Require wealthy immigrants to put 10% of capital into growth investments – Icehouse

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Wealthy immigrants should be required to invest in startups, a business group says.

“We are proposing that at least 10% of wealthy migrant capital is placed into growth investments, such as angel investment, venture capital or private equity growth funds.  These are riskier investment classes but up to 90% of the immigrant’s capital would be placed in lower-risk investments, such as bonds and bank deposits," says Andrew Hamilton, chief executive of business growth hub The Icehouse.

Today, a wealthy immigrant who comes in under the Investor Plus programme has to invest $10 million but the entire sum can go into government bonds. There is also a $1 million investor visa, which has tighter rules for English language skills and other criteria.

New Zealand introduced a wealthy migrant category in 2009. This proposal will require a change in the rules, Mr Hamilton says.

Since the category was introduced, about 570 applications have been approved, bringing in $1.6 billion in new investment. Some 370 applications have been approved in principle, with a value of $770 million. Another 670 applications are under consideration representing another $1.1 billion (these figures are from The Icehouse; MBIE did not immediately reply to an NBR query).

Mr Hamilton has yet to have the opportunity to put his idea to Immigration Minister Michael Woodhouse but says, "We have talked to the officials at MBIE and Immigration NZ and there is a process under way of review, which includes looking at the new proposed Global Impact Visa coming in. Their feedback was positive without necessarily jumping in line with what we proposed. Basically, we are trying to give them a push along."

Already doing it across the Tasman
Obviously, there is a pinch of self-interest in The Icehouse's new campaign.

But it is a concept that has already taken off over the ditch.

Since July, Australia has required wealthy migrants to invest at least $A500,000 – or 10% of the $A5 million total they must invest –  in venture capital or growth private equity funds. This is expected to rise to a minimum of $A1 million (20%) within two years, Mr Hamilton says. 

Another $A1.5 million must be invested into eligible managed funds or listed investment companies that invest in smaller companies listed on the ASX. The balance of funds can then be invested in other listed companies, corporate bonds, annuities or real assets, subject to a limit on property investment. Australia even goes further, requiring the investor migrants to pay a one-time economic development levy of $A250,000.

Mr Hamilton says the policies are a "game changer" for Australia.

Meanwhile, a new KPMG paper says New Zealand businesses would need a combined $420 billion in capital by 2025 to support the government's growth agenda but  "KPMG analysis suggests there will be a shortfall of about $115 billion that will need to be funded by foreign investment."

Migrant investors could provide a "vibrant pool of capital," KPMG says.

In July a series of immigration rule tweaks saw the government double the points for entrepreneurs planning to set up a business in the regions under the Entrepreneur Work Visa from 20 to 40 points – or a third of the total required for entry.

NBR has asked Mr Woodhouse for comment on The Icehouse's proposal.

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