In November, Australia’s doors opened to a new type of entrant. The “significant investor” visa gives residence to applicants with $5 million or more to invest in this country, without the usual age, language or residency requirements of other visas. After four years that residency becomes permanent.
The number of the subclass of the permanent residency visa – 888, a lucky number in China – makes it clear just who the visa is targeting.
While it isn’t yet known how many individuals will come in under this visa, it gives the states and territories a way to attract capital to support their economic development policies in a way they haven’t had before. As applicants need endorsement by a state government, the states have the opportunity to dictate how their applicants will make their so-called complying investments.
“Prior to this visa coming, Australia did not really have an investor’s visa,” Western Australian Business Migration Centre manager Bruno Delfante says. “Our visa program was more about attracting business people to come and live here and run businesses.”
It also puts the states in competition for the same capital. While the allocation of visas between them will be roughly according to population, it is likely that more active states will be able to increase their quotas at the expense of less active ones, observers say. This is, not surprisingly, putting the states in a race to establish themselves as the location of choice.
“We were pretty ready to go day one,” NSW Trade and Investment Minister and deputy premier Andrew Stoner tells BRW. “Some of the other states have been caught with their strides partly down.”
Financial services firms Moelis & Co, Gao Fu and JBWere are already marketing compliant investment products and politicians are keen to press the flesh during sales pitches. Stoner made a visit to Shanghai, Shenzhen and Hong Kong in December that coincided with a trip by Gao Fu executive chairman Geoff Ross.
“We’re happy to work with them,” Stoner says. “If there’s a government visitor there saying ‘You’re welcome in our nation or state’, that helps pave the way. They think there has to be government endorsement for all these things.”
By mid-December, NSW had already put its stamp of approval on six applications. Just like the investment banks, the state is trying to position itself as the destination of choice, Stoner says. “If it seems to [would-be applicants] that NSW and particular investment businesses are the way to go to make a smooth path, that’s the word that spreads and if you’re in first, then good luck to you.”
The visa, which matches similar schemes already offered in the United Kingdom, United States, Singapore, Canada and New Zealand, makes sense for an economy like Australia’s, says consultancy Deloitte partner and immigration leader Mark Wright. “The patchwork nature of the national economy lends itself to migration being tailored to the circumstances of different markets,” he says.
This is happening. NSW has specified that 30 per cent of any complying investment must be put into state-issued Waratah bonds to boost its Restart NSW infrastructure funding program. The state’s six applicants will collectively put $16 million into the bonds.
Other regions are taking a different tack. WA is not as prescriptive.
‘The policy that we commenced with was that we were looking for investors that would make the biggest contribution to the WA economy,” Delfante says. “If you start telling investors where to put their money and if things go wrong, are you partly to blame?”
The state has already had four expressions of interest from would-be applicants, two of whom want to put the total into state bonds. One will provide expansion capital to a local manufacturer seeking to increase its overseas business, while the fourth will fund the local expansion of another firm.
“The local company actively sought the investor,” Delfante says.
Queensland is taking a similar tack, focusing on the direct economic benefits a would-be applicant offers the state. Victoria, which only finalised its investment criteria just before Christmas, is waving a flexibility flag.
“The Victorian government bond will help to ensure that significant investors are not locked into their investment choices made prior to visa grant,” Employment and Industrial Relations Minister Richard Dalla-Riva said in a statement.
The ACT wants to use the inflow to boost its knowledge-intensive industries. The territory already has a small venture capital industry funding spin-off projects from institutions such as the Australian National University and defence companies but it won’t mandate any investment type or route, says ACT executive director for business development Ian Cox.
“[Canberra is] a small city, geographically concentrated,” Cox says. “There are strong people and investor connections within the ACT and those points of contact can be readily accessed. We will do some degree of uncommitted introductory work.”
The new visas are part of a series of changes to the Business Innovation and Investment Program – for which Immigration is planning 7400 places in 2012-13 – outlined by Immigration Minister Chris Bowen in May.
