Business MigrationBusiness MigrationReviewReview

and the Property Sectorand the Property SectorPresented by

Marcus N. BeveridgePrincipal, Queen City Law – www.queencitylaw.co.nz

Chairman New Zealand Association of Migration and Investment

(“NZAMI” www.nzami.co.nz)

LEXISNEXIS IMMIGRATION LAW CONFERENCE 22 JUNE 2006

This session examines:This session examines:

• Trends in Business Migration• Have we got it right?• Changes to the Investor Category (IC)• Examination and critique of the IC in practice• Critique of requirements• Review of other business categories• Intersection between business migration and

property• Recent Tax Changes• Conclusion/Summary/Recommendations

Trends in Business Trends in Business MigrationMigration

• At the end of this presentation one can draw one’s own conclusion - here is some data which may assist.

• LTBV Start up funds indicated were:2001 NZ$140,707,237 2002 NZ$316,736,589

Trends in Business Trends in Business MigrationMigration

• Number of LTBV Applications2001 8562002 32182003 18172004 581 2006 116 (applications rcvd

76 approved Jan 06 – Jun 06)

Investor CategoryInvestor Category

• Funds indicated2001 $1,132,000,000 2002 $1,203,400,000

• Number of Investor Applications2001 10082002 10872006 39 (YTD)

Investor CategoryInvestor Category

• Total Business Applications

2001 25512002 3359

Investor CategoryInvestor Category

• 2006 YTD Expressions of Interest and Investor Category39 EOI’s were received of which 31 invitations to apply ITA were issued. 8 EOI’s have been declined, 17 Investor Applications have been received. 11 approved in principle – 6 in progress

• 2 Applications have been approved since inception of new Investor Category in 2005.

Investor CategoryInvestor Category

• Total investment funds indicated for LTBV & Investor Category

2001 $1,272,707,2372002 $1,520,136,589

Have we got it right? Have we got it right?

• Total business applications

2001 25512002 33592006 (YTD) 1208 (see

overleaf)

Other Recent BMB Other Recent BMB Activities/IssuesActivities/Issues• New Branch Manager Jock Gilray is now on

board.

• Managed queue will be cleared as of 1 July 2006.

• From 1 July, all applications to be allocated to a processing officer immediately once accepted.

• Applicants can expect applications to be decided within a 3 month timeframe.

Other Recent BMB Other Recent BMB Activities/IssuesActivities/Issues

Outcomes:

• NZIS believes it is seeing higher quality applicants.

• NZIS would expect improved settlement outcomes for New Zealand.

Entrepreneur CategoryEntrepreneur Category

Key Stats• For the 05/06 Financial Year to 09 June 2006:

1. A total of 815 of 907 decided Entrepreneur Category applications have been approved.

2. BMB currently has a total of 318 Entrepreneur applications on hand, 68 of these are currently held in our managed queue.

• 39% of decided Entrepreneur applications received from South Korean nationals, 30% China, 9% UK, 4% Fiji, 1% India, 1% Hong Kong, 16% Other.

Interim LTBVInterim LTBV

Key Stats

• For the period January 2006 to 9 June 2006, 76 of 116 decided Interim LTBV applications have been approved.

• For the 05/06 financial year thus far: 41% of decided Interim LTBV applications received from UK nationals, 9% UK, 9% China, 7% South Korea, 6% India, 28% Other.

• BMB currently has 43 Interim LTBV applications on hand. None of these are held in the managed queue.

Work to ResidenceWork to Residence

• A total of 146 Residence Applications have been received and approved under this category for the financial year to 31 May 2006. This breaks down as follows:

1. Talent – Accredited Employer: 1292. Talent – Arts and Culture: 83. Talent – Sport: 64. Long Term Skill Shortage List Occupation:

3

Work to ResidenceWork to Residence

• For the 05/06 Financial Year thus far: 33% decided applications received from UK nationals, 16% South Africa, 11% South Korea, 5% India, 5% USA, 4% China, 3% Germany, 3% Fiji, 20% Other.

