Malta passport sales to global rich down in pandemic year

Revenues from Malta’s sale of citizenship dwindled by an estimated 75% in the pandemic year, according to figures published by the island’s posterity fund, the National Development and Social Fund.

During the year defined by the COVID-19 pandemic, the NDSF received ‘just’ €27.8 million from the Community Malta agency – what was previously known as the Malta Individual Investor Programme Agency.

The downturn in revenues reflected reduced interest in the IIP, now rebranded as citizenship by direct investment, during the COVID pandemic, when compared to revenues of €105.9 million in 2019, €100.6m (2018) and a whopping €201.9m (2017).

To date, total proceeds received since inception from passport sales amounted to €599.8 million. Of these, €364.9 million was invested, resulting in a consolidated profit for 2020 of only €64,154.

The NDSF’s revenues are held in three different portfolios: a discretionary portfolio which takes 30% of the passport sale revenues; a directed portfolio for 70% of the passport sale revenues; and an unallocated portfolio in which any cash balances are held at the Central Bank.

The money in the discretionary portfolio, set up in 2018, is managed by the Central Bank and outsourced a portion of this portfolio to Bank of Valletta Asset Management for investments in high quality foreign financial instruments. As at end-December, this portfolio had a net asset value of €102.6 million, having lost €500,000 over the previous year (€103.1m).

The portfolio suffered at the hands of turbulent markets impacted by the spread of COVID-19, but risk mitigation measures allowed the portfolio “to benefit and participate in the also unprecedented market recovery, albeit in a limited way.” This meant that during the remaining months of the financial year, the fund was able to recoup almost all losses.

The directed portfolio, which funds social and economic initiatives decided on by the NDSF governors, had a market value of €260 million as at end-2020. These investments are held locally in Malta Government Stocks (41%), treasury bills (22%), and domestic equities – mainly Lombard (20%) and BOV (6.1%), as well as 3% in local corporate bonds.

The rest of the cash balance in the unallocated portfolio stood at €227 million.

The NDSF receives proposals for social grants from either voluntary organisations or public entities. Governors examine the proposals in a three-step process which starts from explaining the purpose of the social grant, and assessing whether it is line with the stated objectives of the Fund.

An internal analysis is then carried out to determine the monetised social benefit of the project, according to a cost-benefit analysis presented by the potential beneficiary. The NDSF also carries out a post-implementation exercise to determine the efficacy of the grant.

During the year, the NDSF purchased Mattia Preti’s monumental oil on canvas painting named “Boethius and Philosophy” for €1.48 million from Sotheby’s of New York. The acquisition is deemed to be an investment in the preservation of Malta’s cultural patrimony.

The fund has committed a total of €66 million for social housing projects by the Housing Authority; €1.54 million for the Caritas Community Centre and its drug rehabilitation centres; a €10 million grant for the upgrade of 50 primary healthcare clinics and eight health centres; and a €5 million project for London apartments for the Puttinu Cares Foundation, which has not yet been disbursed.