COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 1 DISCLAIMER
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COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 1 CONTENTS
PREFACE 4
EXECUTIVE SUMMARY 5
PART I: OPPORTUNITIES FOR DEVELOPMENT PARTNER ENGAGEMENT 7
PART II: CAMBODIA 9
COVID-19'S ECONOMIC AND TOURISM SECTOR IMPACT 10
EARLY RESPONSE AND PUBLIC HEALTH MANAGEMENT 10
SUPPORT FOR ECONOMIC RESILIENCE AND SMES 11
ENHANCED SUPPORT FOR THE TOURISM SECTOR 12
REVITALIZATION POLICIES AND PLANS 12
GREEN GROWTH AND SUSTAINABILITY MEASURES 13
POLICY IMPACT, GAPS AND OPPORTUNITIES 13
KEY RECOMMENDATIONS AND AREAS FOR DONOR SUPPORT 14
PART III: NEPAL 15
COVID-19'S ECONOMIC AND TOURISM SECTOR IMPACT 16
EARLY RESPONSE AND PUBLIC HEALTH MANAGEMENT 16
SUPPORT FOR ECONOMIC RESILIENCE AND SMES 17
ENHANCED SUPPORT FOR THE TOURISM SECTOR 18
REVITALIZATION POLICIES AND PLANS 18
GREEN GROWTH AND SUSTAINABILITY MEASURES 19
POLICY IMPACT, GAPS AND OPPORTUNITIES 19
KEY RECOMMENDATIONS AND AREAS FOR DONOR SUPPORT 20
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 2 CONTENTS
PART IV: SRI LANKA 21
COVID-19'S ECONOMIC AND TOURISM SECTOR IMPACT 22
EARLY RESPONSE AND PUBLIC HEALTH MANAGEMENT 22
SUPPORT FOR ECONOMIC RESILIENCE AND SMES 23
ENHANCED SUPPORT FOR THE TOURISM SECTOR 23
REVITALIZATION POLICIES AND PLANS 24
GREEN GROWTH AND SUSTAINABILITY MEASURES 25
POLICY IMPACT, GAPS AND OPPORTUNITIES 25
KEY RECOMMENDATIONS AND AREAS FOR DONOR SUPPORT 26
PART V: THAILAND 27
COVID-19'S ECONOMIC AND TOURISM SECTOR IMPACT 28
EARLY RESPONSE AND PUBLIC HEALTH MANAGEMENT 28
SUPPORT FOR ECONOMIC RESILIENCE AND SMES 29
ENHANCED SUPPORT FOR THE TOURISM SECTOR 30
REVITALIZATION POLICIES AND PLANS 30
GREEN GROWTH AND SUSTAINABILITY MEASURES 31
POLICY IMPACT, GAPS AND OPPORTUNITIES 31
KEY RECOMMENDATIONS AND AREAS FOR DONOR SUPPORT 32
PART VI: VIETNAM 33
COVID-19'S ECONOMIC AND TOURISM SECTOR IMPACT 34 EARLY RESPONSE AND PUBLIC HEALTH MANAGEMENT 35 SUPPORT FOR ECONOMIC RESILIENCE AND SMES 36 REVITALIZATION POLICIES AND PLANS 36 ENHANCED SUPPORT FOR THE TOURISM SECTOR 36 GREEN GROWTH AND SUSTAINABILITY MEASURES 37 POLICY IMPACT, GAPS AND OPPORTUNITIES 38 KEY RECOMMENDATIONS AND AREAS FOR DONOR SUPPORT 39
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 3 PREFACE
The COVID-19 pandemic presents an existential threat to the global travel and tourism industry. Tourism constitutes 10.4 percent of global Gross Domestic Product (GDP) and one out of 10 jobs worldwide.1 As international travel has ground to a halt, every single facet of the industry has been impacted by the crisis, and its value chain has been severely hit as countries have been forced to discourage both international and domestic travel. The magnitude of the impact is immense in terms of the potential shrinkage of revenues, GDP and jobs. According to the World Travel & Tourism Council (WTTC) as many as 100 million jobs are at immediate risk globally, and the sector stands to contract as much as US$ 2.7 trillion. The Asia Pacific faces a proportionate threat to its US$ 2.97 trillion tourism economy and 182 million tourism jobs (2019).
This report aims to aid tourism recovery by providing policymakers and donors innovative and best practice examples of policy response. The authors studied policy responses in five developing destinations spread across South and Southeast Asia:
• Cambodia; • Nepal; • Sri Lanka; • Thailand; • Vietnam.
The authors conducted a practical policy review of the destinations’ responses, focusing on five dimensions:
• Early response and public health management; • Support for economic resilience and small and medium enterprises (SMEs); • Enhanced support to the tourism sector; • Tourism sector revitalization policies and plans; • Green growth and sustainability measures.
The authors relied primarily on desk research as the countries’ policy responses have been well- documented in media reports and other public sources. To validate and enrich findings, interviews were also conducted with key industry leaders or policymakers from national tourism organizations or other well-placed stakeholders.
In consultation with interviewees, the authors have also identified gaps in the destinations’ policy responses and opportunities for donor support and assistance.
The COVID-19 pandemic represents an unprecedented crisis for the tourism industry and the millions of people across the Asia Pacific whose livelihoods depend on it. The authors of this report believe that an orderly and strategic policy response can mitigate the worst of the crisis’s negative impacts. In some cases, policy may even lay a foundation for healthier, more sustainable post-pandemic growth .
1 https://www.weforum.org/agenda/2020/05/tourism-industry-slump-recovery-coronavirus-lockdown/
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 4 EXECUTIVE SUMMARY
Destinations in South and Southeast Asia are struggling to contain the effects of the COVID-19 pandemic’s shock to their tourism industries and economies. 2020’s inbound visitor arrivals are expected to decline nearly 80 percent2. The COVID-19 pandemic has meant millions of job losses, the closure of small and medium-sized enterprises (SMEs), and hard times for the vulnerable communities that rely on tourism.3
Many tourism SMEs will not survive, and some larger national and international players are at risk. The travel and tourism sector that emerges from the crisis may look quite different to that which preceded it. SMEs made up 4/5 of the pre-crisis tourism economy4, and many of those operated on thin margins. As a result, the unprecedented pause in tourism has forced many countries and destinations to start reassessing their business models based on ever-increasing tourist numbers and to plan for an increased focus on sustainable tourism in the future.
Governments have employed a range of fiscal and monetary measures in support of the travel and tourism sector. The aim has been to help enterprises in preventing closures where possible and ensuring that tourism workers will have jobs to return to when the COVID-19 crisis is over. Typical policy interventions have included the waiving of taxes; the easing of regulatory burdens, fees, and charges; the provision of cash grants and subsidies to retain employees; and various other forms of direct support to firms. To help the industry to retain jobs and prevent the loss of vital human capital and skills, some countries have provided incentivized training support to specific tourism sub-sectors, such as food services, hotels, and airlines.
Government commitments range widely from 2 to 12 percent of GDP, with larger investments predictably yielding better results. Vietnam and Thailand have invested heavily in total stimulus. Cambodia, Nepal, and Sri Lanka – with smaller tourism economies – have fielded smaller stimulus packages. Countries with proportionally more stimulus as a percentage of GDP have managed the crisis relatively well.
Cambodia Nepal Sri Lanka Thailand Vietnam
Revenue from the tourism 4.92 bil 2.2 bil 5.6 bil 51 bil 33 bil sector as of 2018/19 in US$
% of GDP 12.1% 7.9% 12.5% 17% 9.2%
Economic impact of the pandemic (estimated % of 80% 80% 80% 80% 80% revenue loss from tourism against 2019)
% of GDP pledged to 4% 4.2% 2% 12% 9% pandemic response
2 Ibid.,1 3 Zurab Pololikashvili, Secretary-General of the UNWTO 4 Abe, M., M. Troilo, J. S. Juneja, and S. Narain. 2012. Policy Guidebook for SME Development in Asia and Pacific. Bangkok: United Nations Economic and Social Commission for Asia and the Pacific (ESCAP)
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 5 Another critical success factor has been the presence of robust social protection/crisis response infrastructure. Sri Lanka’s response has outperformed its modest 2 percent-of-GDP investment thanks to having social protection infrastructure to manage implementation. This infrastructure was able to disburse cash support quickly and efficiently to vulnerable groups. Thailand and Vietnam, which also have well developed social protection infrastructure, have also successfully mobilized as much as half of their allocated budgets.
