The 1.1 billion ringgit project includes an Arabian bazaar, Middle Eastern restaurants, shopping complex, five-star hotel, water theme park, and a unisex Arabic health and beauty spa, the Star daily said on Wednesday.
One of the 'Arab Cities' will be built on a small island lying south of Malacca town, while the other will be located at a beachside resort just west of the historic port, it said.
Malacca chief minister Mohamad Ali Rustam reportedly said the project, due for completion by 2012, will attract more Middle Eastern tourists and give locals a chance to experience Arabic culture.
Malaysia's tourism industry has seen a sharp rise in the number of big-spending tourists from the Middle East in recent years, attracted by the tropical country's Islamic image.
Some 264,338 visitors from the region made their way to Malaysia last year, almost double the figure recorded in 2005.
The capital Kuala Lumpur has already seen the introduction of an 'Arab Street' to make tourists from the Middle East feel at home, while hotel and restaurants serve West Asian food and bring Arab cooks to work in the country.
Tourism was Malaysia's second highest foreign exchange earner in 2007, raking in US$14 billion in revenue from 21 million tourists arrivals.
The government however expects tourist numbers to fall 9.3 per cent to 20 million this year as the global economic slowdown hits. -- AFP