Residence and citizenship planning is gaining momentum worldwide, particularly in Southeast Asia, including the Philippines, as high net-worth individuals or wealthy families are becoming more aware of options abroad that provide better opportunities and security, especially in times of uncertainty in their native lands.
The increasing number of international entrepreneurs and investors getting interested in programs that offer residence or citizenship in other countries could be attributed to their desire for travel ability, mobility, independence, quality of life for family, children’s education and investments, Volek said.
The privilege to secure the option to permanently reside or retire in a safe and neutral country is a plus factor for them, he added.
“If you look at a global scale, there’s a lot of geopolitical issues happening, whether it’s the Trump administration’s travel ban for some nationalities, or the Brexit and what’s happening in the European Union. Of course, throughout Southeast Asia, this tension with North Korea and the South China Sea. All of these create some certainties,” Volek cited.
“So what wealthy people want in times of uncertainty are options. And having a second or alternative passports and citizenship, and second or alternative residence that they can become truly global citizens, these are what they want,” he said.
Global, local interests rise
Internationally, China remains the biggest market for H&P in terms of investment migration, followed by Russia and the Middle East, the top executive revealed.
“But in terms of growth, Southeast Asia is certainly where a lot of growth is happening,” he noted. “There’s a lot of interest here [in the Philippines], and it’s our biggest market in the region.”
What’s making the overseas residence and citizenship programs popular here is the dual citizenship that allows natives or naturalized to have two nationalities, with one being a Filipino.
The increasing number of ultrahigh net-worth individuals and wealthy people in the Philippines, likewise, contribute to the growth of the industry and their business. This is because they always look to diversify their portfolio.
“They either look at investing in stocks, bonds and real estate. But ideally they also want to do that offshore and onshore. So most of our clients are very cash rich and have lots of cash deposit in the Philippines that it’s a natural progression for them to diversify offshore, as well. Any person that has the financial means to do it certainly wouldn’t have all the eggs in one basket,” he explained.
Citing The H&P Visa Restrictions Index 2017, wherein the Philippines is ranked No. 75, with visa-free access to 61 countries worldwide, Volek said that it’s kind of limiting the citizens to travel overseas.
“Unfortunately, the passport is not good from a travel perspective. So now that they know these options exist, it’s very possible for these entrepreneurs to become global citizens. From a business or leisure perspective, it enables them to really travel and do what they want and love a lot,” he said.
Going for EU passports
More and more elite Filipinos are seeking either residence or citizenship abroad, mostly in Europe, primarily due to travel and settlement freedoms they get to enjoy in this side of the Earth.
Location-wise, Cyprus and Malta are on the top shelf of citizenship by investment program that Philippine passport holdersalso seek to have.
Being full member-states of the EU, their citizens automatically have the right to settle, live, work, study and retire in all the 28 countries that make up the economic bloc.
“So effectively our clients can obtain either a Cypriot or Maltese citizenship to go and live anywhere in Europe. And that’s the real benefit. Nowhere is giving much travel and settlement freedoms like these two countries,” Volek said.
Since wealthy people are all concerned about wealth and succession planning, as well as seeking better opportunities that they can give to second generations, these nations are becoming the preferred destination among H&P’s local clients.
“By becoming an EU citizen, they can apply along with their family, dependent children and parents. This creates a multitude of opportunities, whether education, work and, of course, healthcare benefits that come along with being an EU citizen,” he said.
Comparing both countries, Cyprus is what most rich locals choose over Malta for property-acquisition purposes. “It’s more on real-estate investment,” he said of the former’s citizenship program. “This is what attracts a lot of our Filipino clients.”
Cyprus has a modern, free-market, service-based economy, with an effective and transparent regulatory and legal framework, giving international investors and businesses confidence to invest, grow and prosper.
This island-nation was ranked No. 16 on the latest visa restrictions list of H&P, with access to 158 countries globally. Also, it’s positioned as the 65th out of 144 countries by the World Economic Forum Global Competitiveness Report 2015-2016.
The Council of Ministers reduced the investment criteria to €2 million for the Cyprus Citizenship-by-Investment Program. Here, the applicant must make an investment of at least €2 million for the purchase or construction of real estate.
