Saudi Arabia's Economic Diversification Targets Indonesia as a Consumer

Indonesia needs to organize its tourism strategy if it doesn't want to become a mere consumer.

AFP/GIUSEPPE CACACE

A street lined with entertainment facilities in Riyadh, Saudi Arabia, January 2023.

Saudi Arabia realizes that oil and gas is no longer a reliable source of income. Dependence on this sector is slowly being reduced. They are starting to focus on working on sectors that support sustainability. Indonesia, with its large population, is Saudi Arabia's main market.

Quoting Global Finance, Saudi Arabia's non-oil sector is expected to contribute up to 50 percent of the country's gross domestic product (GDP) by 2023. This will be a first in the country's history and a major milestone for diversifying its sources of income away from fossil fuels.

Also read: Tourism, Saudi Arabia's “New Oil”

Government data from Saudi Arabia shows that the growth of non-oil GDP revenue reached 4.4 percent or around 453 billion US dollars. This figure is equivalent to 7.259.3 trillion Indonesian rupiahs with a conversion rate of 16,025 Indonesian rupiahs per US dollar.

"The high-capital oil and gas sector does not create the necessary job opportunities to supply young, highly-educated labor," said Middle East economist Nasser Saidi, who is also a former Minister of Economy and Trade in Lebanon.

In addressing that challenge, the Saudi Arabian Government provides incentives to encourage the service and manufacturing sectors. As a result, the majority of non-oil sectors have grown due to private consumption, such as entertainment, services, and tourism. These sectors contributed up to 40 percent of the country's economy last year.

GOOGLE MAPS

Location map of Jeddah, Mecca, Medina, and Riyadh, in Saudi Arabia.

One thing that the Saudi Arabian government is focusing on is tourism. They are serious about working on this sector as a source of income. The fruits of this ambition are starting to be seen from the number of visits to Saudi Arabia (inbound)which will continue to increase significantly in 2021-2022.

Data from the Saudi Arabian Ministry of Tourism shows that the number of foreign tourists entering Saudi Arabia reached 3.5 million people in 2021. In 2022, that number increased by more than three times to 16.6 million people.

Also read: Saudi Arabia's Latest Leap, Ambitious to Become the World's Gaming and E-sports Center

In 2023, according to the official statement of the United Nations World Tourism Organization (UN Tourism), the country that is a destination for Muslim worshipers will successfully attract more than 27 million foreign tourists and over 79 million domestic tourists. The total amount of money spent will be more than US$67 billion or around Rp 1,073.7 trillion with an exchange rate of Rp 16,025 per US dollar.

From this figure, the Minister of Tourism and Creative Economy (Menparekraf) Sandiaga Uno said that Indonesia was in the top position with the most visits in 2023. Around 1.5 million people went to Saudi Arabia for umrah and Hajj.

"They are developing an extraordinary tourism industry. Last year, they managed to attract 100 million tourists, with 27 million of them being foreign tourists. The highest visitors after Indonesia are Bangladesh, Pakistan, and India," said Sandiaga during a weekly press conference in Jakarta on Monday (6/5/2024).

KOMPAS/YOSEPHA DEBRINA R PUSPARISA

Minister of Tourism and Creative Economy Sandiaga Uno answering journalists' questions after the weekly press conference in Jakarta, Monday (6/5/2024).

He acknowledged that more Indonesian tourists travel to Saudi Arabia than vice versa. The number is even about 10 times smaller compared to the number of Saudi Arabian tourists visiting Indonesia.

Compare it with data from the Central Statistics Agency (BPS). The number of foreign tourist visits in 2021 was only 1.6 million visits. In 2022, this number grew almost 2.5 times to 5.5 million visits in 2022.

Also read: "Dragon Ball" in Arabian Land, Saudi Ambition to Boost Tourism

The success of Saudi Arabia is supported by the strategy initiated by its tourism sector. Demand for tourism activities is projected to increase by 390 percent by 2023. The estimated gross value added (GVA) of the tourism sector exceeds 7 percent. Meanwhile, the direct contribution of the tourism sector to the GDP is expected to reach 4 percent.

