Malaysia moves to tighten rules for expats, raising fears of talent flight

twitterwhatsappcopylinkgoogleAdd Al Jazeera on GoogleinfoThe skyline of Kuala Lumpur, Malaysia, on February 24, 2020 [Mohd Rasfan/AFP]By Patrick LeePublished On 26 Mar 202626 Mar 2026Kuala Lumpur, Malaysia – Until recently, Sanjeet, a business consultant from India, thought of Malaysia as home.

After living and working in the Southeast Asian nation for more than a decade, he had gotten comfortable with the climate, people and way of life.

“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, told Al Jazeera.

“One gets used to what Malaysia has to offer.”

But after a recent move by the Malaysian government to reduce the country’s reliance on foreign workers, Sanjeet’s plans – and those of thousands like him – have been plunged into doubt.

From June onwards, the minimum salary threshold for foreign workers to obtain a visa will be raised as much as two-fold, and workers’ length of stay will be capped at five or 10 years.

“What was surprising was that this came out of the blue,” Sanjeet said.

“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 been an attractive destination for foreign labour for decades.

Many of the 2.1 million documented foreign workers in the country take on manual labour for salaries of around the monthly minimum wage of 1,700 ringgit ($430).

A much smaller pool of foreign workers is employed in highly-paid specialised sectors such as finance, semiconductors, and oil and gas.

In 2024, Home Affairs Minister Saifuddin Nasution said the country’s highly-salaried expatriate population – estimated at about 140,000 people – pumped about 75 billion ringgit ($19bn) into the domestic economy and contributed about 100 million ringgit ($25m) in taxes each year.

Malaysia’s pool of foreign labour has been a focus of growing debate in the nation of 34 million people in recent years.

In the latest five-year national policy strategy released in 2025, the government warned that a “continuous reliance” on low-skilled foreign workers had hampered the adoption of critical technology in the economy.

“This issue induced a ripple effect in the labour market, including the dominance of low-skilled and (low)-wage jobs, wage distortions as well as slow productivity growth,” the authors of the 13th Malaysia Plan said.

As part of efforts to encourage the hiring of locals and boost incomes in a country where the average monthly wage is about $700, the government plans to slash the proportion of foreigners in the workforce from 14.1 percent in 2024 to 5 percent by 2035.

In January, the Ministry of Home Affairs said tighter requirements for foreign workers would be extended to higher-paid expatriates to “support sustainable economic growth while strengthening the development of local talents”.

Under the new rules, the minimum starting monthly salaries for three categories of work permit will be raised from 10,000 to 20,000 ringgit ($2,500 to $5,000), 5,000 to 10,000 ringgit ($1,260 to $2,520), and 3,000 to 5,000 ringgit ($760 to $1,260), respectively.

On top of the higher salary floors, expatriates’ duration of stay will be limited, and employers will need to put in place plans for recruiting local talent after their sojourn ends.

UK native Thomas Mead, who has been working in Malaysia since late 2022, said the government’s plans had left some expats feeling uncertain about their future.

“There have always been rules in place, including minimum salary requirements,” Mead, a 28-year-old wealth manager, told Al Jazeera.

“However, the jump from RM10,000 to RM20,000 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.

“I’ve heard some expatriates starting to talk about relocation options if they’re forced to,” he said, saying many would be “reluctant” to leave.

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 said 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 won’t bring them here,” he told Al Jazeera.

Gan said he was not against moves to tighten the requirements for foreign labour, 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’re taking a wait-and-see approach,” he said.

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.

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 said.

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 labour.

How Malaysians benefit will depend on the implementation of policies to develop the local workforce, Dass said.

“The measures are directionally consistent with strengthening the local talent pipeline, but complementary reforms in capability building and industry upgrading will determine the outcome,” he said.

Joshua Webley, a 33-year-old business manager from the UK who is married to a Malaysian citizen, said that while the higher bar would make it harder for some foreigners to relocate to the country, it would not stop those with the right skills.

“If you come here to Malaysia, you have to be skilled enough,” Webley told Al Jazeera.

“For those high-skilled workers, Malaysia will still be a shining light for relocation.

“For a few people, it might be a bad situation, but I think a year from now it will be perceived as normal,” he added.

Others, such as Sanjeet, are less sanguine.

“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 said.