As global citizenship and residence programs proliferate around the globe, the latest data shows the United States is losing the competitive battle and market share to other nations because of the lack of EB-5 visas available.
In recent years, the popular EB-5 Immigrant Investor Program in the U.S. has created tens of thousands of jobs and generated billions of dollars in economic stimulus, but new data suggests the EB-5 visa backlog is in all likelihood prompting investors to consider similar programs around the world.
The heart of the problem involves the EB-5 visa backlog. The demand for EB-5 visas now exceeds the annual supply of 10,000 available, contributing to an estimated six-year wait for immigrant investors to be issued a conditional visa to live and work in the U.S. An estimated 20,000 to 25,000 visa petitions are pending before U.S. Citizenship and Immigration Services.
New USCIS petition data reveals the number of applications fell from more than 6,000 per quarter in recent years to 848 in the second quarter of this fiscal year. No one is sure yet how big of a role the EB-5 visa backlog played in this drop, but common sense suggests it played a substantial one.
Meanwhile, throughout the world, programs similar to EB-5 offer comparable benefits and often much shorter waits to obtain a permanent visa. For instance, investors in Cyprus can obtain full Cypriot citizenship in as a few as three months.
In light of this, Congress should act quickly to address the EB-5 visa backlog. Several proposals have been floated, including the removal of family members from the EB-5 visa cap calculation. U.S. Rep. Jared Polis, D-Colo., is working to build support in Congress for a bill to address the backlog, and is exploring whether language could be included in proposed comprehensive immigration reform legislation following the presidential election.
“We can do it a number of different ways,” Polis says. “One is to recapture unused immigrant visas. There are hundreds of thousands that are unused. We could increase the number of immigrant visas for the employment-based categories, or we could remove family members out of the 10,000-visa cap. There are a number of ways of going to battle, and I’m supportive of those.”
Global Citizenship is Proliferating
The EB-5 visa backlog comes as the number of global residence and citizenship programs have increased sharply in recent years.
Today, dozens of countries—from Mediterranean island-states such as Cyprus and Malta to European countries like Portugal and the United Kingdom—offer global residence programs. Additionally, a number of countries, including Caribbean islands like Antigua and Barbuda and St. Kitts and Nevis, provide global citizenship programs.
“There are numerous programs and each have varying degrees of complexity and accessibility,” says Chris Willis, the managing partner for North America and the Caribbean at Henley & Partners, a leader in residence and citizenship planning. “Although many countries have residence and citizenship programs, some may be just for simple applications, such as naturalization through descent, marriage or as an economic migrant, such as a skilled worker.”
Many of these nations offer immigrant investor programs that exchange citizenship or residence rights for investments in their economies. The EB-5 program, for example, has brought in billions of dollars in investment capital. The EB-5 program creates American jobs at zero cost to taxpayers, contributes to GDP, and adds to federal, state and local tax revenues. Accounting for just 1 percent of the 1 million Lawful Permanent Residents admitted to the U.S. each year, it makes sense to expand the program, not bog it down with an unnecessary visa backlog.
Recognizing the benefits of these programs, a new industry of residence and citizenship planning has emerged in recent years, catering to an increasing number of wealthy individuals interested in visa-free travel or the right to reside around the world in exchange for making financial investments in different countries.
“They want to ensure they have greater freedom and control of their future,” Willis says. “The effects of globalization are that people are more interdependent and mobile and the concept of borders is changing. Governments have to adapt to this changing landscape and be competitive to be able to generate growth and attract investment and talent.”
Growing Popularity of Global Mobility
This trend, largely the result of a rapid increase in private wealth primarily in emerging market economies, has contributed to a growing number of affluent people interested in greater global mobility and reduced obstacles to travel. This demand is likely to fuel investor immigration into the foreseeable future.
Immigrant investors are interested in these programs for a number of reasons, but primarily they want to provide their children with access to a better education, enjoy the ability to travel freely without the hassle of visas, and obtain a better quality of life.
Global residence programs are offered in many countries. A recent report listed 19 nations, including Portugal, Belgium, Austria, Malta, U.K., Australia, U.S., Canada, Switzerland, Spain, Jersey, Latvia, Dubai/UAE, Monaco, Singapore, Cyprus, Hong Kong, Greece and Bulgaria. The report highlighted global citizenship programs in eight countries, including Malta, Cyprus, Antigua and Barbuda, Austria, Grenada, St. Kitts and Nevis, St. Lucia and Dominica.
The EB-5 program in the U.S. is among the most popular investment migration programs. It has boomed in popularity in recent years, largely fueled by foreign investors in search of access to U.S. schools for their children and visas granting permanent residence leading to U.S. citizenship. The EB-5 program, created in 1990, offers permanent residency for foreigners who invest in a new commercial enterprise that creates at least 10 jobs. The investment is either $500,000 or $1 million, depending on whether the project is located in a Targeted Employment Area.
As part of the program, 10,000 visas are available annually for foreign national investors and their family members. In 2015, 9,764 visas were issued, with 93 percent going to investors from Asia, according to a report by the Congressional Research Service. That’s up nearly fourfold from the 2,480 visas issued in 2010. From 1990 through 2014, USCIS estimated the EB-5 program generated more than $11 billion in investments and created at least 73,730 jobs in America, according to the Congressional Research Service report.
