Opportunities and Challenges for Fdi in Tourism Industry in Malaysia

Topics: Tourism, Malaysia, Foreign direct investment Pages: 9 (3193 words) Published: March 4, 2007
Opportunities and Challenges for FDI in Tourism Industry in Malaysia


2Overview of the tourism industry in Malaysia2
2.1Arrivals and Receipts2
2.2Composition of visitor arrivals4
2.3Performance of sub-sectors and new investments5
2.3.1Hotels and Lodgings5
2.3.2Special Tourism Products and Services6
2.3.3Related transportation service6
3Opportunities for FDI in tourism industry in Malaysia6
3.1Healthy tourism business environment6
3.2Attractive potential market8
3.3Policies and incentives9
4Challenges for FDI in tourism industry in Malaysia10
4.1Competition between countries and industries10
4.2Political risks11
4.3Force majeure11
5Promote inward FDI12

Consistent with the overall improvement of the global tourism market, the tourism industry in Malaysia also experienced a positive increase in recent years, supported by the strong government policy thrust. This essay will look into the opportunities and challenges for foreign direct investment in this sector in Malaysia, and put forward suggestions for the government on how to promote inward FDI. 2Overview of the tourism industry in Malaysia

Malaysia has a wide range of tourism destinations. With its blessing of diverse cultures, traditions and histories, coupled with various landscapes and natural resources, the country has a strong appeal for both domestic and international tourists. Tourism industry, therefore, is of great importance to Malaysia¡¯s economy as one of the major foreign exchange earners second to the manufacturing industry. 2.1Arrivals and Receipts

The tourism industry reported an increasing trend in the last 5 years. ¡°Tourist arrivals are expected to grow at an average rate of 6.9 per cent per annum to reach 14.3 million by 2005. Tourism receipts are targeted to grow at an average annual rate of 9.5 per cent to reach RM 29.5 billion in 2005.¡± (Eighth Malaysia Plan2001-2005, pp.445) The plan for tourism was generally realized except for the falling down to 10.6 million in 2003 which was due to the Severe Acute Respiratory Syndrome (SARS). However, the arrivals increased tremendously by 49% reaching 15.7 million in the following year. And arrivals in 2005 were also spurred despite of the exchange rate events in the first six months-¡°the continued depreciation of the US dollar on global markets, and ringgit appreciating against the greenback (the Malaysian currency was pegged to the US dollar at a fixed rate until July 2005), as well as the declining cost of air travel in the country¡±. (Tourism forecast Q4-2005, pp.2)

Table 1Arrivals in Malaysia: 2000-2005
'000 people
% growth
Source:Euromonitor International from trade interviews and official sources (including Tourism Malaysia Key Performance Indicator 2004), cited in Travel and Tourism in Malaysia, 2006, pp.22 With the increase of arrivals, the incoming receipts from tourism enjoyed substantial growth from 2001 to 2005 as well, that is, from RM 17 billion to RM 34 billion, generally an increase of 160%, except only one year downturn in 2003. Tourist receipts in Malaysia accounted for approximately 7% of its GDP in 2005, which means the tourism industry has been identified as a key driver in the growth of the economy during the Eighth Plan period.

Table 2Incoming Tourist Receipts: 2000-2005
RM million
Current Constant
200429,651.4 28,011.3
Source:Euromonitor International from trade interviews and official sources (including Tourism Malaysia Key Performance Indicator 2004), cited in Travel and Tourism in Malaysia, 2006, pp.23 2.2Composition of visitor arrivals

The composition of...
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