The just-announced revised MM2H programme comes with truly onerous new requirements called ‘hostile’ by one MM2Her, and consultants say it will likely doom the popular visa scheme.

The new Malaysia My Second Home (MM2H) programme has been announced, and it will certainly not be welcomed by many people at all. The new requirements, which take effect in October 2021, add considerable strength to the argument that many expats have expressed to us, concluding that the current government simply does not want them here.

Since early last year, the MM2H programme has taken a real battering and resulted in MM2H visa holders giving up the visa or becoming very upset with the treatment they received. On a number of occasions, the MM2H visa holders were the last residents of Malaysia allowed to return here and some are still locked out. Although we were very disappointed by their treatment during the pandemic, we did not believe the government wanted them out altogether. Some expats and MM2Hers did not share our view, nor our willingness to give the benefit of the doubt. Now it seems they were right and we were wrong.

Apart from the problems MM2H visa holders had returning to their homes in Malaysia, we noted that it was also made easier for them to cancel their visa. In the past, they had to come to Malaysia to cancel it, but that requirement was dropped and they could cancel without coming here – and quite a few did just that. By contrast, anyone whose visa expired while they were locked out of the country were told they could only apply for renewal after the borders were open and could not return to their homes until then. Unsurprisingly, many people who had taken the visa because of the promises of being welcome in Malaysia reached the conclusion that they were no longer wanted here.

MM2H: A BRIEF BACKGROUND

The MM2H programme has contributed so much to the country’s economy and international image. The value and success of the programme has been recognised by economists, major property developers, and those charged with marketing the country. Ever since the programme was launched, we have actively supported it both as an agent, and through our media channels, spreading the word about this excellent government initiative.

The programme is primarily marketed as a retirement programme, and the most common selling point was the high ranking Malaysia received in the annual round-up of ‘best places to retire’ by International Living magazine. In fact, apart from retirees, some people who had not retired chose to apply for the visa, too, including people coming here to have their children educated, people whose worked outside Malaysia and chose it as a base, people who lived in troubled countries and wanted a place to relocate if the situation in their home country worsened, and even some who came from countries not eligible for the 90-day visa on arrival and wanted to avoid the hassles of applying for a visa each time.

Once the new requirements take effect, it looks like many of them will no longer be eligible. During the last year, more people have asked us to cancel their visa than at any time since the programme was launched. We have also received many emails from prospective applicants saying they would not be applying.

THE NEW REQUIREMENTS: Our Analysis

Let us share our reasons for thinking the new programme will be a real blow to both Malaysia and potential applicants. Before starting, we should state that we are relying on news reports about the new programme resulting from the press conference held by Home Ministry Secretary-General Wan Ahmad Dahlan Abdul Aziz on August 11, and our own MM2H agency has not received any official document regarding the new rules. We will issue new updates as we learn more.

Here is a summary of the new rules and our initial reaction to them.

MINIMUM MONTHLY OFFSHORE INCOME UP FROM RM10,000 TO RM40,000

This will be a major factor in reducing the number of new applicants. Of the many applicants we have processed in the last 19 years since the programme started, we doubt even 5% had that level of offshore monthly income. The reason is simple: most retirees take a major drop in income, and with the move away from lifetime employment, fewer people are receiving large pensions – if they get a pension at all.

For example, in the United States, which generally pays higher salaries, the median household retirement income is estimated by the US Census Bureau to be about US$47,400 a year (2019). The new requirement for the MM2H visa is more than double that, at roughly US$114,000 a year based on current exchange rates, clearly putting the programme far out of reach for most American (and other) retirees. That is apparently the intention, but other changes to the rules may well persuade more affluent retirees to go elsewhere.

The previous programme already had some of the highest income requirements among competitive programmes around the world. We are not at all confident the very rich will want to relocate to Malaysia, especially when you do not need that much money to enjoy a great life here.

One of the key attractions of Malaysia is it offers an attractive lifestyle at a lower price than many other countries. If you actually earn RM40,000 a month after deductions, then you likely would not feel compelled to come to Malaysia, simply because there are many other more developed countries which offer a better lifestyle and would certainly welcome you.

Additionally, as MM2H consultants and agents have also noted, such wild swings in the programme’s key requirements communicate a lack of stability and subsequently erode confidence in both the programme and in Malaysia. Moving to a new country and establishing a home there is a major step, they correctly note. Why would people at this level of wealth choose to come here, buy property here, and build a life here when it can all be suddenly yanked out from under them?

