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Monday, December 25, 2023

How Malaysia is finding its way out of the middle-income trap

It has taken the slow but steady route while addressing an ethnic incongruity


. Kuala Lumpur's new landmark, Merdeka 118, is a symbol of the country's growing affluence. (Nikkei montage/Source photos by Hiroki Endo and Reuters) 

Malaysian Prime Minister Anwar Ibrahim vows to focus on achieving faster growth.

KUALA LUMPUR -- Asia's megacities often undergo surprising metamorphoses in short amounts of time. Kuala Lumpur is one such example. When I visited the city in late October, I was amazed at how much it had modernized since I visited nine years ago.

Urban rail lines now crisscross the city, with new shopping malls sprouting everywhere. Particularly eye-catching was Merdeka 118, a 118-story skyscraper completed earlier this year. The 678-meter tower -- the world's second-tallest after the Burj Khalifa in Dubai -- is a symbol of the country's growing affluence. Its spire was designed to evoke the image of Tunku Abdul Rahman, Malaysia's first prime minister, raising his hand as he proclaimed national independence in 1957.

Malaysia over the past few years has experienced a rapid turnover of prime ministers, though the political situation seems to have stabilized. On Dec. 5, about a year after the launch of his government, Prime Minister Anwar Ibrahim stressed his intention to push for faster economic growth. "It's time to focus on developing the economy," he said in an interview with a local broadcaster.

Anwar's government in July unveiled its 10-year Madani Economy plan and the National Energy Transition Roadmap. These were followed in September by the midterm review of the 12th Malaysia Plan and the New Industrial Master Plan 2030. In October, Anwar's government launched its Hydrogen Economy and Technology Roadmap.

"It is not clear how these relate to one another," a Japanese businessperson said. Still, it seems clear that the government's main goal is to achieve annual growth of over 5.5%, a target specified in the Madani plan.

A view of Kuala Lumpur's skyline. Given Malaysia's relatively young population, domestic demand is expected to keep expanding. © Reuters 

Malaysia's gross domestic product grew 8.7% last year, the highest in 22 years, and growth for this year is estimated at 4%, despite the global slowdown. Given its relatively young population, domestic demand is expected to further expand. The country's semiconductor and other sectors are also attracting foreign direct investment as alternative supply chain bases amid mounting U.S.-China tensions.

The country's per capita gross national income was $11,780 in 2022. If the economy grows 5.5% per year and there is no sharp depreciation of the ringgit against the dollar, it could shed its middle-income status, as defined by the World Bank, in two or three years, joining the ranks of high-income nations.

Graduation has been a long time coming.

Malaysia became an upper-middle-income country in 1996, according to a working paper that Jesus Felipe, a professor at De La Salle University in the Philippines, wrote in 2012, when he was with the Asian Development Bank. Felipe reasons that upper-middle-income nations become ensnared in the middle-income trap if they are unable to move up for more than 15 years. Once trapped, countries suffer stagnant growth, sandwiched between technologically advanced developed nations and developing countries abundant in cheap labor. The description fits Malaysia's situation.

To see why Malaysia could not extricate itself from the trap for so long, one needs to look at its history.

Twelve years after the country gained its independence in 1957, a racial riot engulfed the capital. Malays accounted for nearly 70% of the population, but ethnic Chinese, who made up less than 30%, controlled the economy. The strain of this incongruity led to the clash, resulting in about 200 deaths.

To prevent a recurrence of the tragedy, the government began to address the economic disparity and in 1971 adopted a policy called Bumiputera (sons of the soil) -- a type of affirmative action for ethnic Malays. The policy treats Malays favorably in all aspects of life, including school admissions, employment and even stockholding.

The country's ethnic Chinese are traditionally considered to be strong in commerce and industrial activities. "If we recruit people by ability alone, many could be Chinese," an executive at a Japanese company said.

By trying to fix the racial imbalance artificially, Bumiputera is often cited as a source of inefficiency, but it has its merits.

"If the government had not provided elementary and secondary education to Malay villagers and helped them migrate to cities and find jobs in the commercial and industrial sectors, the country would have suffered a serious labor shortage in the early stage of economic development," said Satoru Kumagai, director of the economic geography studies group at the Institute of Developing Economies of the Japan External Trade Organization. It can be said that Bumiputera's goal is to strike an optimal balance between distribution and growth.

