Malaysia will welcome Chinese tourists in 2022

The Chinese tourists are the main booster for Malaysia’s tourism-related industry. Without their large numbers returning, such industries will be negatively impacted.

There are fears that Malaysia will see fewer Chinese nationals this year due to the China lockdowns and its “zero Covid” policy.

Negotiating bilateral travel arrangements that are free from quarantine is unlikely to be successful as Chinese tourists will not accept any other agreements. In 2019, 11.9% of international tourists visiting Malaysia were from China.source

“If Chinese tourists aren’t coming back in large numbers, then I think the expected rebound in tourism-related industries may be a little lower than pre-pandemic levels.

During yesterday’s SERC’s virtual quarterly economic tracking briefing, he stated that “this is something we must monitor, any major shock in China would impact the global or regional economies including Malaysia.”

Malaysia Board tourism

Lee stated that supply chain disruptions in the global semiconductor industry, including in Malaysia may take longer than anticipated to resolve.

He said, “By right the supply chain would likely easeoff by the first or the second half of the year, however, with the Russia-Ukraine war, that could further prolong the supply disruption for components in the semiconductor industry.”

Russia and Ukraine were significant sources of raw material for the semiconductor industry, including rare earth metals, gases, neon, and palladium.

According to Lee, Russia accounts for about 45% of global supplies of palladium (used in memory and sensor chips).

“With this prolonged supply disruption and higher prices for raw materials, increased shipping costs and a shortage of workers it could potentially impact global chip capacity and cause a spike of chip prices.

Malaysia accounts for at least 7 percent of global semiconductor supply. With the disruption, the electrical and electronic sector in Malaysia will expand but at a slower rate than was expected.

Exports-wise, I project a lower rate of growth of 5.9% overall for exports in 2022 than Bank Negara’s 10.9% estimate.

The recovery after the pandemic and highlighted the fact that Malaysia’s economy is on track despite the downside risks to its outlook.

In 2022 gross domestic products (GDP) growth estimate of 5.2% in malaysia. The country’s recovery is underpinned by stronger domestic demand and a rebound within the services and construction industries.

The GDP estimate is slightly lower than Bank Negara’s projection of 5.3% to 6.3% in 2022.

“While SERC revises the higher private consumption growth estimate from 5.9% to 6.5% in 2022, it is still lower than Bank Negara’s 9%.

“While we believe that pent-up demand and cash handouts, as well as the fourth round of Employees Provident Fund withdrawal, will support consumer spending,” the repair of households’ balance sheets and rebuilding depleted savings, as well as an increase in inflation, will result in prudent discretionary spending.

He stated that higher inflation and concerns about cost of living will reduce household disposable income (purchasing potential) and lower consumer sentiment.

Lee also stated that the expected improvement in the labour market and moderate income increases would limit spending.

The think-tank anticipates that private investment will remain cautious due to rising operating costs, supply disruptions and rising material costs. It also expects the need to be more cautious in the face of the ongoing Russia-Ukraine conflict.

Private investment growth will increase moderately from 2.6% in 2021 to 5% by 2022. This is consistent with Bank Negara’s estimate of 5.3%.

Lee stated that Malaysians should be prepared for more price increases in 2022, as he anticipates higher headline and core inflation.

He said that prices for common consumer goods and services like poultry products, vegetables and haircuts for men have already increased.

SERC predicts that the country’s headline inflation will rise by 3%-3%% between 2022 and 2022. This is higher than Bank Negara’s estimates of 2.2% to 3.2%.

Lee recommended that supply-side and monetary measures be taken to control inflation and anchor inflation expectations. He suggested a gradual rise in overnight policy rates from the record-low 1.75%, and a staggered price increase.

To avoid price rises, it is important to rationalize fuel subsidies slowly and carefully. However, there should be moral support for manufacturers and businesses to increase price increases in a more gradual manner.

Lee also demanded that the government intervene in policy to reduce duties and tariffs. There should be a temporary price ceiling and control, as well as an ease in import restriction in order to increase existing supplies.

The strategy of Malaysia

These efforts should be complemented with medium- and long-term supply-side strategies.

Lee stated that supply-side policies such as freer market entry or deregulation would increase productivity and make firms more competitive.

“Reduce high import dependence on agricultural commodities with Imports Dependency Ratio exceeding 50 percent, such as cuttlefish (52.2%) and fresh milk (53.5%). Chilli (72.4%), beef (81.2%), ginger (81.5%), mango (86.2%), and mutton (90.4 Lee stated, adding that domestic production should increase.

According to a new international travel index, Australia, Singapore, and Malaysia have the best conditions for tourism recovery in the region.

Through its Asia Travel-Ready Index (EIU), the Economist Intelligence Unit ranked Malaysia favorably in terms both of ease of travel and local vaccination coverage.

Tourists should be aware of the importance of compliance requirements, such as testing and quarantine requirements, which can affect their decision to travel. Complicated requirements can lead to high travel costs and discourage tourists from choosing ‘freer destinations’. Liuqing Yu, EIU country analyst (Asia), said that these compliance requirements increase the cost of travelling.

Malaysians and visitors who have been fully vaccinated are no longer required to be quarantined upon their arrival in the country. They must be vaccinated at least 2 days prior to departure, and a professional rapid test (RTK–Antigen) upon arrival.

According to the index travellers are more concerned about restrictions and a quarantine-free travel initiative, such as the one in Malaysia, is highly welcomed.

Due to their local vaccination coverage and policies regarding returning citizens, countries such as Vietnam, Indonesia, and the Philippines have received lower scores.

The index’s bottom spot has been taken by countries from north-east Asia, such as Japan, China, Hong Kong and Taiwan. They have taken longer to reopen, and are subject to restrictions under China’s Zero-Covid-19 policy.

Tourism Malaysia Strategic & Marketing Plan 2022 2026

Tourism Malaysia has recently released its Strategic & Marketing Plan (2022-2026), in an effort to increase local tourism.

The new strategy will be focused on domestic tourism promotion as well as international recovery. It will also place greater emphasis on digital adoption and innovation.

At the launch in Kuala Lumpur, Tourism, Arts and Culture Minister Datuk Seri Nancy Shukri stated that “It is vital for the tourism industry be prepared for post-pandemic demand and expectations as well as to stay focused in order support its sustainable recovery and rebuild it in the future.”

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