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Posted by Iain on May 29, 2015, 3:26 p.m. in Immigration
How do you know when an immigration policy is failing miserably?
I have been looking into visa application numbers, approval, decline and withdrawal rates for the Entrepreneur work Visa category.
The policy was put in place just over a year ago in April 2014.
It has to be considered a dismal failure.
We were initially shocked by two aspects of it when it was released - how high the bar was in terms of eligibility criteria and how loopy some of the definitions were.
Those of you that have attended one of our seminars might recall this temporary class ‘self employed work visa’ is the usual pathway the self employed follow if they want to come to New Zealand and buy into or establish a business as a means of securing permanent residence.
It is also the one we advise people to only choose if they have no other options and a very credible business plan behind them.
This is simply because the threshold for entry is so high and getting the visa doesn’t mean you’ll eventually secure a resident visa - residence is only granted after at least two years having made good on the commitments contained in the business plan to employ a number of New Zealanders, invest a certain amount of capital (usually in the hundreds of thousands of dollars) and make a profit - all within three years.
A big ask by any measure and one that comes with considerable commercial and emotional risk.
We have learned that since the policy was released approximately 200 applications have been filed, a small number are sitting in a ‘managed queue’ gathering dust and just under 100 are under ‘active management’ (which means they have at least been looked at).
Only 35 have been approved and 50 have been declined.
Of the 35 approved around 50% have been approved as ‘exceptions to instructions’ which means they don’t meet the rules but INZ has deemed them to have merit.
That is an extraordinarily high percentage of exceptions.
The reason is both surprising and disturbing. According to sources the bar is simply too high and the definitions make it virtually impossible to approve most applications.
It starts with the objective of the policy which intends for these proposed businesses or investment in an existing business ‘to contribute to economic growth by enabling experienced business people to grow or establish a high growth and innovative business with export potential in New Zealand.’
Four key criteria then in one sentence.
You have got be experienced in business. Check, but how experienced? This at least is somewhat answered in the points you claim for business experience.
The business must be ‘high growth’. Okay, but what defines that?
The business must be ‘innovative’. Yeah, but what does that mean?
The business must have export potential. Check, but to what extent?
Applicants must demonstrate all three as well as whatever being an ‘experienced business’ person might mean to an immigration officer.
To demonstrate how kooky it can be here is the definition applied to ‘innovation’ - it is a business that:
‘demonstrates a high probability of succeeding in discovering and applying new ways to produce more with the same quantity of inputs’
You need to show that the chances of your discovering new ways to produce more with the same quantity of inputs is high?
Which means proving what everyone else does now presumably (all your competitors) and how in the future you are going to discover a new or novel way of creating more of that thing with less? The weirdest thing of all is you don't have to have made the discovery yet but show you hav a high probability of doing so!
Save me from these mad people! Please.
How completely bizarre. You have to be a future inventor of sorts. And prove what everyone else in your ‘space’ in New Zealand does now.
Well, we don’t come across too many people like that.
Clearly neither does Immigration New Zealand.
What surprises me is that they must come across some because there has been something like 16 applications approved (out of 207 applications) that they have been able to approve without being an exception to the rule book.
INZ has now been authorised to take a more flexible view of the objectives of the policy.
In doing so they are advising that so long as the business meets one of the three criteria - can be ‘innovative', can be ‘high growth’ or can demonstrate ‘export potential’ and they will consider granting the visa.
Which is pleasing but if there is still going to be decline rates of around 60% (and applicants pay thousands of dollars for the privilege of the lottery) it is hardly good policy setting. I wouldn’t mind betting here and now the decline rates will actually increase.
I am surprised they are getting any applications at all.
And who wrote this stuff? Sounds like something that came out of a conference of a bunch of nerds who have never run a business in their life.
Thankfully change is afoot. There is a review of this policy going on now and we suspect it will lead to less complex criteria expressed in a more simple way.
That at least is our hope. Until there is something intelligent on the table that we can take to market as it were in order to offer certainty to clients we cannot in good faith recommend to anyone they go down this path.
Until next week
Iain MacLeod - Southern Man
Posted by Iain on Jan. 17, 2014, 11:43 a.m. in New Zealand Economy
Happy New Year to all our regular Southern Man Letters from New Zealand readers.
The team is back in the office, tanned and relaxed (that lasted about two days!) and looking forward to an extra busy year. For us it is going to be a year of firsts – we are now dipping our toes in the Hong Kong and Indonesian markets. Across the Tasman Sea our Australian colleagues are heading to Botswana, Greece and Turkey to test the migrant waters there.
And what of New Zealand in 2014? How are the tea leaves looking?
