Peter Hughes. Subsidising foreign investment with visas.Jun 23, 2015
Visas which give wealthy business people and investors a pathway to permanent residence and Australian citizenship through various forms of investment have been around for many years. The new twist, under the Government’s recently announced ‘complying investments‘ for the Significant Investor Visa, is to channel some money out of safe investments and into venture capital and start-ups.
The $5 million worth of investment that a foreign investor must make in Australia to qualify for a visa must now include at least $500,000 in eligible Australian venture capital or private equity funds investing in start-ups and small private companies. The Government expects to increase this to $1 million for new applications within two years. In addition, at least a further $1.5 million of the $5 million total must go into in eligible managed funds or listed companies that invest in emerging firms.
Some commentators, including venture capitalists, have applauded the move. On the other hand, migration agents reportedly have concerns over whether their clients will see this requirement as too risky and turn their attention to other countries. The Government has tried to manage this by only requiring 10% of the total investment to go into the highest risk investments.
One wonders why, if these investments are truly desirable, they cannot stand on their merits and attract sufficient capital without the need to effectively subsidise them by offering visas and a pathway to Australian citizenship as an incentive to foreign investors. Alternatively, why aren’t broader-based non-visa options being pursued to attract venture capital, such as a HECS-style loans scheme?
The changes also raise the broader question of the effectiveness of migration schemes to attract wealthy business people and investors.
Australia has experimented with variations of such schemes over several decades. State and Territory governments are attracted to them in the hope of bringing foreign business talent and money into their economies.
The traditional migrant ‘bargain’ with the host country is that he or she contributes their skills, resources, physical presence and family to that country’s future in return for permanent residence and access to citizenship and its benefits. However, because of their wealth, business and investor migrants have a lot more scope and flexibility to gain benefits without making much contribution.
The Australian Parliament’s Joint Standing Committee on Migration, in its March 2015 Report of the Inquiry into on the Business Innovation and Investment Programme, struggled to find any substantive benefits, noting in the Foreword that ‘the data provided by the Government was limited and furnished little evidence that the programme was actually meeting any of its objectives.’
And yet the risks are substantial. Migration schemes for business people attract a disproportionate number of applicants from a small number of countries, usually countries where it is difficult to verify all aspects of the background of the individuals and the sources of their wealth. China was by far the largest source country for the over 6000 visas granted in the Government’s Business Innovation and Investor programs in 2013-14.
There is an ever present risk of attracting people of character concern who will, down the track, be the subject of criminal investigations in the source country and embarrassing extradition proceedings. There is also the risk of attracting ‘hot’ money, borrowed money and dubious financial arrangements.
Then there is the underlying public suspicion about wealthy people ‘buying’ their way into Australia. One of the earliest schemes, the ‘Business Migration Program’, was terminated following a critical report of the Joint Committee of Public accounts in 1991 , including concerns about the role private migration agents had been given in the system.
Despite all these dilemmas, Australia probably has to compete with other countries and have at least a limited facility for interested business people to migrate permanently. It is untenable to say that a genuinely interested wealthy business person cannot settle here in the way that a skilled migrant can.
However, policy and administration in this area need to be tightly controlled and the results closely monitored to ensure there is a real benefit for the country. The trick for governments is to find a set of rules that lock in the benefits for Australia without scaring away most of the genuine migrants. Scams that undermine the integrity of this element of the immigration program must be quickly identified and terminated.
Without careful scrutiny, there is a good chance that any new arrangements will end in tears, like some of their predecessors.
Peter Hughes was formerly Deputy Secretary of the Department of Immigration and Citizenship. This article was first published by the Lowy Interpreter.