Hoping to entice wealthy investors into its cash-strapped economy, Australia has become the latest in a growing line to introduce a significant-investor visa. In return for a $5 million investment in the country, a foreigner can receive a visa to settle in Australia for up to four years, with the potential for permanent residence rights once the time period is completed.
There is stiff competition. Some countries demand a lot less for residence rights. For a mere $250,000 donation to the governments Sugar Industry Diversification Fund or a real-estate purchase of at least $450,000, Chinese investors can become citizens in St Kitts. For 250,000, investors can buy citizenship in Hungary and with it access to 27 nations of the European Union.
Australias relatively pricey programme also comes up against a deterrent to investment. Introduced in July 2012, the minerals resource rent tax (MRRT) aims to tax "super profits" made by international companies exploiting the land.
So far, the MRRT hasnt pulled its weight: after six months, the tax has generated only A$126 million ($129 million) of revenues, partly because of volatile commodity prices and continuing global instability, but it is way off its goal of raising A$2 billion this year. The tax was also a leading factor in former prime minister Kevin Rudds fall from grace.
But in the name of resource nationalism, the law has discouraged Chinese investors from coming to Australia by adding another level of bureaucracy and uncertainty to the investment process. This is not to mention the added costs involved in production and the hit to profits for Chinese businesses that hoped to set up shop there.
On the one hand, Australian legislation is trying to pull in Chinese investors by offering them residence rights in exchange for their cash; on the other it is making it harder for them to do meaningful business in resources and mining, one of Australias most profitable sectors.
China is a nation of savers. Chinese investment is needed by Australia to make sure that the resource industry and mining continues to develop. But in this economic climate, there are many other needy countries out there. Competition for Chinese money is fierce, and Australia has put itself in a tricky situation by giving little and taking a lot.
Chinese investors will be encouraged to take their money elsewhere at a much more reasonable price.