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
Tourist Arrivals
Tourist Arrivals
Tourist Arrivals
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

Source: Statistics Indonesia (BPS)

The table above shows that the number of foreign tourist arrivals in Indonesia has grown steadily between 2007 and 2015. This solid performance is supported by a reduction in terrorist incidents in Indonesia. Although small, there exists a radical Muslim community that not only believes Islam should be the sole guidance in life (and society) but is also willing to use extreme measures (violence) to reform and uproot established conditions. A series of terrorist attacks aimed at westerners (the 2002/2005 bombings in Bali and the 2009 Ritz-Carlton/Marriott bombings in Jakarta) managed to stagnate foreign tourist arrivals as a large group of westerners ignored Indonesia as a holiday destination in the months following such a violent incident (within a year tourist numbers recover). The 2009 Ritz-Carlton/Marriott bombings explain why growth of tourist arrivals in 2009 was limited (see table above). After 2009 there have not been any terrorist attacks aimed at westerners. This success is due to efforts of the country's special counter-terrorism squad (Densus 88), which is funded by the American government and is trained by the CIA, FBI and US Secret Service. After 2009, when radical groups started to operate in smaller networks (which are more difficult to trace) attacks have been aimed at symbols of the Indonesian state (such as policemen), not on symbols of the western world. This is probably a reaction to the many arrests made by Densus 88 in recent years.

What is Blocking Development of Indonesia's Tourism Industry?

In the World Economic Forum's Travel & Tourism Competitiveness Report, which "measures the set of factors and policies that enable the sustainable development of the Travel & Tourism sector, which in turn, contributes to the development and competitiveness of a country,” Indonesia jumped from rank 70th in 2013 to 50th in 2015, an impressive improvement. This jump was caused by Indonesia's rapidly growing number of foreign visitor arrivals, national prioritization of the tourism industry and investment in infrastructure (for example the mobile phone network now covers most areas of the country, while air transport infrastructure has been expanded). The report states that the competitive advantages of Indonesia are price competitiveness, rich natural resources (biodiversity), and the presence of several heritage sites.

However, the report also stated that Indonesia is not placing enough emphasis on environmental sustainability (resulting in deforestation and endangered species, while only a minimal fraction of the used water is treated). The report also mentions safety and security concerns, specifically the business cost of terrorism. Another concern is that Indonesia lags behind Singapore (11th), Malaysia (25th) and Thailand (35th) in the ranking of the 2015 Travel & Tourism Competitiveness Report.

The lack of adequate infrastructure in Indonesia is a persistent problem, not only because its raises logistics costs steeply thus making the investment climate less attractive but also because it limits the smoothness of traveling for tourists. Infrastructure on Bali is great and acceptable in Jakarta (except for the grave traffic congestion) but outside Bali and Jakarta most of the country's infrastructure is inadequate, particularly in the eastern part of Indonesia where there is a shortage of airports, ports, roads and hotels. The lack of inter and intra island connectivity means that a number of Indonesian regions that contain huge tourist potential cannot be reached easily.

Besides infrastructure, education also forms an obstacle. Although on the island of Bali as well as in the luxury hotels of Jakarta most native people working in the tourism sector are pretty fluent in English (and sometimes even other non-Indonesian languages), in the more remote areas of Indonesia natives have difficulty to communicate with tourists. Therefore, a focus on the study of English would help to overcome this situation. This language barrier has been reason for a portion of Singaporeans to choose Malaysia as their holiday destination instead of Indonesia. Most foreign visitors that enter Indonesia come from Singapore, followed by Malaysia and Australia.

Points of Entry

Most foreigners enter Indonesia at Ngurah Rai International Airport on Bali, the island that is the most popular holiday destination for foreign tourists in Indonesia. This island is home to most of Indonesia's Hindu minority and offers tourists all sorts of Balinese Hinduism-related arts and culture as well as a lively nightlife and beautiful countryside.