• BMB currently has 21 Residence Category Work to Residence Applications on hand.

Dare to CompareDare to CompareHow do our figures compare to Australian figures.All business sub-class visas for Australia are as follows:

Applications Rcvd• 2001-2002 2152

2004/2005 22572005/2006 (YTD applications received) 2174

• New Zealand2001 25112002 33592006 (YTD decisions made) 1208

• Adopting crude mathematics and adding all Investor, Entrepreneur, Interim LTBV and Work to Residence Applications this would give a sum total of 1,208 applications submitted to NZIS/BMB in 2005 – 2006 YTD.

Trends in Business Migration Trends in Business Migration - Have we got it right?- Have we got it right?• In one word the answer is NO• In summary we have:

1. Fallen way back against Australia;2. Last calendar year numbers of applications

under the Investor and LTBV Categories are woefully low;

3. NZ has probably captured less than 2% of the investment funds it gained in say 2001/2002.

4. The new Investor Category is a waste of time and resources. It has been poorly designed. It is commercially naïve. It is unattractive. It will not and is not working.

Have we got right?Have we got right?

• NZ Business Immigration Policy

• Objective – to contribute to New Zealand’s economic growth through:

a) Increasing New Zealand’s level of human capital;

b) Encourage enterprise and innovation; andc) Fostering external links.

Changes to the Investor Changes to the Investor Category (IC)Category (IC)

• Two step process similar to Skilled Migrant Category• Complete an “Expression of Interest”• NZIS make selection based upon information disclosed in

the “EOI”• Successful applicants invited to lodge Residence

application under Investor Category. After verification, approval in principle is issued and investments funds transferred to New Zealand

• To be eligible, applicant’s need to invest NZ$2 million in Government approved infrastructure projects for 5 years. Security and return of the funds is guaranteed by the Government and administered by the Treasury.

• Other conditions are required to be met before conditional 5 year Residence is granted including standard criteria: health, age, character, English language, evidence of source of funds and other criteria

Examination and critique Examination and critique of the IC in practiceof the IC in practice

• NZIS Business Migration Branch (“BMB”) have just indicated that “applicants can expect applications to be decided within a 3 month timeframe”.

• IC does not guarantee indefinite RRV status until $18A requisition uplifted 5 years later.

• Introduction of English language requirement has effectively stopped the flow of predominantly North Asian business migrants, but has not resulted in any significant increase in business migrants from the U.S.A, U.K, Canada or other English speaking countries

• An objective of the new IC is to increase economic growth and also development through the injection of funds into our economy. This vision is sound, however the reality is that solid numbers of experienced entrepreneurs with overseas business networks along with their investment dollars are just not materialising.

Critique of ICCritique of IC• The IC is more likely to attract older or retired migrants who can

afford to have NZ$2 million tied up for 5 years, and it follows that these migrants are less likely to subsequently become actively involved in our economy because of their stage in life.

• To qualify, the maximum age at the time of application (EOI), is less than 55 years, hence persons aged 54 will be 59 years old before their unconditional Residence status in NZ can ultimately be assessed. Reality dictates that not many applicants in this age group would risk leaving their future in abeyance for 5 years.

• It is interesting that NRWT at zero percent is expressly permissible for non NZ tax residents and that policy provides “The investment funds are a registered security for the purposes of the Approved Issuer Levy regime”(BI13). This may well cause headaches for applicants and their advisors in light of the requirement pursuant to policy BI12.10 that an applicant either spends significant time in NZ (BI12.10.1) or has a base established in NZ (BI12.10.2) in order to ultimately obtain full and unrestricted PR status 5 years thereafter.