If you can believe the various surveyors and economic forecasters we are in for a very good year and several beyond this. A few key points in recently released surveys show:
Short of any major external shocks things are looking overwhelmingly positive. No one is talking about an overheating economy or boom times but there is a real and broad based momentum that has been building across all sectors and all regions.
This, I suspect, will embolden the New Zealand Government to continue with high skilled migrant pass marks and forcing a majority (note, not all….) of would be migrants to come and find jobs in order to have certainty of residency approval.
Those employers unwilling to recruit form the ranks of those offshore or who refuse to travel overseas to interview and recruit are within the next few months going to be staring into a very shallow pool of local talent. This will have an upward movement on incomes (we are already seeing it in construction and IT in particular).
While no one who reads this who thinks they may make a move this year should take getting work for granted, there is no doubt that 2014 for the vast majority of you will be a year of greater employment opportunities. Through 2013 we saw average times for most clients to find jobs here get down to a few weeks rather than a few months as it was through 2011-2012. If you are fluent in English, skilled, do your research on demand in the labour market for your skills set and are willing to get on a plane and get here, chances are you’ll find work within 4-6 weeks.
As we reported in December the Government has closed the Long Term Business Visa or self-employed pathway to residence while they think about a new ‘improved’ visa class for Entrepreneurs which they hope to launch in April. We have been offered an outline of the new criteria which we have agreed will remain confidential but what we can say without breaking those confidences is that the new criteria is less a pathway for the self-employed to demonstrate financial self-sufficiency to a move to focus on greater job creation and export related businesses as priority for approval. For the first time the amount of funds invested comes with a minimum and the more invested the higher the chances of success. In essence what we will gain is effectively a new sub-class of Investor – lower investment thresholds than those who apply to many looking to secure residence under the Investor Categories but a much higher threshold than historically in place for the self-employed. As always there will be winners and there will be losers.
Skilled Migrant Category also underwent its standard three year review during 2013 and I expect we may see changes this year. My own view is the changes will be minor (why change a formula that appears to be working?). My only two suggestions to Government were that we should be more prescriptive in regard to English language as the Australians are (better your English the higher your points) and I would also be re-instating points for those with capital they can transfer to New Zealand. Although it is proven that those with more money find it easier to settle I cannot see the Government taking me up on this suggestion; they might on the English language however. We shall see.
My colleague Paul will also be in South Africa in early February kicking for our first round of seminars there.
It is going to be a big, exciting and nerve wracking year for some of you as you pack up and join us here in New Zealand. For some 2013 was the moving year and 2014 will become the year of return to some sort of normality. For others 2014 will be the year of the ‘big decision’ to migrate or not. Wherever you are on that spectrum the Immagine team and I wish you every happiness and success for the year.
Until next week
Southern Man – Letter from New Zealand
Posted by Paul on Dec. 20, 2013, 9:38 a.m. in Immigration
When all through the house, not a creature was stirring..., except for a Government policy maker who decided that changing the rules at the end of the year would make a lovely Christmas present.
Late last week the Minister of Immigration released a statement relating to proposed changes to the Long Term Business Visa (LTBV) Category. Whilst the announcement didn’t reveal specifics over what the new policy would look like, it made a few references to the ideas being batted around inside the immigration halls of power.
Originally established as a pathway to residency for those who wished to come to New Zealand and become financially self sustaining, applicants were required to have a well researched business plan that met a fairly clear benefit test to the country. In hindsight that benefit test was set too low in the eyes of the Departmental officials who implement the policy.
When it was released it was a case of ‘anything goes’ and applications from Bed and Breakfasts to one man band lawn-mowing franchises were being approved in a matter of weeks. Then with a change in leadership came a change in interpretation (although the policy didn’t) and applications were declined en masse. This Category has always been subject to the ever changing mood of INZ, although none of those changes was ever set down in the rules. It was a case of getting to understand each new Branch Manager’s feelings on the benefit to New Zealand before advising your client on whether to proceed or not.
This has led to a policy that is both poorly understood by applicants and immigration officers alike and open to widespread abuse by both applicants and the Department. Often seen as the ‘application of last resort’, INZ struggled with the ebb and flow of applications of questionable benefit to New Zealand, leading to very few residence approvals.
The current (to be no longer as of the end of today) policy sees around 500 applications annually which is quite a few considering the intent of the policy is for people to establish or purchase businesses in New Zealand.
Application volumes have been steadily increasing over the last three immigration years (2010 to 2013), although approval rates have been falling from 89% at the beginning of that period down to 71% in the current year to date. There are various reasons INZ attribute to this trend, some of which don’t appear to hold a lot of water, given they created and administer the policy; but the main thrust of the changes relates to what we have always argued is a clear lack of defined aim of the policy.
