The past few years have been a real eye-opener about how unpredictable the future can be. Nobody could have guessed that by 2023, we would have just overcome a tough pandemic only to face a war in Europe, supply chain issues, a shaky energy scene, and skyrocketing inflation. Even the wealthiest countries are feeling the heat of the rising cost of living, while the changing political and economic alliances are shaping a new world order. It is still too early to say how all this will play out, but I will share a few thoughts on global trends and developments that have the potential to influence the future landscape of investment migration.
New Mobility Regimes
Investment migration is rapidly evolving. Globally, a whole range of mobility regimes are today in the marketplace. As a result of the COVID-19 pandemic, the number of digital nomad visas has steadily risen, while many countries now offer either entrepreneur or start-up visas. By closely examining the emerging mobility regimes, one can gain valuable insights into crafting effective migration policies that are likely to receive sustained public support in the future.
Estonia was the first country to launch a digital nomad visa in 2020, which fast became the ultimate concept for countries to attract remote workers. Just two years later, in 2022, more than 25 countries ran similar programmes, according to a Migration Policy Institute report, making it one of the most important trends in the immigration space in recent years.[i]
The concept behind these pathways is relatively straightforward: they provide foreign individuals with a temporary residency permit, allowing them to live and work in the host country for a period ranging from six months to five years. Moreover, the onset of these programmes addresses a legal vacuum for remote workers wanting to spend an extended period abroad working independently, although there are still some lingering questions about tax obligations.
These programmes are still relatively new and essentially an experiment. However, with an estimated 35 million digital nomads worldwide contributing to a global economic value of US$787 billion per year, it's safe to say that digital nomad visas are here to stay.
Elsewhere, start-up visa programmes have become increasingly popular in recent years, with countries such as Canada, France, and the United States offering them to attract entrepreneurial talent from around the world. In 2022, around 40 nations, including most OECD countries, had some form of start-up-related programme in place. In fact, migration policies in many countries are moving away from being focused on traditional family or employment-related immigration and crafted more around entrepreneurial and highly skilled individuals. This ‘merit based’ approach is proving popular. A growing global nationalistic environment driven mainly by populist ideologies is not leaving much space for the ‘traditional’ immigration policies.
Start-up related visas attract fewer negative sentiments, do not generally spur contentious opinions, and garner wider partisan support. Secondly, if managed properly, start-up visa programmes can potentially leave substantial economic multiplier outcomes on a nation’s economy, creating growth opportunities in new innovative areas.
However, a well-planned and successful start-up visa programme needs to be supplemented by wider policies such as incubators, business networking avenues and tangible investment incentives. With more countries coming up with start-up related visa programmes, having the right ecosystem is what will differentiate one programme from the other. If successful, a start-up visa programme can enhance a country’s standing on the global scene, create new high growth sectors, attract talent, and assert a government’s commitment to entrepreneurship and innovation.
Meanwhile, the average age of multi-millionaires in the world has decreased over the last two decades. Investment migration service providers report that in emerging market economies the average age of applicants is between 35 and 45 years old. Many of them are young entrepreneurs spurring demand for active investment options as opposed to the traditional passive alternatives.
While, for the time being, investment migration is largely driven by Gen X and Millennial customers, the next big spending power belongs to Generation Alpha, the children of Millennials born from 2010 to 2024. Although the demographic transition is still a few years away, the investment migration community needs to start catering for these new realities.
They are forecast to be the largest generation ever, and by 2025, two billion of them will be living mainly in Asia. By 2030, the first Gen Alphas will be young adults and the recipients of the largest intergenerational wealth transfer in history. They'll be just as digital as Gen Z, growing up in a world where the likes of TikTok, Roblox, Instagram, and ChatGPT are the norm.
