For obvious reasons, people feel uneasy when the right to be a citizen is sold off to wealthy foreigners. Even selling the right to residency seems a bit dubious, when so many migrants who are not millionaires get turned away or are made to jump through innumerable hoops – simply because they can’t afford the price tag now being put on the right to residency.
Despite such qualms, research by Dr. Kristin Surak of the London School of Economics (LSE) indicates that 12 countries currently operate “golden passport” schemes through which applicants can buy citizenship directly. About 60 countries operate “golden visa” schemes that offer applicants a lesser reward – residency – provided they make multi-million dollar investments in local real estate or business or government stocks and bonds.
The “golden visa” residency option has been financially rewarding to the countries and regions willing to accept the heightened risks of corruption and criminality known to be associated with such schemes:
In the European Union alone, more than 130,000 people have gained citizenship or residence in this way, through programmes that are found in half of all EU member states. In total, they have brought in over 21.4 billion Euros to the EU..
Who are the usual applicants?
The number one market for those using these schemes has traditionally been China, followed by the Middle East, and Russia. “It’s usually people who are trying to maximise their options in places where there has been great wealth accumulation over the past 30 years combined with authoritarian rule and geopolitical unrest or war,” explains Dr Surak.
Golden visas commonly provide a Plan B escape route for wealthy individuals if and when things turn sour at home. In recognition of that fact, the countries operating golden visa schemes require their rich applicants to reside in their new country for only a handful of days each year. The golden visa schemes are packaged and sold as bolt-holes for people – and their riches – should the wisdom of heading for the airport at short notice ever become apparent.
The experience that some countries have had with golden visa/golden passport schemes – and with the wealthy individuals, kleptocrats and money launderers prone to using them – has been mixed. As Bloomberg News recently noted:
…Law enforcement agencies are concerned that the programmes facilitate criminal activity and are riddled with corruption. Critics say they entrench inequality by giving opportunities to the rich that are denied to others, and say citizenship and residency are fundamental rights that should not to be sold to the highest bidder.
Mindful of this potential abuse of access by criminals and corrupt individuals, the UK, Ireland, the Netherlands, Greece and Malta have reportedly either ended or tightened the rules around their golden visa (or equivalent) policies. Spain has just terminated its golden visa scheme altogether for a different reason: because of the impact of golden visa entrants on house prices, and on housing affordability.
Transparency International, the anti-corruption watch-dog was deeply involved in 2022 with successful efforts to reform the EU golden visa schemes, and limit their inherent potential for corruption. Co-incidentally, in the same week that New Zealand announced a lowering and loosening of the compliance rules for our own golden visa scheme, Transparency International reported that New Zealand had slipped further down its list of the least corrupt countries in the world.
The New Zealand version
It is not known if any impact report was carried out beforehand on the potential impact of loosening the compliance criteria for the golden visa scheme on New Zealand’s international obligations to reduce transnational crime and money laundering. Over the past decade or so, some of the wealthy individuals allowed to buy their way into New Zealand e.g. Peter Thiel, the Russian oligarch Alexander Abramov, Kim Dotcom, the disgraced US TV star Matt Lauer have proven to be of dubious value to this country.
Regardless, the coalition government’s recent extension of the golden visa scheme has been touted by Immigration Minister Erica Stanford as likely to “turbo charge our economic growth.” The waiving of the prior English language requirement seems to be clearly aimed at attracting Chinese applicants.
Expecting business start-ups, jobs and growth to eventuate is wishful thinking for several reasons. One, there is a lot of competition out there among the 60 countries offering similar programmes. Unlike the bulk of those competing countries, New Zealand does not allow golden visa residents to buy existing real estate. True, Portugal doesn’t either – but its other attractions and proximity to Europe offer compensations that New Zealand cannot match.