The second main point of entry is Soekarno-Hatta International Airport, located just outside of the capital city of Jakarta. Many tourists start their holiday by staying a couple of days in Jakarta before traveling to other parts of Indonesia. Jakarta is also the economic center of Indonesia and although it is not allowed by law there are many foreigners that use a tourist visa (valid for 30 days) to participate in business meetings or events in Jakarta.

The third-most used port of entry in Indonesia is Batam, the largest city in the Riau Islands Province of Indonesia, across the Strait of Singapore. Batam has rapidly developed into an industrial boom-town and transport hub. The city is part of a free trade zone in the Indonesia-Malaysia-Singapore Triangle. Since 2006, Batam (together with Bintan and Karimun) form part of a Special Economic Zone with Singapore, implying that trade tariffs and value-added taxes for goods shipped between Batam and Singapore are eliminated.

Main Points of Entry Foreign Visitor Arrivals in Indonesia:

Location       2013       2014       2015
Ngurah Rai Airport (Bali)    3,241,889    3,731,735    3,923,970
Soekarno-Hatta Airport (Jakarta)    2,240,502    2,246,437    2,304,275
Batam    1,336,340    1,454,110    1,545,818

Source: Statistics Indonesia (BPS)

New Visa Policy Indonesia

In 2015 the Indonesian government granted an additional 45 countries visa-free access to Indonesia (Presidential Regulation no.69/2015 on Exemptions of Visit Visa) in an attempt to boost the tourism industry. Previously, citizens of these countries had to obtain a visit visa before entering Indonesia. In March 2016 the amount of countries for which residents are allowed to enter Indonesia without a visa was raised again through Presidential Regulation no.21/2016 on Exemptions of Visit Visa, meaning there are now a total of 169 countries that not need a visa to enter and stay in Indonesia (for a maximum period of 30 days). Meanwhile, the government also introduced a new regulation on yacht and cruise ships. This new regulation lifts cabotage rights for international cruises and yachts, meaning that international cruise liners can now lift and disembark passengers in 5 Indonesian seaports: Tanjung Priok (Jakarta), Tanjung Perak (Surabaya), Belawan (Medan), Soekarno-Hatta (Makassar) and Benoa (Bali). Previously, only Indonesian-flagged ships were allowed by law to lift and disembark passengers in Indonesian waters.

These policy changes were made in order to attract more foreign visitors. Although granting more tourists visa-free access to Indonesia implies that the country misses out on an estimated USD $11.3 million per year (as currently USD $35 is charged for a ‘visa on arrival’), it is expected to attract an additional 450,000 foreign tourists per year. Considering that each foreign tourist spends an average of between USD $1,100 and USD $1,200 during his/her holiday in Indonesia, the country will thus gain around USD $500 million in additional foreign exchange revenue each year (a domestic tourist spends an average of IDR 711,000 per trip).

 Countries Exempted from Obligation to Obtain Visit Visa Prior to Entering Indonesia
 1. Albania 31. Chad 61. Haiti
 2. Algeria 32. Chili 62. Honduras
 3. Andorra 33. China 63. Hong Kong (SAR)
 4. Angola 34. Commonwealth of Dominica 64. Hungary
 5. Antigua and Barbadu 35. Comoros 65. Iceland
 6. Argentina 36. Costa Rica 66. India
 7. Armenia 37. Croatia 67. Ireland
 8. Australia 38. Cuba 68. Italy
 9. Austria 39. Cyprus 69. Ivory Coast
10. Azerbaijan 40. Czech Republic 70. Jamaica
11. Bahamas 41. Denmark 71. Japan
12. Bahrain 42. Dominican Republic 72. Jordan
13. Bangladesh 43. Ecuador 73. Kazakhstan
14. Barbados 44. Egypt 74. Kenya
15. Belarus 45. Ecuador 75. Kiribati
16. Belgium 46. England 76. Kuwait
17. Belize 47. El Salvador 77. Kyrgyzstan
18. Benin 48. Estonia 78. Latvia
19. Bhutan 49. Fiji 79. Laos
20. Bolivia 50. Finland 80. Lebanon
21. Bosnia Herzegovina 51. France 81. Lesotho
22. Botswana 52. Gabon 82. Liechtenstein
23. Brazil 53. Georgia 83. Luxembourg
24. Brunei Darussalam 54. Gambia 84. Macao (SAR)
25. Bulgaria 55. Germany 85. Macedonia
26. Burkina Faso 56. Ghana 86. Madagascar
27. Burundi 57. Greece 87. Malawi
28. Cambodia 58. Grenada 88. Malaysia
29. Canada 59. Guatemala 89. Maldives
30. Cape Verde 60. Guyana 90. Mali


