This article first appeared in The Edge Malaysia Weekly on April 24, 2023 - April 30, 2023

THERE could be a silver lining where stakeholders of the Malaysia My Second Home (MM2H) Programme are concerned, with Putrajaya finally agreeing to review the programme’s eligibility criteria.

The Ministry of Tourism, Arts and Culture (Motac) last Wednesday assured that it, together with the Ministry of Home Affairs, will enable more flexibility in the application process for the programme in future.

A superficial review will be insufficient as a lot of work is needed to resuscitate the shunned MM2H programme, if MM2H agents’ findings of a 90% reduction in applications are accurate — which is the result of major financial changes for eligibility, namely a four-fold increase of the minimum liquid asset threshold to RM1.5 million, a higher fixed deposit (FD) of RM1 million and monthly income of RM40,000 from RM10,000 previously.

The revamp in 2021 was mooted by then minister of home affairs Datuk Seri Hamzah Zainudin under Datuk Seri Ismail Sabri’s government to make way for “quality participants who help to generate income and spur the economy”.

However, the move has been roundly criticised for its lack of dimension in upending a market that, together with its spillover, contributed an estimated RM40 billion between its launch in 2002 and 2018, or RM58 billion by 2019, to the economy. These estimates are said to include not just fees and deposits but also an approximation of investments, mainly in housing.

In 2020, then tourism, arts and culture minister Datuk Seri Nancy Shukri reportedly said that MM2H generated revenue of more than RM2.7 billion in 2018 and RM2.5 billion in 2019.

“Supposing MM2H applications have fallen by 90%, the revenue now would be around RM260 million or an annual loss of RM2.3 billion from 2020 to 2023. That would be RM9.4 billion in total losses over that period to the end of this year,” says Malaysia University of Science and Technology economist Dr Geoffrey Williams, not discounting the effects of the Covid-19 pandemic in the estimation.

Up until now, the Ministry of Home Affairs had been silent about the immigration dilemma it inherited from the previous administration. At press time, the ministry had not responded to The Edge’s requests for comment on its plans nor official data concerning MM2H applications, which would shed light on how it is faring in view of other long-stay or capital-based programmes in the region. Motac referred The Edge’s request for data to the Immigration Department in writing but the latter did not respond.

Stakeholders say all Putrajaya needs to do is to simply immediately reinstate MM2H’s former thresholds to make MM2H attractive again. But even then, it will likely be a mammoth task for Malaysia to win over the foreign market it has lost.

As a former MM2H passholder of nearly two decades puts it: “I believe many MM2H holders, like us, have lost confidence in the Malaysian government. The changes were so radical and with no previous notification. Even if we were willing to pay that exorbitant fee, we are not confident it wouldn’t change again without warning. Others may prefer to look for another second home option. We won’t be returning.”

Williams believes that after reverting MM2H to its former thresholds, Putrajaya could at least review the whole scheme against international competition, not just by financial thresholds but also by any other value-added features such as tax relief, easier property purchases or to include a pathway to permanent residence to make it more attractive.

According to MM2H Consultants Association president Anthony Liew, Motac’s promotional activities for MM2H in South Korea and Japan last July and November respectively and Hong Kong and Taiwan in January fell flat, with “ageing markets such as that of Japan lamenting that MM2H’s requirements were now so expensive that it made better sense for retirees to stay put in their home country”.

Across the South China Sea, Ministry of Tourism, Creative Industry and Performing Arts Sarawak (MTCP Sarawak) has observed a surge of interest in its Sarawak MM2H programme (S-MM2H), which was launched in January 2007. The 411 approved applications in 2022 — comprising single applicants and applicants with dependents — from a total of more than 600 applicants were nearly double that of 224 in 2019. Sign-ups were scanty during the pandemic, with only 66 applicants in 2020 and 27 in 2021 approved.

“We witnessed a surge of interest last August, accounting in part for several brought-forward cases from 2021, [which translated into] a growth rate of 1,422% in 2022. The highest [number of] applicants came from Hong Kong, followed by the US, the UK, Singapore and Japan,” MTCP Sarawak tells The Edge.

The ministry explains that 40 to 50 applications usually come through in a month, but the nearly 200 applications in August led to delays in the 90-day approval process, some of which have been brought forward to this year. Unlike MM2H, which has since its revamp in October 2021 capped participation to not more than 1% of the Malaysian population, S-MM2H does not have a quota.

