[Recorded by Electronic Apparatus]
Thursday, October 31, 1996
.1540 
[English]
The Vice-Chairman (Mr. Dromisky): I'm calling the meeting to order. We're going to operate it at a reduced quorum.
We will continue immediately with dealing with the topic on the agenda today, refocusing the immigrant investor program. We are very fortunate today to have three guests. We have Ralph Girard, the assistant deputy minister of operations; Doreen Steidle, the director general of the selection area; and Don Myatt, director of business immigration - he's the man who looks after the figures, I've been told.
I will now ask the assistant deputy minister of operations to begin the package of presentations.
Mr. Ralph Girard (Assistant Deputy Minister, Operations, Department of Citizenship and Immigration): Thank you very much, Mr. Chairman.
I would simply like to say you're probably all well aware the investor program was begun in 1986 and the moratorium on new offerings was declared by the former minister, Sergio Marchi, in November 1994, so we would have time to take stock and look at the strengths and weaknesses of the program and come up with a new format. Although the period set for that review has been extended because of a number of circumstances, we now have a situation where new offerings through provincial funds are permitted but there are no private offerings, pending a final choice by government on a format for a new program. As a result, the policy issues are in flux. We would have a hard time speculating on the choices, but we can assist you with as much factual information about the program as required.
I have with me Doreen Steidle and Don Myatt, who respectively are director general and director in the area. Doreen will give you a short statement on the background.
Ms Doreen Steidle (Director General, Selection, Department of Citizenship and Immigration): It might actually be a little longer than a short statement.
As Mr. Girard said, the investor program was established in 1986 as part of Canada's business immigration program. The program composes three parts: entrepreneur immigration, self-employed immigration, and investor immigration.
The idea of the immigrant investor program as it was established in 1986 is to facilitate the immigration of qualified, experienced business people who are willing to invest capital in ventures that would enhance Canada's economic development and employment growth. That was 1986. That was the intention of the program.
However, by 1992 it became apparent - and we had a number of abuses reported by the media - that we needed additional regulatory control over the program. So a ministerial task force was formed in 1992. It recommended the imposition of regulations to control abuse and protect investors better. In August 1993 we came up with major regulatory reform, with an actual monitoring and investigation and compliance package which gave enhanced powers to the minister for monitoring compliance with the terms of the program.
In 1994 we asked Mendel Green to look at the investor program from a practitioner's point of view, to focus on selection criteria, and to give us some indications of what might be a better use of investor funds.
Also in 1994, in November, we imposed, as Mr. Girard said, a moratorium on new offerings under the program, again because of concern over the use of the fund; the abuses in the program. When it was imposed in November 1994, the moratorium indicated that all marketing under the current program would cease as of June 30, 1996. Under the Canada-Quebec accord the moratorium did not apply to Quebec funds.
.1545
In November 1944 we had the imposition of the moratorium, and in December 1994 Minister Marchi and Minister Manley of Industry established a private sector advisory panel. This was the Sharwood panel, and it's the Sharwood report we'll be discussing today.
The mandate was to examine the current program, particularly the mechanisms by which investor funds are raised and how investor funds flow to small and medium-size businesses. Its mandate was to make recommendations on the structure for a new program, which would more effectively provide capital to small and medium-size businesses while at the same time limiting the potential for abuse. The panel was not given the mandate to look at other immigration aspects or to alter the basic economic objectives of the program.
The panel report was published in September 1995, last year, and unfortunately the reaction was not particularly favourable. It would perhaps be useful to go over some of the criticism of the report which was received so you could understand the factors we're dealing with.
Three sets of criticism were received, one from the provinces. The provinces didn't like the idea of the limited provincial role in what the Sharwood panel was proposing. The provinces almost unanimously didn't like the idea that under this proposal they wouldn't have the ability to shape their investment to provincial goals and objectives. They didn't like the idea that they couldn't compete amongst themselves and somehow be rewarded for their success in luring the immigrant investor. The provinces indicated to us they felt there was the possibility of a further level of bureaucracy, this would be costly, we would be over-regulating the program.
All in all, in summary, it was not a positive response from provincial governments. We can go into detail if you have any questions on that.
We also received representations from the private sector, which was not very keen on the Sharwood report either, for many of the same reasons: the creation of an additional bureaucracy; they questioned the cost and effectiveness of further financial regulations; and they criticized the lack of investor choice and wondered whether it would be such a good idea, in terms of financial money management, to separate immigrant investor funds from the overall Canadian money market.
We didn't exactly get favourable press coverage either. Part of the problem was the presumed need to guarantee a return of investment to the immigrant investor when in fact those immigrant investors themselves would be benefiting from immigration itself, from permanent resident status in Canada. So we didn't get a great response from the media either.
At the same time we have been dealing jointly with Industry Canada, because in dealing with the immigrant investor program the immigration department role is more the front-end selection of the individuals and we very much take the expertise of Industry Canada on money management. They're certainly the experts and we're not.
