Global Business Guide Indonesia

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Business Updates | The Rise of Halal Tourism in Indonesia

On the 30th October 2013, Indonesia will host the 3rd annual Indonesia Halal Expo in Jakarta as part of a growing movement within the economy to embrace shariah compliant business opportunities. The global Muslim population of over 1.8 billion people is gaining increased attention from businesses worldwide as a specific consumer group given the size of the market and its growing affluence. The opportunities that this encompasses are notably apparent in the halal tourism industry; in 2011 the Muslim tourism market was valued at $126.1 billion USD and is expected to reach $192 billion USD by 2020 (Dinar Standard & Crescent Rating). Indonesia as a moderate Muslim country with plenty of natural tourism attributes is well positioned to take advantage of the lucrative opportunities to be found in the halal tourism market as well as related industries through effective promotion and communication.

Indonesia has failed to make significant inroads into appealing to international Muslim tourists as it has yet to carve out a recognised and distinctive brand. The country has therefore been overlooked in favour of regional neighbours such as Malaysia, Thailand and Singapore whose aggressive marketing campaigns have seen them become some of the most popular Muslim tourism destinations worldwide.

Every year Thailand receives 22 million tourists from Muslim nations (Thai Ministry of Tourism); this far exceeds the 1.3 million foreign Muslims that visited Indonesia in 2010. This marked gap in tourism numbers is particularly poignant considering Indonesia’s readily available Muslim-friendly facilities such as prayer rooms and halal restaurants which cater to domestic tourists who collectively took 72 million domestic tourism trips in 2012 (Euromonitor). Indonesia also enjoys a unique position as a moderate Muslim country which provides the platform on which to carve out a niche in the market and appeal to non-Muslims interested in exploring Islamic heritage or seeking the advantages offered by shariah compliant hospitality services.  

Recent initiatives by both the government and the private sector show an impetus to address these shortcomings in order to realise the country’s potential as a halal tourism and business destination. Earlier in 2013, an MOU was signed between the Ministry of Tourism and Creative Economy and the Indonesian Ulema Council to make Indonesia a premier destination for devout Muslim holiday-makers wishing to abide by their religious teachings. This provides a cohesive direction and drive for the private sector to explore new opportunities and for existing players within shariah compliant hospitality such as the Sofyan Hotel chain to further expand their activities.

Indonesia’s potential within shariah compliant business models is not limited to the tourism industry as reflected by the development of the Islamic banking sector which has grown by 40.12% CAGR over the last five years (CEIC). Over the same period, the Jakarta Islamic Index has also outperformed the Jakarta Composite Index by 48% (CIMB – GK Securities Indonesia) illustrating the scope for further growth within complementary sectors.

Indonesia’s halal tourism sector presents exciting opportunities to potential investors within the field of hospitality such as developing resorts and restaurants and as well as in related industries that have demonstrated success in other markets such as shariah compliant medical tourism and halal food products. The increasing appeal of shariah compliant business models also opens up possibilities within business consultancy to assist Indonesian companies seeking to comply with halal principles in their business practices and for effective marketing strategies to appeal to shariah conscious consumers.

While Indonesia is only at the beginning stages of defining its place in the halal tourism industry, the renewed momentum offers exciting prospects for the private sector to seize the opportunity and contribute to building Indonesia’s national brand in the global halal tourism market and beyond.

Global Business Guide Indonesia - 4th October 2013

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Indonesia Services Snapshot - Tourism

Contribution to GDP: 9.6% (2016)
Number Employed in the Sector: 12.16 million (2015)
Monthly Average of Foreign Tourists: 940,361 (Jan-Oct 2016)
Domestic Tourism: 270 million trips (estimated, 2016)
Competitiveness Score: 37/140 (WEF, 2016)
Regional Rank: 4/15 in Asia-Pacific, 4/9 in Southeast Asia (WEF, 2016)
Most Popular Locations: Bali, Jakarta, Yogjakarta, Bandung, Batam, Medan.