Published in [Elsa Atkin, editor], A Fatal Shore or a Workers’ Paradise? Immigration and Australia’s Economic Future, Evatt Foundation, Sydney, 1992, pp. 10-18.
On the basis of some newspaper reports in the middle of last year, one could easily gain the impression that a large number of business migrants coming to Australia were criminals and that many were characters of suspect behaviour.
After the release of the Report by the Joint Committee of Public Accounts of the Federal Parliament into the Business Migration Scheme, there were various lurid stories in the media of Yazuka criminals entering Australia. It would seem that some of those writing-up those reports about the review of the [Business Migration Program] BMP have seen a few too many screenings of the Michael Douglas film Black Rain.
As this is a conference sponsored by an organisation born out of the labour movement, perhaps it is appropriate to retell a famous tale. Practically everyone involved in the NSW Labor Party has heard the story of what Jack Lang told a young Paul Keating concerning self-interest. “In politics, son, you should always back self interest. In any race, self-interest will be trying every time.”
My contribution will eschew the wider debate and concentrate on one aspect – namely, the worthiness or otherwise of the business migration programme. It is a story with various facets. A story about how we have somehow managed to stuff-up the emergence of a thriving programme and almost forgotten the caveat about backing self interest. In the last twelve months a combination of stupidity, ignorance and government indecision has almost killed the goose that laid the golden eggs.
The need to back Australia’s economic self-interest was one of the issues tackled in the Fitzgerald report. The predominant theme of that Report was that the economic objectives and benefits of Australia’s immigration programe should be much more focused. The observation was made that:
As Australians already know, the good luck which has borne many Australian policies so happily through the early post-war decades is no longer with us. Our economic circumstances have forced us to come to terms with past self-indulgence. The economic circumstances of our friends have forced them to become our economic competitors and adversaries. Our very allies threaten our economic interests. No one of our old friends has the will or means to solve our economic problems. And we are geographically too remote from them for the political implications of our economic problems to have any intimate significance in their domestic politics, as would be the case, for example, if we were in Europe. In Asia we face independent, strong-willed and competitive nations, cautiously friendly to Australia, but entirely unsentimental in their economic and political attitudes towards us.
That kind of thinking influenced the Australian government in the late 1980s to introduce tighter criteria for the selection of migrants and to attempt to drum up interest, investment and activity on the part of business migrants.
The Business Migration programme had its origins in 1976 with the creation of the entrepreneurial migration category in the general Australian migration programme. This occurred so as to enable certain migrants easier passage to Australia and to assist some who might not be able to qualify under other categories to bring their business skills to our country.
In 1981 the BMP was introduced to enable self-employed persons, part-owners and senior executives in enterprises to migrate subject to several factors: (i) applicants needed to put forward detailed proposals about actively participating in enterprises that could be expected to introduce new designs, techniques or technology, expand exports or promote employment opportunities, and (ii) applicants were required to have access to sufficient personal, unencumbered, legally transferable funds to enable a proposed business to have a reasonable chance of success.
Since 1987 to qualify under the BMP an applicant was required to have:
· A Successful Business Record
· Unencumbered and personally owned assets available for transfer for business and settlement purposes. Amounts required for business purposes are:
$350,000 for applicants under 40 years;
$500,000 for applicants between 40 and 58; and
$850,000 for applicants over 58.
· In addition to the above funds, a settlement amount of $150,000 if Sydney or Melbourne is the intended destination, or $100,000 if elsewhere, as additional funds to those required for business purposes; and
· An intention to settle permanently in Australia.
From July 1990 to March 1991 nearly 70% of business migrants came from Taiwan and Hong Kong with those countries taking a bit more than a third each of all business migrants coming here.
In 1990 it was probably the case that those migrants brought with them assets of about A$ 1.2 to A$ 1.5 Billion.
Given Australia’s Current Account problems and the balance of trade deficit, that’s not a bad sum to bring into this country.