The U.S. is a preferred destination for many and will continue to hold this stature, but the emergence of European citizenship-by-investment programs offers applicants an alternative, along with a passport that provides the rights of settlement in the European Union.
However, the U.S. program’s growth has been so rapid that demand for EB-5 visas has exceeded the annual supply of 10,000 that are available, creating an estimated six-year wait for investors to be issued a conditional visa.
While the U.S. is still very attractive to immigrants for its high quality educational system, business opportunities and for many other reasons, the growth of global residence and citizenship programs worldwide suggests the backlog is prompting some people to explore options in other countries.
Buzz among Investors, Entrepreneurs and Celebrities
As word has spread about the benefits, the number of residence and citizenship programs has risen steeply in recent years, generating global buzz among wealthy individuals and their families, investors and entrepreneurs, artists and celebrities, and others interested in alternative residence and citizenship options.
The primary appeal of these programs is that they confer citizenship with minimal or no residence requirements. While some of these programs have existed for many years, some have recently experienced a substantial increase in applicants, along with a surge in capital inflows.
“The main reason that causes the rise of global residence is due to Chinese economic growth in the past few decades,” says Edwin Shieh, the chief executive officer of the ADH Group Co. Ltd., a company that provides immigration, study abroad, international investment, settlement overseas and other professional consulting services to Chinese investors.
“More importantly, wealthy Chinese parents have a strong incentive to provide a better education for their kids. Acquisition of a foreign permanent residence permit is the most effective and efficient way to achieve it. That is one of the main reasons driving the significant increase in global residence and citizenship programs around the world.”
Investment migration programs are found around the world. In addition to the EB-5 program in the U.S., another large one is found in the U.K. The U.K. Government’s Tier 1 investor visa program was created in 2008. It allows high net worth individuals to stay in the U.K. by investing at least 2 million British Pounds in either U.K. Government bonds or capital in registered companies. Since its inception in 2008, 3,093 investors have gained entry to the U.K. The number of annual visa approvals rose 666 percent from 153 in 2009 to 1,173 in 2014. More than 3 billion British Pounds have been invested in the U.K. through the Tier 1 visa program since the program’s creation.
The inflows of funds into these countries resulting from these programs can be substantial. In St. Kitts and Nevis, inflows to the public sector grew to nearly 25 percent of GDP in 2013. Antigua, Barbuda and Dominica, and other countries have experienced significant inflows of funds too. In Portugal, funds generated by the country’s golden visa program totaled 13 percent of estimated gross foreign direct investment inflows in 2014. In Malta, the contributions to the government are expected to total the equivalent of 40 percent of tax revenues in 2014.
Staying Competitive
To remain competitive, especially given the increased demand for global citizenship and residence programs around the globe, Congress needs to address the EB-5 visa backlog. At the same time, Congress also needs to address other issues in the program, including the allegations of misuse and fraud that have garnered headlines recently.
“At some point, by not increasing the numbers, you are sending a message that you don’t want this program to bring economic development to this country,” says Tom Rosenfeld, the president and chief executive officer of CanAm Enterprises, a New York City-based regional center operator that promotes and administers private and government immigration-linked investment funds. “When you have a six- or seven-year backlog, common sense tells you that people don’t want to wait six or seven years to come to the U.S.
“That’s just not realistic for people. Not addressing the EB-5 visa backlog issue is a decision not to want to bring economic development dollars into the country at no cost to taxpayers. I think most congressmen like the program, along with the fact that it’s tax free, but they just don’t want to see the abuses.”
One of the easiest ways to address the backlog involves changing the way the EB-5 visa cap is calculated. The 10,000 visa cap was set in 1990 when Congress passed the Immigration Act of 1990. As the cap is counted now, both investors and each of their family members are counted as part of the total. But a convincing argument can be made that Congress originally intended to limit the program to 10,000 investors each year – not the investors and their family members. Changing the way the cap is counted to align with Congress’ original intent would address the backlog quickly.
“There are several different proposals out there, and one is to simply address it in terms of the visa allocation by only counting the investors rather than their family members too,” says Ginny Fang, chief executive officer at Golden Gate Global, a San Francisco-based immigration investment regional center. “I think at the end of the day, because there is a shortage, there should be some kind of increase in the numbers of EB-5 visas.
“These are people that we want to be a part of American society. We should take the backlog as a sign of the continued confidence and demand for being a permanent resident of the U.S., along with the attractiveness to foreign investors who want to come here and create businesses and jobs. We should take advantage of something that has gained tremendous momentum over the years and look to improve it. It’s been a positive program for job creation in the U.S., and with just a little bit of attention, we can see even greater financial benefits coming to the U.S.”
Shieh says the EB-5 program provides many economic benefits to the U.S.
“The demand for EB-5 projects is huge in China, but there are too many uncertainties on current EB-5 policy that pulls investors back,” Shieh says. “The waiting time with the current EB-5 policy puts the EB-5 program in a less competitive position. I hope the U.S. government is able to come out with a stable EB-5 policy for investors soon.”