Disneyland in Johor?
Laurence Lau
May 26, 06 12:49pm
Malaysiakini
Could Disneyland be headed for Malaysia? If market insiders in
Kuala Lumpur are to be believed, Prime Minister Abdullah Ahmad
Badawi, now in Japan for a five-day working trip, will meet with
officials from Oriental Land, the Japanese partner for Tokyo
Disneyland, with the aim of bringing Disneyland to Nusajaya.
Nusajaya is a large new township development, or planned city,
near the Second Link (a bridge between Malaysia and Singapore) in
southern Malaysia's Johor state, just across the Johor Strait from
Singapore.
Though no official statement has been issued by any of the
governments or companies involved, the rumors were lent credence by
the fact that officials from UEM World, the biggest landowner in
Nusajaya, were said to be accompanying Abdullah. The prime
minister's contingent also reportedly includes Azman
Mokhtar, the managing director of Khazanah, which is UEM World's
largest shareholder.
Abdullah is said to have already met with top Disney officials
early this month, when he was attending the World Congress for
Information Technology 2006 in the United States. A source at a
top-three regional brokerage familiar with the Disneyland-Nusajaya
overture believes that Abdullah's team is in Tokyo to make a
serious pitch, with sweeteners that may include offering Disney an
internationally competitive package of incentives. Should the pitch
be successful, any announcement of Disney making an entry into
Malaysia would improve dramatically the values of land near
Nusajaya.
While the Disney rumblings are still at the level of rumor, sources
say the rumor has a high level of reliability and a decent chance
of success. The reports raise several immediate issues.
First, it is believed that Disney will be more positive for the
project going ahead if Malaysia can rope in the Japanese operator
as a partner. Oriental Land has an excellent track record with the
company; its first park in Urayasu, Chiba prefecture, which opened
in 1983, and the later addition DisneySea are both still highly
successful.
By engaging Oriental Land, Disney would have a higher chance of
successful execution should the project get the go-ahead. Oriental
Land's involvement would also ensure proper follow-through
(execution) and a strict adherence to the firm's management style
and operational culture. These issues, not just financial
viability, are major concerns when it comes to the track record of
Malaysian government-linked companies (GLCs), particularly given
Disney's strong corporate culture.
A free ride
Second, the implications for the perpetual, sibling-rivalry-like
competition between Singapore and Malaysia are another aspect worth
exploring. Some say the Disney overtures could be a retaliatory
move on Malaysia's part after the recent disastrous talks over the
construction of a new bridge for the causeway between the two
countries. Over the past 12 months, Singapore has hogged the
limelight in terms of big tourism projects with its huge integrated
resort/casino projects at two sites in Marina Bay and Sentosa
Island.
The winning bidders for the two integrated resorts (IRs) paid a
very steep price for their winning bids, but none managed to rope
in Disney as partner, reportedly because Disney did not want to
tarnish its wholesome image entering a partnership with a casino
project. The likely winner for Marina Bay IR is likely to be either
Harrah's or MGM, while Genting should get the Sentosa IR with
Universal Studios as its partner.
A comparison between the Singapore IRs and the hypothesised
Nusajaya Disney park is revealing. The winning IR bidders will have
to cough up S$1.2 billion (US$758 million) for the Marina Bay IR
and S$605 million for the Sentosa IR for the land alone. But should
Disneyland decide to go to Nusajaya, chances are the land will be
almost free. Not only that, a Disney park would benefit from
tourists visiting the two IRs, in effect getting a free ride on
Singapore's promotional efforts.
Of the two, the attrition impact would be greater on the Sentosa
project, since its Universal Studios theme park would inevitably be
competing with, and be compared with, Disneyland just a couple of
hours away - no contest, many would say, especially considering
that a Disney facility would be able to price its products and
services a lot cheaper.
Third, a Nusajaya Disneyland would seem to have excellent prospects
with regard to critical market mass and the availability of
transportation services. Any viability study would reveal the same
factors that already successfully justified the initiation of the
Marina Bay and Sentosa IR projects.
In addition, there are two potential international landing strips
in Johor, which would boost both the hypothetical park's prospects
and those of such feeder airlines as AirAsia (the Kuala
Lumpur-based low-cost carrier) and Malaysian Airlines.
AirAsia is already proving to be very successful in ferrying
regional travelers at very attractive rates. Imagine the ability to
offer routes from Phuket, Bangkok, Hat Yai (in southern Thailand),
eastern Malaysia, Hong Kong, Bali or Jakarta to Kuala Lumpur or
Johor Baru (Malaysia's second-largest city, adjacent to Singapore)
for less than RM200 return ($55) - which is approximately AirAsia's
current pricing structure.
Will benefit both
The availability of such low-cost air services could sway Disney's
decision. Malaysia's population on its own is insufficient to
justify a Disneyland, but the country's low-cost air connections
and the additional traffic drawn from Singapore's IRs might be
enough to seal the deal. One wonders whether AirAsia founder Tony
Fernandes is also part of the Abdullah contingent - he should
be.
Fourth, the chances of the project being realised are greater given
that Disney holds strong cards in terms of negotiating with
Malaysian authorities, and the company is liable to be attracted to
Nusajaya since it would have a sharply reduced cannibalising
effect on the firm's existing parks. Nusajaya has a huge land area,
big enough for five or six Disneylands with space for resorts and
hotels.
Given that a Disney park would be crucial in giving Nusajaya the
critical mass for success, Abdullah and UEM World would probably
agree to most of Disney's requests - which might include free land,
a waiver of the requirement for 30% bumiputra (ethnic Malay)
holdings, tax incentives, and so on.
From Disney's standpoint, it is running out of room to grow after
the opening of Hong Kong Disney last year. A Nusajaya Disney would
be far enough away from the locations in Hong Kong, Tokyo and a
proposed Shanghai park to capture the regional crowd without
cannibalising the crowds at other regional Disneylands. It would be
silly for Disney not to do the project.
In all probability, Singapore has inadvertently helped Malaysia to
snare Disney for Nusajaya. However, the development would benefit
both countries, and should not be used to score political points on
either side of the Johor Strait.
LAURENCE LAU has more than 18 years of experience in business and
finance. Born in Malaysia, he has worked in Sydney, Singapore, Hong
Kong and Kuala Lumpur. He was head of research for two securities
firms and a portfolio manager for a UK firm. Article courtesy of
Asia Times Online.
i think i do look forward to this.