Critique of ICCritique of IC

• It is probably fair to assume that many potential applicants are aware of how previous NZ business immigration policy decisions were made retrospectively and without notice or prior consultation or without proper consideration of the financial impact upon applicants. Understandably, there is therefore a lot of nervousness over unilateral changes which can be made by the Government at any time. The North Asian or non-English speaking applicants affected by the overnight English languages changes of 20 November 2002 may still view NZ in a dim light.

• It is planned that the Treasury Department will become caretaker of Investor funds and administer the funds for capacity building, sustainable growth, innovation and infrastructure projects through the budget process.

Critique of ICCritique of IC• The control of IC funds by the Government and Government

agencies raises the question of whether or not this control or channelling of funding will undermine free-market enterprise upon which many financial institutions and lenders rely upon for their businesses. Could it be that SOE’s like Air New Zealand, Telecom and others have a commercial advantage by having access to better rates of interest than say private sector organisations?

• Since the Government is going to invest in “capacity building”, “sustainable growth”, “innovation and infrastructure projects” do we really know what these are?

• From a taxation point of view, the top end tax rate of 39 percent is unattractive and may act as a significant deterrent notwithstanding that this will only be applicable for immigrants who actually elect to live in NZ. As noted above non (tax) residents will NOT pay any income tax on the CPI adjusted return they receive from the Government after the expiry of the 5 year term.

Critique of requirementsCritique of requirements• Another big ask is the requirement that assets must be

liquidated or converted into cash for the NZ$2 million investment. This has serious consequences given that once assets are liquidated it is often difficult to ultimately turn the cash into income producing assets again without paying a premium for inflation. Many investors are likely to prefer borrowing the investment funds using their leveraged assets as collateral and in most cases, they would likely be able to borrow the money cheaper overseas than the interest rate the Government is able to offer.

• Another thorn in the IC is the paper trail process of assessing the source of funding and also the bank transfer, after the approval in principle, hence an applicant may liquidate his or her assets and then fail the next part of the assessment process. One cannot disagree that risk management is necessary, but the process should surely by now move from being “cart before the horse”.

Critique of requirementsCritique of requirements• Applicants are required to make New Zealand their home

by the end of the 5 year journey. This is not an unreasonable expectation however, once again, applicants are required to commit to New Zealand by building up a life in this country and getting well settled before New Zealand has made any meaningful commitment to them.

• It is reasonable to expect that business entrepreneurs will be able to achieve a higher return from a business venture than say the modest return promised by the Government. Applicants may elect to withdraw 50% of their investment (maximum therefore NZ$1M) after two years so why is it that applicant’s may take the risk of withdrawing their investment after two years , lodge another application along with the required business plan and pay more fees.

Critique of requirementsCritique of requirements

If the business plan is rejected or declined, does the applicant then lose out entirely? No. BI11.25b provides “If the requirements of this policy have not been met the business proposal will be declined and the Government will continue to hold the investment funds” – some may see an inherent conflict here. At this stage, given the depressing number of applications a lot of this will be of academic interest only.

• The IC road is complex, the Minister of Immigration’s proposal that some of the appeal processes should be abolished raises the question as to what recourse will be open to an applicant who has been here for 5 years but then is assessed to have failed some or the final stage of the IC process. It would not be ideal if NZIS was judge and jury. The IC Category must provide access to meaningful appeal rights.

Review of other business Review of other business categoriescategories1. Entrepreneur figures featured earlier – great and

welcome news.2. Work to Residence numbers low but growing – would

hope that this will continue.3. Lack of LTBV numbers alarming and policy should

therefore be relaxed.4. Paucity of IC applications means policy must be

redesigned.5. To avoid redundancy I would also refer attendees to 2

papers presented and provided at last year’s conference:i. Policy and Practice Update given by myself and

Michael Carley (Former Branch Manager BMB); andii. Case Law Review Business Residence Categories

(David Ryken).These 2 papers are still highly relevant to all practitioners dealing with Business Migration.

