New Zealand is leading the way in many economical aspects.
For the 6th year in a row, New Zealand has come in at number one in the World Bank’s ranking of the best country to start and run a business – ahead of 190 different countries!
New Zealand also ranks third in the Heritage Foundation's Index of Economic Freedom (National Business Review, 19.10.18).
When it comes to Foreign Direct Investment (FDI) however, New Zealand does not rank well at all. On the United Nations Conference on Trade and Development(UNCTAD)`s index for FDI attractiveness, New Zealand slid from 73rd place in the world in 2000 to 146th in 2011. A 2012 OECD study found that out of 57 countries surveyed, only 6 had more restrictive FDI regimes than New Zealand (Foreign Direct Investment: Open to the World, Manifesto 2017, The New Zealand Initiative).
In comparison, Australia attracted 45% more inwards FDI per capita than New Zealand (Brye Wilkinson and Khyaati Acharya, “Capital Doldrums: How Globalisation is bypassing New Zealand”, Wellington, The New Zealand Initiative 2014).
This stifling regime seems to "rollover" into New Zealand's Entrepreneur and Investor Immigration programs. Here the current state is as follows:
- Only applicants investing NZ $ 10 m or more have a relatively easy entrance under the Investor 1 Category.
- The Investor 2 Category, which requires that the applicant holds funds equivalent to at least NZ $ 3.0 m has a cap of 400 approvals per year (when advised about it, one client once asked me if this is a “typo”).
- Recent selections allowed all applicants, who submitted an Expression of Interest claiming only the minimum amount of points to receive an invitation to apply for residence.
- Within the industry, the overall situation under all investor programs is considered to be “flat”.
- The Entrepreneur Work Visa program currently has an unofficial decline rate of 80 %, possibly even higher and the also unofficial advice from the Immigration Minister himself is not to use it.
Some of the roadblocks are:
- The cap of 400 approvals per year under the Investor 2 Category; it should be raised significantly.
- The restrictive definition of business experience under the Investor 2 Category: Only business experience acquired through ownership of or management level experience in an enterprise that has at least five full-time employees or an annual turnover of NZ$1 million is recognised.
- It is at least worth a discussion about whether business experience should be a requirement at all (it isn’t under the Investor 1 Category). If it stays, the minimum criteria regarding employees or turn-over should be cancelled, mainly because of the difficulties they create from the evidence side: applicants can score maximum points under this section for the business experience of 15 years or more. Hardly anyone can provide evidence for these details going back up to 15 years. Staff numbers are also not part of “official” evidence, such as tax returns, commercial or trade registers etc.
- The requirement to meet the policy objectives under the Entrepreneur Work Visa program in addition to meeting certain points criteria for business experience, creating employment, the investment level etc.; it should be abolished. The points PassMark filter is sufficient to determine if a business proposal is satisfactory or not.
- The Entrepreneur Work Visa policy is seeking to attract only high growth or innovative businesses or businesses with export potential. This excludes many industries that are important for New Zealand and also have been consistently popular with migrants, such as hospitality.
- It also practically excludes applicants who wish to invest or take over existing business, because the current policy does not provide points credits for already existing employments; the applicant needs to create a surplus in employment to gain points that are often necessary for them to reach the points PassMark and also to create a “benefit” for New Zealand, which is a requirement for obtaining permanent residence in New Zealand under the subsequent Entrepreneur Residence Visa application process.
- Apart from these technical considerations, it is obvious that a program with a decline rate of at least 80% is not functional and needs urgent amendments.
These findings are of concern to New Zealand. International research shows that well-managed FDI benefits an economy. Drawing international investors typically boosts the competitiveness by attracting not only foreign capital but also the accompanying technologies, management skills, and access to foreign markets (Foreign Direct Investment: Open to the World, Manifesto 2017, The New Zealand Initiative).
We can and need to do better and live up to our performance as the best country to start and run a business and adapt our business and investor migration policies to attract skilful entrepreneurs and successful investors to New Zealand in a truly competitive global market!