Tourism

Exempt products popular with tourists from import duties. By positioning Malaysia as a duty-free haven, it is envisioned that our prices will be more competitive in the region, attracting tourists to shop more and in turn, leading to an increase in sales.

To achieve this, a crucial first step will be to expand the category of duty free products to include those that have high tourist spend, with duty exemption granted on an automatic basis. The categories of goods proposed for exemption based on the Customs Tariff codes are: cosmetics and perfume (Section 33), leather goods (Section 42), textiles, apparel and clothing (Sections 61-63), footwear (Section 64), headgear (Section 65), jewellery, excluding coins (Section 71), electrical goods (Section 85) and toys (Section 95).

These products constitute the main purchases of tourists in Malaysia with textiles, clothes and handbags(leather goods) being the top categories of tourist spending. This proposal will allow us to market Malaysia as a duty-free shopping destination.

While it is recognised that Government revenues from import taxes will be reduced as a result of this duty exemption, this can be offset by the additional yield from corporate taxes. The estimated loss of Government revenue will be approximately RM630 million while the incremental corporate taxes collected by 2020 are expected to be RM780 million.

Help local manufacturers compete. An area of concern arising from this duty exemption is the impact on local manufacturers. Clear mitigation plans will be put in place to enable domestic manufacturers to compete in this more liberalised market. These include:

• Fiscal incentives
  Provide financial assistance to automate and upgrade manufacturing equipment;

• Non-fiscal incentives
  Provide training to enable local manufacturers to move up the value chain (e.g. establish a training centre for shoe manufacturers); assist local manufacturers to develop their own brands and connect them with international brands to develop higher value products; and

• Local product collaboration
  Shopping complexes and local manufacturers should work together to promote local products.

The Ministry of Tourism will work with the Ministry of International Trade and Industry on the deadline and implementation of this EPP.

• Connect major shopping centres into a precinct
  We will designate Kuala Lumpur City Centre (KLCC)–Bukit Bintang area as a premier shopping precinct in Malaysia. Seamless connectivity between these shopping malls and hotels in the area, both in terms of pedestrian walkways and public transportation, will be developed.

  This will enable Malaysia to market a shopping precinct similar to Orchard Road in Singapore, or Causeway Bay in Hong Kong. Year-round events, such as shopping festivals, culinary festivals and festive light-ups will be organised to improve the vibrancy of the area and enhance Malaysia's position as a shopping destination.

• Establish a KLCC-Bukit Bintang Tourism Council
  The Council will manage, promote and develop the precinct. The terms of reference of the Council are:

  • Improve the business environment of KLCC–Bukit Bintang, through the organisation of events, business development, promotions and marketing;
  • Assist in the promotion and management of KLCC–Bukit Bintang's activities and other public-related issues (e.g. coordinate with relevant authorities on permits for organisation of events, security and general cleanliness of the precinct); and
  • Promote the precinct as Malaysia's shop, eat, play and stay destination

  The Council will be funded by the Government with contributions from property owners and the private sector. Its members will include representatives from the Ministry of Tourism, Dewan Bandaraya Kuala Lumpur (DBKL) as well as property owners within the precinct.

  As DBKL already has plans to enhance connectivity in this precinct, alignment between DBKL and property owners within the precinct is crucial. The Ministry of Tourism will establish the KLCC-Bukit Bintang Tourism Council. Together with the Ministry of Tourism, the Council will plan and organise events within the precinct as well as promote the precinct.

Establishing premium outlets in Malaysia will support Malaysia's tourism aspiration as a top shopping destination which will complement the current multiple retail offerings the country already has.

Ideally, the outlets should be located in areas that meet three criteria. Firstly the location should be a popular tourism destination with a high captive market. Typically, outlets should be located within a one-hour driving distance from key tourism sites and have a large domestic captive market to support sales.

Secondly, the location should have a good network of connectivity and be easily accessible by air and road. Lastly, the outlet should complement the current site offerings.

