Indonesia Tourism Outlook 2025: Challenges Towards 8% GDP Target

Indonesia has set an ambitious economic growth target of 8% in the 2025-2029 period. In an effort to support this vision, the tourism sector is expected to become one of the main pillars. To what extent are the targets and steps currently formulated sufficient to ensure that tourism becomes a significant contributor to national economic growth?

In the draft document of the National Medium-Term Development Plan which is planned to be announced in 2025, the target contribution of the Gross Domestic Product (GDP) of the tourism sector to national GDP will gradually increase, from 4.6% in 2025 to 5% in 2029. On the other hand, the foreign exchange target from this sector is also set at USD 32 billion in 2029. Although it seems realistic, this challenge is still much lower compared to Indonesia’s neighboring countries such as Vietnam, for example, which has set the contribution of tourism to their National GDP to be above 15%, the Philippines 8.6%, and Thailand 7.24%. The latest data shows that the number of foreign tourists in Indonesia is at 13 million per year with an average expenditure of USD 1,200 per tourist, generating foreign exchange of around USD 15.6 billion. To reach USD 32 billion in 2029, an increase in visits of up to 20 million foreign tourists per year with an average expenditure of USD 1,600 is needed.

The figure of USD 32 billion in tourism foreign exchange in 2029 shows that this sector must move much more aggressively than its current performance. However, when compared to the foreign exchange needs of the tourism sector to support economic growth of 8%, which is around IDR 3,741 trillion (or around USD 250 billion) over five years, the contribution of tourism based on the target set by the Ministry of Tourism above still seems relatively small. The Main Challenges of Indonesian Tourism are as follows:

1. Recovery after the COVID-19 pandemic: Diversification of tourism products is the key to recovery, especially in increasing global competitiveness while continuing to focus on strengthening the domestic market.

2. Unequal Distribution of Tourists: Bali dominates with 45% of international visits, while Maluku and Papua only receive less than 3% of tourists. This imbalance exacerbates the potential risk of overtourism in Bali and hinders the development of alternative destinations. The government needs to improve infrastructure and promotion in other regions of Indonesia such as Sumatra, Kalimantan, Sulawesi, Maluku, and Papua.

3. Improving the Quality of Tourism Human Resources

As many as 60% of tourism workers have not been trained according to international standards. Lack of foreign language skills, such as Mandarin and English, is an obstacle in serving the global market. Investment in training and certification is an urgent strategic step.

4. Digitalization of Tourist Destinations

Digitalization has only covered 40% of tourism MSMEs, while Bali has reached 75%. Business actors in the regions need to be supported with technology training to improve operational efficiency and access to international markets.

5. Lack of Inter-Regional Connectivity

Only 35% of priority tourism areas have adequate transportation access. Eastern Indonesia, such as Sulawesi, Papua and Maluku, for example, still need improved connectivity to strengthen the development of new destinations.

6. Lack of Tourism Product Diversification

As many as 70% of foreign tourists only visit Bali. Culinary, health and event-based tourism have not been optimally developed. Product innovations such as ecotourism and historical tourism, religious tourism must be strengthened to attract a wider market.

7. Tourist Safety and Comfort

Indonesia is ranked 50th in the world tourism security index. Law enforcement and training of tourism police personnel are crucial steps to provide a sense of security in tourist destinations and reduce the risk of naughty tourists disturbing order.

8. Digital Transformation of MSMEs

Only 40% of MSMEs utilize digital platforms, while 80% of international tourists rely on technology for travel decisions. Digital transformation training needs to be prioritized.

December 23, 2024, CNBC Indonesia

(https://www.cnbcindonesia.com/opini/20241223070226-14-598032/outlook-pariwisata-indonesia-2025-25-tantangan-menuju-target-pdb-8)