Christian Henrik Nesheim, the founder of IMI Daily, joins us today to speak about emerging trends in the investment immigration industry.
Aisha Mohamed: What led you to set up IMI Daily, and how do you ensure you are always up-to-date with, and ready to report on, industry changes?
Christian Henrik Nesheim: I was working for an investment of migration company. At the time, I was doing B2B sales agreements in China, and I wasn’t that good at it. I’ve always been very fond of writing because the market was relatively young and still quite small. There wasn’t a journal for the market. Most industries have their own journals, but there wasn’t anything like that for investment migration.
I figured I would give that a shot and we didn’t really make any money in the first six months or so, and I think we broke even at the one-year mark. Of course, we don’t have a lot of high fixed expenses, being a fully virtual business. I eventually quit my day job, and I haven’t looked back. That was in May 2017.
As to how do I stay up to date on the market, there’s chiefly two things. First, I have many Google Alerts for different keywords like golden visa and citizenship by investment, so whenever that’s mentioned somewhere on the web, I get a little notification. In the beginning, it was just me paying attention and keeping tabs on all these developments, but then over time, as our audience grew. I now have thousands of people sending me tips from around the world. A Greek lawyer might send me some news on the Greek golden visa, and then a developer in the Caribbean might send me the new policy from the CIU. Today, it’s a mix of just following Google Alerts and getting tips from my readers.
AM: Despite the continued increase in demand for second citizenship, not all Citizenship by Investment Programmes stand the test of time. As we’ve seen, Moldova was short-lived, and 2020 saw the end of the Cyprus Programme and the Malta IIP. Do you think it is likely that new countries will launch Citizenship by Investment programmes in 2021, and, if so, which ones?
CHN: In the investment migration market, there are companies and they tell me a little bit about what they’re doing, who they’re talking to. They are often reluctant to go into specifics, but I hear this and that, and that someone from this company went to the Solomon Islands, someone from that company went to Saint Vincent and the Grenadines. Then I get a feel for what’s on the horizon. But of course, wanting to open a citizenship by investment programme is very different from executing a citizenship by investment programme. I think the lead time from original concept to actual launch is longer than a lot of people think it is. A lot of the programmes that do open up have been shortened in the pipeline for several years before they finally come to fruition.
But of course, it’s been difficult to travel in 2020, and building trust between the government advisory firm and the government takes some time, and it usually takes a number of face-to-face meetings.
I think there are a lot of governments out there that are strapped for cash who don’t really have the option of raising taxes or printing more of their own currency or borrowing money at reasonable rates. I think those countries are definitely interested, especially if their economies are small enough for a citizenship by investment programme to make a difference to their GDP. There are dozens of countries out there that are interested in it. I think most likely for 2021. I think we’ll see at least one, maybe two, of those processes reach the end stage where the country starts publicly announcing that they will be opening their citizenship by investment, whether it happens actually in 2021 or in 2022 I’m not sure.
I would say it’s most likely to happen in the Pacific. I think Vanuatu has demonstrated to a lot of the countries around it how important and how crucial it can be to have that source of income, especially in the pandemic year 2020 because you see now that even before in 2019, more than half of government revenue in Vanuatu came from citizenship by investment.
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In 2020, with their borders sealed, no tourists coming in, it’s definitely made the whole difference for Vanuatu. I think probably people in the governments of Solomon Islands, Kiribati, maybe the Marshall Islands, are looking at how important it’s been for Vanuatu. Some of them indicated openly that they’re interested in citizenship by investment.
I think the Pacific is probably the most likely location for opening a citizenship by investment programme this year. My money is on the Pacific although I don’t know for sure and then after that maybe in the Balkans, yeah, maybe in Albania and maybe most likely Albania. I know Serbia has been talking about it. I don’t consider that realistic. Serbia is too big of an economy, but I think Albania would be the most likely candidate in that region, but I think I see something in the Pacific before that.
AM: While we are used to discussions on the value of ordinary passports, and eligibility for diplomatic passports, 2020 has seen discussion on a new type of passport: the ‘health passport.’ Do you think health passports will be part of the future, and how is the preoccupation with likely to affect economic citizenship patterns?
