Malaysia eyes easing MM2H visa rules to reignite investor interest from mainland China, Japan, Hong Kong

Malaysia appears poised to ease the amount of money required by wealthy foreigners to obtain a long-term visa, after the pandemic - and overly stringent income criteria - led to a collapse in applications to relocate to the Southeast Asian nation.

The country is hankering after a slice of the spending of Asia's rich, from Japan to mainland China and Hong Kong, as well as Westerners seeking to relocate, just as neighbouring Thailand and Indonesia are offering "golden visa" incentives of their own to tease well-heeled people into upping sticks for Southeast Asia.

Applications for the Malaysia My Second Home (MM2H) scheme plunged by 90 per cent from key markets in 2021, including Hong Kong, prompting officials to consider ways to revive interest in a scheme whose successful early years attracted tens of thousands of people relocating to the country.

Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.

In a statement released on April 18, Malaysian minister of tourism, arts and culture Tiong King Sing said the application process for the programme "will be made more flexible".

That follows complaints from visa and property agents across the region that new rules introduced in 2021 - just as the pandemic swirled - made qualification for MM2H scheme too onerous.

To apply, foreigners had to prove they owned liquid assets worth 1.5 million ringgit (US$354,000) - more than triple the previous amount. Applicants were also asked to prove a monthly offshore income of at least 40,000 ringgit (US$9,400) compared with 10,000 ringgit previously, and ordered to live in Malaysia for a cumulative period of 90 days in a year.

"When you make the threshold too high, you are going to lose interest from people who might just choose to apply to another country or hold off their plans to migrate, especially during the pandemic," said Anthony Liew, president of the MM2H Consultant Association.

The programme needed some revision but was tightened too much, he added.

But there are advantages to the scheme: foreigners can purchase freehold property and live in Malaysia on a long-term basis. It has won favour with Chinese and Japanese participants.

The five-year visa also offers a tax exemption on the remittance of offshore funds transferred into Malaysia.

Between the start of the scheme in 2002 and 2019, there were 48,471 applications from 131 places approved, according to data from the Ministry of Tourism, Arts and Culture.

Nearly 16,000 Chinese nationals took up the scheme in that time, 5,000 Japanese and some 1,500 people from Hong Kong. British citizens were fifth on the list.

But the changes made back in 2021 by the Malaysian government doused interest.

Visa applications were suspended for a year because of the Covid-19 pandemic, upending plans for many hopeful participants who had prepared to move to Malaysia.

At the time, the government said the changes aimed to pull in more high-income individuals who could contribute to an economy hard-hit by the pandemic and ongoing political turmoil in the country.

Yet it had the opposite effect, according to Charlene Ng, general manager of real estate agency Jade Land in Hong Kong.

"I think for the mass market, most people who might not be able to meet the [2021] requirements definitely felt frustrated," she said.

Clients also became vexed by the lack of transparency during the period in which their MM2H applications were frozen, Ng added.

Still, some clients from Hong Kong - particularly those who had been looking to diversify risk away from the city amid a period of political tensions and purchase property at more affordable rates in a nearby country - were able to meet the new requirements and apply for the visa scheme.

"For them, maybe they had a financially strong background and they could do it," Ng said. "The ability to freehold land and properties, obtain mortgages at low rates and not worry about inheritance tax policies is very attractive."

Vincent Fong, founder of the MM2H Club in Hong Kong, said that between 2018 and 2020, his consulting agency received 2,000 applications for the scheme.

But since the new restrictions were imposed in 2021, he said there had only been about 300 applications in total.

"Malaysia is still a very suitable place for Hongkongers to retire, to enjoy as a second home or to allow the children to pursue quality international education," Fong said.

"If the review can potentially return the policy of MM2H to its glory days of being the top golden visa programme in the world in 2019, that would be great for Hongkongers wanting to move to Malaysia," he added.

The details of possible changes are yet to be made public, but visa agents speculate that the government will lower the financial requirements and ease the minimum-stay requirement for working professionals.

They also hope that more benefits will be attached to the MM2H scheme, and the application process simplified.

"I think potential MM2H participants may return," said David Chang, a property agent at CiD property agents in Kuala Lumpur. Still, he said revisions were needed since clients "lost some faith in Malaysia when suddenly a 10-year old scheme was changed overnight" in 2021.

Visa and property agents are confident MM2H has a promising future, if the requirements are streamlined.

Jessie Ong, director of visa consultancy Overseas Living (MM2H) in Penang, said she was already hearing a lot of positive feedback since the announcement that the visa's criteria would be reviewed. "This will definitely kick-start interest in the scheme again," she said.

Competition for similar schemes is increasingly stiff in the region, with Thailand offering a long-running elite visa scheme and Indonesia recently introducing its own second-home visa.

Thailand's scheme allows foreigners to live in the country for five years with a payment of 600,000 Thai baht (US$17,500) that can be extended to 20 years.

Singapore targets wealthy entrepreneurs and investors through its 'Entrepass' scheme, and Indonesia has recently started a second-home scheme similar to Malaysia, targeting investors, tourists and retirees.

This article originally appeared on the South China Morning Post (SCMP).

Copyright (c) 2023. South China Morning Post Publishers Ltd. All rights reserved.