TOURISM SECTOR PERFORMANCE ON INDONESIA’S ECONOMIC 
                                                                GROWTH 
                                                                         
                                                          Happy Febrina Hariyani 
                                   Department Economic Dvelopment, Faculty Economic and Business,  
                                                   University of Muhammadiyah Malang 
                                                      Email: happyfebrina@umm.ac.id 
                                                                         
                             
                                                                      Abstract 
                          Tourism is believed to be a booster for economic growth in developing countries. 
                          The  tourism  sector  in  Indonesia  is  one  of  the  sectors  that  has  the  highest 
                          contribution in foreign exchange to the economy. Tourism activity in the form of 
                          export  trade  in  services  is  the  only  sector  that  constantly  make  a  positive 
                          contribution in the balance of trade in services in Indonesia. This study aims to 
                          analyze the influence of tourism consumption, tourism investment and government 
                          spending to economic growth. The results of this study indicate that, in the long 
                          run, those variables affect economic growth. While in the short run, they do not 
                          influence economic growth. 
                          Key  words:  tourism,  economic  growth,  investment,  consumption,  government 
                          expenditure 
                     
                    INTRODUCTION                                          contribute  USD3.8 trillion to world GDP 
                            The  tourism  sector  is  believed  to        with 262 million jobs in 1997. In a decade, 
                    provide a boost to the economic progress of           the figure grew to USD7.1 trillion with 383 
                    developing countries. The development of              million  jobs.  Tourism  growth  has  almost 
                    the  world  tourism  sector  cannot  be               doubled faster than world GDP (Prabowo, 
                    separated  from  trade  liberalization  as            2009). 
                    another form of globalization. The progress                   The  tourism  sector  is  one  of  the 
                    of  this  sector  goes  hand  in  hand  with          main sources of foreign exchange in at least 
                    openness that occurs in various countries.            one of the three developing countries that 
                    The activity of trade in tourism services has         have  made  the  tourism  sector  a  priority 
                    contributed  greatly  to  the  state  revenues,       (Nath,    1998).    Several    studies    have 
                    especially   through     foreign    exchange          highlighted  the  potential  of  the  tourism 
                    earnings from foreign tourists through the            sector in encouraging growth, creating jobs 
                    expansion of job opportunities.                       and generating income for the government 
                            The  World  Tour  and  Tourism                (Lea 1988; Sinclair 1998). Tourism is one 
                    Council  (2014)  stated  in  its  report  that        of the most important activities in the world 
                    tourism  has  become  the  world's  largest           and  is  the  sector  most  widely  found  in 
                    industry  and  the  largest  job  creator.  The       developing  countries  that  have  not  been 
                    worldwide tourism industry is estimated to            fully exploited. Before the terrorist attacks 
                    Tourism Sector Performance on Indonesia ………..………………. (Happy Febrina Hariyani) 
                    in  September 2001, the world of tourism                      In 2010, the contribution of foreign 
                    had grown at an average arrival rate of 7%            exchange from the tourism sector reached 
                    per  year  and  revenues  of  12%  (WTO,              USD 7603.45 million towards Indonesia's 
                    2003).  In  2002,  international  tourism             GDP and was ranked fifth as the sector with 
                    revenues reached USD 474 billion (WTO,                the  largest  income  earner  of  foreign 
                    2003).  It  also  estimates  that  tourism            exchange. The total contribution of foreign 
                    contributes  USD3.7  trillion  to  the  global        exchange increased from year to year until 
                    economy.  Tourism  has  made  important               in 2014. It reached USD 11,166.13 million 
                    contributions       to       socio-economic           and the ranking of the tourism sector rose to 
                    development in several countries that have            fourth  position  (Ministry  of  Tourism, 
                    chosen the tourism sector as a development            2014). 
                    strategy. The tourism sector is a very labor-                 Traditionally,     primary     product 
                    intensive sector and has a spill-over effect          exports have formed major export activities 
                    on other economic sectors.                            in developing countries such as Indonesia. 
                            The tourism sector in Indonesia is            Unfortunately,  developing  countries  have 
                    one of the sectors that contribute the highest        made various efforts to promote the export 
                    foreign   exchange  in  the  Indonesian               of  manufactured goods but this has often 
                    economy. Tourism activities in the form of            proved  to  be  less  successful.  The  main 
                    export trade services are the only sector that        reason, among many other factors behind 
                    consistently   contributes    positively    to        this lack of success can be summarized as 
                    Indonesia's     service     trade     balance         lack of competitiveness, inability to catch-
                    (Lumaksono  et  al.  2012).  The  tourism             up  with  the  latest  technology,  and  low 
                    sector  is  also  the  only  service  sector          quality.    Currently,    many  developing 
                    included in the ten export commodities with           countries that traditionally rely on income 
                    the  largest  contribution  to  the  country's        from primary product exports receive net 
                    foreign  exchange  earnings.  Other  leading          currencies as a result of diversification into 
                    export commodities are oil and gas, palm              tourism,  while  the  others  try  to  generate 
                    oil,  processed  rubber,  apparel,  electrical        additional  income  by  increasing  tourists 
                    equipment,  textiles,  paper  and  paper              flowing from abroad (Sinclair and Stabler, 
                    products,  processed  foods,  and  chemicals          1997).  Foreign  exchange  earnings  from 
                    (Ministry of Tourism, 2012).                          goods exports are often hindered by imports 
                                                                          of  capital  goods for investment purposes. 
                                                                                                                          
                    Jurnal Ekonomi Pembangunan Vol.16, No.01 Juni 2018                                              46 
                     