Like New Zealand, Portugal is choosing not to repeat Spain’s experience – where locals have been rendered unable to compete with the rise in prices caused by golden visa bidders at the top end of the housing market, which has trickle down effects on the affordability of houses further down the chain. That’s why for the foreseeable, any golden visa entrants here will have to rent.
Winston Peters has long been the prime obstacle to lifting that ban on buying local real estate – although recently, he has been expressing a willingness to reconsider that position, but only if huge $50 million plus investments in productive enterprises are put on the table.
The second reason why our golden visa residents are unlikely to add much to economic growth (let alone to “turbo charge” it) is that the bulk of any monies migrating here are likely to comprise passive investments in government bonds – and not in the productive sector. This would boost government finances and ease government debt, an area where New Zealand doesn’t need the help. Any subsequent benefit to business of this financial influx would be at the discretion of a government that seems ideologically averse to the very idea of the state investing for growth.
In a column a few weeks ago, I mentioned that ideological aversion as being a marked contrast between the current centre-right government, and the previous National-led government of John Key which invested heavily in economic development via – for example – the roll-out of ultra-fast broadband. As that previous column said, it is impossible to think of this government doing anything similar. Its mindset and skillset do not extend beyond tinkering with the existing economic tools – such as the golden visa programme – and expecting them to perform miracles.
So the country stagnates in recession, unemployment rises, welfare numbers increase to 400,000, more kids go hungry, the crises in public health and housing are being made worse every day…And all of this is occurring at a time when even right wing economists are saying that Christopher Luxon and Nicola Willis don’t have a clue about what to do next, let alone what a feasible plan for economic growth might look like.
No wonder so many New Zealanders are packing their own passports to the airport, for one way flights elsewhere.
Footnote One: Globally, golden visa schemes have been around for decades, even in the US – where it has long been possible to buy your way to a green card. But ironically- given how the Luxon government is touting them as an engine for growth – golden visas surged in popularity in the wake of the GFC, as countries in crisis sold off residency to plug their budget deficits.
Portugal, Ireland, Greece and Hungary all went down that road after being bailed out by the European Union and the International Monetary Fund. The schemes have largely been a sign of desperation by countries in crisis. Now that Ireland has largely recovered, it is dialling back its scheme.
Footnote Two: As mentioned, few of the funds attracted by the lowering of the investment threshold (among other weakened compliance requirements) will be invested in the productive sector. The history of the golden visa scheme, as Bernard Hickey recently indicated, proves as much:
The previous Labour Government toughened the rules on the ‘golden visa’ scheme in September 2022 to require $15 million of direct investment in businesses, rather than in vanilla Government bonds. Just 33 visas were issued in the first two years to investors who put $65 million into the economy. That contrasted with more than 3,000 visas being issued to investors over the visa’s previous 12 years when bond investments were allowed, which saw $14 billion into the economy, mostly in bonds.
There is no reason to expect things will be any different this time around. To repeat: the bulk of any funds attracted by the golden visa scheme will go into propping up government finances, not into creating jobs and growing the economy.
Music for (lost) love
On the cusp of Valentine’s Day, this new “Will My Love” cut by the wildly prolific London EDM producer who calls herself DJ Sabrina the Teenage DJ seems pretty apt. This video is another example of her ability to use retro images that have deliberately stressed and bled out. The result is an “uncanny valley” effect more genuine than kitsch but not quite either, exactly. BTW, on “Will My Love” she samples “The Wonder Song” and “ Become You” by yesteryear’s folk indie sweethearts, the Indigo Girls:
Her samples flash by as vaguely familiar features in a shifting terrain that – for better and worse – never loses the dancefloor pulse. There’s a site here that lists every known sample across the jaw-dropping number of albums, EPs, mixtapes, remixes and singles she’s issued since 2017. The Destiny album is where I first became aware of her, via the opening cut “Honey.” This video’s collage of retro images summon a certain kind of pathos for these visions of bygone glamour…The samples range from Count Basie’s “April in Paris” to Britney Spears’ “E-mail My Heart.”