KUALA LUMPUR, Nov 21 — Forest City’s plans to become a hub for family offices are progressing steadily, with details such as incentives and criteria to be officially announced in the first quarter of 2025, said Finance Minister II Amir Hamzah Azizan.

He added that the Forest City special financial zone (SFZ) in Johor will not directly compete with Singapore but aims to attract a different market segment by offering lower threshold requirements for family offices.

"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,” Amir Hamzah told The Straits Times in an interview on November 19.

The family office sector caters to the wealth of the super-rich and can be set up in Malaysia with a minimum of RM30 million in assets under management, compared to US$20 million (RM89 million) in Singapore.

In September, the federal government announced a zero per cent tax rate for family offices located in Forest City’s SFZ, part of efforts to attract foreign capital and revitalise the area as a destination for the wealthy within Malaysia and the region.

Amir Hamzah acknowledged that while a zero per cent tax rate alone may not be enough to draw investors to Johor’s Forest City, Malaysia’s lower cost structure for setting up family offices will appeal to those seeking to establish a presence in the SFZ.

So far, Amir Hamzah said that feedback from wealth management firms has been "very strong”, adding that Johor’s state government has indicated that these firms are planning to establish a presence in the SFZ.

"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,” Amir Hamzah said.

While Malaysia is just beginning to make its mark in the family office sector, Singapore has already become a regional powerhouse.

Singapore, which hosts nearly 60 per cent of Asia’s family offices, is the preferred destination for such entities due to its stable political and economic climate, business-friendly regulatory environment, and favourable tax regime.

Experts believe that Malaysia can carve out a niche in the wealth management market by offering itself as an alternative location for family offices in the region.

"Some family offices may not meet the requirements for other locations,” said PwC Malaysia tax partner Fung Mei Lin told the Straits Times.

"Ultra-high-net-worth families seeking wealth management solutions can consider the tax incentives that Malaysia offers.”

However, experts emphasise the need for a robust ecosystem in the SFZ, including investment advisory and fund management services, to make Forest City viable as a hub 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 Danny Wong, CEO of private wealth management firm Areca Capital.

Forest City is a joint venture between Chinese developer Country Garden and a private Malaysian company.

The 2,800ha development, supported by Country Garden Holdings, was designated an SFZ in August 2023 to boost foreign investment and economic growth in the area.

The federal government aims to develop the SFZ and the Johor-Singapore special economic zone to spur Johor’s economy through high-quality investments and job creation.

Malaysia has been dealing with lower wages and a brain drain, with nearly two million skilled workers living abroad, many in Singapore.

Amir Hamzah said that family office managers could earn at least RM10,000 monthly, adding that having a wealth management hub in Johor would help 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,” Amir Hamzah said.