Passport Deals Raise Cash, Capital for Countries

The arrests in Asia of six suspected terrorists carrying passports from the Pacific island state of Nauru have highlighted the legal opportunities to "buy" foreign passports, a transaction that some nations, including many in the developing world, are using to boost their economic fortunes.

The April arrests drew new attention to the number of countries that have migration schemes whereby wealthy individuals can immigrate, become naturalized, and acquire passports after investing large sums of money in the country. The common rationale for these schemes, in otherwise very diverse countries, is that the transfers of capital contribute to national economic development.

At one end of the spectrum are programs in major immigration countries such as Australia, Canada, New Zealand, and the United States. Since the 1970s these countries have accepted as permanent residents individuals who bring substantial amounts of capital to invest. After meeting normal residency and other conditions, these investors or business migrants can naturalize and travel on the passports of their new country. Even in these countries, which have developed extensive systems for checking immigrant credentials, claims of fraud by immigration agents and applicants occur, leading to changes in their entry programs with the aim of limiting the potential for abuse by individuals less interested in settling and investing than in gaining an additional passport. In the early 1990s, Australia suspended its Business Migration Program. Following an inquiry, the re-labelled Business Skills Program was introduced, which placed greater emphasis on the entrepreneurial and business skills of applicants than on their actual wealth.

The economic opportunities associated with such investor migration programs is particularly appealing to poor countries with limited resources to attract foreign investment or to trade on the world market. In the absence of such resources, emigration is a popular option, although one that is increasingly limited as major destinations in Europe, North America, and Australasia introduce more restrictions on immigration from these regions. In such circumstances, treating nationality as a commodity that can be sold to supplement other tradable commodities has considerable appeal. Nauru is one of a number of Pacific Island, Caribbean, and Central American nations that have flirted with such schemes. Others include Fiji, Palau, Belize, Dominica, Grenada, Panama, St Kitts and Nevis, and Namibia.

Given the limited investment opportunities in these countries, their main attraction is often to individuals seeking an alternative passport to facilitate international travel and to establish an "insurance" policy against uncertainties at home. People from Hong Kong and Taiwan have been prominent among those attracted to schemes selling nationality and passports in exchange for capital. The Taiwanese have the necessary wealth and also face difficulties gaining entry to countries that give diplomatic recognition to the People's Republic of China, but not the Republic of China. A second passport from their new country of citizenship has the potential to overcome the barriers to international travel, while also providing opportunities to become foreign direct investors.

Unfortunately, countries adopting such schemes often lack the experience and capacity to manage and monitor the migrants. Especially when associated with corruption among local officials, such programs may attract those involved in money laundering and other criminal activities. As the Nauruan example highlights, terrorist groups have also been taking advantage of these opportunities to acquire new passports.

Following the September 11 terrorist attacks in the U.S., local and international pressures to control tax havens and opportunities for money laundering have combined with efforts to control terrorism, leading to the closure of many programs to exchange nationality and passports for capital and investment. What has not been addressed following their closure are alternative schemes to provide capital and foreign direct investment to what are often the poorest and least resourced nations in the world.