The Australian Government plan to sell a 12-month “pathway to permanent residency” to business migrants for $15 million seems to be a policy at odds with itself.
The new Premium Investor Visa (PIV) was announced as a part of Tony Abbott’s Industry Innovation and Competitiveness Agenda, and will be introduced from the start of next financial year.
That such a visa was created tells a story of strong demand for investor-class visas. And it is evidence of a government that wants Australia to get a good share of investor dollars leaking from China through High Net Worth Individuals.
The PIV is an extension of the existing Significant Investor Visa program set up in 2012 by the previous government, and given bilateral support at that time by the Coalition.
The Significant Investor Visa program enables potential business migrants to gain permanent residency over four years, albeit with reduced language requirements and a relaxed residency requirements. The SIV applicants simply need $5 million to invest in Australia into a “complying investment.”
Critics call the scheme the best deal in town. Anyone with $5 million can drop the money into government bonds, collect their permanent residency visa at the end of four years as they take $5 million back. There is no requirement for long term commitment.
But so large is the pipeline of SIV dollars that government is mesmerised by its potential. And of course, so is the finance sector.
And up to a point this makes sense. The $5 million investment for SIV applicants, or the $15 million from PIV applicants, is only the front-end of a deeper potential capital pool these migrants can access.
Of course, government wants these high net worth individuals to build links with Australia. They know that a permanent visa application is meant to be the start of a much deeper relationship
But given that at last count there were more than 1,000 applications for SIV’s still waiting in Hong Kong to be processed, you might wonder why a $15 million PIV was necessary. Why offer a premium service when speeding up processing times of the existing scheme would have the same net effect.
The fact that government is actively marketing a mechanism to let people buy their way to the front of the mythical ‘queue’ will irk some people.
It is not clear why government felt compelled to launch a $15 million “premium” service, and few details about how the scheme will operate were contained in the Competitive Agenda policy documents.
There are no 12-month schemes like this anywhere else in the world. So when government further reduces the residency and language requirements in return for an additional $10 million, who are we competing against?
The new PIV scheme seems at odds with the objectives of the investor visa policy. There is nothing long term about its requirements. If Immigration Minister Scott Morrison wants applicants who bring talent and money to build businesses in Australia, there is nothing in this policy that requires them to do so.
Lots of short term money, yes. But how many businesses will get built is questionable. No detail about where the several billion dollars of SIV money has been put has been released.
Until data is available about the impact of the investor visa program (positive or negative) the value to Australia of this scheme is unclear. It is true that this scheme is still in its early days, but there is no evidence – none – that this scheme is having a positive impact (even while in anecdotal evidence points to an undesirable impact in the property sector.)
I have written previously that the SIV program may provide a source of new capital for the Australian tech sector. This has not been the case. Certainly there is no evidence of flows of Chinese money, large or small, into this sector. The creation of a premium 12 month visa will not change that.
The appointment of Austrade as the agency responsible for determining whether an applicant’s money is being put to a “complying investment” should be welcomed. Previously this role had been performed by the state’s.
An least with Austrade driving the show, the “complying investments” will more likely be aligned with national investment priorities. The Coalition identified five priority investment areas prior to the last election and reaffirmed them in February.
They are: Food and agribusiness; resources and energy; economic infrastructure; tourism and education; and advanced services, manufacturing and technologies.
While these priorities sound a little too old economy for many in the tech sector, there are abundant opportunities within them for digital applications and services as complying investments. The trick will be to ensure that Austrade markets the program this way.
Assistant Immigration Minister Michaelia Cash has been overseeing a review of the SIV program and its processing arrangements. She says industry will have plenty of opportunity to consult with Austrade on this issue.
“Austrade is still in the early stages of deliberation with regard to these new policy responsibilities – they will consult with stakeholders as part of the process for reviewing complying investment policy settings for SIV and PIV,” she said.
While Senator Cash’s review has resulted in additional resources being added to the Hong Kong processing centre and a streamlining of security and health check requirements – resulting in generally faster visa assessments – the real test of whether this policy is able to deliver on its promise will be in the interpretation of complying investments.
And we won’t get an understanding of this until Austrade declares its hand, and until immigration starts releasing data.
In meantime, David Chin from Basis Point, which is one of the few companies looking at this program in a meaningful way, says the money from high net worth individuals seeking to diversify their assets abroad has only just begun.
Basis Point says the Chinese data suggests that high net worth individuals in China currently have just 5 per cent of their wealth invested outside of China, compared with high net worth individuals from elsewhere in the world who average 24 per cent of their wealth outside of their home country.
“This suggests substantial capital flow can be expected via the PIV and SIV programmes in the years ahead,” Mr Chin said.