James Riley
June 24, 2013

Game Changer: 888 investment visas

 

There is a flood of investment money heading to Australia from high net worth individuals seeking permanent residency in this country through a special new class of investor visa.

What started as a trickle late last year is quickly becoming a river.

The new class of Significant Investor Visas – called sub-class 188 and sub-class 888 visas – were launched last November and have already attracted an identified potential pipeline of $2.2 billion in new money.

The source of this ready cash is predominantly China, and the volume and velocity of its arrival will have a transformative effect on the Australian innovation scene. It has particular significance within the ICT startup sector.

The money that has so far been identified – through the more than 436 expressions of interest to the Immigration Department from potential SIV investor-applicants – has started to wash up on our shores before significant marketing of the program.

These are substantial pipeline sums. The creation of these new visa types will play a huge role in the Australian innovation sector and provide a significant platform for engagement with offshore investment communities, particularly in Asia.

To qualify for these visas, an invitation-only applicant must have a minimum $5 million to invest in Australian businesses, government bonds or, significantly, managed funds. They must maintain that minimum level of investment over a four year period.

These new visas – the 188 the provisional class, which then graduates into a 888 permanent residency visa.

So what do we know about 888 visa applicants

In the six months since the Department of Immigration launched the Significant Investment Visa classification, just two visas have been issued.

But according to Immigration officials, of the 436 expressions of interest the department has received, 276 ‘invitations’ have been sent to potential applicants.

And of these 276 invitations that have been sent, 170 have returned formal applications to the department.

According to the Department, it is simply too early to determine on-going conversion rates of the number of expressions of interest that will become investment visa holders. But it is expected to be high.

The department says the currently lower number of invitations to expressions of interest is because they have not been processed – not because they have been rejected.

The primary source of people applying for these investment visas is China, of course. There is simply no subtlety in its ’888′ designation.

Of the 170 formal applications for Significant Investor Visas that have so far been lodged with Immigration, officials say that 94 per cent come from China.

The plan to develop a new visa class to attract entrepreneurs and investors was announced a year ago – in May 2012 – by former Immigration Minister Chris Bowen. Further details of the program were subsequently released in August before the program came into effect in November.

The first successful visa applicant, which was publicised by the Immigration department, went to a Chinese toymaker. The second and subsequent recipients will pass through the system without fanfare.

Where are they going, what industries are they investing in?

It is too early to know where these investors are focusing their attention. There is a pipeline of interest recorded at the Immigration department, but until SIV visa money starts flushing through the system, it is not yet clear how and where these investments will make an impact.

But we do know which Australian states have been most successful in attracting applicants.

Of the 279 invitations sent to the potential investors that had submitted expressions of interest in applying the SIV visa, the lion’s share came from New South Wales and Victoria, whose governments have been most active in soliciting investments.

NSW sent 115 invitations to Significant Investor Visa applicants, while Victoria sent 116. Queensland has so far sent 30, South Australia 4, and Western Australia 14.

These are March numbers – the latest being released by the Immigration Department.

It is too early to get an understanding of where these potential investors will put their money. The Immigration Department has collected raw numbers on how many offshore investors are interested in applying for an SIV, but there is nothing like a breakdown of where these potential investors want to put their money.

But we do know that financial institutions – fund management companies and Venture firms – are only just now starting to ‘sell’ the visas into offshore markets.

We do know that there are several companies putting together funds now in China, and that these funds will drive a wave a new private investment, and this is good news for the innovation sector.

This is a new scheme, and its fundamental ambitions are solid. Indeed, the scheme seems a no-brainer and has been given largely bi-partisan political support. It’s launch merely brings us in line with global competitors like Canada, the UK or New Zealand, which each have similar schemes.

There will likely be some tweaking of the SIV scheme as it becomes clearer where the investment dollars are going.

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