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Services | Indonesia’s Tourism Industry and the Creative Economy

President Susilo Bambang Yudhoyono announced a cabinet reshuffle in October 2011 which saw the appointment of the former Minister of Trade Dr Mari Pangestu to the newly created position of Minister of Tourism and Creative Economy. The concept behind this new ministry is to link the goals of promoting Indonesia as an international tourism industry with that of regional development through tourism spending. As tourists enter the country with disposable income, they will be inclined to spend money on handicrafts and pieces of art as well as experiencing the local Indonesian culture through eating at restaurants and seeing performances of music, theatre and dance among many others. This framework provides a renewed focus for Indonesia’s campaign to become regarded as a leading regional global tourism destination, yet how effective it will be in serving as a platform for the active promotion of the country and to pique tourists’ interest enough to encourage travel beyond the island of Bali and increase their daily spending remains to be seen.

Indonesia’s Tourism Industry and the Creative Economy
Indonesia’s creative economy provides a unique selling point for the country as it seeks to carve out a position in Asia’s highly competitive tourism market.

Continuing on from Dr Pangestu’s work in promoting Indonesia’s creative industries during her tenure at the Ministry of Trade, her program for the creative economy will focus on 14 subsectors of the economy including fashion, publishing, printing, performing arts, music, TV & radio, architecture, software. These subsectors may also be extended to include the culinary arts to leverage off Indonesia’s varied cuisine as a defining feature of any visitors’ experience of the country. The ministry also undertook a new advertising slogan in 2011 entitled ‘Wonderful Indonesia’ as an all encompassing tagline covering Wonderful Nature, Wonderful Culture, Wonderful People, Wonderful Cuisine and Wonderful Value for Money. In addition to this, the government has issued Regulation No.50 of 2011 on a Masterplan for National Tourism Development (RIPPARNAS) which aims at developing tourism throughout the archipelago through coordinated promotion and priorities. The plan sets out a clear strategy to develop 50 national tourism destinations by 2050 such as Nias in Aceh, Lake Toba in North Sumatra and Komodo Island in East Nusa Tenggara. The local governments of each province are tasked with short, medium and long term measures to develop the tourism capacity of their respective regions such as transport links and qualified human resources which were discussed at length during the first ever nationwide tourism event held in Jakarta in December 2011. The tourism master plan is to be carried out in conjunction with the Master Plan for the Acceleration and Expansion of Indonesian Economic Growth (MP3EI) 2025 which identifies the need for investment of $14 billion USD to achieve tourism industry development.

In terms of results thus far, Indonesia attracted 7.65 million tourists in 2011; a 9.24% increase from 2010 (Central Bureau for Statistics). For 2012, the Ministry of Tourism is targeting 8-8.5 million international tourists with the figures by Q2 2012 showing an 11% quarterly yoy increase thereby supporting such estimates. Yet, while such figures are encouraging, the unchanged pattern of entry and concentrated hotel occupation in Bali and Greater Jakarta highlights the country’s continuing inability to effectively market itself and go beyond its existing tourism profile (See Tourism: Untapping the Potential). Bali received approximately 40% of all international tourist arrivals in 2010, 12% of national hotel capacity and 21% of national hotel income. While the government aims to leverage off Bali’s transport infrastructure to encourage tourism further afield in West and East Nusa Tenggara, this has been slow to come into fruition with the area accounting for only 1% of national tourism income to date (Ministry of Tourism). Jakarta’s Soekarno Hatta International Airport received the second largest proportion of international tourist arrivals. Yet, such figures also bring into question what proportion of these arrivals are short term business travellers which serve to reflect Indonesia’s growing importance as a business hub rather than its improved tourism prowess.

Meetings, Incentives, Conferences and Exhibitions (MICE) are a highly promising area of Indonesia’s tourism industry that the government is keen to develop further through the Wonderful Indonesia campaign. Once again, Bali and Jakarta dominate the sector while Medan in North Sumatra is also beginning to gather attention with the establishment of facilities by five star hotel chains. Other destinations include Bandung, Surabaya, Jogjakarta and Lombok’s upcoming Nusa Tenggara Barat Convention Centre. To date only 10% of venues in Indonesia are categorized as large and can accommodate 1,000 to 3,000 people with the majority being small and medium venues that handle less than 1,000 people. In lieu of further development, Jakarta is expected to continue to lead the pack for business tourism with 55% of Soekarno Hatta’s International’s 2 million international tourist arrivals being business travellers and 10% of those coming specifically for MICE purposes (2010). Jakarta has various MICE facilities such as the Jakarta Convention Centre which can accommodate up to 5,000 people and boasts the presence of the world’s leading hotel chains such as JW Marriot, the Four Seasons and Shangri-la in addition to local luxury hotel chains such as Hotel Mulia Senayan and Hotel Borobudur which all have medium to large scale capacity venues. Further to this, the city’s buzzing restaurant scene, high end malls and golfing facilities make it a firm favourite for MICE events despite the city’s notorious traffic jams. For the local economy, the MICE tourism industry has a major role to play as such tourists spend on average 5 times more than leisure tourists however its role in developing regional economies outside the major cities will be limited until transport links make day trips for business travellers a viable option.

To Indonesians themselves, the country’s attributes as a tourism destination are without question. The list of breathtaking sights is endless; from active volcanoes in Java to sublime diving at Raja Ampat in West Papua and not to mention the countless white sand beaches. Indonesia’s diverse cultural heritage is another element that is overlooked as the country was ranked 39th out of 139 countries for cultural heritage on the World Economic Forum Tourism Competitiveness Index illustrating the wide variety of traditional experiences which the creative economy campaign aims to develop to provide commercial opportunities for the local economy. However the challenge remains as to how to not only attract more tourists to the country but to get them staying for longer and spending more money than they currently are. Receipts from tourism spending did actually rise by 13.16% to US$ 8.6 billion in 2011 from US$ 7.6 billion in 2010. A Passenger Exit Survey from the Ministry for Tourism and the Creative Economy also showed that average expenditure per person per day for 2011 was US$ 142.69 an increase of 5.69% compared to 2010 at US$ 135.01. However, the average length of stay decreased 2.49% from 8.04 days to 7.84 days. These results reflect the increase in tourism from lower income regions such as the ASEAN and China which tend to make shorter trips and spend less than Europeans and North Americans. This serves to highlight that the campaign to develop tourism alongside the creative economy must be conducted strategically to target tourists from developed markets who have the highest spending power to achieve the desired multiplier effect on the local economy.

Indonesia’s creative economy provides a unique selling point for the country as it seeks to carve out a position in Asia’s highly competitive tourism market. It is a platform that includes a variety of industries, encourages the promotion of Indonesia’s unique and diverse cultural heritage as well as the participation of the local inhabitants to play an active role in the development of their region. However, while the plans on paper are being received positively; coordinated execution of the priorities such as transport infrastructure will be the crucial issue as to whether it succeeds. Local development is important but the country has plenty of natural attributes and cultural sites to share with tourists already. Well thought out promotional campaigns that highlight such attributes make a significant impact on tourism numbers as Malaysia has proven and piquing the interest of adventurous travellers who are willing to take on a challenge can raise tourism numbers even in the short term. Indonesia therefore sorely needs to invest in its national image for efforts in other areas such as infrastructure and the creative industries to pay off and ensure tourism plays its rightful role in the nation’s economy.

Global Business Guide Indonesia - 2013

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