PETALING JAYA: Any changes to the Malaysia My Second Home (MM2H) programme must be gradual to avoid causing a shock among potential applicants and existing participants.
Following a flurry of criticism, Home Minister Datuk Seri Hamzah Zainudin told StarBiz that the government is prepared to re-examine the new criteria imposed on the MM2H.
This came amid the warning from experts that the country would turn less appealing to foreigners if the revised conditions are not immediately reversed.
Zerin Properties Sdn Bhd group chief executive officer Previndran Singhe (pic below) cautioned that 60% to 70% of the MM2H permit holders may leave Malaysia for other regional countries, under the revised MM2H conditions.
Zerin Propertie Previndran Singhe
While he welcomed the revival of the MM2H programme, which was temporarily suspended in August 2020, Previndran described the new conditions of MM2H as “atrocious”.
“MM2H is a retirement programme for foreigners and it must be welcoming. But the new conditions have gotten stricter.
“For example, the MM2H permit holders are now required to have a monthly offshore income of at least RM40,000 compared to RM10,000 previously.
“Even if the government wants to increase the income limit, it should have been very gradual instead of such a huge jump,” he told StarBiz.
MM2H is a visa scheme that allows foreigners who fulfill certain criteria to buy property and reside in Malaysia on a long-term basis.
Previndran called for the government to reinstate the earlier conditions, and once again put the Tourism, Arts and Culture Ministry (Motac) in charge of the MM2H programme.
About three weeks earlier, the government said the new MM2H will be reactivated in October, to be managed by the Immigration Department.
Previndran said the earlier MM2H conditions should continue to apply for the existing permit holders.
He admitted that the MM2H programme may have been abused by some permit holders but it is unfair to penalise all interested foreigners with stricter conditions.
“Instead, the government can evaluate applicants on a case-by-case basis,” he said.
Center for Market Education (CME) chief executive officer Dr Carmelo Ferlito insisted that the revised MM2H conditions are a step backward.
Since its inception in 2002, some 57,478 foreigners had been granted MM2H long-term passes.
The programme was temporarily suspended in August last year by Motac to “comprehensively review and re-evaluate”.
On Aug 11, about five days before former prime minister Tan Sri Muhyiddin Yassin resigned, the Home Ministry announced the revised MM2H conditions.
Under the new regulations, those intending to apply for the programme must prove liquid assets worth between RM500,000 and RM1.5mil, depending on their age.
They must also have a monthly offshore income of at least RM40,000 compared to RM10,000 previously. Additionally, they must stay a minimum of 90 days in the country per year.
The MM2H visas are also now valid for only five years, instead of 10 years previously.
Bernama quoted Home Ministry secretary-general Datuk Wan Ahmad Dahlan Abdul Aziz as saying that existing MM2H permit holders could seek extensions subject to the new conditions.
“A grace period of a year will be given so that participants can fulfil the new requirements,” he said.
Recently, Johor Ruler Sultan Ibrahim Ibni Almarhum Sultan Iskandar criticised the new MM2H conditions as “too restrictive” and said it would cause massive revenue loss for Malaysia.
“The review was supposed to make things better but the new criteria is only going to drive investors and tourists away from Malaysia,” said His Majesty in a statement posted on Sultan Ibrahim’s official Facebook account.
For now, while there is a risk of revenue loss for Malaysia, it remains to be seen how the consequence would play out from October onwards.
To be sure, there will not be a sudden exit of foreigners or money flow out of Malaysia.
An analyst said that growing domestic demand, particularly among the high net-worth Malaysians, may be able to fill the gap left by the foreigners.
“The impact on the ringgit would also be manageable, given our current reserve positions and the improving foreign direct investment (FDI),” he added.
However, Center for Market Education (CME) chief executive officer Dr Carmelo Ferlito insisted that the revised MM2H conditions are a step backward.
He added that most existing MM2H permit holders will no longer be eligible under the new programme.
Malaysia University of Science and Technology professor Dr Geoffrey Williams said the MM2H terms should be stable and predictable.
Assuming that each permit holder spends at least RM3,000 per month, he estimated that Malaysia would lose RM150mil of consumption per month.
This is without considering the positive spillovers on employment and the general economy.
Ferlito also pointed out that the new requirements not only put at risk the entry of new foreigner retirees, but also potential new FDI.
“In fact, when a foreign company decides where to go into a certain region, future expatriates also evaluate the possibilities for them in the long run.
“And Malaysia is cutting them out at a time when countries like Indonesia, instead, are adopting aggressive policies to attract newcomers,” he said.
Meanwhile, Malaysia University of Science and Technology professor Dr Geoffrey Williams said the MM2H terms should be stable and predictable.
“People in MM2H are not tourists or employees on a work permit. They are settled here, make their lives here, buy property here and invest here.
“They need stability in their residential status,” he said.
Williams criticised the new MM2H’s income requirements of RM40,000 per month, which is almost three times the top 20% (T20) threshold of RM15,000.
He said Malaysia needs to be realistic, considering that anyone with such an income has better options elsewhere, especially in tax-free countries.
“The anti-foreigner sentiment is very worrying to foreigners because they will just leave and go elsewhere.
“With highly qualified Malaysians also leaving in huge numbers and not returning, this will just grind down the talent pool and increase the brain drain,” he added.
Home Ministry secretary-general Wan Ahmad Dahlan had earlier justified the higher income requirement, saying that the government is targeting high-income participants with adequate capabilities.
However, Zerin Properties’ Previndran said that the government should introduce a “family office” programme, emulating Singapore, if it wants to attract the uber-rich individuals.
“MM2H is not suitable for this purpose. Under the ‘family office’ programme, we can offer tax holidays or lower tax rates to wealthy foreigners to come to the country,” he said.
Calling for a revision in the MM2H terms, Williams suggested that permanent residency should be made easier and offered to MM2H and Talent Pass Residency holders who have settled and are contributing to the country.
Williams also called for the rules on home ownership thresholds and business ownership to be relaxed.
“There should be an end to Malaysian-only contracting and employment and criteria based on good governance and merit should be introduced and enforced.
“Access to better healthcare outside of the very expensive private system should be made available and access to pensions and other contributory welfare schemes should also be opened to foreigners,” he said.
CME’s Ferlito urged the government to consider foreigners as a resource, and not as a threat.
He also said the government should rethink its decision with regard to the MM2H.
“The first reform I would do is to consider MM2H as an automatic option for long-term employment pass or talent pass holders in order to extend their stay beyond their employment period,” he said.