At first the numbers arriving in Australia though the BMP were modest. From 1982-83 to 1985-86 an annual average of 275 principal applicants arrived in Australia. But then some relatively significant increases occurred.
This increase was due to four factors:
First, the scheme became more widely known in North East and South East Asian countries. The liberalisation by the Taiwanese government in the 1980s of guidelines and opportunities for migration and offshore investment meant that some Taiwanese considered migration to Australia as well as other countries. The future of Hong Kong and the handover by the British of sovereignty to China in 1997 prompted many in that colony to consider migration to various parts of the world.
Second, the efforts of Canadians to aggressively promote migration of business people to that country have also had the consequence of prompting some potential migrants, especially in Asia, to consider Australia as a destination.
Third, the weakening of many barriers to foreign investment in Australia, including the financial deregulation in the early 1980s, increased the attractiveness of migrating to Australia.
Four, the Department of Immigration Local Government and Ethnic Affairs initiated in 1987 a promotion campaign to expand the scale and scope of the BMP. Visa approvals under the Programme went up from 885 cases in 1986/87 to 1,793 cases in 1988/89.
In 1987/88 the total number (principals plus their families) arriving in Australia rose to 7,219. The following year it was 10,039.
In 1989/90 the total number was 10,001, including 2,482 principals.
In 1990/91 the total number dropped to about 7,000. I do not know the number of principals. The fact was that without any specific and damaging moves to cut quotas or to increase the difficulty of qualifying for the Business Migration Programme, the economic situation Australia created those cuts. It follows therefore, that in adjusting the BMP, this factor should have been taken into account, a point which has been under-estimated.
The numbers expected to arrive under the new Business Skills Category in 1992/93 is likely to be 5,000. Based on that figure the number of principals would therefore be around 1,250 or about half the number in 1989/90.
It might be noted that the short to medium term economic benefits of migration as a whole have been increasingly challenged over recent years. Fred Argy, the former Director of the Economic Planning Advisory Council, in his Chapter in the book on immigration which I edited, argues that:
The results from econometric models generally confirm that immigration contributes a net increase in demand, and hence leads to a deterioration in the current account deficit (relative to a situation with zero migration).
Argy also referred to other studies, including [Bureau of Immigration Research] BIR reports contesting that conclusion. But it is clear where Argy’s heart and mind are on this matter. It is useful to note, as was advanced in the [Office of Multicultural Affairs] OMA Report Asian Entrepreneurs in Australia released by the Minister last week, that some of the real “quiet achievers” are business migrants developing export markets for Australia.
But whatever may be said about the economic consequences of immigration in general – and I support the ACTU’s recent submission to Canberra which argues for a greater economic and language focus in the Program – the BMP was a program which does not have a negative short term impact and, more importantly, is of immediate economic benefit. (Incidentally the ACTU has been generally supportive of the BMP. A lot of unionists actually like the idea of migrants investing in Australia).
However the programme has never been universally well liked. Some people resented the ability of BMP migrants to buy their way into Australia. Much of the ethnic lobby were either neutral about the BMP or critical. Certainly most of the statements from the major ethnic organisations, including the Ethnic Communities Councils around Australia emphasised the need for family reunions and humanitarian aspects of Australia’s migration programme. The BMP was seen as another instance of cold economic criteria being applied to the detriment of applicants from so-called traditional source countries.
But the most crippling blow to the Programme occurred in 1990/91. Just as many of the benefits of the BMP were beginning to flow through, six events occurred:
One, there was a change in minister and the personnel at the very top echelons of the (Department of Immigration, Local Government and Ethnic Affairs (DILGEA) were removed.
Two, with rising level of unemployment that occurred in 1990 and early 1991, confidence in Australia’s immigration programme rapidly diminished. Opinion Polls showed that most Australians wanted the annual intake of migrants cut.
Three, wild and sensational stories about criminals arriving into Australia through the migration programme began to surface in the tabloid press. The link between the BMP and this problem became a concern. Understandably the suggestion that offshore drug money was being laundered in Australia needed to be seriously investigated.
