Angkor Wat. Ha Long Bay. Borobudar Temple.
Koh Samui. These picturesque and Instagram-friendly Southeast Asian
destinations are globally recognised tourism meccas, attracting millions of
overseas visitors yearly. It might be difficult to imagine, but not so long
ago, some of these popular locations were considered off-the-beaten track, and
difficult for foreigners to navigate.
Obviously, that is the case no longer. The rise of the global tourist is an economic and structural trend that has transformed where and the way the world travels and spends money. Certain economies in Southeast Asia have been revolutionised by the investment and opportunity that comes with opening your borders up to the world. In Thailand, for example, tourism provides one in six job opportunities and accounts for around 13-14% of the country’s gross domestic product (GDP).
Covid-19: Catalyst for change
The Covid-19 pandemic has put a sudden halt to over 20 years of tourism growth in Southeast Asia – even as some countries made stellar efforts to control the spread of the virus. With the effects of this shock reverberating through Southeast Asian economies, governments are turning their attention to how to make up the shortfall.
” The respite from international visitors has given Southeast Asian nations time to reconsider how they want to rebuild the tourism industry in more sustainable ways. ”
Some countries have embarked on a domestic
tourism drive. Singapore has poured $33 million into a local tourism campaign,
while Thailand approved a $720 million domestic tourism package to spur
spending. Indonesia will give ten domestic tourism destinations financial support,
and lower jet fuel prices and airport charges at nine airports.
These efforts can cushion some of the blow taken by tourism and its related sectors, but more importantly, it will help to buy some time for governments to make more drastic reforms.
Some Southeast Asian nations are beginning to rethink their reliance on external sources of prosperity and are investing further in domestic sources of growth. Southeast Asian nations had already been focusing on digital transformation and Industry 4.0 before the pandemic hit, but with the beating the tourism industry has received, governments are stepping up efforts to build other engines of growth.
Thailand: The world’s medical hub
Thailand has enjoyed several years of unprecedented growth on the back of booming tourism, but it is now beginning to invest in domestic capacities to produce more lucrative goods and services, aiming to become one of the world’s top medical device manufacturing and healthcare hub. Arup Raha, Head of ASEAN Economics at BNP Paribas says, “As a leader in global medical tourism, and given that it possesses a strong manufacturing base, it is to Thailand’s competitive advantage to invest in manufacturing medical devices.”
A robust and sophisticated healthcare
system, combined with the Thai government’s commitment to further develop the
medical industry, puts Thailand in pole position to become prime market for
medical device manufacturing and pharmaceuticals in Asia. The medical,
healthcare and wellness industry is also one of the identified new engines of
growth in the Thailand
4.0 policy – a national strategy to leverage the country’s strengths in the
manufacturing supply chain, the medical industry and biotechnology to build
economic competitiveness over the long-term.
Thailand’s Board of Investment (BOI) has been stepping up its efforts to attract foreign investors looking to expand their manufacturing base in the medical device sector. The BOI has introduced additional incentives to promote new investment by manufacturers who wish to ramp up their production for medical devices during the global health crisis and these include: medical robotics or automation, digital medical services, lab and clinical research facilities, standards certification testing and specialised medical care.
Thailand may face some competition very close to home. With a new Trade Agreement with the European Union in place, Vietnam is also hoping to position itself as a medical equipment hub. The country’s largest conglomerate, Vingroup, recently announced a partnership with Irish medical components company Medtronic, which will see the group produce components in Vietnam.
Ramping up Digital
The pandemic is accelerating digitisation in Southeast Asia, as consumers spend more time online and some even make their first digital purchases. The productivity gains generated through digitisation could go some way to keep domestic economies humming along, even as tourism comes to a halt.
Southeast Asian countries such as Malaysia, the Philippines and Vietnam have already benefited from investment by Chinese tech giants such as Alibaba and Tencent. Lazada, the Singapore-headquartered e-commerce giant that operates in most countries in Southeast Asia, has been a key recipient of funding. Local e-commerce allows domestic suppliers to maintain and grow their foothold in the market. In Indonesia, for example, 80 percent of consumers prefer local brands to global brands especially in food categories.
Raha said, “ASEAN has always recognised that a digital economy was the way of the future. Homegrown talent has been matched with policy measures and digital infrastructure. For example, in 2016, Malaysia became the first country in the world to establish a Digital Free Trade Zone to help SMEs with e-commerce.”
Rebuilding Southeast Asia
The respite from international visitors has given Southeast Asian nations time to reconsider how they want to rebuild the tourism industry in more sustainable ways, considering the rich biodiversity within the region. In the time between now and then, Southeast Asia has the once-in-a-lifetime opportunity to capitalise and build on new sectors and dilute its economic dependency on tourism.