Category Archives: Economics

Penang’s Economic Gains

Posted on by

There is an interesting article in Bloomberg on the Penang’s recent economic success:

Penang’s progress highlights the challenges facing the rest of Malaysia and the National Front government as China, Indonesia and Vietnam offer investors bigger workforces while Singapore lures talent with lower taxes and easier immigration. Lim, 50, the countryโ€™s only ethnic-Chinese state leader, embodies the contrast between Penang’s business transparency and the four-decade old policies of the ruling party that favor Malays, which the World Bank says undermine competitiveness.

I am sure that is a politically contentious issue. The very good sign, I think, is the ability of Penang to experiment. For countries to succeed in this very competitive environment they need to experiment and can’t be afraid to disappoint some people. I see Malaysia doing many good things, including recognizing the brain drain and the need to build a partnership with Singapore.

In the first seven months of 2011, Penang won 3.6 billion ringgit ($1.2 billion) of approved foreign manufacturing investment, ahead of the 3.4 billion ringgit that went to Selangor, the state that surrounds the capital Kuala Lumpur, a government report showed last month.
…
Under Najibโ€™s Economic Transformation Program, his government is promoting about 65.8 billion ringgit of private- sector-led projects for southern Johor state, compared with at least 375 million ringgit for Penang, according to data compiled by Bloomberg. The comparison excludes projects covering multiple states or those without a clear single location, which amounted to 34.3 billion ringgit nationwide.

With my admittedly limited knowledge of Malaysia investing in Johor, to build a dynamic relationship with Singapore, is very wise. It seems to me investing in creating strong economic center’s in KL, Penang, Johor and Sarawak makes a great deal of sense. It is always wise to spread development around – at the same time concentrating it (somewhat contradictory, I know).

And the long term economic plans seem very wise: investing in building a high tech workforce, building around natural resources, targeting some key industries (health care, manufacturing…). I would also strongly push to maintain and upgrade the use of the English language. Granted, that is useful for me personally, but economically it is a powerful tool to grow Malaysia over the long term.

Building economies into mid-wage and mid-to-high-wage economies is very difficult. You need to constantly be looking out decades while still making people’s lives better today. And moving the society along with the economic development. Economies are made up of people, forgetting that is dangerous. But they also are in competition with many other countries that are doing what they can to grow and compete with your country. The balance is not easy, but it is much easier when the economy is growing and the gains cResidence Pass for Talented Expatsan be distributed to show people what has already been gained and dream about the potential.

Related: Penang Condo Market – Residence Pass for Talented Expats – Strong Singapore Dollar

Residence Pass for Talented Expats

Posted on by

I wrote about the Malaysian Residence Pass for Skilled Professionals previously. I found some up to date links to the official site, with some updated information (do see my original post, as the post shares information I don’t see on the official site now – that information may not be official but it does provide some good ideas on what was being thought of when the program was originally announced).

One part of the plan for long term economic growth is to focus on workers with highly valued talents globally: technology, engineering (oil production, construction, manufacturing…), higher education, health care… From the official TalentCorp site (this is the organization the government is putting in charge of implementation of the efforts to attract and grow talent):

a nation’s economic growth would hinge on its ability to attract, nurture and retain top talent. Malaysia has thus far achieved some success in steering its economy to current levels. Going forward, talent is expected to play a key role in supporting Malaysia achieve its objectives of propelling the economy to a high-income status.

Major cities around the world have thrived because of talent and their ability to capitalize on the best and brightest minds around. Malaysian professionals from abroad and top foreign talent complement the Malaysian talent pool, providing variety and diversity in terms of expertise and experience. Our local pool must be enhanced with the best skills and talents that can be tapped globally.

We welcome talent to Malaysia, which offers a host of opportunities for talent to develop and enhance their skills and experience in key sectors of the economy. The Malaysian Government has rolled out various initiatives and programs to engage top foreign talent in the long term.

As I mentioned the Residence Pass (which offers a long term visa without being tied to 1 employer – for skilled professionals) program was signed in April of 2011 to attract and keep top talent in Malaysia. Since my original post the program is officially providing the new passes. However, at this time, it is limited to those expats already with a current visa and having been in Malaysia on such a visa for the last 3 years.

Obviously this is a very small percentage of the talent available globally. So the program will obviously need to expand to be more useful. But I don’t see any details on when that will happen. I have asked but have not received a response yet. Please share information you have that others would find interesting.

As I said before, I think this effort to attract, retain and encourage the development of internationally valuable talent is a very wise move by Malaysia. I have written about the importance of science and engineering to economic development on the Curious Cat Science and Engineering Blog for years: How to Build a World Class Technology Economy (2006) – The Economic Benefits of Engineering Excellence (2007) – Keeping Out Technology Workers is not a Good Economic Strategy (2009) – Science and Engineering in Global Economics (2006) – Asia: Rising Stars of Science and Engineering (2007).

Related: Penang Condo Market – Strong Singapore Dollar – Singapore Ranks Highly as an Expat Destination

Malaysian Residence Pass for Skilled Professionals

Posted on by

The Residence Pass program officially launched on April 1st. I still can’t find much information on it. If I am reading things right, Talent Corporation Malaysia Bhd has been tapped by the government to lead this effort.

The Residence Pass was a new immigration instrument which offers 5 to 10 years of residence and work in Malaysia. Unlike other employment passes it is not tied to a specific employers so it allows workers to move between jobs much more easily. For the initial phase of implementation, Residence Pass applicants must hold a valid Employment Pass. The Residence Pass is targeted at world-class talents and thus, to secure approval, applicants must demonstrate a high level of professional achievements, supported by possession of relevant qualifications and work experience, especially in key economic sectors, as identified under the Economic Transformation Programme.