A shopping mall in Kuala Lumpur. Malaysia's Bumiputera policy has helped educate young Malay villagers and bring them to cities hungry for workers. (Photo by Toru Takahashi)

Mahathir Mohamad, who in 1981 became Malaysia's fourth prime minister, shifted the national focus to growth by adopting the Look East policy, which sought to emulate Japan's economic success. The country also began to actively attract more foreign capital. In 1991, Mahathir launched Vision 2020, the goal of which was to become a high-income country in 30 years.

"His greatest achievement was to set a goal of becoming a high-income country," said Abdul Razak Ahmad, founding director of Bait Al Amanah, a private think tank. He "thus changed the people's mindset, encouraging them to have a can-do attitude."

Malaysia enjoyed annual growth of nearly 10% for 10 years before the Asian financial crisis hit it hard in 1997. Afterward, its growth slowed to around 5% to 6%. Anwar, then the deputy prime minister and finance minister, clashed with Mahathir over how to cope with the crisis and was dismissed.

When Anwar this year announced the Madani plan, he said the country had been "caught in a vicious cycle of high costs, low wages, low profits and a lack of competitiveness" since the 1997 crisis. Anwar clearly sees the plan as a roadmap to push the country into the high-income category during his tenure -- something his old enemy could not achieve.

The reason for Malaysia's inability to pull itself out of the middle-income trap becomes clear when looking at the economic development of Taiwan and South Korea.

In terms of population, Taiwan and South Korea are not much different from Malaysia. Taiwan is home to 23 million, South Korea to 51 million and Malaysia to 33 million.

In 1981, when Mahathir became prime minister, the three were not far apart in per capita GDP. Taiwan's was at $2,691, South Korea's at $1,883 and Malaysia's at $1,920.

Taiwan became an upper-middle-income economy in 1986, followed by South Korea two years later, according to Felipe. Taiwan stepped up to high-income status in 1993, with South Korea following in 1995. It took just seven years for the two to move from upper-middle-income to high-income status.



Unlike Malaysia, they did not fall into the trap. Last year, Malaysia's per capita GDP was $12,465, far below Taiwan's $32,687 and South Korea's $32,418. Several factors were at play here.

First, Taiwan and South Korea do not have complex ethnic problems that cause them to pursue difficult socioeconomic policies. Second, the two had no choice but to industrialize as they are not blessed with natural resources like Malaysia, which is rich in petroleum, natural gas and palm oil.

Third, democratization in Taiwan and South Korea began shortly before the end of the Cold War in 1989, allowing them to catch the waves of globalization and information technology. Taiwan democratized in 1986 and South Korea in 1987.

Malaysia has held democratic elections since it gained independence, but the country was under a "developmental dictatorship" that prioritized economic development while restricting political freedom. Malaysians had to wait until 2018 for their government to hand power to another party for the first time.

Fourth, internationally competitive businesses like Taiwan Semiconductor Manufacturing Co., Hyundai Motor and Samsung Electronics have driven growth in Taiwan and South Korea. Malaysia, meanwhile, has failed to nurture such companies with an economy that instead has been led by government-affiliated entities. Its automobile, electrical and electronics industries have depended on foreign businesses.

Grab Holdings, whose ride-hailing superapp is now ubiquitous across Southeast Asia, was founded in Malaysia but quickly relocated its head office to Singapore to facilitate fund-raising and other benefits.

On the whole, Malaysia's lack of economic dynamism was to blame for its lower growth curve.

Still, it should be noted that Malaysia has avoided the so-called resource trap, in which the presence of abundant resources holds back a country's industrialization. Malaysia's leading exports are electrical and electronic products, which account for 40% of its total exports. It tops the U.S. and Japan in terms of exports of semiconductor-related products by value.

A worker inspects chips at Unisem's semiconductor packaging plant in Ipoh, Malaysia, in October 2021. It is becoming imperative for Malaysia to boost investments in higher value-added upstream industries. © Reuters 

This trap can be seen in Saudi Arabia, which in 2016 drafted its Vision 2030 strategy to reduce its dependence on natural resources. Malaysia achieved 40 years ago the industrialization Saudi Arabia is now pursuing.

Said Kumagai: "Malaysia is different from East Asia's elite economies like Japan, Taiwan and South Korea, and from countries with unique strengths such as Singapore, Hong Kong and oil-producing Gulf states. If it achieves high-income status, it will be the first 'normal' country to do so."