The problems we had as a department with some of the recommendations of the Sharwood report echo many of the provincial concerns. With the Sharwood example, in our view, federal government involvement would increase substantially, and with that comes an increased potential for financial liability. The provinces, as they have indicated, would have a rather limited role, and given the cooperative approach we are taking with immigration and the provinces that seems to run counter to the direction we are intending to take. From the federal government's point of view, or taxpayers' point of view, the question of resource savings is questionable.
Last but not least, the financial market seems to have changed a fair bit since the Sharwood report was commissioned. Because of low interest rates in Canada, we're told by Industry Canada there is no shortage of venture capital in Canada for Canadian businesses. That changes the environment within which we consider the Sharwood recommendations.
.1550
As Mr. Girard said, I suppose in conclusion we could say that based on the Sharwood recommendations we're looking at a number of options for redesign of the program. We hope to have recommendations brought forward in the near future.
The Vice-Chairman (Mr. Dromisky): Thank you very much.
Mr. Nunez.
[Translation]
Mr. Nunez (Bourassa): This is the first time I have heard an assessment of this program for immigrant investors. Everyone criticizes, no one is satisfied. I have already asked questions in the House and I have not had satisfactory answers; we have not got to the bottom of it. The Sharwood Report was said to be going to come into force on a certain date and it did not. Now, no one knows what is going to happen.
I would like to ask a question. What abuses have you noticed in this program in 1993, when you undertook to reform the regulations for this program?
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[English]
Ms Steidle: Did you ask what were the abuses?
Mr. Nunez: Yes.
Ms Steidle: I'm sorry, we're a little step behind here.
Generally speaking - in fact, almost exclusively - the abuse has been limited to the private sector. It is a limited number of cases in the private sector, but nonetheless, very public, very visible. It doesn't involve a large number of cases and a large number of investors, but it is of concern to us because of Canada's image abroad and our ability to recruit investor-category immigrants. So we can't stand by and take no action while there is the possibility of abuse.
It would be fair to say that when we are looking at options for redesigning the business program, we're very conscious of some of the loopholes and some of the weaknesses.
Mr. Nunez: Could you please answer my question? What kinds of abuses do you notice in 1993?
The Vice-Chairman (Mr. Dromisky): I believe he is asking you to be more specific.
Ms Steidle: Specific detail?
The Vice-Chairman (Mr. Dromisky): Yes, what are the abuses.
Ms Steidle: A good example would be where immigrant investors were encouraged to invest in what they thought was a hotel and it turned out to be a gold mine. That's one, quite a public case.
Mr. Don Myatt (Director, Business Immigration, Department of Citizenship and Immigration): All the investor programs are on the basis of fund management, and the fund is supposed to make an initial offering memorandum outlining what the prospective of the investment will be, whether it is to build a hotel, a shopping mall, or invest in a certain business.
The very first type of abuse was that fund managers did not carry out the stated investment objectives and diverted the money to other activities that were not approved by either the provincial government or the federal government. That is one type of abuse.
A second type of abuse would be excessive transaction fees on the handling of the money, excessive costs in marketing.
A third area of abuse would be in the overseas marketing of these funds, where many agents were selling the funds with false or misleading advertising about the benefits that would come to the immigrant.
A fourth type of abuse would be outright theft, and these occurred in project-specific funds where an entrepreneur created a trust, an investment fund, to support one sole project rather than an industry - such as building one structure, a hotel - and then paid himself massive amounts of management fees and at the end of the day had only a hole in the ground and nothing built.
Those are the types of abuses that were prevalent in the past - not often, but they are the examples I believe you are looking for.
[Translation]
Mr. Nunez: Were there criminal proceedings against those responsible for these abuses, thefts, etc.?
[English]
Ms Steidle: Yes, in fact we have 20 RCMP investigations currently ongoing. To put it in perspective, we have 750 approved funds, of which 20 are being investigated at the present time with the help of the RCMP.
Mr. Girard: Criminal charges have been laid as a result of some of those investigations.
[Translation]
Mr. Nunez: In which provinces?
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[English]
Mr. Myatt: The question is the abuse in what province. I think it's not really specific to any province.
The abuse is pretty general everywhere, from the early stages of the program when it was monopolized by smaller operators who moved in as fund managers. They appeared wherever they lived or there was an opportunity: British Columbia; Saskatchewan; Manitoba, who pulled out of the program because of abuse; some in Ontario; some in the Maritimes. It's pretty unique, except for the province of Quebec, which selects and manages its own program.
[Translation]
Mr. Nunez: I have read in the newspapers that most of these abuses were committed in British Columbia, against Asiatics, by immigrant investors coming from Asia. Is this correct?
Mr. Girard: This is only an example of the criminal proceedings. It is not the only one and it is not representative of the situation in general. Most of the applicants for Canada and for Quebec are of Asiatic origin; They come from Taiwan, Hong Kong and Korea. Elsewhere, there is very little interest. It was a Taiwanese company that was charged in the last case of criminal charges.