Review of other business Review of other business categoriescategories6. Other issues:

a) Interim Permits under LTBV policy – NZAMI members are not at all happy with these arrangements and are in correspondence with the Ombudsman’s office.

b) Residence status of (pre-existing) Investor cases where applicants borrowed their investment funds. Although precise numbers are scarce, it is thought a couple of hundred cases may still be in the Minister’s hands. In some cases interim RRV’s have now issued for 4 or 5 years and s.18A requisitions have still not been uplifted.

c) Several thousand former Investor Category applications from PRC have now been very much declined and are now off the radar screen.

Review of other business Review of other business categoriescategories

d) BMB current process is that the PA provides evidence of English that he or she considers to demonstrate that he/she meets minimum English language standards, then their Entrepreneur Category application will be accepted for processing as long as all other lodgement requirements have been met. This is a welcome change as a few months ago BMB had been rejecting such applications failed lodgement one consequence of which meant there was no ability to appeal to RRB.

e) Definition adopted by BMB of “relevant business experience” (please refer to attachment 21) still problematic and should be modified.

f) Same applies if LTBV applicant wants to try new business in NZ – the test of “transportability of business skills” should be user friendly given that the subsequent PR application will, in any event, depend on how well the business has performed and the benefit to NZ (see last year’s paper).

Intersection between Intersection between business migration and business migration and propertyproperty• Without question, business migration has been

a significant driver of economic development of our economy in recent years. However, it is safe to say that this development has come to an end for the foreseeable future. Business immigration investment can only take place when there is confidence and stability in our business migration policy. Unfortunately for New Zealand, the Government has perhaps ignored the red lights as we have approached this intersection and the resulting drop in our economic confidence is now a reality.Nevertheless, as we all know things change and sensible policy adjustments would result in more business immigration traffic to NZ.

Intersection between Intersection between business migration and business migration and propertypropertyLet’s quickly look back at 2001-

• In the BNZ Weekly overview of June 2001 consumer confidence was steady with inflation expectations easing to 2.84% from 2.99%.

• The construction sector employment intentions lifted from 4.1% to 14%.

• The volume of residential building work was down 16.8% but in contrast non-residential building activity was up by 0.6%. In essence the building industry had not moved much since 1994.

• It was forecast that over 2001, there would be strength in construction of farm buildings, factories, hotels & motels, retail especially malls and retail upgrades.

Intersection between Intersection between business migration and business migration and propertyproperty• Let’s now look at June 2002 and June 2003• Retailing was strong, housing strong, business

investment strong – good prospects. There was firm domestic growth in housing and business investment.

• Non-residential building work was up by 11% - however, consents data showed that this trend would reverse to strong housing and weak non-residential in the June quarter.

• Retail sales were 11% stronger than in the previous year - however, consumer confidence went up to 35% feeling that things were heading in the right direction, up from 32%.

• House building was equal to 5% of NZ GDP, very strong housing construction, there was good turnover from surging migration resulting in accommodation building, growing student numbers, investor interest, jobs and real wages growth.

Intersection between Intersection between business migration and business migration and propertypropertyAnd now a glance at June 2004

• An NBNZ Business Outlook survey found that in May, a net 22% of businesses felt pessimistic about the economy over the next 12 months. In April, it was 36% and 42% in March.

• The annual total of 31,677 units was 35% above the average for the past 10 years and the highest annual total since the year to April 1976.

• The value of consents issued for construction of non-residential buildings was NZ$239 million in April. Over the preceding 3 months to April consent values were up 19%, led by the construction of offices +105, shops etc +75, and hotels & motels 63% increase. Factory consent values were up by a healthy 34% and farm buildings 2%. In the year to April total consents were up 12% at NZ$3billion.

Intersection between Intersection between business migration and business migration and propertyproperty• Finally June 2006• The economy has clearly ended its recent period of

unusually strong growth and is now tracking along at below average pace. The housing market is cooling and it is freezing cold!!