Still, challenges abound. In chip manufacturing, Vietnam and India are catching up fast, making it imperative for Malaysia to boost investments in higher value-added upstream industries. Given the accelerating trend toward carbon neutrality, demand for its fossil fuels will likely decline.

Yet, while balancing growth and stability, the multiethnic country with an average age of 30 has succeeded in making slow but steady progress toward overcoming the middle-income trap. Its industrial success will certainly serve as a beacon for other emerging and developing countries in the Global South.


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Friday, December 22, 2023

Rolling tang yuan keeps the family together

 

Merry time: Saw (left) and her family preparing for the Winter Solstice Festival at their home in George Town, Penang. — LIM BENG TATT/The Star


GEORGE TOWN: The rolling of glutinous rice balls for the Winter Solstice Festival has been a reunion of generations for the family of 75-year-old great-grandmother Saw Soh Lan.

This year is no different, as Saw continued the family tradition at her home in Sungai Pinang joined by her grandson and all her great-grandchildren.

“I’ve learnt to roll these rice balls since childhood and continue to do so at every festival for our own consumption.

“My children have picked up the skill from me, but most importantly was for them to understand the significance of doing so.

“To me, it’s not just a dessert made during festivals, but a symbol of reunion in Chinese culture,” said Saw as she rolled the rice balls with the family on Monday.

Saw said two of her other sons are working in China but she is grateful to have 27-year-old Tan Yee Kai, his wife Tan Seow En, 26, and their children Tan Jun See, five, and 10-month-old Tan Jun Siang this time.

“Normally, I would roll the rice balls on the eve of Winter Solstice Festival, then cook them for prayers on the next day.

“It has been a ritual practised all my life and I shall continue to do so for the family,” she added.

Glutinous rice balls, otherwise known as tang yuan in Chinese, symbolises unity, togetherness and reunion, partly due to its name being a homophone for the word reunion and its roundness of shape.

Winter Solstice, which falls on Dec 22, is a day with the longest night of the year.

It is the peak of winter and after the solstice passes, daylight hours become longer and nights grow shorter.

The glutinous rice balls are used to worship ancestors and given to relatives and friends as gifts during the festival.

With little to eat in China’s ancient agrarian societies during the snowy weather, tang yuan desserts became their sole feast back in the day.

Farmers would look forward to winter ebbing and getting ready for the next planting season when spring comes.

The local Chinese community celebrates the Winter Solstice Festival by making the delicacy synonymous with the festival – the tang yuan – that comes with a variety of fillings such as red bean, peanut or sesame paste, and is served in plain or ginger syrup.


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  • All smiles: Anwar taking pictures with Malaysians at an event in Imperial hotel in Tokyo. — Photo taken from Anwar’s Facebook page KUALA...

Thursday, December 21, 2023

Look East Policy now includes China




All smiles: Anwar taking pictures with Malaysians at an event in Imperial hotel in Tokyo. — Photo taken from Anwar’s Facebook page

KUALA LUMPUR: Malaysia, which has long looked to Japan and South Korea as models for economic development, is now also interested in learning from China, says Prime Minister Datuk Seri Anwar Ibrahim.

“We need to be open to revise any policy that has been in place for 40 years,” he told Asahi Shimbun in an interview in Tokyo on Sunday.

He was referring to the Look East Policy that fourth prime minister Tun (then Datuk Seri) Dr Mahathir Mohamad introduced in 1982 to learn economic modernisation strategies primarily from Japan and South Korea.

“I wouldn’t say ‘East’ (in this policy) means Japan and South Korea minus China. Now, when we say ‘Look East,’ it’s East (including China),” he was quoted as saying by the Japanese newspaper, according to Bernama.

Anwar added that because digital technologies, cybersecurity and other issues are changing the world, Malaysia needs to expand on the decades-old policy while continuing its aspects that remain beneficial.

The Prime Minister was on a five-day working visit to Tokyo from Dec 15 to attend a summit celebrating the 50th anniversary of the friendship and cooperation between Japan and Asean.

Malaysia, he said, advocates a “fiercely independent” foreign policy, and the country will deal with China depending on Malaysia’s interests.

He said when he was in the United States recently (for Asia-Pacific Economic Cooperation 2023), he was asked why Malaysia was tilting towards China.