Mr. Nunez: Then you are saying that the authors of these misdeeds are equally Canadians or foreigners?
Mr. Girard: It is a mixture of the two. One of the persons against whom the R.C.M.P. laid a complaint...
Mr. Nunez: A charge.
Mr. Girard: - a charge is a Canadian citizen. One of his associates is a landed immigrant.
Mr. Nunez: With regard to risk capital, that is what one is looking for from these immigrant investors. However, here in Canada, we have a lot of risk capital. A few days ago I was at a meeting of the Finance Committee, and we heard discussion about solidarity funds and all the labour funds from everywhere in Canada. In Quebec, the FTQ has two billion dollars of risk capital. Is this what we need in Canada?
[English]
Mr. Myatt: When the program was established nearly ten years ago, the goal was to bring in.... Immigrant investors, in exchange for a Canadian visa, would give us their money, to make the best use of it, and it was determined the economic element was going to be investment, risk capital investment, in small and medium-sized businesses. At that time there was a shortage of venture and high-risk capital in the Canadian economy.
Mr. Nunez: Not today.
Mr. Myatt: You are quite right, though, that today there is a great deal of capital available in Canada. Financial markets evolve and change. Risk capital has emerged in Quebec and other provinces due to other legislative and tax regimes such as the labour market venture capital fund.
There is a great deal of other capital available in Canada, which is why the Sharwood report, when it was written, and the analysis behind it, is not exactly tout à fait with the present economic needs.
The immigrant investors' money is still required to go into other program areas we are pursuing, such as economic development in markets where the risk capital is not as deep or where the large pools of investors in risk capital or venture capital people will not readily invest or know, such as the Maritimes, for example, or the western provinces.
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The Vice-Chairman (Mr. Dromisky): Ms Meredith, ten minutes.
Ms Meredith (Surrey - White Rock - South Langley): Thank you, Mr. Chair.
What I hear you say is that when this report and the program was reviewed, the situation was different from what it is now. You implied that you are currently looking at options for redesigning the program. Are you telling us your options are not in line with what the Sharwood report and others have outlined, or are you still continuing to go in this direction?
The concern I want to raise and I want you to respond to is, are we as a country still going under the concept of selling our Canadian citizenship or legal status in Canada for investment dollars such that we are going to recognize that foreign investors do not want their money in high-risk areas because they want some security of their investment, and we're still going to be allowing them to literally buy landed status without any risk, or low risk, with a guarantee of return of their investment after a period of, say, five years, without a commitment of living in the province in which they're investing their money and without their being actively involved in the business or in the investment community?
Mr. Girard: I think the recent studies that have been made show us that while there may be a surplus of risk capital in Canada these days, there is a great shortage of people who can employ that capital in risk ventures and succeed. So in this program what's more important than the money brought to Canada are the brains that come with it and the people, provided selection is good.
A big part of the reform of this program will also be a review of the selection criteria. It may not go hand and hand with the exact bringing in of the new terms and conditions for investments, but it is part of the package. We're as concerned, or even more concerned, about the calibre of person who comes to Canada than we are about the money that comes in.
One might ask, why do you want to make a visa available to any kind of immigrant on payment of a certain amount of money? In the market outside Canada, we have an opportunity for people who are going to come and engage in business in Canada right away. That's the entrepreneur program. Business persons who have a clear plan of action and are going to establish a business employing Canadians right off don't need to lock their investment money into an investment vehicle and see it spent by other people over five years. They're given visas as investors and they come and set up their enterprises and get on with business.
Outside of that group, though, quite a lot of people aren't willing to come and set up in business immediately. They want to come and get to know the Canadian market. They want to come and get used to how business is done in this country. They want to look for opportunities.
For them, the investment vehicle offers an opportunity without the kind of commitment an entrepreneur has to make. For us, it gives us an avenue to bring in more qualified business people who sooner or later will deploy their expertise in the Canadian marketplace and create jobs.
Ms Meredith: To clarify that statement, can you give us some statistics as to how many of these individuals actually move to Canada themselves, not their families but they themselves, and become active participants in the Canadian economy outside of just an investment?
Mr. Girard: The evaluation is under way. I don't have anything.
Do we have any information?
Mr. Myatt: No. We'll have to get back to you with those statistics.
Ms Meredith: Moving on, you highlighted that you are concerned with not just the money that comes in but also the brains that come in with the money and the selection criteria.
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You seem to think that they aren't great numbers, but any numbers of people come in who are using the investment program to come in or bring their families in and they are are causing serious problems, at least in the lower mainland of Vancouver. The terminology that's used is ``satellite families'': the investors invest the money, get landed status, and bring their families in, who are putting stresses on the education system, on the ESL programs and on other areas.
