1. The Edge : MM2H - A revisit (By Jennifer Gomez )
Most Malaysians would have heard of the “Malaysia My Second Home’ (MM2H) programme. But this may not be due so much to good publicity as to the fact that many of the parties involved in the programme have given their two cents’ worth on it. Most of these comments have been suggestions and feedback to improve MM2H if it is to achieve the goals the government has set for it.
Among the main supporters of the MM2H are property developers. Although buying a home is not a requirement under the programme, developers are always hopeful that those coming in under the programme would consider property a worthwhile investment due to the lower property prices here than in the developed countries. Property consultants, or more bluntly, real estate agents also stand to gain when MM2H participants choose to buy or rent a secondary unit.
The contributions of MM2H participants towards the retail, tourism and service sectors are seen as important by both the government and the private sector. In a nutshell, it should come as no surprise that everyone wants MM2H to work. Certainly, the programme has evolved over time — rules and regulations have changed, and so has the name (it was known as the Silver Hair Programme from 1996 to 2002) and it has been moved from Home Affairs to the Tourism Ministry (see sidebar on new guidelines on Page 4).
These changes are significant and the number of participants is climbing; from 2002 to 2005, a total of 6,695 participants were approved under the programme. The question is, in the decade since its initiation, have the changes to the Silver Hair Programme brought about a positive outcome or are we merely satisfied that the numbers have risen?
The consensus, especially among those in the property industry, is that is hasn’t been an outstanding success. One reason is that the rules keep changing, and not all aspects of the programme have been carefully thought out and implemented. For instance, the government has imposed a ruling that the fixed deposit amount of RM300,000 must remain in the account for a year. However, Jaslyn Sim, managing director of Richmond Consultants Sdn Bhd, feels that participants should be allowed to take it out after a month because the whole idea is for them to spend the money to stimulate the economy.
Veteran developer Datuk Alan Tong, who is also International Real Estate Federation (Fiabci) world president, opines that the fixed deposit amount should be raised to US$500,000 to ensure the programme attracts the right target group, which should ideally be “high net worth individuals”.
Meanwhile, Andrew Davison, managing director of Borneo Vision Sdn Bhd, which publishes The Expat magazine, feels that allowing applicants to only withdraw the money to buy a house, cover medical or education expenses, is very limiting.
New rules, new ministry According to Deputy Tourism Minister Datuk Donald Lim, the MM2H is due for a relaunch of sorts sometime this month by Tourism Minister Datuk Seri Tengku Adnan Tengku Mansor. This is to unveil the revised guidelines and new approach under the ministry. Lim says with the new guidelines, which include approval for visas increased to 10 years from five years previously, Malaysia would be an attractive second home for foreigners. “It is much simpler to come and live in Malaysia than in Thailand, Australia, UK and Germany, for instance. We are offering a 10-year multiple entry visa, while in those countries, it’s only for between one and four years,” he offers. Lim adds that the newly established “one-stop agency” will try to approve applications under MM2H Agent within one to three months initially. Lim also says from this month, the fixed deposit amount will be determined in ringgit in a move to simplify matters.
The emphasis now is on targeting foreigners from East Asia, namely Japan, South Korea, Taiwan, Hong Kong and China as well as Europe and the Middle East. “We are looking at 2,000 to 3,000 approved participants a year although there is no specific target set,” Lim says. Currently, Chinese nationals followed by Bangladeshis are the chart toppers in terms of participation. “We are hoping the participants, by virtue of their upper-class standing, would come here and invest and help spur the economy with their spending power,” Lim says. A study is being conducted to determine the type of properties foreigners prefer, he adds. “We want to find out how much they spend here, which will help determine the market segment better.”
Davison, a keen promoter of MM2H through his magazine, reiterates that one of the weaknesses of the programme is that the rules keep changing. “ The recent changes announced by the Tourism Ministry include withdrawing the ability to make the fixed deposit in US dollars,” he says.
Another instance of the elasticity of the rules, he says, is regarding the withdrawal of the fixed deposit. “First they were told they could withdraw part of the fixed deposit after one year. Then they were told they could withdraw it only to buy a car, house or unit trusts. That was a lot less attractive. And now, Tourism Malaysia has just announced that the funds can only be used to buy a house, or to cover medical or education expenses. So if you do not have children, don’t need medical treatment and have already purchased the house, tough luck, your money is locked in the fixed deposit,” Davison notes.
