Buying a path to citizenship
Canada’s temporary foreign workers program is in crisis. In the fifth of a six-part investigation, Alia Dharssi reports on the role of immigrant entrepreneurs.
On a hot Tuesday afternoon in July, the Moby Dick Seafood Restaurant in the Vancouver suburb of White Rock is bustling with chattering families and retirees dining on fish and chips.
Its owner, Yuriy Makogonsky, had never tasted the popular dish before he came to Canada two years ago.
An immigrant from Ukraine, Makogonsky, 38, had to Google “fish and chips” when his business broker told him about the opportunity to buy the shop.
“It was 2009 when my wife and I came just with a tourist purpose to Toronto and Montreal, and we realized we loved (Canada) and we decided to move,” says Makogonsky. “We thought it was really good for family to live, for kids especially.”
So Makogonsky, who owned and managed a cheese factory and other businesses in Ukraine, settled in British Columbia through a provincial immigration program for entrepreneurs.
Those selected come to Canada on work visas with the promise of obtaining permanent residency in exchange for starting a new business, purchasing an existing one or entering into a business partnership in the province.
Makogonsky has invested more than $1 million in the business, increased sales by 15 per cent and expanded the restaurant’s staff by more than 10 employees. He plans to open a second branch in downtown Vancouver.
The B.C. government touts its provincial business immigration program as a success, reporting entrepreneurs like Makogonsky have invested more than $550 million and created 1,400 jobs in the province since 2010.
But a similar federal entrepreneur program stopped accepting applications in 2011.
It was cancelled three years later amid concerns that it was serving as a vehicle for rich foreigners to buy their way into Canada.
In its place, the federal government created the Start-up Visa Program in April 2013 to grant residency to entrepreneurs who get support from a designated venture capital fund, angel investor or startup incubator.
As of May 2016 — three years after the start of the program — just 51 such entrepreneurs working on 26 startups had come to Canada through the initiative.
But for Canada’s former Conservative government, which created the visa in 2013, focusing only on creative entrepreneurs with ideas strong enough to attain investor backing was precisely the point.
Those selected include an Australian looking to challenge Canada’s big banks with small online loans and a Mexican building an online platform for conducting psychology experiments.
In contrast, the thousands of immigrants who came through the old federal program tended to work in retail, wholesale and real estate.
The program “offered only minimal benefits to the Canadian economy and tended to encourage investments in smaller, safer enterprises, such as food kiosks, instead of encouraging risk-taking and innovation,” said a spokesman for Immigration, Refugees and Citizenship Canada.
“Immigrants coming through this outdated program were also not required to demonstrate important skills, like official language ability, that are the hallmarks of Canada’s modern economic immigration programs.”
But many immigration lawyers and consultants argue we shouldn’t dismiss these small-time businesses. They contend the absence of a broader federal strategy for immigrants to take over and start small businesses is a missed opportunity for Canada.
“There are tens, maybe hundreds of thousands of would-be entrepreneurs in the world who may have interesting and viable business proposals,” said Jeffrey Lowe, a business immigration lawyer in Vancouver.
“There’s absolutely no way most of them would ever get a chance to pitch these to a (venture capital fund) or angel group in Canada. So there’s a disconnect here.”
At issue is the question of whether having hundreds of thousands of dollars in the bank and business experience should qualify someone to come to Canada.
“Immigrant consultants and lawyers say, ‘No, we don’t have enough,’ because they make money out of it,” said Martin Collacott, a former Canadian ambassador in Asia and the Middle East who has testified dozens of times before parliamentary committees on immigration and refugees.
The entrepreneurs who came to Canada under the old federal program simply didn’t fit, said Collacott, who previously studied Canada’s immigration policies as a senior fellow at the Fraser Institute.
“They didn’t have the language and they didn’t have the Canadian business knowledge, so the program was a massive business failure.”
Even so, most provinces, including B.C., Ontario and Quebec, run their own immigrant entrepreneur programs.
