Sector
Tourism
Indonesia has designated tourism as a primary sector with a strong commitment to integrated infrastructure development and the enhancement of skilled and quality human resources. In 2023, the realization of investment in the tourism sector was predominantly driven by domestic investment (PMDN), reaching Rp 14.9 trillion. The PMDN funds were allocated to various types of businesses, including Rp 8.228 billion for star-rated hotels in West Nusa Tenggara, Rp2.601 billion for tourism areas in DKI Jakarta, and Rp1.656 billion for restaurants in Bali.
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Indonesia has designated tourism as a primary sector with a strong commitment to integrated infrastructure development and the enhancement of skilled and quality human resources. In 2023, the realization of investment in the tourism sector was predominantly driven by domestic investment (PMDN), reaching Rp 14.9 trillion. The PMDN funds were allocated to various types of businesses, including Rp 8.228 billion for star-rated hotels in West Nusa Tenggara, Rp2.601 billion for tourism areas in DKI Jakarta, and Rp1.656 billion for restaurants in Bali.
Indonesia has identified 10 priority tourism destinations, including Borobudur, Mandalika, Labuan Bajo, Bromo Tengger Semeru, Thousand Islands, Lake Toba, Wakatobi, Tanjung Lesung, Morotai, and Tanjung Kelayang. Both domestic and international tourists constitute the country’s tourism market potential. In 2023, the number of foreign tourist visits reached 11.68 million, with the largest contributions coming from Malaysia, Australia, Singapore, China, and East Timor. This increase in visits also corresponds with the growth of tourism foreign exchange earnings, which reached US$6.08 billion in the first semester of 2023.
Major provinces attracting international tourists include Bali, DKI Jakarta, Riau Islands, West Nusa Tenggara, and East Java. Meanwhile, the number of domestic tourist trips in 2023 reached 749,114,709 trips, with DKI Jakarta, DI Yogyakarta, and East Java having the highest travel ratios.
Aside from the tourism sector, Indonesia’s creative economy sector has also shown significant growth, with exports reaching US$11.82 billion in the first half of 2023. The fashion subsector is the main contributor with US$6.56 billion (55.52 percent), followed by culinary products with US$4.46 billion (37.70 percent), and crafts with US$792.67 million (6.71 percent).
Moreover, the sector has realized US$225.28 million in foreign direct investment (FDI) and US$577.87 million in domestic direct investment (DDI) in the first quarter of 2023 out of the sector’s total target investment of US$2.68 billion in 2022. The Tourism and Creative Economy Ministry targets investment in this sector to reach US$6-8 billion, with the hope of creating 4.4 million new jobs in 2024. This investment fund is planned to be allocated for the development of five-star hotel accommodations in super-priority tourism destination areas (DPSP) and 10 other priority tourism destinations.
Meanwhile, realized investments in the tourism sector in 2022 amounted to US$2.33 billion. Furthermore, FDI also contributes significantly, especially reaching Rp8.7 trillion from Singapore amounting to Rp2.458 billion, followed by Hong Kong with Rp1.720 billion, and India with Rp1.385 billion.
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The government’s decision to further reduce natural gas exports to Singapore may strengthen domestic energy supplies, but it risks undermining the country's credibility as a reliable trading partner. The move, justified on energy security grounds, could unsettle investors, strain relations with Singapore and weaken ASEAN's efforts to build an integrated regional energy market.
Following a plenary cabinet meeting in Jakarta on Oct. 1, the government announced that it would reduce Indonesia’s natural gas exports to Singapore over energy security concerns during crises. President Prabowo Subianto pointed out that many countries prioritized their own needs in times of crisis and described the prevailing geopolitical environment as one lacking international order in which only strong countries would survive.
Prabowo has taken a more direct role in defining Indonesia's foreign policy goals and their implementation, which reflects his broader domestic policy orientation toward greater centralization under presidential control. One consequence of this centralized, personality-driven approach is that foreign policy decisions increasingly rest with him.
Given Prabowo's worldview that the nation is being exploited by domestic and global elites, along with his emphasis on survival during crises, it is hardly surprising that some within the government have adopted a more confrontational stance in international relations. After all, the Prabowo administration has a track record of attributing setbacks and dissent to “antek-antek asing” (foreign stooges). Indonesia's recent moves regarding Singapore appear to follow a similar pattern.
The two countries are already embroiled in a diplomatic dispute over the wildfires in Kalimantan, both sides blaming companies linked to the other for the fires. Adding to the tension is Jakarta’s allegation that Singapore was behind MSCI's latest announcement on possibly downgrading the Indonesia Stock Exchange to “standalone” status over market transparency concerns.
Even if energy security concerns are driving the government’s decision to reduce gas exports to the island nation, political factors cannot be ruled out. And the move could have far-reaching consequences beyond Indonesia's immediate relationship with Singapore.
Indonesia previously reduced gas exports to Singapore last year, also citing domestic energy needs as the primary concern. Afterward, Energy and Mineral Resources Minister Bahlil Lahadalia reassured gas exporters that there would be no further reductions to export quotas in 2026, whether for existing contracts or spot agreements. Local gas exporters were therefore caught off guard when Bahlil suddenly announced another cut in quotas to Singapore.
After all, gas processing is a highly capital-intensive business that involves advance planning for production capacity and facilities based on expected commercial returns, which can take decades to materialize. Any unexpected change to sales commitments can significantly affect producers' financial positions.
Beyond existing contracts, the government’s sudden move could also undermine Indonesia's future credibility as a trading partner, particularly in the gas sector. The country’s natural gas industry has benefited substantially from participation in international trade, since access to foreign markets has improved the financial viability of new production facilities.
Existing gas agreements have underpinned the production decisions of local gas contractors, which have allocated output to international markets while reserving supplies to meet their domestic market obligation (DMO). A sudden change in the country’s gas export policy could trigger a cascading effect, as any uncertainty is likely to drive foreign buyers away. Gas producers could then find it increasingly difficult to develop new facilities as access to export markets diminishes.
The timing of the announcement also makes it difficult to restore confidence. Indonesia is currently drafting new oil and gas legislation that includes a proposal to change the DMO requirement from a maximum 25 percent to a minimum 25 percent. If the bill pursues this policy direction, future efforts to restore confidence among foreign buyers could be undermined by a provision that allows the government to increase domestic supply requirements at any time.
More broadly, this development also reflects this administration’s foreign policy direction, which increasingly appears to emphasize relations with major powers at the expense of regional cooperation. While a more active role for Indonesia in international affairs is welcome, the country cannot afford disputes within ASEAN, which it helped establish in 1967.
Energy security, the stated reason to justify reducing gas exports, is also critical to strengthen regional cooperation. ASEAN is developing an interconnected regional power grid aimed at facilitating electricity trade among member states: The initiative requires sustained cooperation and mutual trust among member states, and disputes such as the one with Singapore could undermine its progress.
The government cannot claim to strengthen energy security while undermining the credibility of the national energy industry and antagonizing the very partners with whom it must work to build ASEAN’s energy security. It must therefore complement its more assertive global engagement with stronger regional cooperation, particularly in developing a more secure and integrated energy system for Southeast Asia.
