Malaysia Tourism Report Q2 2008

2007 A Strong Year For Tourism The Visit Malaysia 2007 campaign and a series of high-profile events celebrating the 50th anniversary of independence held throughout the year saw Malaysia welcome some 20.97mn tourists in 2007. This was a very strong performance, representing an increase of 19.5% year on year (y-o-y) and just beating our own expectations for the year. Tourism receipts for 2007 stood at US$14.37bn.

This positive performance in 2007 - which beat even the government's own target of 20.1mn visitors for the year - could now mean that 2008 and 2009 are years of relative consolidation, especially as the tourist focus on Asia switches to China ahead of the Olympic Games in Beijing. However, we remain bullish on the longer-term prognosis for Malaysian tourism, which continues to benefit from strong government support and a secure and stable political situation.

Reprieve For Visa On Arrival In a supportive move for the tourism industry, Malaysia has chosen to maintain its 'visa on arrival' programme, despite concerns that the policy has allowed thousands of foreigners to stay in the country illegally. In late October 2007, former Home Affairs Minister Radzi Sheikh Ahmad had said that the country was reconsidering its 'visa on arrival' policy, following reports that some 400,000 foreigners had overstayed in the country. However, Deputy Prime Minister Najob Tun Razak later said that the policy will remain in place and instead called on immigration officials and police to work harder to crack down on foreigners who stay beyond the one-month duration of the visa.

The one-month visa, which was introduced in 2006 and is granted to tourists arriving from 24 designated countries at Malaysian airports for a cost of MYR100, proved very popular with tourists coming to celebrate the 50th anniversary of independence during 2007.

KL-Singapore Liberalisation Welcome The long-awaited liberalisation of the lucrative Singapore-Kuala Lumpur route commenced on 1 February 2008. Malaysia's Air Asia now operates two daily flights, with Singapore-based Tiger Airways and Jetstar Airways having one daily flight each. To celebrate the launch, the budget carriers even offered some seats free of charge (before taxes).

This opening up of a route that was previously the sole domain of Malaysia Airlines and Singapore Airlines should have great benefits to the travelling public, as more flights are allowed and prices are lowered. Full liberalisation of the KL-Singapore route is expected by December 2008 in accordance with an ASEAN agreement. Singapore and Malaysia have very well-developed bilateral tourist ties and the opening of the key KL-Singapore route to competition can only benefit the tourism industries of both countries. The Sydney-based Centre for Asia Pacific Aviation believes that traffic on the KL-Singapore route could triple within two years of full liberalisation.

Of interest now will be the reaction of the two flag carriers, MAS and SIA. Will they use their deep pockets to fuel a price war, trying to knock the budget carriers out of the market? Or will they prefer to concentrate on business travellers, who are happy to pay higher prices for the direct centre-to-centre links provided by the major airlines? Oil Prices Once More On The Rise The second half of 2007 has seen oil prices once again making record highs. BMI's economic analysts believe that oil prices will remain in elevated territory well into 2008, which will see fuel costs once more becoming a headache for international airlines. Our average price forecast for Brent crude for 2008 is US$72.00/bbl.