Let me give you a few examples.
Part of the existing policy requires an applicant to have sufficient funds for maintenance and accommodation – and that’s about as far as the rule book goes in terms of specifying what that figure might be. It doesn’t give a guide as to the amount of money required and so its left up to an immigration officer to decide on what they believe is appropriate. The problem with that is each officer will have a different view on what is ‘sufficient’. Some might drive a BMW and scoff at the idea on living on anything less than $100,000.00 per year (or perhaps $150,000 a year which was a figure quoted to us by INZ recently). Other officers will live with more modest means and believe that a third of that is required.
Then there is the definition of ‘benefit to New Zealand’ which is another criteria that INZ uses to determine if a proposed business is worthy of approval. There is a list of criteria within the rule book; however it was arguably poorly written and therefore open to various interpretations. Also where policy says ‘benefit’ can be satisfied by meeting one of the criteria (such as employing a single New Zealander), INZ recently decided what the policy actually meant was if only one person is being employed they will do a ‘measuring’ exercise to determine whether there is enough weight in the other elements of ‘benefit’ to grant an approval.
That of course is not that the policy suggests at all but this was the Department’s way of dealing to what they considered ‘low quality’ applications – even those that demonstrably met their own single benefit criteria.
So, out with the old and in with the new – but what is ‘the new’?
Before we dive into this, it is important to note that anyone who has a current LTBV in process will be covered by the existing rules and so the proposed changes only impact on those who have yet to lodge a formal application. That does mean ongoing uncertainty as we doubt INZ will be able to resist trying to implement a higher bar test of benefit to LTBV renewals at nine months and the Resident Visa that follows.
In terms of the new policy - put simply INZ is returning to form, trying to cut out as much thinking as they can and putting in place a points system which measures various criteria. The Government has decided to close the current policy down today, release the details of the new policy in February 2014 (date to be determined) and then actually make it effective from March 2014. This then gives INZ and, in particular the Business Migration Branch, a chance to play catch up.
What little we do know is that the policy will utilise a points system to allow applicants to gauge for themselves the likelihood of success and hopefully provide some clarity around the actual criteria.
Points will very likely be allocated based on age, capital investment, level of turnover, business experience, job creation and the level of innovation (not sure how you measure that). There will be a total point’s score of 120 (proposed) and INZ will obviously be balancing age, investment capital and the kind of business to approve the most desirable applications. The focus has very much gone on targeting enterprises that will provide export opportunities and/or technological innovation. Essentially what they don’t want are B&B’s and corner dairies.
There will also be a focus on pushing businesses out to the regions and awarding additional “bonus” points to applicants who propose to establish a business anywhere outside of Auckland. Similar to the Skilled Migrant Category, INZ has always endeavoured to move migrants out of Auckland and in to the smaller parts of the country to stimulate growth.
The Minister sums up his intention of the new policy in the press release as follows:
“The Entrepreneur Work Visa will operate under a new points-based system that will result in higher quality, more productive businesses.
“It will also encourage business-savvy migrants to invest, settle, and create jobs across the country, by offering extra points for expanding or starting businesses outside of the Auckland region.”
But (and there always is a whole lot of these) INZ will also have the discretion to waive certain requirements for funds where the proposed business can ‘excel’ in other areas. So basically you have a set of rules and then another rule which allows an officer to do whatever he/she likes. Let’s hope it isn’t quite as subjective as that.
We support any move to greater transparency that leads to both a higher success rate and a better outcome for New Zealand. Based on the information publicly released so far we question why it has taken INZ so long to work this out and whether or not they have done enough to fix the issues. Time will tell of course.
For anyone who is considering a Long Term Business Visa application stay tuned. We will be sending out the details as we receive them along with our interpretation of what they mean in the real world.
And with that the Southern Man and the IMMagine New Zealand team sign off for another year. It has been an interesting one to say the least as the New Zealand economy continues to outperform its developed country peers and surges into 2014, the Auckland Council debates whether to kick out the current Mayor who has a penchant for extra marital activities and the folks in Christchurch continue to restack the bricks and mortar.
We will be back in January (officially open on the 13th) with a new round of seminars kicking off in the same month – this time featuring for the first time Jakarta followed later by Hong Kong.
To all of our clients and those who have read and enjoyed our blogs in 2013 we wish you a very Merry Christmas and a Happy New Year. We look forward to working with you again in 2014 and hope you all enjoy the festive season (no matter where in the world you are).
For now we are off to the beach as summer settles into a warm dry pattern.
Adieu, Arrivederci, Totsiens, Salamat Jalan and Hasta La Vista…
Paul Janssen, Iain MacLeod and the Team at IMMagine New Zealand
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