Fund managers want the Australian government to speed up the processing of Significant Investor Visa applications to protect startups from the devastating impact of the COVID-19 pandemic.
Significant Investor Visa: Unique Program
Australia’s Significant Investor visa is unique as the only program run by a developed country requiring all applicants to invest in venture capital funds and funds investing in emerging companies.
A U.S. EB-5 investor is free to invest in any commercial enterprise as long as they fulfill the minimum investment and job-creation requirements. Under the UK Tier 1 Investor visa, the applicant must make equity or debt investments in an active and trading company.
Neither program mandates investment in startups or companies operating in the emerging sector.
Australia’s decision to require investors to look beyond passive investments in real estate or government bonds has dampened demand. Yet, the program remains popular among Asian investors seeking fast-track permanent residence in a country closer to their homelands.
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Longer Processing Times
Unfortunately for SIV investors as well as startups and emerging companies, pandemic-related travel restrictions have resulted in the processing of applications, including around 50 in the final stages of approval, coming to a standstill.
Even before the COVID-19 pandemic occurred, fund managers had been drawing attention to a paradoxical problem of falling approvals and rising processing times for SIV applications.
The SIV program targets a processing time of six to nine months. According to fund managers, processing times, which were as low as 8-12 weeks five years ago, have currently risen to more than two years.
The 50 applications stuck in the pipeline represent potential investments of around AUD $100 million into emerging companies in sectors like health, manufacturing, and agribusiness.
Delayed funding often leads to irreparable damage for such companies, along with an inevitable decline in employment generation and creation of intellectual property assets.
Declining Approval Numbers
This increase in processing delays has been matched by a decrease in the number of primary SIV visas granted.
Australia approved 191 SIV applications between July 2018 and June 2019. From July 2019 to December 2019, approvals fell drastically to just 98 primary applications. To put this in context, Australia approved 879 primary applications in 2015.
It seems unlikely that Australia will modify its SIV to allow residential real estate as a permissible investment. Yet, ensuring the removal of processing roadblocks should help boost demand.