VZCZCXRO7694
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHKL #0006/01 0030909
ZNR UUUUU ZZH
R 030909Z JAN 07
FM AMEMBASSY KUALA LUMPUR
TO RUEHC/SECSTATE WASHDC 8229
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHGV/USMISSION GENEVA 1454
RUCNASE/ASEAN MEMBER COLLECTIVE

UNCLAS SECTION 01 OF 03 KUALA LUMPUR 000006 
 
SIPDIS 
 
STATE PASS USTR - WEISEL AND JENSEN 
STATE PASS FEDERAL RESERVE AND EXIMBANK 
STATE PASS FEDERAL RESERVE SAN FRANCISCO TCURRAN 
USDOC FOR 4430/MAC/EAP/J.BAKER 
TREASURY FOR OASIA AND IRS 
GENEVA FOR USTR 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV MY
SUBJECT: High-Tech toilets for tourism; rising Ringgit. Economic Update Dec 2006 
 
¶1. (U) Summary:  The Government of Malaysia is ready to launch its 
drive to attract more tourists this year in honor of its 50th 
anniversary.  Initiatives include a multi-million dollar Ferris 
wheel, sorely needed lessons in customer service, and 23 
self-sanitizing toilets at a cost of USD 113,000 each, in addition 
to a generous appropriation for an advertising campaign.  Meanwhile, 
the Ringgit continues to strengthen against the dollar, but less so 
than some other currencies in the region.  End Summary. 
 
Launch of Visit Malaysia Tourist Campaign 
----------------------------------------- 
 
¶2. (U) Malaysia will soon kick off a grand tourism campaign entitled 
"Visit Malaysia Year 2007" (VMY 2007) with the theme "One Golden 
Celebration."  The campaign, in honor of Malaysia's 50th year of 
independence from Britain, aims to draw in over 20 million tourists 
and generate spending of RM 44.5 billion (USD 12.7 billion).  In 
2006 Malaysia drew 17.5 million tourists who spent an estimated RM38 
billion (USD 10.8 billion), mostly coming from Singapore, Thailand 
and Indonesia. 
 
¶3. (U) On January 6, Prime Minister Abdullah will launch the VMY 
2007 campaign at the Titiwangsa lakeside park in Kuala Lumpur with a 
"Colors of Malaysia" celebration that will include a portable 60 
meter high giant Ferris wheel named the "Eye on Malaysia."  A 
Malaysian Tourism Promotion Board (MTPB) official told FSN Econ 
Analyst that the RM30 million (USD 8.5 million) Ferris wheel will 
face the Kuala Lumpur skyline.  Other activities will include a 
water screen display on Malaysia's history, rides, and performances 
by local artists.  Several fireworks displays are also scheduled 
throughout the year. 
 
¶4. (U) According to the MTPB official, the Ministry of Tourism is 
coordinating over 240 events for VMY 2007 nationwide, with 50 major 
events showcasing Malaysia's  tourist attractions.  The MTPB has 
invited print and electronic media representatives to publicize the 
campaign and is working to link up local tour companies and airlines 
with international operators to highlight places to visit in 
Malaysia.  The GOM is developing tour packages tailored to specific 
travel interests such as shopping, exotic cultures, or nature 
vacations.  MTPB's targeted markets are ASEAN, China, India, the 
Middle East and Europe, with special attention being given to 
countries where cold winters are more likely to entice travelers to 
visit warm exotic places.  The government-owned radio station is 
working with a private production house to air tourism programs. 
 
Plans for VMY2007 
----------------- 
 
¶5. (U) Malaysia has allocated RM 200 million (USD 56.7 million) for 
promotional activities to bring in the tourists.  Working with other 
countries in the ASEAN region, the MTPB has come up with new 
programs such as a "one destination, two nations" package that 
promotes both Malaysia's and a neighboring country's tourist sites 
through the national airlines of both countries.  The VMY 2007 
organizers will also coordinate with the state governments to 
promote region-specific tourism.  On average, MTPB said tourists 
spend about RM 2,600 each but the tourism industry is hoping to 
entice tourists to increase their spending to RM 3,500 each with new 
packages and special deals.  The Tourism Ministry hopes to increase 
tourists' spending in part by asking local tour operators to promote 
tourist destinations outside or in addition to the typical preferred 
destinations. 
 
Cheap Hotels; Courtesy Courses; Taxi Crackdown 
--------------------------------------------- - 
 
¶6. (U)  A representative of the Malaysia Hotel Owners Association 
told FSN Econ Analyst that few hotels acted on last year's approval 
by the Ministry of Tourism to increase prices.  Competition is 
fierce due to Malaysia's abundance of hotel rooms, which helps keep 
prices among the lowest in the region. 
 
¶7. (U) The Ministry of Tourism has started to train some 20,000 
service providers in the tourist industry, including taxi drivers, 
hotel and shopping mall staff, tour coach operators, and Customs and 
Immigration officials.  Programs include crash courses in Malaysian 
tourist attractions, customer service, and basic spoken English 
communication. 
 