He expects these problems to be corrected in due course but this will mean more changes. “All this supports my case that the programme will never achieve its true potential unless some changes are made to the focus, management and marketing of MM2H. The Malaysian economy, businesses and ultimately, the Malaysian people, will lose out. There are plenty of places for people to retire to but it’s not easy to fix the damage these constant changes make,” he stresses.
Needs and preference Richmond Consultants' Sim became a sponsor under the MM2H programme by accident about two years ago, when her Pakistani banker client, who was scouting for a property investment in Malaysia, decided to make Malaysia his second home. “As part of our service, we helped him with the application and the whole process. There were many things we didn’t know, and so we ended up running around to find out. That’s when I decided to sign up as an official sponsor for the programme with the Immigration Department,” she says.
According to Sim, her initial application to be a sponsor was rejected, as the authorities were more partial to signing on developers as sponsors. “I reapplied and explained to them that while developers would only be concentrating on marketing their own projects, we, as an estate agency, could offer MM2H participants a wider spectrum of properties from the market, both old and new. I also went the extra mile to support my application letter with recommendation letters. I was accepted as a sponsor two months after reapplying,” she recalls. Now, sponsors like Richmond Consultants Sdn Bhd come under the purview of the Tourism Ministry and are categorised as “authorised agents”.
Sim has so far helped nearly 40 applicants under the programme and sees brighter prospects now that the portfolio is under the Tourism Ministry. “The Tourism Ministry is the right channel as those coming here under MM2H are basically a special class of tourist and so the ministry can market this programme besides promoting Malaysia among tourists in general,” she says.
Sim managed to sign on five Singaporeans for MM2H during a recent weekend promotion in Singapore organised by Fiabci Asia- Pacific. “These people are either near retirement age or retired and being Singaporeans, they are more inclined to buying property here than renting. One must remember that there are people who come here under MM2H who are not keen to invest in property. They prefer to rent while some even end up in a hotel or serviced apartment for the few months they are here, which is probably to get away from winter in their country,” she says.
On the housing needs of the various nationalities, Sim says: “The Europeans prefer landed homes; there’s a new trend among Americans to live away from the city centre. Generally, foreigners prefer newer homes, with minimum need for renovation. Where they decide to stay depends on the budget… some want total convenience and luxury, others think that since this is a second home, they don’t want to spend too much on it. In the Klang Valley, suburban locations preferred by foreigners include Bukit Antarabangsa, Sri Ukay, Kota Kemuning and gated communities. The Japanese seem to have an increasing liking for Penang.” She adds that the minimum sum foreigners usually set aside for a home purchase here is RM500,000.
If these foreigners are allowed to withdraw from their fixed deposits after a month, this could further spur the property development industry. “The main reason we want them here is for their spending power, so there is no real need to lock up the money for a year,” Sim says. A pro-tem committee set up among 13 real estate consultants has submitted a proposal to the ministry on this suggestion. Sim describes MM2H as a “wonderful” programme, mainly because of its 10-year multiple-entry visa. But what could give participants a sense of “coming home” each time they return to Malaysia is to allow them to queue in the Malaysian passport line at the immigration counters. “It is simple to execute this. All that is required is to put a stroke next to ‘Malaysian passport’ in the sign to indicate MM2H participants. It will also serve as a publicity tool as other foreigners coming here would be curious to find out about MM2H,” Sim suggests. She says she will focus on getting participants from Europe and Singapore, and try to get a better footing among Chinese nationals.
Despite the bullishness, there are some valid concerns about the programme. Fiabci world president Tong says although statistics show an increase in the number of people who have signed up for MM2H over the years, this question begs to be asked: Is it attracting the right target group?
He says it is important to bear in mind that Malaysia has to compete with the rest of the world in attracting foreigners. “We have to ensure that we are getting the best of them, meaning high net worth individuals. From my travels, the feedback I have received is that these foreigners think the benchmark could be set even higher, for instance, US$500,000, provided they are given permanent resident status. This is their justification for uprooting and moving to another place. They shouldn’t have to think about moving again after 10 years.
“And some consideration needs to be given to whether they should be allowed to work… otherwise, how are they going to spend their time? Typically, they would not want to work full-time, and perhaps prefer part-time consultancy. These people could contribute not only in terms of spending, but also in expertise and knowledge. And for those who want to come here and set up a business, the entry fee for them should be set even higher,” he opines.
He points out that the number of MM2H participants categorised by country of origin is “something to be suspicious about”. “What type of people do we want? The authorities should determine this first, and then decide whether the age limit and entry level are appropriate. It is difficult to expect even a 50 -year-old to not want to work at that age, what more for younger people? If we decide that we are looking for retirees, then the age limit must be set higher. But if we want to allow those aged 50 and below, perhaps we should look at allowing them to work here,” he says.