He replied: “Because they’re investing more.”

But Anwar said Malaysia will firmly negotiate with China over territorial disputes in the South China Sea and not allow any unilateral action by Beijing.

The Prime Minister also described Japan as a “very important strategic partner”, adding that Malaysia’s relationship with Japan should be expanded under the Look East Policy such as sharing the Japanese work ethic and its technologies.

According to Asahi Shimbun, Japan announced on Dec 16 that it will provide equipment for warning and surveillance activities worth JPY400mil (RM13mil), including rescue boats and drones, to the Malaysian military under the official security assistance programme.

Anwar emphasised that the defence equipment is designed to help Malaysia protect its territorial waters and does not include any submarines or large aircraft.

“The assistance is mainly for our own security needs, not for offensive or aggressive means,” it quoted Anwar as saying.

Meanwhile, Anwar attended a high-tea event with the Malaysian diaspora at the Imperial Hotel in Tokyo on Monday.

There were 416 attendees ranging from students to those working and residing in Japan.

Also present at the event were Foreign Affairs Minister Datuk Seri Mohamad Hasan and Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz.

Anwar spoke about the need for Malaysians to change their mindset and free themselves from the racial and religious divisions that undermine unity.

To a concern from a postgraduate student that their salaries are not commensurate with their qualifications when they return home, Anwar said the government is also looking into ways to improve wages for all.

Another student voiced concern that students sent to Japan are opting to remain and work there after completing their studies.

Anwar replied that they are encouraged to work overseas, especially when they can learn the Japanese work culture, but should return and contribute to their country when the time comes.

Prior to the event, Anwar and his wife Datuk Seri Dr Wan Azizah Wan Ismail were at the Imperial Palace where they had an audience with Emperor Naruhito and Empress Masako



KUALA LUMPUR: Malaysia’s Look East Policy with the inclusion of China is a wise and necessary move given the latter’s rapid economic rise, says the Federation of Chinese Associations Malaysia (Huazong).

“The time has come for us to fine-tune and further expand,” said its president Tan Sri Goh Tian Chuan.

The same policy with Japan as the role model was first introduced by former prime minister Tun Dr Mahathir Mohamad in 1982 – 41 years ago.

Goh said with China’s rapid economic growth over the past decades that saw it overtaking Japan as the world’s second largest economy, it is timely for Prime Minister Datuk Seri Anwar Ibrahim to include China in Malaysia’s Look East Policy.

“This is especially appropriate, as China overtook Japan as the world’s second largest economy 13 years ago with the United States remaining the largest economy.

“So, for any nation to ignore China’s economic prowess will be unwise diplomatically and economically,” he told Bernama yesterday.

Malaysia and China will celebrate the 50th anniversary of diplomatic relations next year.

With Malaysia being the first Asean nation to establish diplomatic ties with China in 1974, Goh emphasised that it is an opportunity for Anwar to moot the idea.

He noted that Anwar has conducted two official visits to China and successfully brought in a host of advanced Chinese technologies and financially strong investors to set up operations and collaborate with Malaysian businesses, since he became the Prime Minister in November last year.

“I strongly believe that with a strong and stable strategic partnership in Anwar’s era, diplomatic relations between Malaysia and China will be at its peak,” he added.

Goh said more Chinese are expected to invest in Malaysia following the positive shift in the present government’s stance towards Chinese investments, coupled with closer bilateral ties under his leadership.

Malaysia-China bilateral trade hit a record high of US$203.6bil (RM948.38bil) in 2022.

For the first nine months of 2023, trade with China was recorded at RM410.01bil, with exports at RM174.55bil, mainly comprising shipments of electronics and electrical products, palm oil and palm oil-based agriculture products as well as iron and steel products.

He said Malaysia could boost its collaboration with China in the field of advanced technologies, such as aerospace, automotive, high-speed rail, artificial intelligence, drone technology, e-commerce, logistics and packaging as well as environmental technologies.

“Other sectors that are worth collaborating include higher education, human resources, culture and tourism, which will ultimately boost bilateral trade and social relations between Malaysia and China,” he added.

 
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Image

GT investigates: How does US-led G7 wage cognitive warfare against China over South China Sea?

