Indonesian economic recovery & role of tourism, digitalisation | By Dr Mehmood-ul-Hassan Khan


Indonesian economic recovery & role of tourism, digitalisation

RIGHT from the beginning of his term, the President Joko Widodo emphasized that the tourism and digitalization sectors should be “strategic priorities” in Indonesia in terms of foreign exchange earnings.

That is why tourism and digitization sectors have become the emerging “driving force” for the post-pandemic economic recovery in Indonesia which is home to 272.2 million (2021) people, making it the world’s 4th most populous country and the largest Muslim country by population.

It is the world’s 16th largest economy in terms of nominal GDP; the world’s 10th largest economy in terms of GDP (PPP); the largest OIC economy, the largest economy in Southeast Asia; and a member of the G-20 and recently holds its chairmanship too makes it very “attractive” and “productive” destination for the global tourists.

Moreover, it has around 300 ethnic groups speaking more than 600 languages which are the core of its rich and diversified “multiculturalism” and basic strength of its tourism and digitalization drive in the country.

Furthermore, the sectoral breakdown of Indonesian economy is 44.4 percent for services, 38.3 percent for industry, and 13.7 percent for agriculture in 2020-2021.

The key drivers of economic growth and social development have been its service and Industry sectors in which tourism and digitalization play very important role.

Interestingly, the western parts of Indonesia have benefited from disproportionally higher economic development, contributing a substantially larger share of its GDP growth.

The eastern part of Indonesia, meanwhile, is economically isolated and much less densely populated.

However, emerging sectors of tourism and digitalization would be instrumental to “gear-up” business and economic activities in the eastern part of Indonesia.

The Ministries of Communications and Informatics (Kominfo) and Communications and Informatics (Kominfo) have been focusing on economic recovery through increased digital utilization and tourism.

Both are collaborating with 40-50 digital platform providers in Indonesia and main stakeholders in tourism industry collectively named the Industry Task Force (ITF), under the G20 Digital Economy Working Group (DEWG).

It aims to contribute to the success of digital economy discussions toward an inclusive and sustainable digital ecosystem which is “commendable”.

According to official data of Indonesia, its digital economy GDP “surged” 11 percent while its tourism sector showed a good performance in the beginning of 2022, and is expected to grow up to 4.3 percent from 4.2 percent in 2021.

The Indonesia Internet Service Provider Association (APJII) claims that 77 percent of Indonesians utilize the Internet for more than eight hours daily due to which digital adoption has become an integral part of daily lives, the optimization of digital skills and literacy is crucial which may be useful for the growth of tourism and digitalization in the country.

In addition, the continued partnership with the private sector is crucial in building a stronger economy foundation in its digital transformation efforts.

Its inclusive, sustainable and empowering digital ecosystem is the driving force for Indonesia’s post-pandemic economic recovery.

The COVID-19 pandemic highlighted the economic, social and cultural importance of the tourism sector, globally.

The importance of advancing a multi-disciplinary, multi-sectoral approach to sustainable tourism is the need of the hour for Indonesia.

It includes “integrated engagement mechanism”, comprising private, public sector, civil society and local communities in designing and implementing sustainable tourism strategies and models, including community-based rural and agro-tourism and domestic tourism models.

Interestingly, the estimated value of Indonesia’s digital economy in 2025 is US$ 146 billion or equivalent to Rp.2,103 trillion.

In 2030 it will reach US$ 330 billion or equivalent to Rp.4,752 trillion which would be great economic stimulator in the future.

In the context, building a 4G network in 12,548 villages (out of 83,218 villages and sub-districts that have not been reached by the 4G network); development of a digital platform for the tourism network hub; tourism village assistance through English language training, utilisation of online stores and training for digital entrepreneurship academy may be initiated for robust growth of the tourism and digitalization sectors in Indonesia.

In 2020, Indonesia received a total of 4 million tourists, ranking it 44th in the world in terms of absolute numbers.

Tourism alone produced approximately US$ 3.53 billion for the country. It represents 0.33 percent of its gross domestic product and nearly 12 percent of Southeast Asia’s total international tourism receipts.

To conclude, the government of Indonesia should “integrate” latest technologies of digitalization i.e.

“metaverse” and “block-chain” for the rapid growth of tourism and digitalization sectors in the country.

It is encouraging that the Indonesian National Medium Term Development Plan (RPJMN) 2020-2024 upholds importance of tourism which is projected to contribute 5.5 percent of Indonesia’s GDP.

The Indonesian government should also speed-up its efforts on the completion and showcasing of the “10 New Balis project:.

Moreover, apart from the big tourism development projects at the grass-root level, the government should also develop Community-Based Tourism (CBT) in Rural Tourism or Village Tourism (VT).

Hopefully, the modern tourism industry digitalizing in tourism industries will provide accessibility to all tourism stakeholders in Indonesia, starting from the aspects of licensing, tourism business activities and events and providing accessibility for visitors to find information about destinations for visitors in Indonesia.

In this regard, “green”, “resilient” & “sustainable infrastructure” and inclusive human capital development is must for the further development of tourism and digitalization sectors in Indonesia.

Both can be further developed through “Islamic finance”, “climate change fund”, “women and youth participation” and “capacity development”.

There are many aspects that require further optimization, such as “infrastructure”, “human resources” and users’ literacy.

There is an urgent need to ensure that talent, competition and data protection are continually improved.

Moreover, the government of Indonesia should also integrate cultural, historical, educational, health and wellness, countryside, business and last but not the least, medical tourism for the rapid growth of tourism and digitalization growth in the country.

In this regard, addition of Islamic and climatic tourism may also be used to attract more and more Middle Eastern and European tourists in the country.

Furthermore, country-wide and global showcasing of projection of Wonderverse Indonesia is must for a metaverse world where users can interact with each other using avatars and experience Wonderful Indonesia in the virtual universe.

An ideal combination of public-private partnership highlighting blessings of modern technologies, cultural dimensions, natural heritage aspects and aspects of creative economy should be clubbed as soon as possible in the country.

—The writer is Executive Director, the Centre for South Asia & International Studies (CSAIS) Islamabad and regional expert, Indonesia & ASEAN.


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