Tourism Industry Indonesia

Although Indonesia harbors great attractions for tourists - beautiful countryside, interesting cultures & historical remnants, beaches, nightlife (Jakarta and Bali), and much more - the country fails to attract a large number of foreign tourists. Yes, Indonesia may achieve its target of welcoming 10 million foreign visitors in 2015, but this figure is considerably lower than the number of tourists that visit neighboring peers Singapore (15 million) or Malaysia (27 million). Indonesia is not less beautiful nor less interesting than its neighbors. So, what has been blocking more rapid development of Indonesia's tourism sector?

It is important that the tourism industry of Indonesia enhances its contribution towards the country's gross domestic product (GDP) because it will trigger more foreign exchange earnings (as each foreign visitor spends between USD $1,100 and USD $1,200 per visit on average) while also providing employment opportunities to the Indonesian people (based on the latest data from Statistics Indonesia, the country's unemployment rate stood at 5.81 percent in February 2015). It is estimated that nearly nine percent of Indonesia's total national workforce is employed in the tourism sector.

Currently, Indonesia's tourism sector accounts for approximately four percent of the total economy. By 2019, the Indonesian government wants to have doubled this figure to 8 percent of GDP, an ambitious target (possibly overly ambitious) which implies that within the next four years, the number of visitors needs to double to about 20 million. In order to achieve this target, the government will focus on improving Indonesia’s infrastructure (including ICT infrastructure), accessibility, health & hygiene as well as enhancing online promotional (marketing) campaigns abroad. The government also revised its visa-free access policy in 2015 (for further elaboration, see below) to attract more foreign tourists.

Below we present foreign visitor arrivals into Indonesia in recent years. Please note that Indonesia's Statistics Agency (BPS) adjusted the definition of foreign visitor arrival per January 2016. This explains the sharp increase in foreign visitor arrivals between 2016 and 2015.

Foreign Tourist Arrivals in Indonesia, 2013-2016:

Month	Tourist Arrivals         2013	Tourist Arrivals         2014	Tourist Arrivals         2015	Tourist Arrivals         2016
January	614,328	753,079	723,039	814,303
February	678,415	702,666	786,653	888,309
March	725,316	765,607	789,596	915,019
April	646,117	726,332	749,882	901,095
May	700,708	752,363	793,499	915,206
June	789,594	851,475	815,148	857,651
July	717,784	777,210	814,233	1,032,741
August	771,009	826,821	850,542	1,031,986
September	770,878	791,296	869,179	1,006,653
October	719,900	808,767	825,818	1,040,651
November	807,422	764,461	777,976
December	766,966	915,334	913,828
Total	8,802,129	9,435,411	9,729,350

Foreign Tourist Arrivals in Indonesia, 2007-2015:

	2007	2008	2009	2010	2011	2012	2013	2014	2015
Foreign Tourists (in millions)	5.51	6.23	6.32	7.00	7.65	8.04	8.80	9.44	9.73

The raw materials that are required for the manufacturing process of cigarettes are mostly domestically-sourced, implying that foreign exchange volatility has limited impact on prices set by Indonesian retailers (this is also why the recent economic slowdown had a relatively limited impact on the nation's tobacco industry). Mostly domestically-sourced materials in combination with Indonesia's cheap labor costs make the tobacco industry's production costs low. Therefore, even the poorest Indonesians can often be seen smoking.

The kretek cigarettes are tremendously popular among Indonesian smokers. As about 85 percent of all smokers in Indonesia prefer kretek cigarettes over white cigarettes, these clove cigarettes are the clear favorite among Indonesia's smoker community. Kretek - a trademark of Indonesia - is a clove cigarette that consists of tobacco (70 percent) and ground cloves, clove oil as well as other additives (30 percent). Machine-rolled kretek cigarettes contribute around 75 percent to the total cigarette supply in Indonesia, while hand-rolled cigarettes account for nearly 20 percent.