Four, the government communicated poorly concerning its views about the general programme as well as particular components such as the BMP. This partly reflected the division opening up within the government about the merits of the whole programme.
Five, the Opposition began to talk about significant changes and cuts in the programme. Bipartisanship was over. The Opposition has particularly focused on flaws in the administration of the existing programme. This has increased the pressure on the Minister and the Department.
Six, The Joint Committee of Public Accounts of the Australian Parliament decided to inquire into the BMP and the control of Visitor Entry.
This inquiry triggered an announcement by ihe Minister in April 1991 that there would be a review of the BMP. Coinciding with the release of the Report of the Public Accounts Committee in June 1991, the Minister announced that there would be no new applicants accepted under the BMP. The Minister justified his decision by explaining that there was a very large backlog of cases and that Departmental officers would have plenty of work to do in processing those applications over the six months interregnum period before the adoption of a new Scheme.
This attitude reflects a bureaucratic attitude to the whole subject. If it is accepted that the BMP is of net economic benefit, and maybe considerable economic benefit to Australia, it is a joke that insufficient resources were allocated to processing cases. Though it should be noted that the checks of migrant’s assets, business details and possible criminal records is no easy task to safely rush through.
The Public Accounts Committee report became sensational news when it was released. It proposed that the Programme be abolished and replaced by a points based Business Skills Category of Migration.
The Report inter alia:
· Savaged the Department for not closely and effectively monitoring the performance of individual BMP migrants and the whole Programme.
· Complained that the System of Accredited Agents was open to abuse and proposed that the Accredited Agent Scheme be abolished.
· Suggested that organised crime was a significant issue that needed to be considered in the context of the Programme. (A whole chapter was devoted to “Criminal involvement in the Business Migration Programme”). The Committee highlighted the concerns expressed by the Australian Federal Police about the exchange of information between the police and the Department.
· Argued that the Programme’s effective criteria had changed from an emphasis on the development of new businesses to an investment driven programme. The ubiquitous Robert Birrell was quoted in the Report as stating:
…when originally introduced, the programme’s main purpose was to attract enterprising technologically innovative entrepreneurs. The focus was on Europe in the hope we would draw such business persons from the most advanced economies. The programme has attracted some capable European investors, often drawn by the prospects of a safer environment than Europe appeared to offer. More recently, the justification offered has been the inflow for foreign investment. Partly because of this and partly because of European disinterest most business migrants now come from Asia, particularly Hong Kong and Taiwan.
· Mysteriously, the committee observed that:
In examining the evidence concerning migration under the BMP from this region [i.e. Hong Kong and Taiwan], the Committee wishes to state categorically that its concern does not lie with the location of the source countries of the majority of the migrants entering Australia under the BMP, nor the ethnic background of those migrants. However the Committee is disturbed that, over time, what was intended as a global programme has become largely concentrated on one region.
The reason(s) behind that concern was not explained or justified in the Report. At the time of the unfavourable publicity about the BMP, the stories were reported in Taiwan, Hong Kong and the rest of Asia. The whole thing looked, smelt and felt totally racist.
Apparently what was not seriously considered was the option of modifying the BMP through (i) tightening up the system of accrediting business migrant agents; (ii) increasing the amount of funds required by business migrants to qualify under the Programme; (iii) more detailed, mandatory if necessary, monitoring of the performance of business migrants once they have located in Australia; and (iv) addressing some of the security issues raised by the Australian Federal Police. (Though it should be mentioned that the Public Accounts Report stated that: “in conducting security checks on prospective migrants DILGEA is dependent on the goodwill and co-operation of foreign governments and security agencies. Consequently, there are some circumstances in which, despite the security measures adopted by DlLGEA, information which might influence the decision of DlLGEA does not come to light” – a point relevant to the screening of all migrants.)
Further, whatever the faults may have been with the business migrant agency arrangements, it was questionable that that aspect of the BMP be ditched. Certainly there were enough instances of abuses highlighted in the Public Accounts report to suggest significant changes were in order. However, the agency system was a market mechanism which encouraged agents to seek out potential migrants and promote the good sense of migrating to Australia.
