Editorial: It Just Doesn't Add Up!

(5/13/2002)

Is the proposed introduction of a US$50 visa fee for foreign tourist arrivals to Indonesia a clever way to raise much needed state revenues or potential recipe for disaster?

A Potential Financial 'Wash Out'

Economic impact projections drawn by balidiscovery.com indicate that any possible upside in terms of state revenues achieved by collecting the proposed $50 fee are quickly rendered meaningless by the potential downside losses in foreign exchange should, as it is widely feared, the new visa fee results in even a very modest downturn in tourist arrivals.

Current government data showing 5.1 million foreign visitors a year spending an average $1,000 each with the Indonesian Department of Culture and Tourism estimating some $5.1 billion in foreign exchange revenues are generated from Indonesia's tourism industry annually.

So far so good. And, if every foreign visitor is successfully charged a visa fee of $50 each - an additional $255 million in much needed state revenues are produced by the proposed visa fee. That's all fine and well, as far as it goes.

It would, however, be both naïve and dangerous to think that tourism arrivals act independently of any influence from introducing a gateway fee, such as the proposed $50 visa fee. In fact, research carried out by the Pacific Asia Travel Association (PATA) Bali Chapter in 1998 via a survey of inbound travel wholesalers demonstrated that as much as a 30% downturn in foreign arrivals to Indonesia might result from the introduction of a $50 visa fee?

The Potential Risks Make the New Visa Fee an Unwise Move

So the question becomes - how big an negative influence will result from the proposed increase and at what point will the foreign exchange revenues lost from lower arrival figures render the proposed visa fee a zero-sum-game?

The picture painted by the figures we've compiled do not paint a pretty picture. Calculating in the additional state revenues generated by a $50 visa fee, our projections suggest that the new policy becomes a zero-sum-game if it causes even a very modest decrease in arrivals of only 4.8% - a figure far less than the 30% downturn suggested by the respondent to the PATA survey of 1998. Even more alarming, our projections show that should the threatened 30% decrease in arrivals take place, Indonesia stands to take a whopping loss of $1.35 billion - even after calculating in the new revenue generated by the proposed visa fee.

In real terms, that would represent a drop of 25% in foreign exchange earnings from a sector of the economy already suffering ill health.