What are the selection criteria? And is there any screening as to the criminality of these individuals, to the national security risks of these individuals, and going beyond that, to the source of the money that they're bringing into the country? How many ice queens are there who have used Canada as a means of laundering dirty money in order to further their investment potential?
Ms Steidle: Every immigrant to Canada has to go through a security or background check and present a police certificate. That is done as a matter of course.
Ms Meredith: A police certificate from where?
Ms Steidle: From the country they reside in or have resided in in the last ten years. We do ask for that information. In some places it's more reliable than others, but we do make that request. That's number one.
The selection criteria right now say that you must have owned or operated a business of your own, so you must have business experience, and you must have gained a certain amount of money by your own endeavours. I believe it's $500,000 by your own endeavours, not through inherited money. You must be self-made. And of the $500,000 you must be investing a proportion, the $250,000 or the $350,000, as an investor.
Mr. Girard's point about the human capital is really important because we are competing for the same group of people our competitors are - the Americans, the Australians, the New Zealanders - in the sense of looking for the people who can best contribute.
Our program is quite different from our competitors', but we are looking for people with business experience who want to use that business experience in Canada.
In terms of redefining the selection criteria, we're looking at a number of options within the greater package of the whole redesign of our economic immigration selection criteria to put greater emphasis on language ability and adaptability to the labour market.
We're combining that with research, because we need to find out what happens to people who are not establishing businesses in Canada as they were selected to do, for example, in the entrepreneur category. Do they enter the labour market, and if they do, what are the skills they bring with them? These are the things we need to know in order to redesign the program. That's sideways onto your question, but we are very conscious of some of the problems with the existing program.
Ms Meredith: I appreciate your responses and I do hope that you follow up on the criteria and on looking beyond just the money, because there has to be a commitment to this country and an ability to integrate into the society. But what I'm curious about is.... Yes, they are required to have the $500,000 income they've made or capital to be able invest, but what kind of follow-up or investigative research is done to ensure that they are who they say they are? How is the application handled? Is it through interviews? Is it strictly a paper application with documentation?
I have been made aware of a number of cases where the Hong Kong police have known of the criminal activity, and the people have still come in under the Canadian investment program when the Hong Kong police knew they had a criminal background. How much investigative research do we do with the application? Is there an interview, or is it simply a paper chase?
Mr. Girard: Every case of that nature is routinely referred to the RCMP and to CSIS for background checks.
In addition, in 1993, within the department, we set up an organized crime unit to develop police intelligence and to develop the information that will allow us to act against people who - notwithstanding the fact that they may not actually be convicted of an offence - are known to have links with criminal organizations, like the triads or the Russian mafia or these other groups that are well known whose presence in our country would not be in Canadians' interests.
Ms Meredith: So you're -
The Vice-Chairman (Mr. Dromisky): Now we will go to the government side. Ms Minna.
Ms Minna (Beaches - Woodbine): Thank you very much, Mr. Chairman. Excuse my croaky voice.
.1615
First of all, I want to say that I'm familiar with at least a couple of business people in the greater Toronto area who have come through the entrepreneurial system and who have created jobs. In one case it's now at 35, I think, and growing, which is very positive. I believe that we still need risk capital for small businesses and the skills to grow the Canadian economy. We cannot do that, so I think that's a positive.
I just want to look at some of the problems to see whether the solutions are closer than we think. First of all, I think you said that out of, what, 500 or so, or 700, there were 20 investigations. So maybe the problem is serious, but not that big.
Maybe there are some specific elements that caused the 20 that can be looked at. I'm wondering whether that has been isolated. What were the issues? What were the specific things that happened in those 20 cases? As for the reports I've read so far, while they don't say they're solely situated in the western funds, they say that's so in the main.
What was happening there that was different from what was happening elsewhere? I just want to understand this. If we understand the problem, then maybe it's easier to pin down what the solution might be.
If I could get that first, I'll then have a couple of others.
Ms Steidle: I can answer that. I think the investigations we're referring to have one common theme, which is the lack of regulation of fund managers. In other words, these aren't registered, licensed, broker-level professionals. I think that is the problem, and we're very conscious of that. Certainly, had we asked for a higher standard of expertise in money market management, we might have avoided a few problems. So we're quite conscious of that in terms of redesigning principles.
Ms Minna: Okay. So that is one area that can sorted out.
This is the other thing I'm aware of. My understanding, unless I've misinterpreted the reports, is that the Quebec program is working relatively well. Is there anything we can learn from this that would apply to the rest of the country? There's no point in not learning that something is working well elsewhere. This is from the point of view of criminality. It seems to be working well. But I wanted to understand that if that's so, is there anything there that is applicable elsewhere?
Mr. Myatt: There are many variations between the two. I think the first one is the level of professionalism in the financial management, the fund managers. We've certainly identified that. That is quite evident in the Quebec program, because their levels have been much higher than that of the rest of Canada.