An aerial view of Qilianyu Islands in Sansha, South China's Hainan Province. Photo: VCG

An aerial view of Qilianyu Islands in Sansha, South China's Hainan Province. Photo: VC


Editor's Note:


"Cognitive Warfare" has become a new form of confrontation between states, and a new security threat. With new technological means, it sets agendas and spreads disinformation, so as to change people's perceptions and thus alter their self-identity. Launching cognitive warfare against China is an important means for Western anti-China forces to attack and discredit the country. Under the manipulation of the US-led West, the "China threat theory" has continued to foment.

Some politicians and media outlets have publicly smeared China's image by propagating false narratives such as the "China economy collapse theory" and "China virus threat theory," in an attempt to incite and provoke dissatisfaction with China among people in certain countries.

These means all serve the seemingly peaceful evolution strategy of the US to contain China's rise and maintain its hegemony.

The Global Times is publishing a series of articles to systematically reveal the intrigues of the US-led West's cognitive warfare targeting China, and expose its lies and vicious intentions, in an attempt to show international readers a true, multi-dimensional, and panoramic view of China.

This is the eighth installment in the series. In this story, the Global Times looks into how the Group of Seven (G7) attempts to tarnish China's image and jeopardize the peace and tranquility in the region with various cognitive warfare tricks.

A Chinese Coast Guard ship drives away a Philippine vessel (right) in the South China Sea, on December 10, 2023. Photo: Visual News

A Chinese Coast Guard ship drives away a Philippine vessel (right) in the South China Sea, on December 10, 2023. Photo: Visual News


The Group of Seven (G7) has been hyping the South China Sea issue synchronously under the US leadership. In the latest statement released earlier this month, the G7 once again claimed to oppose China's militarization activities in the South China Sea, and, not surprisingly, mentioned the so-called South China Sea arbitration.

These cliché accusations, as well as G7's repeated hypes of the South China Sea issue, have become "a part of the group's carefully planned cognitive warfare against China," said some Chinese observers reached by the Global Times. They pointed out that, through consistently creating strife in the South China Sea, provoking conflict between China and related countries in the region, and even inciting the latter to initiate troubles against China, the G7 attempts to harm China's sovereignty, denigrates China's international image, and jeopardize the peace and tranquility in this region.

The media disinformation campaign is far from the only means used, the Global Times found. Within the framework of the G7, governments, legal professions, media outlets, and academic institutes have largely participated in this cognitive war targeting China in terms of the South China Sea issue.

Murky blue sea interference


The G7, as one of the most powerful and influential intergovernmental political and economic groups in the West, is very good at attacking China over the South China Sea issue in the form of a joint declaration or statement by government heads or top officials among its members, to delegitimize China's rights and interests in the South China Sea at superficially "official" and "formal" occasions.

Apart from the latest statement, the G7 has released several similar joint statements detailing its "concerns" over the South China Sea issue in 2023 alone.

On November 8, 2023, G7 foreign ministers released a statement in Tokyo, stating that they "remain seriously concerned about the situation in the East and South China Seas," and "strongly oppose any unilateral attempts to change the status quo by force or coercion." Similar sentiments were also seen in another statement released after they met in New York in September.

Earlier in May, the G7 also hyped China-related issues in the G7 Hiroshima Leaders' Communiqué and other documents adopted at the G7 Hiroshima Summit, including irresponsible comments on the situation in the Taiwan Straits, and accusations regarding regions like the South China Sea.

Uniformly, these statements mentioned the South China Sea arbitration, saying the award rendered by the Arbitral Tribunal in 2016 "is legally binding upon the parties to those proceedings, and a useful basis for peacefully resolving disputes between the parties."

The fact is that the arbitration, without actual legal effect, has been widely considered a political farce under the cloak of law, said scholars of boundary and marine studies.

"The South China Sea arbitration was conducted by an arbitral tribunal without jurisdiction in violation of the procedures set out in Articles 283 and 298 of the UNCLOS (United Nations Convention on the Law of the Sea). There is no basis in international law, and it (the arbitration) has no legal binding force on China," said Wu Wei, an associated professor in China Institute of Boundary and Ocean Studies of Wuhan University.

Wu said that in 2023 since the US and the Philippines released the "Joint Statement of the US-Philippines 2+2 Ministerial Dialogue" in April, the US-led G7 has further meddled in the South China Sea issue.

"At the level of international law, it has violated the DOC (Declaration on the Conduct of Parties in the South China Sea), the UNCLOS, and the basic principles of non-intervention in domestic affairs," she told the Global Times.