What is really surprising to us about the new programme is that in our discussions with the outside consultants who reviewed the programme, they indicated that they understood the issues. They seemed to have done a comprehensive study and, although they did not share their recommendations with us, they made it clear they were not suggesting drastic changes. Either their assertions were disingenuous or someone has ignored their recommendations completely, because the announced changes are clearly quite dramatic indeed and, in our opinion, will unquestionably result in a major drop in new MM2H applicants.

FIXED DEPOSIT INCREASED FROM RM150,000 / RM300,000 TO RM1,000,000

One of the frequent complaints about the previous programme was having money locked up in a local bank for the duration of your stay. The fixed deposit (FD) amount was RM150,000 for over-50s and RM300,000 for younger applicants. People who purchased a house were permitted to withdraw part of their deposit, but still asked why they should not be allowed to touch their money and be required to leave it on low-yield time deposits.

Now that complaint is sure to increase. The requirement to place RM1,000,000 into an FD can only reduce the number of applicants, as people either cannot afford to put that much money into a declining asset or are not willing to commit so much money. The simple fact is that the ringgit is a weak currency and has been steadily declining in value for the last 25 years, meaning that the value of your FD will quite likely go down. For example, if you joined the MM2H programme in 2010 and placed RM150,000 into an FD, it would have cost you US$46,000 at those exchange rates (about 1:3.22). Today, that account would be worth roughly US$36,000, a loss of almost 25% of your investment.  

Even though the new rules will apparently allow you to withdraw half the money to buy a house, it still means a sizeable amount (RM500,000) left on a fixed deposit paying low interest and declining in value. It’s unclear why MM2Hers would be keen to spend heavily on property, given that the visa’s duration has been significantly shortened, too – more on that later.

It should also be noted that raising the FD requirement can be enacted solely with the goal of reducing the number of applicants, because while it’s always been true that some people would not join the programme if the deposit requirement was considered excessive, nobody could argue that an even higher minimum deposit would make the programme more attractive.

MUST SHOW ADDITIONAL RM1,500,000 OF LIQUID ASSETS

We have always felt it there was little point in having to show higher liquid assets beyond the required FD, but our efforts to have the rules changed failed. We felt that if the key requirement was that you had the income to live here, and you could afford to place the FD, why demand proof of additional cash funds? Assets like property were, of course, not considered liquid assets.

We have had many applicants who, upon retirement, had fully paid for their house which was worth the equivalent of several million ringgit. They also had a good income, but not a lot of cash savings. Unsurprisingly, they were not willing to sell their home in order to show the required liquid assets during the visa approval process, only to run the risk of being rejected and subsequently left homeless, so they did not apply for the programme at all.

The decision to increase this amount is unquestionably going to cause many more people not to apply. The new programme will also require an additional deposit of RM50,000 per dependent, which will not help matters.

MINIMUM AGE INCREASED TO 35

The new programme will have two groups of applicants: those aged 35 to 49 and those 50 and over. It is not clear how (or if) the requirements for each group will differ.

We do not see this change as a major problem and always thought that being eligible for the visa at 21 years of age was rather young and left the visa programme open to abuse. However, we have been advised that some older applicants, especially from China, like to bring along their adult children who are not eligible for a dependent visa, so the children apply separately. This will no longer be an option for those under 35.

MUST SPEND AT LEAST 90 DAYS A YEAR IN MALAYSIA

There have always been calls to make the programme require a minimum stay in Malaysia so that it would encourage people to relocate here and the benefit to the country would increase. For various reasons, this requirement was not implemented. Some people felt it would drive away some eligible applicants. Apart from a few people who worked outside the country, it would mean the programme would only attract genuine retirees who could spend long periods here and a few people who could work overseas but be based here.

This new requirement will certainly turn away some of the current applicants. In theory, it makes sense, but it would make more sense if the programme had different rules for different categories of applicants.

If you truly want the programme to be about owning a second home in Malaysia, which apparently many people mistakenly thought was the intention of the previous programme, then this new requirement will certainly turn them off. It is quite common for people in developed counties to own a second home in another country where they can spend vacations. However, it is a rare person who can spend 90 days at their vacation home. The reason is simple: Virtually nobody gets that much vacation time.

Some people applied for the old programme while they were still working in order to meet the income criteria. That will no longer be possible under the new programme if you have to spend 90 days a year here.

The Sarawak programme only requires a minimum stay of 15 days in the state and will certainly seem a lot more attractive to prospective applicants, especially since their other terms are a lot less onerous and you can still live in West Malaysia with that visa (unless that rule is changed).