Based on these criteria, we will establish the premium outlets in three locations:

• Iskandar Malaysia:
  To cater to both the domestic market and tourists and day visitors from Singapore and Indonesia;

• Sepang:
  To cater to tourists (including transit passengers) from Kuala Lumpur International Airport and the Low Cost Carrier Terminal; and

• Penang:
  To cater to the large volume of tourists in Penang as well as to tap Indonesian tourists who are en route to Thailand for shopping

The first premium outlet in Iskandar Malaysia is currently being developed by the private sector and is scheduled to be operational by 2013. As this effort is highly dependent on the private sector, the Government's role is primarily to encourage and facilitate the implementation of this EPP. MIDA will identify potential local and foreign investors to establish premium outlets, especially on a joint venture-basis with local private sector investors by December 2012.

Investments to date:

Johor Premium Outlets Johor Premium Outlets will be located in Genting Indahpura, Johor, a mixed development township which will feature amongst others; a hotel, international water theme park and retail outlets. This is a RM300 million (USD85.7 million) investment.

The Global Biodiversity Hub (GBH) will be an accreditation body overseen by a Board of Management, drawn from key stakeholder groups, to establish the desired standards of excellence in the management and presentation of key ecotourism sites. The key functions of the Board will be to accredit and monitor each site to ensure the sustainability of ecotourism development and activities and assist with the promotion and marketing of accredited sites.

The objective of the GBH is to attract international attention to Malaysia's outstanding biodiversity and promote responsible tourism and foster sustainable management of Malaysia's natural areas.

On the ground, the GBH will comprise a network of natural areas that showcase the biodiversity of Malaysia's rainforests, freshwater habitats and marine environments and their associated flora and fauna.

Sites will be managed by their individual management bodies. A GBH site that submits itself for accreditation and is designated as a GBH site must maintain the expected level of excellence or risk losing accreditation.

To differentiate and leverage on our strengths, Malaysia will develop an Eco-nature Integrated Resort in Sabah. It will be a showcase of green development, with energy-efficient buildings, renewable energy, recycling and electric transportation, as well as displaying Sabah's rich biodiversity, through a mangrove education centre.

It will leverage on Malaysia's competitive advantages in ecotourism and biodiversity, with attractions such as a river and rainforest safari, nature lodges, a mangrove centre and a discovery cove. In addition, the IR will feature world-class events, duty-free shopping, a water theme park, a world-class golf course and waterfront villas.

A private investor has already been identified for this EPP and the company has the land, financial resources and industry expertise to develop the IR.

The Ministry of Tourism will oversee the implementation of this EPP. The investor will work with the Sabah State Government and related Federal agencies to obtain the necessary approvals before the end of 2011. Based on this timeline, the first phase of the IR could be operational by 2013.

To realise this potential, Malaysia will develop the Straits Riviera cruise playground. It will be anchored by five purpose-built world-class integrated cruise terminals in Penang, Sepang, Malacca, Tanjung Pelepas and Kota Kinabalu, complemented by nine secondary ports. This will help establish a compelling cruise experience and exploit existing coastal destinations. This vision is modelled after the French Riviera cruise experience, which consists of the key ports of Nice, Cannes, Monte Carlo and St. Tropez, and is supported by other popular secondary ports like Golfe-Juan and Villefranche.

Each cruise terminal will serve as a catalyst for waterfront and urban renewal, with the development of adjacent waterfront retail and residential areas and accompanying renewal of tourism sites at each port city to encourage shore excursions.

A consortium of private investors has been identified and is prepared to provide the requisite funding subject to obtaining the required Government facilitation and approvals. This consortium has experience in developing cruise terminals in Southeast Asia and has a vision of transforming Malaysia into a leading cruise playground for Asia.

Investments to date:

Marina Island Pangkor's International Resort & Entertainment Extension Project Globalports Sdn Bhd, Bina Puri Properties Sdn Bhd and Marina Sanctuary Resort Sdn Bhd will work together as a Consortium to spearhead the development of the new 110 Acres Marina Island Pangkor 2nd International Resort & Entertainment Island.

This RM600 million (USD171 million) project will position this area as an international ferry, cruise and marina destination.

