priorities, so each index pillar has an equal weighting to allow users to measure those programme attributes that are most important to them. But Dominica’s success can be attributed to a strong performance across several pillars, including minimum investment outlay, mandatory travel residence, citizenship timeline, ease of processing, and of course due diligence.
With respect to the 2020 addition, I’d also say that Dominica, scores very highly in the new family and certainty of product pillars on our last edition.
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AM: On our last season, you took us through the seven pillars that have been part of the Index since its inception. However, this year, two more pillars were added. Why did you feel the need to add the Family and Certainty of Product Pillars for this edition?
Well, that’s another excellent question. Given the rapid pace of change in the industry, it is my opinion that any tool designed to measure the CBI programmes must itself evolve to reflect these changes as they don’t just occur in a vacuum. For example, the family pillar, which measures the degree of flexibility of a programme to add other family members to a primary application, we felt that was very important to create simply because so many investors are now seeking to include a wide variety of family members in their applications.
In 2020, we saw a number of CBI programmes respond to these investor priorities and demands by expanding their definition of dependant. So here, of course, the difference between a programme that allows for the inclusion of a parent or sibling or other dependants or even dependants from a partner’s previous marriage can really make all the difference for the applicant.
In terms of the other new pillar, the certainty of product, that measures the programme’s certainty across five dimensions. These are longevity, popularity, renowned stability, reputation and adaptability. We felt it was important to include because of the rapid growth of the industry. It really is becoming increasingly important to have a robust means of evaluating the different products on the market as like any other investment space.
In summary, the addition of these pillars very much reflects how a tool designed to evaluate CBI programmes must actually keep abreast with the changes in the industry itself.
AM: 2020 saw a lot of changes in terms of CBI. Some would agree that, before COVID-19, greater visa-free or visa-on-arrival access was an investor priority. Do you think this priority has shifted? If so, what priorities do you think have become stronger?
Yeah. We’re certainly saying that the pandemic has to an extent shifted investor priority
, and on many levels, there will be a reassessment of priorities taking place as a result of the pandemic. Because suddenly, due to the unprecedented closure of borders around the world, many investors just simply found themselves grounded in their own countries.
On a very basic level, the all-important issue of where you can go with your entire family with fewer restrictions on movement is of rising importance, undoubtedly. Here you have to say perhaps parts of the world that a little bit more remote and have fewer cases of COVID-19 may increase in desirability.
The other important point that it’s all too easily forgotten is that the number of golden visa programmes and CBI programmes actually increased quite quickly after the 2008 global financial crisis. The investments that came about as a result of this played a big part in bringing these countries out of the recession. So clearly, we’re in a situation.
Governments realise that with correct due diligence procedures in place, these programmes can help them secure much-needed foreign investment and attract people with proven business success and malleable networks. But of course, the big difference now is that because of COVID-19, a large percentage of the interest being generated by CBI investment such as business travel and tourism has simply been badly affected. So, it’s going to be interesting to see the how the government’s themselves are able to respond to this challenge and how the investors’ decision-making processes about where they end up in the world will change.
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AM: Looking to the future, if we were to ask you about what the ranking may look like in the late summer of 2021 when the CBI Index is generally published, what would you predict?
Certain things will stay the same and consistent, but others will definitely be in flux. For example, the Caribbean nations, particularly Dominica
, have typically scored highly on pillars such as the minimum investment outlay, mandatory travel residence, ease of processing, and due diligence since the beginning of the CBI Index. I just don’t see any significant changes there.
But on the other side, we just hope overall that more countries will increase their scores in those areas. That will raise the profile of the industry, particularly with respect to due diligence.
I would say the change is on the horizon and we have already witnessed some. For example, some have ended their CBI and developed a new CBI proposition within the “Granting of Citizenship for Exceptional Services Regulations” framework. So, there are changes there. And of course, the biggest shock undoubtedly was the sudden end to the Cyprus CBI programme because just as it seemed as if the country had made the necessary changes to the programme, in the last 12 to 18 months, which included changes to the investment fund structure and more stringent due diligence checks, the programme disappeared virtually overnight. The investigations, I believe, is still ongoing.
Bulgaria and Malta are the only remaining EU CBI programmes. It will be very interesting to see and monitor how these programmes respect the increasing European Commission’s good scrutiny.
And finally, another interesting aspect will be to monitor whether countries make adjustments to the programme price levels due to COVID-19 and the related economic impacts. So, for example, Jordan lowered its minimum investment outlay threshold. They did that actually despite high application numbers, at least those numbers that were reported officially.
So, it will be interesting to see if other countries decide to follow that example. Still, in any case, as always, it will always be interesting to see how the industry changes in the coming year, particularly as COVID-19 vaccines bring hope to people and reinvigorate the economies.
This interview has been edited and condensed for length and clarity.