Visitors from India, China drive strong tourism performance in Indonesia

Indonesia’s tourism sector posted strong growth in the first half of the year, supported by rising visitor numbers from key source markets.

Between January and May the country counted almost 6.2 million visitors, against 5.5 million over the same period in 2017, representing a year-on-year increase of 11.9 per cent.

The strong performance in what is generally considered the off-season led Henky Manurung, head of investment at the Ministry of Tourism (MoT), to announce in late July that the government expects to achieve its goal of attracting 17 million visitors in 2018.

To achieve this target, as well as the 20m arrivals sought for 2019, Indonesia is increasingly looking to India and China.

Radeon Sigit Witjaksono, director of the MoT’s marketing for Southern and Central Asia, the Middle East and Africa, told local press in May that out of a total budget of 17 billion rupees (US$1.2 million) his department would allocate three billion rupiah (US$208,000) for digital marketing and ads in India.

Meanwhile, in April, the MoT conducted promotional visits to the Chinese cities of Nanning, Shenzhen and Guangzhou to help build awareness among potential visitors.

Arrivals from India rose by 30 per cent last year to reach 485,000, placing the country among Indonesia’s top-five markets.

The rate of growth was second only to a 35 per cent increase in Chinese visitors that year, to 1.97 million. Arrivals from China have jumped 400 per cent over the past decade.

The MoT expects sustained expansion from both source markets, projecting 700,000 visitors from India and two million from China in 2018.

Event-based tourism to provide a boost in the short term

As the MoT looks to draw more visitors from these rapidly growing source markets, the sector is set to benefit in the near term from a series of high profile international events.

Jakarta, for example, is hosting the 2018 Asian Games from August 18 to September 2, which is expected to draw more than 11,000 athletes from 45 countries and over 170,000 foreign visitors.

Games attendees are projected to spend US$1,200 on average, generating revenue of some US$230 million, according to government estimates.

Indonesian Minister of Tourism, Arief Yahya, has said that the authorities are hopeful that at least five per cent of attendees will extend their trips and visit attractions outside of the games.

Other notable events include a three-day IMF and World Bank summit that will be held in Bali in mid-October. It is estimated that 15,000 visitors will attend the event, injecting some US$500 million into the economy, according to the National Development Planning Agency.

Tourism key to reversing the current account deficit

The revenue generated from tourism is becoming increasingly important for the government as it tries to offset capital outflows and rein in its current account deficit.

In July the central bank, Bank Indonesia, forecast the current account deficit would rise to 3 per cent of GDP, or US$25 billionn, this year, up from 1.7 per cent in 2017.

On July 26 Perry Warjiyo, governor of Bank Indonesia, announced that the bank would coordinate with the government to harness the country’s tourism potential and effectively reverse the widening current account deficit. This would involve expediting investments in tourism, boosting the availability of cheaper flights to popular destinations, improving access to airports and promoting religious tourism.

To this end, the Ministry of Transport announced on July 24 that it is looking to expand Indonesia’s network of airports for low-cost carriers. These terminals will provide basic amenities and keep operational costs low, enabling budget airlines to offer cheaper ticket prices and attract more customers.

In July Agus Santoso, director-general of civil aviation at the MoT, told local press there are plans under way to renovate Terminal 1 and Terminal 2 at Jakarta’s Soekarno-Hatta International Airport in Jakarta to make them Indonesia’s first such budget terminals. The project involves reducing labour costs by installing automated machines.

This Indonesia economic update was produced by Oxford Business Group.