                     Tourism Sector Performance on Indonesia ………..………………. (Happy Febrina Hariyani) 
                     Meanwhile, the foreign exchange potential                 does not have predictive power for tourism 
                     of  tourism  and  tourism-related  activities             revenue. However, tourism revenue has a 
                     creates  a  new  pattern  of  production  and             positive-predictive relationship for the next 
                     trade.                                                    GDP. 
                             The  study  conducted  by  Eugenio-                        Meanwhile,  Brida  et  al.  (2008) 
                     Martin et al. (2004) regarding tourism and                stated  that  international  tourism  is  an 
                     economic  growth  for  Latin  American                    important  foreign  exchange  earner  and 
                     countries show that the number of tourism                 export  for  many  years  for  low-income 
                     arrivals,    the    previous     year's    GDP,           countries  and  developing  countries.  At 
                     investment from domestic income and state                 present,  many  developing  countries  pay 
                     stability have a positive effect on economic              attention to economic policies to promote 
                     growth. Government spending and the level                 international tourism as a potential strategic 
                     of  corruption  negatively  affect  economic              factor  for  development  and  economic 
                     growth. In this study tourism variables were              growth. The tourism-led economic growth 
                     measured by the amount of investment and                  hypothesis  (TLGH)  stated  that  tourism 
                     tourism arrivals in the previous year.                    expansion leads to economic growth. The 
                             Studies     related    to   the   causal          country's economic growth can be produced 
                     relationship  between  the  acceptance  of                not only by increasing the amount of labor 
                     tourism and GDP have been carried out by                  and  capital  in  the  economy,  but  also 
                     Arslanturk et al (2010). The results of the               expanding exports. 
                     study show a sensitive relationship to the                         Based on the discussion above, the 
                     countries analyzed, the sample period and                 main  question  examined  in  this  study  is 
                     the  methodology  used.  Considering  the                 whether  the  development  in  the  tourism 
                     sensitivity of the causal relationship, then a            sector     which      include:     consumption, 
                     varied  time  estimation  method is  used  to             investment  and  government  spending 
                     analyze  Granger  causality  based  on  the               affecting Indonesia's economic growth. To 
                     Vector  Error  Correction  Model  (VECM).                 answer these problems, the purpose of the 
                     The findings of the study indicate that the               study    is   to    analyze  the  effect  of 
                     results  of  the  full  sample  in  the  VECM             consumption, investment and government 
                     model have no Granger causality between                   spending  on  the  tourism  sector  on 
                     series, whereas the findings from the varied              Indonesia's economic growth. 
                     time coefficient models indicate that GDP 
                                                                                                                                  
                     Jurnal Ekonomi Pembangunan Vol.16, No.01 Juni 2018                                                     47 
                      
                   Tourism Sector Performance on Indonesia ………..………………. (Happy Febrina Hariyani) 
                   RESEARCH METHODS                                       specifications  for  the  model  because  the 
                           The type of data used in this study is         existing  economic  phenomena  are  too 
                   secondary data in the form of annual data              complex  and  often  the  relationships 
                   consisting  of  GDP,  consumption  in  the             between  variables  in  a  dynamic  system 
                   tourism sector, investment in the tourism              cannot be explained by just the single static 
                   sector, and government expenditure in the              equation model. The Vector Autoregressive 
                   tourism  sector.  The  period  used  for  this         (VAR) model can be used to overcome this 
                   study is 1988 to 2014. Data is obtained from           problem in time series data. 
                   various sources including: World Tour and                      There  are  several  forms  of  VAR 
                   Tourism  Council  (WTTC),  Ministry  of                models, one of which is the Vector Error 
                   Tourism, World Bank, Central Bureau of                 Correction Model (VECM). VECM is the 
                   Statistics, and other relevant sources.                restrictive VAR used for variables that are 
                           The analytical method used in this             non-stationary but have the potential to be 
                   study is the Vector Autoregression (VAR)               cointegrated.    In    VECM,       additional 
                   econometric method if the data is stationary           retention  must  be  given  because  of  the 
                   and not cointegrated, then followed by the             existence of non-stationary forms of data at 
                   Vector  Error  Correction  Model  (VECM)               the level, but cointegrated (Firdaus, 2011). 
                   method  when  the  data  is  stationary  and           In VAR and VECM analysis, it is necessary 
                   cointegrated. In this study, the Y variable is         to do several tests such as stationary test, 
                   defined as GDP per capita (GDP), while the             VAR stability  test,  optimal  interval  test, 
                   explanatory      variables    are    domestic          cointegration    test,   VECM,       Impulse 
                   consumption in the tourism sector (CONS),              Response  Function  (IRF)  technique,  and 
                   capital  investment  in  the  tourism  sector          Forecast Error Decomposition of Variance 
                   (INV),  and  government  spending  in  the             (FEVD). 
                   tourism sector (GOV).                                          The data stationarity test is carried 
                           Juanda  and  Junaidi  (2012)  stated           out  to  fulfill  the  time  series  model 
                   that  most  of  the  time  series  econometric         requirements,  where  the  data  used  is 
                   models  are  built  on  existing  economic             stationary.  Data  stationarity  test  is  done 
                   theories. Economic theory is the basis for             using  Augmented  Dickey  Fuller  Test  at 
                   developing relationships between variables             level and first difference level. The data said 
                   in the model, but often economic theory has            to be stationary is when the t-count results 
                   not  been  able  to  determine  the  exact             are smaller than t-critical MacKinnon at the 
                                                                                                                         
                   Jurnal Ekonomi Pembangunan Vol.16, No.01 Juni 2018                                              48