Malaysia Tourism Report Q2 2009

2008 Was Solid Year For Tourism… Malaysia welcomed 22,052,488 tourists in 2008, an increase of 5.1% year on year (y-o-y) and slightly above the predictions of a 4% rise. The country had a particularly strong December, when 2,058,684mn arrivals represented a 9.2% increase y-o-y.

Singapore was again the most important source market for in-bound tourists, contributing 49.9% of the total arrivals. Other key markets included Indonesia (11.0%), Thailand (6.8%), Brunei (4.9%), China (including Hong Kong & Macau) (4.3%), India (2.5%), Japan (2.0%), Australia (1.9%), the Philippines (1.8%) and the United Kingdom (1.7%).

At this stage, with the global economic slowdown set to have a significant impact on tourism industries around the globe, we believe that the time is right to make some slight downwards revisions for our tourism industry forecasts. We fear the likelihood of a 9% decline in 2009, in line with the government’s own thinking on the subject, before the industry can recover. That said, the report remains bullish on the longterm prognosis for Malaysian tourism, which continues to benefit from strong government support and a relatively secure and stable political situation.

…But 2009 Will Be More Difficult Malaysian Finance Minister Najib Razak was downbeat on Malaysia’s tourism sector prospects in 2009.

AFP quoted the minister as saying he expects tourist arrivals to fall by at least 9%, because of the global economic slowdown and ongoing regional security concerns. The report shares the finance minister’s caution and has downgraded its forecast for this year’s tourist arrivals accordingly. The report also shares Najib’s view that the recent political unrest in neighbouring Thailand could prove a boon to the country’s tourism sector, if people decide that the situation on the ground in Thailand is too dangerous. Moreover, Kuala Lumpur International Airport is also well-positioned to take up any air traffic that now chooses to boycott Bangkok International.

No Plans To Abolish Service Tax Despite calls from some hotel and restaurant operators for its abolition, the government has no current plans to remove the country’s 5% service tax, according to Deputy Finance Minister Datuk Kong Cho Ha.

Speaking to local media ahead of the 2009 Budget speech, Kong said that the revenue collected from the service levy amounted to MYR3bn in 2007 and that service tax remained a major source of income.

The government has taken steps to remove some of the tax burden from smaller hospitality businesses.

From July 1 2008, the annual sales threshold for the collection of the service tax on non-hotel restaurants was increased from MYR500,000 to MYR3mn.

Increasing Islamisation A Concern For Tourism? Recent events have called into question the previously sacrosanct secular model employed successfully in Malaysia over the past 50 years. It had already been reported in 2007 on the country’s Islamic morality police – which has far-reaching powers under Malaysian law – being accused of breaking into hotel rooms occupied by mixed-race foreign couples and demanding to see marriage certificates.

Since that time, we have seen the success of the Islamist party Parti Islam SeMalaysia (PAS) in the elections of April 2008. The PAS increased its representation in parliament from six to 23 seats and also gained control of some state governments at the same time.

Now, a government proposal aims to curb the rights of women to travel abroad on their own. State media reported in May 2008 that women intending to travel abroad may soon have to obtain a written letter of consent from either their families or their employers before being allowed to go abroad. Foreign Minister Rais Yatim claims that the proposal is aimed at sheltering vulnerable young women from being used as drug mules, quoting a statistic that 90% of cases where Malaysian women had been jailed abroad involved drugs.

However, women’s groups have expressed outrage at the plan, saying it infringes women’s rights. One organisation, the Sisters in Islam, called the proposal ‘totally ridiculous and regressive’. Several commentators have also pointed out that these letters of consent would be very easy to forge.

Certainly, these new proposals, if implemented, would represent a retrograde step in women’s rights. In the event, the government quietly shelved the plans after the criticism it received. The report will continue to monitor the situation on the ground in Malaysia but at the present time believes that tourism is too important a source of foreign exchange for the authorities to start adopting a less women-friendly approach to visiting tourists. Conversely, of course, an increasing adherence to Islamic values could see more Arab tourists coming to the country, which may offset any downturn in visitors from Western nations.