Early management of public health outcomes has framed the availability of later policy options. Much of Southeast Asia has contained the spread of COVID-19, but the pandemic has spread more rapidly in South Asia. Their relatively effective pandemic responses have enabled Cambodia, Thailand, and Vietnam to capitalize on incentive schemes and subsidized packages for domestic tourism promotion. Coastal and ecotourism have boomed in these destinations. Vietnam has a clear strategy to use domestic tourism as a recovery vehicle up to 2024 until the international market returns to 2019 levels. Thailand has a similar aim of spurring domestic tourism with a fiscal investment of US$ 722 million. South Asian destinations, by contrast, have had a more difficult time containing the pandemic, which has dampened domestic tourism demand.
Fiscal and monetary measures have varied in magnitude not character. All governments surveyed as part of this review have introduced tax incentives, moratoriums for loan repayments, income support, tax credits, or direct support of workers and their households. The assistance is intended to help enterprises weather the period of lost income while the pandemic lasts, preventing enterprise closures where possible and ensuring that tourism workers will have jobs to return to when the COVID-19 situation normalizes. The only difference has been the sizes of their response packages.
Domestic tourism has been harnessed as a primary fiscal stimulus and recovery tool by some of the countries. Vietnam has a clear strategy to use domestic tourism as a vehicle up to 2024 until the international market starts reaching its 2019 levels. Thailand’s has a similar aim of spurring domestic tourism with a fiscal investment of US$ 722. Cambodia is already seeing encouraging growth in the sector. Nepal has also announced national campaigns while Sri Lanka has seen growth in the domestic tourism sector too.
Using training incentives to retain workforce, a policy priority for many, has only worked in Thailand. All destinations have been challenged by human resource loss and diversion from tourism to other sectors. While retention of a skilled and experienced tourism workforce is regarded critical, not every country has introduced or implemented a policy solution except Thailand. In addition to wage support schemes and direct cash transfers, Thailand has rolled out incentivized training for various categories of tourism workers.
Some of the countries under review have utilized the crisis as an opportunity to build back better and more sustainably. Cambodia has introduced some green recovery measures with a clean-up campaign and a focus on plastic free coastlines. Nepal is cleaning its trekking trails, using the program to provide work and income relief for tourism workers. Thailand has allocated THB 1 billion (US$ 32 million) for building and renovating attractions in local communities. Sri Lanka has joined hands with development partners to work on sustainable tourism and allocated a portion of designated funds for improving selected tourism sites. Vietnam is alone in declining to introduce new measures for sustainable recovery.
Recognizing that international tourism will someday return, tourism sector revitalization is a priority for all destinations. All of the countries in this study have introduced fiscal and monetary measures for sector revitalization including tax incentives and subsidies. All have also encouraged the development of hygiene protocols in anticipation of reopening to international markets. Most have introduced programs targeting rural industry entrepreneurs, tourism supply chains, and tourism businesses. Sri Lanka notably has introduced an accommodations safety certification scheme and has announced plans to enhance key tourism sites.
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 6 PART I: OPPORTUNITIES FOR DEVELOPMENT PARTNER ENGAGEMENT
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 7 PART I
As part of tourism recovery and rebuilding measures, international development partners may consider engaging in several areas:
Strengthen the destination management, marketing, and crisis communication capabilities of national tourism organizations or provide assistance to build capacity for these in case they do not exist. In countries where a dedicated destination management organization exists the major thrust tends to be destination marketing not true destination management. Development partners can play a critical role in developing their capacity to plan, coordinate, manage, implement, and monitor the tourism sector. In countries that lack a dedicated destination management entity or crisis response task force, technical assistance can contribute to the collaborative formulation of such an entity between public and private stakeholders.
Provide technical assistance in the development of long term domestic tourism strategy with a special focus on destination development and fiscal stimulus to tap into domestic market potential.As domestic tourism is critical for both the short term recovery and long term sustenance of all studied markets, it is essential to provide them assistance to develop country-specific domestic tourism strategies integrated with fiscal stimulus. Alongside this, donors and development partners should consider immediate support to reduce key constraints on destinations with domestic market potential. For instance, support measures can be provided to improve access to parks and protected areas from city centres.
Support the prioritization of nature-based ecotourism or adventure-related destination development in protected areas. The market segment looking for nature-based destination experiences has started to recover domestically. International tourism, when it returns, is likely to follow the same trend as it allows travellers to maintain social distance, immerse in nature, stay active and healthy, and visit remote communities. Development partners should consider technical assistance to match destination offerings at the tourism product level, developing wellness, spirituality, meditation, and other products. Such products will be in greater demand after the crisis. Moreover, they will contribute to sustainable outcomes by incentivizing the development, upkeep, and conservation of natural assets.
Accelerate the pipeline of ecotourism and infrastructure development projects. The implementation of the destination development projects will be critical for immediate jobs of tourism workers in destination areas as well as post-COVID-19 market recovery. Implementing tourism infrastructure projects that have well-founded needs and that are labor-intensive will have the additional benefit of increasing employment opportunities for local workers in the identified areas.
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 8 PART II: CAMBODIA
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 9 PART II
COVID-19’S ECONOMIC AND TOURISM SECTOR IMPACT
COVID-19 brought the Cambodian economy to a standstill.5 The Cambodian tourism and hospitality sector, with a repeat visitation rate of less than 20 percent, had already been experiencing a slowdown prior to the outbreak of the pandemic this March (this was despite a boost from the government’s 2016 “China Ready” tourism campaign). Industry experts have forecast an 80% drop in international visitors this year6, and the Cambodian Ministry of Tourism estimates the country has already lost an estimated US$5 billion in tourism and hospitality revenue7. The country’s hotels and airlines, and tourism services in travel-dependent destinations such as Siem Riep have either reduced their operations or closed completely, leaving the majority of Cambodia’s tourism workers unemployed. Cambodia does not have a destination management organization separately organized under the Ministry of Tourism, equivalent to the Sri Lanka Tourism Development Authority or the Vietnam National Administration of Tourism, to help it liaise with development partners (such as the World Bank, the Asian Development Bank, relevant UN agencies and bilateral donors like GIZ, US AID and UK AID etc.) to effectively respond to the sector’s sustainable development needs.
EARLY RESPONSE AND PUBLIC HEALTH MANAGEMENT
The government of Cambodia prioritized controlling the spread of COVID-19 ahead of its economic interests in order to protect its population and reduce strain on its public healthcare system. When the pandemic hit, the Cambodian government announced a US$ 60 million relief package to support health measures, including testing and quarantining, that would slow the spread of the virus. The government also mobilized more than 400 healthcare workers and made 3,000 additional hospital beds available throughout the country.
Cambodia’s travel restrictions and school closures helped keep the country’s case numbers low and allowed for the eventual reopening of domestic businesses. The government allowed the resumption of a limited number of domestic flights on April 16, and permitted some entertainment venues, including clubs and cinemas, to reopen in June. Meanwhile, the country’s schools began reopening in September.
The Cambodian government allocated a social assistance fund of nearly US$ 400mn. This included US$ 300 million for a new monthly cash transfer program for poor and vulnerable households (set to last five to seven months, starting in June 2020) and a US$ 100 million cash-for-work program.8
The Cambodian government’s fifth stimulus package, announced on July 31, 2020, was aimed at supporting the country’s valuable garment and textiles manufacturing and tourism industries.9
5 Tourism (including hospitality) is the second largest growth driver, estimated to have contributed about 18.7 percent of real GDP growth in 2019. 6 News Release on international tourist and Angkor revenue statistics, April 1, 2020, Angkor Enterprise. 7 https://www.phnompenhpost.com/national/tourism-revenue-drops-5b 8 Ibid., 4 9 Cambodia Economic Update, World Bank, May 2020
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 10 PART II
SUPPORT FOR ECONOMIC RESILIENCE AND SMES
Institutional setup and incident management system: Cambodia established several inter- ministerial 10 working groups and task forces to enact its response to COVID-19: (i) a task force to manage the supply and pricing of strategic commodities; (ii) a budget policy committee to plan the financing of social assistance programs; and (iii) a multidisciplinary working group to research and advise monetary and banking measures.
Social and fiscal policy responses: The Cambodian government has provided the manufacturing export sectors with tax relief support valued around US$ 200 million11, and also allocated US$ 64 million for wage subsidies and skills training programs for furloughed workers in the garments and tourism industries. This August, the government extended the i) allowance subsidy for garment and tourism sectors; ii) tax exemption for tourism and aviation sectors; and iii) cash relief program for poor and vulnerable families for an additional two months. Other fiscal responses include a US$ 70 wage subsidy (US$ 40 of which is paid by the Government and US$ 30 paid by the employer) for suspended workers and an exemption from the ownership transfer tax for property valued at US$ 70,000 or less.