Tong suggests that there should be variations to MM2H, saying a good comparison would be the Australian model, which offers over 50 ways for a foreigner to live there.
Much serious thought needs to be given to MM2H before it can be declared a success. Without a doubt, the various parties City & Country spoke to want the programme to succeed and offer many good suggestions. The onus is now on the Tourism Ministry to work on the suggestions and without imposing unnecessary limitations, turn MM2H into a boost for the economy.
The new recruit Irishman John Rogers just got his papers approved under the Malaysia My Second Home programme and is very excited about starting life here as a retiree next year. The 55-year-old logistics executive was in town for a week recently to collect his approval papers. When City & Country asked him what he liked about this country, he replied: “What is there not to like… it’s such a beautiful country with genuinely friendly people. The only thing is, things are pretty expensive, especially in KL and Penang.”
Still, he has asked his agent Jaslyn Sim of Richmond Consultants Sdn Bhd to find him a house in KL or Penang, although he was first attracted to the idea of living in Ipoh. “I came down for a friend’s daughter’s wedding in November last year and visited Ipoh. It’s a nice place, but not many people there seem to be English speaking and I only saw one other kwai loh!” he recalls. The ideal abode for Rogers, who is single, is a 3-bedroom house with a garden out front with a little space for a swimming pool. But he couldn’t say how much he would be allocating for the purchase. “It depends on how much I am able to sell my house back home for… the good thing is, property prices have increased 20% over the last few months over there,” he offers. — By Jennifer Gomez
Resident foreigners’ spending impacts various aspects of economy Borneo Vision, the publishers of The Expat magazine, conducted a small survey of its subscribers living here under MM2H, and found that on average, these retirees were bringing around RM9,800 into the country every month to support themselves. In addition, the majority (83%) of respondents have already purchased a home in Malaysia or plan to do so. The average price of property was RM890,000 and since most of them paid cash, this represents a substantial amount of foreign exchange, says Andrew Davison (picture), managing director of Borneo Vision.
“We believe increased focus on the programme could attract some 500,000 applicants over a 10-year period, which would mean around 280,000 households, assuming most are married couples. If the average inward remittance is RM9,800 a month (RM118,000 a year), this would mean around RM33 billion a year in foreign exchange receipts. If 83% of them purchased homes at an average price of RM890,000, that would be another RM206 billion of foreign exchange,” he adds.
Davison says retirees who come here to enjoy their retirement would almost certainly be less socially disruptive than the millions of tourists required to achieve the same economic contribution. In addition, resident foreigners will arguably benefit a wider segment of the Malaysian population than tourists as their spending impacts almost every aspect of the economy, he says. “They would be more likely to make capital investments than typical tourists.
Resident foreigners are also in a position to market the country’s attractions to friends and relatives all over the world. The fact that they are foreigners who chose to live here gives them a high level of credibility. Research shows this segment travels around Malaysia on a regular basis, which means they make a valuable contribution to domestic tourism as well,” Davison elaborates.
In addition, this group, being older, would be heavier than average users of local healthcare services. This would be an excellent endorsement for health tourism marketing, he adds.
Old game,New rules
Highlights of new rules for MM2H agent under the Ministry of Tourism (effective April 2006)\
Aged below 50
Open a fixed deposit (FD) account of RM300,000 and after one year, the participant can withdraw up to RM240,000 for approved expenses relating to house purchase, education for children in Malaysia and medical purposes. Must maintain a minimum of RM60,000 from the second year onwards and throughout stay in Malaysia under the programme agent.
Aged 50 and above Can choose to:
Open a FD account of RM150,000 OR show proof of monthly offshore income of RM10,000 from approved/recognised institution in their country of origin, such as a pension scheme.
Participants who fulfil the FD criteria can withdraw up to RM90,000 for approved expenses relating to house purchase, education for children in Malaysia and medical purposes after one year. Must maintain a minimum balance of RM60,0000 from the second year onwards throughout stay in Malaysia under the programme.
Each participant is allowed to purchase up to two units of residential houses at a minimum price of RM150,000 to RM350,000 and above each, depending on the location of the property. Generally, the minimum price for the purchase of houses in Malaysia is set at:
RM350,000 and above each for certain areas in Sarawak;
RM250,000 and above each for Penang, Melaka and Johor; and
RM150,000 and above for other states.