Currently, only those with current employment passes are eligible to apply (but eventually it will be opened to others). To requirements/materials needed to apply for the RP Talent pass are:

  • Academic Qualification: Bachelors / Masters / PHD degree in any discipline from a recognized Institute of Higher Learning, Diploma or a Professional / Competency Certificate from a recognized Professional Institute.
  • Total years of working experience: MINIMUM total of 5 years working experience.
  • Salary: MINIMUM gross annual salary of RM144,000 (approximately US$50,000)
  • Industry/Sector: Applicant from all industries and sectors are welcomed to apply.
  • Local Sponsor: Applicant must have a local sponsor i.e Malaysia Citizen, 21 years old and above.
  • Recommendation: Any recommendation from regulatory bodies will be an added advantage.
  • Years of experience working in Malaysia: MINIMUM total of 3 years working experience in Malaysia and it must be continuous.
  • Income Tax File No: Applicant must have an Income Tax File Number in Malaysia and have paid income tax for a MINIMUM of 2 years.

    • My understanding (though I could definitely be wrong) is that the last two will be removed at a later date, I believe, allowing those who have not worked in Malaysia to apply. I believe the idea is to retain and attract new talent, therefore the last two requirements don’t seem to make sense. My guess is they are just using it, initially, as a way to control applications.

    The Residence Pass Talent Application Form is required only for manual submission of applications. Required documents include: copy of passport, updated resume, and a copy of educational certificates. It seems to cost 2,000+MYR to apply (about $700).
    Continue reading →

    Online Resources for Living in Johor Bahru

    Posted on by

    Johor Bahru is right next to Singapore on the Southern tip of Peninsular Malaysia. Many working in Singapore live in Johor Bahru for the substantially cheaper rents and costs. Malaysia has create the Iskandar Development Region to focus on creating economic success in Southern Johor.

    Singapore and Malaysia have been moving to encourage cooperation on projects that cross the border. The 2nd link added additional capacity for car, truck, motor bikes and buses and they are now working to add MRT (Mass Rapid Transit trains) link between Johor Bahru and Sinapore.

    Here are some resources I have found online for those interested in considering a move to Johor Bahru:

    Blogs about Johor Bahru

    Sites useful for moving to Malaysia

    Penang Condo Market

    Posted on by

    See Topic: Penang Condos 2011 forum discussion of this topic for background information.

    In general property prices can only support what local jobs support. So is Penang adding lots of jobs that can support costly condos? I don’t know, but am skeptical.

    Penang may be a bit of an exception (as a “retirement local”). For retirement locations if you have a future stream of retirees then you can support higher prices than local jobs (this is riskier to rely on as a investor). Retirement locals that are cheaper than where those worked are coming from can seem cheap so those working elsewhere are willing to “overpay.” This could be the situation for Penang.

    MM2H buyers don’t seem that can actually affect the market. Speculators are likely a big player. The smart public policy action in this case is to raise down-payment requirements and increase transaction taxes. This won’t stop a bubble from forming but will reduce the size of the bubble and limit the damage when it pops.

    I wonder if a significant portion of demand (in addition to direct speculation) is Malaysians working in KL, Singapore, USA… buying a condo today that they don’t plan on living in for years. This can be a form of speculation but is a much more solid foundation for sustaining prices. If you have a high working income, purchasing a condo in Penang could be relatively cheap. If you are buying one, to rent for 10 years and then move back into you are unlikely to be harmed greatly when prices drop. Now some people will do this and see their first condo doubled in value and then buy two more, over-leverage themselves and have a great ride up the bubble and then get clobbered when the bubble bursts.

    For the Penang area to sustain a long term boom, Penang needs to develop a sustainable long term pool of buyers. the safest way to do this is with lots of high paying jobs. That can be supplemented with some retirees (Malaysians and MM2Hers). To do either of these the government and developers must pursue strategies that attract these populations. There are other minor factors – you can have people making a lot of money buy a condo for their family or parents… But the only reliable way to sustain increasing property values is adding jobs and creating a pleasant living experience.

    In looking around Penang me sense is that rental prices are very good (for renters). The available condos for rent seem to be quite high also. My guess is this is a sign of the large percentage of speculators/investors compared to those buying condos to live in themselves. This is a dangerous sign – when the market has more capacity than people (normally due to building more housing than the job market supports). My familiarity with the market is extremely limited however, my perception could be way off.

    On the plus side the prices on a regional and global basis are reasonable. Therefor, those accustom to international prices can buy and feel they have a bargain. And this situation can support rising prices (especially if those buyers plan on retiring there – if they need to have a job there then it doesn’t matter how cheap the prices are if the jobs don’t exist). Buying with the hope that Penang is moving toward a prosperous future is reasonable. That is a bet that the island will add jobs and improve infrastructure to support a livable community that attracts people from all over Malaysia, and beyond. There is a great example of how to do this in nearby Singapore. If Penang take cues from many of Singapore’s wish moves investors could certainly be rewarded in the long term.

    One significant risk to investors is the carry cost of their investment if the overcapacity (if there actually is overcapacity) continues over a long period. That will suppress rental rates. As new condos are added it also can reduce the attractiveness of your condo to renters (or future buyers).

    Related: Home Values and Rental Rates – 10 million More Renters In the Next 5 Years (in the USA) – Apartment-vacancy Rate is 7.8%, a 23-year High (in USA, Nov 2009) – Retiring Overseas is an Appealing Option for Some Retirees