Forest City was designated a special financial zone in August 2023 to boost foreign investment and economic growth in the area. - Photo: Forest City
KUALA LUMPUR: Forest City’s plans to become a family office hub are gaining pace gradually, with details such as incentives and criteria to be officially announced in the first quarter of 2025, said Malaysia’s Finance Minister II Datuk Seri Amir Hamzah Azizan.
The Forest City special financial zone (SFZ) in Johor will not be competing directly with Singapore. Instead, it aims to attract a different market segment by offering lower threshold requirements for family offices, said Amir Hamzah in an interview with The Straits Times.
“We want to welcome family offices but we are not competing directly with Singapore, as there are some groups that are not serviced by Singapore, so we (will) set clear criteria to attract those groups to set up within Malaysia,” he told ST on Tuesday (Nov 19).
Family offices, entities that manage the wealth of the super rich, can be set up in Malaysia with a minimum of RM30mil (S$9mil) in assets under management, compared with S$20mil in Singapore.
In September, Malaysia announced a zero per cent tax rate for family offices located in Forest City’s SFZ, as part of incentives to attract foreign capital and revitalise the area as a go-to destination for the rich from within the country and across the region.
The move is aimed at reviving Forest City, a beleaguered US$100bil (S$134bil) development project located a stone’s throw from Singapore.
While experts note that a zero tax rate alone may not suffice to attract investors to Johor’s Forest City, Amir Hamzah said Malaysia’s lower cost structure in setting up family offices will attract those looking to set up shop in the SFZ.
So far, feedback from wealth management firms has been “very strong”, he said, with early indications from Johor’s state government that these firms are planning to establish a presence in the SFZ at Forest City, he added.
“I will not speculate on the numbers now, but all I can say is the feedback of these firms coming into our market is very strong and also the intent of people coming down (to the SFZ) to house their family offices is also there,” said Amir Hamzah.
While Malaysia is just beginning to establish its presence in the family office sector, Singapore is a regional powerhouse.
The Republic, which is now home to almost 60 per cent of Asia’s family offices, has become the region’s preferred destination for establishing family offices due to various reasons, including its stable political and economic climate, sound business and regulatory environment, and favourable tax regime.
Together, Singapore and Hong Kong host 15 per cent of the world’s single family offices. Each city manages roughly US$1.3 trillion in offshore assets, according to a McKinsey study.
Meanwhile, experts say there is a place for Malaysia in the wealth management business as it offers itself as an alternative location for family offices in the region, noting that many wealth management firms have more than one family office set up.
“Some family offices may not meet the requirements for other locations,” said PwC Malaysia tax partner and entrepreneurial and private business leader Fung Mei Lin.
“Ultra-high net worth families seeking wealth management solutions can consider the tax incentives that Malaysia offers.”
But in order for Forest City’s SFZ to be viable, experts stressed the need for a robust ecosystem including investment advisory and fund management services to foster a conducive environment for family offices.
“Forest City is an integrated development project and there is yet to be much business there, which is why the government must give incentives to locals to locate to the SFZ for quality services to be provided to family offices,” said fund manager Danny Wong, who is the chief executive of private wealth management firm Areca Capital.
Forest City is a joint venture between Country Garden and a private Malaysian company backed by the country’s king, Sultan Ibrahim Iskandar of Johor.
The 2,800ha development, backed by Chinese developer Country Garden Holdings, was designated an SFZ in August 2023 to boost foreign investment and economic growth in the area.
The federal government’s strategy is to develop the SFZ and Johor-Singapore special economic zone to boost the southern state’s economy through high-quality investments and create higher-paying jobs.
Malaysia has been grappling with issues of lower wages and brain drain, resulting in nearly two million of its skilled workforce residing overseas, with many based in Singapore.
Johor in particular faces competition from its southern neighbour when hiring skilled workers due to the currency conversion rate and the stronger Singapore dollar.
Amir Hamzah, noting that family office managers could earn at least RM10,000 monthly, said that having a wealth management hub in the southern state would potentially drive wage growth.
“We don’t have to match (wages) dollar to dollar, but what we need is to match the quality of life that a person has in Johor, while providing them with opportunities for growth and a steady pipeline of jobs,” he added. - The Straits Times/ANN