There are three types of complying investments – Commonwealth, state or territory government bonds, Australian Securities and Investments Commission-regulated managed funds with a mandate for investing in Australia and direct investment in proprietary companies.
With investors likely to focus on Sydney and Melbourne, smaller states will have to show a greater level of flexibility to overcome their disadvantage, Tasmania’s general manager for trade and migration services, Alan Campbell, says.
“Tasmania’s flexible approach will allow migrants to choose how they wish to allocate their funds across the three investment steams permitted,” he says.
Cox says smaller states have an opportunity to work more closely with investors and their local economy than larger ones. “We have to present a different opportunity,” he says. “We have the capacity to deeply know our sectors and our business communities.”
South Australia seems to be banking on this approach. It says applicants have to invest a minimum average of $3 million over two years in state-based companies that do their business in the state. This could be seen by some applicants as too prescriptive and complicated but the government says that’s not the case.
“We believe South Australia’s strong economic outlook and low-cost environment for business will provide an incentive to migrants prepared to make that initial $3 million investment,” the trade department says.
The main difference between the 888 visa and other business visas is that it permits residency without demanding the holder live in Australia. In fact, it only requires an average of 160 days’ residency over a four-year period. This allows applicants to invest in Australia while managing interests elsewhere. After four years, the holder can get sub-class 888 permanent residency.
While beneficial for the applicant, the new scheme also benefits states. An initial investment is likely to lead to more, the head of Australia China practice at consultancy KPMG, Doug Ferguson, says.
“We expect the primary earner to make further acquisitions, be they into proprietary companies or further financial service products,” Ferguson says. “It’s not going to be the end of the game with $5 million.”
NSW has already seen this. Two potential applicants were Chinese brothers who, in addition to the complying investment, have told officials from Trade and Investment NSW that they wanted to make a joint venture with an established advanced manufacturer in the state to take advantage of a market opportunity in China. This has had its own spin-off benefits in the battle between the states.
“One of them had a son at uni in Melbourne,” Stoner says. “He’s transferring to university in NSW as a result. That’s a small win.”
The number of the subclass of the permanent residency visa – 888, a lucky number in China – makes it clear just who the visa is targeting.
While it isn’t yet known how many individuals will come in under this visa, it gives the states and territories a way to attract capital to support their economic development policies in a way they haven’t had before. As applicants need endorsement by a state government, the states have the opportunity to dictate how their applicants will make their so-called complying investments.
“Prior to this visa coming, Australia did not really have an investor’s visa,” Western Australian Business Migration Centre manager Bruno Delfante says. “Our visa program was more about attracting business people to come and live here and run businesses.”
It also puts the states in competition for the same capital. While the allocation of visas between them will be roughly according to population, it is likely that more active states will be able to increase their quotas at the expense of less active ones, observers say. This is, not surprisingly, putting the states in a race to establish themselves as the location of choice.
“We were pretty ready to go day one,” NSW Trade and Investment Minister and deputy premier Andrew Stoner tells BRW. “Some of the other states have been caught with their strides partly down.”
Financial services firms Moelis & Co, Gao Fu and JBWere are already marketing compliant investment products and politicians are keen to press the flesh during sales pitches. Stoner made a visit to Shanghai, Shenzhen and Hong Kong in December that coincided with a trip by Gao Fu executive chairman Geoff Ross.
“We’re happy to work with them,” Stoner says. “If there’s a government visitor there saying ‘You’re welcome in our nation or state’, that helps pave the way. They think there has to be government endorsement for all these things.”
By mid-December, NSW had already put its stamp of approval on six applications. Just like the investment banks, the state is trying to position itself as the destination of choice, Stoner says. “If it seems to [would-be applicants] that NSW and particular investment businesses are the way to go to make a smooth path, that’s the word that spreads and if you’re in first, then good luck to you.”
