T

he rising middle class population and consumption shift in the predominantly Muslim and young democratic Indonesia in the past decade have led to increased domestic consumption, including the demand for leisure and religious travel.

Noble intentions coupled with strong economic capacity provide a lucrative business opportunity for religious travel. The number of umrah, or minor pilgrimage, travel agents has grown tremendously, offering innovative bundling packages with haj and leisure trips to neighboring Muslim or predominantly Muslim countries like Morocco, Egypt and Turkey.

However, like in many other industries, unfettered industrial regulation can trigger fraud. Though most umrah travel agents have played by the rules fairly, consumers were still shocked by the embezzlement cases involving First Travel, reportedly amounting to Rp 8 billion (US$560,000), and Abu Travel, reaching Rp 1.8 trillion.

It is high time for the government to step up to ease consumers’ anxiety. Determining a price floor for umrah does not necessarily solve the problem since it incentivizes umrah travel agents to reap bigger margins from consumers without giving better services, and hurts new and trustworthy travel agents that offer low prices to disrupt existing players.

Besides, it also does not address the underlying problem of delaying umrah departure due to ill intention.

So what can the government do to strike the balance between tightening regulations while maintaining an encouraging business environment? The government’s duty is to both protect consumers and ensure that
industrial regulations are conducive enough for the business
to grow.

The government can easily achieve those objectives by using digital services.

Under the Religious Affairs Ministry, the government can build a two-tiered monitoring system that would be able to
collect future pilgrims’ data as well as ensure that pilgrims travel on time.

At the first tier, the ministry would reserve the right to collect all future pilgrims’ data from all umrah travel agents when pilgrims register themselves and pay the fees.

The travel agents must also provide the estimated departure date for each future pilgrim. The second tier is where the ministry can monitor and check whether the travel agents live up to their promises.

The ministry could link the system with immigration data to make sure that future pilgrims leave the country in good time. With this data, the ministry can monitor and evaluate each travel agent’s performance.

In cases where there is an increasing trend of delays from a particular umrah travel agent as shown by the system, the ministry could detect and mitigate fraud earlier.

Adopting the Transportation Ministry’s method to announce on-time performance (OTP) to credit the most punctual airlines, the ministry can also enhance industrial performance by publishing the most complicit umrah travel agents to promote healthy competition as well as mitigate fraud.

With the big data, the ministry can create certain measurements that might serve as ideal standards of industrial performance, such as the ideal waiting period in both high and low
seasons.

This innovation is both inexpensive to develop and has a minimum distortion to how the industry operates, while giving peace of mind for Indonesians aspiring to go for umrah. It does not regulate prices to give market the freedom to compete on price and service. In this digital era, the government should take advantage of digital services to solve policy problems with a cheaper, faster and most efficient method.

This simple innovation is a basic app that can be scaled up to solve bigger problems in the future.
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Talitha Chairunissa is a master of public policy candidate at the John F. Kennedy School of Government, Harvard University under the Indonesian Endowment Fund for Education (LPDP) scholarship.
Ferdian Siswanto achieved a master of business administration degree from the Boston University Questrom School of Management.