• Consumer confidence is deteriorating. The One News Colmar Brunton poll revealed that during May, consumer confidence about the economy over the next 12 months dropped to a net 38% pessimistic from net 29% pessimistic in the last survey taken in March.

• There has been a downward trend in the number of dwelling consents. In April, the total number of dwelling consents issued was 25,330 and this was down from 29,329 from a year ago. It is expected that there will be some property developer casualties.

Intersection between Intersection between business migration and business migration and propertyproperty• During April, the value of non-residential building

consents issued was NZ$209M - this was an 8.3% decrease from a year earlier. The value of factory consents was down by almost 28% from the year before whilst consents values for office buildings were down by 9% while shops and restaurants were down by 16%.

• The monthly Business Outlook survey from NBNZ shows a net 31% of businesses in May expected the economy to get worse over the coming 12 months.

• The correlation between the significant drop in business migration and the drop in property development is compelling and although there are a number of other economic factors which contribute to the downturn including the high New Zealand dollar, interest rates and suchlike, it appears that there is a direct and tangible nexus between business immigration and NZ’s property sector.

Intersection between Intersection between business migration and business migration and propertyproperty• What is also not always understood by our

economists is that in excess of 2000 pre-existing Investor cases approved between 2001 and 2003 would have resulted in an estimated NZ$4B of investment funds being placed on term deposits for 2 years with our primary funding trading banks. The business of banks is to make money from money (which banks have considerable expertise in) hence these trading banks have been awash with capital which they have aggressively put back into circulation further fuelling the major residential property boom NZ has experienced over the last few years – there is no question therefore that business immigration has to date had a significant impact on our property sector. In the next part of this presentation you will also see that major housing cycles are driven most by net migration.

Rodney Dickens – ASB Bank 23 March 2006

“Construction & property sector outlook”

Key pointsKey points Underlying demand for housing will be below

average for the next couple of years driven by below average net migration (in turn driven by a strong international labour market).

Low interest rates, developers, investors and spec builders have created mega-booms in urban, coastal and lifestyle subdivisions, meaning we face major oversupply in all three areas and material negative risks ahead.

Economists have their heads in the sand over inflation risks, while interest rates are not high enough to mount a serious battle against inflation (i.e. despite all the talk to the contrary, upside risk still remains for interest rates).

Some other stuff.

Major housing cycles Major housing cycles driven most by net driven most by net migrationmigration

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Net MigrationAdv. 15 months

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NET MIGRATION & HOUSE PRICE INFLATIONNew Zealand

Net migration **right scale

QV Prices * %Q/Q-4 left scale

* Source: QV** Rolling three months seasonally adjusted and annualised, '000

But downside risk to But downside risk to house prices still some house prices still some way offway off

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REINZ NZ EXISTING HOUSE SALES & MEDIAN DAYS TO SELL

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REINZ HOUSE SALES & LISTINGS

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Listings *

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Net migration driven most Net migration driven most by the global labour by the global labour marketmarket

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MIGRATION('000, seasonally adjusted 3 month average, annualised)

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Quantifying the Quantifying the oversupply of coastal oversupply of coastal sectionssections

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REINZ SECTION SALESAnnual number of sales

PROCEEDING SECTIONSNumber

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TAURANGA DISTRICTSection resales & spec building

Built on (not 4 sale)38%

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Empty (not 4 sale)16%

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PAPAMOA SUBDIVISIONStatus of sections

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PROVINCIAL RESIDENTIAL BUILDING CONSENTS& CBA NZD EXPORT PRICE INDEX

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The hospital pass Dr The hospital pass Dr Bollard got from the Bollard got from the economistseconomists

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INTEREST RATES & DOMESTIC INFLATION

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Labour Cost IndexAnnual % change

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LABOUR COST INDEX & UNEMPLOYMENT RATE

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REINZ NZ EXISTING HOUSE SALES & MORTGAGE INTEREST RATES

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REINZ EXISTING HOUSE SALES &RESIDENTIAL BUILDING CONSENTS 2 month average, seasonally adjusted number

