With the 10 New Bali Project, the shift in focus beyond Bali to other underexplored destinations within the archipelago, this is an outlook on the economic impact and investment opportunities that this project brings about.
Amidst the concerns over recent Coronavirus outbreak and the travel ban imposed on tourists from China, Minister of Tourism and Creative Economy, Wishnutama Kusubandio has kept the spirits up high of those in the tourism industry in Indonesia, even after predicting $4 million dollars in losses. Chinese tourists account for the second highest number of foreign tourist visits to Indonesia and therefore due to health and safety concerns, Indonesia is bound to a major hit in Chinese tourist arrivals. Despite the hit, the Tourism and Transportation ministries have joined forces to negotiate with more than 30 airlines to re-route their flights to domestic destinations within the archipelago, therefore supporting local tourism. Undoubtedly, the tourism Industry will indeed be largely affected by the thousands of flights and hotel cancellations in destinations popular with the Chinese such as Bintan Island, Bali and Manado, but its domestic tourist market has always been underestimated. With attractive packages and generous discounts in flight and hotel prices, Indonesia’s Tourism Industry has the potential to become self-sustaining on its domestic tourism market.
It is no secret that Indonesia’s tourism industry has doubled over the past decade and is expected to flourish even further, with indirect and induced incomes predicted to reach $141.3 billion annually by 2027, according to the World Travel & Tourism Council report. The growth of Indonesia’s tourist industry is the ninth-fastest in the world and the third-fastest in Asia. With the tourism industry being one of the major economic drivers of the Indonesian economy, to facilitate this growth even further, the government has initiated the ‘10 New Bali project’, that highlights Indonesia’s diverse tourist attractions, essentially replicating the economic success of Bali, a major tourist hotspot regularly featured as one of the best in the world.
The success of Bali, as a major tourist destination, not only lies in its unrivalled picturesque attractions but also in its proximity to major Asia-Pacific markets, visa-free travel from major source markets and growing infrastructure that focuses on increasing connectivity and accessibility. Similarly, the destinations in the ‘10 New Bali Project’ is strategically chosen to enhance connectivity and accessibility to target markets, encourage foreign investments by easing on access & restrictive regulations, i.e. Visa-Free Travel policy for 169 countries and promote Special Economic Zones to draw foreign investors in the Asia Pacific. This project complements the President’s broader strategy for more infrastructure development, particularly to enhance connectivity within the archipelago. Development is integrated to include land spatial improvement, roads, clean water supply, waste management, sanitation and renovation of residential areas.
However, Bali alone cannot be overburdened with the task of achieving the ambitious goal of drawing 20 million foreign arrivals by 2021, not including the increasing numbers of domestic tourists. Indonesia risks a continued dependence on exporting raw commodities if it relies on a single destination for its tourism industry. Especially, in the current climate of a global economic slowdown, demands of raw commodities such as crude oil, and coal are fluctuating, along with the international business activity.
According to various reports on real estate investment, despite the economic climate, Indonesia is ranked amongst the top 5 island countries, to invest in. By shifting focus on to other destinations within the archipelago, with this project, the government aims to increase the prospects of future private investment in these unexplored hotspots. Although, many of them are beautiful in their own right, with their own unique signature volcanos, lush forests, mountain ranges, unique flora and fauna and a rich cultural diversity, Indonesia not only aims to increase the potential and scope for these unexplored hubs to become top tier tourist destinations but also to substantially contribute to the GDP led by the increase in economic growth nationally, regionally and locally.
The Ministry of Tourism has listed the destinations earmarked under the 10 New Bali’s plan for further development, which includes the upgrading of airports and construction of new amenities. The destinations are Lake Toba in North Sumatra, Tanjung Lesung in Banten, Kepulauan Seribu in Jakarta, Tanjung Kelayang Beach in Bangka Belitung, Borobudur Temple in Central Java, Mount Bromo in East Java, Mandalika in West Nusa Tenggara, Labuan Bajo in East Nusa Tenggara, Wakatobi in South Sulawesi, and Morotai Island in North Maluku. Until 2024, the 10 new destinations need an investment of $35 billion, according to an official from the Ministry of Tourism. The investment in divided into two categories, namely, tourism investment and tourism funding,” the Tourism Minister said, adding that the Indonesian government had invested $12 billion and that they still needed $23 billion by way of private or public investment. And the strategy is to make investment opportunity as bread as possible, be it indirect, local or foreign.
According to the minister, during the period 2013-2017, investment in the tourism sector had reached $5.47 billion. Of that amount, around $4.23 billion came from foreign investors. Foreign investors in the tourism sector are dominated by Singapore with $460 million and China with $330 million. China had made the biggest contribution to the development of Indonesia’s tourism sector in the past three years. In 2017, the number of Chinese tourists visiting Indonesia was 1.97 million, up 35.7 percent compared to that of 2016. In 2018, the Ministry of Tourism expected 2.6 million Chinese tourists. During the period January-October 2018, the number of tourists amounted to 1.87 million.
