Proposal to attract 2000 foreign high-net worthers to invest at least $50m each gaining momentum. Photo / Getty Images
COMMENT:
A proposal for New Zealand to attract 2000 foreign high-net worthers to invest at least $50 million each here to create jobs in return for a New Zealand visa is gaining momentum.
The concept was originated by investment banker Troy Bowker. It comes down to: first, squash the coronavirus completely, then announce to the world that New Zealand is free of Covid-19 but it's come at a great cost economically. Follow through by announcing that New Zealand will launch a scheme whereby (say) the first 2000 people who comply with strict investing criteria can relocate here with their immediate family.
The proposal would inevitably appeal to US investors unnerved by the chaotic devastation that the Covid-19 virus has wreaked on their own country, and, Asian investors seeking to take part in the NZ recovery in an environment where the Government is committed to keeping the coronavirus under control.
New Zealand has already achieved international billing as the ultimate Asia-Pacific "bolthole". Plenty of high-net worth people have invested in property or Government bonds ahead of the Labour-led Government's new foreign investment rules. But this proposal has a different and more crucial driver – employment.
Bowker suggests high-networthers should have a proven good character and a successful investing track record; must invest, say, $50 million of capital, (equity not debt ) into productive New Zealand-based assets and employ more people.
The capital should be invested within a year of arriving otherwise their special visa is cancelled. All investors would be quarantined on arrival. If they follow through, comply with requirements, stay five years and prove their worth, they get a New Zealand passport.
The heart of the argument – which I support – is that New Zealand business does not need to drown in a tsunami of debt – and that with some ingenuity and significant multi-billions of dollars investment from international investors tempted by the NZ brand story (as well as more from NZ high-networthers) there is a much brighter future ahead that does not have to mortgage the future of younger generations.
That debt snowball might not be apparent right now. But yesterday's quite scary Treasury economic scenarios are a grim lens into what lies ahead, particularly, the huge impact on NZ jobs and livelihoods outlined under the various forecasts for when the country emerges from each coronavirus Covid-19 alert level staggering under mounting billions of extra public and private debt.
And with major export sectors like tourism and international education already facing multi-billion dollar losses, and their workforces alone likely to stay decimated for months, if not years, to come, it is going to take much more than Government subsidies, more bank debt and usurious new Government taxes to restore a pre-Covid-19 thriving business sector, albeit with a different emphasis.
In this environment, New Zealand will need an infusion of new equity into Kiwi businesses to stop them – and the country – drowning in that forecast debt tsunami.
Last Saturday, I wrote in the Weekend Herald "Rich Kiwis need to stand up and be counted" that it would be great if New Zealand's uber-rich could follow Twitter boss Jack Dorsey's example and put their cash behind New Zealand businesses' survival efforts.
While key entrepreneurs like Sir Stephen Tindall; Nick, Anna and Mat Mowbray, and Sam Morgan had stepped up and filled an immediate vacuum by organising and funding personal protective equipment, ventilators and '"track and trace" technologies from offshore, there is also a need for major private sector investment to create jobs.
Bowker responded to my challenge on LinkedIn and has since developed the concept and road-tested this with some foreign high-networthers and economist Cameron Bagrie.
The key hook – as Bagrie observes – is not to "sell off" New Zealand assets which is a politically sensitive topic. But task those coming into NZ to commit to invest and create new jobs which will be the political imperative over the coming five years.
Bagrie makes the point that New Zealand is taking a bigger hit than other jurisdictions upfront. While Government is now in the crisis-management phase, there are two other distinct phases (which to some degree overlap) which are the recovery and growth phases.
"This is not like the Great Depression, or the Asia Crisis, or the GFC ... it is more like 1987-1992 where we didn't get an upfront hit. It took a lot of time for the cracks to come to the surface and then to find we had run out of band-aids."
Bagrie contends New Zealand has the opportunity to excel. Our liveability attraction is high. We are surrounded by water geographically which is a plus and there is the opportunity to live and run businesses from here in relative personal safety. The New Zealand brand should be leveraged. But the time window for exploiting that advantage is narrow.
Bowker returned to New Zealand in 2008 to launch Caniwi Capital after 11 years in London and New York where he became global head of asset finance for HSBC. He was a participant in the international finance hub working group.
The basic math goes like this: If NZ could attract 2000 people to invest $50m, that would raise $100b.
"That essentially pays for the huge black hole in our GDP, mass unemployment and significant negative social outcomes," Bowker contends.
"The most likely alternative of not bringing in huge foreign capital to invest in productive NZ assets is our Government leveraging New Zealand to the hilt with public debt/GDP exceeding 60 per cent, devaluing our currency and having higher taxes for years to come to pay off the debt."
Other investment bankers have related to me their concerns that the unlisted private sector will find it much harder to raise new capital than listed companies in the years ahead.
Several have been in touch with Treasury.
The suggestion of an NZ-version of Temesek (Singapore's investment arm); or a Government mandate to the NZ Super Fund to invest in capital-stretched private Kiwi companies down the track to assist them until NZ comes out of what will be a lengthy downtown; and, a "fund of funds" are among just some of the proposals being floated.
It's important investment banking ingenuity is tapped and that private sector creativity and entrepreneurship is not throttled by a medium-term shortage of equity capital or the over-enthusiastic hand of Government attracted by the Big State model.
There is plenty we need "the State" for right now but the sooner the private sector gets back to investing, taking risks and creating jobs the better off we all will be.
The company employed a lot of immigrant workers as contractors now owed money.