Congress has, totally unwittingly, created an opportunity for a test-run of a modified EB-5 (immigrant investor) program. Let’s call it EB-5 2.0.
The Senate effectively did so in June, when it did not vote to re-authorize the controversial regional center part of the program, in which U.S.-based middlemen pooled (and sometimes stole) the aliens’ money. It left in place the other part of the program, in which individual investor-managers can run their own businesses, using their own money. These are called direct investments in the trade.
My suggestion to Congress is: Let’s not revive the scandal-prone, regional-center part of EB-5 for at least two years so that we can give the other part a chance to succeed or fail. If the only way that rich aliens can come to the U.S. via an investment is to start (or buy) a business of their own, we may get a totally different set of outcomes than we have seen in the former EB-5 program, which was about 95 percent involved in the more risky pooled investments.
The suggestion will be greeted with fury by the now-diminishing number of regional center operators, virtually all U.S. citizens, but it may be much better for this nation and for the individual aliens; certainly the amount of corruption and theft of the aliens’ money will diminish.
From CIS’s point of view, EB-5 2.0, has many advantages over the previous program:
- It is likely to be smaller than the old one;
- The job-creation requirements are much tougher: Each new project must produce at least 10 direct jobs; the old one allowed economists to estimate the number of both direct and indirect jobs; and
- The aliens will be in a much better position to protect their investments, as there will be no middlemen.
For more on the advantages and disadvantages of direct investments, see this article by industry insider Kurt Reuss. It was written before the federal court decision in June.
The EB-5 program allows aliens who have made an appropriately sized investment to collect a family-sized set of green cards; the investment minimum has varied from $500,000 to $900,000 to $500,000 again, following regulation changes and court decisions. As we noted a few days ago, there was an uptick in visas issued in China for the direct investment program when the July data was compared to the June data, while there was a near wipe-out of visas related to pooled investments.
Congress has accidentally created an experiment with a program that sets aside 10,000 visas a year for immigrant investors/managers. Let’s see how it works.