Malaysia has introduced sweeping visa restrictions for foreign workers that could reshape the country’s labour market and trigger an exodus of skilled expatriates, raising concerns among businesses and international professionals.

Starting from June, minimum salary thresholds for foreign workers will increase twofold across three employment pass categories. Monthly requirements will jump from MYR 10,000 to 20,000 (USD 2,500 to USD 5,000), MYR 5,000 to 10,000 (USD 1,260 to USD 2,520), and MYR 3,000 to 5,000 (USD 760 to USD 1,260) respectively.

Additionally, employers can now sponsor each foreign worker for only five or 10 years depending on visa category. Companies must implement plans for recruiting local talent after expatriate tenure ends.

Malaysia hosts 21 lakh documented foreign workers, with an estimated 1,40,000 high-salaried expatriates contributing approximately MYR 7,500 crore (USD 1,900 crore) to domestic economy and around 100 million ringgit (USD 25 million) in annual taxes, according to Home Affairs Minister Saifuddin Nasution’s 2024 statement.

Government aims to reduce foreign workforce proportion from 14.1% in 2024 to 5% by 2035. Officials stated policy intends to support sustainable economic growth while strengthening local talent development, not restricting expatriate entry.

Sanjeet, an Indian business consultant working in Malaysia for over a decade, expressed shock at sudden policy shift. “It does leave room for doubt in terms of long-term plans, which include things like buying a house or car here”, he told the media.

Thomas Mead, a 28-year-old British wealth manager who recently purchased property in Kuala Lumpur, described the jump from 10,000 to 20,000 ringgit as ‘quite a shock’. He noted some expatriates are discussing relocation options though many remain reluctant to leave.

Douglas Gan, Singaporean venture capital founder with Malaysian portfolio companies, warned changes would drive up expenses for firms previously attracted by affordable costs. “If salaries increase to MYR 10 thousand, companies definitely won’t bring them here”, he said, citing engineers from second-tier Chinese cities as example.

Wan Suhaimie, head of economic research at Kenanga Investment Bank, questioned whether Malaysia can actually supply necessary skills. “The long-run gain depends less on blocking expats and more on whether Malaysia can actually supply the skills”, he said. He noted second-tier employment pass holders are core managers, engineers and specialists, not extravagant hires.

Anthony Dass, chief executive of FSG Advisory, said measures align with strengthening local talent pipeline but warned success depends on complementary reforms in capability building and industry upgrading.

However, Joshua Webley, a 33-year-old British business manager married to Malaysian citizen, supported prioritising Malaysian jobs. “For those highly skilled workers, Malaysia will still be a shining light for relocation”, he predicted.

Sanjeet remained less optimistic. “If Malaysia pursues these policies without a comprehensive rationale, then people like me will look for alternatives such as Vietnam, Thailand and elsewhere, which have favourable policies for expats”, he warned.

Source: Al Jazeera