The FINANCIAL — Citizenship by Investment (CBI) programmes, a popular governmental initiative in many western countries, including Australia, Canada and the UK, are believed to provide an easy way to raise funds for targeted investments. Georgian law does not offer such benefits to foreign investors. Experts believe country is loosing the chance to boost foreign investments and attract wealthy people. Georgian National Investment Agency, established to improve investment climate in Georgia, said it doesn’t consider the programme conductive to raising FDI to the country significantly.
According to Georgian law regarding residence permits and residence cards, Georgia issues investment residence permits to foreign citizens who invest at least GEL 300,000 in Georgia. Residence permits, which allow one indefinite residency, are also issued to the investor’s family members. Investment residence does not offer citizenship but it’s a way for long term stay in Georgia.
In 2015, Caribbean countries sold about 2,000 passports through CBI programmes, a rise of 100% over a five-year period, according to Fortune magazine. Meanwhile, Invest in Georgia, the national investment agency of Georgia, does not consider the programme conducive to raising FDI to the country.
On July 19, 2013 Georgia placed a ban on selling agricultural land to foreign nationals. The move puts to an end to earlier grand foreign investment plans such as bringing thousands of South African farmers to settle in the Georgian countryside. Changes made in 2014 in the law ended moratorium on land sale.
Many countries around the world offer citizenship by investment, from the US and the UK, to Cyprus and Australia. Citizenship applications for these programmes are most common in Europe, which receives 56% of all applications, followed by the Caribbean with 25%, and North America with 14%, according to a report by financial advisory specialist Arton Capital.
“Various types of business migration programmes (the earliest dating back to 1976) are popular governmental initiatives in many western countries, including Australia, Canada, the UK and a number of European states (including even such small countries as Latvia, Montenegro and Bulgaria). Currently, over 30 countries in the world have such programmes in place. Arguably, they provide an easy way to raise funds for targeted investments,” Yaroslava Babych, Assistant Professor of Economics at ISET, told The FINANCIAL.
“For countries like Georgia, a business migration programme could be beneficial, and could potentially attract businessmen from post-Soviet states in Central Asia, the South Caucasus, Russia, and even from China and India. The main attraction of citizenship in Georgia could be (in the future) visa-free travel to the EU and right to land ownership in Georgia,” said Babych.
“Under some programmes foreigners can invest in real estate, or in municipal bonds. In some cases (like Malta) the ‘investments’ are non-refundable donations to a governmental fund,” she added.
“These programmes are particularly popular with businessmen who come from countries with weak institutions, and where doing business is associated with a lot of uncertainty. Business investment programmes allow them to circumvent cumbersome immigration procedures and reap the many benefits of citizenship or permanent residency: free travel, employment, education for children, asset ownership, visa waivers, etc,” she said.
“Offering citizenship to investors is a way for countries like Canada and the US to create jobs. Most of these investors are Chinese citizens concerned about the political stability and conditions for wealthy people in their home country. Their investment abroad comes with an exile opportunity in case the situation at home turns awry. Therefore, one might dub these investors ‘exile investors’. While in the past, such people deposited their wealth in a Swiss bank account, today they invest it abroad and get the citizenship of the country where they have stored their wealth. For exile investors, it is not enough to be offered good conditions for doing business, but they demand to live where they made their investments,” said Florian Biermann, Assistant Professor at ISET.
In Biermann’s words, “Georgia offers conditions that such investors might like: a decent level of rule of law; protection of private property; relatively high political stability; freedom of speech; and a low level of corruption. Georgia is geographically closer to China and many other politically unstable countries than the US and Canada. Georgia should utilize these advantages to attract international money to fund the development of the Georgian economy.”
As Eva Bochorishvili, Economist at Galt & Taggart, said, “one of the advantages of acquiring Georgian citizenship for investors will be visa-free travel to the EU, which is expected to be achieved by the end of the current year.”
“Similar regulations are adopted by many countries, including those with developed economies. Therefore, this is an indication that the system for above-mentioned countries is profitable,” said Bochorishvili.
“Georgian law provides certain exceptions and simplified procedures regarding acquisition of citizenship and residence permission for investors. Foreign investments are of great importance for the rapid growth of our country’s economy. Accordingly, further simplification of regulations of citizenship and residence acquisition will have a positive impact on increasing investments,” Bochorishvili said.
Contrary to the experts, Invest in Georgia, Georgian national investment agency, said that CBI will not have a significant raise in the number of investors coming to Georgia. “Having a residence permit is quite sufficient”.
“Since it is important for the investor to be able to move around the country freely and not hinder investor’s business activities we believe that having an investor residency permit is quite sufficient. So, offering Georgian citizenship will not have a significant raise in the number of investors coming to Georgia,” said Giorgi Pertaia, Director at Georgian National Investment Agency.
“Free and simple entrance to the country at any time is of key importance to investors. Therefore, it is essential for potential investors to get a visa, and residence permit if needed, simply and fast. Accordingly, investors and their family members are allowed to travel to Georgia at any time and stay as long as they want,” said Pertaia.
“As for citizenship, in our experience it is interesting for those who want to leave their country as a whole and immigrate to Georgia. Out of these foreigners a rather small portion actually have a sufficient amount to launch a business in Georgia and employ our citizens. Immigration is the main objective for the majority of them. Only a few specific countries are an exception. Here, the majority of businessmen/companies encounter problems due to domestic conditions and therefore want to leave their country,” letter says.
The Republic of South Africa has been mentioned by Pertaia as one such country. “Several major businessmen from RSF have invested in Georgia, implemented new technologies and employed the local population in several regions of Georgia. Some of them have already received Georgian citizenship.”
An investment residence permit was implemented in Georgia in May 2012. In 2015 the country issued 214 investment residence permits.
“In many cases, offering dual citizenship for investors is more an expression of goodwill and holds less practical importance / significance,” Pertaia told.
“The main difference between citizenship and a residence permit is the right to vote. We do not think that the right to vote is so important that it will be considered an extra advantage for investors,” Pertaia told The FINANCIAL.