Malaysia has Southeast Asia’s third largest economy which is steadily growing but the Malaysian recruitment market and economy have both suffered from a persistent brain drain that the country’s government has struggled to address.
The Malaysia Diaspora and Malaysian Returnees
Despite having a fairly advanced economy, Malaysia has long suffered a persistent and steady brain drain. In 2011, the World Bank reported that there were at least 1 million Malaysians working overseas and this Malaysian brain drain was reportedly increasing.
Many of those leaving Malaysia are Malaysian Chinese who leave in part due to the country’s Bumiputera affirmative action policies which favor ethnic Malays at the expense of non-Malays but increasingly Malays themselves are also leaving to seek better job opportunities abroad. World Bank figures also show that 54% of the Malaysian brain drain has gone to Singapore (helping to replace Singaporeans who leave) while 15% went to Australia, 10% to the United States and 5% to the United Kingdom while large numbers of Malaysian Chinese professionals can also be found working in both China and Vietnam.
In response to the Malaysian brain drain as well as a need to recruit and keep highly skilled foreign professionals to fulfill Malaysia’s New Economic Model (NEM) plan to create a high-value economy, the Malaysian government has set up Talent Corporation Malaysia and specifically the Returning Expert Programme (REP). Under Talent Corporation Malaysia’s Returning Expert Programme (REP), Malaysian returnees can avail of an optional flat tax of 15% for five years, tax exemptions for personal effects brought into Malaysia, 2 locally assembled vehicles tax free and PR for any foreign spouse or children.
However, Malaysia has not had much luck with earlier brain gain programs. Malaysia’s first brain gain program, known as the Returning Scientist Programme, was launched in 1995 only to be ended three year’s later after attracting just 93 researchers, scientists and engineers – 70 of whom were foreigners and 23 who were Malaysians.
Meanwhile, the Returning Expert Programme (REP) has had more but still limited success. Specifically and since its inception in January 2001 until early 2010, 1,455 applications were processed with 840 applications having been approved and 601 of the approved applicants officially returning to work in various sectors in Malaysia.
Explanations for the failure of Malaysian brain gain programs to recruit Malaysian expatriates to return include red tape at the implementation level, problems with the immigration process (especially for family members not born in Malaysia or not Malaysian) and the fact that dual citizenship is not allowed.
The Malaysia Recruitment Market
The Malaysian recruitment market has strengthened since the end of the financial crisis with job opportunities on the rise in most sectors of the economy. Moreover, Penang, which has been nicknamed Silicon Island, is increasingly an important part of the global electronics supply chain. In fact, Penang is already the home of high tech electronics MNC giants like Agilent, Altera, AMD, Bosch, Dell, Hitachi, Intel, Motorola, Osram, Plexus Corporation and Seagate who have set up important manufacturing facilities on the island and more companies are following in their footsteps.
Meanwhile, opportunities for foreign expatriates with strong technical skills tend to be concentrated in Malaysia’s oil and gas sector as well as in the Malaysian IT sector as the country seeks to become an IT services hub. In addition, Malaysia is also increasingly becoming an important center for Islamic banking and finance and it should be noted that the country has the highest number of female workers working in Islamic banking.
Working in Malaysia
Foreign expatriates coming to work in Malaysia will need to obtain a Professional Work Permit (DP10) arranged by their prospective employer and usually good for two years. However and general speaking, the ability to employ and the number of foreign expatriates who can be employed at a Malaysian employer will depend upon a company’s paid-up capital and whether it’s a foreign company receiving special investment incentives. In addition, foreign expatriates who are already working in Malaysia for at least three years should check to see if they meet the income and other eligibility requirements of Talent Corporation Malaysia’s Residence Pass – Talent (RP-T) scheme which is intended to encourage high quality expatriate talent to remain in Malaysia. For further information about Malaysian work permits and Malaysian visas in general, visit the websites of the Immigration Department of Malaysia or the Malaysian Investment Development Authority (MIDA).
On the tax front, Malaysia income tax rates are progressive up to 26% while individuals who do not meet Malaysia residence requirements are taxed at a flat rate of 26%. An individual will be considered a tax resident in Malaysia if he or she resides in the country for 182 days or more during a calendar year. Likewise, residency may be established by physical presence in the country for a mere day if it can be linked to a period of residence of at least 182 consecutive days in an adjoining year. In addition, individuals in Malaysia are taxed on income derived from the country while foreign-source income is not taxable. For further information about Malaysia tax rates or Malaysian taxes in general, visit taxrates.cc, KPMG’s Taxation of International Executives page for Malaysia or the website of Malaysia’s Inland Revenue Board.