The other area of abuse was dealt with in the question of where the money can go and into what type of eligible businesses - that is what we call them - that can go? We've tightened that up to a great degree. You can't build your own house any more and you can't buy your own car. We're sophisticated enough to know that was abused.
But Quebec has some very good rules on eligible businesses and where they direct the money. The problem is a trade-off. We want the money to have economic impact. We want it to go to small- and medium-sized businesses that need the capital to get them into the second stage, where they can get public financing.
That's the target of where the money should go. So we have to be restrictive enough that we prevent abuse, but we have to be understanding and open enough that the money will go to some places at risk that might not normally get it.
So Quebec has struck that balance. I think it's because of the professionalism of their fund managers. They're using venture capitalists and people in the markets who know where the money should go. Previously, many of our managers were more interested in making profits from the program than delivering the program's objectives. I think we're a long way from those days now.
Ms Minna: Given that examination and the examples, what I keep hearing over and over again is the credibility and expertise of the registered brokers and fund managers and the level of professionalism.
Could that not be applied across the board? Could that not be an agreement or some sort of negotiation, province to province, whereby that kind of professionalism and accountability is built into the structure of the program? This is so that you don't allow into the program everyone who stands up to say they have a project or that they're a broker. It's so there would be some accountability and control in the same way. Could that not be repeated across the country?
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Ms Steidle: Yes, that, and also the concept of provincial involvement but private sector involvement and a high level of standard.
Ms Minna: Right. It seems to me that you've identified pretty clearly what the problems were, where the weaknesses were and where it needs to be bolstered and what needs to be kept out.
I only have one other question. Accepting the fact that one of the main things we're looking at is investment in risk capital, small businesses, how much resistance has there been from people who invest in Canada to put their money in that area and, looking for some security, want to split the money? I read in the report that one of the recommendations was to split the money, some of it to go to risk management capital, some of it to more secure investment. Is this because the investors were not prepared, or because they were not sure their money was being treated seriously, because of the issue you've just outlined?
Mr. Myatt: That's a very key point. It's a very good observation.
One of the criticisms of the Sharwood report is that there's a premise in the report that the immigrant investor does not want to put his money at risk, that he wants it secure and he wants it all back as quickly as possible.
Some of the opinion of other fund managers and people who have experience with good funds and good investments - and there are many - suggest that the apparent desire of the immigrants to focus on security was a reaction to their perception that there were a lot of bad funds in Canada.
Now that the market is much cleaner and there aren't that many - we don't think there are - evident problems, we think investors will be more willing to put their money up and see it at risk, because the playing field is just at a higher standard. That's something we hope to test with some analysis in the coming months, as we move ahead with this.
Ms Minna: So there's a bit of cause and effect here. It's more than just -
Mr. Myatt: Yes.
Ms Minna: Okay.
Thank you, Mr. Chairman.
The Vice-Chairman (Mr. Dromisky): Mr. Nunez.
[Translation]
Mr. Nunez: I have a first question concerning the responsibility of the Department of Citizenship and Immigration. Is it you who approves these funds? What part do you play in the process?
[English]
Mr. Myatt: The process is that if you have a fund, if you are a fund manager, you make a prospectus, much like a stock offering or a mutual fund prospectus. You present that to the provincial government that signs off on the prospectus as meeting its economic objectives. It is then given to our department to analyse and review to determine that the economic project meets our requirements in terms of economic benefit, and that the money is not going into ineligible investments, such as closer than arm's-length, private homes, non-Canadian companies, etc., etc.
We have a review and monitoring role to make sure the investment is effective, that people are playing by the rules. However, in terms of liability, there is none for the department. This is a contractual basis and it's stated in the offering memorandum between the fund managers and the immigrant investors. So there is no liability per se. We have accountability from a policy perspective, but not a financial liability.
Mr. Nunez: Do you sign a contract with these investors?
Mr. Myatt: No.
Mr. Nunez: Could we have a copy of -
Mr. Myatt: We don't sign the contract. The fund manager signs the contract with each individual investor, and there are standard provisions in each fund prospectus that if the management fails, or it fails to do due diligence, the investors can take over the fund and appoint new managers. That has been done in one instance where the fund abused its management role.
[Translation]
Mr. Nunez: Can we have some examples of the documentation which is given to the candidates and the papers that they must sign?
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[English]
Mr. Myatt: Yes, certainly. We didn't bring any with us today, but we have a standard application kit, and we could provide you with some examples of other funds or generic prospectuses that have been used.
I would remind you that we currently have a moratorium. There are no new private funds on the market at this time, and there have not been since 1 July. The only funds available for immigrant investors at this time are provincial government funds.
So the investors are dealing with a provincial government fund. It makes the investment climate very different now.
Mr. Nunez: With every province?
Mr. Myatt: Every province except Quebec.
[Translation]
Mr. Nunez: How does the Department of Industry participate?
[English]
Ms Steidle: They have no participation in the ongoing maintenance or running of the program.
[Translation]
Mr. Nunez: Why was the Sharwood Report commissioned by Immigration and by Industry Canada?