We will establish a dedicated events body for Malaysia to identify and bid for more major international events, repackage F1 and MotoGP and other existing major international events, and amend the Central Agency Committee for Application for Filming and Foreign Artists Presentation (Agensi Pusat Permohonan Penggambaran Filem dan Persembahan Artis Luar Negara or PUSPAL) guidelines for international events and introduce performance ratings for concerts.

We will also:

• Establish a Dedicated Events Body for Malaysia
• Repackage F1 and MotoGP with better collaboration between the private and public sector
• Amend PUSPAL guidelines for international events and introduce ratings for concert performances

We aim to enhance nightlife, as selected nightlife entertainment areas are expected to stimulate revenue growth from RM600 million (USD171 million) to RM1.8 billion (USD5.4 million) by 2020. To achieve this ambition spur the development of the industry, regulations relating to entertainment will be liberalised by:

• Clearly demarcating dedicated entertainment zones to minimise any adverse impact on local residents as such areas are set up mainly to cater to foreign visitors.
• Allowing an extension of operating hours for entertainment outlets;
• Relaxing restrictions on the ratio of local to foreign artistes specified in the current PUSPAL guidelines; and
• Extending the validity of working visas of foreign artistes and crews based on the type of performance (e.g. one-off shows, bands with long-term contracts or long-term production shows).

The selection criteria to determine an entertainment zone requires it to:

• Fulfill sound-proofing requirements as defined by the local authority's building codes;
• Achieve minimum scale of an average 1,000 visitors per night in one entertainment zone;
• Ensure adequate accessibility and transport accessibility (e.g. parking spaces, taxis and other forms of transportation);
• Provide adequate patrols by police or private security firms to ensure public safety in the surrounding area; and
• Be located in a non-residential area or at a minimum of 100 meters from residential and religious areas.

Five cities have been identified as potential locations for dedicated entertainment zones:

• Greater Kuala Lumpur/Klang Valley
• Genting Highlands
• Penang
• Langkawi
• Kota Kinabalu

As Kuala Lumpur will attract more expatriates, a vibrant entertainment industry will be an integral part of its liveability. The existing entertainment zones are not sufficient to cater to the expected growth given the average weekend occupancy rate of the city's night clubs is 85 to 90%.

In syndication with the Greater KL/KV NKEA, it was agreed that the potential location for a new entertainment zone will be the area surrounding Central Market. This area will be designed to attract tourists with 24-hour facilities, adequate public safety, transportation and infrastructure, and yet it will remain segregated from residential and religious areas.

We aim to enhance nightlife, as selected nightlife entertainment areas are expected to stimulate revenue growth from RM600 million (USD171 million) to RM1.8 billion (USD5.4 million) by

In order to address the shortage of skills, the private sector will take the lead to develop three centres of excellence (CoEs) as training centres to produce local therapists in the spa industry. Three potential locations have been identified based on proximity to spa establishments: Greater Kuala Lumpur/Klang Valley, Johor and Sabah.

The first CoE is expected to begin operations by the beginning of 2012 to train 500 therapists annually. During the first three years of establishment, these CoEs will train local spa therapists. Once fully operational, the three CoEs will be able to produce 1,500 local therapists annually. With this increase in local supply, the aim is that by 2018, the ratio of local to foreign therapists will be 70:30.

By mid-2011, the Spa and Wellness National Council shall be established with the role of providing accreditations and ratings for spa and wellness outlets to ensure service delivery and consistency. The Council will also be a self-funded private independent body with Board Members from the Ministry of Tourism, the Ministry of Health, the Ministry of Housing and Local Government, and the private sector (from spa outlets, hotels and resorts associations and spa academies).

Accreditation criteria and classifications of spa outlets shall be developed by the Council. By the end of 2012, 20% of the total spa outlets shall be accredited and endorsed by the Council.

The development of golf courses in Malaysia has predominantly been as a complement to property development rather than as a tourism product in itself. However Malaysia's golf tourism offerings can be enhanced by repackaging products to target the high-yield segment.

