Written by Dimsum Daily
Malaysia recently announced a major reduction in the minimum investment required for its Malaysia My Second Home (MM2H) programme, from 1 million ringgit (US$216,000) to just 500,000 ringgit (US$108,000). This over 60% decrease seems designed to revive interest and applications, which have dropped over 90% since stringent new rules were imposed in 2021. However, the lower financial bar is unlikely on its own to attract significant numbers of applicants from China, despite that country previously making up a third of MM2H participants.
The lack of key details, Malaysia’s history of policy inconsistency, and political instability will hinder the programme’s appeal to Chinese investors who now have attractive options elsewhere in the region. While the latest MM2H changes appear reactive and rushed, Malaysia must focus on crafting clear, stable visa policies and strengthening fundamentals if it hopes to truly compete for China’s wealthy migrants and retirees.
MM2H was launched in 2002 as a “residence-by-investment” programme, allowing approved foreigners renewable 10-year visas. By 2019, it had drawn nearly 50,000 principal applicants plus dependents and generated an estimated $9 billion in revenues. However, the minimum investment and liquid assets required were just $50,000 and $250,000 respectively.
The programme clearly appealed more to Asia’s middle-class than ultra-rich. Chinese made up the largest share with 16,000 participants by 2019. But in 2021, Malaysia abruptly imposed stringent new rules, requiring a minimum monthly income of $8,600 and liquid assets of $1.3 million. This priced out the vast majority of applicants, causing Chinese interest to plummet 90%. Just 400 Chinese families applied yearly since.
The latest move slashes the prior $216,000 fixed deposit back down to just $108,000. However, it is unclear if other onerous 2021 requirements remain, like the high monthly income. The lack of transparency and erratic policy shifts do not inspire trust or confidence from foreign investors.
More broadly, Malaysia has sent mixed messages on attracting global talent. It imposed a blanket hiring freeze for foreigners in 2020 that drew criticism from business groups. Quotas limit foreign workers in manufacturing and services to just 15% and 45% respectively. Permanent residency is restricted predominantly for highly-skilled immigrants only.
Such policies contradict what China’s middle to upper-middle class seek abroad. Top priorities are educational opportunities for children, ease of gaining residency and citizenship, lifestyle amenities, and healthcare. Malaysia lags competitors on most fronts. Its universities rank behind Singapore, Japan, and China’s own. Public schools impose Malay-language requirements. Healthcare infrastructure and costs are comparable to China.
Critically, pathways to permanent residency in Malaysia remain limited. The new 5-year LTSVP visa represents fragile, impermanent status. In contrast, Thailand offers investors permanent residency in just 3 years, with no language or medical requirements. Singapore has a clear 6-year route to PR for investors spending just $1.5 million. Even Indonesia grants quicker PR based on property purchases over $100,000.
Malaysia also carries political risks that spook foreign capital. The turbulent events of the past decade – botched GST rollout, the 1MDB scandal, sudden leadership change – raise concerns about policy consistency. China’s pragmatic investors seek stability. Malaysia’s volatile politics jeopardise investment security.
Ongoing corruption probes into past leaders also stain Malaysia’s reputation. Transparency International ranks it 62nd cleanest in the world – behind rivals like Singapore, Japan, and South Korea. Chinese view corruption as a threat to business interests.
Finally, Malaysia’s prior mistreatment of MM2H holders undermines trust. Many Chinese families uprooted lives back home only to have visa terms unilaterally revised. Sudden deprivation of promised 10-year stays leaves applicants feeling burned, and unlikely to return.
Make no mistake, Malaysia retains inherent advantages. It boasts warm climate, modern amenities, renowned cuisine, established Chinese communities, and cultural diversity. Mandarin is widely spoken. These strengths fueled MM2H’s past popularity among Chinese. However, the programme’s chronic mismanagement and lack of clear strategy have eroded these assets. Unless Malaysia progresses on fundamental issues around transparency, stability, permanent residency, healthcare, and education, mere financial tinkering of MM2H requirements is unlikely to attract quality Chinese investors and skilled migrants.
Malaysia must rebuild trust and address root policy limitations before Chinese interest and applications rebound significantly. The latest MM2H changes feel reactive rather than proactive. Relaxing investment terms treats symptoms, not the cause, of Chinese applicants’ exodus.
MM2H and Malaysia’s economic future depend on long-term vision and planning. This includes rolling out permanent 10-year visas to rebuild confidence, establishing clear residency/citizenship pathways, improving bureaucracy and transparency, enhancing education and healthcare offerings, aligning with China’s Belt and Road Initiative, and ensuring political stability.
Cosmetic efforts like simply reducing investment sums will not stem the outflow. Only through hard reforms, strategic engagement with China, and restoring the promise of permanence can Malaysia resuscitate Chinese enthusiasm for its “Second Home.” - https://www.dimsumdaily.hk/
Written by Dimsum Daily
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