Cover Story / March 2018
By Muhammad Al Azhari
Despite visitors’ complaints over poor infrastructure, cleanliness and unfriendly immigration policy, the tourism sector has defied its critics by turning on a good performance and has emerged as the new star of the country’s economy.
GlobeAsia interviewed Minister of Tourism Arief Yahya at his office where he shared his insights over where the government is heading to improve the sector that is currently the country’s second biggest foreign exchange revenue generator.
The former CEO of the country’s largest telecommunication company, PT Telkom, shared a presentation highlighting hopes that the sector could one day serve as the core economy for the archipelago nation. “Currently, the biggest foreign exchange revenue is from the palm oil sector. We believe in years to come tourism will overtake it,” said Arif.
In 2016 tourism climbed into second place, beating oil and gas and coal and contributing $13.68 billion in foreign exchange revenue to the nation. That compared with its position in fourth place from 2013 through 2015. The ministry now projects that by 2020 tourism could overtake palm oil to take the number one spot.
“We are now among the top 20 fastest-growing travel destinations in the world,” said Arif, referring to a United Nations World Tourism Organization (UNWTO) report published last year. Indonesia registered 14.04 million foreign tourist visitors in 2017, a healthy 22% increase from the previous year. Last year’s target was 15 million visitors but volcanic eruptions in Bali discouraged many at the end of the year.
Even so, the 2017 growth figure was a sharp jump from 8% in 2015 and 12% in 2016. Many industry players and observers credit the sector’s positive performance to the ministry’s intense promotional strategy worldwide, its targeted marketing, and deregulation moves that have helped unburden policy processes.
Deregulation is Key
Under Arif’s leadership, the ministry has intensified efforts on branding, advertising and selling the flagship ‘Wonderful Indonesia’ tourism campaign to raise awareness worldwide.
Some of the many tactics adopted have included forging cooperation with McDonalds to feature promotional videos about Indonesia in hundreds of the fast food giant’s outlets in Europe and spending money on advertising on public buses in Washington DC and European cities like Rome, Frankfurt and London.
Wonderful Indonesia garnered many awards in 2015-2016, with one of the most prominent from Travel Weekly Asia, which bestowed its flagship Best Destination Marketing 2016 on the program.
Arif did not rush into the strategy. Early in his tenure as minister, the marketing specialist turned the focus of the ministry’s attention on marketing of destinations that were ready with ‘3A’ (attraction, accessibility, amenity) elements. That was why in the first year of his tenure he focused marketing on the country’s three main international gateways: Bali, Jakarta and the Riau Islands, with its tourism islands of Batam and Bintan.
Later he was responsible for the government’s decision to promote 10 new priority destinations beyond Bali, a move considered a good strategy to spread the economic benefit derived from the sector. Most important was development of his own role into a ‘strategic-level’ position in which he could deregulate troubling red tape hampering the sector’s growth. Among his achievements was shortening the time needed for yachtsmen to secure permits to enter the country.
He also managed to exempt cruise ships from the ‘cabotage’ rule that requires all vessels operating within the country’s territory to be domestically owned. For him, giving the best service to the rich is part of the business of being a successful host.
“Do you know the cost of a yacht? It could be $100,000 and we want to make it difficult for these people to spend money here. Under the old regulations it could take them three weeks to get the permits; what kind of rich people bother to wait that long?” said the minister.
Arif, who earned his PhD from the University of Padjadjaran in Bandung, West Java and who has a Master of Telematics from the University of Surrey in England, says his ‘text book’ states that the wealth of global economic activities is concentrated in just three things: “Trade, tourism and investment.”
“The world is that simple. We need good flow of people, money and goods. But sometimes it is made difficult because of bureaucracy,” said Arif, who was President Joko ‘Jokowi’ Widodo’s choice as minister as soon as he took over running the country in 2014.
Jokowi’s administration in 2016 accepted his controversial advice to introduce a visa-free policy for visitors from 169 countries, as part of an effort to lure foreign tourists. “The visa-free policy is like a starter pack. I remember my lesson at Telkom. The company made 99.9% of its revenue selling phone credit for prepaid users, not from the starter packs. Even so, starter packs had to be freely available, otherwise how could the company sell phone credits? The same analogy applies for visas. How can we expect tourists to spend money here if we make it difficult to come?
“Immigration checkpoints are where the moment of truth is challenged. When people come here, first impressions are important. If they start with negative impressions, how do you think this will affect the perception of the entire country?”
