Get Wonderful, Come to Indonesia!

Attracting foreign and domestic investment in Indonesia’s tourism sector is a key driver of economic growth

By Karmila Bain
Tuesday, May 16, 2017

Transforming Indonesia’s extraordinary beauty, biodiversity and range of cultures into a powerhouse tourism sector and major driver of economic growth has been a central part of President Joko Widodo’s vision for Indonesia since he first took office. The country’s current slogan, “Wonderful Indonesia,” seeks to capture the idea with marketing and national branding.

The president’s vision translated into Presidential Regulation No 3 Year 2016, which lined up tourism, food, energy, maritime and industrial and special economic zones as priority sectors for development. In 2016, tourism was one of the sectors opened to 100 percent foreign investment under the revised Negative Investment List (DNI), with officials saying it has the potential to spur growth quickly and to become a magnet for small and medium enterprises at the local level.

As a result, the government has designated ten “new Balis” for special attention and development. These include Lake Toba in North Sumatra, Bangka Belitung, Labuan Bajo in East Nusa Tenggara, Morotai in the Malukkus and parts of Sulawesi.  The government is encouraging more air routes and other incentives for these areas and also actively looking for investors. 

Manado, in North Sulawesi, will be the site of an International Conference on Tourism Investment May 23-24 co-sponsored by BKPM and the Ministry of Tourism. AmCham member PwC is also a co-sponsor. The event is designed to showcase the area to investors, particularly its proximity to China and its vast tourism market.

Indonesia has long been held back in its tourism drive relative to Thailand and other neighboring countries because of poor infrastructure and often unclear regulations but officials insist that will soon be a thing of the past in many areas.

AmCham Indonesia met recently with Tourism and Destination Industry Development deputy Dadang Rizki Ratman to discuss the future of the tourism sector.

AmCham Indonesia: Tourism Minister Arief Yahya has stated that tourism is the easiest and cheapest contributor to GDP, foreign exchange and employment. Could you elaborate on this?

Dadang Rizki Ratman: Yes, of course, but before we jump deep into it, we have to establish some general knowledge about tourism. Tourism consists of three components - the tourists, the destinations and the stakeholders.

Generally, if you want to be an expert on tourism, you need to master the marketing of tourism. The customer is the key point. Customers can be family travelers or communities; businesses such as travel agents, SMEs [small and medium sized enterprises], associations and local governments; international visitors are also included.

Second, understand the characteristics of the destinations. Destinations are divided into three focuses of attraction: nature, culture and man-made; accessibility (via air, land, and sea); and amenities such as electricity, water resources, public facilities and accommodation. These are the most important things.  

We need to consider the reasons why people like to come back to Indonesia after their first visit, or are attracted the first time. It could be marine tourism, eco-tourism, heritage and culinary tourism or event tourism. Indonesia is blessed, has a very beautiful landscape, and is rich in potential that needs to build and develop through more investment.

Third, the role of investment is through the stakeholders, either domestic or foreign.

So, these three components influence the rate of Indonesia’s GDP, foreign exchange and employment.

First, GDP. In 2015, tourism contributed 10 percent of national GDP – among the highest in the ASEAN region. The growth was above the average industry growth and the highest industry of all.

Second, take a look at foreign exchange. Tourism is Indonesia’s number four foreign exchange earner at 9.3 percent of the total, and growth of 13 percent is the highest of foreign exchange earners. Against that, marketing costs only 2 percent of the projected foreign exchange.

Third, look at employment. Tourism contributes 8.4 percent of total jobs at 9.8 million, and it is growing fast, so tourism has the potential to create many new jobs.

The projection for 2017 is that tourism will contribute about 13 percent of national GDP, earn about 13.4 percent of foreign exchange, and create employment for 12.4 million workers.

How does the growth of tourism in Indonesia compare with other countries around the world?

Tourism in Indonesia has shown the greatest improvement year to year. In 2015, for example, Indonesia’s tourism grew 10.3 percent nationally, 5.1 percent in the ASEAN region and 4.4 percent globally. The Travel and Tourism Competitiveness Index comparison of Asian countries reported that Indonesia’s competitiveness index rank jumped from 74 in 2013 to 50 for 2015. However, there is still a long way to go to match the top 20 performances of Singapore, Malaysia and Thailand.  

The World Economic Forum’s 2015 Travel and Tourism Competitiveness Report noted that Indonesia’s greatest improvements were in international openness, the business environment and air transport infrastructure. Indonesia also ranks number three in the world in terms of price competitiveness.

Tell us about the ‘10 New Balis’ program and its development

Creating the 10 New Balis is stated in the national strategic project and national priority program of President Jokowi.

Through Presidential Regulation No 3/2016, President Jokowi has asked all the related ministries and institutions to support tourism, particularly the national strategic project of the 10 New Balis.

The 10 New Balis are Toba Lake (North Sumatra), Thousand Islands (DKI Jakarta), Cape Kelayang (Bangka Belitung), Cape Lesung (Banten), Borobudur (Central Java), Bromo Tengger Semeru (East Java), Labuan Bajo (East Nusa Tenggara), Mandalika (West Nusa Tenggara), Wakatobi (South East Sulawesi), and Morotai (North Maluku).

With these 10 priority tourism destinations in Indonesia, the government is targeting 20 million international tourist arrivals in 2019.

If Malaysia can reach 24 million international tourists last year, Indonesia should be able to achieve more than that.

To increase the number of international arrivals, the government has implemented visa free entry for arrivals from 169 countries, as stated in Presidential Regulation No 21/2016.

Moreover, the government is also simplifying yacht and cruise arrivals by axing the Clearance Approval for Indonesia Territory (CAIT) Policy, allowing passengers of foreign cruise ships to embark and disembark in five main Indonesian ports.

How is the Wonderful Indonesia brand helping investment in tourism?

Branding, advertising and selling are part of marketing activities. The Wonderful Indonesia or Pesona Indonesia is the brand to promote our tourism domestically and globally.

The brand is very powerful in increasing tourism investment in Indonesia. Throughout 2016, Wonderful Indonesia achieved 46 awards in 22 countries.

According to [the latest] data from the Indonesia Investment Coordinating Board (BKPM), tourism investment realization in 2016 was $1,353 billion, 29 percent tourism investment growth and a 4 percent contribution to national investment realization.

By 2019, we target to have an additional 120,000 hotel rooms, 15,000 restaurants, 100 international recreational parks, 100 diving operators, 100 marinas and 100 tourism special economic zones.

We are also working with locals and hotels to collaborate to sell local products and promote Indonesian merchandise in order to attract domestic and international tourists, as well as boost investment.

What’s next?

As the world’s fourth largest population and with the demographic bonus [the percentage of the public in the productive age range], we are looking for private investment in tourism with an economic growth potential above 5 percent, driven by strong consumer confidence and spending.

The 10 New Balis will keep going to reach the target in 2019. We recommend that the private sector invest in amenities in tourism areas, as these need to be developed.

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