And the sneers about the BMP becoming a vehicle for investment into Australia should be challenged. What is wrong with that? A migrant with millions to invest in Australia adds to the economic capacity of the country and, on balance, is likely to be a net economic gain for Australia.
One idea which I have personally raised with the government and the Minister is the suggestion that business migrants might be encouraged to invest funds into approved major projects.
Think about the concept. If you or I were thinking about migrating as business migrants to Korea or Taiwan, where would we begin? At the very least it would be uncertain what might be the best industries to invest in. What would work out best?
This kind of problem was addressed by the Canadians who encouraged migrants to invest in certain funds, set up by provincial governments. Some of their experience is not worth repeating, but the idea is worth developing in Australia.
Why not allow BMP applicants to be successful by parking substantial sums in, for example, infrastructure funds managed by the private sector. If properly organised, the result over time would add to the credibility of the whole immigration programme.
Think what attitudes might be if the Sydney Harbour Tunnel project had of been funded through BMP funds. Or, in the future, what attitudes might be if this or that project were funded through BMP sources.
In suggesting a fresh look at the “strategic project” approach, the way it is structured will effectively provide in itself a monitoring mechanism to ensure that investment monies do, in fact, remain in place and are utilised in terms of the BMP’s intentions. Under the old scheme this was not possible and was one of the grounds for severe criticism.
One of the reasons that some of the BMP migrants did not carry out their Business Programme was that there was inadequate infrastructure which would have allowed them to do so successfully. In fact, using their best judgment some did not proceed with their intended project. With a strategic project programme, the framework would be provided with the local expertise and assistance in place.
Let me develop the point further. In some cases, the state governments are in the best position to make the initial assessment of projects which would qualify. Final assessment and approval could be made by a BMP Investment Board. Projects which might qualify for acceptance could include:
• Major residential, commercial or industrial development;
• Manufacturing, pastoral, trading or new technology developments;
• Defined regional area developments;
• Public Works;
• Developments which may not be otherwise commercially viable but determined to be in Australia’s best interests;
• Projects should be substantial to avoid obvious problems. This could be defined as those which have a total capital requirement not less than A$10 million and which will be completed over a period of say, 3-5 years.
Each application for inclusion as an Approved Project could be endorsed with a Certificate of Endorsement from a Qualified Financial Institution operating in Australia. The Certificate of Endorsement would be required to address the full financial position of the Project, including period, return to investors and capital guarantees, etc.
The existing provisions of the BMP could have been expanded to allow for persons who invest in approved projects. Some management complications could be streamlined if potential BMP Project applicants were required to submit evidence of their investment together with their application for migration. In the event of their migration application being refused, they would be eligible for an immediate refund of their investment, if they so wished.
The level of investment could be tiered according to the location and duration of the project. For example, a 3 year project in a designated area (such as is now used for the Points Test) might require an investment of, say, A$300,000. The same project with a 5 year investment could require A$200,000. This could have been in addition to the transfer of the existing monies for settlement in Australia.
In some senses this could have built on the investment “bonds” proposals concerning infrastructure projects and announced in the Prime Minister’s One Nation Statement. These ideas should be looked at afresh.
The new business skills category, which began on February 17, supersedes the BMP, and contains two selection criteria:
• an applicant has to establish, based on a set of baseline criteria that he or she has a certain base level of business experience and skills; and
• a points test which is used to assess applicants against a profile of characteristics considered appropriate for people seeking entry to Australia.
The baseline criteria requires that an individual:
• overall, has a successful business career;
• can demonstrate a genuine and realistic commitment to engaging in business in Australia;
• has no history of involvement in business affiliation of a nature that is not generally acceptable in Australia;
• must register (subject to agreement with relevant states and territories) with an Australian state or Territory Government Business Advisory Agency in the state or territory of intended residence;
• must sign a declaration acknowledging the Australian government’s requirements in relation to his or her entry to Australia as a business skills migrant.