91. Malta 117. Portugal 143. Sweden
92. Marshall Islands 118. Puerto Rico 144. Switzerland
93. Mauritius 119. Qatar 145. Taiwan
94. Mauritania 120. Romania 146. Tajikistan
95. Mexico 121. Russia 147. Tanzania
96. Moldavia 122. Rwanda 148. Thailand
97. Mongolia 123. Saint Kitts and Nevis 149. The Netherlands
98. Monaco 124. Saint Lucia 150. Timor Leste
99. Morocco 125. Saint Vincent and the Grenadines 151. Togo
100. Mozambique 126. Samoa 152. Tonga
101. Myanmar 127. San Marino 153. Trinidad and Tobago
102. Namibia 128. Sao Tome and Principe 154. Tunisia
103. Nauru 129. Saudi Arabia 155. Turkey
104. Nepal 130. Senegal 156. Turkmenistan
105. New Zealand 131. Serbia 157. Tuvalu
106. Nicaragua 132. Seychelles 158. Uganda
107. Norway 133. Singapore 159. Ukraine
108. Oman 134. Slovakia 160. United Arab Emirates
109. Palau 135. Slovenia 161. United States of America
110. Palestine 136. Solomon Islands 162. Uruguay
111. Paraguay 137. South Africa 163. Uzbekistan
112. Panama 138. South Korea 164. Vanuatu
113. Papua New Guinea 139. Spain 165. Vatican
114. Peru 140. Sri Lanka 166. Venezuela
115. Philippines 141. Suriname 167. Vietnam
116. Poland 142. Swaziland 168. Zambia
169. Zimbabwe

Through its Ministry of Tourism and Creative Economy, Indonesia promotes itself as a tourist destination in foreign countries with its "Wonderful Indonesia" campaign. It is important for the government to invest in such promotional campaigns to spread a positive image of Indonesia as most western countries mostly receive negative headline stories from Indonesia (for example radical Islam, natural disasters such as a tsunami or massive volcanic eruptions), causing an undue negative image of the country.

It is also important for authorities to build a magnetic brand for the country as a whole. While the island of Bali already has a strong brand that is widely known across the globe, Indonesia as a whole hasn't.

Opportunities in the Tourism Industry of Indonesia

With increasing numbers of foreign visitor arrivals (both tourists and foreign businessmen) in combination with +5 percent GDP growth and investment growth, there is growing demand for hotels, condominium hotels (which combine features of apartments and hotels), as well as conferences and exhibition venues. If the government target of welcoming 20 million foreign visitors by 2020 is indeed achieved then there is plenty of need for investment in the country's hospitality industry. Moreover, the ASEAN Economic Community (AEC), which will see its birth at the end of 2015, implies intensifying trade relations in the ASEAN region (resulting in more demand for hotel accommodations etc).

However, Bali and Jakarta have already seen a large influx of investment in recent years (especially in the upper end of the market) leading to excessive supply. Investors who want to establish hotels in these regions (as well as existing hotels) need to come up with original and creative new concepts to become market leaders.

Overview Indonesia's Tourism Sector:

2017 2018 2019
Contribution to GDP
  11   13   14   15
Foreign Exchange Earnings
(in IDR trillion)
172.8 182.0 223.0 275.0
(in million)
 11.7  12.4  12.7  13.0
Competitiveness Index
 n.a.   40  n.a.   30
Foreign Visitor Arrivals
(in million)
  12   15   17   20
Domestic Tourists
(in million)
 260  265  270  275

Updated on 16 December 2016