Australia - investment program and visa application

Australia's SIV raised A$680 million in FY 2020, but the pandemic has severely hindered its processing

Over the twelve month period (to June 30, 2020), Australia recorded 427 applications for the Significant Investor Visa (SIV) program, which requires applicants to invest a total of A$5 million in a portfolio spread across high, medium and low risk asset class categories. However, a small number (135) were granted during this period due to COVID-related failures. The pandemic has had a major impact on FY 2020. In the last four months of FY 2020, only 11 program applications were granted.

The decline in manufacturing capacity resulted in a sharp drop in capital inflows in FY 2020 compared to the previous year. The program brought A$680 million worth of investment into Australia over the period, well below the A$955 recorded in FY 2019. While the number of visa grants fell sharply, the number of applications actually increased slightly (the program received four more applications in FY 2020 than in FY 2019), meaning that much of the lost revenue is likely to be made up in 2021 as the backlog of applications is processed.

In the 2019 financial year, the fortunes of SIV, which is under the umbrella of the country's broader Business Innovation and Investment Program (BIIP), changed for the first time since July 2015, when investment needs were redirected to private equity and venture capital rather than real estate, explaining the sharp drop in applications.

The cumulative investment attracted under the program since 2012 now stands at A$11.75 billion, a figure that seems even more significant when you consider that SIV applicants account for only one in a thousand immigrants to Australia each year.

Chinese applicants remained the main source of SIV investment in FY 2020 (85% of the total), followed by Hong Kongers (5%), Vietnamese (1.3%), Malaysians (1.2%) and South Africans (1.3%).

The share of applications from China steadily declined from its heyday until 2016, while the share of applications from Hong Kong, Vietnam and South Africa increased each year. However, in aggregate, Chinese applicants still account for about 87% of all SIV investors since 2012.

Since the program began, the states of New South Wales and Victoria have been the most popular destinations in Australia. In FY 2020, New South Wales took a slight lead with 44% of the total compared to Victoria's 41%. However, in aggregate, Victoria (largely due to Melbourne's popularity with Chinese and Vietnamese applicants) remains the clear leader with 56% of the total compared to New South Wales' 34%.

What if visas and citizenship were auctioned off? Australians have already thought about it

The response to a pandemic and the overall quality of health care are fast becoming some of the most decisive factors and assets for migration decisions today and for the foreseeable future, along with the functioning rule of law needed to respond to a crisis in a timely manner. These factors are particularly important for some developing Pacific small island states involved in investor migration, sometimes heavily dependent on investment migration for their budgets.

Australia, both continentally and nationally, with its free public health care system (Medicare) and social safety net (Centrelink), is exceptionally well positioned in the region. Australia has over 27,400 cases of COVID-19, far fewer than many other developed countries. The state of Victoria alone accounts for more than 90 percent - 905 deaths nationally.

In the face of isolation, Australia seems to be well positioned in the housing market. There is talk that it may become COVID-free by the end of the year, joining Vietnam, Brunei and small island nations that have claimed (and in some cases lost again) COVID-19 free status.

Melbourne, considered one of the world's most livable cities, has lifted its curfew as of Monday, October 28. The opening was eagerly awaited by many, including the Australian Retailers Association and the Council of Small Business Organizations.

Australia's major positive news for the Business Innovation and Investment Program (“BIIP”) was the doubling of its quota, resulting in a very real post-pandemic outlook for businesses and individuals. Similarly, Australia has now also reduced the cap on citizen returns. Since July, the government has limited the number of Australians returning home (approximately 26,000), although all arrivals must undergo a 14-day quarantine in hotels with a separate fee. That limit will rise to 5,865 in November, an increase of 290 people, after the states of Western Australia and Queensland said they could accept more people. Western Australia has agreed to accept an additional 140 returnees each week, while Queensland has agreed to accept 150.

Australia does not directly accept citizenship by investment (CBI) without naturalization, but it does sell visa programs through residency by investment (RBI).

In the case of 2016, the Australian Productivity Commission think tank considered Nobel Prize winner Gary Becker's idea of selling or auctioning (in this case) the right of residence for a set entry fee to virtually all migrants (with humanitarian and other exceptions). This could mean a general and uniform shift of the entire visa system towards RBI logic, given the overall migrant population beyond the wealthy segment, with an average value of the right of residence in the neighborhood of $50,000. It was estimated at the time that such a scheme, once implemented, could generate revenues of up to USD 50 billion per million migrants and could be combined with a repayable loan scheme for those without economic means. Proposed similar possibilities included auctioning citizenship.

To stimulate the 'post-pandemic' economy, countries, including Australia, might now consider revisiting more open, inclusive and general RBI programs in the style of the Becker proposals, home sales, with these programs likely to be on a temporary and limited basis.

These options may also benefit those who are already temporarily in Australia on various visas, allowing them to become permanent residents of Australia.

This pandemic “visa sell-out” response could refer to the economic recovery process and municipalities' need for basic infrastructure, which is already occurring in some circumstances: for the interim period from September 8 to October 6, Victoria announced changes to Victoria's Business and Investor Visa Nomination Program for 2020-2021 (subclasses 188 and 132). These considerations, clearly focused on recovery rather than ordinary income generation, may provide insight into the future structure of investor policies, including references to recovery efforts in response to the pandemic crisis:

All of the applicant's business and investment activities must contribute to Victoria's economic recovery or health in order to be approved to apply for a visa. You must meet this new criterion using the 'Economic Recovery Forms - Business and Investment Support' when applying through the Live in Melbourne portal.

Against this background, any expansion of the notion of who can be an 'investor' must be in the interest of the nation. In these unusual times, one might even consider extending these boundaries up to the conceptual boundary of the RBI's temporary common program. Expanding and updating the concepts of residence and citizenship that I suggest above should not be too alien an endeavor. The world has clearly entered an experimental stage of selling membership rights (residency and citizenship): for example, former Australian Prime Minister Kevin Rudd even proposed that Australia offer citizenship to residents of the small Pacific states of Tuvalu, Kiribati and Nauru in exchange for control of their seas, exclusive economic zones and fisheries.

Australia's choice as the leading power in the Pacific will be closely watched. The country already functions effectively as a “mother center” and backup plan for some small island states, for example, in crisis issues other than pandemics, including climate-induced migration.