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It Still Doesn't Add Up

Government Blue Book Questions Wisdom of Proposed Visa Fee.

(6/30/2003) A blue book reportedly compiled by the marketing department of the Ministry of Culture and Tourism has added more questions to growing doubts over the wisdom of a proposed visa fee system to replace the current visa-free-arrival extended to the nationals of 48 countries.

According to a report in the Indonesian-language Bisnis Indonesia on June 28, 2003, the tourism ministry study looked at the top ten producing countries for tourist visitors to Indonesia: Singapore, Japan, Malaysia, Australia, Taiwan, South Korea, U.K., U.S.A., Germany, and The Netherlands. These top ten tourism producing countries were responsible for 78.4% or 4 million of the total 5.15 million visitors to Indonesia in 2001.

Under the terms of the proposed change in visa policy - now under indefinite suspension 8 of the 10 top ten tourist producing countries would no longer be provided a visa-free facility and instead be required to pay a visa fee of between $30-35 per person.

The Potential Fallout

If the introduction of visa fee at the $35 level is successful, it would produce US$ 140 million in additional state revenues at the 2001 arrival total's level. On the other hand, if tourism observers are correct in their fear that the introduction of a visa fee will cause tourist numbers to decline, any potential revenues generated by the proposed visa fee must be offset against foreign exchange loses due to decreased tourist spends.

Using a worst case scenario that projects tourism arrival numbers to decline by 50%, total foreign exchange losses would equal US$ 1.4 billion based on projections of an average holiday spend of US$ 100 per day and an average length-of-stay of seven days.

It Still Doesn't Add Up

Should the worst case materialize, Indonesia would earn a paltry US$ 70 million is visa fees against massive foreign exchange losses totaling US$ 1.4 billion in tourist spending.

Even adopting the less pessimistic view that a visa fee of US$ 35 would have a much less dramatic impact on tourism arrivals, a decline in tourist arrivals of only 4.76% would result in a zero-sum-result between any additional revenues generated from visa fees and foreign exchange lost from visiting tourists.

Although the Minister of Justice and Human Rights recently announced an indefinite suspension of the plans to introduce the visa fee in October 2003, the Presidential Decree approving the visa-paid-on-arrival system remains valid and could be introduced at any time.