¶8. (U) The GOM also is taking stern action against unlicensed taxi service providers at the Kuala Lumpur International Airport. A draft amendment to the Road Transport Act would carry a fine of up to RM 50,000 (USD 14,000) and a sentence of up to five years in jail, or both, for providing non-licensed taxi services from the airport. These providers normally offer cheaper fares but the GOM finds their solicitation of arriving passengers "aggressive" which, according to Tourism Minister Datuk Seri Tengu Adnan, "could reflect poorly on the country during VMY2007."
 
High Tech Toilets 
----------------- 
 
¶9. (U) Malaysia's public toilets have become a hot issue for the GOM 
because of tourist complaints that they are often dirty with water 
everywhere and basic items such as soap and toilet paper missing. 
In response, the GOM installed 23 high-tech, self cleaning toilets 
in major shopping areas and tourist sites in and around Kuala 
Lumpur.  Each air-conditioned toilet, which reportedly costs RM 
400,000 (USD 113,000), has an automatic seat cleaner that washes, 
scrubs and dries the bowl after every use, according to the city 
authorities.  Users are charged RM1 (USD 0.28) per use.  Deputy 
Prime Minister Najib, who tested one of these toilets during their 
debut, said clean toilets were a measure of a country's level of 
civilization. 
 
The Strengthening Ringgit 
------------------------- 
 
¶10. (U) On December 22, Malaysia's ringgit appreciated to 3.5278 against the U.S. dollar, its highest level in nine years. The currency had weakened to a two-week low against the dollar on December 18 following news of Thailand's imposition of capital controls but bounced back when Thailand reversed its decision a day later. Several senior Malaysian government officials and the central bank immediately announced Malaysia would not impose similar capital controls. The ringgit subsequently fluctuated between 3.53 and 3.54 during the final week of 2006.
 
¶11. (U) Malaysian officials appeared to shrug off concerns that the strength of the ringgit against the dollar would hurt the nation's trade-driven economy. The press reported that Second Finance Minister Nor Mohamed Yakcop said the government was not worried about the ringgit's rise because the currency's strength is mainly the result of the U.S. dollar's weakness. He said the ringgit was not that strong when viewed against other currencies and has not approached a level which could hurt exports, noting that other Asian currencies have appreciated more against the US dollar. For 2006 the ringgit gained 7% against the dollar while the Thai baht appreciated 13% and the Indonesian Rupiah 8%. (Comment: Malaysia shifted the ringgit peg to a managed float system based on a basket of trade-weighted currencies in July 2005. The Central Bank closely monitors fund flows in and out of the country and intervenes in the market in an effort to maintain the ringgit within in a range to ensure economic stability.)
 
¶12. (U) Bank Negara data indicated that from July 2005 to the end of 
September 2006, the ringgit had appreciated 3.1% against the US 
dollar and 7.9% against the Japanese yen, but during the same period 
had weakened by 7.6% against the Thai baht, by 7.3% against the 
Philippine peso, by 6% against the Korean won, by 3.3% against the 
Indonesian rupiah, by 2.8% against the Singapore dollar and by 1.4% 
against the Chinese renminbi. 
 
¶13. (U) Analysts say the ringgit has more room to strengthen on 
expectations of further appreciation of other Asian currencies, 
particularly the renminbi.  The Malaysian Institute of Economic 
Research (MIER), an economic think tank, estimate that the ringgit 
is still undervalued and expect it to reach 3.5 to the dollar by the 
end of the first quarter of 2007.  Commerce International Merchant 
Bank (CIMB) also revised upwards its forecast for the ringgit, 
raising its forecast from 3.55 to 3.45 by end of 2007.  A Dow Jones 
Newswires poll of 10 financial institutions put expectations at 
3.535 to the dollar by the end of March and 3.455 by the end of 
¶2007. 
 
Inflation Eases 
--------------- 
 
¶14. (U) Malaysia's consumer price index (CPI) rose 3% year-on-year in November, the lowest rise in 15 months. For January to November, the CPI increased 3.7% from a year ago. For the full year, inflation is expected to reach 3.6%, below the Ministry of Finance official projection of 3.9%, and is expected to continue to ease. Although the government has not made a forecast for next year's inflation, CIMB has projected inflation to retreat to 2.7% in 2007, provided there is no hike in fuel prices.
 
Comment 
------- 
 
¶15. (SBU) The GOM's lavish spending to attract tourists bears all the marks of typical government waste and economic micro-mismanagement. The concept of letting the private sector do what the private sector does best has not quite caught on in Malaysia. It is the government, not the private tour operators, putting together the packages and telling people where they ought to want to go. The bright side is that the GOM seems aware of the need to improve customer service throughout the country; training in this area could prove a worthwhile investment. The same cannot be said for an 8.5 million dollar Ferris wheel and two dozen hundred-thousand-dollar toilets.
 
SHEAR