Malaysia intends to internationalise its real estate and aims to generate RM20 billion from foreign investment for the next ten years to counteract a drop in private investment.
The Malaysia Property Incorporated (MPI), a new public-private entity, was assigned to improve the foreign investment level in the sector, which is just 2.5 percent of the total properties transacted value. In other nations, foreign deals are more than 30 percent.
A 9 percent drop in private investment of GDP (gross domestic product) in 1997 forced Malaysia to turn to property investment. The country was pushed to liberalise several sectors, including property (where Malaysia was once very protective), due to the competition for global capital and the radical change in the global landscape.
Owning freehold residential property is allowed for foreigners and with RM1,000-plus per square foot prime space, Malaysia’s is among the region’s cheapest.
The sector has also been recently liberalised by the government by eliminating a major approval for foreign deals, except when the transaction includes a dilution of bumiputra interests and when it exceeds RM40 million.
But according to property players, widespread crime could be the current impediment. It will also be expected for foreign investors to be cagey unless efforts to contain crime will be redoubled by the government.
Thong Yaw Hong, MPI board of directors chairman, stated at MPI’s launch last week that “To encourage foreign direct investment in commercial and shopping areas and in residences, we cannot but emphasise the increasing concern regarding personal safety and property security in our country”.
“The business climate in Malaysia has, to some extent, been negatively impacted by the increasing number of companies indicating that crimes and thefts are a severe obstacle to investment”, he added.
The country’s efforts to persuade multinational firms to set up their operational headquarters in Malaysia is also hindered by the perception of crime.
Nor Mohamed Yakcop, minister in the department of prime minister responsible for economic planning, stated that it was a problem (the same with poor public transport), which causes investors to choose Singapore or Hong Kong markets. “We have taken note of it”, said Yakcop at the entity’s launch.
Over the next five years, MPI will be given RM25 million by the government “to promote and brand Malaysia as a preferred real estate destination to international investors”, with the private sector expected to give a matching amount.
Indonesia, Singapore, United Kingdom, Hong Kong, West Asia, Korea and Japan are the target markets of MPI.