Malaysia can focus on developing the golf tourism business by addressing three areas:

• Increase promotions and marketing of golf tourism by leveraging on existing offerings such as the international golf events held each year
• Establish a Golf Tourism Task Force to bring the golf tourism industry together to plan and execute joint promotions and marketing efforts; and
• Provide tax exemption for selected items that are large-cost components for golf courses, e.g. fertilisers and buggies

The private sector needs to work together with the Ministry of Tourism to set up a Golf Tourism Task Force and to ensure a cohesive national plan to develop and propel golf tourism as a key product to attract high yield tourists. The Task Force is to be set up by 2011 with clear strategic planning on future promotional and marketing plans for golf tourism, especially in conjunction with large-scale international events.

• Provide support and allocate funding through MyCEB
  An effective and properly-funded convention and exhibition bureau is critical to ensure Malaysia is able to successfully grow its business tourism. The need for adequate funding is important given the competitive nature of bidding for business tourism events. Funding is required for the entire process: from preparing the bid document to supporting due diligence during the selection process, providing subsidies to defer costs during the event itself and finally to supporting post-event activities.

  In light of this, we will allocate RM50 million (USD14.3 million) per annum over the next two years and over time, raise this to RM100 million (USD28.6 million) per year by 2020 to support the growth of business tourism in Malaysia.

• Dedicate two to three iconic “shell sites” to host business tourism events
  Iconic shell sites are an important feature of any leading business tourism destination. Typically these are sites where gala dinners or cultural shows are held for large business events (more than 3,000 to 4,000 delegates).

  Currently, there are no such sites in Kuala Lumpur that can cater for large business tourism events. Taman Tasik Titiwangsa is the only site used regularly. In comparison, cities such as Singapore and Bangkok have several iconic sites such as the Old Parliament House in Singapore and the Rose Garden and Royal Palace in Bangkok. In order to strengthen business tourism, we will identify at least two sites that are suitable for the purpose of hosting gala events.

In addition to these two key recommendations, it is also important to note that full Government support will be given to ensure the success of this initiative.

We will focus on increasing frequencies to 10 priority cities and developing an air-rights allocation framework to facilitate efficient development of these key routes.

• Increase flight frequencies and air rights to 10 priority cities
  Australia, China, India, Japan, South Korea and Taiwan are expected to contribute over 90% of incremental tourist arrivals from medium-haul countries by 2020.

  It is thus critical to focus on the key cities within these six countries where there is a significant connectivity gap today, namely: Beijing, Delhi, Melbourne, Mumbai, Osaka, Seoul, Shanghai, Sydney, Taipei and Tokyo. Compared to Singapore and Thailand, Malaysia has a double-digit flight frequency gap to most of these cities. The increase in flight frequencies to address this gap and meet 2020 tourist arrivals will be achieved through focused capacity increases from our local airlines and targeted efforts by Malaysia Airports Holding Berhad (MAHB) to attract more airlines from these countries to either start operating or increase existing flight frequencies to Malaysia.

  In parallel, the Ministry of Transport will focus efforts on increasing air rights to the countries that currently have restricted air rights (primarily Australia, India and Japan).

• Develop an air rights allocation framework
  
  A transparent and liberalised air rights allocation framework will enable our local airlines to plan and launch additional flights to priority cities in a more efficient manner after additional air rights have been negotiated.

  Specifically, the Ministry of Transport will identify immediate action steps to enhance connectivity for Malaysia to Sydney and Osaka as well as other priority medium-haul cities namely Shanghai, Beijing, Mumbai, Delhi, Melbourne, Seoul, Tokyo and Taipei that have already been given approval by the Ministry for operations by both MAS and AirAsia X.

  The Ministry of Transport will facilitate the development of an air-rights allocation framework with inputs from local airlines and other relevant stakeholders. This will include the application process as well as the allocation criteria. Once approved, the airlines will be briefed on the new framework. Such framework will be critical for further development of both Malaysia's tourism and the airline industries.

Investments to date:

AirAsia X AirAsia X has signed a purchase agreement for the acquisition of three A330-200 aircraft (with an option for two additional aircraft) from Airbus for RM1.86 billion (USD531 million).

