ECONOMIC IMPACT OF TOURISM IN INDONESIA : AN INPUT-OUTPUT ANALYSIS

Abstract

By defining that international tourism sector is all economic activities which significantly provide goods and services to international tourists, one of the aims of this study is to measure the linkages and contribution of the sector in the Indonesian economy by employing a modified input-output analysis. Based on the 1985 Indonesia Tourism Input-Output Table, the linkages were modest and the contribution of the sector was very small. Meanwhile, the light industry sector offered better output, value-added, and employment linkages, and tended to import less than the tourism sector. Another objective of this study is to develop international tourism demand models for Indonesia. I find that both tourist expenditure and tourist arrival are price elastic, income elastic (thus tourism is classified as luxuries)., and population inelastic. This study also attempts to find a reliable tourism demand forecasting technique, the two techniques examined, namely the structural models and exponential trend analysis, have provided less satisfactory results. Finally, this study suggests some tourist development measures, such as: improving tourism facilities and attractions, continuing liberalization in trade, investment, and aviation, providing Japanese and Chinese characters in some famous tourism attractions and brochures, regional specializing in tourism activities, promoting Indonesian typical products, considering non-economic objectives in tourism policies, and reducing air fare by state-owned airline company.