The Edge Markets today has an in-depth analysis of the MM2H program’s competitively weakened position relative to the residence by investment programs of Thailand and (in what’s arguably a somewhat apples-to-oranges comparison) Portugal.
The paper points out that the tightening of financial and physical presence requirements in Malaysia has coincided with reforms in the opposite direction for Thailand’s Elite visa program. The conclusions reached in the comparison are not in Malaysia’s favor:
One of the most popular options is the Elite Easy Access. Similar to the new rules under MM2H, the Elite Easy Access has a validity of five years and is renewable for another five years. However, there is no minimum stay requirement unlike MM2H, where applicants now have to reside in Malaysia for at least 90 days in a year.
There is no income requirement to hold the Thai Elite Visa. The applicant only needs to pay a membership fee, which ranges from THB600,000 to THB2 million, depending on the membership package applied for.
In comparison, the fee for a MM2H Pass will be increased from RM90 to RM500 for each year of the duration of the pass. A processing fee of RM5,000 will be imposed on the principal applicant and RM2,500 for each dependent. Previously, no processing fee was charged.
There is also no age limit under this programme apart from the Elite Ultimate Privilege (Grand Package), which requires the applicant to be at least 20 years old.
Malaysia’s new financial conditions appear to be comparatively higher. An MM2H participant must now have a minimum offshore income of RM40,000 per month, a minimum fixed deposit of RM1 million and must prove that he or she has liquid assets of RM1.5 million.
“While the intention of having high-quality investors here is good, the new threshold appears to be too steep, which may make Malaysia not so attractive compared with other countries. And other Asean countries like Thailand have a lot of things to offer such as culture, places of interest such as beaches, and a vibrant nightlife,” says Lee Heng Guie, executive director of the Socio-Economic Research Centre.
“The biggest concern is whether these new requirements will also be backdated. It should only apply to new MM2H applicants and not the existing ones,” he adds.
Are secondary and tertiary economic contributions given due consideration?
While not a formal component of the MM2H program, real estate investment indirectly arising from the program’s historical attraction of retirees who need a place to live in Malaysia dwarfs the direct contributions program participants have made through the program-mandated bank deposits:
According to a survey conducted by the Malaysia My Second Home Consultants Association (MM2HCA), 55% of the MM2H participants have purchased a property here while another 25% are renting their accommodation. Of the total who own a property here, 27% bought properties valued at above RM1 million. The majority (25.8%) of the participants live in Kuala Lumpur, followed by 20.3% in Penang and 17.2% in Johor.
In light of those figures, Malaysian business leaders are urging the government to reconsider its new rules, highlighting the vast, uncounted economic contributions the country stands to alienate by making the program drastically less hospitable, particularly at a time when the pandemic is keeping the property market in the doldrums:
“We need to avoid a massive exodus of people just because they are unable to top up the funds based on the new criteria. It would be unfortunate if they had to put their property up for sale now when the market is very depressed. The rental market is also currently depressed,” [Siva Shanker, the CEO of a major real estate agency] adds.
Siva is of the view that the new financial conditions under the revamped programme should not apply to existing participants. “By changing your goal post all the time, you are forcing people to have no confidence in you. It would be like saying you can play badminton with a racket, then midway you tell them they can no longer use the racket but that they would instead have to use their feet like when playing sepak takraw.”
ExaStrata Solutions Sdn Bhd CEO and chief real estate consultant Adzman Shah Mohd Ariffin points out that the MM2H purchasers form a profile of customers who have a positive impact not only on the real estate market but also the economy.
“These purchasers will normally bring foreign capital into the country to buy property and engage locals to provide related services,” he says.
Adzman adds that some may also open businesses in Malaysia and invest further domestically, providing work and spending that can help the local economy. “They may even purchase more properties for investment. The spillover effects are what is important.”