• Link rating of four- and five-star hotels to a target average room rate
  From 2013, a minimum room rate will be set for four- and five-star hotels. This move is to encourage the hotel industry as a whole to increase their rates to close our gap versus peers in the region. This increase is meant to ensure hotels are able to provide a higher quality of service (through attracting and retaining better quality staff) and to encourage more investment into the four- and five-star hotel segments.

• Adjust MIDA incentive to encourage investment into more four- and five-star hotels
  In order to encourage hotels to upgrade and refurbish their assets, we will extend the Investment Tax Allowance (ITA) to include four- and five-star hotels with foreign ownership. In addition, we will also allow ITA for new construction as well as new purchase of four- and five-star hotels across Malaysia. Currently this incentive is open given to one-, two- and three-star hotels across Malaysia and four- and five-star hotels in selected states. The ITA for refurbishment of hotels will also to be increased from three times per company to five times for each property regardless of ownership.

  Following preliminary discussions with MIDA, the Ministry of Tourism will champion and push through the request for ITA expansion.

Investments to date:

	St. Regis The six-star St. Regis Kuala Lumpur will be built on a 2.2-acre site, with a total development area of 1.4 million square feet, at KL Sentral. Investment: RM1.2 billion (USD343 million).
	Majestic Hotel YTL Hotels is building the Majestic Hotel on a 3.2 acre site along Jalan Hishamuddin in Kuala Lumpur. Investment: RM250 million (USD71.4 million).
	Teluk Datai Development Plan Teluk Datai Resorts Sdn Bhd (TDR), a company which is 70% owned by Khazanah Nasional Berhad and 30% by its original founders Tan Sri Razali Rahman and Datuk Hassan Abas through Archipelago Hotels (East) Sdn Bhd, will be developing 300 acres of land in Pulau Langkawi as part of its development plans for Teluk Datai. Investment: RM1 billion (USD286 million).
	YTL Group: Pulau Gaya Development The Pulau Gaya Resort is being constructed amidst the existing rainforest, respecting the natural environment, with all trees and topography in the area being preserved. Investment: RM75 million (USD21.4 million).

Food and beverages represents one of the core components of tourist spend. Given the increase in arrivals as well as the shift towards high-yield tourists, there is an opportunity to increase GNI from food and beverage outlets by RM3.6 billion (USD1.03 billion) in 2020.

This will be achieved through an increase in the number of food and beverage outlets which will be driven by additional demand arising from growth in the number of tourist arrivals.

We estimate the food and beverage segments will require approximately RM1.4 billion (USD400 million) in capital expenditure. An estimated 9,600 job opportunities will also be generated due to this business opportunity, though these will predominantly be positions for lower-wage service workers given the nature of the industry.

Tourists spend about 10% of total expenditure (about RM230 (USD66) per visit) on local transportation. A significant portion of that is spent on taxis, which has contributed to the 5% growth in the number of taxis from 2007 to 2009.

Additional taxis to support further growth will be required not only in the Klang Valley, but also in the other tourism clusters in the North (Penang), South (Melaka and Johor), Sabah (Kota Kinabalu) and Sarawak (Kuching), that are being developed through EPPs such as the Integrated Resort and Cruise Tourism.

Specifc EPPs, such as the Global Biodiversity Hub, which promote development of tourism sites away from traditional city centres, will also increase the need for local transportation and taxis.

Overall, the GNI impact is expected to be RM0.7 billion (USD200 million) with 45,000 jobs generated by 2020. Total capital expenditure required is estimated to be RM1.2 billion (USD323 million).

Given the increase in arrivals, there is an opportunity to increase GNI from the tour operator segment by RM0.9 billion (USD257 million) in 2020. This will be accomplished through an increase in the number of travel agents, an improvement in the productivity of travel agents and an increase in the number of tour guides to serve more inbound tourists to Malaysia.

Additional capital expenditure of RM1.1 billion (USD314 million) will be required and it is expected that this will generate 7,450 additional jobs, including 2,300 additional tour guides.