The 2022 CBI Index: A tool to finance stronger, more resilient economies

Globally, the investment migration industry is valued at US$21.4bn and offers tangible benefits to countries that offer investment migration programmes, such as the ability to diversify and uplift smaller economies that would otherwise rely heavily on international aid. The increased revenues from these programmes facilitate the enrichment of the lives of the local population through job creation, infrastructure improvements and development of social programmes. 

Investment migration is a form of legal migration used by more than 80 countries around the world, including multiple EU countries, the US, Australia, New Zealand and several Caribbean nations.

The investment frameworks differ based on a particular country’s needs, and can take the form of real estate purchases, donations to national development funds or business investments. 

Today, Europe hosts the largest number of such frameworks in the world — 19 of the 27 EU member states use investment migration frameworks offering residency status for external nationals in return for an investment, while only two — Malta and Austria — offer citizenship. Portugal, Greece, Malta, Spain, Italy and Austria are among the key beneficiaries of investment migration flows — garnering €750m of the €3bn attracted by the investment programmes, according to research by the LSE Business Review.

In some countries, the programmes represent a sizeable proportion of foreign direct investment (FDI). In Latvia and Portugal, the ‘golden visa’ schemes have generated well over 10 per cent of FDI over time, and in Greece it tops 7 per cent. But it must be noted that in these countries, FDI is only a small proportion of the overall economy and in none of the countries do programme revenues bring in more than 0.3 per cent of gross domestic product (GDP).

The same research found that countries start these programmes following economic declines and are more likely to do so after economic crises. They also tend to select investment options tooled to meet economic needs — this is especially true for Caribbean countries using their citizenship by investment (CBI) programmes to diversify their economies and are crucial for funding projects that make sustainable development possible. With climate change accelerating natural disasters, small island countries in particular use CBI revenue to create sustainable and climate-resilient housing and infrastructure to build back stronger.

In small states, the inflows to the private sector can have a sizeable impact on economic activity. In St Kitts and Nevis and Dominica for example, the inflows have improved fiscal outcomes, facilitated debt repayment and spurred economic growth. Research by the IMF corroborated this.

In the Caribbean region, where five small states of Antigua and Barbuda, Grenada, Dominica, Saint Lucia and St Kitts and Nevis offer economic citizenship, the industry jumped from 0 per cent of regional GDP in 2007 to a substantial 5.1 per cent in 2015.

The five Caribbean nations all have a donation option, through which an investor pays a specific non-refundable amount of money to a government fund in exchange for citizenship for themselves and their families.

This direct influx of unincumbered foreign capital can play a massive part in supporting an economy that is still growing. For smaller countries that face major natural catastrophes, such as annual hurricanes, this influx of investment can make a major difference in the performance of their governments.

CBI is enabling many of these island nations to fulfil their true ambitions to become independent, developed, prosperous countries.

Many of the listed countries in the Caribbean are also recognised as Small Island Developing States (SIDS) — a distinct group of states that face unique social, economic and environmental vulnerabilities.

Climate change has a very tangible impact on SIDS. Hurricanes Harvey, Irma, Maria, and Nate turned the 2017 tropical cyclone season into one of the deadliest and most devastating of all time, destroying communications, energy and transport infrastructure, homes, health facilities and schools. These challenges are compounded by limited institutional capacity, scarce financial resources and a high degree of vulnerability to systemic shocks.

If it were not for CBI programmes, many of these nations would be unable to source the revenues to recover from the destruction of their communities and build back better and stronger.

Funds have been channelled into long-term sustainable projects such as constructing climate-resilient infrastructure that can withstand natural disasters, building hospitals and education facilities while creating lasting jobs in construction and hospitality.

CBI is indeed a legitimate response by governments to the need to raise revenue through FDI. These programmes constitute a creative and valid strategy to change the economic landscape. 

While many people express qualms about investment migration, its full economic impact is far-reaching.