In addition, a person who wants to qualify as a shareholder/sole proprietor must demonstrate that for at least three of the last four years prior to the application he or she held net assets of not less than A$350,000 in one or more businesses and, in respect of his or her principal business:
• had direct and continuous involvement on a day to day basis in the
management of that business; and,
• had not experienced a trading loss in that business in more than one of the four years preceding the application.
Also it is possible to qualify as a senior executive, regardless of personal equity holdings, if a person worked for at least 3 to 4 years prior to the application in the top three management levels of a major corporation. A major corporation is taken to be one with an annual turnover of not less than A$50,000,000.
The business skills points test scores applicants against four factors: business attributes, age, English and capital. An applicant must score 105 or more points to pass the test.
There are some significant problems with the new guidelines.
The points test means that, as the guidelines state: “A 56 year old (0 points) executive with limited English (10 points) cannot pass”. That is too inflexible. Indeed a person aged 46 (20 points) with turnover in a business of A$2,000,000 employing 5 full time employees (50 points), but with limited English (10) with A$1,300,000 in net assets to bring to Australia (5 points) would fail. (Only a total of 85 points). Even if that person had net assets of A$6,000,000 to bring in he or she only gets another 10 points and “fails”. (With only 95 points, ten short of the pass mark).
It is therefore likely that the net value for Australia of migrants coming to Australia through the new Business Skills category is likely to be substantially less than the old BMP.
The media release issued by the government at the time of the release of the new guidelines stated that: “…around 50 per cent of applicants under the old BMP would qualify under the new arrangements.” However the Minister’s media release claims that “these early indications are likely to be somewhat conservative: Reduced emphasis on capital and added emphasis on youth and English ability is likely to attract interest from a range of applicants who would not have come forward under the BMP.” But this is to group together the old BMP applicants with those who applied under the skilled and employer sponsored categories.
In my view the new Business Skills category is a much inferior scheme to the old BMP. In one sense, however, it is still too early to judge what might be the success of the new Business Skills category of the immigration programme. The new guidelines were only promulgated a few months ago.
But what seems certain is that a good deal of damage has been done to Australia’s ability to attract entrepreneurial and wealthy migrants under the business category.
Those who follow the contemporary immigration debate and who, like me, favour the pro-immigration thrust of the Fitzgerald Report must sometimes express exasperation about the cacophony of different claims made about the “merits” of the Programme. It seems that for every BIR argument in favour of immigration there is an EPAC paper suggesting an opposite view! A Tower of Babel has arisen over the consensus that immigration is basically a good thing for the country. The debate about the quality of migrants and the economicimplications of the level of migrant intakes has never been more vigorous.
Skepticism is generally a good thing. I welcome the establishment of the BIR (something that directly arose out of one of the recommendations of the Fitzgerald Report) to help the debate along.
But skepticism about the BMP? Sure, there are many good arguments in favour of reviews, reassessments and some significant changes. Closer monitoring of the Programme was in order. But not the strangulation of the old Programme. The pity is that the damage was ever done. Why strangle the goose that laid the golden eggs?
References
Various ACTU Immigration Submissions, 1991 and 1992, mimeo Melbourne.
Michael Easson, editor, Australian and Immigration – Able to Grow?, Pluto Press/Lloyd Ross Forum, Sydney 1990.
Report 310 of the Joint Committee of Public Accounts, Business Migration Programme, Australian Government Publishing Service, Canberra June 1991.
Various Ministerial Media Releases.
Committee to Advise on Australia’s Immigration Policies, Immigration: a Commitment to Australia (The Fitzgerald Report), Australian Government Publishing Service, Canberra 1988.
Postscript (2015)
The then minister, Gerry Hand, rang to ask why I was so hostile to the changes he had introduced. My answer was that I considered his announcement on the immigration intake, considered as a whole, was highly politicised, reactive, and unthoughtful.
Getting the “best” out of the programme became an important policy interest. The focus on increasing the employability and quality of the intake, I saw as something worth arguing for.