Monetary and macro-financial policy responses: The National Bank of Cambodia has introduced measures to improve liquidity, and issued guidelines to financial institutions on loan restructuring and rescheduling for loan borrowers in sectors (particularly tourism, garments, construction, transportation, and logistics) experiencing financial difficulties during the pandemic. As of April 2020, the reserve requirement rate was reduced to 7 percent, for both local currency and foreign currency, down from 8 percent and 12.5 percent for domestic and foreign currency, respectively.12
Clarifying visiting protocols for international visitors: The Cambodian government now requires that all international travelers obtain an entry visa at a Cambodian diplomatic mission abroad and a health certificate before departure to Cambodia. Foreign travelers must also pay a deposit (to cover potential healthcare and quarantine costs upon arrival). Additionally, all arrivals are subject to a mandatory COVID-19 test and 14-day quarantine period. Repatriated Cambodians are also required to self-isolate for 14 days after arriving in the country.13
10 Ministry of Economy and Finance, Ministry of Health, Ministry of Tourism, Ministry of Foreign Affairs and International Cooperation, Ministry of Interior, Ministry of Commerce and Ministry of Education, Youth and Sports 11 https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19#N 12 Ibid., 4 13 https://www.evisa.gov.kh/
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 11 PART II
ENHANCED SUPPORT FOR THE TOURISM SECTOR
Tax exemption: The government has provided travel agents and employees of hotels, guesthouses, restaurants in Phnom Penh, Siem Reap, Sihanoukville, Kep, Kampot, and Bavet an exemption from paying tax until the end of September 2020; this is an extension of an earlier grace period that expired in July.
Minimum wage support to formal employees: The Cambodian government has also committed to paying approximately 20% of the minimum wage to employees affected by the cessation of tourism- related business operations. Employers are expected to contribute additional funds to employees’ monthly payments if they have the capacity to do so. Though the Tourism Ministry originally required that all employees must attend a mandatory skills-based training session before receiving relief funds, this requirement has since been suspended. 14
REVITALIZATION POLICIES AND PLANS
Hygiene protocols and training: The government has enacted new health and safety measures to prepare the country to restart the tourism sector. These measures include training courses for staff at hotels, restaurants and other hospitality outlets and the implementation of temperature checks, sanitization stations, and social distancing measures where relevant.
Promotion of domestic tourism: This summer, Cambodia officially relaunched domestic tourism with a five-day public holiday period that lasted from August 17 to 21. The government encouraged people to travel to tourist sites in an effort to kickstart the domestic tourism economy. This public holiday was a substitute for the Khmer New Year public holidays which were cancelled in April amid the pandemic.
International tourism recovery measures undertaken: In June, Cambodia introduced an entry deposit scheme that required prospective foreign travelers into Cambodia to pay a fixed fee of US$ 3,000 for a COVID-19 test and quarantine and healthcare services.15 However, on September 3, Cambodia lowered its entry deposit fee to US$ 100 and returned the remainder of the deposited funds to travelers who had already paid the fee.16
14 https://www.bangkokpost.com/business/1947920/cambodia-bolsters-tourism-sector-with-tax-incentives-emphasises-human-resource- development-moving-forward 15 https://aecnewstoday.com/2020/international-travel-in-the-age-of-covid-19-cambodia-leads-the-world-with-user-pays-system/ 16 https://www.khmertimeskh.com/760155/cambodia-revises-covid-19-test-fee-and-return-of-remaining-deposit-for-arriving-foreigners/?fbclid=IwA R06vwkmRjSbExe-D4CVmRiwU6I-DjtwBaXkxcIB2Ga9uZRpADvmbe9YNa8
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 12 PART II
GREEN GROWTH AND SUSTAINABILITY MEASURES
Cambodia will receive a special assistance grant from the UNWTO (the World Tourism Organization, United Nations agency) to help restore the tourism sector after COVID-19. The purpose of the grant is to facilitate the post-pandemic recovery of the tourism sector through human resource development.17
Enhancing tourism offerings: Local authorities have made efforts to restore the Angkor temple complex and its surrounding areas.18 They have also drafted a tourism master plan for the entire Siem Reap province and are working to identify new tourism products in the area.
Renovations and improvements: During the pandemic, authorities have been working on renovations and improvements around the country. These include road repairs, the development of a new cycling trail at Angkor, a coastline clean-up, and other initiatives that provide employment opportunities for local workers. The government is committed to ecotourism, and is promoting green initiatives such as “Refill Not Landfill” and “Plastic-Free Cambodia”. 19
POLICY IMPACT, GAPS AND OPPORTUNITIES
Sector impact: The Cambodian tourism industry has already lost US$ 5 billion this year, and with an 80% decline in international arrivals expected in 2020, most of its SMEs will go out of business and the majority of its workers will seek work in other sectors. Although domestic tourism operations have now resumed due to the successful containment of community transitions, they can only contribute about one- fifth of the revenue that the industry needs to survive. The domestic SME sector had been expanding before the pandemic, as small tourism businesses took out micro credit loans to upgrade their operations and meet the demands of a robust international tourism market. Now, many of these businesses will not be able to repay their loans, and this will lead to prolonged economic distress in the country.
Strength of response: Cambodia’s US$ 1.16 billion (4.3% of its GDP) post-pandemic stimulus package focused on containing the outbreak and providing relief to the economy. The government’s fiscal and monetary policies, which include tax holidays, loan concessions, minimum wage subsidies for tourism sector workers, and nearly US$ 400 mn of social assistance to poor and vulnerable households, helped mitigate the financial fallout from the pandemic. However, while the decision to reopen domestic tourism helped revitalize some tourism operations, the tourism sector is still in dire straits. Inconsistent communication around the rollout of the entry deposit scheme was a deterrent for potential international visitors, and the government also did not adequately communicate the details of the stimulus package through mainstream media outlets. This meant that many local workers were unaware of the package, or did not know how to receive the wage subsidies.
Preparedness for recovery: The government has rolled out new training programs to help workers in the hospitality sector comply with new health and safety standards. While domestic tourism has restarted, Cambodia currently has no dedicated destination management organization in place, meaning that it is not yet prepared for the challenge of reopening to international tourism. There has been a delay in revamping testing facilities and establishing other health protocols, and this means that Cambodia may be already losing the opportunity to assimilate into “travel bubbles” established in the region.
18 See Apsara authorities’ website; http://apsaraauthority.gov.kh/?page=front&lg=en. 19 Interview with Nick Ray, Tourism Consultant, Cambodia
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 13 PART II
Focus on green/sustainable recovery: Cambodia has made proactive moves during the pandemic to restore and improve its destinations and introduce green recovery measures. Provincial Cambodian governments, together with local NGOs, have also initiated a coastline clean-up program, and are piloting ecotourism projects in the country’s Protected Areas. If the government adopts policies that make it easy for high-end ecotourism operators to do business in the country, Cambodia can take its place as a premiere regional tourism destination after the pandemic.
KEY RECOMMENDATIONS AND AREAS FOR DONOR SUPPORT
• Utilize the collaboration between public and private stakeholders to formulate a dedicated destination management entity, the establishment of which is critical to promote the country as a tourism destination and to manage its sustainable development;
• Develop a cohesive mechanism among the international development partners within Cambodia that bridges the communication gap and avoids the duplication of infrastructure development efforts;
• Continue the sustainable development of nature-based, ecotourism or adventure-related destinations in the Protected Areas and support the development of coastal tourism products;
• Assist in the implementation of sustainable tourism infrastructure projects in destination areas that provide employment opportunities for local workers;
• Continue to lobby forest-based enterprises and local governments to transition to sustainable forest management and subsequently provide the urgently needed funding for habitat protection, which will enhance these woodlands as potential sites for ecotourism activities.
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 14 PART III: NEPAL
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 15 PART III
COVID – 19’S ECONOMIC AND TOURISM SECTOR IMPACT
Nepal’s tourism industry was among the first to bear the shock of the COVID-19 pandemic. In 2019, the country had 1.2 million international arrivals, leading to tourism revenues of US$2.2 billion (7.9 percent of its GDP) and providing more than one million jobs for local workers (6.7 percent of total employment). 20 At the outbreak of the pandemic in February 2020, arrivals from China, one of its top markets, fell by 70 percent. In March, arrivals effectively dropped to zero as the government stopped issuing entry visas.21 This year, Nepal’s tourism-related revenue is expected to be 80 percent lower than its 2019 levels. The country’s tourism operators are either paying staff a substantially reduced salary or have put them on leave without pay. Airlines, hotels and big operators are now going into debt, while domestic SMEs are gradually going out of business.
EARLY RESPONSE AND PUBLIC HEALTH MANAGEMENT
Nepal registered its first confirmed COVID-19 case on January 23, the government imposed a nationwide lockdown at the end of March. This included a ban on domestic and international flights and the closure of land borders. The government lifted the national lockdown on July 22, but has since reimposed restrictions due to a new spike in COVID-19 infections.