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Valuations stretched in Valuations stretched in most (all?) property most (all?) property marketsmarkets

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left scaleQV Median

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Dairy Payout/Hectare

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NZD and the game the NZD and the game the forex traders are playingforex traders are playing

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MAJOR TAX CHANGESMAJOR TAX CHANGES

STARTING 1 APRIL 2006

The Taxation (Depreciation, The Taxation (Depreciation, Payment Dates Alignment, FBT Payment Dates Alignment, FBT

and Miscellaneous Provisions) Bill and Miscellaneous Provisions) Bill became law on 22 March 2006.became law on 22 March 2006.

Some of the changes are Some of the changes are reasonably significant. These reasonably significant. These

changes include: changes include:

Depreciation Depreciation changeschanges

There has been significant changes to depreciation rates:

from 1 April 2005, tax depreciation rate on most plant and equipment have increased

effective 19 May 2005 depreciation rates on most buildings have been reduced

from 1 April 2005, tax depreciation rate on motor vehicles have increased

effective from 19 May 2005 low asset threshold has increased from $200 to $500

FBT changes & Motor FBT changes & Motor VehiclesVehicles

The new legislation introduces significant changes to the Fringe Benefit Tax regime. The key changes include:

Effective 1 April 2006, the FBT valuation rate applying to the cost of a vehicle will be reduced from 24% to 20% Effective 1 April 2006, a new valuation method of 36^ of the tax written down value of a vehicle will be available

for vehicles acquired on or after 1 April 2006 Effective 1 April 2006, vehicles under a 9-5 lease/flip-fop lease/business use lease will become liable for FBT. This applies to existing as well as new arrangements From 1 April leased vehicles will be deemed to be

owned by the lessee for FBT purposes

Other FBT changesOther FBT changesA new FBT exemption has been created for “business tools” such as mobile phones and laptops, as long as

the following criteria are met:

items provided mainly for business use items are must be used in the performance of

their work cost to the employer is not more than $5,000

Other ChangesOther Changes Tax Exemption for New migrants and returning

New Zealanders

A four year exemption from NZ income tax will apply to new migrants and certain returning New Zealanders who become tax residents on or after 1 April 2006. The tax resident test is modified for this purpose – i.e. the physical presence test is abandoned and the permanent place of abode test is used. The exemption from tax will apply to most form of overseas income.This may be in conflict with Investor Category requirements set out earlier requiring migrants under this category to make NZ their home at the end of the 5 year term.However, it is a step in the right direction and will hopefully negate the requirement for complex and protracted structuring requirements for senior business personnel on secondment to NZ.

Other ChangesOther Changes Changes for Trustees of Foreign Trusts

NZ resident trustees are required to disclose certain information to the IRD and to keep certain records in NZ in

relation to offshore trusts they act for.

Companies Migrating Offshore With effect from 21 March 2005, rules have been established for companies who transfer their place of

incorporation from New Zealand to an offshore jurisdiction. The migrating company will be treated as if it had been

liquidated and all assets realised and distributed to shareholders.

Conclusion/Summary/Conclusion/Summary/RecommendationsRecommendations

The Good, The Bad and The Rugby:

1. New Investor Category will not cut the mustard. It demonstrates an overly influential role by Treasury officials totally out of touch with business immigration internationally.

Conclusion/Summary/Conclusion/Summary/RecommendationsRecommendations2. A quick comparison with Australia

illustrates this:Australian Investor Policy (state sponsored)a) Same age cut-off (55)b) No English language skills required in

Australiac) Approx. ⅓ capital to invest ($750,000 vs.