[English]
Ms Steidle: Because when we were given the mandate to redesign the program, we were asked to redesign it jointly with Industry so that we'd break out the program into a continuum, with Immigration responsible for the front-end selection aspect and Industry Canada to act as financial adviser for the immigrant investor money. That's why it's a joint project.
The Vice-Chairman (Mr. Dromisky): Thank you.
Ms Meredith.
Ms Meredith: Thank you.
I want to get back to a couple of issues I raised and that Mr. Nunez has since raised on the application process.
They fill in an application. Are they interviewed? The security screening is done, the criminality checks are done, but is there an interview? Is there some check to make sure their business reputation is solid and they have in fact earned that $500,000 on their own recognizance?
Mr. Girard: Yes, most of them are interviewed. It's not impossible that an interview would be waived in exceptional cases, but most are interviewed, particularly where people are applying in offices outside of the area where they reside. If they're applying in Los Angeles, for instance, or New York City or any number of other posts, we routinely remind posts that risk management does not mean risky management, and people applying from offshore should be interviewed as a rule rather than as an exception.
Ms Meredith: Again, you spoke of options for redesigning the program and said you weren't necessarily following the studies you have before you. Why are you even contemplating continuing the program if there isn't a need for it?
I've been talking to a person in the academic community who has spent time extensively researching this, and he feels there are two types of investors. One is the investor who is very wealthy and would invest anyway, because of the investment opportunities in Canada. The other is an individual who has pooled resources in whatever way he can to get into the country as an immigrant and then bring in family members and establish himself in the country.
His feeling was the investment income would come anyway from those people who are well funded and who have the resources, and we wouldn't have the problems if we were to have the other people come through the ordinary immigration programs. Why are we considering keeping this program if the investment dollars are there, the risk capital is there and the venture capital is there? Interest rates are low. Why would we consider keeping the program in place?
Mr. Girard: There are two reasons. One, all of the provinces, without exception, want this program to continue, because they feel it's an opportunity to get capital into non-traditional areas and into places where it wouldn't go on its own accord.
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Secondly, as I mentioned, it is the avenue for additional human capital which wouldn't come to us through the entrepreneur program. Just how much we're getting isn't defined, because we haven't done the evaluation, but with the numbers being what they are, there is likely to be a substantial increment to the business program through this which we would not have if investment immigration weren't available.
Ms Meredith: Then my next question is if you feel there is a reason why we would want the capital, why would we continue to give unconditional visas, unconditional landed status, for the investment of dollars? Why wouldn't we be looking at conditional visa or landed status pending some result from their investment? In other words, are these people going to come and be participants in our society? If so, then they get the landed status. If not, if there problems, they don't. Why wouldn't we have some period, three or five years, where a condition is put on their legal status in the country?
Mr. Girard: We've looked at that. Our experience with conditional migration is not very good. It suggests it's a costly and ineffective way to try to police a segment of the immigration market.
The entrepreneur program, for instance, provides for conditional admission on certain performance within usually two years of the person's arrival in Canada. We've uncovered a significant proportion of people who for one reason or another don't fulfil those conditions, and we have succeeded in removing about one person, despite a huge investment in follow-up on terms and conditions. What it tells us is that non-criminal removals are so difficult to achieve that it isn't worth the effort. Where you have to focus your attention is on the selection. If you get good people, you take your lumps and expect the country will benefit.
The other option was simply not to let people come as immigrants until they had actually set up a company or made an investment for the long term in an acceptable vehicle. We marketed that around with the provinces and we looked at the performance of similar funds in different countries and the conclusion was that if we excluded immigration for people up front, we would lose out to the competition. The Australian, the American, the New Zealand programs would be the beneficiaries of a shutdown of our immigration program for people in the business category.
The Vice-Chairman (Mr. Dromisky): Mr. Steckle.
Mr. Steckle (Huron - Bruce): Maybe we can continue from where you left off.
Thank you for appearing. I'm not a regular on this committee, and this of course is a different department from what I normally speak to.
Small businesses, as we know, have been the area where we as a government have tried to focus in regenerating some employment in this country. Risk capital is always difficult to procure, but we know in this country at this moment we have plenty of risk capital. We even reflected that in our most recent budget. Given the fact that there are people who wish to invest in this country, who have made a deliberate choice of moving moneys into this country, is the moving of money to this country always the reason for coming here as an immigrant or is it the investment in the country that is most inviting to them?
It makes me wonder when there are opportunities.... You mentioned Australia and the United States of America, and there are other places, I'm sure, where they could invest. What is it in Canada that makes people want to come here in the first place?
Mr. Myatt: That's a question I've not been asked before.
Successful entrepreneurs and investors living abroad are free to invest in Canada at any time. They may do so directly by coming here and placing direct investments with Canadian securities brokers, or they may do it through the offshore markets, through the stock market in Hong Kong or wherever. We're the immigration department and we don't know that. There are many successful investors who buy Canadian enterprises, such as Husky Oil.
