These funds would then be deployed to fill these gaps in capital needs in New Zealand. Imagine the impact we could have if say 30% of these funds was allocated to strategic areas such as funding for growth companies, supply of housing stock, regional economic development and even to social and environment causes.
Our philosophy is that if you want to jump the queue based on the size of your wallet, then you have to agree to aligning a greater portion of this investment to areas that we have a high priority and need for. We would even go to the point of giving investor migrants more points on their application for the percentage of their funds they allocate into these key areas.
We recommend to start with that at least 10 percent of wealthy migrant capital should be placed into growth investments, such as angel investment, venture capital or private equity growth funds.
If we take funding for growth companies, which we are recommending the Government start with, changing the settings could bring in $50 million to $100 million a year. When you look at the early stage market currently it is running at around $100m per year so the quantum of impact would be significant. This is pertinent given that we have over the last few years created a quality demand issue in New Zealand with so many companies requiring funding to be successful.
A major challenge for this next generation of high growth, global markets oriented New Zealand companies is raising capital for early growth and offshore expansion. Over the next decade emerging growth companies will need billions of new investment. We have estimated that a subset of this funding for early stage fast growth businesses sees a gap of around $2b.
Currently we are missing an opportunity and suffering an economic loss from the lack of effective utilisation of the migrant funds.
We recommend to start with that at least 10 percent of wealthy migrant capital should be placed into growth investments, such as angel investment, venture capital or private equity growth funds. These are riskier investment classes, but the remaining 90 percent of the migrant's capital would be placed in lower risk investments, such as bonds and bank deposits and then these ratios and criteria could be changed over time.
Other countries such as Australia, Canada, the US, the UK, Singapore & Israel use wealthy migrant rules to require migrants to invest in growth opportunities. So should New Zealand. We are not being competitive and in-fact are disadvantaging ourselves, just taking investor migrants for their money, nothing more is a zero sum game.
It would better align investment with the need to grow New Zealand's economy and to increase its productivity. In our position, it is arguable we need to do more. It also utilises a stream of private sector investment rather than forcing the Government to step in while we are creating an annuity based investment flow for New Zealand off the back of the investor migrants each year.
New Zealand wants migrants committed to building lives and wealth in New Zealand over the long term. There is alignment in having a requirement to invest part of their wealth into longer-term investment funds and companies which are focused on long term growth.
Currently we are missing an opportunity and suffering an economic loss from the lack of effective utilisation of the migrant funds. The proposed changes are better aligned to New Zealand's economic needs. We are not saying migrants should solve the problem. But they can be part of the solution. Their participation in NZ can align with our future prosperity and theirs.
See the Icehouse investor migrant policy here:
