NZ - Open For Business

It’s incredible how quickly we can access information in the current era, and a far cry from my early years in the immigration industry when getting policy updates was a far more ceremonious and drawn out affair (because most of it was handled in paper form). New rules were often a highly guarded secret, prepared behind closed doors, with little to no external input, and announcements generally happened on the day the rules went live. Once you finally had those rules, getting the message out to clients was equally time consuming - there was no easy means to broadcast updates, and certainly nothing like we have now. Today, within minutes of a policy change, clients are already reading about these changes, being pinged by a dozen social media apps.

The world has become much faster, and information infinitely more accessible, and it seems that the Government has kept pace with this, by moving quickly to roll out numerous visa updates, stacking up announcements, and signalling changes months in advance of the policy being released in to the wild. The current coalition Government took a while to get their head around the visa system, but hats off to the Minister, who has now found her feet, and is pushing out change like the 10th instalment of the Fast & the Furious.

Some of those policy changes have been simple updates to correct issues with previous settings, but of late, there has been a big focus on delivering new, decisive policy settings, targeted at showing the world that New Zealand is indeed open for business. On the whole these are really positive changes, and bring about a real push to attract investment, networks and entrepreneurial skill - however they have been delivered at a time when plenty of people are looking for an escape route, rather than an attractive investment destination. The real test of the tenacity of these new settings is how they perform when the heat is off, and are they attractive enough to maintain their existing momentum.

The New?

Only this week, the Government rolled out a new Business Investor Visa (BIV), and simultaneously dropped the Entrepreneur Work Visa (EWV), replacing the old with the new, well sort of. The BIV will replace the EWV for now, but its quite a different animal. The EWV had a minimum investment amount of $100K, driven by a points system, aimed and weighting experience, business idea, proposed benefit and investment. It was, to put it mildly, a dog’s breakfast (one from the day before). It was vague, poorly worded policy that gave INZ far too much discretion.

Business Investor

The new Business Investor Visa (BIV) replaces the old Entrepreneur Visa, with a cleaner, simpler (but higher) set of criteria.

The BIV is far simpler by all accounts (although the policy hasn’t been released yet), but it focuses on investing in existing businesses, or buying them outright, rather than setting one up from scratch.

It is really an investment visa, for entrepreneurs, as opposed to the more start-up focused EWV. It is a welcome change to the EWV and we are all glad that policy has been retired, but it really only fills a portion of the business visa space. The final piece of the puzzle is yet to come (more on this below).

The BIV, offers two separate pathway to residence, which are actually quite similar to how the EWV operated. Invest in or buy a business for $2 million and operate it for 12 months, then apply for residence. Alternatively if you invest in or buy a business for $1 million you have a three year pathway to residence. Unlike the Active Investor Visa, the BIV require you to be involved in the business here with the likely requirement to spend a specific amount of time working in the business. If you are not buying the business outright, you need to be acquiring at least a 25% share, using the above investment minimums. Businesses must employ at least five full-time staff. The BIV also introduces an age-cap (55 years inclusive) which is new, but keeps the English language requirements.

There will be a lot more meat on the policy bone to unpack, but these are the nuts and bolts and whilst they retain some of the EWV settings, they move away from it as well, heading more towards a middle ground, between Active Investor and the previous EWV.

Given this new visa, will be complimented by a third business visa (being worked on now), which will focus on start-ups, what the Government has done here is very clever. They have essentially separated what we always had as two visas, trying to capture various business markets and created three, that give much better coverage.

Active Investor for those who can bring significant investment in to NZ but may not want to be physically present here. The Business Investor for those who aren’t quite at the AIV level, but have an investment to make and want to be actively involved in that business, and then the third option, which will arrive to cater for the start-ups, looking to do that new, clever thing.

I applaud this Government for bringing options and I also give them hearty pat on the back for moving pretty quickly and also seizing the opportunity given significant global uncertainty, however I cannot help but think aspects of all of this have been a bit rushed. Like a new product trying to get to market really quickly, it is easy to miss things along the way. I will expand on that near the end of this piece.

The Updated

Alongside the new BIV is the roaring success of the updated, refreshed, 2025 model investor visa (the Active Investor Visa or AIV). You will likely hear this referred to as the “Golden Visa’, a moniker adopted from other offshore countries, who offer something similar (it always reminds me of Betty White), but it is for the higher net worth individuals with the funds to invest. Requiring either a $5 million or $10 million investment, it is not for the faint of heart, or the shallow of pocket.

The updated version of the previous Governments dismal failure (also called the Active Investor Visa) has by all accounts been a success. With over 257 applications lodged (some transitioned from the old category), representing over $1.3 billion in nominated investment funds, this new system has delivered the goods, for the Government. The Minister will very rightly be quite chuffed with the results.

