Borobudur, one of tourists attraction in Jogyakarta, Central Java (Image credit : TIS/RK

JAKARTA (TheInsiderStories) – Indonesian tourist arrival showed a positive sentiments to the state of the economy. The number of foreign tourists arrived in Indonesia rose 16.6 per cent month-on-month and 12.1 per cent year on-year to 1.54 million in August.

This would increase the amount of Indonesia’s foreign exchange reserves, which in turn would help to halt the rupiah’s fall. Recently, to overcome the problem of the current account deficit (CAD) in the trade balance, government made eight decisions

According to Coordinating Minister for Maritime Affairs (CMMA) Luhut Binsar Panjaitan the decision made to boost exchange rates revenues from tourism sector.

In the meeting with several ministries, institutions and the Regional Government in Yogyakarta on Oct. 29, he targeted the foreign exchange revenues from tourism sector of US$17.6 billion in 2019 and $28.5 billion in 2024.

The number of foreign tourists itself is targeted at 25 million to 30 million in 2024 with the priority of Lake Toba in North Sumatera, Borobudur and Joglosemar in Central Java, Mandalika in Lombok, Labuan Bajo in West Nusa Tenggara, Bali, Jakarta, Banyuwangi and Bromo in West Java.

Regarding on financing access, it has been agreed that this year the CMMA will establish general provisions for People’s Business Credit in the tourism sector.

Related to the strengthening of connectivity, it was agreed that the status of Banyuwangi Airport would be designated as an international airport by the Ministry of Transportation.

In addition, the operation of Yogyakarta’s new airport is targeted to start in 2019, and the Ministry of Transportation will build a railway line that is connected to the airport.

Indonesian government also has plans to remove import tariff on the yacht in an attempt to boost revenue from the tourism sector that will increase reserve exchange. Panjaitan said the tariff cut will make the yacht business easier and more attractive to visit Indonesia. It brings foreign tourist and will increase foreign exchange.

According to the Ministry of Finance regulation Number 35/PMK.010/2017, the import tariff on the yacht set at 75 percent as it categorized as luxury goods. The meeting agreed to cut the import tariff to 0 percent.

Tourism Minister Arief Yahya said the import tariff cut potentially increase five times the revenue from tourism sector to $442.450 million from current $80.540 million. In addition, he claimed the import tariff cut will increase revenue from the standard duty and operational maintenance up to $350 million.

Investment Coordinating Board Head Thomas Lembong added the deregulation could be a strategy to boost Indonesia’s tourism development, one of the main focus in the President Joko Widod leadership. This regulation will also bring more tourists to Indonesia.

Indonesia only has limited ability to generate the foreign exchange reflected in the persistent high current account deficit that exacerbates by the trade balance deficit. Indonesia record US$5.5 billion or 2.15 percent of gross domestic product (GDP) in current account deficit in the first quarter this year, according to the Bank Indonesia data.

The higher current account deficit in the second quarter of this year is triggered by the persistent trade balance deficit that recorded $1.02 billion from January to June 2018, according to the Central Statistics Agency data. Export in January to June 2018 reached $88.02billion or increase 10.03 per cent (YoY), lower than the import that reached $89.04 million or increased 23.10 per cent (YoY).

The condition added more pressure on the Rupiah exchange rate against US dollar. Rupiah exchange rate weakened 6.93 percent against US dollar from January to July 20, 2018. It was higher than its regional peers in Southeast Asia namely Malaysia, Vietnam, and Thailand that weakened 0.38 percent, 1.52 percent, and 2.60 percent, respectively.

Encouraging the tourism sector itself is a way to overcome the problem of the current account deficit, in addition to other policies pursued by the government, namely the use of 20 percent biodiesel mixture (B20), increased exports in the mining sector, and optimization of domestic industries.

Email: linda.silaen@theinsiderstories.com

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The Insider Stories Founder Linda Silaen has a solid, proven history, established over more than a decade as a journalist with a leading internasional news organization, of being the first with the biggest economic news stories in Indonesia. Specializing in corporate news, Linda is also a veteran of some of the biggest macroeconomic and general news stories as Indonesia rapidly transforms into a major market economy. One of the founders of the original blog from which this company developed, Linda’s knowledge of investors’ information communications and data us developed from unrivaled networking skills that make her a well-known name among CEOs, bankers, government officials and private equity investors both in Indonesia and other countries.

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