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The people who choose to come to Canada in the investor category and invest in Canada are doing so because of immigration. They want to come and live in this country. It's a standard mix of push and pull factors. They're attracted by all the good things we're all very familiar with in our country. Many of them are driven by the conditions in their homelands.
They choose the vehicle, the investor program, to come to Canada, because for them it's the most sensible choice according to their circumstances. They have the wealth. The $250,000 or $300,000 lost for five years is not a great inconvenience. It doesn't require them to build a business immediately. It gives them the flexibility to understand our financial market, make the connection with the people in our financial markets, and at some point down the road create a business or remain passive investors.
We have not done a great deal of analysis on impact. We're in the process of doing that. We have first indications that many of the people who do come to Canada as investors end up being what we would normally call entrepreneurs. They open businesses much down the road.
So this is the best vehicle for them, and we get the benefit of their money for economic development in many regions of the country. We get the human capital they represent.
Mr. Steckle: If we look at the province of British Columbia, I suppose that area has attracted over the years more new money, particularly out of Hong Kong and Japan, than perhaps any part of Canada. Being so close to the Pacific Rim, it's probably a good place for them to invest. But I have to believe that people abroad look upon Canada as a favourable place not only to invest but also to live. I'm not sure whether that demographic has ever been pursued. But I think Canada can be better off because of this.
When we take these kinds of risks, there will always be those.... We've mentioned I think that 20 were being investigated out of 750 funds begun. That is not really a high percentage. If you were a bank manager and had 20 delinquent accounts out of 750, I suppose you'd probably think you were doing pretty good. I'm not heaping praise on the department for that, but I think it's something we need to be thinking about.
We need to reflect upon what Canada is. The United Nations can't be all wrong all of the time. I would like to think Canada has been a great place to invest and will continue to be a great place to invest, and a great place to live. I would hope that would be the reason for people wanting to come here versus somewhere else.
The Vice-Chairman (Mr. Dromisky): Thank you, Mr. Steckle. Mr. Nunez.
[Translation]
Mr. Nunez: Can you list the characteristics of an investor? Can you describe the average immigrant investor? How many people come here? How many family members do they bring with them? What countries do they come from? Earlier, you mentioned Taiwan, Korea, Hong Kong. What other countries do they come from? How long does it take them to finally enter here?
[English]
Ms Steidle: The average investor would be someone from Hong Kong. The average family size would be three to four, and middle-aged, like us.
Mr. Nunez: Spouse and children?
Ms Steidle: Yes.
Mr. Nunez: Parents also?
Ms Steidle: No - separate application.
The top source countries are Hong Kong, Taiwan, South Korea, China, Germany, Iran, Switzerland, England, the United States and Pakistan. So the top four countries are what we call ``Greater China'', certainly Asia, but thereafter it's a good mix among the Middle East, Europe and the United States.
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Mr. Nunez: And their average capital?
Mr. Myatt: I don't have their average capital here. We have the figures on what they would bring, what they declare on their applications. To fit in the category they must have a net asset worth of half a million dollars and they must have invested either $250,000 or $350,000 in a fund in a Canadian province.
We certainly have numbers on what they then declare on their visas. These numbers are usually very conservative, given their real wealth, given standard attitudes about reporting large amounts of money to governments. We do know that to be in the category everyone is worth $500,000 and has given and has lost that much income for that five-year period.
Ms Steidle: I would add that we expect the visa offices abroad to verify that net worth, because that's a fundamental part of selection criteria.
[Translation]
Mr. Nunez: I went to Moscow in 1993, where I spoke with immigration officers. I was told that they received applications from people who wanted to come to Canada to invest. The problem was to know whether it was clean money. Have there been requests coming from Russia? How many were accepted? Where did these people settle.
Mr. Girard: There have been very few because the problem is the source of the money. The instructions given to our personnel abroad are that if the source is not obvious and it is not money from a legal source, we must refuse to accept these people. There are a few who qualify, but it is a small number.
At the moment, it's the same for the Peoples Republic of China. There is no private-sector economy. There is no system for checking the funds. It is therefore difficult for Chinese investors to prove to us where their money comes from, even though there are many people who have amassed fortunes in a short time.
[English]
The Vice-Chairman (Mr. Dromisky): Ms Meredith.
Ms Meredith: Thank you, Mr. Chair.
There are a couple of things I want to come back to. One is your statement that you are interested in the brains. You are interested in these individuals coming and that they become entrepreneurs. Why is there not a residency requirement for an investor immigrant, then?
Mr. Girard: There's a residence requirement for every permanent resident. That has not changed since 1976. If you spend more than 183 days outside the country in any calendar year you must get a re-entry permit.
Ms Meredith: Is this enforced?
