The EB-5 program provides wealthy immigrants with the option of acquiring a coveted US Green Card in a relatively short span of about years. The EB-5 program offers permanent residence in the US for applicants investing at least $1 million; $500,000 in case of a Regional Center in a rural area or a high-unemployment area; in a business that generates at least 10 jobs in the country.
Introduced in the early 1990s, the program initially failed to attract sustained demand from applicants and US businesses alike until the 2008 recession. Analysis of data released by the US Bureau of Consular Affairs shows a staggering 2960% increase in the number of EB-5 visas issued over a ten-year period between 2005 and 2014. During the post 2008 recession, the issuance of investment immigration visas to wealthy investors rose by 640%. During the decade, the issuance of visas rose every year except for two years; in 2007 and 2010.
Investments rose from $321 million in 2008 to more than $2.5 billion in 2014 with FDI inflow from EB-5 applicants expected to exceed $3.5 billion in 2015. Growth in demand for EB-5 visas is attributed primarily to three factors.
First, the 2008 recession made it virtually impossible for businesses to obtain financing from conventional sources like bank loans. This compelled entrepreneurs and companies in the USA to seek alternate sources of funding.
Second, the Chinese economic boom led to a consequent increase in number of wealthy investors seeking attractive investment opportunities in developed countries. The extent of Chinese demand is evident from the fact that 85% of all EB-5 visas issued in 2014 went to immigrants from China.
Despite a low return on investment, demand for these visas are high as wealthy Chinese are drawn to other factors such as access to an improved lifestyle, better educational facilities, and travel privileges that a holder of a US passport enjoys globally. Other countries like South Korea, Mexico, Taiwan and Vietnam account for 6% of all applications.
Third, was Canada’s decision in 2014 to suspend its own investment immigration program, which, until then, had been a preferred option for many wealthy investors seeking permanent residence in a developed country.
Impact on the US Economy
The program is credited for attracting billions of dollars of FDI into the construction and real estate sector, which has outpaced other sectors in terms of inflow of capital, around $875 million, and creation of jobs under the program. Apart from providing a valuable boost to the economy, wealthy applicants who choose to stay in the USA end up making further investments in the country.
There has also been a surge in the number of EB-5 projects in various counties throughout the US. Orange County in California for example, which attracted $2.1 million in EB-5 investments accounting for the creation of 28 jobs in 2010, received more than $400 million in investment which resulted in the creation of approximately 16,000 direct and indirect jobs in 2014.
The rise in demand for EB-5 visas has led to questions about the manner in which the program is run, undervaluation of the right to reside in the USA, and security implications involved in allowing wealthy immigrants into the country without effective scrutiny.
Critics oppose allowing wealthy immigrants to enjoy faster access to permanent residence in the USA. Further, applicants resort to questionable interpretation of US census tracts to qualify for projects with the lower investment requirement of $500,000 as opposed to the original $1 million requirement.
Critics have highlighted that more than 90% of all visas under the program are issued to those investing just $500,000 in Regional Centers, which have increased from just 11 in 2007 to 700 in 2014.
This has raised doubts about whether the program is actually contributing to its intended objective—to attract investment in rural areas and regions with high unemployment.
While supporters point out that around 15% of the applications are rejected each year, a recent Government Accountability Office report highlighted 35 instances of securities fraud in the investment immigration program. The report further criticized the lack of adequate oversight on the program.
With the EB-5 law up for reauthorization in September, 2015, there is growing demand for comprehensive reforms from critics of the investment immigration program.
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