Similarly, the "Limits in the Seas No.150" report that the US Department of State released in January 2022, which said it "examines the maritime claims of the People's Republic of China in the South China Sea" based on the UNCLOS, was also no more than a political tool of attack by the US against China under the guise of law, observers commented.

"The US itself has not ratified the UNCLOS," noted Wu. "Washington's interference in the South China Sea issue has hindered the normal implementation of the Convention."

The US and the Philippines conduct the so-called joint air and maritime patrols in the South China Sea, on November 23, 2023. Photo: Visual News

The US and the Philippines conduct the so-called joint air and maritime patrols in the South China Sea, on November 23, 2023.


Hypes from media, academy community


G7 members have continually added fuel to the fire in the South China Sea issue, with Western media outlets amplifying their incendiary talking points. This year, US media outlets such as The New York Times, The Washington Post, and Time magazine have extensively reported on the maritime conflicts between China and the Philippines.

Throughout 2023, when the Philippine Coast Guard (PCG) stirred up trouble in the South China Sea, it contrived the accompaniment of local and Western media entities on many occasions, with mainstream Western media outlets such as the New York Times, NBC, and AFP being invited to join Philippine journalists. The Foreign Correspondents Association, representing foreign media in the Philippines, has also been in contact with the Philippine Department of Foreign Affairs and Department of Defense to coordinate journalists' boarding for interviews.

Presumably dissatisfied with journalists' inability to capture good photos on board, the US military has dispatched P-8A anti-submarine patrol aircrafts to assist the PCG in their resupply operations at Ren'ai Jiao (Ren'ai Reef). These aircrafts captured high-definition videos and photos, which were used for sensationalist purposes by Western countries and Philippine media outlets.

In an effort to assist the Philippines in its dispute with China, some third-party countries are seeking advice from their own think tanks. One notable case is that of Project Myoushu at Stanford University in the US, which focuses on South China Sea security issues.

In February, Project Myoushu claimed that "China harasses PCG vessel." Subsequently, the PCG asserted that a Chinese ship had directed laser at the PCG, and the US State Department spokesperson, Ned Price, further fanned the flames by stating that the US stands with their ally in the face of alleged laser incidents.

In the context of the Chinese Foreign Ministry's clarification of the facts and emphasis on the Philippine side's baseless accusations, Raymond Powell, Project Myoushu team lead and a retired US Air Force colonel, claimed that the actions of Project Myoushu pushed the Philippine government to finally decide to expose the maritime dispute between China and the Philippines.

In addition, the Asia Maritime Transparency Initiative at the Center for Strategic and International Studies (CSIS) is also a major project in the US that focuses on researching the South China Sea issue.

Over the years, this project has repeatedly accused China of "disrupting the status quo" and "threatening regional security" when releasing information about China's rights protection and law enforcement activities in the South China Sea.

However, it selectively ignores unilateral actions such as island construction and militarization by other claimant countries in the disputed waters.

In recent discussions between several US and the Philippine think tanks, various ideas regarding the US-Philippines cooperation in occupying Ren'ai Jiao were generated. In terms of logistical support, some have suggested that Western military forces should assist the PCG in delivering supplies to the grounded vessel, or even consider airdropping them using military aircrafts.

Currently, the Philippines is intensifying its propaganda campaign in the South China Sea in collaboration with foreign media sources and think tanks, using various tactics to overstate the severity of the conflicts between China and the Philippines in the South China Sea. Behind this is a mindset of sensationalism, deliberately portraying China as aggressively attacking and bullying a smaller country - the Philippines, Peng Nian, vice president of the Regional National Research Institute at the Hainan Normal University, told the Global Times.

"The more they exaggerate and amplify these negative incidents, the more it seems beneficial for the Philippines and the West. It not only maligns China, but also magnifies the South China Sea issue, continuously attracting international attention," Peng said. However, in reality, apart from escalating tensions in the South China Sea, these performers are only deceiving themselves with the illusion of enhanced influence, he noted.

A 'test site' to suppress China


The South China Sea is another "test site" for some Western countries, including the G7, to isolate and contain China, said observers.

By constantly hyping the South China Sea issue, they try to influence the international community and the Chinese public to force the Chinese government to change its foreign policy, Chen Xiangmiao, director of the World Navy Research Center at the National Institute for South China Sea Studies, told the Global Times in a previous interview.

