A Sudden Change of Fortune
Until recently, Sanjeet, a business consultant from India, considered Malaysia his permanent home. After living and working in the Southeast Asian nation for more than a decade, he had grown comfortable with the climate, people, and way of life. The country offered stability and opportunity that seemed ideal for long-term planning. Once I had crossed the five-year mark, Malaysia seemed like an ideal long-term choice, Sanjeet, who is in his 40s and asked to use a pseudonym, explained. One gets used to what Malaysia has to offer.
But a recent government decision has thrown those plans into disarray. From June 2026 onwards, the minimum salary threshold for foreign workers to obtain visas will rise by as much as twofold, and employers will face strict limits on how long they can sponsor individual visa-holders. For Sanjeet and thousands of expatriates like him, the announcement arrived without warning, forcing a reconsideration of futures built over years.
What was surprising was that this came out of the blue, Sanjeet told Al Jazeera. It does leave room for doubt in terms of long-term plans, which include things like buying a house or car here.
Malaysia, which transformed into one of Southeast Asia’s most developed economies after gaining independence from Britain in the 1960s, has served as an attractive destination for foreign labour for decades. The current population includes approximately 2.1 million documented foreign workers, creating a complex economic ecosystem that the government now seeks to recalibrate.
Understanding the New Requirements
The Malaysian government announced in January that tighter requirements for foreign workers would extend to higher-paid expatriates, a move designed to support sustainable economic growth while strengthening the development of local talents, according to the Ministry of Home Affairs. The changes take effect in June 2026 and represent a dramatic shift in how the country manages its foreign professional workforce.
Under the revised framework, the minimum starting monthly salaries for three categories of work permit will double across the board. The top tier will jump from 10,000 to 20,000 ringgit ($2,500 to $5,000), the middle tier from 5,000 to 10,000 ringgit ($1,260 to $2,520), and the entry professional tier from 3,000 to 5,000 ringgit ($760 to $1,260). These increases place Malaysia’s salary requirements on par with or above many regional competitors.
Additionally, employers will be permitted to sponsor each foreign worker for only five or ten years, depending on the visa category. Companies must also submit detailed plans for recruiting local talent to eventually replace the expatriate positions. Officials have stated the policy is not intended to restrict the entry of expats but to ensure their employment genuinely complements and catalyzes the development of local talent.
Economic Stakes and Dependencies
Malaysia’s relationship with foreign labor has evolved significantly since the country gained independence from Britain in the 1960s and transformed into one of Southeast Asia’s most developed economies. Currently, the nation hosts approximately 2.1 million documented foreign workers, with the vast majority employed in manual labor positions earning around the monthly minimum wage of 1,700 ringgit ($430). A much smaller but economically significant pool works in specialized sectors such as finance, semiconductors, and oil and gas.
In 2024, Home Affairs Minister Saifuddin Nasution highlighted the economic weight of this high-salaried cohort, estimating that 140,000 expatriates pump about 75 billion ringgit ($19bn) into the domestic economy annually and contribute approximately 100 million ringgit ($25m) in taxes each year. These figures underscore the potential financial impact of any policy shift affecting this demographic.
The new visa rules align with the 13th Malaysia Plan, the government’s five-year national policy strategy released in 2025. The document warned that continuous reliance on low-skilled foreign workers had hampered the adoption of critical technology in the economy. The plan identified ripple effects including the dominance of low-skilled and low-wage jobs, wage distortions, and slow productivity growth. As part of broader efforts to encourage the hiring of locals and boost incomes in a country where the average monthly wage is about $700, the government aims to slash the proportion of foreigners in the workforce from 14.1 percent in 2024 to 5 percent by 2035.
Business Community Reacts
The business sector has greeted the announcement with concern, particularly regarding the speed and scale of the changes. Thomas Mead, a United Kingdom native who has been working in Malaysia since late 2022, said the government’s plans had left some expats feeling uncertain about their future. Mead, a 28-year-old wealth manager, noted that while rules have always existed, the jump from 10,000 ringgit to 20,000 ringgit was quite a shock.
After falling in love with Malaysia’s culture and food as a student, Mead returned to the country to work, and recently bought a property in Kuala Lumpur with a view to putting down roots. He has heard some expatriates starting to talk about relocation options if they are forced to leave, noting many would be reluctant to depart.
