The Rise of the Tourism Industry

INDONESIA - Report 25 Sep 2017 by Cyrillus Harinowo

The tourism industry has become another prime mover of the Indonesian economy. Long experiencing relatively slow growth, the industry has gotten increasing attention from the new government. In fact, optimism abounds that in the next few years, the tourism industry will become one of the largest foreign exchange earners, taking the position of oil and gas as well as other commodities, such as CPO and coal.

At the beginning of Jokowi’s government, the number of foreign tourists visiting Indonesia was less than 10 million and it grew at a rate between 7% and 8% annually. President Jokowi has set the target very high, at 20 million, or double the number in five years (which means in 2019). Last year, the number of foreign tourists was 12 million. However, the government is optimistic that this year (2017) the number of foreign tourists will reach approximately 15 million people. The Ministry of Tourism may set a new target that will promote the arrival of 18 million tourists for 2018. By achieving that target, President Jokowi's challenge to reach 20 million foreign tourist arrivals would no longer seem too ambitious.

In order to promote the tourism industry, the Indonesian government decided to promote 10 “New Bali” destinations, three of which were set as a priority for this year. This includes places such as the Borobudur region (which includes Yogyakarta), the Toba Lake Region, and Mandalika in Lombok Island. In order to promote the Borobudur Temple Region, the Indonesian government decided to start the development of New Yogyakarta International Airport in the west of the city of Yogyakarta. This new airport will replace the current airport, which has been very over crowded.

While the tourism industry is being promoted, the Indonesian government also continued to promote the export sector. In the month of August 2017, Indonesian exports managed to rise again, reaching $15,208.4 million. On the other hand, imports experienced a considerable decline, to $13,485.8 million. The balance was a large surplus in the trade balance of $1,722.6 million, the largest monthly surplus since 2012.

At the same time, Indonesian prices in August registered deflation of 0.07%, leaving year-over-year inflation at 3.82%, a relatively mild rate. Therefore, Bank Indonesia was confident in reducing the benchmark rate further, by 25 basis points to 4.25%, after slashing the benchmark rate by 25 basis points in the previous month.

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