Lagging Behind the Neighbors
Despite applause for the positive developments, the country with more than 17,000 islands with a remarkably intricate coastline stretching more than 80,000 km, the fourth longest in the world, still lags behind its neighbors in terms of tourism visits.
Arif realizes that further breakthroughs are needed. Although the archipelago offers plenty of tourist attractions – from its spectacular beaches, the breathtaking scenery of its mountains and volcanoes, and its cultural richness – the country continues to struggle to come close to the tourism figures its closest neighbors enjoy.
Malaysia topped 20 million visitors last year and its government is looking to increase that figure to 33.1 million in 2018. Thailand crossed the 35 million mark in 2017.
The Travel & Tourism Competitiveness Report 2017 produced by the World Economic Forum showed Indonesia ranked a relatively lowly 42nd out of 136 economies across the world. Malaysia ranked 26th and Thailand 34th.
The report offers an in-depth analysis of a number of factors, including policies, enabling environments (factors such as safety and security, health and hygiene and ICT readiness), infrastructure and natural as well as cultural resources.
“With everything that we can offer how come we are still at the level below our neighbors? I often think there must be something wrong with our regulations,” said Arif.
After digesting the global-standard study, Arif came to the conclusion that different approaches are needed. That is especially true if he is to meet the president’s target of achieving 20 million foreign visitors a year by 2019.
Being a CEO at a major corporation for several years clearly shaped the mind of the minister. His response to the problem was to implement a 4P marketing mix concept: product, pricing, promotion and place.
“Our tourism destinations are good. There are plenty to sell. The pricing is also good. Then, why we can’t sell them? There must be some problems with the other two Ps, promotion and place, which means the service. The theory says extraordinary results require extraordinary means,” said Arief, who led the ministry in securing 21 awards last year from 10 countries and 46 awards in 2016 from 22 countries for the Wonderful Indonesia campaign.
The man born in Banyuwangi in East Java on March 2, 1961, said part of his game to level up the sector’s competitiveness is by embracing digital technology, creating a breakthrough to improve connectivity.
“One extraordinary effort is to go digital,” he said, adding that about half of the ministry’s promotional budget has been allocated for digital promotion. “Why? Because 70% of our customers have gone digital,” he said. The ministry was allocated Rp3.7 trillion in the 2018 state budget.
Arif encourages social media users to help promote the country’s tourism. Last year the minister pushed for seven “Instagrammable” tourism spots in the country, all of which he claimed turned to become trending topics. “This year we are aiming for 100 spots,” he said.
Other creative ideas include developing village tourism through homestays rather than have to build new accommodation. “We have 17,000 islands and 75,000 villages in Indonesia. If you wait, let’s say in a small city like Banyuwangi, it could take five years (to build), that’s not including the time to wait for permits. So why not use people’s homes for homestays to support tourism?”
The ministry held a contest for the best architectural design for a homestay to uniquely represent each region. The ministry is currently developing a marketing platform called Indonesia Tourism Exchange, which can offer services like San Francisco-based Airbnb.
And in a bid to tackle slow infrastructure development at ports and airports, the government is looking at using sea planes. “The Maldives, a small country with only 300,000 people, can draw 1.1 million foreign tourists. if each tourist spends about $2,000, then we are talking about $2.2 billion of business,” he said.
“They have about 2,000 sea planes but Indonesia only has two,” the minister said with a laugh. He added talks are underway with former Garuda Indonesia CEO Arif Wibowo to lead a company that will provide such a service.
Another new idea the minister has floated is the concept of “nomadic tourism.” The ministry is initiating projects called ‘Glamour Camp’ and ‘Home Port’ in which amenities are portable. Glamour Camp means the accommodation can be picked up and moved, while with Home Port capsule-like lodgings are also portable.
“We have many tourism heavens, why aren’t we able to pick the best spots for our tourists? And if (accommodation) is portable, the environmental impact is also minimized,” he said.
Arif believes such services will appeal to backpackers, who seek real adventure in exploring Indonesia’s beauty. “The nomadic solution could be a temporary answer to break all the current barriers, but I believe this will become a trend in the future,” said the author of Paradox Marketing, the 2012 book in which he shared his experience and thoughts on marketing.
Arif has until the end of the government’s term of office in 2019 to realize his creative plans and he has high hopes that he can take Indonesia into the era of modern tourism, even though it remains a country where bureaucracy can get in the way of development. “Consumers’ behavior has changed, it will really be strange if we don’t follow the trend,” Arif muses in conclusion.
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