In Fredericton, N.B., city staff see immigrant entrepreneurs as a way to bring fresh blood into the aging city. They actively court them, sending followup emails to prospective business people after they visit.
Another argument in the favour of wealthy newcomers is they could take over businesses from retiring baby boomers.
One-fourth of small business owners plan to sell their operations to someone who isn’t related to them, but there’s not enough interest from young Canadians, said Dan Kelly, chief executive officer for the Canadian Federation of Independent Business.
A 2014 review of the old federal program found immigrant entrepreneurs declared far less income on their tax returns than immigrants who moved to Canada under the Federal Skilled Worker Program.
One year after arrival, entrepreneurs had an average taxable income of $12,100, compared to $28,000 for skilled workers. Nine years later, the gap was bigger with $19,200 for entrepreneurs versus $46,800 for skilled workers.
The report also raised concerns about “business flipping,” or immigrants buying businesses to meet program requirements, only to sell them to other immigrant entrepreneurs after doing so.
There was little oversight. Though the program gave applicants conditional permanent residency, it didn’t track their activities, the federal review said.
“Any program that we put in place has to ensure the integrity of Canada’s immigration system,” said Michelle Rempel, a Calgary MP and the opposition critic for immigration in Ottawa.
“How are we going to bring in someone to ensure they stay and build jobs so we don’t see people buying citizenship?”
Some provincial programs have given immigrants permanent residency and taken deposits as a guarantee they will start a business only to see immigrants forfeit the money after settling in Canada.
In 2008, the federal government shut down one such program in P.E.I. after allegations it was being mismanaged. In 2013, Manitoba’s provincial entrepreneur program briefly stopped accepting applications after coming under fire for providing immigrants with a backdoor into Canada.
Those who genuinely want to start a business face challenges because they are unfamiliar with local laws and regulations, in addition to struggling with cultural differences.
Just 51 per cent of new businesses started in the country still exist five years later, according to a study by Industry Canada.
“When you look at most business immigrants, they come from large urban areas of 10 to 20 million people,” explained Randy Boldt, an immigration consultant and former manager of Manitoba’s business immigration program.
“They tend to do business for consumers, such as an advertising company, a restaurant, an auto-parts store. If you’re in a large city, those work well. In a smaller city, retail is unprofitable.”
In addition, years may pass between the application and when entrepreneurs reach Canada. The timeline can throw off their plans.
Language ability also isn’t taken into consideration by all entrepreneur programs.
In 2009, when Leon Li, an immigrant from Beijing, arrived in Winnipeg, he spoke little English and couldn’t follow through on his plan to manufacture and refill print cartridges.
He didn’t realize labour costs were so high. Now he runs an English-as-a-secondlanguage school that has partnerships with the University of Manitoba and several local colleges, but it took him six years to establish those links.
Those in favour of a federal program say past failures shouldn’t deter the government.
“Rather than fixing what we have and ensuring that the tenets of the program are solid, we’ve cancelled them outright,” said the CFIB’s Kelly. “I don’t think that’s been serving us well.”
Proponents of immigrant entrepreneur programs point out they give foreigners who don’t qualify for the Federal Skilled Worker Program — but who have capital and business experience — a chance to invest in Canada’s economy.
Makogonsky of the fish and chips shop is one example. He and his wife thought of coming to Canada as skilled workers, but were denied in 2012.
Since then, Makogonsky’s investment in a small B.C. restaurant has generated 10 jobs. Though he faced challenges, he recommends the entrepreneur program.
“From the day you immigrate to Canada, you already have a business,” he said. “You have a source of income. You have a future.”
HOW ARE WE GOING TO BRING IN SOMEONE TO ENSURE THEY STAY AND BUILD JOBS SO WE DON’T SEE PEOPLE BUYING CITIZENSHIP? — MP MICHELLE REMPEL
This year-long project is a result of the annual Michelle Lang Fellowship program in memory of the Calgary Herald reporter killed while covering the conflict in Afghanistan.