The reopening-of-borders conundrum

Just this week, Thailand's Prime Minister Prayut Chan-o-cha announced that the country will be opening its borders to long-staying foreign tourists come October. They will be allowed in under a special tourist visa scheme for 90 days, which can be extended for up to 270 days.

Local newspapers reported that Thailand, whose tourism industry accounts for about 15% of gross domestic product, expects the special tourist visa scheme to generate THB12 billion (RM1.6 billion) a year. The Thai premier added that the scheme has received approval in principle and is targeting tourists who intend to travel extensively or receive medical treatment in the country.

In Malaysia, the borders remain closed to foreign tourists, save for those seeking medical care. While allowance has been given to medical tourists, it was recently reported that the Malaysia Healthcare Tourism Council foresees fewer than 300,000 medical tourists in 2020.

It is worth noting that the latest available data by the Department of Statistics Malaysia shows that total tourism spending in Malaysia in 2018 was equivalent to 15.2% of GDP, or RM170.4 billion.

As the Covid-19 pandemic is expected to last longer than had earlier been anticipated, the present conundrum is clear: loosenborder restrictions to facilitate economic growth — especially in the tourism sector — but risk a potential resurgence, orkeep tight border controls at the expense of potential economic growth.

The economy was hammered in the second quarter of 2020 (2Q2020),with the GDP contracting 17.1% year on year (y-o-y) due to movement restrictions. Since then, the economy has rebounded, with green shoots of recovery emerging.

Many believe that relaxing border controls at the right time is crucial to spur along the shoots of recovery.

Malaysian Association of Tour and Travel Agents (MATTA) president Datuk Tan Kok Liang believes that Malaysia needs to focus on its readiness and prepare for the eventual reopening of its borders.

"But we can't wait too long as it is killing the economy," he tells The Edge. He says the tourism sector is "more than prepared and ready" in terms of complying with the standard operating procedures if Malaysia were to welcome foreign tourists back into the country.

While the tourism sector is raring to go, others have a more cautious approach. Socio-Economic Research Centre (SERC) executive director Lee Heng Guie says it is a tough balancing act for the government.

"While the delay in reopening the country's borders to international tourists and continued uncertainty create further challenges to revitalise the tourism sector, which has been hardest hit, moving too quickly could risk further dampening of the government's efforts and consumer confidence in getting the sector up and running for the longer term," he adds.

In 1Q2020, tourist arrivals declined 36.8% y-o-y to 4.23 million, according to data compiled by Tourism Malaysia. International tourism receipts also plunged 41.5% y-o-y to RM12.5 billion.

"The tourism and culture industries are estimated to have suffered a loss of RM45 billion in the first half of 2020, of which RM31 billion is expected to come from the international segment and the rest from the domestic segment," says Lee.

In 2018, half of the RM170.4 billion in total tourism spending in the country was derived from domestic tourists.

"Without foreign tourist dollars, we expect a significant demand deficit of 6% to 7% of GDP after taking into account the gradual increase in the share of domestic tourist spending over the past several years," notes Dr Yeah Kim Leng, professor of economics at Sunway University Business School.

Will Cuti-Cuti Malaysia offset the shortfall?

With international holiday destinations temporarily out of the equation, the hope is for domestic tourism to play a pivotal role in leading the recovery of the tourism sector this year.

"Owing to the restriction on Malaysians travelling abroad, the high spenders are now spending more domestically. Malaysians are getting more value for the same budget they
spend overseas and some are willing to pay for premium domestic tourism packages, and hence , translate into higher spending per capita," says SERC's Lee.

Yeah believes that while it is a daunting feat, it would be possible to stimulate domestic tourism to offset about a quarter to half of the expected drop in inbound tourist arrivals.

"This still leaves a sizeable 2% to 3% of GDP shortfall to be offset by other sources of domestic demand," he observes.

Many parties have called on the government to explore the option of a travel bubble among Asean countries in efforts to revive the tourism sector.

"To mitigate the severe impact of closed borders on the economy, the government will need to actively engage with member countries on kick-starting the Asean travel bubble proposal. The other target group would be tourists from 'green zone' countries as foreign tourist spending will help to minimise shrinkage of the consumption economy," says Yeah.

Lee also suggests that the government and the private sector collaborate to prepare for the eventual reopening of borders, and put in place necessary standards to assure travellers of their safety while travelling in Malaysia.

"These include the sharing of updated information within the business and providing clear communication about the guidelines on keeping the tourist destinations safe; and introducing safe and clean labels to reassure visitors that it is safe to travel in Malaysia," he says.

In Thailand, foreign tourists looking to spend their holidays there would have to first undergo a 14-day quarantine upon arrival at their own expense,before being allowed to travel. They will also have to prove their longstay plans — be it by paying for accommodation or residence ownership.

However, a recent report by RHB Research on Thailand's hospitality industry notes that lengthy stays may not attract Thailand's key source markets in East Asia, given that their average stay is only about seven days.

It expects only a small group of high spenders from long-haul destinations in Europe and the US to possibly benefit from the scheme, as their average stay is 17 days and 15 days respectively.

"We do not expect to see a big jump in arrivals as the resurgence of Covid-19 cases continues globally, and flight operations remain very limited," adds the report.

As Thailand takes a cautious leap forward in welcoming selected groups of tourists, it would be interesting to see if this will give Malaysia and countries in the region some
courage to loosen their present restrictions. •