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 na´ve 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.
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