Recently, there's been a noticeable increase in the number of foreigners, particularly in Kuala Lumpur. This raises questions about their reasons for being in Malaysia and the potential impact on the country and its citizens.
Malaysia My Second Home (MM2H) Program
The MM2H program, introduced in 2002, aims to attract foreigners to reside in Malaysia, either as a second home or for retirement. The program has generated over RM40 billion in revenue since its inception, which helps subsidize government expenses. It essentially provides a special visa to foreigners looking to live in Malaysia for various reasons, including retirement, business opportunities, education, and the appealing climate and cuisine.
MM2H Categories and Requirements
The MM2H visa is not permanent and has a time limit, allowing stays of up to 20 years depending on the chosen category. In June 2024, the program introduced a three-tiered system:
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Silver: Entry-level tier with specific requirements.
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Gold: Mid-level tier with more stringent requirements.
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Platinum: Premium tier with the highest requirements.
Each category requires a minimum fixed deposit ranging from $150,000 to $1 million USD and the purchase of property valued between RM600,000 and RM2,000,000.
Special Economic Zones and MM2H
The Johor-Singapore Special Economic Zone (SEZ) offers a unique MM2H category with a lower fixed deposit requirement of USD65,000 and the stipulation of buying property from a developer. This initiative aims to revitalize developments like Forest City in Johor. A key advantage of the MM2H SEZ is tax exemption on offshore income, attracting digital nomads. Furthermore, high-net-worth individuals working within the economic zone can benefit from a personal tax rate as low as 15%, while companies enjoy a 0% tax rate.
East Malaysia, specifically Sabah and Sarawak, also have their own MM2H programs like Sarawak's SMM2H, offering more affordable and flexible options.
Why Malaysia? The Allure for Foreigners
Several factors contribute to Malaysia's appeal as a destination for foreigners:
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Natural Disaster Free: Malaysia is relatively free from natural disasters.
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Tropical Climate: The consistent tropical weather is attractive to those seeking to escape harsh seasonal changes.
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Safety: Major cities like Kuala Lumpur and Penang are generally considered safe.
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Language Advantages: English is widely spoken alongside Bahasa Malaysia, and other languages like Mandarin, Tamil, and Cantonese are also common.
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Cultural Diversity and Openness: Malaysia's diverse mix of ethnicities fosters an open and welcoming environment for people from various backgrounds.
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Halal Food Availability: The widespread availability of halal food caters to Muslim communities.
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Affordable Cost of Living: Compared to Singapore, Malaysia offers a significantly lower cost of living, including cheaper food and property prices. Foreigners can also purchase freehold properties.
Comparison with Singapore
While Singapore offers similar advantages, Malaysia's cost of living is a significant draw. For instance, the price of chicken rice is notably cheaper in Malaysia compared to Singapore. Property prices are also considerably lower, and the availability of landed housing options is greater. The less stressful lifestyle in Malaysia is also attracting Singaporeans to send their children to international schools there.
Healthcare Tourism
Malaysia is becoming increasingly popular for healthcare tourism. In the first half of 2024, the healthcare traveler revenue increased by 18%, driven by affordable healthcare costs. For example, IVF treatments in Malaysia are significantly cheaper than in the United States.
Potential Impacts of Increased Foreign Residents
The growing number of foreigners in Malaysia presents both opportunities and challenges.
Economic Benefits
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Economic Improvement: Foreign investment and business ventures can boost Malaysia's economy.
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Job Creation: Foreign businesses can create job opportunities for Malaysians.
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Skill Development: Exposure to international expertise can encourage skill development among the local workforce.
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Currency Strengthening: Increased conversion of foreign currency to Ringgit strengthens the local currency.
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Tourism Boost: More tourists will boost tourism in Malaysia
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Property Market Growth: Revival of the property market.
Potential Challenges
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Job Competition: Highly skilled and experienced foreigners competing for high-value jobs, which are already in short supply.
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Competition for Local Businesses: Malaysian businesses, especially those with low-cost business models, may face increased competition from foreign companies.
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Inflation: Increased demand could drive up property prices and contribute to inflation.