International flights resumed on September 2, 2020, and domestic flights and long-haul public transport services resumed on September 17. While the government has permitted trekking and mountaineering tourism activities for foreign visitors as of October 17, tourism businesses must comply with health and safety protocols, and will be monitored to ensure their compliance.22
The Nepali government announced a stimulus package of US$ 420 million (4 percent of its GDP) as part of its response to the pandemic, and it also introduced policy measures to aid economic recovery. Some of these measures included reductions and deferrals of tax, fees, and interest for travel and hospitality companies.23 However, many companies in the tourism industry report they have not yet received the stimulus benefits promised by the government.
The government plans to establish a monitoring mechanism to oversee training on new hygiene and safety protocols for workers in the tourism sector. Once it does this, the industry will be more prepared to receive international tourists.
20 World Travel and Tourism Council, Economic Impact Report, Nepal 2020 21 Nepal Development Update, World Bank, July 2020 22 https://trtfnepal.com/content/NepalReopensTourism 23 Provision for the budget for FY 2020/2021, Ministry of Finance Nepal
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 16 PART III
SUPPORT FOR ECONOMIC RESILIENCE AND SMES
Institutional setup and incident management system: The government has established the Corona Crisis Management Centre, a committee that aims to prevent the transmission of COVID-19 in Nepal. The Corona Crisis Management Centre is set up under the leadership of the Deputy Prime Minister and consists of representative ministers from eight different ministries.24
Social and fiscal policy responses: The government has three types of fiscal responses to the pandemic. First, the government has increased access to COVID-19 tests, established official quarantine 9 facilities, and waived customs duties for imported personal protective equipment (PPE) such as masks, sanitizer, and surgical gloves. Second, the government has implemented food distribution programs, extended the eligibility period for the Prime Minister’s Employment Program, and provided discounts on utility bills for households throughout the country. Third, it has offered tax filing extensions for businesses in the tourism, agriculture, and other sectors affected by COVID-19.25 The government has also prioritized a subsistence wage support for informal sector workers who lost their jobs due to the pandemic. Workers who participate in public-works projects may receive financial assistance, and may also receive 25 percent of the local daily minimum wage should they choose not to participate.26
Monetary and macro-financial policy responses: Nepal Rastra Bank (NRB), Nepal’s Central Bank, enacted measures to provide liquidity for banks and make credit available to the private sector. These measures included easing regulatory requirements for bank and financial institution (BFI) lending and reducing targeted interest rates. The policy measures also include:
• Concessional loans for small and medium scale enterprises in the COVID-19-affected tourism sector: The bank will create a fund of NPR 50 billion (US$ 430 million)27 to provide loans at the interest rate of 5 percent for the purpose of helping small businesses pay worker salaries
• Discounted electricity fees: A discount of 25 percent on electricity fees for households consuming up to 150 units of electricity in a month, and a discount of 15 percent on electricity fees for individuals consuming electricity up to 250 units of electricity in a month.
• Loan refinancing facility for businesses in COVID-19-affected sectors: A provision was made through the NRB to provide a refinance facility of up to NPR 100 billion (US$ 860 million) at an interest rate of 5 percent for enterprises in the COVID-19-affected agriculture and tourism industries.
• Discounts for domestic airlines: The bank is providing discounts on parking fees, airline licensing renewal fees, flight qualification certification charges, and taxes on aviation fuel
• Concession loans for start-ups: The bank will create a fund of NPR 500 million (US$ 4.3 million) to provide loans at an interest rate of 2 percent to new start-ups.
24 Ministry of Federal Affairs and General Administration, Ministry of Industry, Ministry of Commerce and Supplies, Ministry of Health and Population, Ministry of Agriculture, Ministry of Foreign Affairs, Ministry of Energy, Water Resources and Irrigation, and Ministry of Culture, Tourism and Civil Aviation. 25 Ibid., 13 26 Ibid., 5 27 This will be operated through the NRB.
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 17 PART III
ENHANCED SUPPORT FOR THE TOURISM SECTOR
Employment opportunities and wage support: The Nepali government has introduced a work-for-relief program for informal sector workers affected by COVID-19. Workers who are willing to participate in public works projects initiated by the federal, provincial, and local governments will receive wage support. The government has also introduced a clean- up campaign along the country’s trekking routes to create employment opportunities for trekking guides and porters. However, as of October 2020, the government has neither implemented the wage support program nor a social security fund for workers.
Situation Analysis by the Nepal Tourism Board: The Nepal Tourism Board (NTB) commissioned a situational analysis study to determine the employment and investment loss in the tourism sector, and will use the data from the study to inform their response to the pandemic.
REVITALIZATION POLICIES AND PLANS
Tourism Task Force set up: Nepal has set up a Tourism Recovery Task Force (TRTF-Nepal) as part of its strategy to recover from the pandemic. TRTF-Nepal is a public-private partnership for tourism recovery composed of industry leaders and members of leading global tourism organizations, tourism associations28 and the Nepal Tourism Board. Unfortunately, the initiative has struggled with funding shortages and is currently working with the private sector to retool its strategy.
Hygiene protocols and training: Nepal released the "COVID-19 Safety and Hygiene Protocols for the Tourism Industry” in June. The Protocol includes detailed guidelines for the operation of hotels, restaurants, tourism offices, transportation, packaged tours and adventure activities, and also includes environment-friendly recommendations for sustainable and responsible tourism practices.29
Promotion of domestic tourism and gradual opening of the sector: This June, during the national lockdown, Nepal announced a domestic tourism campaign called Desh Darshan (Visit Your Country).30 Domestic tourism was also a feature of Nepal’s Fiscal Year 2020-21 budget. However, many local travel restrictions are still in place, which thwarts domestic tourism in many regions of Nepal. The country does have plans to gradually open up to business travellers and short-haul regional markets and tap into nature-based and “spiritual market” segments of the international tourism market.
28 Like PATA Nepal Chapter, ATTA (Adventure Travel Trade Association), Nepal based associations - Hotel Association of Nepal, Nepal Association of Tour Operators, Trekking Agents Association of Nepal etc. 29 https://trade.welcomenepal.com/wp-content/uploads/2020/06/Operational-Guideline-with-Health-Protocol-for-Tourism-Sector.pdf 30 https://trtfnepal.com/content/DeshDarshan 31 Budget Speech, Ministry of Finance Nepal, Fiscal Year 2021
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 18 PART III
GREEN GROWTH AND SUSTAINABILITY MEASURES
Enhancing tourism offerings: The government has prioritized the development of nature-based tourism to boost international tourism after the pandemic. National parks and forests, wildlife reserves, protected areas and buffer zones, botanical gardens, and forests are to be developed as nature-based tourism destinations.31
POLICY IMPACT, GAPS AND OPPORTUNITIES
Sector impact: The demand for international tourism in Nepal has dried up due to a rising number of community transmissions of COVID-19 in the country. Despite the re-opening of domestic tourism, it is unlikely that the tourism sector will stay afloat until international tourism returns. Therefore, there is a high probability that many tourism SMEs will go out of business, and the tourism industry will face a significant loss of human capital.
Strength of response: Nepal has allocated roughly 4% of its GDP to respond to the pandemic. The fiscal and monetary measures focus primarily on tax incentives and concessional loans, but do not provide any immediate monetary relief to the majority of tourism companies struggling to operate during the pandemic. Meanwhile, the continuing national lockdown has hampered the government’s implementation of its work pay program for low-wage workers. Since there has also been a substantial delay in delivering the monetary benefits of the stimulus package to the country’s tourism operators, the TRTF-Nepal task force is working with tourism investors to help tourism SMEs secure the capital to pay their expenses and wages for their staff.
Preparedness for recovery: Nepal has taken deliberate steps, such as establishing hygiene protocols, setting up the Tourism Recovery Task Force, and launching a domestic tourism campaign to prepare for the reopening of the tourism sector. The country also upgraded and enhanced tourism products such as heritage sites and trekking trails during the lockdown. However, these steps will not provide immediate relief for a large number of the tourism industry’s businesses.
Focus on green growth/sustainable recovery: Though the Nepali government has announced its intent to develop its nature-based tourism market, green or sustainable strategies are not laid out in its current recovery plan. The government did not recruit the country’s tourism workers to help develop nature-based tourism products within the first six months of the pandemic, and now much of the talent in this workforce has migrated to other sectors in search of employment.
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 19 PART III
KEY RECOMMENDATIONS AND AREAS FOR DONOR SUPPORT
• Technical assistance for the Tourism Recovery Task Force to create innovative, alternative sources of revenue and social media marketing and communication tools for the tourism sector;
• Support the implementation of several pipeline ecotourism and infrastructure projects to provide employment opportunities for tourism workers in destination areas and aid post- pandemic market recovery;
• Support the sustainable development of nature-based, ecotourism or adventure-related tourism destinations;
• Support local governments’ upgrading of ecotourism facilities, management of COVID-19 transmission risks, and destination development.
