Government actions aimed at combatting the coronavirus have caused havoc to those developing economies, that rely heavily on income from tourism. Politicians, government officials, and senior managers of private companies are constantly complaining about the dire situation and expressing hope, that the future will be better. But let’s be clear about it, even if all corona related restrictions were lifted tomorrow, tourism would not rebound to previous levels within the next 1-2 years.

Instead of grumbling, governments and the private sector in the affected countries should join forces and launch innovative packages to attract potential long-term visitors, especially digital workers and entrepreneurs. To be sure, this segment won’t be able to fully offset the loss in tourism revenue, but it can generate substantial income and help to keep many locals employed.

Digital Workers and Entrepreneurs (DWEs)

Digital workers and entrepreneurs are location-independent, as they can work remotely from anywhere in the world. Their lifestyle has been made possible by technological progress enabling fast internet connections, video conferencing and cloud computing, as well as by changing marketing and customer service habits.

There are still widespread misconceptions in many developing countries about remote workers. They are often called digital nomads, implying that they keep moving from one place to another and only have limited funds to support themselves. Though this might apply to a subset of digital workers, the group is very diverse as far as profession, employment status, age and income is concerned.

Many digital workers earn their living in the tech field as web and graphics designer or software engineer. Others have sales related jobs, such as digital content creator, online marketer, copywriter, or blogger. And there is also a growing number of accountants, consultants, project managers, and online teachers, who can work from anywhere in the world.

A large number of remote workers are freelancers, others work at start-up companies, and some are employed with large corporations. Quite a few have their own company and there are also true digital entrepreneurs, who employ several other digital workers or even run their own medium-sized company.

Not all digital workers are young. There is a growing number of people above 40 years of age, who decide to move abroad after a successful career in their home country. The income range is huge. Some have to live on USD 10,000 per year, which is not too bad if you live in a rural area of the Philippines or Columbia. Many earn in the USD 25,000 – 75,000 range, and 10%-20% have a high income, that allows them to fly business class, rent luxury apartments and vacation in 5-star hotels.

Corona-related lockdowns have proven, that many jobs can easily be carried out from home or anywhere else in the world. Remote work helps companies to substantially lower office costs and employees to avoid wasting many hours per week commuting. The share of remote workers is therefore destined to spike in the coming years.

The multiplier effects

Digital worker and entrepreneurs are a very attractive target group for developing countries, as their presence does not only increase GDP, but also has a multiplier effect on employment, education and training as well as tourism:

  • Income: As remote workers obtain 100% of their income from abroad, every dollar spent by them locally increases GDP by the same amount. A country that manages to attract 50,000 DWEs with average annual local spending of USD 30,000, will boost its local economy by USD 1.5 billion
  • Employment: A large part of tourist spending stays with foreign companies or just increases the profit of a few local corporations. As DWEs tend to organize their stay by themselves and mingle with the local population, they have a much higher impact on local employment. Depending on the host country, a digital worker can easily earn 2 – 10 times more than the median local employee. Including secondary and tertiary income effects, the presence of one remote worker easily generates 2-4 local jobs. Taking the 50,000 DWEs from the example above, this means an additional 100,000 – 200,000 people are employed
  • Education and training: Most DWEs have an excellent education. Some of them might be willing to work part-time as English teachers or university lecturers. Others with specific skills will interact with local employees and entrepreneurs in their field, resulting in valuable knowledge transfer
  • Tourism: DWE’s draw in additional tourists. As they stay in their host country for extended periods, they tend to invite their family and friends to visit them. And those visitors won’t just come for a day or two. If they need to take a long-distance flight, they are likely to stay 2 weeks or longer and will travel to many tourist destinations during that time. Without the digital worker, they might never come.

Many officials are concerned, that the influx of foreigners will trigger a big infection wave in their country. However, many digital nomads are willing to accept and pay for multiple corona tests and 14-day quarantine, as they plan to live in the host country for a year. There are not many tourists, who will voluntarily agree to embark on 14 days of isolation during a two-week holiday.

