The Thai government, led by 2014 coup leader Prayut Chan-ocha, has once again shown its indecisiveness by regressing to a closed-door policy on international travel.
General Prayut on Tuesday followed through the recommendation made by his Deputy Prime Minister and Public Health Minister Anutin Charnvirakul to suspend the ‘Test & Go’ system that was introduced on November 1 this year.
The ‘Test & Go’ was put in place to help spur the tourism sector that accounts (directly & indirectly) for 15 per cent of the country’s gross domestic product (GDP).
Thailand saw close to 40 million visitors in 2019 before the pandemic. The arrivals generated close to 1.9 trillion baht in tourism revenue.
However, those numbers fell sharply to 332 billion baht in 2020 with the numbers likely much worse this year.
McKinsey & Co came out with a report in November welcoming the move by Thailand to open its borders to foreign tourists.
The management consultants said that the move would help spur spending in the much-needed industries including hospitality, retail, and food & beverage sectors. These were the top areas where foreign tourists spent their money (60% of the $1.9 trillion in tourism receipts in 2019).
Thailand’s tourism sector which was ranked 8th globally for tourism arrivals in 2019 has also been the backbone of job creation in Thailand and the sector created 36 million jobs between 2014 to 2019.
The decline in foreign tourists and now the reimposition of measures to curtail arrivals is likely to have a major impact on the nearly 1.2 million tourism-related small & medium-sized enterprises which were already in a precarious situation.
McKinsey in its report said that in 2019, although international tourists accounted for a only 33% of the travelers in the country, they accounted for 60% of the spending far outpacing the spend by local tourists.
Pre-COVID-19, China was one of the main contributors to Thailand’s tourism income, accounting for more than 27 percent of 2019 tourism receipts.
Given the current prudent approach of the Chinese government towards international travel, the road of return for Chinese visitors to Thailand will be a long one. China’s international-flight seat capacity and passenger numbers remain down by 95 percent compared to pre-COVID-19 levels, and stringent public-health measures for international travel remain in place.
The Prayut administration has been plagued by indecisiveness since the pandemic began.
The administration has been back-peddling on every aspect whether in implementing economic policies that could spur economic growth or the vaccine procurement policies that have led to such disastrous results.
Even before the pandemic, the government was wracked by indecision and a lack of leadership.
Thailand’s neighbors, especially Vietnam and Malaysia, have surpassed the kingdom in its bid to be a friendly place for international investment.
Just last week, US chip giant – Intel, decided to invest $7 billion in Malaysia creating close to 10,000 jobs.
This decision by Intel is not surprising to the investment community especially taking into account the lack of futuristic thinking by the Prayut administration.
Foreign investors didn’t flock to Malaysia for its political stability, the country is undergoing political upheaval, but more so due to incentives offered and the more skilled labor force in Malaysia than in Thailand.
Flip Flop Policies
The decision by the Prayut administration to suddenly cancel the planned trip by those who want to come into Thailand during the peak of the tourism season (or whatever it remains of the peak season) was yet another example of how the situation has been mishandled by the government.
The bolt from the blue for the cancellation of the ‘Thailand Pass’ which had more than 200,000 people registered and was the hope and aspiration for the millions of Thais to be able to return to normalcy is likely to have a larger than life impact.
The service sector, that had its hopes to return to a new normal in the very near future, is likely to see those hopes come crashing down after the flip flop of the Prayut administration.
Countries around the world have made certain adjustments to the rise of the Omicron variant but not many have gone as far as to shut the borders, especially countries that have high reliance on tourism revenues.
Creating confusion among the tourists is the last thing any government that relies heavily on the tourism industry needs. The shock and awe of the cancellation of the ‘Test & Go’ system reverberated in the investment community with some of the big international firms in Thailand calling the measure unnecessary.
With 10’s of thousands of tourists planning their trips, the cancellation of the ‘Test & Go’ was not necessary. The entire episode of how the Prayut is handing the country has been compared to starting and stopping the entire, which could lead to more fuel being burnt and in process also damaging the country.
Be More Prepared
Governments across the world have been taking steps to prepare for the new wave and with higher vaccination rates the impact of the Omicron is expected to be benign than its predecessor – Delta variant.
Although most of this issue is yet to be confirmed but the Omicron variant that was detected in late November has so far shown very high degree of infection but the severity of virus is shown to be far lesser.
Data from South Africa where the virus was first detected has shown that those needed intensive care is far less than the Delta variant or the Beta variant.
Thailand’s economy has been on a fragile footing even before the Covid-19 outbreak had hit the country.
The country’s competitive landscape had deteriorated to a point that the country saw the position of the Ministry of Finance was a musical chair as General Prayut kept trying to change the minister in hopes of reviving the economy.
After all the failures, he got his ‘Yes Sir’ man back on the position. Arkhom Termpittayapaisith, was put back in the drivers seat of the Ministry of Finance but his policies have yet to yield any tangible results.
The country is expected to see its GDP rise by a mere 1% during 2021 and as per the latest data released Thailand’s GDP in Q3 2021 contracted by as much as -0.3% and the full year GDP is expected to see a growth of a mere 1.2% after having slipped by -6.1% in 2020.
The outlook for 2022 has not been that optimistic either, with the National Economic & Social Development Council (NESDC) having announced that they expect 2022 GDP to grow by a mere 3.5-4.5% (pre-Omicron outbreak).
With inflation already propping its ugly head and headline numbers likely to be around 3% in 2021, the country’s overall outlook does not look very promising.
Tourism could have been the saving grace but with the government already putting the brakes on this sector the expected recovery of this sector is likely to be delayed by a bit more.
With consumption remaining low, investments on a downward trend, people continuing to lose jobs, household debts at all time high, the country’s debt-to-GDP at around near limits, and inflation propping its head the outlook for the country already is bleak, and the Prayut government seems to be exacerbating the situation by its indecisiveness.
What the government of Prayut should do is not to try to close down the country but restart the vaccination drive as early study suggests that people who get the booster shots of Moderna and Pfizer (both are mRNA) vaccines helps lower the chances of getting the Omicron variant.
The Prayut administration that relied heavily on Astra Zeneca vaccine and the sub-par Chinese SinoVac, needs to start the distribution and inoculation of the population with the more effective vaccines.
Research has shown that a booster shot of Astra Zeneca, Moderna or Pfizer have all lowered the chances of severe infection of Omicron variant.