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 20 PART IV: SRI LANKA
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 21 PART IV
COVID – 19’S ECONOMIC AND TOURISM SECTOR IMPACT
The COVID-19 outbreak brought Sri Lanka’s tourism industry to a halt. Before the pandemic, tourism was a major source of revenue for the Sri Lankan economy, accounting for US$5.6 billion and 12.5% of the GDP in 2018. International tourist arrivals this year are down 46 percent from their 2019 levels, and the post-pandemic decline has jeopardized more than 1.3m formal and informal tourism jobs.32 Meanwhile, lockdown restrictions and social distancing have created severe difficulties for more than 1 million of the country’s small businesses and daily wage earners.
EARLY RESPONSE AND PUBLIC HEALTH MANAGEMENT
Sri Lanka has experience fighting infectious disease outbreaks and has a generally well-functioning healthcare system, which helped the country manage the outbreak of the COVID-19 pandemic.33 Early lockdowns, high testing rates, and effective social distancing measures helped keep Sri Lanka’s infection rate low by international standards. The government also imposed the following travel restrictions to restrict the spread of the virus including indefinite shutdown of the Bandaranaike International Airport (BIA) and an entry ban for all visitors, including Sri Lankan nationals (this ban lasted from March 19 to March 25) and entry restrictions on arrivals at seaports and the nation’s other airports.
The Sri Lankan government has introduced austerity measures along with various fiscal and monetary responses, including a six-month extension on bank loan repayments for borrowers in the tourism, garments, and trade sectors. However, the Tourism and Hotels Association (THASL) has requested additional policy measures34 including: (i) a moratorium on the capital repayment of all loans and overdrafts taken by tourism businesses from banks and leasing companies; (ii) a complete waiver of interest on loans and overdrafts for a period of two years; and (iii) the issue of interest-free loans with lengthy repayment periods to meet the working capital needs of tourism businesses and to fund their salary obligations.
On March 31, the Central Bank of Sri Lanka announced a $250 million refinancing facility for banks. The fund will enable banks to expand their lending capacity to businesses, offer loan repayment moratoriums and provide working capital at four percent interest. Sri Lanka also plans to enter into an agreement with the Reserve Bank of India to execute a currency swap worth $400 million that will boost foreign reserves and ensure financial stability.35
32 SLTDA Tourism statistics- February/March 2020 33 Interview with SLTDA Chairperson Ms. Kimarli Fernando 34 Such measures if enacted by the government could have a negative impact on banks’ balance sheets and lead the financial sector to become more risk averse. 35 https://www.srilankaweekly.co.uk/covid-19-saarc-nations-unveil-stimulus-packages-protect-economy/
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 22 PART IV
SUPPORT FOR ECONOMIC RESILIENCE AND SMES
Institutional set up and incident management system: The President of Sri Lanka has established the Task Force on Economic Revival and Poverty Eradication. The Task Force will have a budget allocated for pandemic containment and mitigation and social welfare spending, and will be supported in part by local and international donations.
Social and fiscal policy responses: The government has allocated up to 0.1 percent of GDP for containment measures as well as US $5 million (0.01 percent of its GDP) to the SAARC (South Asian Association for Regional Cooperation)36 COVID-19 Emergency Fund. It has also allocated cash payments of up to 0.25 percent of GDP for vulnerable population groups, and extended the payment deadlines for several taxes including income taxes and VAT until the end of December 2020. Additionally, the government partially wrote off income tax arrears for SMEs and halted legal actions against delinquent taxpayers. It also announced tax exemptions for sales of PPE and provided for additional energy subsidies, concessionary loans, and food allowances for the poor and disadvantaged. In late April, the government suspended import duties on gasoline and diesel, but it reversed this measure in late June.37
Monetary and macro-financial policy responses: The Central Bank of Sri Lanka (CBSL) has relaxed monetary policy and reduced interest rates by 200 basis points (bps) since March, and lowered the required reserve ratio of commercial banks by 3 percentage points. The CBSL has also reduced liquidity coverage and net stable funding ratios to 90 percent, and reduced the interest rate on advances to banks by 650 bps. Additionally, commercial banks are banned from declaring dividends, sharing buybacks, or increasing payments to directors until the end of 2020. There is a debt repayment moratorium, including a six-month moratorium on bank loans for SMEs in the garment, agriculture, and IT sectors. The debt moratorium for the tourism sector in particular will last until the end of March 2021.38
ENHANCED SUPPORT FOR THE TOURISM SECTOR
Hygiene protocols and training: Sri Lanka Tourism Development Authority (SLTDA) has presented clear operational guidelines that adhere to the guidance from the Ministry of Health (MoH) and the World Health Organization (WHO) for domestic tourism stakeholders to follow. The SLDTA intends for these guidelines to minimize community spread of COVID-19 in Sri Lanka, and seeks to implement them measures in a manner that avoids unnecessary inconvenience to tourists and industry stakeholders.39
Safe and Secure Certification for tourism businesses: The SLTDA has given the auditing firm KPMG- Sri Lanka the authority to conduct assessments of SLTDA-registered tourism providers who seek to obtain the “Safe & Secure” certification. This certificate is a seal of approval that acknowledges that the tourism operator has fully complied with the hygiene and safety protocol standards of the SLTDA. After tourism providers successfully complete the auditing process, they must undergo the final review and certification process of the Sri Lanka Ministry of Health, before they receive their certificate.
36 South Asian Association for Regional Cooperation. 37 https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19#S 38 https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19#S 39 https://sltda.gov.lk/storage/documents/SLTourism-OperationalGuidelines.pdf
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 23 PART III
REVITALIZATION POLICIES AND PLANS
Tourism Development Levy (TDL): Sri Lanka collects a mandatory tourism development levy on every institution licensed under the Tourism Development Act No. 14 of 1968. This levy amounts to one percent of turnover. After the combined shocks of the 2019 Easter Sunday attacks and the COVID-19 outbreak, the Sri Lankan government granted tourism operators a grace period for TDL payments until 30th April 2020.40
Short-term tourism revival plan of tourism: The Sri Lanka Ministry of Tourism is implementing a short-term $1 million action plan to revive the country's tourism industry and enhance tourism products and facilities. Under the plan, the Ministry of Tourism will develop twelve new tourist attraction sites in several districts and several community tourist villages. The ministry also intends to modernize the Negombo, Kandy, and Kalutara railway stations, and will refurbish three old forts in Mannar, Kalpitiya, and Batticaloa in cooperation with the Sri Lanka Archaeology Department. 41
Tourism revival readiness: The Sri Lanka Tourism Development Authority (SLTDA) is collaborating with the UN Development Program (UNDP) on a three-stage strategy of situation assessment, impact assessment and road mapping “to help get the tourism industry back on its feet".42 The first stage of the strategy entails changes to visa requirements to include mandatory testing, adjustments to immigration processes, and certification of hotels to ensure the health and safety of tourists, employees and the local community. Second will be on enhancing tourism infrastructures like rest spots, toilets etc. and third will be on diversifying tourism offers in collaboration with the provinces.
Skills training programs for SMEs: SLTDA and the Department of Trade Commerce and Tourism of the Central Provincial Council are conducting a training program for tourism industry operators and entrepreneurs and youth in Sri Lanka’s Central Province. The program’s goal is to enhance the capacities of SMEs along the tourism supply chain and encourage students and young people to take advantage of employment opportunities in the tourism sector.43
Multipurpose travel app for visitors: The SLTDA has developed a multipurpose travel app, called Travel App, to ensure the safety of international visitors. The all inclusive Sri Lanka Tourism app will help track down the movements of the travellers entering the country post COVID-19, provide destination information and will be linked to online visas after the cabinet approval.
40 https://sltda.gov.lk/tourism-development-levy 41 https://www.thebridgechronicle.com/world/post-covid-19-travel-sri-lanka-ready-short-term-plan-revive-tourism-55152 42 https://travel.economictimes.indiatimes.com/news/destination/international/sri-lanka-tourism-readies-for-post-covid-19-revival/75248084 43 https://www.sltda.gov.lk/tourism-news/Sri-Lanka-Tourism-is-set-to-celebrate-World-Tourism-Day-2020-under-the-theme-%E2%80%9CTourism- and-Rural-Development%E2%80%9D-from-25th-to-27th-September-in-Kandy.
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 24 PART III
GREEN GROWTH AND SUSTAINABILITY MEASURES
Tourism focus in the National Policy Framework: Sri Lanka plans to utilize the current tourism downturn to redesign its tourism industry to be more environmentally-friendly. The National Policy Framework indicates the country seeks to attract six million international visitors by 2025, and lists several priorities for destination and product development. These priorities include identifying new attractions for foreign tourists, setting up new conference facilities, easing regulations to promote investments into the tourism sector, improving the quality of airports and other travel hubs, and enhancing tourist facilitation centers in major cities to streamline immigration and emigration processes.44
Sustainable destinations: Sri Lanka is supporting its sustainable tourism strategy with specific projects such as the National Sustainable Tourism Certification Scheme,45 national campaigns to make certain tourist destinations plastic-free, and environmental management measures including enhancing sanitation standards at tourism sites.
