New Zealand needs to make better use of migrant funds to help meet the country's economic needs and the Government's growth priorities, a paper released yesterday says.
The Icehouse chief executive Andy Hamilton said investment in high-growth-potential companies could increase $50million to $100million a year if a proposal to change wealthy migrant rules was implemented.
The recommendation is to require a portion of wealthy migrant investment be allocated to growth-capital funding and is being proposed by The Icehouse and a group of business leaders who want immigration settings to be better used to help fill gaps in New Zealand's strategic priorities, particularly with investment.
''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 only around half of the capital needed by young companies is likely to be available for investment.''
Wealthy migrants to New Zealand constituted an untapped source of capital, he said.
Other countries required wealthy migrants to commit a portion of their investment to growth opportunities.
Australia introduced new rules this year and he believed New Zealand should follow suit, Mr Hamilton said.
New Zealand introduced a wealthy migrant category in 2009. However, the new proposal would require a change in the rules.
In the past six years, about 1500 applications had been approved, approved in principle or were under consideration.
Another 300 applications were in the pipeline. The total value of the wealthy migrant investments in the pipeline was $4billion.
Nearly all of that money ended up in bank bonds and deposits, which had very little economic impact and ultimate benefit for New Zealand, he said.
The Icehouse was proposing at least 10% of wealthy migrant capital be placed into growth investments, such as angel investment, venture capital or private equity or growth funds.
Such a change would initially bring between $50million and $100million a year into New Zealand's growth-capital markets and over time increase by a factor of two as the demand for investor migration was forecast to double.
''We are not suggesting wealthy migrants alone solve problems in New Zealand's capital markets but, clearly, they can play a role in the solution.''
If the goal of migration policy was to attract residents committed to building lives and wealth in New Zealand over the long term, he and the business leaders believed there was alignment in requiring wealthy migrants to invest part of their wealth in investment funds and companies which were focused on the long term, Mr Hamilton said.
''We also think this move would create a precedent into the future for aligning the future prosperity of New Zealand with people who wish to become residents of New Zealand,'' Mr Hamilton said.
The proposal
Ten 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% of the migrant's capital would be placed in lower-risk investments, such as bonds and bank deposits.
