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Tourism vital to Indonesia economy

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Foreign tourists on a traditional boat enjoy the sunset at Kuta beach in Bali, Indonesia. SONNY TUMBELAKA/AFP

Tourism vital to Indonesia economy

The Jakarta Post/ANN: The Indonesian government has increasingly realised the crucial role of tourism and the hospitality industry in reducing the current account deficit (the balance of trade in goods and services), one of the main drivers of the rupiah’s sharp depreciation over the last eight months.

The participation of government leaders including Coordinating Maritime Affairs Minister Luhut Pandjaitan, Bank Indonesia (BI) Governor Perry Warjiyo and the chairman of the Financial Services Authority, Wimboh Santoso, at last week’s conference on tourist development in Yogyakarta confirmed the full awareness that the development of these sectors needs a holistic approach.

Indonesia – arguably the world’s largest archipelago with rich diversity of cultures, natural attractions and heritage – saw a 12.5 per cent increase in tourist arrivals in the first seven months of 2018 but the total number was only around 9.06 million.

Thailand, for example, attracted 35.4 million tourists last year with each spending an average of US$1,625, compared to Indonesia’s $1,026. No wonder, according to BI, foreign exchange earnings from foreign tourists were the main contributor to last year’s $48.1 billion current account surplus in Thailand.

The Yogyakarta conference reiterated the importance of the strategic coordination of policies and activities because tourism involves many sectors such as transportation infrastructure, health and hygiene, customs, immigration that lie outside the jurisdiction of the Tourism and Creative Economy Ministry.

The government has set an ambitious target of 20 million arrivals next year, as against 17 million this year, by accelerating the development of 10 new destinations outside Bali, including Lake Toba in North Sumatra, Riau Islands, Lombok in West Nusa Tenggara, Maluku and Flores in East Nusa Tenggara. But infrastructure is only one of the three fundamental pillars of the industry, besides attractions and services.

Fortunately we have beautiful volcanoes, beaches and historical culture with friendly people to amazing man-made structures like Borobudur and other attractions. But we must work harder to improve the quality of services for tourists, notably high spenders from the United States, Europe, the Middle East and China. Good hospitality can overcome a deficit in infrastructure, but not the other way around.

Most travelers may tolerate minor infrastructure deficiencies, but they expect excellent service in return.

Given the wide gap in hospitality service quality, the government needs to include the private sector, especially travel-related businesses, to improve human capital in hospitality, especially in areas lacking significant historical linkages to the hospitality service.

For example, good cooperation with international hotel chains could develop a large pool of skilled hotel workers able to provide the kind of services needed by visitors from around the world.

As a nature and culture-based industry, tourism should be among our most suitable businesses because of the multiplier effect, low import-content and labor-intensive nature of its operations.

Travel-related businesses such as hotels, restaurants, transportation, handicrafts and cultural shows are all labor intensive, the very kind of businesses needed to absorb the huge pool of job seekers.

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