Henley & Partners' Dominic Volek talks about how Singapore scales up as a major player in wealth migration
Volek also points out where the trend in investment programs is going and where is the place to be.
There is no doubt that Singapore has been attracting companies and firms from across the globe, given its relatively free economy. In 2016, the World Bank ranked Singapore second in the ease of doing business, further cementing its position as a global hub for firms.
This has led to the steep rise in the interest and uptake of investor migration programs in Singapore not just for its citizens but also for the wealthy expat community that are residents in Singapore.
In this exclusive interview with Singapore Business Review, Henley & Partners head of Southeast Asia Dominic Volek discussed how wealth and investment migration is fast changing not just in Singapore but in other countries.
SBR: How has the trend of wealth and investment migration changed, especially in Singapore?
In an unsettled, ever-changing world, acquiring an alternative residence or citizenship is increasingly being seen as the most worthwhile investment you can make as it reduces your exposure to risk, secures your families future and opens up new opportunities for you and your business.
Increasingly popular worldwide, citizenship-by-investment programs provide a mutually beneficial solution for a growing movement of global citizens as well as governments seeking to drive economic growth. By offering greater choice, opportunity, freedom and security to talented and wealthy individuals from other countries, governments in turn secure much-needed foreign investment and enrich their own citizens by attracting people with proven business success and valuable networks.
In Singapore, the interest and uptake of investor migration programs is on a steep rise – not for Singaporean citizens themselves as dual citizenship is not permitted and strongly enforced – but for the wealthy expat community that are resident in Singapore including Russian, Indian and Chinese nationals amongst others who are driven by the desire for better travel freedom which an alternative citizenship can provide. We are also seeing unprecedented levels of interest from Korean, Japanese and US nationals who, although they have very good passports from a travel-ability perspective, are seeking alternative citizenship and residence in more tax efficient jurisdictions.
SBR: Aside from its strategic location and business-friendly regulations, what do you think are the reasons why firms decide to set up shop in Singapore?
Of course, from a geographical perspective, Singapore is ideally situated with excellent and easy access to some 650 million people all within a two to three-hour flight.
With efficient regulatory processes, political stability, strong credit rating and very well-educated and English speaking residents – Singapore represent an attractive proposition for ‘setting up shop’. General living conditions are also extremely favourable with a good climate, strong economy, safety, efficiency and reliable public transport.
As an International Finance Centre (IFC), Singapore will undoubtedly continue to play an important role in global finance markets and therefore continue to attract businesses. Although, in order to remain relevant and given the changes in global compliance requirements such as the Common Reporting Standard, the future of Singapore as an IFC will very much depend on its ability to refine its value proposition amid the changing regulatory environment – something that Singapore has historically managed to do quite well.
SBR: On a global scale, where do you think do most people prefer to put up their investments?
The Malta Individual Investor Programme is the most popular European investment migration program, and offers citizenship in an EU member state that is stable, neutral and highly respected. The application process includes the world’s strictest due diligence standards and vetting of applicants. It is also the most successful program globally, securing more than EUR 1 billion in new capital for Malta within the first 18 months of operation. Maltese citizenship provides an individual with the right to live, work and study in any of the 28 EU countries and Switzerland; visa-free travel to 167 countries, including Canada, the US and Australia; and it is an attractive place to live or own a second home, being strategically located with excellent air links.
From a business and investment perspective, Malta stands to significantly benefit from the repercussions of Brexit as more and more companies are expected to move to Malta’s shores given its easy access to the EU, efficient regulatory process, political stability and high financial/credit rating. Maltese residents also speak English and are very well-educated.
Malta also has a number of advantages that are supporting its emergence as one of the world’s most important financial jurisdictions with membership of both the EU and the Commonwealth and a solid tax framework with 65 tax treaties internationally.
In the Caribbean, the Grenada Citizenship-by-Investment Program is one of the most popular options. The Caribbean state is ranked 37th on the Henley & Partners Visa Restrictions Index 2017, offering visa-free travel to 124 countries, including Europe’s Schengen area, the UK, Singapore, Brazil, China and Hong Kong.
Grenada is also the only Caribbean country with a citizenship-by-investment program that provides visa-free access to China and the opportunity to apply to live and work in the US through the E-2 Investor Visa. In the Global Residence and Citizenship Programs 2016 report, Grenada ranks highly under the Physical Visit and Residence Requirements, as it does not require applicants to visit the island nation and there are no residence requirements.
SBR: How does global security affect wealth migration? What are other threats that may hamper the growth of this trend?
