What could go wrong as Australia privatises visa processing

On the basis of the limited information provided to the public to date, the business and risk case for privatising visa processing appears highly questionable, writes former Immigration deputy secretary Abul Rizvi.

Privatisation of core government functions such as visa processing is high risk, especially when undertaken under the cloak of commercial-in-confidence secrecy. Major ICT transformation projects conducted “in partnership” with a big IT company are also high risk. Doing the two together multiplies the risk big time, but that’s exactly what the Department of Home Affairs is doing.

The government first announced its intentions in the 2016-17 Budget through a measure titled ‘Reforming the Visa and Migration Framework’, promising to deliver significant savings for a relatively modest upfront investment.

We found out considerably more about the plan with the department’s request for information document released in January revealing that privatisation of visa processing will take place in eight separate bundles. Last month, The Australian reported bundle one, covering a ‘global delivery platform’ and certain low-risk visas, may be contracted relatively soon. Subsequent bundles involve more subjective and complex visa categories and functions, with the entire system worth in the order of a billion dollars over 10 years, according to evidence given by Home Affairs at Senate Estimates.

Overstated growth in application numbers

Home Affairs’ key justification for this unprecedented shake-up, in the Department’s own words, is that it is “faced with never before seen volumes of visa applications … forecast to increase by around 50 per cent by 2026-27.”

As the senior official responsible for design and delivery of both permanent migration and temporary entry visas from the late 1990s until 2007, I can tell you this argument is highly misleading and seriously flawed. During my time in the then Department of Immigration, we experienced a genuinely unprecedented increase in the visa caseload:

• Net overseas migration increased from 72,402 in 1997 to 301,200 in 2008, a 316 per cent increase). By contrast, the government itself is forecasting net overseas migration will actually decline from 240,300 in 2017 to 221,400 in 2021.
• The Migration Program grew from 67,900 people in 1998-99 to 171,318 in 2008-09 (an increase of 152 per cent). This government has cut the Migration Program from 190,000 in 2015-16 to 162,417 in 2017-18. All the indicators point to a further reduction in 2018-19. These cuts will lead to a reduction in citizenship applications.
• Overseas student visa grants increased from 110,894 in 1998-99 to 320,368 in 2008-09 (an increase of 189 per cent). While student visas reached 378,292 in 2017-18, policy actions government has taken to cut off opportunities for successful students to secure permanent residence will significantly slow growth in student visas over the next few years.
• Skilled temporary entry (former sub-class 457) grew from 29,320 in 1998-99 to 110,280 in 2007-08 (an increase of 276 per cent). Skilled temporary entry visa grants fell to 64,470 in 2017-18 and are likely to fall further. These falls will have flow on implications for applications for employer sponsored permanent entry.

The only areas where growth is likely to continue is in categories like visitor visas that are already largely automated and have been since the 1990s.

Ballooning backlogs and processing times

One area of growth that does outstrip my time in the agency is ballooning application backlogs and blowouts in processing times. But these are due to a mixture of poor visa design changes; uncertainty around how the migration program is to be managed; reduced resources relative to other Home Affairs functions; and visa processing staff being intimidated by constant fear-mongering from the department’s leadership and demoralised by the complaints and inquiries as the large backlogs draw resources away from actual application processing.

No private company will take on these backlogs without eye-watering levels of compensation. Moreover, they will demand further recompense to get processing times back to their previous levels while maintaining high levels of visa integrity.

Revenue from visa application charges

An improved online visa processing platform is of course worth pursuing, as well as examining the option of using artificial intelligence as the department suggests. But why can’t government pay for this? The Productivity Commission found in 2016 that “revenue collected from visa charges is three times the administrative cost”. With massive increases in visa charges in recent budgets, that revenue to cost gap would now be even wider!

Treasury would never agree to relinquish such a lucrative revenue stream, so companies that win a contract to deliver visa services would need to either increase charges even further, use their monopoly position to find new revenue streams, reduce costs or rely on a growing caseload.

The final option would be taking a very big risk, unless Home Affairs guaranteed a minimum rate of caseload growth. That would hardly be conducive to good border protection and immigration policy!

