Was the govt misguided or short-sighted in its revision of MM2H guidelines?

WHY has there been silence from the housing developers’ association, the food and beverage industry and other sectors that benefitted from the presence of Malaysia My Second Home (MM2H) participants against the revised guidelines that might force them to leave in droves? They should voice and lend their support to the community.

The MM2H programme is mired in a situation that could potentially cost the country billions in the outflow of funds and overhang of vacant properties.

In August 2020, the Home Ministry announced that MM2H will be reintroduced with improvements to its policies and application conditions so as to balance security and economic aspects. The reasons cited for the revision was that the program had not been updated or reviewed for almost 20 years and that there was a need to ensure those who are here are capable of helping us economically.

Principally, the improvements cited were:

- Increase in the offshore income requirement from RM10,000 to RM40,000 per month

- Increase in the fixed deposit requirement from the current RM300,000 to RM1 million, where a maximum withdrawal of 50% is allowed for property purchase, healthcare, and education. For every dependent that the principal applicant intends to bring in, an additional RM50,000 per dependent is required in the fixed deposit account

- At least RM1.5 million in liquid assets

- A reduction in the tenure of the renewable multiple-entry visa from 10 to 5 years,

- MM2H holders must stay in Malaysia for at least 90 days per year.

In a news report on September 1, the Home Ministry reportedly said although the program was suspended in September 2018 before being reopened only to be frozen in July 2020 again, this is the first time the programme was being revised, almost 20 years since its implementation in 2002,

To date 57,478 foreigners have been given long-term MM2H passes – comprising 28,249 principals and 29,229 dependents – even though more than 7,000 people enrolled in the programme were believed to not be residing in Malaysia. The country’s economy was stimulated with a cumulative gross value-added income of RM11.89 billion from 2002 to 2019 through visa fees, property purchases, personal vehicle purchases, fixed deposits, and monthly household expenditure from the MM2H program since its inception in 2002.

Based on the reply by the Tourism, Arts and Culture Minister to Parliament in November 2020, where she said the country recorded over RM2.7 billion in revenue through the programme in 2018, RM2.5 billion in 2019 and RM214 million in 2020, it appears that almost 50% of the cumulative gross value-added income of RM11.89 billion was spent by the participants of the MM2H in the three years preceding the closure of the country’s borders.

The increase spending appears to be in tandem with and coincides with the increase in number of participants for the MM2H programme.

MM2H was a rebrand of the Silver-Haired Programme (SHP), which the government introduced in 1987 for foreigners who had reached retirement age and chose Malaysia as a place to live in. When it was first introduced, it was opened only to nationals of Japan and Western Europe and the period of stay is from five years to a maximum of 10 years.

Despite the phrase ‘my 2nd home’ in its name, MM2H is not a permanent visa or permanent residence permit for Malaysia. It only allowed successful participants a 10-year visa with multiple entry passes with freedom to leave and re-enter as they pleased. Applicants have the option to extend this for another 10 years.

The rebranded MM2H, launched in 2002, aimed to spur the nation’s economy, especially in sub-sectors such as education, medical, properties, and automobile industries. Initiated and helmed by the tourism authority and the Immigration Department, MM2H was touted as one way for Malaysia to boost its tourism industry and promote the country as a positive place to live.

The criteria for application were loosened from only approving those older than 50 to all ages and welcoming all nationals.

The first screening of potential participants, prior to the introduction of the revised guidelines in August 2020, is that:

- applicants aged 50 years and above must show they have liquid assets worth RM350,000 in their personal bank accounts. Those 50 and below have to show RM500,000 in their bank accounts

- regardless of age, all applicants must have offshore income of RM10,000 per month

Once the applicants satisfy the above criteria, they will be given a conditional approval letter upon which:

for applicants aged 50 and above, they have to open a fixed deposit account with a bank in Malaysia and place RM150,000 as deposit, and for those 50 years and below, they have to open a fixed deposit account and place a RM300,000 deposit

To ensure applicants does not pose security threats directly or indirectly to the nation, each application is vetted by a committee that is co-chaired by the Immigration Department’s director-general or his deputy and the Tourism Ministry’s deputy secretary-general (tourism), and which includes the Special Branch of the police which looks at the security screening and works together with Interpol to examine the applicants’ background and three divisions from the Immigration Department of Malaysia, namely Intelligence, Special Operation and Analyzation Division, Security and Passport Division and the Visa, Pass and Permit Division. These divisions will review each and every application to ensure the applicants have no criminal record of any kind.

Contrast the participants for the MM2H program against foreign workers employed in Malaysia.

According to data released in 2018 by the National Immigration Department, the number of foreign workers legally employed in Malaysia stood at 1.73 million. The majority of these workers are from Indonesia, while the rest are from Bangladesh, Nepal, Myanmar and Pakistan.

A government study conducted in 2015 found that foreign workers remit about 80% of their salaries back to their home country for their family’s expenses. Assuming each of these foreign workers who are legally employed remit RM500 a month abroad back to their respective countries, no less than RM10 billion of our money flows out annually from these 1.73 million foreign workers.

The above annual outflow excludes the undocumented foreign workers in the country. Some estimates claim the figure is three times the amount sent by those legally employed.

Yes, these foreign workers contribute to the economy in the sectors where they are hired in productivity but they, for those legally employed alone, took out a minimum of RM10 billion from the country as remittances back to their home countries.

Compare this to the participants of the MM2H program who contribute an average of RM2 billion per annum to the country’s economy.  As these participants generally do not work nor have any businesses in Malaysia, they do not cause any outflow of funds from the country.

Even though the overall crime index involving foreigners showed a decline from 13,110 cases in 2016 to 11,441 in 2017 and 10,751 in 2018, it is projected that the crime rate involving foreigners is projected to increase in the future in view of the economic challenges facing the country following the pandemic, where a lot of the undocumented foreigners were left struggling and laid off from work.

The inconsistency of the government in the administration of the MM2H program does not bode well for the country’s efforts to lure and attract big IT companies to invest in the country under the Malaysia Digital Economy programme.

Bank Negara even stated in their reports that the effectiveness of Malaysia’s policies to attract foreign investment is unclear. Even the investment report by the United Nations Conference on Trade and Development World said growth of FDI in Malaysia over the past ten years has been weak compared with that of many of its neighbours

These big IT companies assess and evaluate our country’s suitability not only based on political, economic and financial policies and stability but also on how consistent we are in our policies.

For example, upon the programme’s suspension in September 2018, the government in 2019, in an effort to reducing the overhang in high end properties in the country, agreed to reduce the minimum price threshold for property purchases from RM1 million to RM600,000 for successful MM2H applicants upon its resumption. And for it to be suspended again, a year later, before returning with new conditions.

Having a small and vibrant expat community which is happy and lives here voluntarily subject to them meeting the statutory requirements will incentivise and present a strong value proposition to these big IT companies in their decision to invest in Malaysia and to the expats relocating here to oversee these investments.

Turning them away will only negate all the plus points we have to try to convince these big IT companies to invest here. The government needs to take a long-term view in designing incentives in a way that ensures the long-term benefits largely compensate for the cost of incentives in attracting foreign direct investments, especially in the digital sector. – September 15, 2021.

*FLK reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight.

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  • "... the program was suspended in September 2018..."

    Had anyone ever thought it was to destroy the popularity of Forest City?

    Posted 4 days ago by Malaysian First · Reply