$2,000,000)d) Term = 4 years vs. 5 NZ

Conclusion/Summary/Conclusion/Summary/RecommendationsRecommendations

e) Interest payable quarterly and commercial rate approx 5% vs. NZ rate of inflation payable after 5 year term

f) In 2 years can apply for indefinite PR vs. 5 years NZ

g) In 3 more years can apply for Australian citizenship vs. 5 more years in NZ

h) Economic opportunity greater in Australia

Conclusion/Summary/Conclusion/Summary/RecommendationsRecommendations

End Result:i. Less money neededii. Less time involvediii. Better return in AustraliaTherefore, it is currently cheaper and quicker to go to Australia, get PR and/or citizenship and then fly to NZ and get PR at the airport !!This is not acceptable and is very difficult for those at the coalface to digest.

Conclusion/Summary/Conclusion/Summary/RecommendationsRecommendations

A different analysis of our current Investor Category for which I cannot claim copyright reads as follows:

Look at the figures – it’s _ _ _ _ _ _ unacceptable.A year of tax funded Government spending on a government office and all they have to show for it is 2 x Investor funds paid (total NZ$4M). And this money is not even the governments – it’s a loan that we have to repay in 5 years. For an Investor NZ $2M @ 7% p.a. forgone for 5 years = NZ$700,000 less 39% taxable = $NZ$427,000 (disregarding NRWT option of zero tax that is) net cost of having “bought” residence for family. For that, 2 kids get a University Education that would have cost say NZ$30,000 p.a. x 2 kids x 5 years = $300,000 so net cost therefore down to NZ$127,000 (for which you get free healthcare for whole family for 5 years = father/mother and 2 kids ÷ by $127,000 = $6,350 per annum).

Conclusion/Summary/Conclusion/Summary/RecommendationsRecommendations

Factor in potential exchange rate fluctuations and the Investor may even finish up getting paid by the government !

Compare this to the heyday of the earlier policy when in excess of NZ$1B was introduced in one year vs. the present performance of NZ$4M to be repaid with interest.

It represents the result of Treasury officials with little life experience bouncing off politicians who have never had a real job being frightened by a certain other politician who does not even take himself seriously – it’s an outrage !!

For the record these words are not mine but both scenarios above show spin doctors at play. Nevertheless, important issues are raised.

How did we get here?How did we get here?Well those of us a little older will remember earlier policy in the 1990’s:

A. $500,000 in active investment outside Auckland or Wellington; or

B. $625,000 in active investment in Auckland or Wellington; or

C. $750,000 in passive investment.

Then in 1996 this was adjusted to $750,000 - $3,000,000 (points indexed). In 1999 this changed to NZ$1M to NZ$6M (points indexed) through to 2005. Now no more points, age limit and investment funds are fixed at NZ$2M.

Pre Existing Investor Pre Existing Investor Category Points - Test Pass Category Points - Test Pass Mark 12Mark 12Age Points Business Points Investment funds

(NZ$)Points

Experience

25-29 10 2 years 1 $1,000,000 1

30-34 9 4 years 2 $1,500,000 2

35-39 8 6 years 3 $2,000.00 3

40-44 6 8 years 4 $2,500,000 4

45-49 4 10 years 5 $3,000,000 5

50-54 2     $3,500.00 6

55-64 0     $4,000,000 7

65-74 -2     $4,500.00 8

75-84 -4     $5,000,000 9

        $5,500,000 10

        $6,000.00 11

How did we get here?How did we get here?During these years the level of English language required was fiddled around with, culminating in a mandatory level of English language for the Principal Applicant suddenly introduced under cover of darkness on the 20th of November 2002 (which it is noted the then Minister of Immigration now regrets). This change in 2002 decimated numbers of applications from China, Taiwan and Korea which were our biggest markets – this is in fact a serious understatement.

The 2005 changes introduced an age limit of 55, a 5 year complying period (formerly 2 years), unrealistic commercial terms and pretty much took away an immigrants ability to be the master of his or her own financial destiny – to date there is little human capital “yield”. The changes are widely considered to be unrealistic, inherently delusional, self-defeating and have been and will continue to be poorly subscribed to.