Current digital nomad visa offers

There is a growing number of people, who would love to live and work abroad to achieve a better work-life balance, higher flexibility and independence as well as lower cost of living. Unfortunately, they lack good visa options, that would make it easier for them to embark on a new life.

Some countries such as Germany, Portugal, Czech Republic and Mexico offer visas, that can be used by remote workers. But they are either not specifically targeted at them or have quite tough conditions. Currently only three countries have implemented a tailor-made visa to attract digital workers. There is the 12-moth Barbados Welcome Stamp, the Work from Bermuda Certificate and Estonia’s Digital Nomad Visa. Georgia has announced plans to launch such a visa very soon.

All existing digital nomad visas have a duration of 12 months and allow remote work for companies operating abroad. Estonia even allows part-time work for local employers. All countries require sufficient income or funds and a valid health insurance providing coverage throughout the stay. Visa fees vary between USD 100 (Estonia) and USD 2,000 (Barbados). Whereas visa holders are not liable for local income tax in Barbados and Bermuda, Estonia considers them as tax residents after a stay of 183 days.

All three countries have certainly launched interesting products that set a benchmark for other countries to follow. However, additional improvements are possible to achieve a truly comprehensive solution for digital workers.

How to attract digital workers and entrepreneurs?

Multibillion-dollar stimulus or bailout packages are not required to attract DWEs. Well-thought-out policies can be implemented at very low costs and if they are successful, the return of investment will be far higher than from any other government policy.

In the future it will become more difficult to attract digital workers. As many countries have been battered by the effects of the coronavirus, many will try to lure DWEs and the competition will be tough. Only those governments will succeed, who are willing to discard old habits and adapt innovative strategies. In the following we will explain, what digital workers and entrepreneurs expect.

 

Make foreigners feel welcome

Have you ever tried to obtain official information on long-term visas from countries around the world? We have and can tell you that it is a nightmare, especially with regard to developing nations. In most cases important information is only available in the local language and not in English. And the limited information in English is it is often imprecise and spread over several official websites with contradictory content. Eventually you have to check websites of private agents, that have a modern layout, but often conceal the truth as earning fees and commissions is the main objective.

To be successful, we recommend that a country sets up a digital expat office to deal exclusively with foreign remote workers. All staff should speak English fluently, and the head of department should be appointed not based on seniority but competence. Choosing an older bureaucrat with limited or no knowledge of English, who has never lived abroad and considers foreigners to be more of a threat than an opportunity, is bound to result in failure.

The digital expat office needs to be designed as a one-stop-shop. There should be no need for digital workers to visit other government branches, such as the immigration department, employment bureau, tax authority, local registration offices, etc. Having everything under one roof does not only offer convenience to the customers, i.e. digital workers, but also ensures that all information about them is readily available. Criminals or people who misbehave can therefore be identified easily.

A main responsibility of the digital expat office is the development and maintenance of a state-of-the art website in impeccable English, as well as the design of PR and marketing activities on social media. By communicating with potential customers around the world, the digital expat office learns a lot about their requirements and can therefore launch specific offers for target segments.

Visa application is best done via the official website in a paperless and trouble-free form. This ends the necessity to look for a (dodgy) private agent or pay a special “incentive fee” to speed up the process. Service standards should be in line with top companies in the private sector. Only then will DWEs really feel welcome.

Officials might object, that the above is not in line with the current bureaucratic setup and that the costs are too high. This argument is hardly convincing. Visa fees can easily cover the additional costs of the new digital worker office. And as far as the current organization is concerned, what politician wants to explain to the population, that tens of thousands of new jobs were not created, because the government organization did not allow it.

 

Design visas that stand out

Visas rules are usually designed by the immigration department or the foreign ministry with domestic security as the top priority. As nobody wants the country to be flooded by criminals or people unable to pay for their stay, security should also be a main concern for DWE visas. But attracting foreign talent needs to have the same priority and the digital expat office needs to ensure this.

