Saturday, December 10, 2011

A Hot New Export Commodity: Residency Permits

For all the angst about immigration, it is interesting to realize that the US and other countries have found ways to make money from those who wish to enter their countries. The US has a process called the Immigrant Investor Program—or EB5. An article in The Economist with the fetching title, Give me your Gucci-clad masses, describes the program. 
"....EB-5, was set up in 1990 to lure in foreigners by giving them the right to live and work there permanently if they created jobs."

"Initially EB-5 came laden with stringent conditions: immigrants had to invest $1m either in a new enterprise that would create at least ten full-time jobs, or in a failing one to preserve the same number. They were required to manage the business themselves, and even to dedicate some of the jobs to exports. If a company failed in its first two years, investors would lose both their money and their green cards."

"With the exception of the two-year rule, these restrictions have now melted away. Investors today can choose to buy into all sorts of packaged projects, created by regional centres that oversee their day-to-day management. Many projects qualify for a minimum investment of only $500,000, designed to push investment to rural regions and areas of high unemployment. Crucially, the required ten jobs no longer need to be in direct employment. This permits investment in limited partnerships whose purpose is to lend money to companies that do employ workers, reducing investors’ risk."

This program has the potential to inject needed funds into the economy if enough wealthy people from other countries are interested. Apparently that is the case.

"....EB-5 finance has become a much-needed source of funds for private property deals."
"Over the summer, the Citizenship and Immigration Services streamlined the EB-5 process further. Last year, 2,480 immigrants got their green cards via EB-5. The Obama administration would like to see that number increase to 10,000 a year, which should bring in billions of dollars for building shops, offices and infrastructure. It should also mean tens of thousands of jobs for the poor, huddled masses of America’s unemployed."

Such an immigrant must invest at least $0.5 million plus living expenses in the economy. Presumably they would buy a house, cars, and assorted other living expenses. Since we are dealing with wealthy people here let us say at least a million dollars will enter the economy. If the 10,000 participant goal is reached, that is at least $10 billion each year. Here is a good example of area in which adding a few more government employees to facilitate the processing of requests for residency permits might be a good investment.

An article in Businessweek gives us more information on who these people are that want to take up residency: China’s Super-Rich Buy a Better Life Abroad.

"In the U.S. so far this year almost 3,000 Chinese citizens have applied for investor visas, up from 270 in 2007. That’s 78 percent of the total applicant pool for this type of visa, according to U.S. Citizenship and Immigration Services (USCIS). The U.S. investor visa, also known as the EB-5, requires a minimum investment of $500,000 by the applicant in a commercial project in the U.S...."

Whereas Russians are busy moving their families and their capital permanently out of Russia, the Chinese have little desire to leave China permanently. Most will maintain their businesses in China and reside a great deal of the time there. The motives for coming here seem split among providing a healthier environment for their families, a form of long term tourism, and wishing to have a safe harbor to settle in if things go sour in China. Many of the good things in life, especially those cherished by the wealthy, are actually cheaper here. Education is another lure, with US schools—at least universities—seen as a source of a more useful education for their children. The fear of coming to a bad end in China is derived from two possible futures.

"Moving a family abroad and obtaining foreign residency cards could also prove useful in case of sudden legal or policy shifts that hurt entrepreneurs, or if social unrest reaches a boiling point. So-called mass incidents—riots, strikes, and protests—doubled in five years, to 180,000 in 2010, Sun Liping, a professor at Beijing’s Tsinghua University, wrote in a Feb. 25 article in the Economic Observer. ‘Some people in China are talking about class conflicts against rich people,’ says Wang Xiaolu, deputy director of the National Economic Research Institute in Beijing."

That seemingly incredible number of mass "incidents" is supported by another seemingly incredible bit of data.

"One émigré in Boston (who asked only that his last name, Yang, be used since he still owns a factory in China) points out that the Chinese government spent more money on internal security (549 billion yuan) than on defense (534 billion yuan) in 2010. He says that if things got ugly, the rich would be targets not just for being rich but for their close connections with the government."

What is the other future that could disrupt these people’s lives in China?—nothing less than an outbreak of lawfulness.

"Most of China’s wealthy have an ‘original sin,’ or some illegality relating to earning their ‘first bucket of gold,’ says Yang."

1 comment:

  1. People can enjoy and freely travel to country of their choice as and often they want without much hassle. Getting economic citizen provides benefits not only on business but on personal front as well.

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