The Impact of Global Financial Crisis to the Tourism Industry in Indonesia

Indonesia is located on over 17,504 islands and has over 17% of the earth’s species. Roughly and conservatively, Indonesia houses about 11% of flowering plant species, 12% of the world’s mammals, 17% of all birds, and at least 37% the world’s fish. Since its independence, the government of Indonesia has exploited the natural resources of country to fuel “development”. Minerals and oil are heavily extracted; forest have been cleared and cut down. The development which emphasizes very much on economic growth has neglected almost all aspects other than economic growth. Until the late 1980s, the focus of the development had been on import substitution, and after that on developing export oriented industries. Hence, development in Indonesia means nothing more than industrialization. Moreover, industrialization in Indonesia has been focused on manufacturing.

As stated in its long-term plan of development, Indonesia started its development by boosting the agriculture to be self sufficient in food, and at the same time, establishing the foundations for industrialization. After completing the phase of developing its secondary (manufacturing) industry, the country moved forward to tertiary (service) industry. Relying on this concept on the early 1990s, Indonesia promoted the development of service industries. The most prominent sector in this industry is tourism. The tourism sector in Indonesia has expanded as a prospective contributor to earning of a number of local governments. Nowadays, the tourism sector is not only potential in Bali but also probable in all parts of Indonesia. Indonesia has lots of wildlife flora and fauna as well as cultural diversities, black and white sand beaches, natural landscape, marines, mountains, etc. The tourism sector becomes a more prospective sector in Indonesia as illustrated in the growing number of international tourist arrivals.

UNWTO (United Nations World Tourism Organization) predicts that due to financial crisis, until December 2008, the growth of world tourism sector will slow down about 2% to 3%. This will affect to the tourism industry which involves travel agents, hotels, domestic and international airlines industries, and other tourism business. Preliminary UNWTO figures for the first months of 2009 indicate a continuation of the negative growth already experienced in the second half of 2008. Destinations all around the world have suffered from a decrease in demand in major source markets. With the exception of Africa and both Central and South America, who all posted positive results in the range of 3-5%. So far, northern, southern and Mediterranean Europe, north-east Asia, south Asia, and the Middle East are amongst the most affected sub-regions. In this context, UNWTO expects international tourism to decline between 2% and 3% in 2009 (UNWTO, 2009).

In ASEAN countries, the global financial crisis also hit the economic of the country. The Asian Development Bank (ADB) estimates that the average growth rate of Asian developing economies would be 3.4%, much lower than the 6.3% in 2008, and the lowest since the 1990s Asian financial crisis. In Indonesia, the central bank has lowered its growth rate forecast to 4% from 4.9% and the National Development and Planning Committee predict exports will drop 6% compared to last year. Non-oil and gas exports will fall around 20%. Indonesia, ASEAN’s biggest economy, is planning to put 73.3 trillion Rupiah (11,950 Rupiah to one US dollar) into the market through tax relief.

The global financial crisis has not affected the tourism industry in Indonesia according to the number of international tourist’ arrival and tourism receipt. To some extent, Indonesia may have benefited from tourists switching holidays away from Thailand as an impact of troubled and political instability. The other fact is United States of America (USA) tourists is not the highest market of international tourists to Indonesia and only 220,202 tourists (2.82%) from total tourist’ arrivals. However, in 2009, Indonesia’s tourism has a big challenge due to the decline of economic indicator (GDP and employment) as an impact of present global financial crisis.