Methodology for Investment Migration Programs 2021 (Henley & Partners)

For those of you interested in indexes and citizenship and how the private companies make their assessment:

In constructing the Global Residence Program Index (GRPI) and Global Citizenship Program Index (GCPI) we have referred to multiple sources and experts to obtain and interpret the primarily qualitative data used. We have relied principally on the expertise of residence and citizenship analysts and the experience of investors and government officials. As a result, the explanatory power that supports the scores in the different categories is based on surveys, interviews with respondents, and opinions solicited from selected experts. Where possible, the subjectivity of the various factors has been assessed against publicly available data and widely accepted composite indicators.

The data for surveys and interviews has been consistently collected from a representative sample that includes respondents, experts on citizenship, and practitioners who have been involved in the design of qualitative research in global mobility and related spaces. The sample frame for respondents consists of existing and potential investors, their advisors, and government officials in countries that either already have, or are in the process of establishing, investment migration programs. Relying on potential clients means that the responses of those who decided against proceeding with any program are also included. It may also be noted that among our respondent and expert base are government officials and consultants engaged in investment migration programs that have been discontinued as well as those that are in the process of being established or reformed.

The factors that are analyzed in each of the indexes are as follows:

Global Residence Program Index

  • Reputation
  • Quality of Life
  • Visa-free or Visa-on-arrival Access
  • Processing Time and Quality of Processing
  • Compliance
  • Investment Requirements
  • Tax
  • Total Costs
  • Time to Citizenship
  • Citizenship Requirements

Global Citizenship Program Index

  • Reputation
  • Quality of Life
  • Visa-free or Visa-on-arrival Access
  • Processing Time and Quality of Processing
  • Compliance
  • Investment Requirements
  • Residence Requirements
  • Relocation Flexibility
  • Physical Visit Requirements
  • Transparency

Reputation 

Reputation relies on the perceptions of investors and advisors regarding the image of the countries in which they invest. This indicator is subjective by nature, but much like the Attractiveness Indicators employed by the IMD in its Executive Opinion Surveys, our intention was to allow our respondents and informants the space to consider intangible and unanticipated factors while assessing the reputation of destination countries.

Endeavoring to assess reputation is not new, and the relationship between reputation and outcome is a popular mechanism for assessing the competitiveness of organizations, cities, and even regions. Furthermore, the reputation of a country, much like the reputation of a corporate, is a historical indicator that allows its previous efforts to meet investor expectations to be assessed.

Quality of Life 

The assessment of Quality of Life (QoL) uses a wide range of methods to evaluate subjective perceptions of various sample groups in different contexts, as well as developing factors that are independent of subjective perceptions. Like Reputation, QoL could well benefit from considering investors’ experiences and what is particularly relevant to individuals who are interested in investment migration.

We are aware, moreover, that there are substantial institutional efforts in developing composite indicators for QoL — the United Nations Human Development Index is one of the most comprehensive (relying on life expectancy at birth, schooling, literacy rates, and gross national income per capita). These factors do not cover all civil and political liberties though; for assessing democratic values, Freedom House’s Freedom in the World report is a preferable indicator.

As our focus is also on investment, the World Bank’s Doing Business reports are pertinent, since investors may have to negotiate the regulatory environment of destination countries for a variety of economic activities. We have sought to anchor the framing of our questions in established indicators but recognize that such indicators do not always correspond to what is being assessed in the GRPI and GCPI.

Visa-free or Visa-on-arrival Access

The methodology for this factor is relatively straightforward. It aims to measure an improvement in the mobility of an investor, or their ability to enter additional countries visa-free or with visa-on-arrival access as a result of being a citizen of, or resident in, a particular jurisdiction.

For the GCPI this factor relies on the 2021 Henley Passport Index, which curates data from 227 different travel destinations (including countries, territories, and micro-states), collated by the International Air Transport Association, to arrive at the ranking. The Henley Passport Index compares data on the number of destinations that a citizen of a given country can visit without requiring a prior visa. A relaxed travel policy is worthwhile in itself, but it also characterizes a country’s political regime and the extent of its civil liberties.

While acquiring alternative citizenship is more directly linked to ease of travel, an alternative residence can also enhance the mobility of individuals. It thus also features as a factor that motivates residence investments and is included in the GRPI.

Processing Time and Quality of Processing

Processing time for applications and their quality of processing are two distinct aspects that are assessed differently. Some countries may offer a short processing time between lodging an application and issuing a visa or permit, but there may be uncertainties in administrative processes. In this regard, input from respondents has proved valuable: the responses and analysis thereof have verified the official or declared processing time and complemented the ‘hard’ data on actual processing time taken (namely, the number of days), including obstructions faced.

Compliance

Countries have different procedures and varying due diligence requirements for profiling applicants (including criminal records and financial statements), sources of funds, the manner of fund transfers, and the vulnerability to abuse of the funds invested. The standard measures adopted are best practices developed by international associations and professional agencies for anti-money laundering, counter-terrorist financing, and anti-bribery and corruption. The EU, unlike the USA, does not have a joint or federal procedure for conducting due diligence, so EU countries differ widely in terms of their national rules. Clear information and frameworks regarding due diligence facilitate better risk assessments for potential investors. A more intensive due diligence requirement may be an advantage as this translates into less uncertainty in private investments. Since financial institutions usually engage in Know Your Customer audits regardless of the regulations of investment migration programs, they are less vulnerable than private investments. Vulnerability to money laundering in different sectors could, furthermore, be avoided in the presence of clear regulations.

Investment Requirements

The upfront investment amounts for residence differ in terms of amount required, nature of investment, and additional costs. For this indicator, we consider the required investment amounts. The range in the stated amounts is broad and the nature of the investment is not always left to the discretion of the investor. Options for different forms of investment are specified by the destination governments, largely depending on policy considerations and benefits to the respective countries. Generally, a country offering more choice in how to invest and requiring lower investment amounts (including additional costs) scores higher.

Because of the unique nature of citizenship-by-investment (CBI) programs, investment amounts are substantial, and the accompanying conditions do not allow much choice in the nature of the investment. There is a noticeable pattern to the investments required for CBI programs: the investment amounts are generally greater than those required by residence-by-investment (RBI) programs, there is usually a requirement or at least an option to purchase real estate, and there is usually a requirement or an option to make a non-refundable contribution.

Tax

This factor raises the question of the extent of the tax burden that a resident is required to bear for both corporate and personal economic activities. It is rare for a country not to impose any taxes on its residents. The only two countries in our indexes that have that distinction are Monaco and the UAE, since they do not impose personal income tax, property tax, capital gains tax, or net worth taxes. For all other countries, preferential tax schemes and tax waivers, and incentives for applicants with significant investments heavily influence the score arrived at for this factor.

Total Costs

The stated investment amount does not always constitute the total actual cost an investor must bear to acquire residence status. As the nature of investment differs considerably across programs, it is difficult to compare the total actual cost of investment. Programs that offer a range of investment options score higher in this sub-indicator. Some investors have, however, raised questions about the uncertainties and volatility of foreign markets and therefore the value of choosing options that appear to be safer. Generally, destination countries that reduce investors’ opportunity costs by providing a wider choice of investments or by offering incentive-based investments are considered by investors to be more attractive.

Time to Citizenship

The time it takes applicants to gain citizenship is one of the criteria for assessing a RBI program’s attractiveness.

This refers to the process of naturalizing as a citizen once already a resident, which is distinct from direct CBI. Countries that have appeal in this regard offer a relatively fast path to citizenship, mainly because the time it takes to naturalize is comparatively short. However, this factor considers both the formal time required and any physical presence requirements. Countries with prohibitive rules governing the transition to citizenship score zero.

Citizenship Requirements

This factor examines all the requirements to qualify for naturalization after the specified minimum time has been fulfilled, including physical presence requirements, additional investment requirements or other ‘commitment’ requirements, and other requirements to qualify for citizenship, such as language requirements and cultural integration tests. In some countries, the transition from permanent residence to citizenship is less demanding and there are minimal additional requirements. Other countries have stringent physical presence but few additional requirements.

Residence Requirements

None of the countries ranked in the GCPI impose demanding conditions of residence. Smaller countries keen on attracting investment use waivers or substantial reductions in residence requirements to their competitive advantage.

Relocation Flexibility

An assessment of the number of citizenship investors in the different countries reveals that a substantial percentage of them apply for the migration of family members with the intention of either settling in the destination country or keeping the option open in case they need to leave their home countries. For this factor, we evaluated first the number of investors who indicated their intention to relocate and compared it to the number of investors who have relocated, in order to gauge which countries are conducive to relocation. Subsequently, we assessed the factors facilitating relocation. In this regard, EU member states have a clear advantage because a citizen of an EU member state can consider relocating to another member state or to a choice of several additional countries that have agreements with the EU, such as Switzerland. Though such relocation is not automatic, the rules are well established, they provide clarity on how and when relocation to another EU member state is permissible, and the process entails lower information costs. Destination countries’ efforts towards enabling family unification, and the ease with which they deal with private property, reduce the uncertainties that relocation can entail. Furthermore, for citizens who can support themselves financially, EU law imposes very few restrictions on their freedom to relocate.

The rule of law plays an important part in informing investors’ choices in relocation: their confidence in an existent fair process for securing personal freedom, settling investment disputes, and the legal wherewithal to negotiate with government authorities, all point towards a higher score.

Physical Visit Requirements

This indicator assesses whether physical visits are required as part of the application process, usually for interviews, oath-taking ceremonies, and passport renewals, by evaluating the number of visits required and the bureaucracy of the processes that precede them.

Transparency

The World Economic Forum’s transparency indicators for CBI programs are: public support, evaluation studies, availability of public data, and due diligence criteria. No GCPI countries publish evaluations of CBI inflows, but the other criteria inform the structure and content of the surveys, which inquired about access to clear information on application processes, including due diligence, and how funds are used. Although many investors wish to understand, and preferably choose, where their investments are used, investments are often deployed in predetermined ways, making it difficult to influence their use. The visibility of such contributions in domestic projects and the earmarking of funds influence investors’ decisions and perceptions of program transparency.

Circulating such information is advantageous as it enables investors to conduct meaningful risk assessments. Furthermore, the impact of investments on potential and existing businesses could influence business decisions. The pivotal aspects for transparency are program rules and regulations, and processes and their implementation in program administration.

Source: https://www.henleyglobal.com/publications/investment-migration-programs-2021/methodology

About Andrew
Andrew blogs and tweets public policy issues, particularly the relationship between the political and bureaucratic levels, citizenship and multiculturalism. His latest book, Policy Arrogance or Innocent Bias, recounts his experience as a senior public servant in this area.

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