Wealthy migrant investment could help propel NZ forward

Published: Mon 14 Sep 2015 09:06 AM
Wealthy migrant investment could help propel NZ forward
Investment into high growth potential companies could increase by between $50 million and $100 million a year if a proposal to change wealthy migrant rules is implemented.
The recommendation is to require a portion of wealthy migrant investment to be allocated into growth capital funding and is being proposed by The Icehouse and a group of prominent business leaders who say that immigration settings should be more effectively used to help fill gaps in New Zealand’s strategic priorities, particularly with investment.
The Icehouse chief executive Andy Hamilton, said it is estimated that over the next decade emerging growth companies will need many billions of new investment.
“Growth companies look to the early stage investment markets for capital. Our angel, venture capital and private equity sectors are developing well, and crowd-funding and public markets are also options. But our work has led us to conclude that only around half of the capital needed by young companies is likely to be available for investment.
“An untapped source of capital are wealthy migrants who want to live in New Zealand. Other countries require these migrants to commit a portion of their investment to growth opportunities. Australia, for example, introduced new rules this year. So should we” he says.
New Zealand introduced a wealthy migrant category in 2009. However, this proposal will require a change in the rules. In the last six years, around 1500 applications have been approved, approved in principle, or are under consideration, and another 300 applications are in the pipeline. The total value of the wealthy migrant investment in this pipeline is $4 billion. Almost all ends up in bank bonds and deposits – which has very little economic impact and ultimate benefit for New Zealand.
Hamilton explains what the proposed changes are and what it will mean to New Zealand.
“We are proposing that at least 10 percent 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 percent of the migrant’s capital would be placed in lower risk investments, such as bonds and bank deposits.
“We estimate that such a change would initially bring in between $50 million and $100 million a year into New Zealand’s growth capital markets and over time increase by a factor of two as the demand for investor migration is forecast to double. We are not suggesting that wealthy migrants alone solve problems in New Zealand’s capital markets but clearly they can play a role in the solution.
“This would be a significant boost to the development of the New Zealand-based internationally capable businesses we need more of. The investment sector’s ability to absorb and deploy this level of capital into growing technology companies has strengthened considerably over the last decade.”
One of the supporters of the change is businessmen Mitchell Pham, a Director of the Augen Software Group, and he comments
“This year is my 30th anniversary of arriving in New Zealand. I often say to people that this country was discovered by migrants, then founded by migrants, then built by migrants – and is still being built by migrants today. Investing in our growth is a new way to continue building the country the new migrants can participate in.”
Hamilton continued that if the goal of a migration policy is to attract residents committed to building lives and wealth in New Zealand over the long term, than Hamilton and the business leaders believe there is alignment in having a requirement to invest part of their wealth into longer-term investment funds and companies which are focused on long term growth.
“We also think this move would create a precedent into the future for aligning the future prosperity of NZ with people who wish to become residents of New Zealand.”
“Currently we are missing an opportunity and suffering a net economic loss from the lack of effective utilisation of the migrant funds. The proposed changes are better aligned to New Zealand’s economic needs and the Government’s business growth priorities. I am old enough to remember with jealously the remarkable job other countries have carried out with their superannuation funds and how difficult it was for New Zealand to catch up. We don’t want to be that country again, especially when we must compete harder and smarter to improve our position in the world.”

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