Visa rules have to be short, but comprehensive and precise. We recommend to cover at least the following six topics and consider the conditions described below:

  • Duration: Minimum of 12 months with the option to extend for another year or more
  • Funds: Applicants need to provide proof of sufficient funds, either in the form of regular monthly income or a bank deposit. The respective amount should be stated clearly. If the requirement is too high, nobody will come. If it is too low, applicants might not be able to cover their daily costs. As a general guideline, the monthly requirement should be set close to the gross income of the average local middle-class employee (potentially with lower limits for younger and/or older digital nomads)
  • Work: In general, full-time work should only be allowed for foreign companies carrying out activities abroad. However, it would be smart to allow domestic part-time work as teacher or university lecturer or in areas with a local shortage of skilled staff
  • Health coverage: Sufficient health coverage should be mandatory and set at a realistic level. Applicants should not be forced to buy local health insurance, as this is a no-go for older DWEs, who often already have existing expat insurance. However, it would be good to offer a solution within the local health care system to those, who don’t want or can’t purchase expensive expat health insurance
  • Visa fee: Some countries feel tempted to use the visa fee as an additional source of income, assuming that foreigners have no choice but to pay. However, nowadays digital nomads already have many choices. Europeans can live and work almost anywhere in Europe. Americans, Canadians and Australians have many interesting domestic places. As the competition between developing countries is likely to increase, DWEs will have many locations to choose from. Countries that try to overcharge on the individual visa fee, will achieve very limited total visa income
  • Income tax: People who have stayed in a foreign country for 183 days and more, are usually subject to income tax in that country. It is up to the visa issuing country to demand income tax filing or not, but it is important to state the respective conditions clearly. The tougher the conditions, the less digital workers will be attracted

 

Provide tailor-made products

Digital workers have specific requirements regarding accommodation, workspace, telecommunication and IT support as well as leisure activities. They are also savvy in finding the best deals. A traditional two-tier tourist pricing policy, whereby tourists pay an additional 100% or more compared to locals, doesn’t work with them in the long-term. Therefore, don’t even try it.

To really attract digital workers, it is important for the private sector to launch targeted products and promotions. Hotel operators can transform existing rooms for tourists into accommodation for DWE, including free Wi-Fi as well as lounge and gym access. Traditional offices can be converted into modern workspaces, where local and international experts have an opportunity to interact. A “digital expat card” offering special telecom, travel, fitness, restaurant and shopping deals is another option to appeal to remote workers.

The list can be extended endlessly. With every new digital expat, more opportunities for local businesses emerge and thousands of jobs can be created. The better the offers, the more foreigners will come and spend.

 

Offer a long-term perspective

Many digital workers might want to stay in their host country after their visa expires. Therefore, at least an extension for another year should be possible. But it is smart to offer more, such as a clear path to permanent residency or even citizenship, provided that certain conditions are met.

The attractiveness of such offers should not be underestimated, as they can be a deciding factor in choosing one country over another. Without a clear outlook, many digital workers will also avoid making major investments, such as buying a condo or a house.

Countries that manage to attract a large number of digital nomads are not just able to obtain short-term economic benefits. They can observe their guests and offer a long-term perspective to those, who truly provide value to society and are willing to learn the local language. This will turn short-term spenders into long-term investors.

As many DWEs already have their own company or are planning to set one up in the future, attractive local incorporation offers should also be available. As no one wants to deal with the local bureaucracy, that in many cases only speaks the local language and might be hard to deal with, special solutions need to be developed.

 

Digital workers and entrepreneurs represent a multibillion-dollar opportunity. Those countries and businesses, that react quickly and offer attractive solutions, will reap huge benefits. Contact us at info@adexoconsulting.com to discuss, how we can help you to become a leading player in this field.

Disclaimer: The above is for informational purposes only. It is not an offer or advice to buy or sell any products or services. Adexo Ltd does not provide specific investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this blog.