While sustainability is already important to Millennials and Gen Z consumers, it is expected that Gen Alpha will resonate especially strongly with sustainability, given they will be growing up entirely under the threat of climate change. There is also consensus among researchers that COVID-19 will have a lasting impact on this cohort since their formative years have been shaped by a global pandemic. So, it’s perhaps unsurprising that many believe that Gen Alpha can be defined by their worries towards becoming ill and not being able to see their families for a long period.
Although the demographic transition is still a few years away, the investment migration community needs to start thinking about these new realities. For Gen Z and Gen Alpha themes such as the environment, general wellbeing, and technology ought to be more central, while those who wish to win them as clients need to adapt their communication methods. Bureaucracy, antiquated portals and slow processes will not attract the upcoming generations.
If there was one headline that dominated business publications this past year, it was the arrival of the metaverse. Metaverse technology is now a major part of discussions on the internet, and many believe that it will – much like the internet did – redefine how people interact with their environment and with each other.
In this context, the possibility of digital or virtual citizenship is another idea that’s being discussed within investment migration circles. In fact, the idea of virtual citizenship isn’t new. It has been debated ever since Linden Lab launched its online platform Second Life in 2003. At its peak, Second Life reported millions of active users in self-made virtual worlds complete with property sales, a market of virtual goods, and a functioning economy that self-reported being worth around US$500 million in GDP around 2007, according to Time magazine.
While Second Life might not represent the broader vision of the modern metaverse, it can certainly be called a metaverse pioneer. KPMG predicts that by 2040, digital citizenship will thrive and many individuals will have given up their physical passports for virtual citizenship.
The consulting firm further forecasts: “There are at least 11 virtual nations now with a combined population of 200 million ‘citizens’ and a GDP above US$100 billion each. Their citizens enjoy higher incomes and live in ‘gated communities’ that have their own security. Benefits like virtual welfare, employment, and other amenities are vastly superior to those provided by physical nations, creating a substantial lifestyle gap between citizens of physical nations and those in virtual nations, who are dual citizens of the physical country they reside in.”[ii]
The future of the metaverse is far from certain, and many say the metaverse is still several years away. However, a likely scenario is that individuals are physical residents of one country but meta citizens of another because they connect with the values, ideologies, and laws of the meta state more than with those of their base in the real world. Moreover, they conduct business with like-minded forward-thinkers in the metaverse, attend the best universities online, and invest in digital real estate using crypto.
You believe the idea is far-fetched? Just think of Estonia’s successful e-residency programme. While e-residents are permitted to open bank accounts, start companies, sign documents, and pay tax under Estonian jurisdiction and law, they gain no rights to live in Estonia, nor do they accrue any other kind of physical benefit.
Adapting To Change
The future of migration policy is undoubtedly complex. However, one trend that is likely to continue is the increasing demand for investment migration as geopolitical tensions and market volatility create new desires for security. In addition, investment migration is likely to continue playing a significant role in attracting foreign investment and funding key government activities in many countries. Given limited room to increase taxes, the opportunity to raise revenue from investment migration will remain a major motivation for countries to retain or introduce investment migration pathways. As such, investment migration is likely to remain an important tool for achieving economic growth and stability in the years to come. However, as the average age of multi-millionaires decreases and young entrepreneurs prefer more active investment options, investment migration must be able to adapt quickly to the evolving market as is being tested this spring with the closure of the Irish and Portuguese pathways, at least for now and in their respective current forms. By the time this article goes to print, there will have already been further changes in this fast-moving sector.
Bruno L’ecuyer is Chief Executive of the Investment Migration Council. Bruno leads the Secretariat and is responsible for all IMC operations. A regular contributor to international publications and conferences in Europe, North America, Caribbean, Middle East and Asia, he has held positions in London, Paris and Hong Kong. Bruno was previously head at a national financial services association, acting as a bridge between government, industry and international policy institutions. He has extensive expertise and experience in the management and expansion of a professional services association. A member of the Governing Board, Bruno acts as its Secretary and chairs the Advisory Committee.