Douglas Gan, the Singaporean founder of a venture capital fund with portfolio companies in Malaysia, said the changes would drive up expenses for companies previously drawn by the country’s affordable costs. Gan explained that the new rules would be challenging for those recruiting overseas talent who currently qualify for visas under lower salary thresholds, giving the example of engineers from second-tier cities in China.
If salaries increase to 10,000 ringgit, companies definitely will not bring them here,
Gan told Al Jazeera. He stated he is not against moves to tighten the requirements for foreign labor, but expressed hope that the government would consider the impact on different industries instead of taking a blanket approach. For businesses already in Malaysia, we are taking a wait-and-see approach, he added.
Anthony Dass, the chief executive of FSG Advisory, a strategic advisory firm, said the new policy could increase costs for firms relying on mid-tier expat labor. How Malaysians benefit will depend on the implementation of policies to develop the local workforce, Dass explained. The measures are directionally consistent with strengthening the local talent pipeline, but complementary reforms in capability building and industry upgrading will determine the outcome.
Expert Warnings and Policy Critique
Academic and economic analysts have raised questions about the underlying assumptions driving the policy changes. Professor Geoffrey Williams, an economist, argued that the policy to raise the wage thresholds for expatriate workers is based on misconceptions about expatriate employment. He stressed that Malaysia has a strong pool of high-skilled local professionals and it is not necessary to replace expatriates.
Williams elaborated that the claim that expatriates are taking jobs from locals is not true. Firstly, there are too few expatriates to make that claim meaningful. Secondly, it is already costly to pay for visas, so they are not competitive in a cost sense. Thirdly, expatriates are employed for very specific reasons based on experience and expertise. This will not change.
The new rules could influence how foreign professionals and investors view Malaysia. The economic risks of the new Home Ministry rules are that they give a very bad signal that Malaysia is unfriendly to foreigners. This will harm not just employment but also investment, Williams warned.
Wan Suhaimie, head of economic research at Kenanga Investment Bank in Kuala Lumpur, said firms could only hire locals when workers with the necessary skills were available. The long-run gain depends less on blocking expats and more on whether Malaysia can actually supply the skills, he told Al Jazeera. He said the doubling of salary thresholds had come as a shock, and foreign workers on the second-tier employment pass were not extravagant hires but core managers, engineers and specialists.
Tenure limits can work for skills transfer, but only if succession plans are real and not just paperwork,
he added.
One French expatriate based in Malaysia for 15 years, speaking anonymously to This Week in Asia, described the policy as ridiculous and unacceptable, reflecting the intensity of sentiment among long-term foreign residents.
Personal Plans Thrown into Doubt
Beyond economic statistics and policy debates, the new rules are disrupting personal lives and family plans. Leonardo, an Indonesian who works in Malaysia in the computer games sector, said the changes would see him downgraded from the second to the third employment pass category. He had hoped to settle down in Malaysia and eventually bring his mother to live in the country, but now wonders if that will be possible.
My mum is alone and living in Indonesia. There was a thought that if I could settle here, I could bring her over,
he said.
Not all foreign workers oppose the changes. Joshua Webley, a 33-year-old business manager from the UK who is married to a Malaysian citizen, said he was fully on board with the move to prioritise Malaysian jobs and predicted the changes would not stop those with the right skills.
If you come here to Malaysia, you have to be skilled enough. For those highly skilled workers, Malaysia will still be a shining light for relocation,
Webley told Al Jazeera.
However, for professionals like Sanjeet, the uncertainty has prompted consideration of alternatives. 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.
Key Points
- Malaysia will double minimum salary thresholds for expatriate work permits from June 2026, with top-tier visas requiring 20,000 ringgit ($5,000) monthly, up from 10,000 ringgit
- Employers must now limit sponsorship to five or ten years depending on category, and submit plans to transition roles to local workers
- The 140,000 high-salaried expatriates currently contribute approximately $19 billion annually to Malaysia’s economy and $25 million in taxes
- The government aims to reduce foreign workers from 14.1 percent of the workforce to 5 percent by 2035 to boost local hiring and wages
- Business leaders and economists warn the sudden changes could trigger a talent exodus to regional competitors like Vietnam and Thailand
- Experts argue that expatriates fill specific expertise gaps and cannot be easily replaced without significant local skills development
- Long-term expats report reconsidering property purchases and family reunification plans due to visa uncertainty