The Good OilThe Good Oil

1. As noted above great to see many LTBV holders realising their dreams and obtaining PR under the Entrepreneur Category and no doubt after a fair bit of sweat equity. To see 815 families (YTD) rewarded with PR after running their own businesses in NZ for 24 months is good news. What is not so good is that the new numbers coming through under this category will ultimately be significantly less given the poor number of new LTBV applications directly attributable to the English language changes of 2002. The approvals under this category in a sense prevent business immigration becoming a thing of the past but for the time being only.

The Good OilThe Good Oil

2. Work to ResidenceIn the greater scheme of the annual immigration intake 146 PR approvals is very modest. However, it should be noted that the Talent – Accredited Employer policy is quite new and that employees working to residence must have been in employment for 24 months, so hopefully this will become a burgeoning part of business immigration.I understand the minimum salary of NZ$45,000 gross p.a. may be under review by INZ/DOL.

RecommendationsRecommendations1. Wake up

i. Scrap Winston’s existing Investor Category – start again – it ain’t working so get rid of it. Make it user-friendly and attractive. Consider further harmonising of OIC / IRD and immigration rules.

ii. If any form of deal has been struck between Labour and NZ First in relation to NZ Government Business Immigration Policy dishonour it and get on with it.

2. Reduce English language fluency levels – either regard immigration as an intergenerational issue or introduce “user-pays” charges.

3. Solve Auckland’s roading problems by creating policy that is commercially realistic but at same time encourages high net worth individuals to make NZ home. Get the detail right. Make it a win-win reciprocal arrangement whereby investing migrants get tangible value for their investment and feel they are genuinely contributing to our economy.

4. Look at Canadian model(s). Consider private – public partnerships. If suitable adopt policy and go for it !!

RecommendationsRecommendations

5. Make business immigration a priority again.6. Consider changing LTBV policy so that

requirement for elaborate business plan is replaced with simple positive obligation to employ say 5 kiwi’s for 2 years.

7. Promote Work to Residence policy (again!) amongst corporate/employer NZ. Consider increasing application fees for NZ companies so that DOL Purchase Agreement (for services) and Minister’s Service Level Agreement works profitably. As required increase staffing levels.

RecommendationsRecommendations

8. Consider introducing new policy to fast-track direct investment and to allow and facilitate priority processing for those willing to commit substantial capital to NZ and create significant economic benefits for NZ regardless of age or English language ability of applicant.

9. Create another new policy to encourage regional investment and for making investor funds available to local economic development initiatives again with a win-win outcome.

RecommendationsRecommendations10. Understanding the importance of business immigration to our

small economy:i. Elevate it beyond current DOL workforce adjunct;ii. Market and promote it so that it is not perceived to be

about “buying PR” by New Zealander’s but rather what its objectives stand for namely, contributing to our economic growth through increasing our level of human capital, encouraging enterprise and innovation and fostering external links. To get “buy-in” from stakeholders this would require a compelling strategic vision which to date has not been sighted.

iii. Whilst recognising need for policy to remain robust, fluid and transparent consider introducing some underlying guidelines as to what investment is encouraged (even if there is some form of points indexing for different types and levels of investment as required from time to time) e.g. deep green ecofeminist wind generation may be flavour of the month so develop system to recognise this akin to way Immediate Skills Shortage List updated.

RecommendationsRecommendations

iv.Ensure active investment is appropriately rewarded.

v. Ensure BMB is managed by personnel with business experience/acumen and an empathy for those with the drive to make things happen.

vi.Cross-fertilise services more vigorously with other appropriate Government agencies including MFAT/Trade NZ as well as private sector.

The RugbyThe Rugby

Next year NZ is hoping to bring home the Rugby World Cup. We then host the World Cup in 2011. We will be a busy little nation. Let’s hope that we have our act together so that we manage to attract our fair share of talent, human capital, enterprise and innovation during our short tenure on the World stage.

Thank you