With some pensioners faced with shrinking retirement funds, the financial turmoil might present the perfect opportunity for the Malaysian government to aggressively promote its Malaysia My Second Home (MM2H) programme.
The programme, which was introduced in 2002 under the Ninth Malaysia Plan, aims to attract foreign homebuyers - and their capital - into the local economy by waiving the need to get government approval for buying property over RM250,000 ($71,750), issuing a 10-year, multiple-entry visa and allowing applicants to bring along their spouse and children provided they are below 18 years of age and unmarried. Yet, despite attractive incentives, the government received only 10,000 applications in its first five years.
While tourism arrivals have increased steadily - from 17.45m in 2006 to 20.9m in 2007 - and receipts have increased to RM46m ($13,22m) during the same period, it is doubtful whether Malaysia can reach its tourist arrival target of 22.5m this year, given the current global slowdown.
But Malaysia may be able to ride out the current turbulence as an overwhelming majority of tourists come from Asia - 75% in 2007 and 76% in the first nine months of this year.
Although the Asian markets have been affected by the current financial situation, the 1997-1998 Asian financial crisis was much worse for the region and the regulations adopted in the late 1990s have provided some insulation in recent months. Today, many Asian countries have well-prepared foreign reserves and the banks are well-capitalised. Thus, although the government acknowledges that economics might affect tourist arrivals, the main base of visitors is comparatively well off and may still be planning to travel.
The government anticipated that in addition to continuing to travel to Malaysia, investors will see real estate and development projects - particularly in medical tourism, education tourism, ecotourism and MICE (meetings, incentives, conventions and exhibitions) - as viable alternatives to putting money into volatile US and European markets. Since the 1997-98 crisis, the government has exerted tremendous effort to make sure that the real estate industry is robust. In particular, its decision to suspend the real estate capital gains tax in April 2007 has piqued investor interest across all segments, particularly the high-end segment, which has attracted a number of foreign investment funds. Furthermore, as of 2006, foreigners are no longer limited in the number of residential properties they can own or conditions on their usage.
Despite its potential, MM2H marketing remains largely underdeveloped. According to Andrew Davison, managing director of the local Expat Magazine and owner of several businesses that promote Malaysia, the biggest single reason for the low take up is the absence of any coordinated marketing plan. "Most of the current efforts are carried out by property companies, a few MM2H agents and the occasional mention of the programme by tourism officials traveling overseas. Clearly a carefully structured marketing plan to raise awareness in selected markets is critical if the programme is to attract applicants," he told OBG. "The problem has been compounded by the fact that, historically, the country has been quite resistant to foreign property investors," he added.
Still, MM2H is relatively new and has started to attract more interest, often through word of mouth from participants. Datuk Richard Fong, the president of International Real Estate Federation (FIABCI) Malaysia, said that real estate agencies are starting to bring in groups of foreign tourists under a "property" tourism package that includes visits to property launches and show houses to encourage them to buy local property.
"With 1000 foreigners each buying RM1m worth of property, totals revenue will amount to RM1bn," he told local press. He added that each foreign expatriate who bought a home in Malaysia spent an average of RM10,000 a month, which, with 1000 expatriates, would generate RM10m. Fong also emphasised the ripple effect of foreign buyers, noting that expatriates would bring friends to Malaysia, thus boosting retail and hospitality sectors.
Malaysia's tourism industry is weathering the current economic crisis and has a promising future, with more growth on the horizon. Malaysian Association for Shopping and Highrise Complex Management advisor Datuk Eddy Chen told the local press that the country could do a lot more to attract tourists, including offering more quality products and services and increase Internet marketing.