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Discontinuation of The Reduction Of Fixed Deposit Placement Based On Property Purchase And MM2H Approval By Government Pension
Kindly be informed that MM2H Centre has discontinued the reduction of Fixed Deposit placement based on property purchase worth RM1 million and above in Malaysia. Also discontinued is the MM2H...
Cebu as a second home: Consider Malaysia's model Print E-mail
Tuesday, 10 November 2009 00:53

Last week, in the anniversary celebration of the Cebu Investment Promotion Center (CIPC), we heard its prime mover, Joel Mari Yu, harping on the possibility of having Cebu as the most preferred choice of global citizens who are trying to find their second home.

This development is very encouraging. For one, CIPC has the credibility and track record in investment promotion. Apparently, they already have the experience, a database and a network of moneyed individuals.

However, just like any business, promotion will only translate into profits if the products or services offered approximate the representation it makes. Otherwise, sustainability is not even an issue worth delving in. It is practically dead from the very beginning.

The idea of promoting a country as second home isn't new at all. Malaysia started it a few years back and has now started reaping dividends. What Malaysia did wasn't something really special. It wasn't something that is beyond every ordinary Filipino mind's reach. They started it five years ago when they launched "Malaysia-My Second Home" (MM2H) by offering foreigners, particularly retirees, to live permanently in their country. They started by giving five-year visa with unlimited entry/exit privileges and without minimum annual residence requirement. Permanent residency is also a possibility after a five-year stay. Retirees may also bring in household effects duty-free, and import or purchase one vehicle locally, tax free. Income tax incentives are also offered for investing retirees. Notably, recipients (foreigners) are eligible to buy houses at a cost of not less than RM150,000.00 (or roughly US$41,677.50 at the current exchange rate) each. More importantly, for purposes of owning the house, they are also entitled to borrow from local banks 60% or more of its cost or value. As a result, Malaysia topped other Asian countries for two (2) consecutive years in a row in the International Living's survey

for preferred destinations.

From the criteria by which the survey was done, which include, among others, proximity to their homes, cost of living, weather, availability of telecommunications, infrastructure, safety (peace and order), best health care, investment priorities and tax incentives (should retirees find a way to invest their retirement pay), the Philippines is nowhere to be found.   In such survey you can't see our country on top nor as one of the top thirty (30) preferred destinations. This year's survey has a new leader in Ecuador. Last year's leader, Mexico, is comfortably behind at second place. Inarguably, because of these two (2) countries proximity to the USA, it comes naturally as the first choice. Other Latin American countries like Panama, Uruguay, Brazil, Argentina and Costa Rica are also in the top ten (10) rankings.   Surprisingly, however, while Latin American countries have the edge and will probably dominate due to their proximity to the huge markets, our neighbor, Malaysia, installed itself as Asia's best by placing 16th (13th last year) of the world's most preferred. Likewise, Thailand was impressive at number 19 (20th last year).

Why we aren't visible isn't difficult to comprehend. Never blame promotions because that concern is superlatively handled by our Philippine Retirement Authority (PRA). What needs careful study are the privileges and benefits we are trying to promote.

Should we attempt to compare our own program with that of Malaysia, ours pale in comparison. Unfortunately, due to some restrictions that our existing laws provide, the privileges and benefits are just so limited. For instance, the Philippine Retirement Authority's (which promotes and grants Special Resident Retiree Visa) website simply bragged about, among others, "our world-renowned Filipino hospitality, our diverse culture, and reasonable standard of living". Other incentives include the option to retire permanently, and exemptions from income tax over retirees' pension and annuities; exit and re-entry permits of the Bureau of Immigration; annual registration requirement of the Bureau of Immigration; customs duties and taxes with regard to the importation of household goods and personal effects up to US$7,000.00; and travel tax, if the foreigner-retiree opts to stay in the Philippines for less than a year from the last entry date.

The country's time deposit requirement in obtaining the visa (PRA accredited banks' certificate of inward remittance is necessary) ranges from US$10,000.00 to US$50,000.00 depending on whether one is a pensioner or not and his/her age. While it seems that our time deposit requirement is not stiff, its subsequent conversion is irrational. These required time deposits can only be converted into active investment through purchase, acquisition and ownership of a condominium unit; long-term lease of house and lot, condominium or townhouse for a period not shorter than twenty (20) years; and purchase, acquisition and ownership of golf or country club shares.

Notably, in comparing ours and that of Malaysia's, the issues on ownership of real properties and the conversion of the time deposit requirements are the most discouraging provisions that made our program inferior. Never blame PRA for that because restriction on ownership of real properties by foreigners is a constitutional provision.

Additionally, the conversion of time deposit is so limited and impractical to some extent. An elderly may no longer have the energy to play golf and, therefore, buying club shares is no longer an option. Moreover, retirees who are already in their seventies may opt for spaces, greens, beautiful sceneries and the serenity of the countryside, yet, we only tell them to buy a compartment we so elegantly call condominiums.

On the other hand, we truly have retirees who are still young and vibrant. Since their time deposit requirements are also higher, definitely, they wouldn't want to see it sleeping in the bank. Energetic as they are, they might opt for direct investments and help generate employment. Unfortunately, however, our program prohibits such.

Indeed, there seemingly is an undying interest in our retirement program. Unfortunately, however, what we are trying to offer are sadly those that they don't need. What is important now is for all the players (including our lawmakers) to consider amending certain laws to keep abreast with the fast-changing environment brought about by the irreversible journey to globalization.   In this regard, the possibility of foreigners owning real properties inside accredited retirement villages must be given due consideration.   Without these necessary changes, the dream of becoming the world's most preferred "second home" may just remain as that - a dream and the frustration it brings may just turn out to be as deep as a retiree's final resting place.


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