James Riley
July 6, 2014

SIV: Great wall of frustration

SIV: Great wall of frustration
 

There are more than 1,000 formal applications from wealthy Chinese for Significant Investor Visas sitting in Hong Kong with officials from the Australian Immigration department waiting for approval. This is making Australian fund managers and migration agents cranky.

Those 1,000 applications represent a minimum of $5 billion in investment dollars waiting to be transferred into Australia. It’s fair to say that putting $5 billion just out of arm’s reach of the investment industry will get them cranky every time.

The industry has already begun pressing government to streamline its approvals process.

It wants the discovery work for applications in China to be done by industry associations and private sector auditors rather than by the Immigration department, which they say are too slow and maintain evidence benchmarks that are too onerous.

A succession of speakers at the second annual Significant Investor Visa Conference in Sydney pointed to difficulties in the shepherding visa applications through the current system.

The SIV program is still in its infancy, but there are some learnings we can take from its early operation. The SIV program lets foreign entrepreneurs and high net worth individuals with $5 million to invest apply for special visas that have lower residency and language requirements as an expedited route to permanent residency and citizenship.

More than 90 per cent of SIV applications come from China. These are processed by Immigration department staff in Hongkong.

According to conference organiser David Chin from market intelligence outfit Basis Point, the Coalition government has been good to its word on getting SIV applications processes faster, and to expanding the numbers coming through the scheme.

Chin says the number of visa’s approved each month has steadily grown from a tiny handful last year to 40 per month and climbing. That’s $200 million each month and growing. The current run-rate is about 1,000 SIV approvals per year, or $5 billion through the investment door annually through this program alone.

But these numbers, according to those marketing the visas, may yet be small. In fact, David Chin believes that the SIV program could quickly make up half of the quota of 7,000 business visas granted each year.

With that kind of growth, pretty soon we’ll be talking about real money.

But for the tech startup industry, which has been watching patiently for the arrival of the rivers of new venture capital, the wait will continue for some time yet.

Because the SIV program is not quite working out the way that many had expected.

Certainly the initial investments have been conservative, either going entirely into government bonds, cash funds, or managed funds looking at property.

So patience is yet called for. And while there is talk of substantial SIV-related tech funds being created, these won’t surface for some time.

But in relation to the continued acceleration of visa approvals and the expanding flow of investment dollars, the immediate future is still bright indeed.

Competing schemes in Canada and Singapore have now closed, although Canada is considering reintroducing a revised program. Both the Canadian and Singapore schemes attracted domestic criticism for distorting markets and social programs (most notably the Vancouver property market brouhaha).

But these programs have been closed despite an increasing demand among High Net Worth individuals in China (or HNW’s as they are called in the biz.) Chin says the appetite for HNW’s is growing, both as a vehicle for getting money out of the country and as a legacy hedge for the family.

Very often, the primary visa applicant remains fully entrenched in their mainland business and would remain so. But they are motivated in seeking an international tertiary education for their kids and an international lifestyle.

These people are therefore looking at Australia.

Chin points to the SIV investors coming to Australia as being “first generation wealth.” These are people who are hands-on with their investments, who are generally more active in moving investments around, and who generally have greater appetite for risk.

Which sounds like good news for Australian tech companies, except that the money that has so far arrived in Australia is still sitting in “patient” investments.

But this is to be expected. And is likely to be a temporary phase. Many of these visa applicants and HNWs are still doing their due diligence, and still building their personal business networks in Australia and will take some time.

Certainly it will take time to reach the higher risk technology investments.

And in the meantime, for the cranky fund managers, the main prize is not the $5 million that a wealthy Chinese investor must commit for four years to get an permanent residency visa. The main prize is the trusted relationship with that individual – and the wealth behind them.

That is the exciting prospect this visa program holds, and is the reason the program garners bilateral support in Canberra.

In the meantime, the industry wants the logjams and bottlenecks removed from the approvals process in Hongkong.

Shanghai Resources general manager and old China hand John Findley says the requisite standards of proof that SIV applicants must produce for the Immigration department are “beyond criminal.”

He wants to see “panels of auditors” set up in China to conduct the due diligence on behalf of the department. The panels could include chambers of commerce, migration agents, CPAs working inside China. And there should be separate panels for any city with more than 4 million people (more than 20, al least).

This approvals process, he says, will get the investment moving and the visa process underway. The managed funds are already under a legal obligation in Australia through various legislation to ensure that their investors’ funds come from legitimate sources.

And the Immigration department can run its own checks in the background.

The SIV program is still in its early days. A conveyor belt of applications and approvals is still getting up to speed. And the investment dollars are still making their way to the end investments.

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