“We know that some are genuine candidates who work and reside in Sarawak based on their application screening and earlier visas approved in 2017; however, we believe that many applied for S-MM2H because it is more flexible than the federal government’s visa programme. People have applied for S-MM2H to live in Peninsular Malaysia because the visa allowed that previously. We don’t take issue with where our participants wish to live but the Immigration Department issued a circular last August forbidding the practice,” says MTCP Sarawak.

With S-MM2H’s more palatable FD requirement of RM150,000 for individuals and RM300,000 for couples — more aligned with MM2H’s financial requirements prior to the 2021 changes — it is little wonder that applicants would favour it over the latter.

In addition, not only does S-MM2H require passholders to be in Sarawak for only 30 days in a year, compared with MM2H’s 90 days, but it allows participants to live in both Sarawak and Peninsular Malaysia, compared with the federal government’s MM2H programme that does not give participants long-term access to the rest of Malaysia apart from Peninsular Malaysia.

It is believed this will apply to Sabah MM2H, which has similar criteria to S-MM2H, when it is open for registration later. This particular feature in the Bornean states’ MM2H programme is due to both states having autonomy over their immigration policies.

However, the Immigration Department’s potential intervention to prevent S-MM2H passholders’ long-term stay in Peninsular Malaysia, may now put the said passholders in a precarious situation should they be made to uproot and leave someday. This then begs the question if Malaysia is ready for another exodus of its foreign residents community, and if there is just cause for it. Foreigners will also view the intervention as yet another policy flip-flop.

“Following the revamp of MM2H, we did propose to then home affairs minister Datuk Seri Hamzah to lower the programme’s requirements, but he had his reasons. MM2H can be structured to target the middle-aged working crowd rather than just retirees,” says Associated Chinese Chambers of Commerce and Industry of Malaysia’s Socio-Economic Research Centre (SERC) executive director Lee Heng Guie. Given the weaker ringgit, he believes MM2H’s requirement of RM1.5 million in liquid assets will not be a problem for applicants from countries with stronger currencies.

Currently, Malaysia has four residence-by-deposit-based visa programmes. Apart from the federal government’s MM2H and S-MM2H, there is also the Malaysia Premium Visa Programme (PVIP), which Hamzah introduced last October to “attract global tycoons”, and Sabah MM2H — the programme’s policies reportedly approved by the state cabinet ahead of its launch later this year.

Of note is the PVIP’s targeting of very high income earners as the scheme raises much more income for the Immigration Department of Malaysia by a factor of 40 compared with MM2H. (See table for comparative details of local and regional visa programmes.)

Williams provides a simple deduction: “With its high fee of RM200,000 for the main applicant and RM100,000 for his dependents, a family of four would cost RM500,000. Given the quota of 300,000 [PVIP applicants], Malaysia could rake in a revenue of RM60 billion from single applicants or RM150 billion from families of four. These sums can be raised quickly compared with MM2H’s RM58 billion from 2002 to 2019, going by industry estimates. So the basic economics are clear, obviously PVIP raises more income quicker and so they have to ‘kill’ MM2H. Applicants for PVIP would include those wanting three residences to avoid tax. Others in this group are wealthy people from countries where their wealth is at risk such as Russia, the Middle East or China.”

Critics, however, have also commented that foreigners who bring money into Malaysia want to know what the country has to offer them in investment potential, and that people are looking out for specific stipulations as to what investment opportunities would be approved under PVIP. The programme in itself is merely seen to be a costlier alternative to MM2H, but one that is less restrictive since it does not have a minimum liquid asset requirement, minimum day count or age limit, and allows the participant to work, study, invest and run a business in Malaysia.

Meanwhile, Cambodia’s My Second Home and the Philippines’ Special Investor’s Resident Visa are among the only long-stay programmes in Southeast Asia with pathways to citizenship after fulfilling US$100,000 (RM444,100) in investment and US$75,000 in investment requirements respectively, possible after the applicants’ fifth and 10th year in the countries.

Singapore with its Global Investor Programme requiring at least S$2.5 million (RM8.3 million) in a new business start-up or expansion of an existing business operation, or a GIP-approved fund that invests in Singapore-based companies, is seen as an altogether different league from that of its neighbouring countries’ visa programmes in terms of investment size.

“Malaysia must now contemplate how it intends to posit itself as an investment destination for foreigners. It might like to be like Hong Kong, which recently launched a new visa programme for very wealthy foreigners. The point is, Malaysia must consider where it stands and what its goals are,” SERC’s Lee says. 

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