Unspun

From January 1 this year all Indonesian residents (local as well as expatriates) who are registered with the Tax Department through their NPWP no longer have to pay Rp1 million fiscal or exit tax each time they leave Indonesia. Conversely, those who do not have a NPWP registration will have to pay Rp2.5 million fiscal.

The tax laws are such that most working professionals would have a NPWP number by now. This being the case it is an interesting thought experiment on how the removal of fiscal payments would affect domestic tourism in Indonesia.

Unspun suspects that there is a huge number of Indonesian professionals who are comfortable but who are not well off who in the past thronged to Bali for their holidays because they could not or did not want to incur the extra Rp1 million fiscal if they went overseas instead.

But now, with the fiscal removed the rules of the game are changed. Would Bali still beckon to them, or would they flock to somewhere else instead for a change? Nobody seems to have investigated this in depth but Unspun thinks a huge proportion of them will fly elsewhere.

Of all the destinations made more accessible by the new tax law Malaysia stands to be the biggest winner if its Tourism Ministry can take advantage of the situation.

The reason is simple. Two destinations now are as cheap to fly to as Bali for the Indonesian in Jakarta – Singapore and KL. Singapore (at an exchange rate of S$1- Rp 7,500 or so), however, has gotten very expensive for Indonesians. On the othr hand, terms of hotels, KL is probably cheaper than Bali and travel and food costs there are about par and perhaps a little lover than Bali. What’s stopping many Indonesians from going there is a negative perception that Malaysians are negatively pre-disposed toward Indonesians. If that can be corect and Malaysia can let Indonesians know that they are welcomed there, it would see a great influx of the middle to lower middle market of Indonesian tourists.

It would be interesting too to wonder what the tourism industry in Bali would do as a reaction to this potential threat? Bali has great natural resources but development there is not planned well. It is also not competitive in terms of value for money. So what will they do?