Indonesia: Capitalising on multiple strengths

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Indonesia has set ambitious targets for tourism growth this year, as the country looks to realise its potential as a leading international destination for visitors and expand an important part of the economy.

The country is aiming to increase tourist arrivals by 10% to 7.7m in 2011, following 8.5% growth to a record 7m arrivals in 2010, up from 6.45m in 2009. Indonesian authorities are confident that factors including global economic growth and a number of major international conferences will drive up tourism earnings.

In 2010, earnings from international tourists reached $7.6bn, with tourists spending $1086 on average during their stay, up 9% from $996 in 2009, according to official figures. The average length of tourist stay also rose, from 7.69 days to 8.04 days in 2010, with this likely implying an increase in long-haul travellers.

This growth was achieved despite volcanic eruptions on Java and an earthquake in West Sumatra, natural disasters that might have had a negative impact on arrivals.

Research by the World Tourism and Travel Council (WTTC), a global organisation of travel industry professionals, suggests that official figures greatly understate the importance of tourism to the Indonesian economy. The WTTC forecasts that the sector – including domestic tourism – will contribute $26bn to GDP in 2011, 3.2% of the total. However, given tourism’s effect on demand in other sectors, the council estimates that the total contribution to GDP, direct and indirect, will come to $75.3bn, or 9.1% of the total.

The WTTC expects tourism to grow strongly over the next 10 years, forecasting 5.8% average annual growth of both sector GDP and overall economic impact. Meanwhile, it expects investment in the sector to grow by 6% annually, from $9.5bn in 2011.

Indonesia aims to capitalise on its traditional tourism strengths as well as develop new niches to build value in the sector. International press reports suggest that the island of Bali, for many years the jewel in Indonesia’s tourism crown and arguably its single destination of universal recognition, will see a 9% increase in international arrivals to 2.5m, from 2.3m in 2010.

At the same time, the authorities are putting a strong emphasis on cultural tourism, drawing attention to Indonesia’s historical sites, traditional arts and local festivals. These attractions often appeal to well-heeled tourists from around the world, notably those in growing markets that have long had cultural ties to Indonesia, including China and India. On April 4, the Indonesian ambassador to India drew attention to the historical links between the two countries and urged the promotion of tourism between them.

Indonesia also has a growing reputation as a centre for meetings, incentives, conventions and exhibitions (MICE) tourism, a segment that the minister for tourism and culture, Jero Wacik, expects to grow by 40% in 2011. The country benefits from its location near many of the world’s most dynamic emerging markets, relatively low costs and good conference facilities, as well as the strength and size of the domestic market.

Events being held in Indonesia this year include the Congress of the UN Educational, Scientific and Cultural Organisation (UNESCO) in Bali in November. Coincidentally, UNESCO will discuss official recognition of several places in Indonesia as World Heritage Sites, including the 17th century Pura Taman Ayun temple in Bali.

There are some downside risks to the industry that are common worldwide. While the global economy currently looks fairly healthy, a slowdown in recovery could have an adverse impact on visitor numbers. Unexpected events can also have an effect; Balinese tourist officials are reporting a slump in the number of Japanese visitors since Japan’s devastating earthquake and tsunami in March. But past experience suggests that Indonesia can ride out temporary dips caused by economics and natural disasters, whether domestic or overseas. The strength of the country’s tourism is undoubted, and the sector is now moving to realise its potential.

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