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.
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 hypothesized
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. 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 Badawi contingent - he should
be.
Fourth, the chances of the project
being realized 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 "cannibalizing" 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, Badawi 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 cannibalizing 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.
(Copyright 2006
Asia Times Online Ltd. All rights reserved. Please
contact us about sales, syndication and republishing
.)
