From her Charlottetown fitness studio, Wendy Chappell has watched a parade of new, immigrant-owned businesses open in nearby storefronts.

She was excited to have newcomers open up shop around her, but watched in disappointment as their companies — including a Chinese children's book store, a porcelain shop, a store that sold reproductions of art and a baked goods store — closed over the last two-and-a-half years.

She started wondering about the province's business immigration system — and whether it really retains immigrants or creates lasting jobs.

"How do we have a system that encourages this? Where's the oversight to our provincial [immigration] nominee program?" she asked, standing at her second-floor window overlooking University Avenue, near the city's downtown.

"From my window, I could see four storefronts which began to be these turnover businesses, which were legitimate businesses, but weren't conducting much business."

'Wealthy applicants will work the system'

Locally, such businesses set up under the "100 per cent ownership stream" in the provincial nominee program are known simply as "PNP companies."

It's a system the provincial Liberal government says is diversifying the Island's population and economy, but its critics say has evolved into a side-door route to larger Canadian cities, while filling the province's coffers with forfeited deposits from failed or abandoned ventures.

"In the absence of a sound and rational immigration program with proper oversight ... wealthy applicants will work the system," veteran Halifax-based immigration lawyer Lee Cohen wrote in an email to The Canadian Press.

Two thirds of the 2016-17 applicants, 177 people, defaulted on the business component of their agreement.

In P.E.I.'s program, foreign business people provide the province with a $200,000 deposit, commit to invest $150,000 and actively manage a firm that incurs at least $75,000 in operating costs.

After the deal is signed, the province nominates the firm to the federal Immigration Department as a permanent resident. After an agreed period of time, usually a year, the immigrants can claim a refund of $150,000 if they met the business requirements, and $50,000 more if they could prove to the province they stayed in the province.

For Chappell, the results aren't evident.

'We think Ontario is the better choice'

Just beneath her studio, the Elite Gourmet Bakery closed up earlier this month. Chappell said during her occasional visits over the past year she'd seen a rack of baked goods purchased from a local shop, as hired students sat working on their laptops or reading books.

The Canadian Press visited the owner's address listed on the province's business registry, but a former landlord said he had moved.

What this invites ... is that the province loses the moral [and maybe legal] authority to reject other applicants in other immigration streams. —Lee Cohen

Jun Jia, the co-owner of the children's book store that used to operate across from Chappell, confirmed in an email that he has closed his commercial space.

"We have left Prince Edward Island and moved to Ottawa ... We just want to give my sons better education, and we think Ontario is the better choice," he wrote.

Judy Chen, the owner of Grace Home Decor, a shop that also used to operate near Chappell's studio, said in a telephone interview from Ottawa that she was now travelling around Canada and might be back in "about a month."

The provincial nominee program is a "win-win situation," she wrote in an email.

"We like to be involved in the local community. It's not a bad idea. We would like to try. We opened a business. We hired a lawyer, an accountant, local people," she said in an interview.

Meanwhile, figures that emerged recently from the province's public accounts showed many PNP businesses simply never open at all.

The Island Investment Development Inc., which holds the deposits for the newcomers' businesses, indicates $18 million in net revenues over the past year came from immigrant companies that defaulted on their obligation to create a business.

The figure is equivalent to about half the province's projected new spending on infrastructure projects.

177 defaulted on business component

Two thirds of the 2016-17 applicants, 177 people, defaulted on the business component of their agreement, while 92 did succeed in receiving the $150,000 business portion of their deposits back, according to the province.

However, of those, the province said 30 closed after one year. Of the 177 who defaulted, 152 never opened, and 25 defaulted after opening.

Yet, the provincial minister responsible said almost all the nominees are passing residency requirements, allowing them to keep $50,000 of their deposit, and, he said, the immigrants are staying in the province.

Heath MacDonald, the provincial minister of economic development, said during an interview at his office he's not contemplating changing the deposit system.

