Opportunities and Challenges for FDI in Tourism Industry in Malaysia
CONTENTS
1 Introduction 2
2 Overview of the tourism industry in Malaysia 2
2.1 Arrivals and Receipts 2
2.2 Composition of visitor arrivals 4
2.3 Performance of sub-sectors and new investments 5
2.3.1 Hotels and Lodgings 5
2.3.2 Special Tourism Products and Services 6
2.3.3 Related transportation service 6
3 Opportunities for FDI in tourism industry in Malaysia 6
3.1 Healthy tourism business environment 6
3.2 Attractive potential market 8
3.3 Policies and incentives 9
4 Challenges for FDI in tourism industry in Malaysia 10
4.1 Competition between countries and industries 10
4.2 Political risks 11
4.3 Force majeure 11
5 Promote inward FDI 12
6 Conclusion 12
References: 13
1 Introduction
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.
2 Overview 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 Malaysias economy as one of the major foreign
exchange earners second to the manufacturing industry.
2.1 Arrivals 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 1 Arrivals in Malaysia: 2000-2005
000 people
% growth
2000 10,221.6 –
2001 12,775.1 25.0
