As Southeast Asia begins to recover from the pandemic’s effects on international travel, many countries in Southeast Asia have created new visas to attract foreign workers and digital nomads. Indonesia’s digital nomad visa allows foreign nationals to live in Bali tax-free for up to five years. Malaysia launched its own digital nomad visa that will allow a 12-month stay. And Thailand has also joined the game with a 10-year long-term residence (LTR) visa aimed at wealthy foreigners in the tech sector.
The benefits expected by host country governments are clear. Tourism has been such a large part of Southeast Asia’s economy — representing as high as 20% of pre-pandemic GDP in the case of Thailand. With the hits to tourism suffered over the last three years, governments are looking for ways to prop up the economy with high-spending travelers and create jobs. Indonesia’s tourism minister said that the five-year visa will help create over 1 million jobs, while in Thailand, the government hopes the LTR visa can bring in 1 million wealthy and talented foreign workers in the next five years. The Thai government also estimates that the new LTR scheme will bring in around US$25 billion over the next decade.
But most discussions of digital nomad policies lack criteria beyond economic growth for evaluating them. Ideas like fairness, inequality, and the common good are rarely heard. A more complete picture of the programs would include the detrimental effects they may have on their host countries.
Taxes
These visa schemes come with all sorts of tax benefits that are attractive to foreign nationals. The 3.6 million nomads that Indonesia hopes to attract to the shores of Bali will not have to pay tax on their overseas income. In Thailand, those on the LTR will enjoy a flat, reduced tax rate of 17%.
But if these workers are earning a lot of money, especially by local standards, from their remote jobs, is it fair that they are paying less in tax to resource-starved governments? While an Indonesian would be taxed 30% if they earned more than 500 million rupiahs per year (US$33,000), a foreign worker would earn their income tax-free. In Thailand, it’s a similar situation. Foreign workers would only need to pay 17% as opposed to the 35% tax that a Thai would pay on earnings of more than 5,000,000 baht (US$130,000) per year. In the long term, Thai nationals would generally bear a greater responsibility and burden for paying government taxes.
Perpetuating global and local inequality
Another issue is that these visa schemes generally privilege only the wealthy and are exacerbating class and income inequality at a global and local level. On one hand, these schemes are geared towards attracting foreigners from more developed countries. Thailand is targeting specific groups in Europe and expects that 50% of the LTR applications will come from Europe. But what about skilled digital nomads from other countries who want to move but cannot fulfill the income threshold? And not just that, but what about blue-collar workers who have the potential to also contribute to the economy?
On the other hand, there will also be economic impacts on the local residents. If digital nomads with high spending power enter a country, they could also drive up the price of basic goods and necessities in that country. For example, in Mexico, the prices of rental houses and vacation homes have increased by 20% this year. Could that foreshadow what may become of Southeast Asia?
In some ways, this is already happening. A study investigating tourism gentrification in Bali (2021) finds that “the gentrification of tourism causes land and property rental values to increase.”
Another example is the rent prices in Singapore. New expatriates, such as those fleeing Hong Kong, are partly responsible for driving up the demand in the rental market in the city-state. This year, properties leased by expats are rising on average by 20%-40%. What has happened in Singapore could very well happen in Bangkok and other Southeast Asian cities, displacing locals from their homes because they simply can’t afford it anymore.
Shifting cultural fabric
Not only can we expect an increased economic burden on local residents, but cultural shifts and commodification are also happening to cater to visitors.
Cities and places are all too happy to adapt to cater to the preferences of foreign digital nomads. Having grown up in Bangkok, I see the changes every time I’m back. A local mom-and-pop shop goes out of business and a glamorous air-conditioned cafe with English menus takes its place. Through urban sprawl, the city grows larger and larger and the sphere of this changing culture expands. Where my mom lives, which used to be the end of the train line, is now considered the “city” and lots of restaurants nearby that cater to a Western clientele can be found in the area.
As tourism increases, destinations become gentrified and tourist facilities are constructed to accommodate newcomers. This change can erase the local culture and way of life. The case of Bali shows friction between locals and newcomers; there is resentment from local residents that digital nomads are taking over the island and some locals see tourism of their culture (such as temples and rituals) as “experiences to be bought and sold.”
How to balance protecting their citizens and economic revival?
The increase in global movement that emerged after the pandemic can and will be used as a means of economic recovery in Southeast Asian countries. But as the digital nomad wave crests, governments should also consider the multi-layered implications that their schemes bring, namely, the impact on their country’s culture and people.
Is there a way to promote and share their culture in a way that is less commercial and commodified? Or is there a way to incentivize and protect long-term residents from increasing prices and gentrification?
There is no easy answer, but finding a way to balance economic recovery and the needs and interests of their citizens will be the key as we enter an era of increased digital nomadism.
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TNL Editor: Nicholas Haggerty (@thenewslensintl)
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