The federal government has recently launched its new Immigrant Investor Venture Capital (IIVC) Pilot Program which aims to raise $120 million from 60 eligible ultra-high net worth investors. The funds are intended to be invested in Canada-based start-ups with high growth potential. Ironically, the new program, unofficially confirms Canada’s definitive retreat from the global residence-through-investment industry, which it created in 1986 with the Quebec government.
Under the new program, approved applicants with a personal net worth of $10 Million, must invest at least $2 million into a government approved VC fund for a minimum period of 15 years, with no guarantee for return of capital. Applicants must demonstrate their net worth threshold was obtained from lawful, for profit-making management, business or investment activities providing capital or equity gains. Inheritances or assets from principle residential real estate are excluded. Additional requirements include mandatory language testing and proof of completed Canadian post-secondary education of at least one year, or proof of a foreign educational equivalent. Education assessment can be exempted for applicants with a personal net worth of $50 million. A maximum of 500 applications will be accepted during the 14-day solicitation period which ends in mid February. The government then plans to invite up to 60 candidates to apply for Canadian permanent residence. Applicants will be charged a modest processing fee of $1,050. Selected applicants must also submit a comprehensive due diligence report prepared by a designated service provider to ensure the source of wealth is generated from lawful business or investment activities. The fund will be managed by BDC Capital, the investment arm of the Federal Business Development Bank of Canada and by government selected fund managers.
Despite this launch, the Harper government’s new program is a charade. It has a dubious history in the immigrant investor industry. In February 2014, after a 2-year pause on new applications, it terminated the previous Immigrant Investor Program geared to entry level millionaires, cancelling more than 15,000 unprocessed applications mostly from Chinese nationals. Many had been waiting up to 6 years to invest $800,000 per applicant. To meet new program requirements, the delays to complete mandatory language testing, education equivalence assessment as well as to secure the comprehensive financial documentation will take far longer than the short solicitation window.
By imposing mandatory language testing, the only immigrant investor program in the world to do so, Canada would not even be a consideration for the vast majority of the world’s ultra high net worth individuals who reside in China, accounting for 80% of the market. This factor alone renders Canada’s new program a non-player in the residence by investment industry, which it has dominated for almost 30 years.
The leading countries offering ultra-high net worth permanent residence programs include the UK, Malta and Australia. Each offer far more attractive terms and conditions that include much shorter investment terms, substantially lower net worth criteria, open ended subscription periods and no language proficiency requirements. Comparatively, the UK requires an investment of $4 million CAD for five years which can include government bonds with interest paid to the investor. The USA, which became the default leader in the industry once Canada terminated its highly popular program in 2014, offers its EB-5 conditional residence visa which requires an investment of US $1 million or US $500,000 in an approved Regional Center and no minimum net worth requirement.
The immigrant investor industry has proven to be a highly lucrative business bringing billions of dollars to governments including Canada for infrastructure investment. Canada had a stronghold on the mid level investor market largely dominated by China and the Middle East. The province of Quebec continues to successfully promote its own immigrant investor program of $800,000 which will fully subscribe on March 20, 2015 to 1750 applicants. Each applicant must pay a processing fee of $10,000. These fees alone will fund the Quebec Government’s entire annual immigration program.
The previous Federal Immigrant Investor program, a 5-year interest free passive investment, was established in response to the demand for investment capital by Canadian businesses. During the 1990’s Canada received a much greater benefit from the investment capital attributed to higher interest rate environments.
However even at the current low rates, Canada would remain the most popular destination for the mid-level immigrant investor market allowing for tremendous revenue potential to governments and the private sector.
Under a revised passive immigrant investor program at $2 million, with suitable legislation and a centralized processing centre, Canada could easily subscribe and efficiently process 1000 applications each year and charge a subscription fee of $25,000 per applicant. Aside from the obvious massive direct monetary benefits, are the indirect economic “consumption” benefits that objective studies have assessed at $700,000 per family during a 5-year term, which the government dismisses. Most importantly, the children of immigrant investors will, in many instances, provide invaluable links to the international business community, which is an immeasurable benefit from effective immigration policy.
There are currently more than 25 global residence and citizenship based investment programs. The industry will experience significant growth in the years ahead. Perhaps there are other reasons why this government chooses to close Canada’s doors to a largely Asian and Middle Eastern immigrant investor clientele. In the current rapidly changing economic environment, Canada’s business community should demand an immediate, objective reconsideration.
Canada launched its Temporary Foreign Worker Program in 1992, thereby bringing live-in nannies and caregivers into the homes of several Canadian citizens and permanent residents. This accounts for a fifth of all temporary immigration.
The authorities allow these individuals to enter Canada to do jobs that Canadians would avoid for low rates of pay that Canadians would decline outright. These individuals stay away from their homes and families for years. In addition, they can neither settle down in Canada nor marry nor bring their children over nor change jobs or expect a raise in their salaries. As if this were not enough, they also need to live in rooms provided by the employers and stick to the same job unless the authorities drive them out of the country.
Many people would feel that Temporary Foreign Workers belong to restaurants and other mining occupations, without sparing a thought for the live-in caregivers who reside with them. The Live-In Caregiver Program currently employs about 25,000 women, who have helped Canadian women enter the workforce and looked after the children and the elderly as well.
Yet, the Caregiver Program and other temporary programs have created a massive socio-economic problem. These caregivers, who contribute much to the lives of Canadians, have to live in Canada on a full-time basis, which invariably results in the deepening of their ties to the country. At the same time though, they cannot aspire to have any legal connection to the country’s society or economy. Since 2010, live-in caregivers can apply for permanent residence after completing 24 months of work over a four-year period. This makes them better off than the over 300,000 skilled, unskilled and agricultural workers currently in the country on a temporary basis.
Permanent immigrants are a net gain and they contribute to the welfare of the country and the economy. However, temporary immigrants merely live in the country, without forming a family or developing any educational or economic ties with the country. In doing so, they harm themselves and the country too.
On an average, it takes from 6 – 8 years for these temporary workers to become permanent immigrants. Canada needs immigrant workers to meet its shortage of skilled and unskilled labour. Because Canada is an underpopulated country with an ageing population, it makes sense to transform temporary immigrants into permanent ones, thereby helping them rebuild their lives even as they contribute to help the national economy prosper.
Source: The Globe and Mail