“Since most of our Filipino clients are quite real-estate savvy, owners of a lot of properties and are involved in real-estate development, they prefer to get involved in projects where they buy in real estate in Cyprus as opposed to a program like that of Malta,” Volek noted.
Meanwhile, the Malta Citizenship-by-Investment Program requires a single applicant for a minimum investment or contribution of €650,000 for government fund and €150,000 government bond, which can be availed for five years. These amounts increase incrementally if dependent children, adult dependents, parents or espouses are included in the application.
“So that’s an investment. But again it’s a government bond, so you’re not going to get a big return on it. It’s more of donation rather than investment-oriented program like in Cyprus,” he said, while adding the third requirement is having a property in the Maltese archipelago. “But still you can invest here, either into real estate for €350,00 in minimum, or lease an apartment for just €16,000 per annum, which 80 percent of our clients usually do.”
Being the most exclusive in the world, Malta—which is ranked 10th in the H&P Visa Restrictions Index 2017, with visa-free access to 167 countries—accepts only 1,800 applications for this program, of which 1,450 have been already received.
“So this is a program that’s not gonna be available forever because there is a quota. We’ve done probably 70 percent to 80 percent of those applications, and the majority of them are just leasing an apartment,” Volek divulged. “The program has been incredibly successful. So there’s a good likelihood that they’ll have another quarter [to offer]. Also, they’ll likely increase the investment amount set or required.”
Setting sights on the Caribbean
Known for luxurious travel and leisure spots, the Caribbean is also luring more Filipino elites, especially to get a much better travel document or passport. This region issued a total of 2,500 passports last year.
The most ideal for them would be Antigua and Barbuda and Saint Kitts and Nevis, where they could get the privilege to travel to 136 countries sans visa. Both countries claimed the No. 30 spot in the visa restrictions index of H&P this year.
“So more than double what you currently get with a Philippine passport, and that includes the entire European region, the United Kingdom and various other countries,” Volek said.
Saint Kitts and Nevis has the oldest citizenship by investment program in the world for over 35 years now. Together with Grenada, the applicants here need not have to set foot on the island, and obtaining a second passport is very fast from three to four months.
Once an individual becomes a citizen of Antigua and Barbuda, on the other hand, he or she needs to visit for five days in the first five years. But it’s the only one in the Caribbean that has visa-free access to Canada.
“Because of that, we see a lot of interests in Antigua from Filipinos. That’s quite a popular destination for citizenship by investment program here in the Philippines,” he pointed out.
Meanwhile, the managing partner and head for Southeast Asia of H&P noted that Grenada is another Caribbean option that is quite interesting because it has one of very few passports in the world that has visa-free access to China. He said, “A lot of entrepreneurs in the region ergo are attracted to Grenada from a business perspective.”
Just like in Malta, the above-cited Caribbean nations are mostly on donation basis. Saint Lucia, for instance, requires an applicant to donate $100,000 and within three months can have a passport.
With the financial capacities of their clients, Volek said their clients are indeed rich, thus, indicating the residence and citizenship planning industry a lucrative business.
“If you are either donating or investing $300,000 to $500,000 to just get a bit of travel document, the clients that are doing it from a net-worth basis are probably worth anywhere from $8 million to $20 million,” he estimated.
“The guys that are doing Europe—Malta or Cyprus—if you’re gonna be investing $1 million to $2 million just to get a passport, that would sort of be more ultrahigh net worth, like $30 million plus.”
“So if it’s purely a travel document issue, then the Caribbean is obviously what we advise the wealthy Filipino clients to choose because it’s relatively much cheaper than Europe. But if it’s a case of giving the family and kids as much opportunities in terms of work, experience and education, certainly Europe is a better option,” Volek stressed.
Founded in 1997, H&P has been the global leader in residence and citizenship planning for 20 years. The firm runs a leading government advisory practice, which has raised more than $5 billion in foreign direct investment.
Its global presence extends to more than 20 offices globally, including Australia, Antigua and Barbuda, Austria, Belgium, Canada, Croatia, Cyprus, Czech Republic, Dominica, Dubai, Hongkong, Jersey, Liechtenstein, Luxembourg, Malta, the Netherlands, the Philippines, Portugal, Russia, Saint Kitts and Nevis, Singapore, South Africa, South Korea, Switzerland, the United Kingdom and Vietnam.