Sin Chew Daily
The impact of COVID-19 on the economy of China and the world is hard to estimate, and naturally Malaysia will not be exempted given the fact much of the country's economy is closely linked to China's. Many local businesses, in particular those dependent on Chinese supplies and demands, are beginning to feel the chill. It is imperative that the government come up with effective measures soonest to mitigate the coronavirus' impact on the local economy.
China is also one of the biggest sources of tourist arrivals to Malaysia. With Chinese tour groups canceling their trips, those in the tourist industry including travel agents, hoteliers and transport service providers will be the hardest hit. The country has set a goal of 30 million tourist arrivals for Visit Malaysia Year 2020, with approximately 10% from China alone. Following the rapid spread of the coronavirus, many travel-related businesses have been caught unprepared. It has been reported that nearly 5,000 Chinese tour groups have canceled their trips to Malaysia, and this translates to roughly RM440 million in lost tourist revenue between late January and March.
Chinese nationals are not the only ones canceling their trips, as some countries have already issued travel advisories to their citizens to stay away from Asian destinations. It is therefore an uphill task for the tourism ministry to woo tourists from other countries to offset the sharp decline in Chinese arrivals.
The biggest problem encountered by the operators now is liquidity because large sums of cash have been disbursed to hotels and transport service providers and they urgently need cash flow now to stay afloat, without which many companies may have to start laying off their workers very soon.
These companies hope to keep their workers in employment through this crisis. The months of July and August are traditionally peak summer holiday season for visitors from Greater China and it is generally believed this whole outbreak will have been put under control by then. Nevertheless, before that happens, travel-related operators still need government help to weather the crisis.
Distress signals have also been sent out by companies in the transport and hospitality industries, and those in these two sectors have pinned their hopes on a stimulus plan from the government, hopefully by this week, to cope with the impact from the coronavirus outbreak. It is hoped that the economic stimulus package will produce the desired effects within three to six months. Meanwhile, they also hope the government will lower the Human Resources Development Fund (HRDF) and EPF contribution rates, as well as easier loans from banks and more substantial incentives to help them promote their products and services. They also urge the government to minimize the tourism tax for the time being.
In addition to the tourist industry, the coronavirus outbreak also squeezes the supply of raw materials for local manufacturers, especially in the automotive and E&E industries. Malaysian manufacturers in general rely heavily on Chinese imports, and if the crisis extends beyond the first quarter, global supply chains will take the brunt given China's dominant position in global supply chains and the fact alternative sources may not come by readily.
The effects of the outbreak on the country's economy are far-flung, and relevant government departments must introduce effective measures to arrest the downward spiral, in particular the finance and economic affairs ministries. In the meantime, the domestic trade and consumer affairs ministry must also take the preemptive move to ensure steady supply of imports in averting possible shortage of daily necessities and the ensuing inflationary pressure. The government can no longer afford to be hesitant and inert. The country's economy has been underperforming for over a year now and the viral outbreak will only make things much worse. It's time for the government to do something!