POLICY IMPACT, GAPS AND OPPORTUNITIES
Sector Impact: The Sri Lanka tourism industry, which had generated annual revenues of US$ 5.6 billion before the COVID-19 pandemic, came to a standstill this year. The pandemic was the second major recent interruption to the domestic tourism sector, following the Easter Attacks of 2019. To support its foreign currency reserves, Sri Lanka agreed to a US$ 400 million currency swap with the Reserve Bank of India. Now, due to a meager economic relief package, the livelihoods of tourism SMEs and the majority of the sector’s workers are now in question.
Strength of response: At the outbreak of the pandemic, the Sri Lankan government issued clear guidelines regarding quarantine protocols and visitor registration to help them mitigate community transmissions of COVID-19. Although Sri Lanka’s fiscal pandemic response was the smallest in the region, the government did manage to effectively implement measures such as food distribution and cash transfers to workers. Tourism associations, however, still request that the government enact more ambitious measures, such as an extension on the moratorium on loan repayments and overdrafts for tourism businesses, a complete waiver of interest on loans and overdrafts for a period of two years, and the issue of interest-free loans with lengthy repayment periods.
Preparedness for recovery: Sri Lanka seems to be well-prepared for the recovery, and has a clear three-stage strategy to reopen the international tourism sector safely. The government utilized the lockdown period to upgrade hygiene protocols in tourism destinations, introduce safety certifications for tourism providers, and promote the country as an international tourism destination. Because of its ability to contain the pandemic, its history of recovering from other crises, and its popularity as an international tourism destination, Sri Lanka is confident its tourism sector will make a strong recovery after the pandemic. Since the Sri Lanka wellness industry is well-established, but not as popular as the corresponding industries in Thailand and India, Sri Lanka intends to promote its wellness industry on the international market as a means of drawing in more tourists.
Focus on green/sustainable recovery: Sri Lanka’s National Policy Framework outlines its intention to make the tourism industry more environmentally-friendly during the pandemic, and the country will identify and develop new tourism products to attract six million international visitors by the year 2025. Sri Lanka also aims to tap into the sports tourism and adventure tourism sectors as part of its sustainable recovery by organizing mega sports events, including international cricket matches, in the country. The SLTDA expects the diversification of tourism offerings to minimize pressure on the country’s other tourism assets.
44 https://ceylontoday.lk/news/developing-human-resources-for-post-covid-tourism 45 https://www.sltda.gov.lk/sustainable-tourism
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 25 PART III
KEY RECOMMENDATIONS AND AREAS FOR DONOR SUPPORT
• Facilitate SLTDA’s development of a comprehensive travel app, safety certifications for tourism operators, and diversification of tourism destinations;
• Provide technical assistance for SLTDA’s work in Sri Lankan provinces and their capacity- building exercises with provincial authorities, in accordance with the National Policy Framework;
• Support Sri Lanka’s pivot into the international wellness tourism sector; and
• Fund social protection schemes and wage support programs for unemployed informal tourism sector workers.
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 26 PART V: THAILAND
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 27 PART V
COVID – 19’S ECONOMIC AND TOURISM SECTOR IMPACT
The economic impact of COVID-19 has been severe due to Thailand’s openness to trade and exposure as a global tourism hub. COVID-19 led to a 12.2 percent contraction of the Thai economy,46 year-on-year, in Q2-2020.47 The GDP and the economy are projected to contract by as much as 8 percent overall in 2020 , the sharpest projected declines in the East Asia and Pacific Region.48 The tourism sector, which accounts for close to 15 percent of total Thai GDP, has been severely impacted due to the near cessation of international tourist arrivals since March 2020. With international tourist arrivals to Thailand (through March) down nearly 80 percent since January and a state of emergency first instituted on March 26th extended to the end of September, tourism, as a highly labor-intensive service sector that is estimated to employ 21 percent of the country’s workforce (WTTC, 2020)49 , has shed a disproportionately high number of jobs relative to other sectors in Thailand.
The outbreak has had a particularly severe impact on the labor market. Tourism jobs are at particular risk because of social distancing measures, leading to a sharp decline in income for tourism workers (especially those living below USD 5.5 per day in PPP terms). As per the National Economic and Social Development Council, tourism accounts for about 30% (2.5 million) of the estimated 8.4 million jobs lost in services and manufacturing.50
EARLY RESPONSE AND PUBLIC HEALTH MANAGEMENT
In response to the outbreak, Thailand has enacted several public health interventions, travel bans, and other social distancing restrictions to contain the COVID-19 outbreak. A state of emergency was enacted for three months, from March 26 to June 30, 2020, and the government also mobilized a series of fiscal, monetary, and cash grants/subsidy programs to support the tourism industry. Additionally, the government has established incentive-based training programs for tourism workers.
Thailand has allocated 2.2 trillion-baht (12.9 percent of its GDP) to COVID-19 relief and recovery efforts. It has a major focus on providing relief to vulnerable households and affected firms. It includes cash transfers to households and support for local infrastructure projects (5.9 percent of GDP). Tax relief and debt restructuring for firms and households are also included in the package. Moreover, special SME lending programs have been launched to provide liquidity support to the firms.
Thailand is reopening its borders in phases. In the first phase, the government will allow business travelers, investors, skilled workers, people with Thai family members, and teachers into the country.
In the second phase, the country will be open for medical tourism travelers, and the last phase is reserved for general tourists.
46 https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19#T 47 https://www.adb.org/countries/thailand/economy 48 “Global Economic Prospects: June 2020”, World Bank, June 2020. 49 https://www.unwto.org/news/covid-19-world-tourism-remains-at-a-standstill-as-100-of-countries-impose-restrictions-on-travel 50 https://www.bangkokpost.com/business/1925808/nesdc-14-4m-workers-at-risk
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 28 PART V
SUPPORT FOR ECONOMIC RESILIENCE AND SMES
Institutional set up and incident management system: The Thai Government was quick to address the COVID-19 threat with the establishment of a close inter-ministerial cooperation mechanism led by the Prime Minister with members from the Ministry of the Interior, the Ministry of Public Health, the Ministry of Foreign Affairs, the Ministry of Commerce, and the Ministry of Defence.51
Social and fiscal policy responses: The COVID-19 response packages included policy measures for health-related spending, support for vulnerable households, and financial relief to SMEs and large firms to minimize cash flow constraints and ensure job preservation.
• Assistance for informal workers, farmers, and entrepreneurs affected by COVID-19 (includes 5,000 baht per month per person for three months to about 14 million non-farm workers outside the social security system and 10 million farmers); • Lower water and electricity bills and reduced social security contributions; • Soft loans to businesses from specialized financial institutions and the Bank of Thailand; • Bond stabilization fund to provide liquidity to firms; • Regulatory forbearance while balancing risk disclosure and supervisory expectations;
Cash transfer to vulnerable groups: The government has created a cash transfer program providing THB 5,000 (US$ 160) per month for 3 months to informal off-farm workers: Support to vulnerable households (living below US$ 5.5/day in PPP terms and subject to high risk of falling into poverty). This includes support to informal off-farm workers, on-farm workers, and formal workers.
Cash transfer to formal workers: Employees furloughed because of COVID-19 are eligible to receive 62 percent of their daily wages up to THB 15,000 (US$ 480) from the Social Security Fund for up to 90 days. Those laid off are eligible to receive up to 70 percent of their daily wages up to 15,000 baht for up to 200 days.
Liquidity support for vulnerable firms/SMEs: The government took policy decisions to implement soft loans and defer or restructure debt obligations. These measures addressed immediate liquidity challenges, helped minimize business closures, and prevented widespread worker layoffs. The government approved 150 billion baht (US$ 4.8 billion) in low-interest loans from the Government Savings Bank (GSB), 30 billion baht (US$ 1 billion) in loans from the Social Security Office (SSO), and 500 billion baht (US$ 16 billion) in loans via a dedicated SME lending program among commercial banks who are also giving certain eligible SMEs a six-month moratorium on principal and interest payments.
51 http://www.xinhuanet.com/english/2020-03/27/c_138920748.htm
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 29 PART V
ENHANCED SUPPORT FOR THE TOURISM SECTOR
Thailand is planning to offer a special tourist visa (STV) for international visitors. It will permit visitors to stay in the country for 90 days and it may be extended twice, each for a further 90 days. The visa will cost THB 2,000 (US$ 60) per 90-day extension. The visa will be available until September 30, 2021.52 Applicants for the visa will need to book a hotel or private accommodation for the full 90 days in order to qualify, and they also must agree to a 14-day quarantine period upon arrival in Thailand.
