Friday, December 19, 2008

Tourism crisis-proof? Oh, wake up

A director general at the Culture and Touris Ministry said that our tourism is a crisis-proof industry (The Jakarta Post, 19/12/2008).

He is in denial. Tourism is just like other export commodities: it is a function of exchange rates and foreign income. The situation now is that the positive effect from Rp depreciation is smaller than the negative effect from falling income of our trading partners.

In addition, in the case of tourism, the other key determinant is of course the attractiveness of the destination place itself. And we've been very lousy in this.

2 comments:

Haryo said...

Agree, tourism is luxury good and luxury good far from crisis-proof is the first to be hit by the crisis.

Torism is income elastic (between 1 and 2, the range found in most empirical studies) but price inelastic (less than 1)

I even doubt about the positive effect from Rupiah depreciation considering other currency is also depreciating (competitive devaluation).

salam,
haryo

Aco said...

I think you're right, Mas Haryo. In this time around depreciation effect is minuscule. And thanks for the elasticity figures.