CHN: I think it’s going to be a thing, health passports. I’m not happy about that. I just I don’t see how we’ll return to the normal travel freedom that we had before the pandemic without some sort of health certificate or vaccine certificate being involved in that process. I think a lot of the countries that today have Schengen access in their passports, will still nominally have Schengen access. Still, I think in practice, probably the European Union will make the working of that visa or that visa waiver contingent on having a vaccine.
For example, it might be something akin to the ETA you have in the United States where you need prior authorisation. For example, I have a Norwegian passport, and I can travel to the United States. However, I still need to 72 hours in advance fill out a form online and submit some documentation, like a DIY mini visa application.
I don’t know exactly how that would be implemented, but I just don’t see us returning to conditions of travelling to Europe just on visa-free passports alone.
AM: EU entities have been cracking down on European Citizenship by Investment and golden visa programmes. What impact will this have on the rest of the industry? How should other countries set themselves apart and are some already achieving this?
CHN: I think that one of the impacts it’ll have on the market is that citizenship by investment programmes, golden visa programmes, are probably going to stop referring to themselves as programmes because they know that it gets them on the European commission’s radar. In some ways, we’ve seen this in Malta, which discontinued their citizenship by investment programme, but they replaced it with what I call The Maltese exceptional investor naturalisation policy, which they’re studiously avoiding referring to as a programme, even though it clearly is.
It’s a formulaic standardised route to citizenship through investment in Malta. Still, they insist on not calling it a programme and I think that’s because whenever you talk of a programme, citizenship by investment programme, golden Visa programme, it sets off these alarm bells in Brussels. I think that will be that will be one change
We talked about Albania maybe introducing a citizenship by investment programme. I think that the signal that the European Commission is sending in their treatment in their infringement proceedings against Malta and Cyprus, that’s something that certainly the Prime Minister of Albania is paying attention to. I’m sure that it makes him think twice about introducing a citizenship by investment programmes.
I think the European Commission’s actions on Malta and Cyprus will, to some extent, act as a deterrent to other countries within the EU. I don’t think it will have any effect or not much impact in the Pacific or the Caribbean or elsewhere and I think over time also that the role of the European Commission will become less important. Especially now that the UK is out of the EU, let’s see what happens with the southern European countries. Let’s see if the EU is even here in 10 years.
It was definitely a scare to a lot of countries who were thinking of opening a citizenship by investment programme. Now as to Golden Visa programmes, I don’t think that it’s going to change a lot because certain leftist elements in the European Parliament are saying ‘hey, you’re starting infringement proceedings against Cyprus and Malta for having citizenship by investment programmes. But what about all these countries that have golden visa programmes, aren’t you going to initiate the infringement proceedings against them as well?’ And the answer is no, and the European Commission has confirmed that they don’t have any plans of that.
I understand why they would say that because, in Europe, there’s two or three citizenship by investment programmes, but there are 23-24 golden Visa programmes, and the majority of EU member states have golden Visa programmes. So, they would have to initiate infringement proceedings against the majority of their own member states, and I just don’t see that happening.
AM: In your opinion, what lessons can the industry learn from the cancellation of the Cyprus Programme?
CHN: I think the lesson is that just a small number of miss-steps from a minority of actors is enough to bring down ad otherwise legitimate and lucrative programme. I think it’s a disaster in some ways for Cyprus that they’ve lost that programme. I think they threw out the baby with the bathwater because the programme was doing a lot of good things. It’s true that it was overly focused on the real estate sector. It was kind of imbalanced in that way. It was here today and gone tomorrow. It can disappear overnight, a programme like that, don’t take it for granted.
It’s just a reminder to other programmes that the biggest threat to your existence comes from inside the house. To speak in the sense, if your own government, your own service providers, your own programme stakeholders, are not sticking to the straight and narrow road, then scandals happen, and scandals have a way of terminating these programmes. That’s what I would say is the lesson from Cyprus
AM: According to many industry specialists, Nigerian and American markets saw high demand for Citizenship By Investment in 2021. Which regions do you think will become the next markets interested in acquiring Citizenship by Investment and why?