To safeguard China's legal interests in the South China Sea, and to contribute more to the peaceful and stable development of the region, Wu from Wuhan University suggested that China should actively take countermeasures from multiple aspects, which include hosting summits for peaceful consultations between China and ASEAN (Association of Southeast Asian Nations) countries on the South China Sea situation, further encouraging fishermen to conduct fishing operations in the region with more guaranteed protection.

"It's also necessary to further promote international law studies on the South China Sea issue, to gain more say for China in today's global international law community on topics regarding this region," Wu told the Global Times.

Gone are the days when a handful of Western countries could willfully meddle in other countries' internal affairs and manipulate global affairs, said the Chinese Foreign Ministry on May 20, in response to the G7 Hiroshima Leaders' Communiqué released that same day.

"The international community does not and will not accept the G7-dominated Western rules that seek to divide the world based on ideologies and values. Even less will it succumb to the rules of exclusive small blocs designed to serve 'America-first' and the vested interests of the few," it noted. "G7 needs to reflect on its behavior and change course."


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'Sanctions from hell' against China, ignorance or malice?: Global Times editorial

Offering explanations to China for threats like those from Graham, expressing apologies for harming the collective sentiments of the Chinese people, and ensuring commitments are fulfilled is what the US should do.

Tuesday, December 19, 2023

Relaxed MM2H a boon to property sector, More foreigners eyeing properties

PETALING JAYA: The relaxation of the Malaysia My Second Home (MM2H) programme, with changes to the eligibility criteria and financial requirements aimed at attracting a large pool of foreigners, may be a much needed boost to the property sector.

However, more needs to be done to encourage more uptake of the programme, given the competition from the neighbouring countries looking to woo foreigners with similar programme.

Professor Geoffrey Williams, who is an economist and Provost for Research and Innovation at Malaysia University of Science and Technology, agreed that the revised MM2H is better than the previous version, but still gives the impression that this is a revenue-raiser for the Immigration Department rather than a scheme to encourage expatriate residents in Malaysia.

“It is still relatively unfriendly, with a bad feeling for foreigners, and would only be attractive for tax avoidance to provide multiple residency for high tax payers to avoid paying tax at all in any single country.

“People with less than half a year’s residence pay no taxes so if you can get residence in three places you have one third residence in each and pay no taxes,” he told StarBiz.

He added that the MM2H programme will not have much of an impact on the economy.

Last Friday, the Tourism, Arts and Culture Ministry unveiled a revamped version of the MM2H programme. introducing a three-tiered structure along with updated financial requirements. The revised guideline brings several changes to the eligibility criteria.

The government has lowered the minimum age requirement to 30 years from 35 years previously, widening the accessibility for individuals who seek to make Malaysia their second home.

A measure aimed at streamlining and fortifying the application process requires that applications are now exclusively accepted through licensed MM2H agents accredited by the ministry under the Tourism Industry Act 1992.

Another significant change relates to the expanded range of eligible dependents. The programme now covers children between 21 and 34 years old, who are neither employed in Malaysia nor married. Parents and parents-in-law are now considered eligible dependents.

“I do not believe it will boost the economy much. The claims of a big economic impact for previous MM2H were not really delivered, which is why the Malaysia Premium Visa Programme (PVIP) scheme was introduced to raise more money quickly,” Prof Geoffrey said.

PVIP, which was launched in September 2022, is a “Residency Through Investment” concept that allows wealthy foreigners to invest and reside in Malaysia for 20 years, with an option to extend for another 20 years.

“The damage done to Malaysia’s reputation is serious and competition from other countries with better schemes and lower costs of living is intense,” he added.

He explained that the changes under PVIP were to attract “the right type of people” with lots of money.

“These changes attract more people but even the rich are likely to choose the lower tier options because the main incentive is residential access not other perks. So you may attract the wrong type of people in the form of tax avoiders,” he said.

Prof Geoffrey stressed that the government needs to create a positive sentiment and a welcoming environment, which is essential for foreigners when choosing long-term options in life.

MM2H was launched in 2002 with the purpose of attracting foreigners to retire and live in Malaysia for an extended period.

The programme was suspended in November 2019 and was re-launched in October 2021 with more stringent application conditions.

