SIV program: The Great Wall of Frustration

There are more than 1000 formal applications from wealthy Chinese for Significant Investor Visas sitting in Hong Kong with officials from the Australian Immigration department waiting for approval. It’s making Australian fund managers and migration agents cranky and for our aspiring technology start-ups the promised influx of capital still seems illusory at best.

The 1000 applications represent a minimum of $5 billion in investment dollars waiting to be transferred into Australia and it’s fair to say that putting $5bn just out of arm’s reach of the investment industry will get them cranky every time.

Unsurprisingly, the industry has already begun pressing the federal 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 is too slow and maintains evidence benchmarks that are too onerous.

Shepherding the system

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, which lets foreign entrepreneurs and high-net-worth individuals (or 'HNWs', as they are called in the biz) with $5 million  invest apply for special visas, is still in its infancy but there are some lessons we can take from its early operation.

With lower residency and language requirements, most of the demand for this expedited route to permanent residency and citizenship (more than 90 per cent) is coming from China.

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 visas approved each month has steadily grown from a tiny handful last year to 40 per month and climbing. That’s $200m each month and growing. The current run rate is about 1000 SIV approvals -- or $5bn through the investment door -- annually, through this program alone.

But these numbers, according to those marketing the visas, may yet be small. In fact, Chin believes that the SIV program could quickly make up half of the quota of 7000 business visas granted each year.

Good things come to those who wait

With that kind of growth, pretty soon we’ll be talking about real money. However, for the tech start-up industry -- which has been watching patiently for the arrival of the rivers of new venture capital -- the wait will continue for some time yet.

That’s mainly 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 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 Singaporean 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 HNWs in China. Chin says the appetite for HNWs 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.

Logjams and bottlenecks

For the cranky fund managers, the main prize is not the $5m that a wealthy Chinese investor must commit for four years to get a permanent residency visa. Instead it’s the trusted relationship with that individual -- and the wealth behind them -- that’s worth its weight in gold.

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 Hong Kong.

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 due diligence on behalf of the department. The panels could include chambers of commerce, migration agents or CPAs working inside China. And there should be separate panels for any city with more than 4 million people (at least more than 20).

This approvals process, says Findley, 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.

The Immigration Department can run its own checks in the background.

The SIV program is still in its early days, the conveyor belt of applications and approvals is still getting up to speed and for our tech start-ups patience could well be the key to potential prosperity.

James Riley has covered technology and innovation issues in Australia and Asia as a writer and commentator for 25 years. Read more from James Riley at www.InnovationAus.com or follow him @888riley on Twitter.