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Economics of International Migration12 Jan Brzozowski, PhD Cracow University of Economics International Migration and FDIs • Immigrant investment: the role of host country policies • Case study: Canadian immigration policy Immigrant investment • Usually immigrants come with low stock of financial capital • Still, it’s not about the quantity, but quality of migration flow • Selected, less numerous groups of immigrants can be very beneficial to destination country How to attract immigrant investment? • Growth potential of destination economy • Favorable entrepreneurship environment (rule of law, good governance, stability, low corruption etc.) • Administrative incentives (fiscal instruments, admission procedures, residence&citizenship acquisition etc.) Examples of favorable immigrant investor policies • Cyprus Citizenship by Investment: investment of 2.5 € million or more in real estate enables national citizenship and passport. The property can be sold after 3 years • Swiss Immigrant Investor Program: residence permit for invividuals who fund their company and create jobs for Swiss citizens; alternativelly: Lump Sum Taxation (min. 150 thousand CHF) for permanent residents US: EB-5 Immigrant Investor Visa Program • 10 thousand visas EB-5 issued anually • Avaliable for individuals who invest 1 million $ or 500 thousand $ in Targeted Emplyment Areas (high unemployment area or rural area) • Investment must benefit the US economy: create at least 10 jobs or save jobs in „trubled businesses” • After the investment criteria is met – conditional residence permit for 2 years, then possibility to apply for permanent green card http://blog.lucidtext.com/category/eb-5-statistics/ EB-5 VISA STATISTICS (2006-2012) www.iiusa.org Case study: Canadian policy of attracting immigrant investors Basic facts • 2006: population of 31.6 million, including 6.2 million foreign-born • 2011: population of 33.5 million, including 6.8 million foreign-born individuals • Immigrants constitute 20.6% of the population (the highest proportion among the G8 countries) • Consistent immigration policy in last 30 years: each year ca. 200250 thousand new immigrants are admitted • Economic and humanitarian immigration 300000 70 60 250000 50 200000 40 150000 30 100000 20 50000 10 0 0 Economic immigrants All immigrants economic immigrants as % of total immigration Entry mode for economic migrants: points system • Main aim: to make sure that immigrant will contribute positivelly to Canadian economy • The evaluated elements are: educational attainment (up to 25 points); language facility in English and/or French (up to 24 points); labour market experience (up to 21 points); age (up to 10 points); personal adaptability (up to 10 points). Additional 10 points awarded for employment already arranged in Canada. • The passing grade was 67 points out of a possible 100 (for 2008). • 1st Jan 2015: new Comprehensive Ranking System introduced (up to 1200 points (core human capital factors, accompanying partner/spouse factors, skill transferability factors and job offer/arranged employment factors) Within Economic Migrants – 3 cathegories of immigrant entrepreneurs • Self-Employed (1969) - small-scale entrepreneurs, expected to establish a business immediately upon arrival. Conditions: business experience and financial capital. The entry treshold was only 30/100. • Entrepreneurs (1978) – middle-scale entrepreneurs, expected to have a credible plan for estabilishing a business that will hire at least 1 person,. Conditions: previous firm ownership, net wortk of at least C$300,000 (€195,000). They needed only 35 points to qualify for permanent residence. • Investors - larger entrepreneurs, expected to invest a minimum amount of approximately $400,000 (€260,000). The threshold was also 35/100. • Special emphasis put on manufacturing sector (considered as underdeveloped in Canada). Still, migrants mostly are active in real estate and commerce sectors. 90000 Please note: only principal applicants included (in the previous charts also the relatives in each catheogory have been included) 80000 70000 60000 50000 40000 30000 20000 10000 0 2004 2005 2006 2007 2008 Business Classes 2009 2010 Economic immigrants 2011 2012 2013 3500 3000 2500 2000 1500 1000 500 0 2004 2005 2006 2007 Entrepreneurs 2008 2009 Self-employed 2010 2011 Investors 2012 2013 But how it affected Canadian economy? • Initial outcomes very promissing • Research on intentions of entrepreneur immigrants arriving to Canada between 1992 and 1995: they intended to create or maintain ca. 24,000 jobs • investor immigrants between 1986 and 1996 – hoped to add over $3 billion (€2 billion) of venture capital • Enthusiasm of policy-makers: the programme seems to be effective But • Nearly 2/3 of Business Class immigrants – Eastern Asia (Taiwan, Hong Kong, mainland China) • Limited language skills + cultural differences Evidence from Vancouver (Wong and Ng 1998) • Beneficiaries of the programme of Chineseorigin • They work long hours and achieve low profit rates. Many of their businesses are in precarious circumstances • They remain active in the ethnic enclave, few go into the mainstream economy Ley (2003): study among business imigrants in British Columbia • Failed expectations of immigrants, reluctance to open a new business • Complaints about Canadian economic environment (high taxes, strong trade unions, too many regulations) • Transmission of business skills from one cultural or economic and regulatory setting to another can be problematic! Hiebert (2008) • comparison of Business Class immigrants with other cathegories of immigrants • Immigrants who arrived to Canada between 1985 and 2001 and filed a tax return in 2001 • Skilled workers had on average higher language skills (87% claimed proficiency in English or French, while in Business cathegory only 55%) Employment earnings in 2001 Business immigrants fare not very well on (Canadian $) labour market)… Business immigrant Refugee Family immgirant Skilled Worker All immigrants 0 5000 10000 15000 Hiebert (2008) 20000 25000 30000 35000 40000 Total income in 2001 Business immigrant Refugee Family immgirant Skilled Worker All immigrants 0 5000 10000 15000 Hiebert (2008) 20000 25000 30000 35000 Conclusion • Business immigrants have the lowest average income among all immigrant cathegories • This can be attributed to underreporting of income (tax evasion), but still the gains for Canadian economy are rather modest • Conditions for Immigrant Investor Program have been increased (investment of min. invest C$800,000) • On June 19 2014 the federal Immigrant Investor Program and Entrepreneur Program were terminated