Reigniting MM2H

If Malaysia intends to be back on the international radar for investors, the revised MM2H programme must be reviewed and adjusted to be more attractive for retirees. — Reuters

THE Malaysia My Second Home (MM2H) programme, which was launched in 2002, hit a snag a couple of years ago when the government then decided to impose stricter conditions for foreigners wishing to make Malaysia their second home.

As we are aware, among the tighter regulation is the monthly offshore income requirement, which was raised from RM10,000 to RM40,000 per month, as well as the ability to exhibit RM1.5mil in liquid assets, compared with RM500,000 for those under 50 years of age and RM350,000 for those above 50.

The fixed-deposit requirement too was raised to RM1mil from just RM150,000 for those above the age of 50 and RM300,000 for those under 50 previously. An applicant is also required to clock-in to reside in Malaysia for 90 days.

According to several reports, the MM2H programme attracted a reasonable amount of applications before the change in 2021, with some 34,347 foreigners granted the 10-year social visit pass, which is also renewable upon fulfilling the renewal conditions.

Of the total numbers, 27,894 are MM2H participants while another 6,453 are under the Silver Hair Programme.

Interestingly, the MM2H programme was also a money churner for Malaysia, generating about RM40bil in revenue in the form of expenditure from the community in various forms and big-ticket items, like homes and cars.

Justified?

According to the Home Minister then, Datuk Seri Hamzah Zainuddin, the change was to attract high-quality participants who can contribute positively to the economic growth of the nation while the tighter condition for the 90-day residential stay condition was imposed as the Immigration Department found that some 7,000 of the MM2H holders were not residing in Malaysia.

Since the change in the requirements, it is of no surprise that the revised guidelines failed to attract a meaningful number of applicants as the minister was quoted as saying only 267 new applications were received between September 2021 and June 2022, while some 1,461 holders pulled out of the programme.

Clearly, the revised MM2H conditions had become unfriendly to would-be foreigners wanting to take up the MM2H programme.

Malaysia’s move to punish all MM2H holders due to the claim that some 7,000 of them were not residing in the country was unfair and if indeed these holders have violated the requirement, all the government had to do then was to revoke their pass.

After all, Malaysia’s MM2H programme was never a permanent resident (PR) or citizenship programme that allowed foreigners to enjoy certain privileges as enjoyed by all Malaysians.

Malaysia did feel the need to fine-tune the programme but left the revised guidelines unchanged and instead introduced a new programme called the Premium Visa Programme (PViP).

The key difference is that the PViP programme is not restricted in age, unlike the MM2H programme which imposes a minimum age of 35.

In addition, PViP is a 20-year programme with five-year year validities issued at five-year intervals for a maximum of four times, and renewable for a future 20-year period.

Malaysia also introduced a cap on the total number of holders on the MM2H or PViP programme with a limit of not more than 1% of the total Malaysian citizens.

PViP in a way is also restrictive as the participation fee alone is a whopping RM200,000 for the main applicant and RM100,000 for each dependent, although the PViP does not impose any residency requirement nor the need to have a minimum liquid asset of any amount.

Flip-flopping

While the PViP is seen as a more comprehensive programme to attract talents into Malaysia, especially those with high skill sets, the exorbitant fees imposed on the principal and dependent are a big turn-off.

The government should be more welcoming under the PViP programme by reducing the participation fees to a more affordable level, for example, RM2,000 for the principal applicant and RM1,000 for each dependent.

Remember, the purpose of this programme is to attract high skilled workforce and those who will not only invest in the country but may even reside in the country.

An exorbitant participation fee will deter these investors from choosing Malaysia as a destination of choice.

If Malaysia intends to up its game in attracting foreign direct investment, the PViP programme must be in-tune with our desire to attract the right talent and not one that is prohibitive.

As for the MM2H programme, which is a retirement programme, the government’s tighter condition has clearly backfired big time with net attrition in terms of the number of holders under the programme.

The biggest hindrance is the RM40,000 monthly income requirement, which does not make sense, given that the applicants are retirees.

A more palatable income requirement should be the original amount of RM10,000 per month or if there is a need to raise this, the right figure should not be more than RM16,000 per month, which is a reasonable increase given that the original sum was fixed in 2002, and taking into consideration inflation.

Similarly, the high fixed-deposit requirement too is a turn-off while the liquid asset requirement can be further fine-tuned to be more attractive unless the MM2H programme applicants are allowed to place the deposit in a foreign currency account.

Malaysia’s move to drastically changed the eligibility requirement had backfired on would-be retirees as even new applicants are hesitant due to the flip-flopping nature of our MM2H programme.

If Malaysia wants to compete with the rest of the world, especially within the Asean region itself, to attract the global retirement market, Malaysia must have policies that are consistent and firm.

After all, with the current MM2H programme holders attracting barely less than 0.1% of the country’s population, we have a long way to go to be concerned about the social impact of foreign retirees residing in Malaysia.

On the contrary, these retirees can be good economic generators from their spending habits related to tourism, healthcare, education and even for the retail segment.

After all, the target market based on these revised requirements may not even consider Malaysia, as they would rather be retiring elsewhere and in locations that are either deemed as global cities or exotic locations.

State-level MM2H programmes

Since the introduction of the new MM2H eligibility requirement, Sarawak has introduced its own MM2H conditions with greater flexibility and cheaper entry requirement.

This has opened the doors for some of the current MM2H holders to look at Sarawak as a retirement destination.

The state of Sabah too introduced a more relaxed rule for MM2H applicants early this year, while Johor too is said to be looking at introducing a Johor MM2H programme, with lesser restrictions than those imposed by the federal government, and in particular as a way to address the serious property overhang issue.

While Sabah and Sarawak’s move to introduce their own MM2H version is understandable, given that the two provinces have the autonomy to decide on immigration issues, the move by other states will be interesting to watch as to whether the federal government will allow other states to have their own MM2H versions.

Supporting this argument is, of course, those related to the property sector as land and property purchase are matters of the state and not the federal government.

Hence, should the federal government maintain the current MM2H programme, there are increasing possibilities that other states may introduce their own MM2H version, especially in retirement locations like those in Johor, Penang, Langkawi, Kuala Lumpur, Melaka or other holiday destinations within Peninsular Malaysia.

Of course, the more logical move is for the unity government led by PMX, Datuk Seri Anwar Ibrahim, to fine-tune the current MM2H programme to be more inclusive, attractive and permanent.

If Malaysia intends to be back on the international radar for investors, the revised MM2H programme must be reviewed and adjusted to be more attractive for retirees. Only then, the programme can be called Malaysia, my second home.

Pankaj C. Kumar is a long-time investment analyst. The views expressed here are the writer’s own.