The visa, which matches similar schemes already offered in the United Kingdom, United States, Singapore, Canada and New Zealand, makes sense for an economy like Australia’s, says consultancy Deloitte partner and immigration leader Mark Wright. “The patchwork nature of the national economy lends itself to migration being tailored to the circumstances of different markets,” he says.
This is happening. NSW has specified that 30 per cent of any complying investment must be put into state-issued Waratah bonds to boost its Restart NSW infrastructure funding program. The state’s six applicants will collectively put $16 million into the bonds.
Other regions are taking a different tack. WA is not as prescriptive.
‘The policy that we commenced with was that we were looking for investors that would make the biggest contribution to the WA economy,” Delfante says. “If you start telling investors where to put their money and if things go wrong, are you partly to blame?”
The state has already had four expressions of interest from would-be applicants, two of whom want to put the total into state bonds. One will provide expansion capital to a local manufacturer seeking to increase its overseas business, while the fourth will fund the local expansion of another firm.
“The local company actively sought the investor,” Delfante says.
Queensland is taking a similar tack, focusing on the direct economic benefits a would-be applicant offers the state. Victoria, which only finalised its investment criteria just before Christmas, is waving a flexibility flag.
“The Victorian government bond will help to ensure that significant investors are not locked into their investment choices made prior to visa grant,” Employment and Industrial Relations Minister Richard Dalla-Riva said in a statement.
The ACT wants to use the inflow to boost its knowledge-intensive industries. The territory already has a small venture capital industry funding spin-off projects from institutions such as the Australian National University and defence companies but it won’t mandate any investment type or route, says ACT executive director for business development Ian Cox.
“[Canberra is] a small city, geographically concentrated,” Cox says. “There are strong people and investor connections within the ACT and those points of contact can be readily accessed. We will do some degree of uncommitted introductory work.”
The new visas are part of a series of changes to the Business Innovation and Investment Program – for which Immigration is planning 7400 places in 2012-13 – outlined by Immigration Minister Chris Bowen in May.
There are three types of complying investments – Commonwealth, state or territory government bonds, Australian Securities and Investments Commission-regulated managed funds with a mandate for investing in Australia and direct investment in proprietary companies.
With investors likely to focus on Sydney and Melbourne, smaller states will have to show a greater level of flexibility to overcome their disadvantage, Tasmania’s general manager for trade and migration services, Alan Campbell, says.
“Tasmania’s flexible approach will allow migrants to choose how they wish to allocate their funds across the three investment steams permitted,” he says.
Cox says smaller states have an opportunity to work more closely with investors and their local economy than larger ones. “We have to present a different opportunity,” he says. “We have the capacity to deeply know our sectors and our business communities.”
South Australia seems to be banking on this approach. It says applicants have to invest a minimum average of $3 million over two years in state-based companies that do their business in the state. This could be seen by some applicants as too prescriptive and complicated but the government says that’s not the case.
“We believe South Australia’s strong economic outlook and low-cost environment for business will provide an incentive to migrants prepared to make that initial $3 million investment,” the trade department says.
The main difference between the 888 visa and other business visas is that it permits residency without demanding the holder live in Australia. In fact, it only requires an average of 160 days’ residency over a four-year period. This allows applicants to invest in Australia while managing interests elsewhere. After four years, the holder can get sub-class 888 permanent residency.
While beneficial for the applicant, the new scheme also benefits states. An initial investment is likely to lead to more, the head of Australia China practice at consultancy KPMG, Doug Ferguson, says.
“We expect the primary earner to make further acquisitions, be they into proprietary companies or further financial service products,” Ferguson says. “It’s not going to be the end of the game with $5 million.”
NSW has already seen this. Two potential applicants were Chinese brothers who, in addition to the complying investment, have told officials from Trade and Investment NSW that they wanted to make a joint venture with an established advanced manufacturer in the state to take advantage of a market opportunity in China. This has had its own spin-off benefits in the battle between the states.
“One of them had a son at uni in Melbourne,” Stoner says. “He’s transferring to university in NSW as a result. That’s a small win.”
