Passport for sale: Instability in the Middle East leaves many seeking second citizenship
How much is a passport worth? People can secure the rights to live in another country through a growing trade in ‘economic citizenship’ around the world, and much of that demand is from the Middle East.
“Rana” and her family have never set foot in the Commonwealth of Dominica, but they can legitimately claim citizenship of the Caribbean island.
The Jordanian family, from Abu Dhabi, are part of a growing trend in the region of buying so-called “economic citizenship” to secure their future.
Like thousands of others, many from politically troubled countries such as Egypt and Syria, they have invested several hundred thousand dollars to secure second passports that may give them better opportunities.
Rana knows the value of a passport from Dominica. Because the island was once a British colony, they have already used their new citizenship for a visa-free holiday to the United Kingdom.
As Jordanians, they would have needed to apply for a standard UK visa up to three months before the trip. As Dominicans, they enjoy visa-free travel, a privilege that will be extended next year for visits to the rest of the European Union.
Economic citizenship, or second passports, is a multibillion-dollar industry, and one that is growing faster in the Middle East than in any other part of the world.
In the past five years, the number of countries offering citizenship and/or residency, in exchange for cash or property investments, has doubled, and a single applicant can now secure a second citizenship with US$100,000 (Dh367,000).
Certain countries such as Hungary, Bulgaria, Cyprus and the UK give the passport holders almost instant access into Europe – tempting for those whose own passports give them little security or freedom of movement.
“Unfortunately, there is a direct correlation between what’s going on in the Middle East and the demand for second citizenship,” says Armand Arton, chief executive of Arton Capital, a Canadian advisory group that deals with immigrant investor programmes.
“The demand in the Middle East is growing faster than any other market, because of the political instability that started with the Arab Spring.”
Rana, who has spent much of her life in the UAE, believes that second citizenship will make her family’s lives easier and will provide more opportunities for her children. Along with her husband and three children, the family spent almost Dh1 million on 10-year renewable passports two years ago.
“A friend of my husband told him about Dominica, and there was an office in Dubai to help with the applications,” she says.
“We had interviews and had to sort a lot of paperwork, but somebody was there to talk us through it all. I feel more at ease having it. It makes travelling very flexible.”
New rules mean that citizens of Dominica will be allowed to live in European countries for a total six months a year under the Schengen Agreement.
Arton Capital has offices around the world and has generated more than $2.5 billion in foreign investment to countries offering second citizenship or residency since it was established in 2006. There are currently about 20 countries that offer some form of second citizenship.
In Saint Kitts and Nevis, in the West Indies, it can be bought in two ways. The real estate option requires applicants to invest at least US$400,000 in designated property. The property must be kept for at least five years to qualify.
The second option in the tax-free federation is to make a contribution to the Sugar Industry Diversification Foundation. Single applicants have to pay $250,000, plus a fee of $7,500.
People with up to three dependents must pay $300,000, and those with up to five, an extra $350,000.
The cost for a single applicant in the Commonwealth of Dominica is a contribution of $100,000 plus fees, or investment in certain real estate worth $200,000.
Cheaper options like these, Mr Arton says, “have opened up the market to the less fortunate”, such as those affected by conflict and upheaval in Syria, Yemen and other Middle East countries.
“Before the sanctions, Iran was one of the biggest markets. Now it is Pakistan, Lebanon, Syria, Egypt and Iraq.”
The reasons for seeking economic citizenship or a second residency depend on the region or country the client is from.
For most people it is an “insurance policy”, Mr Arton says, giving the holder a freedom of movement that their original nationalities do not provide.
Others want better futures for their children by opening up opportunities to study in western countries such as the US or UK.
A more obvious reason is ease of travel. For someone with business interests all over the world, fast access and visa-free travel could be invaluable.
One of the last reasons, Mr Arton says, is for tax purposes, but these applicants account for less than 5 per cent of the global citizenship market. More than 95 per cent of applicants come from emerging markets, countries and regions that have passports with “low mobility rankings”, such as China, Russia, South Asia and the Middle East.
“Some people are becoming over-insured, so they take a second and third and fourth passport,” says Mr Arton.
“At one point it overlaps a lot with freedom of mobility, it becomes a status symbol.”
In China, where dual citizenship is not officially recognised, new millionaires and ultra high-net-worth individuals worth more than $30 million view having a second residency or citizenship as a statement of wealth.
In the Middle East, motivations are different. About 60 per cent of Arton Capital’s Middle East applications are for citizenship, and about 30 per cent for residency.
“The people in the Middle East don’t care so much about having another residency in Europe, they want to have another passport,” says Mr Arton.
“The Arabs are the ones saying, ‘We have a bigger problem and residency is not going to fix it, we need another passport now’.”
The number of applications was much lower between 2005 and 2009, he says, because people in Dubai were “so busy making money, the region didn’t look like it does now”.
Demand from the region was half what it is today – the increase mainly attributed to the financial crisis and the Arab Spring.
Most advisory groups that deal with global citizenship rank countries to help clients choose a destination.
CS Global Partners, a firm with offices in London, Zurich, Dubai, New Delhi and Lagos, ranks the Caribbean island of Dominica as the easiest place to get second citizenship.
Countries are rated according to investment amount required, number of visa-free countries accessible with the passport, the time an applicant must spend in that country to qualify, and the time it takes the application to be processed by the government.
On the Arton Capital Index, which is measured in a similar way, Dominica has an overall score of 60 out of 100 but only scores four out of 20 for global mobility, the lowest of all.
But all this is expected to change next year when EU legislation will allow visa-free travel into Europe for Dominican passport holders.
A May 2014 ruling, expected to be enforced next year, will give passport holders from 16 countries including Dominica, Saint Lucia and the UAE, a visa-free stay in EU countries for up to 90 days in any 180-day period.
“Those countries in 2016 will be giving you the same mobility as Saint Kitts and Nevis, but right now it costs one third of the investment in Saint Kitts,” says Mr Arton. “People are saying, ‘Let me invest now’, and it’s ranked in our index as number 85, but the day this directive comes into effect, the ranking will change and Dominica will go up by 25 points.
“People will understand how a simple decision that doesn’t seem to be of very high importance can change a lot in the economies in those countries, simply by increasing the value of their passports. Of course the prices will increase.”
Saint Kitts and Nevis was given these rights in 2009 under a similar law. It had been offering economic citizenship since 1984 but the number of applicants before 2009 was about 300.
Mr Arton says the number jumped to 2,000 a year “from one day to the next” when the legislation was enforced.
While the business of buying citizenship and residency is now largely accepted, some have expressed concerns.
In January last year, the then-vice president of the European Commission, Viviane Reding, delivered a powerful speech on European citizenship, questioning the issue of buying passports.
“Do we like the idea of selling the rights provided by the EU treaties? Certainly not. Citizenship must not be up for sale.”
She added that the it was legitimate to “question whether EU citizenship rights should merely depend on the size of someone’s wallet or bank account”.
Portugal, Cyprus, the UK and Malta all offer some kind of EU citizenship in exchange for cash or investment.
CS Global says Cyprus’s scheme costs €2,500,000 (Dh9.9 million) and it takes four to six months to get citizenship.
“When you’re born with a passport that has never made you think about visas, you don’t even question or understand,” says Mr Arton.
“Ten years ago buying a passport was a little bit strange. There is of course, the illegal practice of people bribing and illegally selling passports.
“Some people put our industry into the same bracket. They think: ‘It doesn’t matter if you spend $10,000 or $200,000, you’re still buying a passport.’ We try to differentiate. We don’t buy the passport, we make an investment that makes an impact in certain countries.”