According to RHB Research, the stricter conditions led to the collapse of the MM2H market whereby there were only 1,905 MM2H applications approved between November 2021 to September 2023 (23 months) versus 5,610 in 2018.

During the same year, there were 197,385 transactions in the residential market according to National Property Information Centre.

The research house said this meant the MM2H approval represented 2.8% of the residential transaction volume, which is a rough gauge of the potential addressable market from MM2H holders.

“PVIP struggled to gain traction given the large upfront processing fees of RM200,000 needed versus RM5,000 for MM2H. PViP had only processed 57 applications where 28 were approved as at October 2023,” RHB Research added.

Nevertheless, RHB Research believes UEM Sunrise Bhd, Sunway and Eastern & Oriental Bhd are key beneficiaries under the new MM2H programme.

“We reiterate our ‘overweight’ call on the sector, as government policies, investment flow, infrastructure developments and the US Federal Reserve’s signal of a potential rate cut next year are favourable to stimulate demand for property,” the research house said.

Meanwhile, HLIB Research said the revised MM2H programme, with better clarity on the relaxed conditions, gives developers a better picture and visibility of the market and could potentially translate to more launches in the high-end residential segment.

“The development is an overall positive for the sector, especially for the high-end residential segment. Maintain ‘neutral’ for the sector with top picks Sunway BhdOSK Holdings BhdSime Darby Property Bhd and IOI Properties Group Bhd,” it said.

The research house pointed out that given the main nationality of the MM2H holders are Chinese (32.8%), this may potentially benefit Sunway’s development in Velocity, Jalan Cochrane, as there is a high proportion of Chinese residents in the area.

It added that the MM2H programme should also have spillover economic benefits to tourism and healthcare, benefiting in particular Sunway through its senior living, healthcare and hospitality businesses.

“Having said that, we also cautioned about increased competition from neighbouring countries like Thailand and Indonesia which had in recent years launched similar programmes.

“Thailand launched its Long-Term Residence Visa programme in September 2022, while Indonesia launched its 10-Year Visa Second Home Programme in December 2022,” HLIB Research said.

Similarly, TA Research, which maintained its “overweight” stance on the property sector, anticipated it to be a main beneficiary of increased domestic activities, driven by a surge in infrastructure projects and investments.

“This adjustment could attract more foreigners to our shores, positively impacting the real estate market.

“Moreover, by relaxing the MM2H programme, Malaysia can continue to vie for highly skilled foreign individuals, fostering their contributions to the nation’s growth through residency and investment,” it added.

However, TA Research suggested that the government remove the high RM40,000 monthly income requirement introduced in the 2021 revamp to enhance the appeal of the new MM2H programme.

“If the government reintroduces a monthly income requirement later, we propose setting it at RM10,000.

“This adjustment is particularly relevant when compared to countries like the Philippines, Indonesia and Cambodia, which do not impose a stipulated minimum income for enrollment in their long-stay visa programmes,” it added.



More foreigners eyeing properties



GEORGE TOWN: There is a surge in demand for residential properties priced above RM1mil from foreign nationals this year compared to a year ago due to a weaker ringgit, say property experts.

Ideal Property Group general manager (sales & marketing) Nancy Teo said due to the current value of the ringgit, foreign enquiries for high-end properties had surged by a double-digit percentage.

“The enquiries are mainly from Taiwan, Singapore and Hong Kong. Chinese nationals who can buy property in Penang are those who have investments here,” he said adding that this year, the group had seen foreigners buying the completed Queens Waterfront 1 & 2 in Bayan Lepas priced above RM1.8mil to RM2.3mil.

“Projects in strategic locations generally sell better,” she said.

Teo added that the recently revised Malaysia My Second Home (MM2H) programme guidelines to allow foreigners to buy properties priced from RM500,000 would help stimulate the local property market.

One Asia Property Consultants (Pg) Sdn Bhd executive director Chandra Mohan Krishnan said there were more foreigners buying industrial properties.

“This has to do with the weaker ringgit and maybe the new MM2H guidelines will help boost our sales later,” he said.

Eastern & Oriental Bhd assistant general manager (marketing and sales) Ramesh Gnanasegaran concurred that most of the enquiries were from Hong Kong, Singapore and Taiwan.

“The interest is in properties below RM3mil. The increase in enquiries has translated into more robust sales in 2023. Locals still form the bulk of our customers, but we are also seeing an increase in foreign purchases.”



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