Several thousand from China alone are expected to apply for legal residency under a fast-track scheme where the necessary papers are issued in exchange for buying EUR 250,000 worth of Hungarian government bonds. As Hungary is part of the Europe’s open-border Schengen zone, the right to reside conveys all the freedom of movement advantages of an EU passport. The offer comes with the promise of a six-month fast-track to permanent residency status, which can in turn lead to full citizenship.
The government is clearly hoping to attract a lot of interest from China, a country with which it has assiduously worked to increase diplomatic and trade links under a policy of “opening to the east”. The first of four agencies so far mandated to sell the bonds, the Cayman Islands-based Hungary State Special Debt Fund (HSSDF), has already received 20 applications from China. Thousands more are expected to sign up, the firm’s director Lian Wang was quoted as saying by the state news agency MTI after an invitation-only press conference on Tuesday.
HSSDF, which has a monopoly on sales to Chinese and Vietnamese citizens looking to buy a toehold in the EU, is even organising a promotional roadshow through 20 cities across China. The Hungarian embassy in Beijing is helping out by linking directly to the firm’s website. In addition to paying in advance for at least EUR 250,000 worth of “residence bonds”, prospective settlers are asked to deposit an “immigration advisory” fee of EUR 40,000 in a Hong Kong bank account.
The bonds – zero-coupon government securities – are sold to the intermediary firms at below par. If the prospective settlers pay the face value up front, financial newspaper HVG estimated in a 23 May website post, that would add another EUR 30,000 or so to the middleman’s potential cut for each successful sale. Some people are going to make a lot of money out of this programme.
Applicants must have no criminal record and according to government communications, they will be vetted by the Hungarian authorities. In the event of refusal the bond money and the whopping admin fee will be refunded, according to HSSDF’s website. If they are successful, they get their EUR 250,000 back from the government, without interest, after five years when the bond matures (in the meantime, the instrument cannot be traded). There is no obligation for applicants to actually move to Hungary, or even visit: the paperwork can be dealt with by proxy, and a Hungarian ID card will get you into any country in the Schengen Zone.
The benefit to the state is that it can borrow money at the equivalent of 2 per cent interest. That is well below the current market rate for Hungarian government debt, which is still considered speculative grade (“junk”) by international ratings agencies. The bonds, issued by the state debt manager ÁAK, can only be sold through agencies like HSSDF.
Four such brokers have so far been approved by a parliamentary economics and IT committee, controlled by the ruling Fidesz-Christian Democrat alliance. Eyebrows were raised by the official endorsement of firms registered in notorious offshore tax havens. The government has often railed against tax avoidance and is wont to hurl the term “offshore knight” at opponents, notably the former central bank governor András Simor.
When the approval of HSSDF was announced in April, the head of the committee – Fidesz MP and mayor of District V Antal Rogán – argued that the Cayman firm was not really “offshore” as the identity of its owners was known. The main shareholder is Simon Mu, head of the Chinese concern Wanhua, which took full control of the domestic chemical firm BorsodChem in 2011. The other names are the aforementioned Lian Wang (who has worked at Deutsche Bank and Morgan Stanley, according to a report in the financial daily Napi Gazdaság on 23 April), the Hungarian businessman Attila Boros and one Jonathan Chan.
Besides the Cayman Islands outfit, firms in Malta and Cyprus have also been approved to act as agents for the residence bond programme, according to ÁAK’s website. The former, Discus Holdings Ltd in the Maltese capital Valletta (discusholdings.com – “Your residency bond partner in Hungary”) signed its contract on 27 May and is now authorised to sell residence bonds to citizens of Nigeria, Kenya, South Africa and Indonesia. A Cypriot-registered firm called Innozone Holdings Limited has cornered the Indian market.
Approved agents have a monopoly on sales of the residence bonds in their respective target markets, the ÁAK website tells us: “Only one such company per a third country will be approved by the Economic and Information Technology Committee of the Hungarian Parliament. In order to apply for permission please contact the Committee directly,” it says, giving the relevant phone, fax, and email details.
It seems a would-be broker need not rule himself out simply because his firm has no track record in the field of immigration counselling, or paltry registered capital. A fourth company, recently approved by the parliamentary committee, was established only this year with starting capital of less than HUF 3 million, according to publicly available company data. Arton Capital Hungary Pénzügyi Tanácsadó Kft, headquartered in District VI of Budapest, is set to act as sole broker of residence bonds to citizens of the United Arab Emirates – presumably home to many with the wherewithal to lend Hungary a quarter of a million in exchange for lifetime visa-free access to Europe.
With many thousands of wealthy potential clients around the world, it is little surprise that others appear to be getting in on the act. The whistle-blowing website atlatszo.hu (the name means “transparent”) reported last week that a Chinese legal firm specialising in immigration to the US, Canada and Australia is now promoting the Hungarian deal on its home page, scstar.net. Though hardly authoritative, google translate seems to convey the essence of the marketing pitch: “Enjoy life navigate Europe 26 European welfare Schengen!”