Give the program back to MoTAC or get used to sky-high rejection rates, former Tourism Minister warns
Malaysiakini this week reports on former Tourism Minister Nazri Abdul Aziz, now a backbencher, calling on the government to return governance of the program to the Ministry of Tourism, Arts, and Culture (MoTAC), warning that not doing so will inevitably lead to more rejections, even under the new, stricter rules.
The observant reader may recall that the MM2H has been the subject of what IMI has termed a political turf-war, a dispute that explained much of the delay in ending the program’s 22-month moratorium between 2019 and 2021. The program originally fell under the remit of the Ministry of Home Affairs (MoHA) before MoTAC took the reins in 2006.
In April 2019, however, while MoTAC continued to operate the program, all applications became subject to final review by the Immigration Department, which sorts under MoHa. The latter soon began applying more stringent background checks, which quickly led to a doubling of average processing times. By the fall of 2019, industry practitioners began reporting that the Immigration Department was rejecting nine out of ten applicants, without explanation or justification. This eventually ended with a formal suspension of the program, and MoHa’s wresting control of the program away from MoTAC altogether.
Former Tourism Minister Abdul Aziz intimated that, now that MoTac is entirely out of the picture, MoHa’s Immigration Department is liable to begin rejecting applicants with impunity:
Nazri said purview of the programme should be returned to the Tourism and Culture Ministry (Motac) rather than the Home Ministry.
This is because previously, the Immigration Department had rejected applications without any reasons when the programme was under the Motac.
“This happened when the MM2H unit under Motac had vetted through the applications and approved them. If we had this problem when MM2H was under Motac, what more now, when the programme is placed under the Immigration Department. I think more applications will be turned down by the department.”
The Umno veteran said that the Immigration Department should not think that every foreigner who wants to stay in Malaysia has intention of committing an offence that can threaten the nation.
“Of 57,478 people enrolled in MM2H, not even one person has been suspected or charged over being a threat to the country. I urge for MM2H to be returned to Motac and for the Home Ministry to only reject applicants when there is factual evidence that they’re a threat to the nation.”
Of course, if the presumption is that MoHA was rejecting the applications handed to it by MoTAC out of spite, rejection rates will be more likely to fall than to rise now that MoTAC has been sidelined.
Abdul Aziz also emphasized that the new program rules would likely cost Malaysia as much as US$11.5 billion.
“Malaysia isn’t the only country that people want to retire in. There’s Indonesia and Thailand, too. If existing participants are not satisfied with the new rules and decide to sell their belongings and properties, we will lose RM48 billion, which will be taken out of Malaysia and into another country.”
The Minister did not specify how he had arrived at that figure.
Dependents went unvetted
The Star this week points out that the Auditor-General’s 2019 report on the program had raised concerns about the complete absence of due diligence performed on MM2H dependent-participants. While main applicants must submit a Letter of Good Conduct, no such requirement has applied to the family members accompanying them.
“So, there is no way to verify if the dependents are free of criminal records in their home countries,” the report said, according to The Star. “The absence of the LOGC requirement poses a risk as people with criminal records could enter the country and be recipients of the facilities provided to MM2H participants.”
Sultan Ibrahim of Johor, meanwhile, whose home state has been among the prime beneficiaries of the aforementioned secondary economic contributions from the MM2H (in the form of real estate investment), continues his crusade against the new rules; so far, to no avail.
During an audience with the Prime Minister this past Saturday, the Sultan called for an immediate review of the tightened program terms. While the Malaysian government has promised to take another look at the new rules and consider the pleas of long-time residents hoping to get grandfathered in under the previous conditions on a “case-by-case basis”, they have so far offered little specific succor to foreign settlers now unable to afford their extensions.
Christian Henrik Nesheim is the founder and editor of Investment Migration Insider, the #1 magazine – online or offline – for residency and citizenship by investment. He is an internationally recognized expert, speaker, documentary producer, and writer on the subject of investment migration, whose work is cited in the Economist, Bloomberg, Fortune, Forbes, Newsweek, and Business Insider. Norwegian by birth, Christian has spent the last 14 years in the United States, China, and Spain.