Legislation introduced by the Hungarian government back in 2012 granted residency and ultimately a Hungarian passport to any foreign investor who invested at least €300,000 in special government residency bonds, allowing the holder to live and work anywhere in the European Union.
At the time, public debt in Hungary was equivalent to about 80 per cent of its annual economic output and households were also struggling with huge foreign-currency debt.
However, shortly after the program was officially launched in January 2013, Hungary’s economy exited its second recession and showed growth for the first time since 2011.
The residency program’s main purpose was to help the Hungarian government refinance its growing foreign currency and avoid bankruptcy.
In just three years, the Eastern European country has managed to entice 3,429 applicants, in comparison to the UK program, which has been operational since 1994 but attracted only 2,398 in the following decade. In terms of investments, Hungary has secured just under €1 billion since the program’s inception.
So why has Hungary been so successful at attracting wealthy foreigners who are mainly from China and the Middle East?
The investment terms are simple. Investment is guaranteed by the government, through special residency bonds issued by the Government Debt Management Agency. The lock-up period for the investment is five years after which period the securities are 100 per cent redeemable. In comparison, other programs are based on donation or investment real estate, which can be very inflated.
The process established by the authorities is efficient and allows for processing of applications within the officially prescribed terms. It takes three months for investors to obtain temporary residency, although some insignificant delays were experienced in the summer months of 2015 when many EU entry points such as Hungary were faced with the challenge of registering an overwhelming number of refugees.
All agents who are involved in the purchase of special residency bonds for the program are approved by the government and are assigned territories that they can exclusively operate in. It can be only one territory or as in the case of global immigrant investment specialists, Arton Capital Hungary – the only agent who has registered its business in Hungary and 28 other countries around the world. This makes it easier for the government to monitor and supervise their performance. The government has also created incentives for companies like Arton Capital who have chosen to register their business in Hungary. Such agents are allowed to process files of applicants from any nationality, even those who are under the territorial license of another agent, as long as they are submitted from Hungary. This also brings additional benefits to the local economy, since applicants have to make at least one trip to Budapest.
Hungary is in the process of devising additional changes to its program to attract even more wealthy migrants. One such stimulus is to waive the language requirement from qualified applicants and to reduce the time to obtain citizenship from eight to five years. This will make the program more competitive and allow it to be on a par with its European rivals. Further changes, including the introduction of a fast-tracked path to citizenship if applicants invest more in the country, have been proposed by Arton Capital Hungary Kft — one of four licensed companies who are exclusively authorized to represent the Hungarian bond program.
Immigrant investor programs are becoming more and more popular in Europe and while they are beneficial for the local population and economy, they can also be a means of expressing solidarity for those migrants who are less fortunate and are not in a position to relocate through an immigrant investor programme. One such initiative that is gaining attraction in Brussels in the past few months is the idea of a global citizen contribution – to set a percentage of the total investment made by qualified applicants that will be redirected to a pan-European fund. The money accumulated in this fund will be used solely to combat the adverse effects of the refugee crisis in Europe and to help the victims of political and economic distress in the Middle East and North Africa who seek refuge in Europe.
On March 31, the popular Hungarian Residency Bond Program will be officially over, havingHungary