"One number that really stands out to us is our residency number. Even though they [nominees] may default on their business application and obligation, they are staying here," he said during an interview in his Charlottetown office.

Economic Development and Tourism Minister Heath MacDonald says he's not contemplating changing the deposit system. (Randy McAndrew/CBC)

In addition, he said the forfeited deposit money can be used to support the social programs that benefit newcomers, such as the hiring of more teachers.

He also said some of the PNP companies that succeed add to the province's economy, including a recent success story where a firm has signed a $150 million sales deal with a Bangladeshi company.

Surprised federal government hasn't 'weighed in on this'

In an email, an official with the economic development department said the province hopes it can still work with those that have forfeited their deposits and will "reinstate their escrows if the applicants open a business at a later point."

However, critics of the program said it's not doing enough to ensure a serious effort will be made to create a business, or that the immigrant is likely to stay on the Island.

An analysis by the Atlantic Provinces Economic Council shows that only one out of four people who've entered the province under the PNP program has remained five years later.

In neighbouring Nova Scotia and New Brunswick, five out of 10 economic class immigrants are still in the province over the same time period.

I will, from this point forward, recommend to all of my clients wanting to immigrate under a PNP stream to do so only in P.E.I. where the rules, apparently, don't apply. —Lee Cohen

In addition to turning the Island into an entry point for immigrants heading elsewhere, the PNP program is leading to a double standard in Canadian immigration, Cohen said.

If business immigrants fail to meet P.E.I.'s provincial conditions, the lawyer added, it's unfair that they gain permanent residency while applicants in other provincial programs who don't meet standards may be asked to leave.

"What this invites ... is that the province loses the moral [and maybe legal] authority to reject other applicants in other immigration streams who fail to satisfy the immigration criteria in other streams," he wrote in an email.

"I am surprised the federal government has not yet weighed in on this."

'Rules, apparently, don't apply'

A spokesperson for the federal Immigration Department wrote in an email that the criteria for nominations are set by the province, though they must conform to federal regulations.

"Defaulting on a deposit made under P.E.I.'s 100 per cent ownership or partial ownership streams does not preclude a permanent resident from maintaining their permanent resident status or eventually seeking Canadian citizenship," wrote Jennifer Bourque.

Informed of Bourque's comment, Cohen replied: "If what Ms. Bourque says is true, I will, from this point forward, recommend to all of my clients wanting to immigrate under a PNP stream to do so only in P.E.I. where the rules, apparently, don't apply."

The provincial government brought in $18 million in net revenues over the past year from immigrant companies that defaulted on their obligation to create a business. (Wael Khalill alfu/Shutterstock)

Meanwhile, the deposit system the Island is using is being dropped by some provinces. Saskatchewan ended its requirement for a deposit two years ago, and requires applicants set up the business and pass through an evaluation before the provincial nomination is sent to Ottawa to become a permanent resident of the country.

Manitoba has just ended its deposit system, which used to require $100,000 per applicant and brought in about $9 million in forfeitures over the last fiscal year, half of P.E.I.'s levels.

Nova Scotia dropped its deposit system about a decade ago, and doesn't believe it leads to good retention levels of immigrants, said Suzanne Ley, the director of the province's Office of Immigration.

Province revamping intake system for applications

Abbey MacPherson, director of P.E.I.'s Office of Immigration, said steps are underway to increase the number of business owners who go through with their plans, and meet the conditions of their agreements.

She also said the province is revamping its intake system for applications that will allow her officials to do more ranking and screening of applicants for the ownership program, based on language, skills and other criteria.

The province has also been partnering PNP immigrants with P.E.I. Connectors, an initiative of the Greater Charlottetown Area Chamber of Commerce, and is finding that mentorship with local business people creates a higher success rate, said MacDonald.

Still, for Chappell, the statement in the appendix of each PNP agreement that businesses show "good potential for sustained commercial viability," seems far from being met.

"I understand the businesses [in the program] are supposed to contribute to the local economy.... That's not what's happening with a good portion of these," she said.