The Saudi Arabian Tourism Authority, represented by the President of the Asia-Pacific Market for Saudi Arabia, Alhasan Aldabbagh, stated that Indonesia is one of their main tourism markets. Visitors to Saudi Arabia are expected to explore more than just performing Umrah and Hajj, but also to vacation and engage in other activities.

"In 2023, we recorded 1.5 million Indonesians going to Saudi Arabia. This year, we are targeting 2.2 million Indonesian travelers. However, the difference is that we want Indonesian communities, especially those from the middle and upper classes, to vacation in Saudi Arabia," said Aldabbagh.

ITB BERLIN

Saudi Arabian Tourism Authority Asia Pacific Market President Alhasan Aldabbagh.

Until the first quarter of 2024, almost 500,000 visitors visited Saudi Arabia. The positive trend is expected to continue until the end of the year.

He continued, tourism is the future of Saudi Arabia because it wants to diversify the economy beyond oil.

Efforts to catch visits

In order to increase the number of tourist visits from Saudi Arabia to Indonesia, the government is making various efforts. This includes collaboration with airlines and optimizing the performance of Indonesia's creative economy sector there.

Sandiaga stated that up to now, the planes that carry pilgrims from Indonesia to Saudi Arabia return empty. Ideally, these fleets could be filled with Saudi Arabian tourists who come to Indonesia.

"We are currently lobbying both Garuda Indonesia and Saudi Airlines to offer attractive tour packages for tourists from Saudi Arabia, such as beaches, mountains, and other natural attractions. We aim to bring the number of visitors back to pre-pandemic levels, exceeding 100,000," said Sandiaga.

Thus far, Indonesian society spends over Rp 60 trillion per year on Umrah. There is a lot of food, clothing, and souvenirs from Saudi Arabia that can be collaborated with Indonesia.

Apart from that, one of the Middle Eastern countries needs human resources for service management, including hotel and tourist destination managers. The Ministry of Tourism and Creative Economy sees this as an opportunity to patch up the lack of movement from Saudi Arabia to Indonesia. "That's what we are developing so that there is no total loss," he said.

Also read: Gaining Fortune from the Blessings of Mecca and Medina

Not only promoting Indonesian tourism on the international stage, the government is also working to allow citizens of Saudi Arabia to visit freely without a visa. This is in accordance with the local government's request.

Tourism observer from Jenderal Soedirman University in Purwokerto, Chusmeru, stated that Saudi Arabia has not been very aggressive in promoting and marketing its tourism to the global market. However, their efforts represent an extraordinary transformation that will seriously develop the tourism industry.

That's what we're developing so that there's no total loss.

He believes that in the future, not only Muslim tourists will visit Saudi Arabia, but many people of various religions will also go there. This is because Saudi Arabia is rich in historical, cultural, and natural locations that are rarely found in other countries, such as deserts.

"Saudi Arabia has a high level of competition and has a high comparative value compared to other tourist destinations. This could serve as a comparison for potential tourists who will visit there," said Chusmeru.

AFP/FAYEZ NURELDINE

Two women are taking photos in the Al-Ula region, a UNESCO World Heritage site in Northwestern Saudi Arabia, on February 19, 2023.

Apart from various visa facilitations given to tourists and pilgrims, Saudi Arabia also develops the tourism sector through infrastructure development. These efforts will undoubtedly push Saudi Arabia as a spearhead of world tourism.

The Middle East region, according to Chusmeru, is never free from political turmoil. However, so far, Saudi Arabia has been able to maintain the stability of the country despite the relatively mild domestic political conflict.

Inter-state conflicts in the Middle East that may affect travelers are travel disruptions, especially in air travel. "However, many people perceive that the conditions in Saudi Arabia have been relatively stable, so I don't think there is a problem," said Chusmeru.

The Saudi Arabian government's awareness is slowly transitioning away from oil and gas as its main source of income, prompting them to shift towards other sectors, including tourism. Indonesia will be the primary target for these tourism products. Indonesia needs to properly plan its tourism strategy if it does not want to be just a consumer.

Also read: Seeing Changes in Saudi Arabia