According to a recent report by property consultancy Knight Frank, the entry point to the 1 per cent club of the richest people in Malaysia was US$485,000 in net wealth in 2022. Compare this with US$12.4 million for Monaco, which has the world’s densest population of super-rich individuals, Switzerland at US$6.6 million or Singapore’s richest at US$3.5 million.
While the Knight Frank report did not provide the number of individuals in Malaysia who met the minimum US$485,000 needed to be among the country’s richest 1 per cent, it did state that the country had 85,126 high net worth individuals (net worth of at least US$1 million) in 2022. And 721 ultra rich individuals with more than US$30 million net worth each.
These figures indicate that there were at least 85,847 individuals in Malaysia’s top 1 per cent club last year. Projections from Knight Frank's Wealth Sizing Model suggest this number will nearly double to 165,883 by 2027 (164,839 high net worth individuals and 1,044 ultra high net worth individuals).
Malaysia’s pursuit of wealthy investors is part of a larger global race among nations to secure foreign capital and talent. In 2022, global foreign direct investment (FDI) flows reached US$1.3 trillion. For Malaysia specifically, FDI accounted for 61.7 per cent of total approved investments in the country in 2022, or RM163.3 billion (US$34.8 billion).
The infusion of wealth and capital from rich investors can have a transformative impact on Malaysia's economy. These investors bring not only financial resources but also expertise, networks and connections that can stimulate local industries.
One of the key strategies Malaysia has implemented to attract overseas retirees and wealthy investors is the Malaysia My Second Home programme (MM2H). Launched in 2002, the programme grants eligible participants a multiple-entry social visit pass, allowing them to stay in Malaysia for up to 10 years, with the option of renewal. Between 2002 and 2019, close to 50,000 foreigners were approved under the MM2H programme. In a surprising move, however, the government in 2021 introduced more demanding requirements, reducing uptake for the scheme. This included a quadrupling of the minimum monthly income to RM40,000 and increasing the required period for physical presence to 90 days in a year. More onerous was the new bank deposit requirement of RM1 million, up from the previous amount of RM150,000 to RM300,000, and that of liquid assets of RM1.5 million (up from RM350,000 to RM500,000 previously).
It was almost as if the revised MM2H wanted to dissuade potential applicants since other countries in the region had less stringent thresholds. Since the regulations were tightened in 2021, there have been a 90 per cent drop in the number of applicants.
A second programme to attract wealthy foreigners is the Premium Visa Programme (PVIP). This programme is not by any stretch of imagination less demanding in its requirements than that for MM2H, with applicants having to open a local fixed deposit account of about RM1 million.
PVIP differs from MM2H in that it allows applicants to conduct business and seek employment; it does not require a minimum period of stay in Malaysia and waives the need to show proof of liquid assets.
There have been calls from various quarters for the MM2H regulations to be eased, with the Johor Sultan urging the government on multiple occasions to revise the conditions. In April 2023, the government confirmed that it would review the criteria for the programme.
As with its FDI policy, which aims to attract technologically sophisticated investments and top end talent, the second home policy is priced out of the reach of ordinary folks. Why? Because the government is only interested in the top segment of the expatriate market. The government's primary objective is not promoting diversity but harnessing economic benefits.
It is only for those with the means who can create the market for exclusive commodities, luxury condominiums and high-end hospitals that resemble hotels.
There are different segments of foreigners who would want to make Malaysia their second home, including retirees, individuals seeking holiday homes, property investors and those seeking refuge from challenging conditions in their home countries. In the past, Malaysia may have courted retired Japanese citizens, but more recently, the focus has shifted to the Chinese for several reasons.
The revised MM2H is seen as a failure. And the Government is not moving or moving at a snail pace to further ease it. We can understand if PN is in power but not so with this Madani government!
Reference:
Commentary: What will it take for Malaysia to woo wealthy investors? Dr Shankaran Nambiar, www.channelnewsasia.com, 24 September 2023
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