Visa charges impacting key Australian industries

Home Affairs has indicated that while successful companies will be allowed to charge for premium services, the overall charges must not be greater than those of key competitor nations. That would be a hard ask given the Productivity Commission has noted that “charges for Australian visas appear to be higher than in Australia’s major competitor countries”.

Additional charges for high volume visas are also likely to be strongly opposed by key Australian industries such as tourism, education and agriculture. Home Affairs should not be allowed to wash its hand of charge increases just because they’re imposed by a private company. At this stage, it’s not clear if these industries are conscious of the potential impact on their international competitiveness.

Charging for ‘premium services’ and visa integrity

The long-term implications of allowing two separate processing streams for each visa type are truly frightening. Any monopoly provider would want to maximise charges for the fast lane and try to drive as many applicants as possible into that lane. There would inevitably be an incentive for the company to be more ‘facilitative’ on subjective criteria for applicants who paid for priority service.

For applicants and Australian sponsors who couldn’t afford the higher charges for the fast lane, we would likely see continuing acceleration of people by-passing standard off-shore visa processes and instead entering Australia on visitor visas and then applying onshore for the actual visa they need. This would perpetuate visa integrity problems including the blowout in people in Australia on bridging visas that Home Affairs has exacerbated through extraordinarily poor administration.

Home Affairs has suggested companies may also use their position to generate new revenue streams such as through online advertising or provision of ‘wrap-around services’ such as airfares, accommodation, etc. Giving a monopoly visa service provider such power raises even more issues around both visa integrity as well as potential abuse of market power.

Cutting costs

A final option is for the winning company to cut costs. At present, complex visa services are delivered by relatively low paid staff in Home Affairs, particularly in centralised processing centres in cities such as Adelaide. Because these staff deal with much more highly paid lawyers and migration agents, they must have deep knowledge of the Migration Act, extensive legal skills and good knowledge of the common ways non-genuine applicants try to beat the system.

Any successful company would undoubtedly try to recruit existing Home Affairs staff but pay them less to maximise profit, as we’ve seen all too often with other outsourcing projects. Recruiting and training new staff would risk serious errors such as applicants who are not eligible being approved and applicants who are eligible being refused.

Alternatively, the successful company could seek to transfer the visa processing work to a low-wage economy overseas. This would cut costs significantly more, but the risks would rise accordingly.

On the black market, an Australian visa would be worth many times the annual salary of low-wage economy staff. Would Home Affairs cover the additional cost to monitor and investigate such corruption? And is the Australian public happy to take on such a risk given its attitude to issues such as border control and visa integrity?

We also don’t know the extent to which companies would be subject to scrutiny by government agencies such as the Ombudsman and the Auditor-General. Would Freedom of Information still be applicable? How would issues of national security be addressed? How would the successful company deal with privacy issues given the vast wealth of personal data it would have access to? Could it even be allowed to sell some of that data as an additional revenue stream?

Another issue would be the charges the successful company seeks whenever government wants to change visa design or visa policy – something that happens very regularly. Would that also impact on the policy advice Home Affairs gives to government, discouraging good advice that came at a high cost?

Finally, there’s the question of what happens to thousands of Australian staff who currently process visas as Home Affairs employees. Home Affairs would need to meet the costs of redundancy payments for staff who are no longer needed.

Will the business case be made public?

On the basis of the limited information provided to the public to date, the business and risk case for privatising visa processing appears highly questionable.

Is the government prepared to be open with the Australian public and Parliament about this high-risk initiative?

Will the Australian public be comfortable with these extraordinary risks being taken on our behalf with such a core government function?

And how long before taxpayers have to bail out the department because one or more of these risks materialises?

It really is a gamble that’s just not worth taking.

Abul Rizvi left the Australian Public Service in 2015 as a deputy secretary and is currently undertaking a PhD on Australia’s immigration policies. He was a senior official in the Department of Immigration from the early 1990s to 2007. He was awarded the Public Service Medal and the Centenary Medal for services to development and implementation of immigration policy, including in particular the reshaping of Australia’s intake to focus on skilled migration.