Promotion of domestic tourism: The Thai government has deployed a US$ 722 million subsidy to spur domestic travel.53 It will cover up to 40 percent of certain travel costs for up to as many of 5 million domestic tourists. These tourists must register their details with the government in order to participate, and 4.65 million Thai citizens have already done so. In addition, the government approved a new THB 51 billion (US$ 1.6 billion) shopping subsidy package for welfare cardholders on September 22.54 The government has also offered special schemes for medical personnel and healthcare volunteers valued at 2.4 billion baht (US$ 7.6 million), which provides for free hospital visits, subsidies for hotel rooms, meals, and transport to work areas.
Pilot project ‘Safe and Sealed’: ‘Safe and Sealed’ was the government’s plan to open Phuket for international tourism on October 1st. Phuket would be open to tourists willing to quarantine for a 14- day period upon their arrival in Thailand. However, the idea faced resistance and was later dropped after some Phuket locals expressed their opposition.55
REVITALIZATION POLICIES AND PLANS
Reopening of the economy: The partial August reopening allowed entry to certain non-Thai visitors, including medical tourists, film crews, Thailand Elite card56 members, foreigners with work permits, foreigners married to Thai nationals, and foreigners studying at educational institutions who were willing to undergo a mandatory 14-day quarantine period. Diplomats are not required to enter quarantine, although they must undergo a COVID-19 test at the airport.
Special tax relief measures for businesses: Thailand has introduced a Coronavirus Tax Relief package for private businesses. The income withholding tax was cut from 3 percent to 1.5 percent for six months from April to September 2020, and the package also doubled the tax benefits for investments in long- term mutual funds.57 Thailand also extended the personal income tax filing deadline from June 30 to August 31.
Firm level support: The government also provided grants and subsidies to cover for professional cleaning and sanitization expenses and rolled out expanded training programs for tourism industry workers, which could help strengthen furloughed employees’ skills and their market re-entry prospects. The measures allow tourism firms to furlough workers temporarily (rather than firing them) to enter them into training programs, which are either fully or partially subsidized.
52 https://news.cision.com/tourism-authority-of-thailand/r/thai-cabinet-approves--special-tourist-visa--for-long-staying-visitors-,c3200228 53 Ministry of Finance, Thailand 54 ibid., 34 55 https://www.thaipbsworld.com/new-grand-plan-to-bring-tourists-back-to-thailand-in-fallout-of-covid-19/ 56 The Thai government initiative membership program run by Tourism Authority of Thailand (TAT) with benefits for immigration, leisure, business etc. 57 https://news.bloombergtax.com/daily-tax-report-international/thai-cabinet-approves-phase-one-of-covid-19-stimulus-package
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 30 PART V
GREEN GROWTH AND SUSTAINABILITY MEASURES
Public Investment Program: A THB 400 billion (US$ 13 billion) public investment program has been launched to help rehabilitate the economy through projects that create jobs, build local infrastructure, and strengthen local communities. 58
POLICY IMPACT, GAPS AND OPPORTUNITIES
Sector Impact: The tourism sector that accounts for 15 percent of the Thai economy and employs 21 percent of the workforce has lost 80% of its expected business since January 2020. The outbreak has had a severe impact on the economy, and tourism jobs are at particular risk, leading to a sharp decline in labor income for tourism workers. The government declared a state of emergency that lasted from March 26 through June 30, 2020, and social distancing measures led to sudden loss of income for more than 2 million of the country’s tourism workers. Inbound operators have been hard hit and have been forced to reduce operations by 50 to 70%; many have even closed down.
Strength of response: Thailand’s 2.2 trillion baht (approximately US$ 7 billion and 12.9% of GDP) package is a relatively strong response and a necessary stimulus for the economy. The cash transfer scheme for informal workers (which amounted to monthly assistance of 5,000 baht) benefitted almost 24 million workers. The fiscal and monetary policy responses of tax exemptions, loan deferrals, concessionary loans, and the SME lending program were critical for keeping the tourism sector afloat. Grants and subsidies for sanitization and training programs for tourism workers have helped retain some of the human capital in the sector. However, these measures, along with government tax rebates, can only mitigate a small part of the economic damage the Thai tourism industry has suffered.
Preparedness for recovery: The government selected domestic tourism as the starting point for tourism recovery in Thailand, and its Thai baht 22.5 billion (US$ 722 million) domestic tourism stimulus package is expected to fuel growth in this sector. Thailand has already launched an elaborate reopening plan to allow certain non-Thai visitors to enter the country, and a special tourist visa (STV) program for long-staying visitors (a program that is unique to the region) may allow recovery to begin in a controlled manner and serve as an example to kickstart recovery in other markets.
Focus on green/sustainable recovery: As various destinations within Thailand have had a negative impact due to high numbers of tourists, it was already considering plans for green and sustainable development to revive affected destinations before the pandemic. Additionally, the Thai baht 400 billion (US$ 13 billion) public investment program to help rehabilitate the economy will help address the critical issues of climate change, environmental degradation, and community benefit sharing during the recovery efforts.
58 Ibid., 41
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 31 PART V
KEY RECOMMENDATIONS AND AREAS FOR DONOR SUPPORT
• Develop programs to retain human capital within the tourism sector, as diversion to other sectors would significantly delay the sector’s recovery in the short to medium term;
• Strengthen the coordination mechanisms between private sector actors to facilitate their cohesive efforts to address the crisis and develop a long term tourism strategy;
• Continue support for the development of nature-based ecotourism and adventure-related destinations, thereby helping address Thailand’s critical challenges around over tourism and environmental degradation;
• Develop partnerships to augment and support Thailand’s 400-billion-baht (US$ 13 billion) public investment program to assist infrastructure development projects that provide employment opportunities for local workers.
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 32 PART VI: VIETNAM
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 33 PART VI
COVID – 19’S ECONOMIC AND TOURISM SECTOR IMPACT
As a direct impact of COVID-19, this year Vietnam’s GDP dropped to its lowest level since 2000 (1.8 percent year- on-year), 59 mainly due to a substantial slowdown in manufacturing and a contraction in the transport, tourism, and hospitality industries. Tourism has been one of the hardest-hit sectors, with foreign arrivals declining by almost 80%, and tourism revenue falling by more than 50 percent in the first half of the year. However, Vietnam quickly brought the pandemic under control, and this allowed domestic tourism to restart by mid-April in some provinces, and some domestic tourism destinations witnessed a 120% growth in attendance. The government then weathered a second outbreak in September, which fueled additional domestic market growth as well as some outbound travel.
Vietnam's domestic and international tourism sectors grew rapidly over the past decade, with 18.5 million foreign tourists visiting the country in 2019 alone.60 The pandemic has brought this booming industry to a halt; the Vietnam National Association of Tourism (VNAT) estimated that the country will lose up to US$7.1 billion in tourism revenue this year.61
EARLY RESPONSE AND PUBLIC HEALTH MANAGEMENT
Through a series of stringent control measures to contain the pandemic, Vietnam was able to keep COVID-19 cases to a regional low. While most businesses have reopened, many public gathering places, including bars, dancing clubs, and karaoke parlors remain closed. The first commercial international flight landed in Vietnam on September 25th, and since then authorities have allowed limited international travel to select regional destinations while enforcing a mandatory 14-day quarantine period for international arrivals.
Vietnam allocated VND 686 trillion (US$ 29.5 billion or nearly 9 percent of its GDP) to a stimulus package to combat the pandemic, and it has so far spent 47 percent of this budgeted amount.
The government is pursuing fiscal measures, including the deferment of VAT, Corporate Income Tax (CIT), and Personal Income Tax (PIT) payments until the end of the year, and deferring land rental fees by 5 months. Following the lead of the Central Bank, private financial institutions are also offering fee reductions. Moreover, businesses affected by the pandemic are eligible to receive concessional loans from the Vietnam Social Policy Bank (VSPB).
59 Recent Economic Development of Vietnam, World Bank July 2019 60 Ibid., 58 61 http://www.vietnamtourism.gov.vn/index.php/items/34268
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 34 PART VI
SUPPORT FOR ECONOMIC RESILIENCE AND SMES
Institutional set up and incident management system: After the outbreak, Vietnam established a National Steering Committee chaired by a Deputy Prime Minister. The Vietnamese government responded to the pandemic in a planned and coordinated manner. Its relative success in preventing widespread transmission has been attributed to its timely and effective measures. Centralized quarantine facilities and social isolation measures introduced to combat local outbreaks were recognized as being effective.62
Social and fiscal policy responses: The government introduced a fiscal support package of VND 284 trillion (equivalent to US$ 2.24 billion or 3.6 percent of GDP) to support the economy. Newly-approved measures include cutting registration taxes by 50 percent and deferring excise taxes on domestically produced cars, lowering land rental fees by 15 percent, reducing the environmental protection tax on jet-fuel by 30 percent from August to December 2020, cutting the CIT rate for small and micro firms by 30 percent, and increasing PIT deductions.
