On 30 May it was reported that Malaysian government had withdrawn the Visa on Arrival (VoA) facility to Indians. The Malaysian Home Minister, Syed Hamid Albar, said that Indians would require a two-week social pass and a return ticket if they wished to visit Malaysia. In an interesting turn of events, however, Malaysia's Human Resources Minister, S Subramaniam, stated on 4 June that the Malaysian Government would continue with the VoA facility for Indians. Malaysia provides VoA facility to all foreign visitors except for those from 25 countries, introducing the facility for Indian citizens in September 2006. Under the VoA scheme, a tourist gets a visa at the airport by paying 100 Ringgit for a single entry.

The Malaysian government believes that illegal immigrants are a major cause of concern, responsible for many social evils and the increasing crime rate in cities. The government's estimate suggests that there are more than 1.2 million illegal immigrants in Malaysia of whom Indians are estimated to be the third largest group after Indonesians and Filipinos. According to the Home Minister, the illegal immigrants usually came on short term visa but never went back after their visa expired.

However, the latest episode of VoA must be seen in the light of March 2008 drama about the proposed cut in the number of foreign workers. In March 2008, the Malaysian authorities declared that it would send back at least 200,000 foreign workers by 2009, but soon backtracked. Eventually this was also directed mainly towards Indian workers. Illegal immigration is a major problem in Malaysia, but why target only Indians? If both these events are taken together, it appears that the issue is not only about illegal foreign workers, but also about targeting a particular ethnic group by other means. It is also believed that the recent HINDRAF protests and its outcome might be the reason behind targeting Indians. Indian workers have contributed a lot to the development of Malaysia's manufacturing, construction, services and agriculture sectors. It is important here to highlight the fact that a country of 23 million people relies heavily on its 2.1 million foreign workers. In economic terms it is not wise to blame the foreign workers and try to stop them or 'over regulate' them. In recent studies some economists have suggested that paying illegal migrants less than local workers means that the relative price of non-traded goods is lower than it would be in the absence of such workers. In a nutshell, the move exaggerates the problem of illegal migrants and underplays their economic contributions. Further, targeting Indians in particular is unreasonable.

The tourism sector is a major revenue earner in Malaysia. In 2007 Malaysia launched a special programme named "Visit Malaysia Year 2007" with the aim of receiving over 20 million tourists from all over the world. Seeing the increasing tourist flow from India, Malaysia had extended the VoA facility to Indian visitors from September the previous year. The primary purpose was to make the visit to Malaysia totally hassle free, and hence increase the flow of tourists. The secondary aim was to let the tourist spend the money in Malaysia first, before moving to other tourist destinations. The response to VoA was tremendous. In recent years a large number of Bollywood films have been shot in Malaysia. It also proves the point that interest of Indian visitors in Malaysia has increased.

There can be some fallout due to the current confusion, however. First, Indian visitors interested in going to Malaysia might get discouraged and prefer other destinations, like Thailand. Last month it was reported that Indian government was considering VoA facility to citizens of Hong Kong, SriLanka, Malaysia and Maldives on a reciprocal basis. If the facility in Malaysia for Indian citizens is withdrawn, this will certainly affect the decision of Indian government. Further, Malaysia relies heavily on foreign workers and it is experiencing a labour shortage in the plantation and construction sectors. It is estimated that there is a shortage of 400,000 low-skilled workers each year.

While the problem of illegal workers in Malaysia is a matter of concern for the country, because of its heavy reliance on foreign workers (around 2.1 million), any heavy handed approach towards them can hurt the economy. In addition, targeting of workers from some particular countries through various means (like withdrawing the VoA) can send the wrong signals, even hampering the tourist inflow to Malaysia. It seems that the nationalist Malay political lobby wants to target foreign workers (especially Indians), but due to overwhelming economic and diplomatic considerations the government remains in two minds whether or not to go along.