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‘Strange regulations’ stymie tourism investment
Strict regulations and inefficient bureaucracy continue to impede investment into tourism even as Indonesia looks to the sector as a new engine of economic growth through the development of special economic zones and super priority destinations
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span>Strict regulations and inefficient bureaucracy continue to impede investment into tourism even as Indonesia looks to the sector as a new engine of economic growth through the development of special economic zones and super priority destinations.
Investment Coordinating Board (BKPM) head Bahlil Lahadalia reiterated President Joko “Jokowi” Widodo’s “do not disturb investors” message during a recent trip to Banyuwangi, East Java.
“Many investors are attracted to tourism but become entangled in strange regulations,” Bahlil said last week in Banyuwangi as quoted in a press release from the agency.
Banyuwangi, an increasingly popular destination thanks to natural wonders such as the blue flames of Ijen crater, has reaped the rewards of tourism development, with the sector providing a big boost to regional government revenue and per capita income, allowing many people to lift themselves out of poverty.
Jokowi has issued regulations to establish six tourism special economic zones (SEZs) including in Likupang in North Sulawesi and Singhasari in East Java. The government has also identified five super priority tourist destinations, namely Likupang, Lake Toba in North Sumatra, Borobudur temple in Central Java, Mandalika in West Nusa Tenggara and Labuan Bajo in East Nusa Tenggara.
Tourism is expected to become a new engine of economic growth, which has slowed to a two-year low, and become the largest contributor to the country’s foreign exchange reserves. However, red tape and regulatory bottlenecks continue to turn off investors.
In Banyuwangi, for instance, Bahlil cited a cable car project that has been on hold for several years because of the Environment and Forestry Ministry’s sluggishness in approving the necessary permits, despite being requested by the regent more than three years ago.
Meanwhile, government institutions are busy pointing fingers.
The Tourism and Creative Economy Ministry’s assistant deputy for investment, Hengki Manurung, claimed the ministry’s permit process was “easy” and laid the blame on other ministries, noting that land permits in particular were “extremely difficult” to obtain.
The environment ministry’s forest use and area planning director, Rossi Tjandrakirana, said such projects typically did not meet the necessary requirements to obtain a permit. In some cases, applicants have complained about long wait times despite not having submitted an applications at all as they were waiting for a gubernatorial recommendation, she added.
“We are a country with a government that has the grandest regulations [as] there are regulations for everything [...] This is what complicates [investment],” Indonesian Tourism Scholars Association (ICPI) chairman Azril Azhari said on Tuesday.
In addition to a permit to set up a business, investors and businesspeople also need to obtain Environmental Impact Analysis (Amdal) documentation for tourism activities and meet certain standards for their employees, Azril explained.
Companies also need specific permits for different types of tourism operations, whether they be a restaurant, a hotel or a travel agent.
The Travel and Tourism Index published last September by the World Economic Forum (WEF) ranked Indonesia 98th out of 140 countries regarding the business impact of rules on foreign direct investment.
Indonesia fared even worse concerning the time needed to obtain construction permits, ranking 111th in the index. The report indicated that it takes approximately 200 days to handle the necessary procedures to build a warehouse in Indonesia.
David Makes, tourism businessman and former head of the Tourism Ministry's ecotourism acceleration team, added that the involvement of several ministries had further complicated tourism investment.
“We need a one-destination, one-management concept so that investments can be processed through a simple and accurate mechanism,” David urged.
In response to such concerns, President Jokowi directed in November that all licensing be streamlined under the BKPM. To promote an investment-friendly climate, the government is also drafting an omnibus bill to eliminate inefficient regulations and bureaucracy.
However, the road ahead remains a long one. The development of SEZs continues to progress at a snail’s pace as investors remain reluctant to open factories in the designated areas despite the promise of government incentives, recent data has shown.
Former tourism minister Arief Yahya said the country needed 120,000 more hotel rooms, 15,000 more restaurants, 100 more recreational parks, 100 more diving operators, 100 more marinas, 100 more tourism SEZs and 100,000 more homestays to boost tourist arrivals from 2019 to 2024.
In 2019 alone, the country needed to invest Rp 500 trillion (US$33.49 million) in tourism development, he estimated.
While Hengki claimed that investment in tourism had been “good”, the government had failed to hit its targets several times over the last five years. BKPM data shows that investment in tourism steadily increased from 2013 to 2017 before falling in 2018.