Mr. Girard: It is enforced, yes, and it's a source of great difficulty in places such as Hong Kong, because people like to press the limits. We take a very constructive approach to that point of law at the visa office. We don't fare very well in the appeal courts in Canada, because once the individual is back in Canada and shows a prima facie intention to be here the rulings we get on the question of intent, on which the current law turns, are usually favourable to the applicant rather than to the department.
There was a celebrated case of a high-profile Chinese entertainer at Pearson International last year. She was detained and reported on the grounds that she wasn't a permanent resident. She was removed. It went to appeal and the court did uphold us.
Ms Meredith: So basically you're not getting any support from the Canadian court system to enforce residency and other kinds of regulatory controls on this.
Mr. Girard: It's the immigration appeal division that hears appeals against decisions by the department of alleged loss of Canadian residency.
Ms Meredith: So we're talking about the IRB.
Mr. Girard: Yes, it's the appeal division of the IRB.
Ms Steidle: I could add to that. The returning resident regulation is intention based, asMr. Girard said. Therefore the onus is on the immigrant to prove he or she did not intend to abandon Canada as a place of permanent residence after the 183 days were over. That's actually a very difficult thing to rebut on behalf of a visa officer. It's hard to say that someone, on the basis of their actions or their activities, did not formulate an intent. Because of the definition, it's difficult to enforce sometimes.
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Ms Meredith: But because we're allowing people to get this landed status simply by investing money, we're not really sending a message to them that we expect them to live in our country for more than 183 days and to contribute and participate in our society. Maybe it needs to be clearer to the investor that there is a requirement or expectation that they are going to live in the country, that they are not just going to go back to their home country and reside there and invest money.
The other thing I'm concerned about hasn't been addressed here, and that is the guarantee of the return of the capital investment. I would like to know how you can give that kind of guarantee to an immigrant investor but Canadian law cannot and is not willing to give the same guarantee to a Canadian investor. How does this program come with that hypocrisy?
Mr. Myatt: Well, it's not there, and that is one of the primary criticisms of the Sharwood report. One of its major design objectives was to guarantee the immigrant a 100% return on his capital after five years, which came up with the pool system. The criticism from many quarters was that the program was a visa in return for risk capital. That was the original design of the program, and it is, in our analysis, one of the flaws with the Sharwood report.
We would not recommend that there be a guaranteed return of investment. That creates other problems for us. It would create questions of liability and questions of regulatory control and enforcement, which are the last things we want to get into.
Ms Meredith: So then we get back to the option for redesign of the program you are considering. Are you in a position of sharing with us what you are considering and what you aren't?
Ms Steidle: No, not yet.
Ms Meredith: So we're no further ahead than we were before we started.
Thank you, Mr. Chairman.
The Vice-Chairman (Mr. Dromisky): Thank you very much.
Ms Minna.
Ms Minna: Thank you, Mr. Chairman.
I have no problem at all in accepting the fact that we need to have investment in this country. Whether or not we think we have a lot of venture capital right now that we didn't have a minute ago, practically we may not have it in the next minute. The fact of the matter is that we are a growing yet small economy that needs that. If it doesn't come here, it will go somewhere else and we lose out.
We said earlier that our program is slightly different. What does the United States or Australia do, for instance, to deal with the issue that has come up a few times with clean money, unclean money, or what have you? What kinds of programs do they have? Are their programs structured differently than ours so that they are better able to address this issue than we are? Or are they having the same problems we're having?
Ms Steidle: They don't deal with the issue -
Ms Minna: At all.
Ms Steidle: - of legitimacy of source of funds.
Ms Minna: They just want the money.
Ms Steidle: I think it would be fair to say that. However, the programs are of shorter duration and they do guarantee the return. That being said, they ask for a considerably higher amount of money. For example, Australia asks for between $780,000 to $2,080,000 Canadian invested in government securities at market rates for three years. That's one of our principal sources of competition. Another example would be New Zealand, which asks for $600,000 for two years at market rates in bank accounts, stocks, etc.
Ms Minna: Well, the Australian economy is doing well at the moment, so maybe we should take at look at it.
Thank you, Mr. Chairman.
The Vice-Chairman (Mr. Dromisky): Thank you very much.
I have just one quick question because I have to get over to the House to speak. If the members don't mind, I'm asking that we terminate a little bit earlier than usual.
Go ahead, please.
Ms Meredith: Is our competition - Australia, New Zealand and the United States - looking at changes to their investment programs, as we are?
Ms Steidle: No, not that we're aware.
Ms Meredith: So there were no changes in the latest American legislation dealing with the investment program.
Thank you.
The Vice-Chairman (Mr. Dromisky): Thank you very much. We appreciate the information you've shared with us. I think we're better informed to understand this whole program. I'm hoping that when other bits of information come forth in the future, you will share them with us.
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I would like to make an announcement to the members of the committee. Sometime next week, possibly, the Minister of Citizenship and Immigration will probably be meeting with this committee to discuss immigration levels.
Thank you very much. This meeting is adjourned.