Questions asked over Canada's millionaire migrant scheme

Canada's millionaire investor programme was so popular that it had to be frozen, but critics say cash-for-citizenship can never be justified

PUBLISHED : Thursday, 06 February, 2014, 10:53pm
UPDATED : Friday, 07 February, 2014, 5:09am

In 2010, it had become clear to Canada's immigration authorities that their investor migrant scheme was reaching crisis point - and the epicentre of the problem was the consulate in Hong Kong.

Two years earlier, applications to the scheme at the SAR mission had doubled. They did so again in 2009, hitting 20,563 and easily surpassing the entire number being processed in the rest of the world. Nearly all of the SAR applicants - about 99 per cent - were rich mainland Chinese seeking Canadian residency

By the start of 2010, applications to the scheme via Hong Kong were pouring in more than five times faster than they could be processed.

With the backlog soaring out of control, Canada announced drastic action. On June 26, Immigration Minister Jason Kenney said he planned to double the wealth and investment criteria, to C$1.6m and C$800,000 respectively. But he made no mention of the situation at the consulate 12,000 kilometres away.

New applications were paused until that December when the new rules came into effect. But despite the six-month hiatus, a record 42,312 applications hit the system in 2010, with the Hong Kong consulate receiving 34,427 of them. The influx of millionaire applicants slowed but still exceeded processing capacity the next year, leaving the government little option but to shut the application system down in 2012.

It remains frozen.

The way the situation unfolded was gleaned from documents obtained by the South China Morning Post, including immigration department spread-sheets listing applications and processing rates, as well as documents detailing the backlog.

David Mulroney was Canada's ambassador in China at the time of the investor migrant scheme's meltdown. He said he was aware of the situation but it was handled mainly by immigration staff and it was not considered "a political issue".

Nevertheless, he said Canada "didn't get it right" with the scheme, and doubted whether the investor scheme and wealth limits were the best way of finding good citizens. "My view at the end of the day is that money isn't everything, and that you can't rely on money alone as an indicator of potential contribution to Canada," Mulroney said.

Under the scheme, principal applicants worth a minimum of C$1.6 million are granted residency visas if they "invest" C$800,000 in the form of an interest-free loan to the Canadian government for five years. They and sponsored family members can apply for citizenship after three years. The scheme has been criticised as a cash-for-citizenship operation.

Mulroney questioned whether the programme was "doing a good job of bringing to Canada the people who want to make a lifelong commitment to Canada, who want to help build Canadian society".

"That's one objective. At the same time, are we doing a good job of investment promotion?" he asked. "Sometimes the very nature of these programmes works against the very belief that Canada is a good place to do business. It's kind of artificial, it's concocted by the state, so you get people who think that because we have this programme that we are not a naturally entrepreneurial society."

Unlike investment schemes such as the EB-5 visa programme in the United States, which requires active investment and the hiring of a certain number of employees, the Canadian "investment" is a passive one, and entirely risk free: the C$800,000 loan is returned in full after five years.

Unsurprisingly, the concept of risk-free "investment" proved hugely popular with would-be immigrants, particularly mainland Chinese who make up 75 per cent of the 75,651 people in the backlog queue, as of January last year. The approval rate is about 96 per cent in Hong Kong.

A parallel scheme run by the province of Quebec has also been heavily oversubscribed by mainland Chinese, as detailed in a South China Morning Post report in December.

Prominent Vancouver immigration lawyer Richard Kurland, who provided the Post with the immigration department documents, said Canada was "selling $5 pieces of pie for 50 cents".

"The investment should be a minimum of C$2million for a case, minimum net worth, C$4million," he said. "I'd even go for double that. There's no shortage of applicants for the limited number of Canadian investor visas. We should peg high - if we don't meet the number of required applicants, reduce the price. Otherwise, we have the entire year's quota gone in a day."

Comment on the Post's investigation was being sought from the Canadian government.

Even before the scheme was frozen, it had been subject to criticism that its applicants contribute little to the Canadian economy, besides the initial loan. A 2011 report by the Analysis Group found that only 16 per cent of investor migrants conducted any business activity in Canada.

Mulroney, now a senior fellow at the University of Toronto's Munk School of Global Affairs, said that before deciding how the investor migrant scheme could be reformed, Canadians needed to ask what was expected of themselves as citizens.

"There are lots of people in China who are building communities, who are equipped with skills that we need in Canada," he said. "Is the dollar limit a good proxy for identifying the kind of people that we want to come and build [Canada]? Are we, in fact, discouraging people who can't make that kind of commitment but could contribute greatly to Canadian life?"