The concept of citizenship by investment (CBI)—allowing wealthy individuals a fast track to a second citizenship and passport in return for investment—is becoming increasingly attractive as a gateway to acquire citizenship and passport in one’s country of choice. For GCC, CBI programmes are a welcome source of extra revenues and a pole of attraction of high net worth individuals and entrepreneurs who may in turn contribute to the development of the country and bolstering of economic competitiveness. The primary benefit for states that administer citizenship by investment programmes is a significant financial investment in their domestic economies. The cost and design of each programme vary, but most involve an upfront investment into the country. These inflows of funds are considerable and the macroeconomic implications for most sectors can be extensive.
In the Middle East and GCC in particular the phenomenon of citizenship by investment has come to be known as investor residency programme or acquiring of second passport. In 1984, St Kitts and Nevis became the first-ever state to allow persons to be registered as citizens after making a substantial investment, in the 1980s Austria legalised granting nationality by reason of a person’s actual or expected outstanding achievements. Emmanuel Nanthan, the Head of Citizenship By Investment Unit, Commonwealth of Dominica, said, “The Middle East’s first fully-fledged CIB programme was established in 2017 by Turkey and tailed shortly after by Jordan.” The trend for economic citizenship, as confirmed in the 2018 CBI Index, is gaining traction, particularly in the Middle East, added Nanthan. Bearing in mind the industry’s expanding reach, financial institutions, and other supporting entities around the world must see economic citizenship as an opportunity to open new investment opportunities for those who can generate economic growth on a global scale— namely high net-worth and ultra-high networth businesspersons.
The GCC community saw the inception of the first fully-fledged programme in 2018 when the UAE introduced an array of CBI aligned reforms. In January May 2018, the UAE announced 100 per cent foreign ownership and 10-year visa for investors. This was followed by the UAE Cabinet’s approval of a plan to allow non-Emiratis to remain in the UAE from 2019 in a meeting chaired by Sheikh Mohammed bin Rashid the ruler of Dubai, Vice President and Prime Minister of UAE in Q3 2018. The move will allow foreigners to obtain long-term residency visas after they retire, in a major policy shift which will make UAE’s economy more competitive compared to its GCC neighbours. Additionally, the Sultanate of Oman flexed its business and investment requirements, a move which will allow foreigners to start a business without an Omani partner and no minimum capital requirement will be necessary for the exchange of a longer residence visa. Just, like UAE, Bahrain was also quick to announce that it will follow the Emirates way in 2019 to create a competitive investment environment.
However other GCC countries, that is Saudi and Kuwait among others have not yet clarified their position concerning the programme, but in the case of Saudi, given the Kingdom’s economic transformation programme under Vision 2030 anything is possible. According to Savory & Partners, one of the CIB consultancy agency in GCC, the majority of the applicants for CBI are from Syrians, Yemenis, Egyptians as well as Pakistanis and Sudanese. Elsewhere in the Middle East, Jordan announced conditions to grant investors nationality or permanent residency in February earlier this year and interested investors who meet two of the stipulated standings will become eligible to get permanent residency for their families as well. Jordan requires an investor to do any of the following, buy securities worth $1.5 million from an active investment portfolio, invest $1 million in SMEs for five years or invest $2 million in any location in the country.
Moreover, Turkey’s CBI programme went into effect in January 2017, offering foreign nationals Turkish citizenship in exchange for purchasing property worth $1 million but it failed to come close to the ambitious target of $10 billion. As of May 2018, the Government was planning to overhaul the citizenship incentive to properties worth $300,000 as part of a larger legislative package with hopes of a better return going forward. The implementation of CIB in the Middle East region is expected to increase foreign direct investment (FDI) and aid non-hydro economic grow, with the UAE and Bahrain expecting profound effects in the fintech industry generating much needed funds to diversify the economy from reliance on oil, added Nanthan. The foreign direct investment (FDI) attained from inviting global citizens to apply for the UAE’s 100 per cent ownership and 10-year visa has allowed investment in the banking and finance industry through the establishment of fintech start-ups. Since the passing of the law in Q2 2018, Dubai has seen an increase in Islamic fintech start-ups and blockchain technology.
These are but a few examples of how the funds are being injected directly into diversifying economies in GCC as well as bolstering economies for oil aftermath. GCC governments are also working to improve real estate industry which has resulted in a surge in tourism in the past years as well as advancement in fintech in a bid to provide innovative, seamless and competitive experience in both Islamic and conventional banking. The foreign direct investment brings capital both into a country’s public sector—in the form of donations to the government, tax payments or treasury bond investments - and the private sector, in the form of investments in businesses, start-ups or real estate. According to Nanthan, In the GCC, countries are able to use citizenship-by investment funds to finance infrastructure development, improve people’s standard of living as well as improve fiscal performance and minimise dependence on oil.