Active Investor Visa

By all accounts the AIV has been a significant success, but that success is largely driven by push, not pull factors.

Of course a lot of the nominated funds, still have to find their way here, and one challenge we have is having enough acceptable investments to house those funds, which also creates a bit of an issue in itself.

The sharks are circling and as demand for the visa continues, more and more investment funds are popping up to claim a slice of the pie. The security of some of these funds is marginal and there are potential liquidity issues that many investors, are potentially unaware of. With over 80% of all applicants going for the lower level ($5 million) Growth Category, which requires investments in higher risk assets with lower liquidity, the rush of blood to the head, might cause a few of them to miss doing the required due diligence. We have to be very careful that we dont create a reputation issue, three years down the line.

Whilst the visa has been very popular, the real test of its ability to work for NZ is how well it does when the chaos subsides. There is plenty going on globally to incentivise people to look for an escape hatch (which is why a large portion of the existing applicants are from the US), however that is push and not pull migration theory. When things settle or shift (as they have a habit of doing) and the pull factors abate, it remains to be seen if this visa will have the required pulling power to keep numbers afloat.

The viability of the AIV, also sits alongside NZ being an attractive investment option, which encompasses factors well beyond just the visa process. That is why we have to make sure that this initial wave of early adopters carry the flag for this policy, rather than turn around in three years, heading for the door.

The Yet To Come

As referred to above, the final component in this newly created business visa suite will be aimed at the start-ups, and whilst there is no announcement or policy for this product yet, I expect it will fill the gap that the other two policies have left. Whilst the Active Investor Visa meets the demand at the high net-worth end of the walk, and the new BIV tackles the mid-market, there is now a space for those new and innovative business ideas.

Engaging Start-ups

The final piece of the business visa puzzle, will be a policy aimed at new business ventures and innovative start-ups.

Where the previous EWV attempted to tackle both the entry-level and mid-market business visa categories, and largely failed - separating them out makes a lot of sense.

Having a clear pathway for those who are seeking to make a more significant investment, and keeping that relatively simple and investment focussed, allows room for another policy that will be aimed at the start-up scene.

The now disbanded EWV was aimed at trying to solve both problems, with a points weighted system to try and leverage higher investments, and then a focus also on benefits and innovation. Having a separate category to address new business ventures, which will likely have more emphasis on the business plan, innovation and so forth, keeps things simple and easier to understand for applicants.

I have no doubt that the start-up visa, when released, will draw on some of the previous criteria from the EWV and be a more case-by-case based assessment, but I also hope that lessons have been learned from the EWV, that any policy rolled out, has to be clear, tangible and make sense in order to be attractive enough for people to want to take the risk. Given any start-up based visa will be far more risk-based, that is the factor that INZ will have to grapple with, acknowledging that for taking the risk there has to be a good enough reward.

Signs Of Change

It is really encouraging to see that in a time where many other countries are pulling back on their business visa options, New Zealand is rolling out the red-carpet and in relatively innovative ways. The innovation isn’t necessarily in terms of how distinctive the policies are, because in essence both the AIV and BIV are simply previous policies that have been modified, but realising that we need to have a suite of visa that caters for different applicants, is a very smart idea.

I can’t however escape the feeling that whilst speed to market was essential, to capture the growing interest for those with capital to find “safe havens”, that haste has potentially meant that we might have overlooked a few key things along the way.

The AIV for example, has two options, one that carries higher risk and the other that requires double the investment to reduce the risk. Could we have perhaps engineered something in the middle of those two things, to split the difference, opening up the market to a larger pool of applicants, but also reducing our own longer term reputational risks. Fundamentally money has options and for those with money, they have choices as to where it might end up - offering something with more flexibility over managing that risk level, could have been viable and potentially more attractive in the longer-term.

For the BIV, it will be interesting to see how the policy measures the success of that investment, and therefore the ability to secure residence. One key issue with the EWV was it’s very punitive approach to meeting the requirements of a business plan. Business success, can be hard to predict and any number of things can influence the results. We can only hope that INZ has recognised that in terms of how the transition from the temporary visa to the residence application takes place.

The timing of the start-up visa will also be relatively crucial, because ideally the Government needs to push this out fairly quickly if they want to keep the momentum going. The BIV will be an attractive option for many applicants looking to make the move, but it could still be out of reach for some, so the start-up visa might be the solution to that.

What is really encouraging in all of this, and something that our industry is very much in favour of, is the fact that we have a Government keen to send a clear message (and quickly) that New Zealand is indeed open for business. For far too long we have sat with the EWV policy that had a reputation of being the visa to avoid, if at all possible, and advisers were actively steering people away from. Now we have the potential to offer three related, but also tailored options for those looking to invest in New Zealand Inc.

We just need to make sure that these policies become the pull factors we need them to be, when the push to get out of certain countries subsides.

Until next week.