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The secret behind Indonesia’s tourism boom 

Jun 08. 2018
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By James Guild
The Jakarta Post
Asia News Network

Since President Joko “Jokowi” Widodo took office in 2014, Indonesia’s tourism industry has boomed.

In 2014, we got 9.4 million overseas visitors. By 2017, that number had exploded to over 14 million and continues to climb. This is generally considered a net positive for the economy, as foreign visitors spend billions of dollars, drive investment and generate thousands of jobs for local workers and businesses.

So how did it happen and what lessons can be taken?

Indonesia’s booming tourism sector is best understood as the result of careful policy planning and execution by the Jokowi administration, which rolled out a multi-pronged approach to boosting the industry in 2015. The plan featured bureaucratic restructuring, regulatory reforms, and the acceleration of big-ticket infrastructure projects that would make it easier to access marquee destinations.

Jokowi inherited an economy overly reliant on exports, particularly oil, gas and coal. As the global market for these commodities cooled, economic policymakers saw the need to rebalance by boosting non-export service sectors – such as tourism. The Tourism Ministry was duly restructured in 2015 and its budget hiked.

Previously, the Ministry had been tasked with promoting Indonesian culture via finance for films, music and art. With a narrower mandate and bigger budget focused solely on tourism, the ministry was armed to achieve its ambitious goals.

Those goals are part of a 5-Year Strategic Plan developed in 2015, which set benchmarks for 2019. These were: 20 million overseas visitors, 240 trillion rupiah (Bt551 billion) in tourist expenditures, 13 million tourism jobs, and boosting tourism revenue to 8 per cent of GDP. They are well on their way to achieving most of these benchmarks, indicating the plan is working remarkably well.

The plan was rolled out in conjunction with regulation changes that eased foreign travel to and investment in Indonesia. The number of nationalities eligible for visa-free travel to Indonesia was raised from 45 in 2014, to 169 in 2016. Restrictions on foreign ownership of hotels and restaurants were relaxed or eliminated altogether, and the permit process for new businesses was streamlined.

Despite varying success, overall these reform efforts they have contributed to swift growth in overseas travellers and renewed enthusiasm from investors who are now pouring money into commercial and resort developments. Critically, these efforts to improve the regulatory environment have gone hand-in-hand with an acceleration of big infrastructure projects, particularly the expansion and construction of airports and toll roads.

One of these areas is Lake Toba in North Sumatra, the largest volcanic crater lake in the world. In 2017, Jokowi opened the renovated Silangit Airport, with a larger runway and expanded passenger terminal that can handle 500,000 passengers per year, including international arrivals. A rail line connecting Lake Toba to the provincial capital of Medan, which received a new international airport in 2013, was opened in February, and a toll road from Medan directly to the Lake Toba ring road is under construction.

Yogyakarta, where the ancient Buddhist temple Borobodur, a Unesco world heritage site, attracts hundreds of thousands of foreign visitors and millions of Indonesians annually, is also getting a new airport. A plot of 587 hectares of land was acquired this year to develop an international airport with a capacity of 15 million passengers. These sites, which have been prioritised by the Tourism Ministry as strategic destinations, are thus rapidly being equipped with the infrastructure necessary to handle millions of travellers in the coming years.

A pair of large development projects in Labuan Bajo, gateway to the Komodo Islands, and Mandalika in Central Lombok, serves as further evidence of strong investor interest in Indonesia’s tourism industry. The Labuan Bajo Marina Project is a 398 billion rupiah development featuring a 180-room hotel, ferry dock, restaurants and retail businesses. It is on schedule to be completed by August, and will help diversify Labuan Bajo’s attractiveness as a tourist destination in its own right, and not merely as a gateway to the Komodo dragons in the nearby National Park.

The Mandalika resort project is a massive undertaking in Lombok. Media reports state that several large international hotel chains have already begun construction, with investment hitting 2.2 trillion rupiah. Once completed, the integrated resort complex is expected to absorb over 58,000 local workers.

All of this paints a pretty optimistic picture of tourism-led growth in Indonesia. Regulatory barriers have been rolled back, the Tourism Ministry has been streamlined and equipped with sufficient resources to better carry out its mandate, and infrastructure projects that will improve ease of access are barrelling ahead. Large increases in visitor numbers year over year since the program was started in 2015 support the conclusion that the government’s multi-pronged approach to growing the industry is paying dividends.

In 2014, Jokowi made bold promises about economic growth and development in Indonesia. Some of these, such as the lofty ambition to add 35 gigawatts of installed capacity to the electric grid by 2019, have not quite lived up to their promise. But tourism is one sector that is moving along at a fast clip, thanks to a methodical approach that included a comprehensive policy vision, clear benchmarks to measure success, and a strategy that coordinated a range of actors across ministries, industries and jurisdictions in service of that vision.

With April national elections looming, voters will be judging Jokowi in part based on his economic record in office. While not perfect, he will be able to point to examples like the tourism industry as proof that his economic policies are working, and this ought to hand him a potent weapon for his 2019 campaign arsenal.

James Guild is a PhD researcher at the S Rajaratnam School of International Studies in Singapore, with a research focus on Indonesia’s political economy. 

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