Global events such as Brexit, the US Administration under President Donald Trump, and recent terror attacks have indeed brought the topic of global security to center stage.
Henley & Partners has noted an increase in the number of wealthy families and investors wanting to reduce their exposure to risk by gaining residency in another country that provides greater educational opportunities, financial freedom and security. In the context of greater global uncertainty and change, these individuals have realised the importance of diversifying not only their traditional investment portfolio, but also their citizenship portfolio.
SBR: What opportunities will help shape wealth migration?
Worldwide, governments are finding themselves not only competing for international talent, but also for investors, entrepreneurs and high net worth individuals and families, and having to now find new ways of generating growth based on this growing trend of wealth migration.
In terms of investment migration opportunities, I can single out three further programs that are stimulating the movement of wealth worldwide.
The Cyprus Citizenship-by-Investment Program has reduced the minimum requirement to EUR 2 million for all four investment options. Updates to the requirements were made in an effort to further promote foreign direct investment in Cyprus and align the program with the most recent industry requirements and standards. The investment options were also restructured and include the choice to invest in real estate or land development; purchase, create or participate in Cypriot businesses; invest in alternative investment funds; or a combination of the first three options.
The Malta Residence and Visa Program was launched in 2015 and applications opened in February 2016. The program is geared specifically towards qualified, reputable third country nationals who can make a significant contribution to the economic development of Malta. This allows the individuals the right to reside, settle and stay indefinitely in Malta, with free movement of travel within the Schengen area.
And finally, Grenada’s Citizenship-by-Investment Program has been revitalized, and now offers visa-free travel to all the major consumer markets, double taxation treaties with CARICOM and the UK, as well as an E-2 Investor Visa Treaty with the US, allowing successful applicants the right to enter, live, work and stay in the US by making an investment in a US business.
SBR: Can you elaborate on citizenship-by-investment and residence-by-investment programs?
The purpose of residence- and citizenship-by-investment programs is to enable individuals to acquire residence or citizenship by making an exceptional economic contribution to another country. The programs are structured to ensure that the investment contributes to the welfare, advancement and economic development of the country in which they wish to reside or belong too. It is often more about making an economic contribution than just an investment.
In contrast to other foreign direct investments, where the investment decisions are based purely on competitive rates of return and provide for a certain level of economic efficiency, investors in residence- and citizenship-by-investment programs are generally willing to invest at less favorable rates or may acquire assets for more than their intrinsic value as the result of the inclusion of the passport asset in their investment decision.
In recent years an increasing number of high net worth individuals have specifically acquired a second or third passport to diversify their personal exposure and options. They realise that not only their investment portfolio but also their citizenship portfolio, needs to be diversified to reduce risk and increase international flexibility. Having a second or third passport is still regarded as the ultimate insurance policy.
SBR: What can you say about the future of global mobility? What trends can you see playing out in the years to come?
Compared to a decade ago, there are now more residence- and citizenship-by-investment programs available for those who wish to increase their travel freedom as well as business and personal opportunities. More and more governments are embracing these programs as a means of stimulating economic development and growth, and there is an increasing number of wealthy and talented individuals looking to diversify their citizenship portfolios to give themselves and their families greater international opportunity, stability, freedom and security.
Today, it’s progressively more common to be educated abroad and to have roots, footings, connections, residences and even citizenship in more than one country. In fact, it’s becoming the norm. It was recently reported that most people today move an average of 12 times during their lifetime, and this average is expected to increase in the coming decade. The desire for global mobility, additional security, and a better quality of life is increasingly driving the demand for these investment migration programs. Investors see these programs as an ‘insurance policy’ to reduce their exposure to risk, and ensure enhanced stability and security for their families. Henley & Partners believes this sector will continue to grow over the next decade.
SBR: Anything else you would like to add and highlight?
For wealthy individuals who hold passports of countries with fewer visa waiver agreements, a second passport can open up travel to countries previously restricted by time-consuming visa application requirements and processes. This second passport gives a business person access to the global market, which in turn creates opportunities for growth. Investors and their families can use this second passport to relocate to regions that can simultaneously provide them with better security, quality of life, education, and help them expand their businesses.
In an unsettled, ever-changing world, acquiring a second citizenship is a wise decision and an investment for the future. When you acquire citizenship, your spouse and children, and sometimes your parents, can be included. Citizenship is for life and can be passed on to future generations, and depending on the country or countries of which you become a citizen, there is often no need to give up your current citizenship and you can, therefore, enjoy the benefits of both or all citizenships as states increasingly allow multiple nationalities.