Tourism in Indonesia: Growing but not Reaching its Potential

Originally, the Indonesian government targeted an economic growth rate of seven to eight percent per year after 2013 through the MP3EI. However, the country’s gross domestic product (GDP) growth has in fact slowed to 5.12 percent (year-on-year) in the second quarter of 2014. The MP3EI aims to turn Indonesia into one of the world's largest economies by 2025 and involves USD $470 billion in investments that, to a large extent, should be supplied by the private sector through public-private partnership (PPP) projects with the government. This Masterplan specifically focusses on infrastructure development as the lack of adequate infrastructure development causes Indonesia's logistics costs to rise steeply, thus reducing the country's competitiveness and attractiveness of the investment climate. Moreover, it blocks tourists from going to regions that have plenty to offer.

Although Indonesia is Southeast Asia’s largest country (and economy) it fails to attract the highest tourist numbers compared to its regional peers. While Indonesia only managed to attract 8.8 million foreign tourists in 2013, Malaysia welcomed 18 million tourists and Singapore 20 million tourists. Does this mean that Indonesia has less beaches, countryside, culture and nightlife to offer to tourists compared to its competitors? No, and possibly the contrary. Apart from the infrastructure problem, education and marketing also form obstacles for tourist growth. Although on the island of Bali many native people working in the tourism sector are pretty fluent in English (and sometimes even other non-Indonesian languages), in the more remote areas natives have difficulty to communicate with tourists. Therefore, a focus on the study of English would help to overcome this situation. Regarding overseas marketing, things have improved. Indonesian embassies abroad have put more effort in promoting Indonesia as a tourist destination (which may partly explain the rising number of tourists in recent years) particularly through its “Wonderful Indonesia” campaign. President Director of the Institute for Development of Economics and Finance (INDEF) Didik J Rachbini said that new and creative ideas are needed to give tourist numbers another boost. Lastly, no major violent or destructive incidents (terrorist attacks by Muslim radicals or big tsunamis) have taken place in recent years. Such incidents tend to make tourists ignore the country (temporarily).

The Ministry for Tourism and Creative Economy is optimistic that this year’s target of welcoming 9.5 million foreign visitors in Indonesia will be realized. Minister Mari Elka Pangestu said that Indonesia’s tourism sector contains bright prospects. Among the G-20 group of largest economies, Indonesia shows the highest growth pace in foreign tourist arrivals amid an improvement in the global tourism industry in 2014. This year numbers of global tourists are estimated to grow between 4.0 and 4.5 percent.

Foreign Tourist Arrivals in Indonesia - 2013-2014:

Month	Tourist Arrivals          2013	Tourist Arrivals          2014
January	614,328	753,079
February	678,415	702,666
March	725,316	765,607
April	646,117	726,332
May	700,708	752,363
June	789,594	851,475
July	717,784	777,210
August	771,009
September	770,878
October	719,900
November	807,422
December	766,966
Total	8,802,129	5,328,732

Foreign Tourists Arrivals in Indonesia - 2007-2014:

	2007	2008	2009	2010	2011	2012	2013	2014¹
Foreign Tourists (in millions)	5.51	6.23	6.32	7.00	7.65	8.04	8.80	9.50

^{¹ indicates government target
Source: Statistics Indonesia (BPS)}

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