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KUALA LUMPUR (AP) - Malaysia will sharply cut the departure tax at two budget airline terminals starting next month as part of efforts to become a regional low-cost carrier hub, a government minister said Wednesday.

International passengers at the Low Cost Carrier Terminals, or LCCT, in Kuala Lumpur and in Kota Kinabalu in eastern Sabah state will pay only 25 ringgit (US$7.40; ?5.40) starting June 1, said Transport Minister Chan Kong Choy.

The rate already incorporates security charges, he said in a statement.

Passengers now pay a total of 41 ringgit (US$12; ?9) for departure tax and security charges at the Kuala Lumpur LCCT, and 51 ringgit (US$15; ?11) at the Kota Kinabalu LCCT, he said.

The rate for domestic flights will be cut to 6 ringgit (US$1.80; ?1.30), from 9 ringgit (US$2.60; ?1.90) at both airports.

The move is aimed at "increasing Malaysia's potential to become an operational hub for low cost carriers in Asia," Chan said.

The region's top budget carrier, AirAsia, hailed the move, saying it would make Malaysia more competitive in the budget airline business.

AirAsia, the main tenant at Malaysia's LCCTs, has been lobbying the government to cut taxes, which were high compared to neighboring airports, said senior official Kathleen Tan.

"We welcome this. It's fairer to our passengers. It will make Malaysia more competitive," she told The Associated Press.

Apart from AirAsia, Philippines' Cebu Pacific also uses the Malaysian LCCTs.

Malaysia's new rate will make it cheaper than rival Singapore, which charges 13 Singapore dollars (US$8.60; ?6.30) at its no-frills airport.

Malaysia, Singapore and Thailand are competing for Asia's cutthroat and booming budget airline business, which analysts say is likely to grow rapidly in the next few years.