ARCHIVED – Backgrounder — Improving The Immigrant Investor Program

Purpose of Consultation

Canada’s Economic Action Plan 2012 announced that business immigration programs will be reformed to attract “more active investment for Canadian growth companies.”

Additionally, in April 2012, the Honourable Jason Kenney, Minister of Citizenship, Immigration and Multiculturalism, announced that Citizenship and Immigration (CIC) is considering whether it should use its authority under the amended Immigration and Refugee Protection Act (IRPA) to create small short-term programs that can have a greater impact on Canada’s economy (For more information, see the news release).

To support these objectives CIC is launching consultations to gather input and ideas from stakeholders and the public on how the current federal Immigrant Investor Program (IIP) can be improved and how it could support Government of Canada objectives related to long-term growth and prosperity by:

• Increasing the economic benefit that immigrant investment capital brings to Canada;
• Attracting experienced, international investors with the skills and resources needed to ensure they integrate into Canada’s economy; and
• Developing efficient and cost effective ways of delivering and ensuring the integrity of an immigrant investment program.

The following information provides an overview of the current program, its challenges and potential areas for improvement. It is has been developed to guide your feedback in the three consultation areas outlined above.

You are invited to provide feedback by submitting a policy paper/recommendations for the government’s consideration.

Introduction

The IIP was originally created in 1986, and provided investment capital to private and provincially-administered investment funds and business ventures with the goal of job creation.

The IIP is designed to meet three economic objectives:

1. Attract experienced business persons to Canada;
2. Raise investment capital for economic purposes; and
3. Contribute to the IRPA objective of ensuring that the benefits of immigration are shared across all regions of Canada.

In 1999, the program was significantly redesigned to address program issues related to fraud and mismanagement, losses suffered by investors, and burden related to regulatory oversight.

The current program offers permanent residency to individuals who meet specific business experience criteria, possess a net worth of at least $1.6M, and are able to make an $800,000, five-year, zero-interest, guaranteed investment. Investment capital raised through the program is allocated to participating provinces and territories (PTs), for the five year term. PTs use the money according to their own regional economic development and job creation objectives. At the end of that period, PTs must repay the principal to the investor in full.

The program has raised almost $4B in capital from more than 9,500 investors (principal applicants) since 1999. Federal Immigrant Investors are one of three categories of federal business class immigrants (alongside Entrepreneurs and Self-Employed Persons), which represent approximately four percent of economic class immigrants annually (two percent of all immigrants). In 2012, Canada seeks to welcome between 5,500 and 6,500 federal business immigrants (principal applicants and their dependants) to Canada.

A. Investment Capital

As outlined in the introduction, participating PT governments are required to use investment capital for economic development and job creation, according to their own specific needs. However, given the need to repay the principal to investors at the end of five years, many PTs take a low-risk approach that sees most capital in no/low risk investments, such as bonds and cash deposits, with only a portion actively invested in higher value-added areas of the economy such as:

• Infrastructure investments;
• Loans to small and medium sized business; and
• Venture capital.

OBJECTIVE 1: Increasing the economic benefit that immigrant investment capital brings to Canada.

Elements to consider in your submission / policy paper include:

1. Areas for Immigrant Investment Capital: Areas or sectors of the Canadian economy where research has demonstrated deficits in investment capital exist.
2. Type of Investment Required from Immigrant Investors:  Guaranteed principal vs. at risk investment.

B. Investors

While successful in attracting investment dollars and high net worth individuals to Canada, there are concerns around the extent to which Canada benefits from the business skills and networks of these investors and whether they have a vested interest or commitment to Canada’s economic success. It has proven challenging to track the benefits of the IIP for Canada. For a number of reasons, investors’ activities in Canada are not well documented.

There are anecdotes that principal investor applicants – who are selected on the basis of ability to become economically established in Canada – return to their country of origin to continue their business career, while their spouse and children remain in Canada to pursue education and other social opportunities.

Anecdotal indications are that some investors’ motivations are not to pursue business or economic opportunities in Canada, but rather to obtain permanent residence and seek a safe and secure future for their families. This is consistent with findings in other immigrant-receiving countries offering investor-type immigration programs.

Some have argued that Canada can better select Investors with the skills and business know-how to generate economic growth. For example, the current program places little emphasis on characteristics that have been shown to assist in economic integration, such as education or knowledge of French or English. In addition, business experience requirements presently allow middle managers, who may not necessarily have cross-cultural business management skills that are transferable to Canada, to qualify for the current program.

OBJECTIVE 2: Attracting experienced, international investors with the skills and resources needed to ensure they integrate into Canada’s economy and are committed to Canada’s economy.

Elements to consider in your submission / policy paper include:

1. Establishing broader economic expectations for immigrant investors, beyond the current $800,000, five-year, zero-interest, guaranteed investment.
2. Improvement of selection criteria for immigrant investors, beyond the current two year business experience and $1.6M net worth requirements (e.g.: language, education and international business experience).

C. Program Delivery

Canada does have a backlog of applications from immigrant investors because more individuals are interested in coming to Canada under this category than can be accommodated within Canada’s Annual Immigration Plan, and not due to a lack of processing resources. That said, a common challenge in delivering immigration programs is the ability to efficiently verify information and claims about an individual’s background. Performing these verifications in an efficient manner, especially in the Canadian context where program demand has outpaced room in the annual levels plan, will need to be considered in any program design going forward. Different countries have different documentation requirements and those who deliberately abuse or try to circumvent the system are using more and more sophisticated approaches. In addition, investor programs face added challenges because of the significant cash flows involved. Across international models risks include the possibility of money laundering or fraud, abuse or mismanagement by those receiving investment through the program.

OBJECTIVE 3: Developing efficient and cost effective ways of delivering and ensuring the integrity of an immigrant investment program.

Elements to consider in your submission / policy paper include:

1. Program Safeguards:  Ensuring immigrant investor funds are managed with integrity.
2. Use of Third Parties: Third party verification of immigrant investor background information to increase program efficiency.

Topics for Discussion and Input

CIC welcomes your input on how a Canadian investor program can best support Canadian economic priorities.

Please use the following template to provide your input.

CIC will publish the responses received through this consultation process, when consent has been provided and in the language of the submission. If you make a submission, please clearly indicate your agreement to:

• Post your submission on the CIC website, and
• Include your name and/or the name of the organization which you represent with your submission.

A highlight summary of the results will be published on our website in the winter 2013.

Immigrant Investor Program: Public and Stakeholder Consultation

Contact Information

Your Name / Name of the Organization which you represent with your submission

Permission To Post Submission

I grant CIC the permission to post my submission on the CIC website and to include my name and/or the name of the organization which I represent with my submission.

• I grant permission
• I do not grant permission

Executive Summary

Please summarize your submission in 250 words or less and include this executive summary along with your policy paper / submission for the Government’s consideration.

Policy Paper / Submission

Please provide your complete submission / policy paper, taking into account CIC’s objectives for the immigration investor program, as outlined in the background document.

OBJECTIVE 1: Increasing the economic benefit that immigrant investment capital brings to Canada.

OBJECTIVE 2: Attracting experienced, international investors with the skills and resources needed to ensure they integrate into Canada’s economy and are committed to Canada’s economy.

OBJECTIVE 3: Developing efficient and cost effective ways of delivering and ensuring the integrity of an immigrant investment program.

Please submit your policy paper/recommendations document by e-mail to: IRCC.COMMConsultations-ConsultationsCOMM.IRCC@cic.gc.ca.

Thank you.

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