Malaysia to open its borders

Malaysia tourism collapsed
Empty Malaysia tourism advertising signs at KL Sentral Station in Kuala Lumpur – February 2022. Photo by The Chili

Malaysia might reopen its borders as early as Mid March. An entire industry is desperately waiting for it to happen …

Malaysia was one of those few countries where the share of tourism’s total contribution to  the national GDP used to be above 10%. Other big players in this category: Thailand, Croatia, Portugal, Greece and Morocco. In March 2020, a deadly virus from Wuhan did bring this party to an abrupt stop. Exactly two years later, the remains of Malaysia’s tourism industry stare into an abyss.

In 2019, the Malaysian tourism sector accounted for impressive 12.5% of the national gross domestic product (GDP). The bulk of it was contributed by accommodation and shopping activities. So called ‘spillover effects’ into other industries were significant to the economy of the south east Asian country. According to the Tourism Malaysia website, in 2019, the country saw 26 million tourist arrivals and receipts of 86 Billion Ringgit (20 Billion Euros / 21 Billion US Dollars).

In 2020, due to the Covid-19 pandemic lockdowns, the figures dropped massively from 26 to 4 million tourist arrivals with receipts of meager 13 Billion Ringgit. In 2021, numbers dropped even further to just 80.000 tourist arrivals – finally bringing many tourism related businesses to its knees after two years of forced withdrawal.

In tandem with the bad news of massive amounts of room cancellations, workers in the hotel industry in the capital Kuala Lumpur have been the worst hit by the pandemic. From a sample size of 17,826 workers, 542 workers, equivalent to 3%, had been laid off. Meanwhile, 3641 (20%) workers had been asked to take unpaid leave and 2880 (16%) workers had faced pay cuts.

Now, two months into 2022, the situation could not be worse. Malaysia’s government continues to stick to its no-tourism-agenda. Meanwhile, northern neighbour Thailand is on a different path. Already in November 2021 the country re-opened its borders in a “Test-and-Go” scheme. Roughly 350,000 international tourists gave Thailand’s economy a desperately needed boost. Although groundless fears about the danger of Covid’s Omicron variant did bring the project to a temporary halt, Thailand is now again back on track to welcome as many tourists as possible. Advantage Thailand: With its surrounding neighbours still reluctant to follow suit, Thailand gets them all. Travelers from the cold northern hemisphere are longing for heat and sunshine. Lacking of alternatives, they are more than willing to get tested twice and lock themselves up for 2 nights in an SHA hotel. Long story short: Thailand’s tourism industry is on its way to win back a lot of lost ground this year, while Malaysia continues to suffer.

Thailand tourismus slowly recovers from Covid Catastrophy - Krabi 2022
Thailand tourismus slowly recovers from Covid Catastrophy – Krabi 2022

No doubt. Following Thailand would be positive for the Malaysian economy, given that the tourism sector will be the immediate beneficiary and its close linkages with other industries. An extremely high vaccination rate in the country has already allowed the government to take a softer approach when it comes to pandemic-related standard operating procedures for Malaysian citizens.

Malaysia’s Government did recently announce, that the reopening of its borders for international tourists will be happening in early 2nd quarter.  Rakuten Trade Research noted that following the NRC announcement, the national bourse had edged higher from a surge in buying interest on blue chips amid optimism on the reopening of the nation’s borders.

The benchmark index was up 21.42 points to close at 1,551.51 on Wednesday, with gainers led by banking heavyweights such as Malayan Banking Bhd, Public Bank Bhd and CIMB Group Holdings Bhd.

Rakuten Trade head of equity sales Vincent Lau said, a reopening of borders without mandatory quarantine would benefit all sectors of the economy, not just tourism. Still, key beneficiaries would be the tourism sector and related stocks such as Capital A Bhd (formerly AirAsia Group Bhd), Malaysia Airports Holdings Bhd (MAHB) and Genting Malaysia Bhd.

In a recent report, CGS-CIMB Research says a resumption of international travel will have a strong leveraged impact on MAHB’s earnings, as international passengers pay five to seven times more in benchmark passenger service charges than domestic passengers, and can also shop at duty-free outlets.

Suddenly, time seems to be running fast. Besides Thailand already fully open for quite some time, other top tourist destinations such as the Philippines (from February 10), and Australia (from February 21) did follow. Experts also expect Singapore to abandon its 50% limit on vaccinated travelers.

However, several other large neighbours continue to restrict arrivals, such as Indonesia, Vietnam, Japan, China and India. Means: It is not too late to get a piece of the cake.
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