Tourism Industry Indonesia: Gov’t Seeks $20 Billion of Investment

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The Indonesian government is looking for big direct investment – both domestic and domestic direct investment – in Indonesia’s tourism industry in its quest to turn the tourism industry into the nation’s top foreign exchange earner, hence strengthening this industry’s role toward the national economy. Therefore, the government formulated ten priority tourist destinations that are regarded to have great tourism potential.

Indonesian President Joko Widodo targets to welcome a total of 20 million foreign tourists in Indonesia in 2019. This is a very ambitious target considering only 12.7 million foreign visitors arrived in Indonesia in the first 11 months of 2017 (foreign visitor arrivals in December 2017 will most likely disappoint due to the eruption of Mount Agung on Bali). Thus, within the next two years, the government seeks significant growth in foreign tourist arrivals and therefore needs major investment in infrastructure and tourist facilities to be able to attract the 20 million foreign tourists by 2019.

Hiramsyah Thaib, Team Leader of Acceleration for the Development of Priority Tourism Destination at Indonesia’s Tourism Ministry, said a combined total of USD $20 billion worth of investment is needed to turn the ten priority destinations (see table below) into great tourist attractions, equipped with updated infrastructure and plenty of facilities such as hotels, restaurants, shops, bars, parks, and more.

It is estimated that about USD $10 billion is needed for infrastructure development – such as roads, ports, airports, and electricity – in the ten priority tourist destinations, while the remaining USD $10 billion is needed to build all tourism facilities that are needed by tourists.

The Indonesian government can, however, only cover 10 to 20 percent of all required funds (the government will only contribute to infrastructure development such as roads and ports; it will not contribute to investment in tourist facilities), hence the private sector is envisaged to contribute most to to investment in the ten priority tourist destinations.

Thaib said a couple of priority destinations have already managed to attract a significant amount of investment. For example, Lake Toba in North Sumatra has welcomed a few investors so far. Currently, several projects are under construction near Lake Toba with a combined value of IDR 1 trillion (approx. USD $75 million).

Mandalika on the island of Lombok even managed to attract IDR 13 trillion (approx. USD $977 million) worth of investment so far. However, Mandalika was declared a Special Economic Zone (for agro industry and ecotourism industry), implying investors enjoy fiscal incentives to invest in this area.

Thaib added that investors from several countries have showed interest in projects related to the ten priority tourist destinations. These countries include China, Singapore, Malaysia, Japan, the Middle East, and several European countries.

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