MAXIMUM NUMBER OF MM2H PARTICIPANTS

One of the more surprising statements made by the Home Ministry Secretary-General when announcing the new programme was that in response to concerns about the number of foreigners living here, they would limit the maximum number of participants to 1% of the total population.

This seems to reflect the attitude of a small group who we believe do not understand the MM2H programme. We have been asked on a number of occasions to explain to Malaysians the very real benefits of the programme for the country and the people of Malaysia. Once we did that, very few expressed a desire to stop the programme.

According to the Home Ministry, just over 57,000 people in total have been approved for the programme (since its inception in 2002), even when dependents are included. This is nowhere close to 1% of the population, which would limit the programme to some 330,000 visa holders based on the current population. It should also be noted that quite a few applicants choose not to relocate to Malaysia, and we estimate a lot less than half actually live here. In addition, some of the applicants who did move here have since died or cancelled their visas and relocated elsewhere.

In terms of disruption to Malaysian society, it should be noted that the population of Malaysia has increased by around nine million people since the programme was launched, and so the number of approved applicants hardly registers at all, and the number of MM2Hers actually living here, even less so.

HIGHER GOVERNMENT-IMPOSED CHARGES

The government has also decided to raise the fees by a significant amount. In the past, the agents were considered the people who would market the programme and collect higher fees to cover their costs. Now that the government will substantially increase their own fees, this will certainly dissuade some people from applying.

Under the old programme the renewable visa was for 10 years, which made the programme very attractive, but the new visa will be for only five years. Moreover, the actual visa issued was only valid until your passport expired (which would almost always happen during the visa’s 10-year validity), but it was a fairly easy exercise to transfer it to a new passport. The new rule may not make this process materially more difficult, but it will make it far more costly.

The charge for the visa is going to be increased over five-fold, from RM90 to RM500 a year, which will certainly not be welcome, particularly when Immigration will also charge a processing fee of RM5,000 for the main applicants and RM2,500 for each dependent.

This means that many applicants will pay more in Immigration charges and visa fees than was previously paid to agents. When you add the agent’s fee, then the whole application process will become extremely expensive.

Of course, one option is to do away with agents. However this will make the work of Immigration staff that much harder, turn off the more affluent who would like additional assistance for the heavily increased fees, and of course also means that all the marketing efforts of the many agents will be lost, as well.

EXISTING VISA HOLDERS MUST MEET NEW REQUIREMENTS

In a major shock, it was also announced that even existing MM2H visa holders will have to meet the new criteria.

One of the impressive things about the old programme was that once you joined it, the government did not make any significant changes to the rules or requirements. It was a valuable selling point to be able to assure people that the rules would not suddenly be changed.

That is now clearly no longer the case. The government plans to insist that all existing MM2H visa holders meet the new criteria, and we know for a fact that the overwhelming majority will not be able to meet them. They will therefore be forced to leave the country with the attendant negative impact on the economy.

They will apparently allow current MM2H visa holders one year to meet the new requirements, but the simple fact is that if they are retired and do not meet the criteria today, they will not meet it in one year’s time. It is not clear if they have one year from the launch date of the new programme (October 2021) or one year from when their current visa expires.

SUMMARY

As you may have guessed, our view is that the new MM2H programme will have a detrimental impact on the number of applicants and consequently will not be of much benefit to the Malaysian economy.

Those who meet the new criteria may well apply, but making it much harder to apply will not increase applications, nor will bringing in the ultra-wealthy increase the benefit to Malaysia to a point that will offset the loss of revenue from the many applicants who cannot qualify.

It does seem those visa holders who concluded the country no longer wanted them to be here were correct. That is obviously bad news for the many people who were interested in joining the programme, and in our opinion, it’s even worse news for Malaysia and Malaysians.

The people who will doubtlessly be happy with the new MM2H programme requirements are the other countries who offer competitive programmes, most of which were already easier to join than the previous MM2H programme. More and more countries are realising the positive impact of these visa programmes. We anticipate increased interest in Thailand and Vietnam as places to live, two regional neighbours which are also well-regarded by the International Living ‘best retirement destinations’ list. If Malaysia implements these new rules, we believe it will certainly make the programme exclusive to a very small number of people, with a greatly reduced benefit to the country.

As we stated earlier, this article is based on the rules as we have seen them reported in the national press. We have not seen the official documents, and there is always the chance further revisions will be made before the new programme takes effect. We will keep readers advised as we learn more.