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As banker Walt Wriston noted, capital goes where it is welcome and stays where it is well treated. Political instability means a proportion of the world’s wealthy are on the move. Nations are vying to attract them, even as they struggle to keep out much larger numbers of poor migrants.
The EU this week inked a €1bn deal intended to stem immigration via Tunisia. The UK parliament meanwhile passed a bill that could result in Rwanda receiving £170,000 per migrant relocated there. The efficacy of both schemes is questionable.
Developed countries make a quieter pitch to attract footloose millionaires and billionaires. About 122,000 are expected to relocate in 2023, according to a report from Henley & Partners, a consultancy.
The biggest beneficiary is likely to be Australia, which offers nice beaches and no inheritance tax. The countries with the largest net outflows are China and India.
In contrast, the UK, which before Brexit was a magnet for the rich, is forecast to lose 3,200 wealthy individuals. Fewer rich people are expected to quit Russia.
The prizes for host nations are higher consumption, employment and investment. Governments solicit the latter by doling out residency permits or passports to people who invest a threshold amount.
This has become a sizeable business. Countries raised more than $21bn from the programmes in 2021, according to analysis by Investment Migration Insider. Indebted southern European countries make compelling offers. Caribbean island states rely on the programmes to balance their budgets. They account for 40 per cent of government revenue in Saint Kitts and Nevis.
The footloose wealthy are seeking “domicile diversification” in case the country they inhabit raises taxes, suffers a health crisis, or pursues policies hostile to their interests.
Some schemes work too well. A case in point is Portugal’s “golden visa” programme. It has raised about €6bn of revenue over the past decade. But it has also fuelled a housing crisis. The government is looking at tightening conditions, including closing the option to access a visa via a high value property purchase.
There is no shortage of alternatives. In Italy, investing €500,000 in local equity or debt will secure residence. For a different crowd, Thailand’s relatively cheap programme is a popular lifestyle play.
Poor migrants may risk their lives in a bid to switch domiciles. Rich migrants only need to risk some capital.
Lex is the FT’s concise daily investment column. Expert writers in four global financial centres provide informed, timely opinions on capital trends and big businesses. Click to explore
