Government initiatives to further boost inward investment

Prosperity Fountainguard Advisers welcomes the Federal Government initiatives announced under the Industry and Competitiveness Agenda that will expand the Investor Visa Programme.

The Government will reform the programme to encourage more high net worth individuals to make Australia home and to better direct additional foreign investment, while maintaining safeguards to ensure the migration programme is not misused. The changes to the programme will:

  • streamline and enhance visa processing, further promoting the programme globally and strengthening integrity measures, to both increase the attractiveness of investing and settling in Australia while ensuring Australia’s interests are protected;
  • align the criteria for complying investments with the Government’s national investment priorities. The investment eligibility criteria will be determined by Austrade in consultation with key economic and industry portfolios;
  • introduce a Premium Investor visa (PIV), offering a more expeditious, 12 month pathway to permanent residency than the SIV, for those meeting a $15 million threshold;
  • and task Austrade to become a nominating entity for SIV (complementing the current State and Territory government’s’ role as nominators) and to be the sole nominating entity for PIV.

We led a nine city investor roadshow throughout China in June, and saw that although there is strong interest in Australia as an immigration and investment destination, and there is a reasonable pipeline of SIV applications, we face strong competition from other jurisdictions. Recent changes in NSW have made this State more attractive with the removal of the need to invest $1.5m in Waratah Bonds recently removed and the Commonwealth measures will only assist to further attract high wealth investors in the future.

Discussions with potential investors in China revealed certainty and clarity of the process were issues that are front of mind for potential SIV applicants when considering which country to pursue.  While the initial detail is scant, it appears the initiatives proposed will assist on those fronts. There is uncertainty in other countries SIV programs at the moment and the Government’s focus to enhance the scheme and encourage investment in the right areas as well as remove red tape will continue to make Australia an attractive destination.

Prosperity Fountainguard have a second investor delegation en route to Shanghai at the moment and they will present to over 20 potential investors in the higher net wealth category who are looking to invest $20m plus in Australia.  The proposed Premium Investor Visa will no doubt assist that group with their decision making and the revised program commencing in 2015 that allows an applicant to gain residency after twelve months is likely to be highly attractive.

We are eager to understand the detail of the new investment eligibility criteria.  These are no doubt designed to temper some of the strong interest in property development.  However, if the measures are too prescriptive, it may serve to stifle investor inflows or move them away from areas that Chinese investors are typically attracted to.

Are these the greatest opportunities in Asia right now?

As a privileged part of the Australian delegation to the Asian Financial Forum in Hong Kong last month, Luke Malone, the head of our Asian Business Desk, has his eye on Asia. 

The Asian Financial Forum last month brought together 1200 business leaders from throughout the Asia Pacific region and addressed many of the economic opportunities and issues that matter. 

Over coming months I plan to provide you with articles that give you an insight to these, so you can take advantage of our learnings as we navigate the Asian Century.

This week I want to talk about the three biggest areas of focus at the conference, and highlight what could be the most exciting opportunities for Australia in coming years:

1.  Food security and production for a growing Asian population

Food security in Asia is a large opportunity for Australian food businesses looking to produce and export into the region.  Recent data shows that we have the capacity and ability to produce food for over 500 million people here in Australia.  With growing population density throughout Asia and land shortage in many countries, the ability to produce the quantities of food for the emerging middle class in these countries seeks is becoming more and more difficult.  The changing socio-economic position of many has increased their desire to eat well, and their ability to afford high quality produce for which Australia is most renowned.  This is a trend that may change the allure of farming and food production investment in Australia in coming years.

2.  China and the ASEAN+6 Relationship will lower tariffs and build trust

This year, the 10 ASEAN Countries plus China, Japan, South Korea, India and Australia and New Zealand will start negotiating a Regional Comprehensive Economic Partnership.  The plan is to have a deal in place by 2015 creating a free trade zone that will encompass almost two thirds of the world’s population.  Lower trade barriers and greater trade integration should lower the tariff costs for businesses working across borders in these 16 countries.

3.  Chinese capital is freely flowing out of China seeking a return  

Recent figures on China’s foreign direct investment (FDI) shows two very interesting trends.  Outgoing FDI rose almost twelvefold from $5.5 billion a year to more than $65 billion per year from 2004 to 2011 and is expected to reach approximately $150 billion per year by 2015. In contrast, inward FDI fell 0.2 percent in October 2012 from a year earlier to $8.3 billion, the 11th fall in 12 months.  (Source: China Daily Jan 18-24 2013).  The sentiment of Chinese investors and businesses is strong despite some of the portrayed ‘slow down’ of the Chinese economy portrayed by the Western media.  My discussions with many prominent investors and high net wealth family groups during the Asian Financial Forum indicated that the desire for investments in Australian agricultural assets, resources, real estate and education remains strong.

Each of these issues presents terrific opportunities for Australia in an Asian context.  We are watching the trends closely with many of our Asian Business Desk clients, looking for ways that business and investment can benefit from the changes.

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About our Asian Business Desk

At Prosperity Advisers we have a dedicated Asian and Chinese business desk that understands the culture of doing business in China.

Our team includes Tax, Accounting, Corporate Advisory, Audit, Wealth Management and Mergers & Acquisitions Specialists who speak the language and have extensive Chinese and Asian business experience.  We currently act for a number of high net wealth Chinese investors and we help guide them on the transaction and regulatory path to both source investment opportunities in Australia by connecting them with the right people, while at the same time managing tax and other compliance objections.

For outbound investment into China, Luke and his team spend significant time in China and the Asian region and our connections in the region allow us to advise outbound Australian investors on the complex path of investing in China and Asia.  We are also a member of the Leading Edge Alliance, an accounting firm affiliation of some 4,000 members throughout the world and a strong presence in China and Asia.