CHN: Vietnam is probably the most interesting emerging market for investor migration because I think it has so many parallels to what happened to the Chinese market 15 years ago. Both are formerly communist, still nominally communist countries, but a great deal of market liberalisation in both countries led to wealth creation. In China, they had the reform and then opened-up back in 1979. Then in Vietnam, they had the joined reforms in 1986, and so the model of economic development of both those countries have been very similar. Of course, they are very different countries and Vietnam is not even a tenth of China’s size, but at the same time, there are lots and lots of parallels in how that investment migration market is developing and its still pretty early days.
In the Vietnamese market, the number of high net worth individuals is growing rapidly and shows no signs of stopping. Vietnam is one of the few countries around the world that’s been unaffected by COVID-19 and has been able to grow 3% of their economy even in 2020. Let’s not forget, Southeast Asia is home to 650 million people. I think that’s going to be an extremely interesting market because it’s growing fast and the people are interested in migration. In Vietnam, they’re quite cosmopolitan, more so than in China. I think that’s going to be a very interesting market.
The most remarkable trend in 2020, in my opinion, isn’t about the Vietnamese. It’s not about Nigerians. It’s about the Americans because that’s incredibly exciting that Americans are now waking up to the investor migration industry’s existence. Most Americans prior to 2020 had no idea what it was like not to have these access to the places they wanted to visit. 2020 is giving Americans a taste of what it’s like not to have visa-free travel. Of course, in the United States, there is social unrest. There’s been there’s an increasing polarisation of the political landscape.
There is now a new administration that’s just coming but probably going to take a very different line on taxes than the previous administration. We’re seeing Americans giving up their citizenship in record numbers, especially the high-net-worth ones. The reason I think that this is so exciting is that historically, the investment migration market catered to and targeted millionaires in the developing world. So, that’s people from not so wealthy countries or people with wealth from countries whose passports have low mobility scores.
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But, let’s not forget that three-quarters of all the high net worth individuals globally live in what we think of as the West. They live in principally, North America and Western Europe, and those are three-quarters of the potential market for citizens.
We’ve presumed that ‘well, Europeans have excellent mobility and settlement freedom, and so do Americans, so there’s no reason to target them.’ But now, that they are feeling the sting of immobility.
If these three-quarters of the market really do wake up, that could effectively overnight double or triple or quadruple the investor migration market size. Now that we’ve entered the appetite of Americans, I think the next up is Western Europeans. If we can really wake up both of those Western markets, it can transform the investment migration industry beyond recognition.
AM: Though China claims to be leading the world in pandemic recovery, Citizenship by Investment experts say its investment immigration market is still behind. Why do you think this is?
CHN: Well, a couple of different reasons for that. Number one is that the Chinese, since February, haven’t been able to renew their passports. Essentially, since the pandemic struck and they closed their borders, they also stopped renewing passports. That’s one thing. The other thing is that a trend began at the very end of 2018, where the Chinese government deregulated China’s investor migration industry.
To be in China’s investment migration business, you needed a particular license that limited the number of immigration service providers, and that’s why we also saw the rise of these behemoths, gigantic Chinese investments.
Some of them have upwards of a thousand employees and then thousands of cases a year. After the deregulation at the end of 2018, the market was opened up to every Tom, Dick and Harry who wanted to set up their own investment migration firm. They just needed a regular old business license rather than a special license for this.
In big companies, a lot of the key employees have left and set up their own shop. A lot of the firm’s that used to use the services of those huge companies, for example, wealth managers, family offices, law firms, they’re now saying, ‘well, now that the market is deregulated, we can do this ourselves. We can do this in-house. So we’re going to start doing this in house.’ And so, you had sort of a disintegration of the investment migration market in China.
There’s definitely still a lot of demand, but I think there is a mismatch between demand and supply because many big companies don’t work the same way they used to. There’s also a lot of distrust now in China toward a lot of these companies because they haven’t behaved in an exemplary model in the past.
I think there’s also an opportunity there for European and Middle Eastern and North American companies for the first time in a generation actually directly to target the Chinese B2C market. In the past, very few International firms would dare to go directly to China’s market to target the investors themselves. They always went for the B2B business through these big companies. They avoided targeting clients directly because that would jeopardise their very lucrative agreements because a single large company in China might send you a hundred clients a year. So everybody was avoiding going B to C.
But now, everything is kind of up in the air and China, and now there is an opportunity for Western firms actually to target Chinese clients directly. It’s the first time in a generation that that opportunity has been opened up and its something I would encourage Western firms to do now.