Singapore, China, Malaysia and Australia have always dominated the arrival figures for Indonesia. Singapore is the largest source of tourists with 1.5 million visitor arrivals and a Twin Destination Program to encourage more. The Ten New Bali’s book was launched in Singapore as part of this program. From January to November 2019, 1.9 million Chinese tourists visited Indonesia, representing nearly 13 percent of overall foreign tourist visits. Statistics Indonesia data shows Malaysia and Australia are natural target markets due to their proximity to Indonesia. Australia, in particular, is a robust and reliable market with its improving bilateral relationship with Indonesia. With better infrastructure and amenities, the Indonesian government aims to catch up with regional neighbours, Malaysia and Thailand, and claim the title of a major player in the global tourism industry. Indonesia recorded 13.6 million foreign tourist arrivals from January to October 2019 — a far cry from the record 39 million that Thailand attracted throughout the year. To put a number on it, the Indonesian government seeks US$ 20 Billion in investment, with half of it allotted to public infrastructure investment.
The government actively encouraging development of related industries such as hotels, transportation, recreation and more, reflects the potential business and investment opportunities in these industries. Although, the development of infrastructure and improved access is already well underway, such as for Mandalika in Kuta Lombok, where there are new roads throughout the island, an international airport & 5-star Pullman hotel is nearing completion, the International Circuit Track (Moto GP) has been confirmed for hosting the series starting from 2021 and a range of other private investor developments. With foreign investment pouring in, the uniqueness Lombok and other destinations have to offer is apparent, with sustainable and eco-friendly events becoming a core principle of a new type of development emerging on Indonesia’s islands. Borobudur Temple, a UNESCO world heritage site and the largest Buddhist temple, attracted global visitors because of its beauty and rich historical value. As it is an hour away from the main city Yogyakarta, The new Yogyakarta International airport makes it more accessible to foreign visitors. With such development in the infrastructure to increase accessibility, Indonesia’s 10 new Bali’s is bound to contribute to an increase in arrivals as well as growth in those regions. The expected growth include 120,000 hotel rooms, 15,000 restaurants, 100 international recreational parks and 100 diving and water sports operators.
President Joko Widodo’s administration has frequently emphasized on how infrastructure financing will be one of the biggest capital market opportunities in Indonesia for foreign investors and therefore, to ensure that infrastructure developments are carried out efficiently, the ministry has streamlined the project approval process, which previously required collaborations with various local authorities. Further, special zones will be created for meetings, incentives, conferences and events, or Mice activities, as well as sports tourism.
Researcher Syarif Hidayatullah from think-tank Wiratama Institute said that the government is heading in the right direction in terms of its focus on improving infrastructure to boost tourism. But he noted that it cannot be committed only to infrastructure development – it must also see that there are proper healthcare facilities as well as ensure security. The outbreak of coronavirus that originated in Wuhan has led to 10,000 Chinese tourists to cancel their trips over fears of the deadly flu spreading. The chairwoman of Indonesia Travel Agent Association (Astindo), Elly Hutabarat, said, that there were cancellations both ways, from China to Indonesia and Indonesia to China. This affects all the key players in tourism industry, especially those of the local communities as tourism generates jobs and employment for those in the regions.
Eco-tourism empowers local communities by developing its potential while preserving its culture and environment based on the sustainable tourism principle. The 10 New Bali project is being developed on the model of sustainable tourism, to encourage village tourism, to create employment for millions within the archipelago, to empower the local communities and lead to better socio-economic growth in those regions. This is the paradigm shift that the Indonesian tourism industry needs, to go beyond “10 New Bali’s”, to shift into a more quality- oriented than quantity oriented tourism. This would require the local communities near conservation areas be actively involved in their management with support from the private sector and government and that is a challenge. However, Nature Resources and Ecosystem Conservation Director, General Wiratno has proposed a joint taskforce involving various ministries to revamp and harmonize regulatory frameworks in order to guarantee the co-extensiveness of local economic development and wildlife conservation, bridged by sustainable tourism. To expand the tourist industry to the next level, a country like Indonesia needs more than just an increase in tourist arrivals. Attracting high-quality tourism with direct impacts on local economy development also matters. The real challenge is how to engage local communities and the private sector to co-manage the areas, especially the ones beyond their conservation areas, including inside land belonging to local communities or managed by private companies.
In order for the government to achieve its goals by 2020, despite the global changes and current geo-political climate, targeted investments and implementation of policies to facilitate this growth can lead the way to success for Indonesia’s tourism Industry and its initiative of the 10 New Bali’s. In President Joko Widodo’s vision for Indonesia, he had emphasized that improvement in the country’s infrastructure, human capital, investment climate, bureaucracy and state budget could pave the way for Indonesia in being a major global player and therefore the tourism industry can ensure this path for Indonesia for decades to come.