Monetary and macro-financial policy responses: The State Bank of Vietnam (SBV) has cut its benchmark policy rates by 50 base points (bps) for the second time in the year after an initial reduction of 50-100 bps on March 17. The short-term deposit rates cap was cut further by 30-50 bps, while the short-term lending rate cap for priority sectors was trimmed by an additional 50 bps.63
The SBV has also issued guidelines to commercial banks to reschedule loans, reduce/exempt interest, and provide loan forbearance. As of mid-September, banks have registered a credit package totalling VND 300 trillion (US$ 13 billion, about 3.8 percent of GDP) at lower interest rates, and supported nearly 1.1 million customers with outstanding loans by rescheduling repayments, reducing interest on existing debts, and extending new loans. Banks also cut several securities service fees, and extended exemptions through June 30, 2021.64
Support to SMEs: The government launched a US$ 2 billion SME support program that will cover a 5-month payment extension for VAT, corporate income taxes, personal income taxes, and land-use fees. Half of this budget (US$ 1.16 billion) will be utilized for tax break programs. The other half of the financial assistance includes a 2 percent reduction in interest rates on loans from the SME Development Fund; a 10 percent cut in electricity prices; and a 20 percent price discount entitlement for hotels and tourist accommodations that have been used for quarantine purposes. The government also supports businesses, including those in the tourism industry, to cover the employees’ wages.65
62 https://www.mof.gov.vn 63 Monetary Policy: State Bank of Vietnam: www.sbv.gov.np 64 Covid-19 Policy Note Vietnam: World Bank June 2020 65 Ibid.,48
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 35 PART VI
Direct cash transfer to workers and households: Based on Resolution 42/CP66, the government also approved a cash transfer package worth VND 36 trillion (0.5 percent of GDP) for affected workers and households with monthly cash transfers provided for no more than 3 months from April to June. More than 10 percent of the population is estimated to have benefited from this program.67
REVITALIZATION POLICIES AND PLANS
Clarifying visiting protocol for international visitors: Vietnam has introduced a sound health protocol for travellers, requiring a medical check and 14-day centralized quarantine for all inbound travellers. Meticulous contact tracing of infected individuals and indirect contacts has been enacted.68
Advocacy for enhanced support to the tourism industry (tax exemption): The Ministry of Tourism has asked the government to provide tourism companies with more simple procedures that will make it easier for them to access the government's 62 trillion VND (2.6 billion USD) support package. As most tourism businesses are not currently making any income, the Ministry has also asked for an extension on loan interest payments until December 2021, along with a reduction of the VAT rate from 10 percent to 5 percent through until the end of 2021.69
ENHANCED SUPPORT FOR THE TOURISM SECTOR
Boost to domestic tourism: The Ministry of Tourism announced a national campaign “Vietnamese people travel in Vietnam” which debuted in early May, and major airlines resumed their operations. Many cities created tourism stimulus programs to help local companies provide discount packages to domestic tourists. Many companies have recently launched various travel packages and promotions to attract the domestic market.70 Similarly, there are local level initiatives to promote domestic tourism, including “7 Destinations - Safe and Happy Travel” and “Hello Ho Chi Minh City” campaigns aimed to accelerate tourism recovery in the country.71
GREEN GROWTH AND SUSTAINABILITY MEASURES
Tourism Development Fund: Vietnam also plans to fulfil its rebuilding efforts by setting up a state- owned Tourism Development Fund under the Ministry of Tourism. The fund, under the aegis of the Ministry of Culture, Sports, and Tourism, will be a limited liability company and will develop plans, promote tourism, and support the overall growth of the tourism sector. The fund basket will total VND 300 billion (US$12.9 million) of chartered capital, and will be financed by the state budget for the first three years following its establishment.
66 https://thuvienphapluat.vn/van-ban/EN/Lao-dong-Tien-luong/Resolution-42-NQ-CP-2020-assistance-for-people-affected-by-Covid-19- pandemic/439660/tieng-anh.aspx 67ibid., 48 68 Vietnam Case Study, PATA 2020. 69http://www.vietnamtourism.gov.vn/english/index.php/items/15234 70 Ibid.,48 71 https://en.nhandan.org.vn/travel/sightseeing/item/9137502-hello-ho-chi-minh-city-communication-campaign-launched.html
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 36 PART VI
POLICY IMPACT, GAPS AND OPPORTUNITIES
Sector Impact: Vietnam witnessed a drop of 49.5% (US$7.1 billion) in tourism sector revenue during the first half of 2020. Heavy restrictions on international and domestic travel led to a drastic slowdown of the tourism economy. Concurrently, the domestic economy suffered from a nationwide lockdown that went on for several weeks.
Strength of response: The Vietnamese government had a strategic response to the pandemic. After its initial measures to contain the pandemic, it pursued aimed to achieve positive growth despite the challenging year. It has followed sound fiscal and monetary policies to achieve positive growth despite a challenging year. The government increased domestic investments by Vietnamese firms and corporations, encouraged foreign investment, and spurred demand for domestic tourism.
Vietnam combatted the pandemic by allocating 9% of GDP, the largest response, by proportion, in the region. A high-level national committee set up to manage and respond to the crisis recommended a series of fiscal policy decisions to support the economy, including tax deferments and fee reductions. The Central Bank also issued directives for salary support and cash transfers for affected workers and households, which were given to almost 10 percent of the population. The policy was implemented remarkably well, with 36% distributed within only a few months. The government also supported SMEs with deferrals, concessions, tax incentives, and wage support during the crisis.
Preparedness for recovery: Vietnam’s tourism strategy, until international tourism resumes, is to stimulate domestic tourism. The target is to increase the share of domestic tourism up to 70% from the current 45% share. To achieve this, with the gradual opening of the economy since September, a number of support measures are put in place. There are stimulus packages for local companies to support domestic tourism, and the government has launched campaigns to promote domestic tourism. To prepare for the opening of regional travel bubbles, the country is planning to streamline visa procedures, set up safe flight routes, shorten the quarantine periods, and implement more testing facilities. Additionally, training and capacity development programs could help make the sector more resilient against possible future outbreaks.
Focus on green growth/sustainable recovery: Vietnam has faced issues related to over tourism and environmental degradation in the recent past, and it can mitigate these issues by designating some tourist destinations as sustainable areas and aligning its policies to achieve the United Nations Sustainable Development goals. While the government plans to activate a Tourism Development Fund to promote sustainable tourism after the pandemic, it has yet to come up with a long-term post- pandemic recovery strategy.
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 37 PART VI
KEY RECOMMENDATIONS AND AREAS FOR DONOR SUPPORT
• Support the Vietnam government and the VNAT in developing sound policies for green travel that encourage environment conservation, green growth and sustainable tourism recovery, thereby addressing the problems of over tourism and relieving pressure on natural assets;
• Support the implementation of Vietnam’s Tourism Development Strategy 2030 by aligning SMEs and tourism funds to focus on more effectively managing natural resources, protecting the environment and biodiversity, actively adapting to climate change, and ensuring national defense and security;
• Provide technical assistance for VNAT’s research and surveys that will help determine levels of investment and unemployment in SMEs in the tourism sector.
COVID-19 AND THE TOURISM SECTOR: A COMPARISON OF POLICY RESPONSES IN ASIA PACIFIC 38 CONTRIBUTORS
PROJECT PARTNERS
PROJECT FACILITATOR: Founded in 1951, the Pacific Asia Travel Association (PATA) is a not-for profit association that is internationally recognized for acting as a catalyst for the responsible development of travel and tourism to, from and within the Asia Pacific region.
SUPPORTING PARTNER: Financial support was provided by the Global Initiative on Disaster Risk Management (GIDRM), a project implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and commissioned by the German Federal Ministry for Economic Cooperation and Development (BMZ). GIDRM supports international and national, governmental and non-governmental stakeholders in their efforts to strengthen coherent planning, implementation and reporting on disaster risk management. GIZ is a public-benefit federal enterprise and supports the German Government and a host of public and private sector clients in a wide variety of areas, including economic development and employment promotion, energy and the environment, and peace and security.
PROJECT ANALYSTS: Founded in 2013, Clickable Impact Consulting Group leverages expertise in integrative project design, communications, behavior change marketing, public sector engagement, and partnerships to magnify sustainable development impact in Asia and the Pacific.
Project Advisors Trevor Weltman, Chief of Staff, PATA Graham Harper, Director - Sustainability & Social Responsibility, PATA
Project Sponsor Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
Project Authors Sumit Baral, Senior Tourism Consultant, Clickable Impact Consulting Group Jason Lusk, Managing Partner, Clickable Impact Consulting Group
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